Friday, August 31, 2007

Losing It

It's very hard to get out of a war, even a war that most know that you are losing. If you are a superpower, and your opponent is weak mini-state, the difficulty of extraction is greatly increased. An awful lot of people are certain to have a stake in continuing the war long after it becomes clear that the original goals can't be achieved, or can't be achieved at an acceptable cost. Foremost among those are the idiots who got you into the war in the first place, in our case, the President, the Congress, and the Neocon cabal.

They aren't the only ones of course. For many, a war is a great moneymaking opportunity. For a partially outsourced war like Iraq, the opportunities are multiplied. All those who supply weapons, food, fuel, equipment, and contract mercenaries are making a killing, and they don't want the war to stop.

The soldiers, though, are a key. In Vietnam, and in the Soviet disaster in Afghanistan, the soldiers were mostly draftees with little investment in the war or their military units, so they were relatively quick to see the disaster unfolding. The professionals in Iraq are different. To a far greater degree, they are committed to the military and especially to their own units. Giving up is seen as a betrayal of their sacrifice and the sacrifice of their fellow soldiers. So long as they see any hint of progress, it is very difficult for a professional soldier to concede defeat.

Finally, there is us, the mass of citizenry without a direct stake in the war. If our own husbands, wives, and children aren't at stake, the wars depredations don't hurt so much, and nobody wants to admit to being a loser. Also, we are easy prey to the scare mongers who promise horrible things will occur if "the mission fails."

What is needed is an Eisenhower or a Rabin, a man of undoubted military credibility who will say - "I will end the war." There is no such person now alive.

Thursday, August 30, 2007

Census Schmensus

Responding to a Debate in the Comments:

A couple of years ago a Jewish relative of mine returned from a trip to Israel filled with enthusiasm for the country and its accomplishments. We fell to discussing the Palestinian question and she explained to me that the Arabs there were mostly immigrants, and that the country had been almost unoccupied when the Zionists started arriving.

This seemed implausible to me - a fertile country, a stone's throw from the origins of early civilization, unoccupied and uncultivated. I started researching the question, and it quickly became clear that this had to be nonsense.

In 1944, for example, the British survey found that 90% or more of the land was owned by Arabs, who produced an even larger proportion of the agricultural production. The notion that the land was unpopulated is also belied by the statistics;

From census data:



The Ottoman census of 1878 for Jerusalem, Acre, and Nablus showed 400,000 Muslims, 43,000 Christians, and 25,000 Jews, of whom 10,000 were foreign born. Thirty-two years later, the demographic of Jerusalem considered by itself had become predominantly Jewish - though the numbers are still small compared to the whole district's population of 1878.

The short version is that Israel had a large population, mostly Muslim, with a significant minority of Christians and many fewer Jews around 1900. Jewish immigration during the first half of the twentieth century, and expulsion of Arabs in 1948 largely reversed these population proportions.

From Wikipedia

After a visit to Palestine in 1891, Ahad Ha'am wrote:
From abroad, we are accustomed to believe that Eretz Israel is presently almost totally desolate, an uncultivated desert, and that anyone wishing to buy land there can come and buy all he wants. But in truth it is not so. In the entire land, it is hard to find tillable land that is not already tilled; only sandy fields or stony hills, suitable at best for planting trees or vines and, even that after considerable work and expense in clearing and preparing them- only these remain unworked. ... Many of our people who came to buy land have been in Eretz Israel for months, and have toured its length and width, without finding what they seek.[142]


There is also genetic evidence that the Palestinians have long been in Israel. That genetic evidence indicated that in many ways Israelis and Palestinians are more closely related that Palestinians and some other Arab groups - that "Dad was out and about, while Mom stayed home" as Judy Siegel-Itzkovich put it in The Jerusalem Post. A potful of studies here. The Jews who stayed in Palestine mostly converted to Christianity and later to Islam.

Tuesday, August 28, 2007

Larry Craig's Explanation

Withdrawn

Oddly Enough

I caught a bit of Scarborough Country on MSNBC, and they were discussing US Senator Larry Craig (R-Idaho) and his bathroom exploits. The discussion mentioned Craig's actions as described by the arresting officer (repeatedly putting his eye up to the crack between door and stall to peek in, foot tapping and touching, etc.)

At this point, Tucker Carlson mentioned that he had been bothered in a men's room. I suddenly remembered a road trip through Idaho a few decades ago. I was just trying to get comfortable on my seat in a restroom stall, when I noticed a small hole in the partition, and a creepy eye behind it. Being still a bit busy, I wadded up some toilet paper and stuffed it in the hole. This bought me only a little time, as the eye's finger poked it out - whereupon I fled and complained to the management, who allowed that they had indeed had a problem.

Macho girl that he is, Tucker was more direct - at least in his account. He recruited a few friends and went back into the restroom to beat the crap out of the perpetrator.

So, anyway, Senator - can I call you Larry? - if that was you back in Pocatello in 1978 or so, I apologize for not beating the crap out of you. Perhaps that would have saved you from your subsequent life of crime.

I've never really liked Idaho ever since.

Monday, August 27, 2007

Rules of the Game

Suffocating heat in the Southeastern US, floods in the midwest, calamitous fires in Europe and the drought stricken Western US, records broken every day in the disappearance of Arctic sea ice. Evidence of global warming? Except possibly for the sea ice, scientific caution suggests that it's too early to tell.

Denialist nuts find proof for their doubt in one cool summer day in one city, but science can't afford to work that way.

Cherry picking the evidence is a standard tactic of the dishonest in every endeavor, so the climate doubters are hardly an exception here.

Extreme local weather events, taken in isolation, can't be evidence of global change, but they do serve a useful purpose in reminding us that reality can be ignored only at our peril. Some, of course, are notably slow learners.

Gay Deceivers

The Republican Party has been the stalwart defender of Christian virtue against the supposed evils of homosexuality, so why does it seem that the most conservative, anti-gay reactionaries keep turning out to be closeted Republican gays?

Compulsive dishonesty about everything?

The Israel Lobby Again

From David Remnick's article The Lobby in The New Yorker:

Last year, two distinguished political scientists, John J. Mearsheimer, of the University of Chicago, and Stephen M. Walt, of the John F. Kennedy School of Government, at Harvard, published a thirty-four-thousand-word article online entitled “The Israel Lobby and U.S. Foreign Policy,” a shorter version of which appeared in The London Review of Books. Israel, they wrote, has become a “strategic liability” for the United States but retains its strong support because of a wealthy, well-organized, and bewitching lobby that has a “stranglehold” on Congress and American élites. Moreover, Israel and its lobby bear outsized responsibility for persuading the Bush Administration to invade Iraq and, perhaps one day soon, to attack the nuclear facilities of Iran. Farrar, Straus & Giroux will publish a book-length version of Mearsheimer and Walt’s arguments on September 4th

Remnick's short article is essentially an attack masquerading as a review. Reminick ignores most of the aspects of M&W that I found most interesting, for example:

Since the October War in 1973, Washington has provided Israel with a level of support dwarfing the amounts provided to any other state. It has been the largest annual recipient of direct U.S. economic and military assistance since 1976 and the largest total recipient since World War II. Total direct U.S. aid to Israel amounts to well over $140 billion in 2003 dollars.2 Israel receives about $3 billion in direct foreign assistance each year, which is roughly one‐fifth of America’s foreign aid budget. In per capita terms, the United States gives each Israeli a direct subsidy worth about $500 per year.3 This largesse is especially striking when one realizes that Israel is now a wealthy industrial state with a per capita income roughly equal to South Korea or Spain.

Instead, Remnick attacks them for picking on Israel:

It’s a narrative that recounts every lurid report of Israeli cruelty as indisputable fact but leaves out the rise of Fatah and Palestinian terrorism before 1967; the Munich Olympics; Black September; myriad cases of suicide bombings; and other spectaculars. The narrative rightly points out the destructiveness of the Israeli settlements in the occupied territories and America’s reluctance to do much to curtail them, but there is scant mention of Palestinian violence or diplomatic bungling, only a recitation of the claim that, in 2000, Israel offered “a disarmed set of Bantustans under de-facto Israeli control.”

A damning critique, but it doesn't describe the article Mearsheimer and Walt wrote and that I have now read. In fact they do detail at some length various crimes committed in Israel's name, but explicitly note the many parallel crimes in the names of the Palestinians. One facet of their argument is that the "moral superiority" claimed for the Israelis is exaggerated. From M&W:

There is no question that Jews suffered greatly from the despicable legacy of anti‐Semitism, and that Israel’s creation was an appropriate response to a long record of crimes. This history, as noted, provides a strong moral case for supporting Israel’s existence. But the creation of Israel involved additional crimes against a largely innocent third party: the Palestinians.

The history of these events is well‐understood. When political Zionism began in earnest in the late 19th century, there were only about 15,000 Jews in Palestine.29 In 1893, for example, the Arabs comprised roughly 95 percent of the population, and though under Ottoman control, they had been in continuous possession of this territory for 1300 years.30 Even when Israel was founded, Jews were only about 35 percent of Palestine’s population and owned 7 percent of the land.

If Justice were the motivator, Europe and the US would have agreed to give the Jews Bavaria, say, or maybe Austria. The perpetrators should be the ones held accountable.

Israel's tactics were hardly gentle:

To achieve this goal, the Zionists had to expel large numbers of Arabs from the territory that would eventually become Israel. There was simply no other way to accomplish their objective. Ben‐Gurion saw the problem clearly, writing in 1941 that “it is impossible to imagine general evacuation [of the Arab population] without compulsion, and brutal compulsion.”33 Or as Israeli historian Benny Morris puts it, “the idea of transfer is as old as modern Zionism and has accompanied its evolution and praxis during the past century.”34
This opportunity came in 1947‐48, when Jewish forces drove up to 700,000 Palestinians into exile.35 Israeli officials have long claimed that the Arabs fled because their leaders told them to, but careful scholarship (much of it by Israeli historians like Morris) have demolished this myth. In fact, most Arab leaders urged the Palestinian population to stay home, but fear of violent death at the hands of Zionist forces led most of them to flee.36 After the war, Israel barred the return of the Palestinian exiles.

The past, of course, is the past, and cannot be undone. M&S concede that Israel has a right to exist, however illegitimately it came into being - it could hardly be more illegitimate than all the other nations built on genocide, like, for example, the US. M&S do argue that Israel's special place in the hearts of American politicians is not deserved by its history, value as an ally, or for any services it has rendered us. Arguably, it has been a very undependable ally, taking our money, spying on us, selling our military secrets to China and Russia, and compromising our relations with a whole set of states vital to US interests.

It's a long detailed argument. The Israel Lobby doesn't like it, but Americans ought to hear it. The American people have an astonishing naivete about Israel, a naivete carefully nurtured by Israel and its partisans. It is potentially a very costly naivete.

UPDATE: A Dissenting View

The Jewish Daily Forward, a progressive publication, disagrees: here.

I found myself unconvinced.

Shrill?

Michele Malkin is a right-wing crazy lady - hot but crazy. But she did sound positively shrill going through a list of the incompetent and unqualified cronies Bush has appointed to Homeland security positions.

You know you are rotten if you're a Republican President and even Fox News is being driven shrill.

Bogus Bogus

I have a lot of legitimate gripes about Michael Chertoff, but rather than talk about them, let me note one really bugus claim that has a lot of currency on the internet: that he holds dual US and Israeli citizenship.

The slender thread upon which this claim rests is the fact that his mother, an immigrant, may have held Israeli citizenship - she lived in Israel for a while, and was El Al Airline's first stewardess. Children of Israeli citizens are entitled to Israeli citizenship, even if born abroad.

Chertoff was born in the United States, at least if you consider New Jersey the United States, and has never apparently asserted Israeli citizenship.

Thus the claim is bogus, and moreover has an anti-semitic tinge. We have plenty of real complaints to raise about Chertoff - lets stick to them.

Sunday, August 26, 2007

This is the Way the World Ends

A blasted post-apocalytic world of environmental catastrophe is the theme of many an SF story. Right now, China is taking the lead in exploring this particular scenario in real life. JOSEPH KAHN and JIM YARDLEY, writing in The New York Times take a close look today in a long story.

No country in history has emerged as a major industrial power without creating a legacy of environmental damage that can take decades and big dollops of public wealth to undo.

Public health is reeling. Pollution has made cancer China’s leading cause of death, the Ministry of Health says. Ambient air pollution alone is blamed for hundreds of thousands of deaths each year. Nearly 500 million people lack access to safe drinking water.

Chinese cities often seem wrapped in a toxic gray shroud. Only 1 percent of the country’s 560 million city dwellers breathe air considered safe by the European Union. Beijing is frantically searching for a magic formula, a meteorological deus ex machina, to clear its skies for the 2008 Olympics.


China's problems are also the worlds - they export pollution all the way across the Pacific. If China can learn to deal with the challenges of its growth and pollution, maybe the rest of the world can as well. If not, we all may pay.

Saturday, August 25, 2007

Consensus and Denial

The best know denialist movements have had a common thread: some powerful interest has promoted skepticism to protect itself. The messages they promote (tobacco doesn't cause cancer, the Holocaust didn't happen, natural selection has not been proven, anthropogenic global warming doesn't exist) all serve to protect somebody's profit or image (big tobacco, antisemites everywhere, big religion, big energy).

It's pretty clear, though, that they also tap into something fundamental in human nature. People want their cigarettes, national mythologies, faith, and SUVs. Three of the four cases mentioned each have powerful corporate sponsorship. Another interesting case, where such sponsorship is far from obvious, is that of those who deny the connection between human immunodeficiency virus HIV and AIDS.

Tara C. Smith and Steven P. Novella have an article on the subject in PLOS Medicine: HIV Denial in the Internet Era. (via DarkSyde at Daily Kos)


It may seem remarkable that, 23 years after the identification of the human immunodeficiency virus (HIV), there is still denial that the virus is the cause of acquired immune deficiency syndrome (AIDS). This denial was highlighted on an international level in 2000, when South African president Thabo Mbeki convened a group of panelists to discuss the cause of AIDS, acknowledging that he remained unconvinced that HIV was the cause [1]. His ideas were derived at least partly from material he found on the Internet [2]. Though Mbeki agreed later that year to step back from the debate [3], he subsequently suggested a re-analysis of health spending with a decreased emphasis on HIV/AIDS [4].

HIV denial has taken root in the general population and has shown its potential to frustrate public education efforts and adversely affect public funding for AIDS research and prevention programs. For example, the AIDS Coalition to Unleash Power (ACT UP) was for many years on the front lines of AIDS education and activism. But now a San Francisco chapter of the group has joined the denialist movement, stating on its Web site that “HIV does not cause AIDS… HIV antibody tests are flawed and dangerous…AIDS drugs are poison” (http://www.actupsf.com/aids/index.htm). In 2000 the chapter wrote letters to every member of Congress asking them to stop funding research into HIV [5]. ACT UP San Francisco's position has been condemned by other ACT UP chapters, such as ACT UP Philadelphia and ACT UP East Bay (http://www.actupny.org/indexfolder/actupgg.html). Rock stars have weighed in on the topic. Members of the group “The Foo Fighters” provided music for a soundtrack of the recent documentary, “The Other Side of AIDS” (http://www.theothersideofaids.com/), which questions whether HIV is the cause of AIDS. The band has spread its message that HIV does not cause AIDS at concerts [6], and it lists the HIV denial group “Alive and Well” as a worthy cause on its Web site (http://www.foofighters.com/community_cause.html).


The ocean of stupidity is wide and deep, and my spoon is so small.

Pro Israel

M J Rosenberg takes a look at what American presidential candidates have to do to avoid being "wrong" on Israel. He traces the origins of the phenomenon to the 1967 war and the resulting occupation of the West Bank.

...[I]t was only after the Six Day War of 1967, that both parties began exploiting the Israel issue with anything like the vigor – not to mention the nastiness – we see today.

There is a certain irony here. In the first two decades after the Holocaust and the establishment of Israel -- when there were millions of Holocaust survivors still among us and Israel was truly fighting for its life -- it did not occur to ideologues and partisans within the pro-Israel or Jewish communities to use either as wedge issues to score political gain.

That all changed after ’67. At the very moment when Israel was at its strongest, suddenly it became acceptable, even necessary, to defend Israel as never before. Of course, at this point, it was no longer Israel itself that was being defended but rather Israel’s right to the occupied territories.


Rosenberg notes that the hysteria associated with the issue has become an important barrier to American presidents actually doing anything to produce a solution to the fundamental conflicts.

Is it any wonder that candidates seem to go to great lengths to avoid saying anything remotely substantive on the Middle East. They simply utter platitudes about supporting Israel, despising terrorism, and believing in peace – in the abstract. Knowing that any substantive statement could be used against them, candidates just play it safe. And the most vocal segments of the pro-Israel community encourage them by criticizing constructive suggestions as anti-Israel, and by giving ovations and donations to candidates who tell them what they want to hear.


Rosenberg suggests a formula for candidates:

“If I am elected president, I will do everything in my power to bring about negotiations between Israelis and Palestinians with the goal of achieving peace and security for Israel and a secure state for the Palestinians.”

Fair enough, I think, but it won't deter those searching for "wedge" issues and it won't satisfy nuts like Charles Krauthammer.

He adds:

The status quo is bad for Israel and for Palestinians, and disastrous for America’s interests throughout the Middle East. Candidates should not listen to those who tell them that they must endorse it.

Thursday, August 23, 2007

Where the Undead are Buried

Like many, I found the recent turmoil in the financial markets both fascinating and puzzling. What happened, why, and especially, since everybody and their brother saw this particular train coming from a million miles away, why did markets seemingly get caught unawares?

It seems that asset price bubbles are not exactly new phenomena in the world of finance (dot com, 1929, South Seas, tulip mania), and that people always see them coming, and that most still get caught in the avalanche. Partly that is kind of a deer in the headlights effect - people can't figure out which way to run.

I saw this (or something) coming, for example, and took much of my 401K out of the S&P index fund - and put it in Euro-Pacific indices.

Doh!

Part of it is greed, part is stupidity, and, I'm guessing, part of it is old-fashioned swindle.

So why the panic? Gillian Tett, writing in the Financial Times had a pretty clear view back in May.

Once upon a time, it was presumed that the actions of central bankers controlled behaviour in the risky lending world. For if central banks jacked up rates, the argument went, the cost of borrowing would rise - making it harder for highly leveraged groups, such as buy-out funds, to snap up deals.

Now, however, this argument is looking a touch quaint. In the last couple of years, Western central banks have indeed been raising rates. Meanwhile, investors have had to contend with minor matters such as surging oil prices, Middle East turmoil, and now subprime woes. Yet, the credit party has continued, seemingly oblivious - triggering a buy-out frenzy.

So could anything else take the punchbowl away? Some bankers are now starting to mutter quietly about one risk that is not often discussed - the collateralised debt obligation world. For though the CDOs certainly do not have the debating glamour of a small war or central bank, they have helped power the credit bubble. Thus the question now is whether trends in this sector could also now deliver a jolt.

First, however, a quick finance recap: a CDO essentially is a pool of debt assets, in which investors take stakes with different levels of risk, a little like the way mutual funds operate in the equity world. They have existed for many years, particularly in the US. However, in the last couple of years the sector has exploded, particularly in Europe, where collateralised loan obligations - which buy risky loans -- have spread like wildfire.

This, unsurprisingly, has roiled credit markets. After all, if a hundred new well-funded mutual funds suddenly appeared, it would not be hard to imagine the impact on stock markets. So, too, the sudden proliferation of asset-hungry CDOs has raised debt prices, making borrowing increasingly cheaper for buy-out groups. Last week alone, for example, another $4.5bn new CDOs came on tap wanting to buy assets - and another $57.7bn are now in the pipeline, according to JPMorgan.

But now there are ominous rumblings from CDO land. Rumours are circulating that some funds have suffered losses from the recent subprime debacle. While no funds have folded as a result, this has the potential to dent iconfidence (or at least prompt them to demand a higher price when they invest in these funds). Indeed, I am told some smart money is already furtively creating vehicles designed to feed on sickly CLOs. This week in London, Park Square Capital created a new credit fund which publicly declared that it expects to see a CLO shakeout - and prey on this.


There is more, and anybody who care about such things should read Gillian Tett, because she combines deep understanding with exceptional clarity.

So far so good. Some people or institutions bought some stuff that might not be worth much and now might get burned - we might even have a few billionaires fall back to Earth. Why is that a big deal?

The problem seems to be that the new financial instruments created in recent times are so opaque that nobody really knows where the bodies are buried. Brad Setser takes a look:

The process that turned subprime mortgages into triple AAA rated securities is, by now, pretty well known. Rich Bookstaber (his blog is here) describes the process nicely.

Here's the recipe for a CDO: you package a bunch of low-rated debt like subprime mortgages and then break the package into pieces, called tranches. Then, you pay to play. Some of the pieces are the first in line to get hit by any defaults, so they offer relatively high yields; others are last to get hit, with correspondingly lower yields. The alchemy begins when rating agencies such as Standard & Poor's and Fitch Ratings wave their magic wand over these top tranches and declare them to be a golden AAA rated. Top shelf. If you want to own AAA debt, CDOs have been about the only place to go; hardly any corporation can muster the credit worthiness to garner an AAA rating anymore. Here's where the potion gets its poison potential. Some individual parts of CDOs are about as base as bonds can be — some are not even investment grade. The assumption has been that even if the toxic waste bonds really stink, the quality tranches can keep the CDO above water. And life goes on.

The problem is that CDOs were untested; there was not much history to suggest CDOs would behave the same way as AAA corporate bonds.

Nouriel [Roubini] is characteristically more blunt. He concludes a recent post on the securitization of subprime lending by noting:

That “toxic waste” of unpriceable and uncertain junk and zombie corpses is now emerging in the most unlikely places in the financial markets.


Who should we blame? I like the choice of Joseph Stiglitz, a Nobel laureate in economics and former Chairman of the Council of Economic Advisors. Via Brad DeLong, he blames the prematurely sainted Alan Greenspan and George W Bush:

A Day of Reckoning for Americans Who Lived Beyond Their Means
By Joseph Stiglitz
The Taipei Times
Sunday 12 August 2007
The pessimists who have long forecast that the US economy was in for trouble finally seem to be coming into their own. Of course, there is no glee in seeing stock prices tumble as a result of soaring mortgage defaults. But it was largely predictable, as are the likely consequences for both the millions of Americans who will be facing financial distress and the global economy.
The story goes back to the recession of 2001. With the support of former Federal Reserve chairman Alan Greenspan, US President George W. Bush pushed through a tax cut designed to benefit the richest Americans. It did not lift the economy out of the recession that followed the collapse of the Internet bubble.
Given that mistake, the Fed had little choice if it was to fulfill its mandate to maintain growth and employment. It had to lower interest rates, which it did in an unprecedented way - all the way down to 1 percent.
It worked, but in a way fundamentally different from how monetary policy normally works. Usually, low interest rates lead firms to borrow more to invest more, and greater indebtedness is matched by more productive assets.
But given that overinvestment in the 1990s was part of the problem underpinning the recession, lower interest rates did not stimulate much investment. The economy grew, but mainly because American families were persuaded to take on more debt, refinancing their mortgages and spending some of the proceeds. And, as long as housing prices rose as a result of lower interest rates, Americans could ignore their growing indebtedness.
Even this did not stimulate the economy enough. To get more people to borrow more money, credit standards were lowered, fueling growth in so-called "sub-prime" mortgages. Moreover, new products were invented, which lowered upfront payments, making it easier for individuals to take bigger mortgages.
Some mortgages even had negative amortization: payments did not cover the interest due, so every month the debt grew more. Fixed mortgages, with interest rates at 6 percent, were replaced with variable-rate mortgages, whose interest payments were tied to the lower short-term T-bill rates.
What were called "teaser rates" allowed even lower payments for the first few years. They were teasers because they played off the fact that many borrowers were not financially sophisticated and didn't really understand what they were getting into.
And Greenspan egged them to pile on the risk by encouraging these variable-rate mortgages. On Feb. 23, 2004, he pointed out that "many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade."
But did Greenspan really expect interest rates to remain permanently at 1 percent - a negative real interest rate? Did he not think about what would happen to poor Americans with variable-rate mortgages if interest rates rose, as they almost surely would?
Of course, Greenspan's behavior meant that, under his watch, the economy performed better than it otherwise would have done. But it was only a matter of time before that performance became unsustainable.
Fortunately, most Americans did not follow Greenspan's advice to switch to variable-rate mortgages. But even as short-term interest rates began to rise, the day of reckoning was postponed, as new borrowers could obtain fixed-rate mortgages at interest rates that were not increasing.
Remarkably, as short-term interest rates rose, medium and long-term interest rates did not, something that was referred to as a "conundrum."
One hypothesis is that foreign central banks that were accumulating trillions of dollars finally figured out that they were likely to be holding these reserves for years to come, and could afford to put at least some of the money into medium-term US treasury notes yielding - initially - far higher returns than T-bills.
The housing price bubble eventually broke, and, with prices declining, some have discovered that their mortgages are larger than the value of their house. Others found that as interest rates rose, they simply could not make their payments.
Too many Americans built no cushion into their budgets, and mortgage companies, focusing on the fees generated by new mortgages, did not encourage them to do so.
Just as the collapse of the real estate bubble was predictable, so are its consequences: housing starts and sales of existing homes are down and housing inventories are up. By some reckonings, more than two-thirds of the increase in output and employment over the past six years has been real estate-related, reflecting both new housing and households borrowing against their homes to support a consumption binge.
The housing bubble induced Americans to live beyond their means - net savings have been negative for the past couple of years. With this engine of growth turned off, it is hard to see how the US economy would not suffer from a slowdown. A return to fiscal sanity will be good in the long run, but it will reduce aggregate demand in the short run.
There is an old adage about how people's mistakes continue to live long after they are gone. That is certainly true of Greenspan. In Bush's case, we are beginning to bear the consequences even before he has departed.

So why a swindle? Those who created the exotic and opaque instruments got rich. Those credit agencies who waved their magic wands made money too. Those who took out the impossible mortgages (on AG's recommendation) include both victims and perpetrators.

Exotic financial instruments probably have some social utility. So far they have been efficient at fleecing somebody - we just don't know quite who yet.

Wednesday, August 22, 2007

Nice Work If You Can Get It

Harvard's endowment increased in value by $5.7 billion dollars last year - or not quite $1.5 million per undergraduate. Somehow that makes it seem quite nervy for them to actually charge tuition.

The Flinch

Democrats were elected on a tidal wave of opposition to the war, especially as conducted by GW. They have now been in office for eight months, and what have they done? Zero. Nada. Zilch.

Supposedly they were waiting on the Petraeus report, but suddenly the air is full of intimations of surrender. I posted on a couple earlier. There are more here and here.

Democratic leaders in Congress had planned to use August recess to raise the heat on Republicans to break with President Bush on the Iraq war. Instead, Democrats have been forced to recalibrate their own message in the face of recent positive signs on the security front, increasingly focusing their criticisms on what those military gains have not achieved: reconciliation among Iraq's diverse political factions.

And now the Democrats, along with wavering Republicans, will face an advertising blitz from Bush supporters determined to remain on offense. A new pressure group, Freedom's Watch, will unveil a month-long, $15 million television, radio and grass-roots campaign today designed to shore up support for Bush's policies before the commander of U.S. forces in Iraq, Army Gen. David H. Petraeus, lays out a White House assessment of the war's progress. The first installment of Petraeus's testimony is scheduled to be delivered before the House Armed Services and Foreign Affairs committees on the sixth anniversary of the Sept. 11, 2001, terrorist attacks, a fact both the administration and congressional Democrats say is simply a scheduling coincidence.

The leading Democratic candidates for the White House have fallen into line with the campaign to praise military progress while excoriating Iraqi leaders for their unwillingness to reach political accommodations that could end the sectarian warfare.

What could explain this bizarre turnabout? Glenn Greenwald offers a clue in this provocative and scary post.

Carl Levin, probably the most influential Senate Democrat on Iraq policy, just returned from a "visit to Iraq." In a joint statement with GOP Sen. John Warner, he pronounced that "the military aspects of President Bush's new strategy in Iraq, as articulated by him on January 10, 2007, appear to have produced some credible and positive results."

Greenwald calls bullshit on this one:

But Levin has not -- as his joint statement claimed and media reports recite -- "seen indications that the surge of additional brigades to Baghdad and its immediate vicinity and the revitalized counter-insurgency strategy being employed have produced tangible results in making several areas of the capital more secure." It is patently inaccurate to claim that Levin "saw" anything meaningful. Rather, he simply heard claims voiced by U.S. military officials about U.S. military progress and Iraqi troop improvement -- claims the U.S. military has been making for four straight years -- and he is now repeating those claims.

Levin is willingly serving as an uncritical spokesman here for the most dubious and sunny claims of the U.S. military regarding our great progress. But he knows that, and it is almost surely deliberate. The important point here is that Levin's statements signal the clear strategy Senate Democrats are embracing in the preparation for Gen. Petraeus' imminent visit.

Senate Democrats largely will not challenge, but rather will embrace and celebrate, the notion that The Surge Is Working and that we are making "military progress," whatever that might mean this month. To "oppose the war," they instead will follow the strategy Hillary Clinton has adopted this year -- namely, blaming the Iraqis for failing to take advantage of the great opportunities we are creating for them. Levin's demand that Prime Minister Maliki be replaced is designed to accomplish exactly that. Democrats are afraid to challenge the U.S. military's claims that we are Winning, and are even afraid to oppose the Surge, so instead, they will take the safest course -- heaping the blame on the Iraqi government and demanding that they improve.

It gets much worse.

That the Congress will do nothing -- before September, during September and after September -- to force Bush out of Iraq is not news to anyone other than our Beltway elites. The only certain political fact has long been that we will be occupying Iraq at roughly the same levels of troop strength throughout the Bush presidency. But the fact that Congressional Democrats actually seem to weaken by the day -- they actually seem, as a group, to be turning gradually more pro-war -- is extremely alarming for an entirely different reason.

An article by former CIA officer Robert Baer in this week's Time Magazine -- headlined: "A Prelude to an Attack on Iran" -- casts such an attack as virtually inevitable prior to the end of the Bush presidency, and likely much sooner than that:

Reports that the Bush Administration will put Iran's Islamic Revolutionary Guard Corps on the terrorism list can be read in one of two ways: it's either more bluster or, ominously, a wind-up for a strike on Iran. Officials I talk to in Washington vote for a hit on the IRGC, maybe within the next six months. . . .

Strengthening the Administration's case for a strike on Iran, there's a belief among neo-cons that the IRGC is the one obstacle to democratic and a friendly Iran. They believe that if we were to get rid of the IRGC, the clerics would fall, and our thirty-years war with Iran over. It's another neo-con delusion, but still it informs White House thinking.

This still leaves open the question of the Democrat's fold? Can they really be that stupid? That cowardly? Maybe the latter.

Greenwald reaches into the comments for the clue:

UPDATE: As Scientician notes in Comments, House Democrats, in the face of intense AIPAC lobbying, already backed away once before from a rather mild amendment that would have required (or, more accurately, purported to require) the Bush administration to obtain Congressional approval before attacking Iran:

House Democrats, who have been divided on whether the president needs authorization from Congress to attack Iran, suggested yesterday that they are more united on the controversial issue.

But with Iran measures possibly headed to the House floor as early as today, it is unclear if Democrats have the votes to pass legislation calling for the president to seek authorization from Congress for a preemptive strike on Iran.

House Democratic leaders initially attempted to insert Iran language in their now-vetoed Iraq supplemental bill, but abandoned the plan after some New York Democrats, including Reps. Eliot Engel and Gary Ackerman, balked at the language.

The American Israel Public Affairs Committee (AIPAC), an influential group that advocates strong U.S. ties with Israel, lobbied heavily to remove the Iran provision in the supplemental, arguing that the measure would weaken President Bush's attempts to dissuade Iran from developing nuclear weapons.

Israel has been the third rail of American politics. American newspapers and politicians are afraid to stand up to provocations of right-wing nutjobs who would (and regularly are) called out in Israel.

Allowing or signing on to another proxy war on Israel's behalf is not likely to end well for America or Israel - or for the Democrats involved.

Tour Bus

I'm off. Got to catch the interstellar tour bus.

Tuesday, August 21, 2007

Valentine's Day

NPR went all out to hand Bush a double early Valentine today. First a story claiming that a growing consensus in Washington has concluded that "the surge is working." They hauled out Michael O'Hanlon of the "center-left" Brookings Institution for his usual line of crap (though they did concede that his billing as an anti-war Democrat might be "slightly misleading").

Next was US Representative Bryan Baird (D - Wash) who had voted against the war before he was for it. He thinks we need another Friedman Unit or two before we can start to pull back a little.

It's like being the prosecuting attorney at one of those old Mafia trials. All your witnesses suddenly seem to have developed terrible memories.

Hillary seems to be ramping up her pro-war rhetoric as well - is the fix really already in? Somebody at least seems to be working at giving the impression.

Monday, August 20, 2007

Today's Lesson in Human Relations

If you are paranoid enough, people will start plotting against you.

Usufruct

From Dictionary.com

u·su·fruct /ˈyuzʊˌfrʌkt, -sʊ-, ˈyuzyʊ-, ˈyus-/ Pronunciation Key - Show Spelled Pronunciation[yoo-zoo-fruhkt, -soo-, yooz-yoo-, yoos-]–noun Roman and Civil Law.


The right of enjoying all the advantages derivable from the use of something that belongs to another, as far as is compatible with the substance of the thing not being destroyed or injured.
[Origin: 1620–30;


I put up this definition, since usufruct is not a very common word for non-lawyers, and since my source for the subject misinterpreted the word to read the key text exactly backwards.

Jefferson declares clearly that everything about these resources should be decided by the people who live at the particular moment. The Earth belongs to them in "usufruct".


This misinterpretation was apparently intended to aid his attack against James Hansen's article: The Real Deal: Usufruct & the Gorilla, which discusses the tactics and objectives of the climate deniers and their paymasters. In particular, Hansen discusses the recent hysteria whipped up over 1934 -a very hot year in the US, but not so much globally.

What we have here is a case of dogged contrarians who present results in ways intended to deceive the public into believing that the changes have greater significance than reality. They aim to make a mountain out of a mole hill. I believe that these people are not stupid, instead they
seek to create a brouhaha and muddy the waters in the climate change story. They seem to know exactly what they are doing and believe they can get away with it, because the public does not have the time, inclination, and training to discern what is a significant change with regard to the global warming issue.
The proclamations of the contrarians are a deceit, but their story raises a more important matter, usufruct. It is the most important issue in the entire global warming story, in my opinion. The players in the present U.S. temperature story, we scientists included, are just bit players. The characters in the main drama are big fish, really big fish. But before we get to that matter, I need to expoBut before we get to that matter, I need to expose how the deceit works.


Not too much new to the student of that river, but all stuff that continues to escape the Robert Samuelsons of the world and their corporate masters.

Johnny Freedomseed

The preposterous new meme being pushed by the President and the clown show at the Washington Post is that Bush had a "vision of ending global tyranny" that stalled "in a bureaucratic and geopolitical morass." Give me a f****** break. This from a guy who has done his best to install and practice tyranny in the US and who never met a dictator he didn't like.

Peter Baker's article begins with:

By the time he arrived in Prague in June for a democracy conference, President Bush was frustrated. He had committed his presidency to working toward the goal of "ending tyranny in our world," yet the march of freedom seemed stalled. Just as aggravating was the sense that his own government was not committed to his vision.

As he sat down with opposition leaders from authoritarian societies around the world, he gave voice to his exasperation. "You're not the only dissident," Bush told Saad Eddin Ibrahim, a leader in the resistance to Egyptian President Hosni Mubarak. "I too am a dissident in Washington. Bureaucracy in the United States does not help change. It seems that Mubarak succeeded in brainwashing them."


Excuse me while I barf.

Bush did not wait long after reelection in November 2004 to begin mapping his second term. Relaxing from the burdens of the campaign, he leafed through galleys of a book given to him by Tom A. Bernstein, a friend and former partner in the Texas Rangers. The book, "The Case for Democracy," was a manifesto by Natan Sharansky, the Soviet refusenik, Israeli politician and favorite of neoconservatives.

Bush found it so riveting, he asked aides to invite Sharansky to visit. The next day, nine days after the election, the author was ushered into the Oval Office. He and Bush talked about the nature of democracy and how to advance it. Bush was struck by a metaphor in the book comparing a tyrannical state to a soldier pointing a gun at a prisoner until his arms tire, he lowers the gun and the captive escapes. "Not only did he read it, he felt it," Sharansky said last week.

Within weeks, according to several aides, Bush called his chief speechwriter, Michael J. Gerson, to discuss using his second inaugural address to "plant a flag" for democracy around the world. Bush had made democracy in the Middle East a cornerstone of his response to the Sept. 11, 2001, attacks, but now he wanted to broaden the goal.


So how to do the job?

Bush and his team tried to demonstrate their commitment. The president met with Russian President Vladimir Putin in Slovakia for a tense discussion about the Kremlin's crackdown on dissent. And when Egypt arrested opposition leader Ayman Nour, Secretary of State Condoleezza Rice canceled a trip to Cairo. Two weeks later, Egypt released Nour.

The most serious test came in May, when Uzbekistan, a U.S. ally, massacred hundreds of protesters in the town of Andijan. The Pentagon, which maintained a base in Uzbekistan, resisted making a strenuous protest, but even the restrained criticism provoked Uzbekistan enough to expel U.S. troops. It was the first tangible price paid for the focus on freedom.

But it was all ad hoc. "There was no blueprint here," said Joshua Muravchik, an American Enterprise Institute scholar who serves on Rice's democracy advisory panel. "No one knew how to do this. People at the State Department felt they were groping in the dark."


What a shock! The gang that can't find its ass with both hands can't implement a concept they despise in their own practice. Amazing.

Bush's budget slashed money for democracy programs in Russia and the former Soviet Union, where civil society was in retreat.


In the end, Baker does a reasonable job on the play by play, but somehow manages to stay too dense to realize that "democracy promotion" like "Mission Accomplished, the "mission to Mars" and every other half-assed idea of Bush and Rove was never more than a gimmick - a billboard put up to draw cheers, never backed with any substance.

And when it goes wrong, as everything this guy touches does, it's somebody else's fault.

Sunday, August 19, 2007

Can't Dance

Hairspray, the movie.

The music wasn't bad, and the Tracy actress could sing. The good news sort of ends there.

I tried to overlook the movie's shallow racial pieties - it was a musical after all. John Travolta has been entertaining in a wide variety of movies. Unfortunately, his turn here as Jabba the Hut (or something) isn't one of them. Michelle Pfeiffer, luckily enough, was pretty much unrecognizable as the villainous villainess. Christopher Walken did what he could with what he had to work with.

More serious was the lack of any discernable wit. This kind of movie really does need to be funny.

Catastrophically for a movie about a dance contest, there was very little good dancing on display. Why not, I wonder?

I suppose I was spoiled. I happened to catch a little bit of an old Gene Kelly movie the other day.

The Iraqi Branch of Hezbollah

Brad DeLong quotes Andrew Sullivan who quotes Michael Totten:

One reason the surge is "working" in bringing some peace to some areas in Iraq: there's a truce between Shia soldiers who have infiltrated the Iraq military under US command and the Shia militias. Duh. Totten sees beneath the spin here:

I went inside the Tactical Operations Center and spoke to the Public Affairs Officer. "What can I help you with, Mike?" he said.

"I want an on-the-record interview with Military Intelligence," I said. "Why?" he said. I told him what I had heard. "I can print rumor or fact," I said. He got me the interview.

Master Sergeant Jeffrey K. Tyler met with me privately. "It's true," he said. "Many of the Iraqi Army soldiers here are supporters of JAM.” JAM is military shorthand for Jaysh al Mahdi, or Moqtada al Sadr's radical Shia Mahdi Army militia.
"They aren't in JAM cells necessarily, but they are sympathizers. They may let JAM guys through checkpoints, for example. They aren’t out kidnapping Sunnis or anything like that. They are sympathizers, not direct actors. Almost all the Iraqi Army soldiers here are Shias."

"Is their presence here the reason we aren’t getting mortared?" I said. "Because the Mahdi Army doesn’t want to blow up their own people?"

"We think that’s probably so," he said and nodded with confidence.

I didn't hear that in the briefing when I first got there.

I bet he didn't. Michael's conclusion:

Nothing makes me more pessimistic about Iraq’s future prospects than this. The Mahdi Army is Iran’s major proxy in Iraq. It is, in effect, the Iraqi branch of Hezbollah.

And we're training them.

Oh well.

Friday, August 17, 2007

Dean

Hurricane Dean is the first hurricane of the 2007 Atlantic season and it is already a very large and powerful category four storm with peak wind gusts of 180 miles per hour (145 sustained). It will likely be a category five tomorrow and Jamaica is squarely in the cross hairs for a direct hit.

It is still too early to tell what it will look like in the Gulf - that will depend on the interaction with land in the Yucatan pennisula and other factors, with the worst case (for the Gulf and the US)likely to be passage of the eye through passage between Mexico and Cuba with little land interaction.

Details here from Weather Underground.

Nothing to See Here Folks

So say our denier friends. Unless maybe you were hoping to be able to kayak to the North Pole this year. You might be able to come pretty close. With a good month still left in the melt season, Arctic sea ice reached a record low this week.


Compare the white space with the median August ice line (pink). For a look at your kayaking prospects, check out the cool North Pole webcams.

(via Jeff Master's Wunderblog)

Eat Like a Geek

Actually, I think that the original meaning of "geek" was the guy in the carnival who bit the head off a live chicken, but that's not our subject here. Julianne Dalcanton of Cosmic Variance has this post on how to eat like a geek:

How do you eat your candy?
Julianne at 7:45 am, August 14th, 2007
My temporary officemate runs down to the vending machine and buys a bag of gummi bears. He dumps them on the desk, sorts them by color, and then procedes to eat them in order of increasing bin size (i.e. the pile of 1 orange one, then the pile of 3 yellow ones, then the pile of 4 green ones, etc).

If I buy a bag of M&M’s, I sort them by color, then figure out a division that lets me arrange them in a triangle, with one color per horizontal row, but allowing colors to be repeated (i.e. it’s ok for 9 red M&M’s to show up as a row of 7, and then further up, a row of 2). I then eat off each diagonal, producing a progressively smaller triangle, but one that maintains the horizontal color structure till the tasty end.

My kids, who I suspect inherited a geek-streak a mile wide, also sort multicolored candy into patterns and make up an algorithm for eating it.

The non-scientists who I have asked about this habit look at me like I’m nuts. (So do people who grew up in large families, because someone was bound to snarf the candy before they could take the time to develop this particular neurosis.)


Some of the commenters are pretty weird eaters as well. I myself sort my M&Ms by color, identify the various colors with quark flavors, and consume them three at a time, starting with proton, neutron, lambda, sigma zero and so on in (more or less) mass order. I usually run out of u and d quarks somewhere in the baryon decuplet, in which case I need to move on to heavy quark exotics.

OK, I don't really. But I am considering it.

Conspiracy Theory

Before Bush, I was always one to pooh pooh conspiracy theories. The Bushies ability to transcend irony in self-caricature has made me a believer, though. Cheney is type cast as the sinister sociopath at the core.

Gareth Porter, writing in The Huffington Post, has some new slants on Cheney's long time itch for a fight with Iran. Joe Lieberman figures in the story as well, playing the role of the amiable priest with a shiv up his sleeve.

I was never one of those who believed the Bush administration was getting ready to attack Iran in 2006 or early 2007. But it is now clear that at least Vice President Dick Cheney is conspiring to push through a specific plan for war with Iran. And Senator Joe Lieberman is an active part of that conspiracy.

We have known for a long time that Cheney wants a major air attack on Iranian nuclear sites and other military and economic targets. But an August 9 story published by McClatchy newspapers reveals that, instead of waiting for a decision to go ahead with such a strategic attack against Iran, Cheney now hopes to get Bush to approve an attack on camps in Iran where Iraqi Shiite militiamen have allegedly been trained in recent years.

. . .

The Cheney proposal for an airstrike against three bases in Iran can have only one purpose -- to provoke an Iranian retaliation that would then make it possible to unleash a full-fledged strategic air attack against Iran. The provocation strategy would be an obvious way around the political obstacles in the way of an unprovoked attack.

This is not the first time that such a provocation strategy has been attributed to the Bush administration. In February 2007, Hillary Mann, the National Security Council director for Iran and Persian Gulf Affairs until 2004, told CNN that the Bush administration was "pushing a series of increasing provocations against the Iranians in, I think, anticipation that Iran will eventually retaliate, and that will give the United States the ability to launch limited strikes against Iran, to take out targets in Iran that we consider to be important."

The revelation of the Cheney attack proposal throws a new light on a series of developments relating to Iraq since early June. The first event that takes on new meaning is Joe Lieberman's public call on June 11 for exactly the same kind of attack on the alleged training bases in Iran as Cheney was advocating inside the administration.

Lieberman, appearing on CBS's Face the Nation, said, "I think we've got to be prepared to take aggressive military action against the Iranians to stop them from killing Americans in Iraq. And to me that would include a strike over the border into Iran, where we have good evidence that they have a base at which they are training these people coming back into Iraq to kill our soldiers."


Lieberman is noted for his sense of humor, so the irony of calling for actions that would get a lot of Americans here and in Iraq killed in the name of stopping "them from killing Americans in Iraq" was probably not lost on him.

From averagejoe in the comments on that story:

A few weeks back, according to UPI's Arnaud De Borchgrave, Netanyahu declared that Israel "must immediately launch an intense, international public relations front first and foremost on the United States -- the goal being to encourage President Bush to live up to specific pledges he would not allow Iran to arm itself with nuclear weapons. We must make clear to the (U.S.) government, the Congress and the American public that a nuclear Iran is a threat to the U.S. and the entire world, not only Israel."

Israel's war is to be sold as America's war.

The project is underway. According to Peter Beaumont, foreign affairs editor of the Guardian, Israeli media are reporting that the assignment to convince the world of the need for tough action on Iran has been given to Meir Dagan, head of Mossad.


I can sympathize with Israel's alarm, but that doesn't mean we should allow ourselves to become their patsy in this folly.

Thursday, August 16, 2007

The Israel Lobby

A major political storm is brewing over a new book. The New York Times has a review of The Israel Lobby and U.S. Foreign Policy. A hint of the incendiary quality:

“Now that the cold war is over, Israel has become a strategic liability for the United States,” they write. “Yet no aspiring politician is going to say so in public or even raise the possibility” because the pro-Israel lobby is so powerful. They credit the lobby with shutting down talks with Syria and with moderates in Iran, preventing the United States from condemning Israel’s 2006 war in Lebanon and with not pushing the Israelis hard enough to come to an agreement with the Palestinians. They also discuss Christian Zionists and the issue of dual loyalty.

Opponents are prepared. Also being released on Sept. 4 is “The Deadliest Lies: The Israel Lobby and the Myth of Jewish Control” (Palgrave Macmillan) by Abraham H. Foxman, the national director of the Anti-Defamation League. The notion that pro-Israel groups “have anything like a uniform agenda, and that U.S. policy on Israel and the Middle East is the result of their influence, is simply wrong,” George P. Shultz, a former secretary of state, says in the foreword. “This is a conspiracy theory pure and simple, and scholars at great universities should be ashamed to promulgate it.”

It's long overdue to have this debate. My own view is that the peculiar alignment of neo-cons, right-wing Israeli interests, and fundamentalist Christian millenialists is a threat to both Israel and the United States.

Monday, August 13, 2007

Quant Mechanics

The Statistical Mechanic talks about hard times for Rocket Science, Wall Street style. It seems that the current financial turmoil has hit the "Quants" hard.

Wolfgang:

I would call it the "quant finance crisis" and there certainly is big trouble in several hedge funds and all kinds of quantitative strategies [*]. As somebody mentioned today, "the last 5 days have been the worst for statistical arbitrage strategies in the last 20 years". This is of course the area of finance where mathematicians, econo-physicists (= physicists who could not get a hep job 8-) and many other smart 'rocket scientists' operate. I wrote about them some time ago, "May the new theories and models of risk prevent us all from meeting the black swan...".
Well, of course they did not and so we witness once again the well-known phase transition from investors interested in return on their money, to investors interested only in the return of their money.

Brad DeLong has also addressed the same topic in The Subprime Meltdown Hits Quant Hedge Funds:

If you had asked me where the subprime meltdown was going to hit first, I would never have guessed "heavy-quant hedge funds." Yet so it has:

Blind to Trend, 'Quant' Funds Pay Heavy Price: by Henry Sender and Kate Kelly:
Computers don't always work. That was the lesson so far this month for many so-called quant hedge funds, whose trading is dictated by complex computer programs. The markets' volatility of the past few weeks has taken a toll on many widely known funds for sophisticated investors, notably a once-highflying hedge fund at Wall Street's Goldman Sachs Group Inc. Global Alpha, Goldman's widely known internal hedge fund, is now down about 16% for the year after a choppy July, when its performance fell about 8%, according to people briefed on the matter. The fund, based in New York, manages about $9 billion. The fund's traders in recent days have been selling certain risky positions, according to these people. Early this week, those moves sparked widespread rumors on Wall Street that the entire fund might be shut down. A Goldman spokesman has said the rumors are "categorically untrue."

Campbell & Co., an $11 billion hedge fund that trades in the futures market as well as in stocks and bonds and is completely driven by such computer programs, was down 10% to 12% by the end of July. Quant funds -- "quant" stands for quantitative -- generally operate by building computer models of market behavior and then allowing the computer programs to dictate trading. A recurring characteristic of the recent trouble in financial markets is that many lenders, funds and brokerages were following statistical models that grossly underestimated how risky the market environment had become. "Our risk models failed to pick up the fact that we were due for a correction," says Keith Campbell, founder of Campbell & Co. "We were highly diversified. It was the perfect negative storm."... He told investors that the losses stemmed from "a unique combination" of factors.... "All [computer-driven] managers say the models make sense and look like they are working," says Bill Johnston, founder of Bayon Capital, an investment fund based in San Francisco that isn't computer-driven. "But then something happens which statistical probability suggests would never happen."... Renaissance Technologies Corp.... is holding up despite the market's downturn.... Other hedge funds declined to disclose to brokers or portfolio managers in charge of so-called funds of hedge funds just how badly wounded they have been by the recent extreme swings...

"Our strategy is fine. We were just hit by a sixteen-standard-deviation event." "Then it didn't happen: the universe isn't old enough for even one sixteen-standard-deviation event to have ever happened."

Tails are fat.


Wolfgang blames us:

[*] Maybe those complicated stories can be reduced to a much simpler story after all; U.S. consumers lived beyond their means for several years, wasting away their savings (in home equity) and are now in too much debt. Many investors were foolish enough to lend them money. But who wants to hear that?

My first question is this: If clever guys can design statistical models designed to fail only in the case of extremely unlikely random events, can some other clever guy arrange for such an unlikely event to happen non-randomly?

Also, I can understand how a bunch of dumb consumers who would really like to own a house could be persuaded to live beyond their means - after all, if the whole country is, why not them? So how did the IQ 150 plus Rocket Scientists manage to get sucked in?

Karl Rove

The WSJ reports this morning that Karl Rove is resigning. If that story is behind the wall, The WaPo has the story here.

Rove is alleged to own a dungeon and well-concealed coffin in an undisclosed region of Texas. He plans to write, teach, and wait for the next dark age.

Beauty

The always insightful Bee asks a deep question:

Our perception of beauty has developed with evolution. What reason do we have to believe it is good guidance to understand the fundamental laws of nature?

The astounding thing is that, so far, it has been good guidance indeed. We can't be sure that that will continue - maybe the string theory landscape is all there is. Why should it be the case that there exists in the universe "the unreasonable effectiveness of mathematics in understanding the physical world," as Eugene Wigner put it?

Nobody knows the answer, I suspect. But, as the leaper said after passing 90 stories of the 100 story building: So far, so good.

PS: Bee's post was grossly distorted and criticized by You know Who, and a response by Bee earned her the coveted Deleted by LM award.

Sunday, August 12, 2007

Olympians

America's Physics Olympians scored a respectable tie for third at the World Physics Olympiad, winning two gold medals and three silvers in Iran recently. The WaPo has several nice stories on the US contestants.

Both Sides Now

Overdue for Newsweek to Lose the Egregiously Dishonest Robert Samuelson.

Last week Newsweek ran a great news cover story on the continuing efforts of the global warming deniers to obscure, obfuscate, and lie about the evidence of anthropogenic global warming. This uncharacteristic feat of journalistic honesty must have rankled some of the dinosaurs lurking in the WaPo's icy journamalistic heart, because this week Robert Samuelson employs his column in the same magazine to attack the piece. The attack is striking mainly for the blatant dishonesty of its approach, though that's hardly a surprise to those who have watched Samuelson, bob, weave, and distort to the wing-nut tune these many years.

Samuelson says:

The story was a wonderful read, marred only by its being fundamentally misleading.

So, exactly how was it "fundamentally misleading?" Samuelson next spends four paragraphs avoiding the question with a riff on an at best peripherally related but interesting question: what can be done about global warming. His answer: nothing. Doh!

But let us not be distracted so easily. He attacked the story, why? Four paragraphs down:

Against these real-world pressures, NEWSWEEK's "denial machine" is a peripheral and highly contrived story. NEWSWEEK implied, for example, that ExxonMobil used a think tank to pay academics to criticize global-warming science. Actually, this accusation was long ago discredited, and NEWSWEEK shouldn't have lent it respectability. (The company says it knew nothing of the global-warming grant, which involved issues of climate modeling. And its 2006 contribution to the think tank, the American Enterprise Institute, was small: \$240,000 out of a \$28 million budget.)

Every sentence in this paragraph contains a lie, except possibly the last. Sharon Begley's story reported (not "implied")what has long been known and well documented: that Exxon Mobile, the American Petroleum Council, and an allied group of energy interests have orchestrated, coordinated, planned and funded a network of denialist think tanks, "institutes," councils, politicians, and individuals with the sole purpose of discrediting the scientific evidence for global warming. That last sentence in his paragraph, while possibly accurate in isolation, is nonetheless equally dishonest, since it attempts to portray one small part of a huge campaign as representing the whole.

Except for that slim, deeply dishonest paragraph, the rest of the column is an unexceptional discussion of why it would be hard to do anything about global warming. If I were slightly more paranoid, I would think that the sinister hand of Donald Graham had slipped that paragraph into a boring story.

Link to column via The Reference Frame.

Rudy, Hero of 9/11

As Mayor, Rudy Giuliani insisted on locating the emergency control center in the World Trade Center, despite the fact that the WTC had already been the target of terrorist attacks. He wanted the poshly appointed center close to his office, it seems. For one thing, before he acknowledged his adultery during his second marriage, he used it for assignations with his then girlfriend, Judith Nathan.

Rudy Giuliani got into a little hot water by claiming that he spent more time at ground zero than the rescue and recovery workers. Sometimes a clarifying follow-up question can help clarify things. Perhaps he was including the (pre 9/11) time spent screwing his mistress there.

Saturday, August 11, 2007

This Week in Denial

There was great joy along the river when indefatigable statistician (and denier) Steve McKintire discovered an anomaly in the GISS data. He reported it to NASA and recalculations were made. The result, hailed by denialist bloggers, talk show hosts, and the benighted everywhere, was that 1934, in the United States, which had previously been a statistically insignificant 0.01 C cooler than 1998, was now a still statistically insignificant 0.02 C warmer than 1998.

This, according to the usual suspects, was proof that global warming was a myth, that James Hansen should be fired or worse, and that the Earth was indeed flat, as they had known all along. Now it is true that 1934, like 1998, was indeed very hot - it was the height of the dust bowl, and much of the Southcentral US was blowing away. It's also true that, as usual, our river dwelling friends don't seem to grasp the meaning of the word "global" in the phrase "global warming." The global trends were not noticably affected by this change in the temperature status of a couple of percent of the planet, and the global warming trend is unaffected.

Gavin Schmidt at RealClimate has the details in 1934 and all that. He also has an explanation of why these occasional recalculations are necessary (mainly trying to compensate for the effects of urbanization).

It's good, I suppose, that the people of the river had something to cheer about, because Sharon Begley of Newsweek had a cover story on the denial industry: The Truth about Denial. The contents aren't news to those of us who have followed the doings of Exxon Mobile and its agents and allies, but they may be new to the Newsweek audience. An excerpt:

[California Senator Barbara]Boxer figured that with "the overwhelming science out there, the deniers' days were numbered." As she left a meeting with the head of the international climate panel, however, a staffer had some news for her. A conservative think tank long funded by ExxonMobil, she told Boxer, had offered scientists $10,000 to write articles undercutting the new report and the computer-based climate models it is based on. "I realized," says Boxer, "there was a movement behind this that just wasn't giving up."

. . .

Since the late 1980s, this well-coordinated, well-funded campaign by contrarian scientists, free-market think tanks and industry has created a paralyzing fog of doubt around climate change. Through advertisements, op-eds, lobbying and media attention, greenhouse doubters (they hate being called deniers) argued first that the world is not warming; measurements indicating otherwise are flawed, they said. Then they claimed that any warming is natural, not caused by human activities. Now they contend that the looming warming will be minuscule and harmless. "They patterned what they did after the tobacco industry," says former senator Tim Wirth, who spearheaded environmental issues as an under secretary of State in the Clinton administration. "Both figured, sow enough doubt, call the science uncertain and in dispute. That's had a huge impact on both the public and Congress."

The whole story is well worth reading.

Friday, August 10, 2007

The Kindness of Strangers

Like Blanche Dubois, the US has become financially dependent on the kindness of strangers. Brad Setser takes a look at this in The balance of financial terror, circa August 9, 2007 , quoting extensively from Former Treasury Secretary (and former Harvard President) Larry Summers:

Back in early 2004, former Treasury Secretary Lawrence Summers highlighted the emergence of what he termed the "balance of financial terror." China – and others – relied on the US for demand that their economies were not generating internally, and the US depended on China – and others – for financing. Summers defined the balance of financial terror as:

"a situation where we [in the US] rely on the cost to others of not financing our current account deficit as assurance that financing will continue."


China now holds about a trillion dollars in US debt - equivalent to 1/3 of its GDP.

China's growing dollar holdings, in turn, finance much of the US current account deficit. Summers noted the United States growing dependence on the discretionary acts of "political entities" in early 2004:

"There is surely something odd about the world’s greatest power being the world’s greatest debtor. In order to finance prevailing levels of consumption and investment, must the United States be as dependent as it is on the discretionary acts of what are inevitably political entities in other countries? It is true and can be argued forcefully that the incentive for Japan or China to dump treasury bills at a rapid rate is not very strong, given the consequences that it would have for their own economies. That is a powerful argument, and it is a reason a prudent person would avoid immediate concern. But it surely cannot be prudent for us as a country to rely on a kind of balance of financial terror to hold back reserve sales that would threaten our stability."

Since then, the United States' dependence on a single political entity has only increased.

The rest of the article discusses in detail Chinas recent hint that its patience as a lender was not unlimited, and the arguments for why China might or might not want to continue extending its credit.

This looks to me like another calamity waiting to happen, brought to us as usual by Calamity Dick Cheney and Buffalo Brains Bush.

Thursday, August 09, 2007

Amazing Money Secrets of the Super Rich!?

Buy low, sell high; get an effective monopoly on something in high demand; be lucky. So far, not too amazing, but these ideas explain a lot. The richest man in the world today, Mexico's Carlos Slim, built his fortune on monopolies. Some of these he acquired by shrewd business deals, some he acquired through sweetheart political deals, and others he got through various techniques of suppressing rivals. The sixty billion dollars or so he's worth is about 7% of Mexico's GDP - proportionately more of the economy than Rockefeller, Morgan, and Carnegie at their peak. His wealth has put him beyond any political power, save his own.

Rockefeller, Carnegie, and others used similar tactics to achieve a similar result. Bill Gates had slightly different tactics, but the money machine was the same: an effective monopoly that allowed him to build millions of software products and sell them dear.

The WalMart story looks different. The Waltons built their empire in a commodity market that was already fiercely competetive. WalMarts secret has just been the relentless quest for efficiency and low prices, but in success, its much the same. Competitors are driven out and an effective local monopoly emerges.

Waking up with much of the world's oil in your backyard also works.

How, though, do we explain the latest generation of zillionaires, the hedge fund managers? How is it that they justify their fabulous earnings? Why doesn't market competition lead to lower fees? This question has been bothering Kevin Drum and Brad DeLong

FINANCIAL WIZARDRY....Brad DeLong asks a question today that's also perplexed me for quite a while:

I wound up being quite unhappy with my "fear of finance" piece, because it completely ducked one of the most important questions: why the extraordinarily outsized pay packets of the high financiers? Why doesn't competition — which sorta works elsewhere in the economy — cause us to see greatly reduced earnings? We understand, we think, why celebrities get paid so much — a combination of increasing returns in distribution, being the genuinely best in the world, and being well-known for your well-known-ness. But why financiers?

What is it that blocks effective entry and competition, exactly?

Coffee Anyone?

Memo to Self: Lose the Diet Soda

Not a surprise, but still a disappointment: Do Diet Foods Lead to Weight Gain?

Well yes, says this Time article:

If you think you're cutting calories by eating diet or low-calorie versions of your favorite foods, think again. A new study by Canadian scientists published in the journal Obesity suggests that our bodies can't be fooled that easily.

Other studies reported in the same article say:

Two years ago, scientists at the University of Texas reported in an eight-year study that for every can of diet soda that a person drank, he raised his risk of being overweight by 41%, compared to a 30% increase in drinkers of regular, sugared drinks. Earlier this year, another study of diet-soda drinkers came to a similar conclusion, this time about metabolic syndrome, the dangerous constellation of risk factors, such as obesity, high cholesterol and insulin resistance, that increases the likelihood of heart disease. In this report, part of the 60-year-old Framingham Heart Study, researchers found that soda drinkers, regardless of whether they consumed diet or regular beverages, had a 48% higher risk of metabolic syndrome than non-soda drinkers.

UPDATE: ... for every can of diet soda that a person drank, he raised his risk of being overweight by 41% . . .

Ouch! It seems that I raised my risk of being overweight by 41,000,000%! No wonder I'm fat.

Wednesday, August 08, 2007

China's Other Nuclear Option

From the Standard: China threatens 'nuclear option' of dollar sales.

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

I think this is less of a "nuclear option" than a mention of the obvious fact that China has a firm grip on one of our most vulnerable organs. Unlike a real "nuclear option" this one is one that can be rather precisely calibrated. Like a real "nuclear option" the money bomb is double edged - one of the first things to collapse would be US purchases from China.

More important than the threat is the fact that China cannot and will not continue to stockpile dollars forever - at some point they will get tired of lending us ever more money.

Tuesday, August 07, 2007

Republican for President

The last bunch of Republicans turned out to be crooks. What can we hope for from the next? On the evidence, gross hypocrisy, with hints of lunacy. For today's consideration, John McCain of Arizona, Senator, former naval aviator, long time prisoner of war in Vietnam, former straight talker and current sell-out. After falling foul of the law and ethics through his involvement with Arizona's anti-pornography crusader and savings and loan swindler Charles Keating, McCain got religion and crusaded against lobbyists influence and pork barrel politics. Until he decided he needed the support of the Christian right and its devotion to lobbying.

Standard politics so far. What qualifies McCain as a genuine lunatic are his pronouncements on war. This is a man whose fond vision is of war unending. Josh Marshall looked at his pronouncements in the Iowa debate:

McCain said that the fight against militant Islam is the calling or fight of our generation, or something to that effect -- and of course that's a quite subjective statement so he can say whatever he wants.

Then he says, though, that this is a fight that will be with us for the rest of this century. To quote the man, "I also firmly believe that the challenge of the 21st century is the struggle against radical Islamic extremism. It is a transcendent issue. It is hydra-headed. It will be with us for the rest of the century."

Now, think about that. That's ninety-three years.

You can almost imagine him licking his chops. Hoo boy, war for-ev-er! No piddling 25 year war against fascism, or sixty year fight against communism, but a whole century.

How preposterous. Most Islamic countries are aligned with us, are our dependents, or are our bankers - or all of the above. All together, their military power is a tiny fraction of ours. The only possible excuse for prolonged war against any or all facets of Islam is a scheme to siphon money from the treasury to military contractors. Unfortunately, that is just what Cheney-Rumsfeld-Bush-Lieberman-McCain and friends have given us.

Ants in the Kitchen

I caught a little bit of Edward O Wilson being interviewed on CSPAN. He had evidently been talking about the ecological crisis of habitat destruction, but was now answering questions called or emailed in. Besides being an expert of ecology, Wilson is of course a pre-eminent expert on ants, so the last question came in by email: "What to do about ants in the kitchen."

His reply (more or less):

Watch where you step. Be careful of tiny lives. Feed them small bits of peanut butter and a little honey. Watch them carefully through a magnifying glass and see how they make their living. You will see a life as interesting and strange as you could expect to find on another planet.

Sunday, August 05, 2007

Republicans vs. Islam

I caught a bit of the Republican Debate this morning - not much before my gag reflex took over - and one recurring theme was that we are "in a war with militant Islam" (Brownback) or a war against "Islamic extremism."(Tancredo) This strikes me as an extraordinary and dangerous propaganda line, one that even Bush has rarely crossed. There is a gigantic step between a war against terrorists who have attacked America and a war against "militant Islam," but there is only a tiny step between a war against militant Islam and a war against Islam in toto.

Because it would be very easy for a war against militant Islam to become a war against Islam, and because it is highly unlikely that any other country except perhaps Israel would join us in such a war, it would be very perilous. The US is much stronger than all the Islamic countries in the world combined, so that isn't the problem. However, such a war would have to be a war of extermination or at least total subjugation. It would be a civil war as well, since the US would fracture into religious groups.

Those promoting such a war are militant Christianists, militant Zionists, and, of course, unscrupulous politicians. The consequence of reigniting the religious wars of past centuries would likely plunge us back into some of the worst of the sixteenth century. It is unlikely that the enemies list would stop with Muslims. Atheists, Jews, Catholics, Hindus and other "others" would be more grist for those bloody mills. It is not impossible that Yugoslavia could happen here.

The American people must decisively reject these reactionary warmongers, or face a likely future of unending war. Remember please, that these idiots have proven incapable of pacifying one small desert country.

Franco's Labyrinth

This post by John Holbo of Crooked Timber inspired intense pangs of jealous envy. The comments are also very interesting.

I too believe that Pan's Labyrinth had a happy ending.

Evolutionary Biology of Self-Deception

UPDATE: I have changed the title to the present one (from "Misinformation Theory") which I consider more appropriate. I have read a little bit on what others have had to say about this topic, but haven't seen my particular point in any readings. I followed the hint from Tom Paine's comment.

Information is now more available than it has ever been before, so are we better informed than we used to be? Well maybe. There are some problems.

For one thing, there are limits on the speed with which we can absorb information and the amount of information we can retain. For another, the same technology that permits rapid dissemination of information also permits rapid dissemination of misinformation. There is nothing new about deception, either. As a species we have always been good liars.

One of the oddest forms of deception is self-deception. It's pretty easy to see the possible evolutionary advantages of being able to deceive others, but what could be the percentage in fooling ourselves? This is especially interesting to me, since I think that it is a pervasive and frequently pernicious influence in life.

My guess is that the fundamental driver for self-deception is our need to achieve some kind of cognitive coherence. One of the things we do, or at least I do, is to try to build up a coherent picture of the world. The value of such a coherent picture is that it allows us to make logical deductions. It's well known in logic that anything whatsoever can be deduced from mutually contradictory premises, and that is a very real threat to our ability to reason about the world.

There is a social dimension to cognitive coherence as well. Our ability to cooperate with others is dependent on having a common understanding of the cooperative behavior - if we can't agree on goals and the nature of the cooperation, it can't happen. That fact, I suspect, is why societies go to considerable trouble to impose a common world view on their members.

New knowledge challenges and frequently overthrows old world views. Science is an ongoing challenge to our world view. The theory of evolution was one of the most fundamental challenges to the common world view ever encountered. Before Darwin, almost everybody believed in some version the intelligent design idea. A natural corrollary was that we all had assigned places in the designed universe, and that tampering with those places was an unnatural activity.

Natural selection challenged all that, and consequently challenged all established hierarchies and values. Most fundamentally, it challenged the necessity of a God to plan and order the universe. Religion quite naturally recognized a deadly enemy and fought back bitterly. That's the social dimension of self-deception in the sevice of cognitive consistency, but the individual dimension closely parallels it. If religion is a fundamental ordering principle for your world view, accepting natural selection creates strong cognitive dissonance.

An even more contemporary example is the debate over global warming. For those who see, it is a profound puzzle that others regard global warming as a political issue, but it is. The social dimension of doubt here is the clear financial interest of those who own polluting resources in suppressing a conclusion that would cost them money. The fact that doubters are overwhelmingly from the conservative ranks is in part a result of that social power and the propaganda it generates.

I don't think it is an adequate explanation, though. Plenty of doubters, some of them intelligent, have no clear self-interest in energy production and are too wily to be taken in by propaganda - unless it is propaganda that they want to hear.

Once again I think internal cognitive consistency is the root of self deception. If your fundamental world view is a mystical devotion to the ideas of individualism and the virtues of a free market, a happenstance that demands collective action is a very unwelcome visitor. This, I think, is the root of the conservative folly on the subject.

It is a fundamental insight of evolutionary theory that clearly disadvantageous traits like sickle cell anemia persist in a population because they have a side effect (like resistance to malaria) that gives them an evolutionary advantage. This sort of adaptation is a classic example of why intelligent design theories fail. My argument is that self-deception thrives as a side effect of the need to maintain cognitive coherence.

This post had its origins in a discussion of this article by Bee.

Saturday, August 04, 2007

String Terrorist?

The organization for which I work loves training. An occasional subject is the topic of work place and other threats. The typical wacko who shoots up a business, school, or workplace usually has a considerable history of hostile and threatening behavior before he (it's almost always a he)comes in with guns blazing. Consequently, they say, the death threat, even if made in in a casual or seemingly facetious manner, is a bright red line which should never be ignored. Obviously there are exceptions - a friend may say to another "I'll kill you if you do that," and usually it's no more than an expression of disapproval. When the threat comes from a hostile individual, especially one with a history of somewhat unbalanced behavior, the situation is quite different.

Which brings me to the somewhat embarassing topic at hand. Our fellow blogger Lubos has gotten in trouble for threats before. When he rather indirectly threatened Peter Woit (I think the words were: "I hope you die soon,") Peter took the matter to Harvard. Perhaps that had something to do with Lubos leaving Harvard - I don't know.

In any case, his retreat to his castle somewhere west of Transylvania seems to have emboldened him, and this time I was the target. His comment was short of an absolute threat:

...I would be happier if the amount of misinformation were smaller - but to achieve this goal, we would have to get the right to freely shoot miserable pigs first. In current circumstances, if I shoot you...


But still much more direct than his threat against Woit.

Lot of bloggers get death threats, including very direct ones, and Lubos probably doesn't know exactly who I am. This threat is not exactly at the top of my list of worries, but it is annoying. In many ways I find it more disquieting than a similar or worse threat from some anonymous sorehead.

It does leave me with the puzzle of what to do. Anybody have any ideas?