Here’s a cute little web site that practices the art of reducing life’s complexities down to mathematical formulas. A few examples:

PONZI SCHEME = ROI – R – I

CRAZY = TALKING TO ONESELF – (CELL PHONE + EAR PIECE)

BRUNCH = BREAKFAST + LUNCH + CANTALOUPE

DOGGIE DAYCARE = KENNEL – GUILT

You get the idea.

Here’s a blog piece by Paul Krugman that analyzes the financial policy of the Obama Administration, captive as it is of Wall Street. He claims that Obama is basically trying to put Humpty Dumpty together again – that is, securitization failed to spread risk, but instead intensified it. Now they want ot go back, pick up the pieces, and try securitization of risk, one more time.

Underlying the glamorous new world of finance was the process of securitization. Loans no longer stayed with the lender. Instead, they were sold on to others, who sliced, diced and puréed individual debts to synthesize new assets. Subprime mortgages, credit card debts, car loans — all went into the financial system’s juicer. Out the other end, supposedly, came sweet-tasting AAA investments. And financial wizards were lavishly rewarded for overseeing the process.

But the wizards were frauds, whether they knew it or not, and their magic turned out to be no more than a collection of cheap stage tricks. Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.

But if Wall Street has spent $5 billion over the last ten years to influence policy, Wall Street is pretty well going to get its way, and forget for a moment whether a “D” (45% of contributions) or an “R” (55%) is in power, because that person is not really in power anyway.

To be fair, officials are calling for more regulation. Indeed, on Thursday Tim Geithner, the Treasury secretary, laid out plans for enhanced regulation that would have been considered radical not long ago.

But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.

As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.

But try they will. Wall Street, I mean. Obama is merely a conduit, as McCain would have been. Two parties is nonsense. It’s one party – the capitalist party, with two right wings, one of which flaps harder than the other, meaning we go in circles.

But who knows the future? Well, one person does – here’s the tail end of a blog comment by Dave Budge at Electric City Web Log, 3/26/09 11:49am:

In other words, we’re screwed. The only thing that can save us is to reduce spending as a percentage of GDP. But for at least the next two years that ain’t gunna happen.

I think what he is saying there is that change is in store, two years down the road. Mid-terms. Restoration of financial sanity. ‘R’s (55% of $5 billion) take over from ‘D’s (45%), and we’ll have a change of course. Of course.

He’s also saying that the government should not be spending money like it is – in fact, many R’s are saying this – that we should be cutting spending, reducing tax rates for the wealthy once more – you know – all of these people who did not see this coming now know how to get us out of it. It’s pure insanity.

Here’s some more formulas:

Steve and I are going back and forth now on our upcoming post #1,000. This one is #996, so we get to do three more of no consequence, and then have to deliver profundity. I suggested that we do something on this TV phenomenon called The Hills, but Steve says it is “painfully shallow.”

Who knew? I presumed that pop culture would contain elements of self awareness and would embed a deeper message, perhaps satirizing our consumer-driven wealth-crazed existence.

Not so. It’s just a show. The actresses are simple, stupid, pretty people. Totally.

Here’s something interesting I learned from that: It turns out that beautiful people don’t have to work as hard for success as the rest of us, and so end up in professions like modeling and acting, where looks trump everything else. So people in those professions tend to be shallow.

But that makes me wonder – I like this TV show called “House”, but can’t help but notice that everyone involved in that show is stunning and beautiful. At our local hospital, nurses tend to be a little frumpy and stressed – the medical profession in general attracts people who work very hard. Pretty people can make a living without working hard. So most doctors and nurses are pretty ordinary looking.

Could it be that TV is peddling a fake bill of goods? Could it be that ordinary people lacking in extraordinary beauty and charm are worthy too? Could it be that Jennifer Aniston will never marry again, and that it will not matter? Could it be that Brad and Angelina are really just very shallow and self-absorbed people, so much so that they think their own public ‘caring’ for others is just another form a narcissism?

I’m leaving #1,000 to Steve. I’m out of ideas. I don’t know what is profound, what is shallow. I mean, if Brad Pitt is just another pretty boy, if George Clooney is not really a deep thinker, if Tim Robbins and Susan Sarandon are just paper mache, then all I have left to guide my thoughts is Jon Stewart. And when I listen to him when he is not scripted, he doesn’t seem to know very much.

I am lost. Where to go for guidance? How to know what to think? I’m calling on Steve now to use post #1,000 to help me out. It will be a doozy – maybe the best blog post ever. No pressure.

Closing the Collapse Gap is a wry and wonderfully witty talk by Dmitry Orlav, an expatriate Russian living in America. Since it is a slide show/lecture from 2006, I am probably miles behind the curve. I just discovered him.

Orlav observes in 2006 that a collapse in the U.S. is inevitable, and will probably occur within the near future. He was prescient. But he’s not a pessimist by any means – just a sardonic observer with some useful experience for us as we stumble through it.

A few samples:

Many of the problems that sunk the Soviet Union are now endangering the United States as well. Such as a huge, well-equipped, very expensive military, with no clear mission, bogged down in fighting Muslim insurgents. Such as energy shortfalls linked to peaking oil production. Such as a persistently unfavorable trade balance, resulting in runaway foreign debt. Add to that a delusional self-image, an inflexible ideology, and an unresponsive political system.

Then there is our dependence on foreign oil – something that did not trouble the Soviets:

… [an] untenable arrangement rests on the notion that it is possible to perpetually borrow more and more money from abroad, to pay for more and more energy imports, while the price of these imports continues to double every few years. Free money with which to buy energy equals free energy, and free energy does not occur in nature. This must therefore be a transient condition. When the flow of energy snaps back toward equilibrium, much of the US economy will be forced to shut down.

Americans don’t like being compared to Russians, since we are exceptional people. But Orlav does the comparisons, and finds Americans coming up short in the survival of the fittest game. And then there is the American holiday season … We live miles apart for a reason. We don’t like each other.

When confronting hardship, people usually fall back on their families for support. The Soviet Union experienced chronic housing shortages, which often resulted in three generations living together under one roof. This didn’t make them happy, but at least they were used to each other. The usual expectation was that they would stick it out together, come what may.

In the United States, families tend to be atomized, spread out over several states. They sometimes have trouble tolerating each other when they come together for Thanksgiving, or Christmas, even during the best of times. They might find it difficult to get along, in bad times. There is already too much loneliness in this country, and I doubt that economic collapse will cure it.

Then there is our food system, with “organic” meat and vegetables shipped to various Whole Foods in refrigerated diesel trucks:

[Americans] don’t even bother to shop and just eat fast food. When people do cook, they rarely cook from scratch. This is all very unhealthy, and the effect on the nation’s girth, is visible, clear across the parking lot. A lot of the people, who just waddle to and from their cars, seem unprepared for what comes next. If they suddenly had to start living like the Russians, they would blow out their knees.

Perhaps the greatest efficiency of the Soviet Union was its incredible inefficiency. Things that benefit humans, like day care, paid vacations, pensions and health care, are not so conducive to “efficiency” as are fear of job loss, loss of home and savings.

A private sector solution is not impossible; just very, very unlikely. Certain Soviet state enterprises were basically states within states. They controlled what amounted to an entire economic system, and could go on even without the larger economy. They kept to this arrangement even after they were privatized. They drove Western management consultants mad, with their endless kindergartens, retirement homes, laundries, and free clinics. These weren’t part of their core competency, you see. They needed to divest and to streamline their operations. The Western management gurus overlooked the most important thing: the core competency of these enterprises lay in their ability to survive economic collapse. Maybe the young geniuses at Google can wrap their heads around this one, but I doubt that their stockholders will.

Then there is American “democracy” with our switches back and forth between two parties who are more alike than different. We can’t even get rid of the worst president in our short history for eight long years. That’s dysfunction junction.

Perestroika and Glasnost were all about democracy, and in my opinion it had the same chance of success as the hopelessly gerrymandered system that passes for democracy in the US, (although much less than any proper, modern democracy, in which the Bush regime would have been put out of power quite a while ago, after a simple parliamentary vote of no confidence and early elections). The problem is that, in a collapse scenario, democracy is the least effective system of government one can possibly think of (think Weimar, or the Russian Interim Government)…

Collapse is here, it seems. Are we prepared? My wife and I occupy a small patch of land, and use it to grow trees (currently being eaten by pine beetles) and flowers. Maybe we will convert it to a food coop. Maybe our neighbors will shoot us and steal it from us.

If you have a few minutes, read the whole talk. For me, it was rewarding and well-spent time.

“War is Peace; Freedom is Slavery; Ignorance is Strength.” The Party Slogan, Orwell’s 1984

Ward Churchill took the stand yesterday to defend himself. He was a University of Colorado professor who was removed from his position after he made impolitic comments in the wake of 9/11. He said some of the victims were, apparently, worthy of death

because they were too busy braying, incessantly and self-importantly, into their cell phones, arranging power lunches and stock transactions, each of which translated, conveniently out of sight, mind and smelling distance, into the starved and rotting flesh of infants. If there was a better, more effective, or in fact any other way of visiting some penalty befitting their participation upon the little Eichmanns inhabiting the sterile sanctuary of the twin towers, I’d really be interested in hearing about it.”

Offensive? Yes. Quite. It’s not that he isn’t on to something, however. The U.S. has rained hell on various countries around the world, leaving a trail of corpses that would reach to the moon if stacked. It seems to bother no one here that we bomb cities, starve children, torture and use chemical warfare on other countries.

But 9/11 happened to us , and that’s not right. The outpouring of victimhood was sad to watch – people so blind as to not be capable of seeing suffering in others, yet wanting vindication and revenge when it happens to them. Americans are an insulated people, kept ignorant by a pliable news media, and distracted by games and TV while our soldiers are off committing atrocities in our name.

It was blowback. Churchill said as much. The University people, of course, acknowledged his free speech rights. He could, as a citizen and a professor, make offensive remarks.

Then they railroaded him out of town. His scholarly work underwent scrutiny none could withstand, and sure enough, they found some alleged incidents of plagiarism and an unsourced conclusion regarding the U.S. Army infecting native Americans with smallpox way back when. (Churchill is Native American.)

Something very similar happened to Norman Finkelstein, who was denied tenure at DePaul for his controversial stands on Israel. His real crime was to expose Harvard Professor Alan Dershowitz as a fraud. He got the Dixie Chicks treatment, as did Churchill.

Goebbels was in favor of free speech for views he liked. So was Stalin. If you’re really in favor of free speech, then you’re in favor of freedom of speech for precisely for views you despise. Otherwise, you’re not in favor of free speech. (Chomsky)

I have commented elsewhere at this blog on the seeming contradiction that the people of East Germany and Russia could bring about meaningful change. They overthrew oppressive governments thought to be intractable. Here in the United States we don’t seem to be able to affect much change, no matter what.

Oh yeah – and freedom of speech … it’s kind of an illusion. Isn’t it.

Thanks to a boatload of free publicity from Professors Natelson and Juras of the University of Montana, I and many others are now aware of the Kaimin, the campus newspaper, and more specifically of its Bess Sex column, by Bess Davis. I should probably go to the archives to find the really salacious stuff, but I’m nearly 59 years old, and I just don’t have the energy. It feels a bit creepy.

Today’s column is pretty tame, urging campus couples to use condoms, or to avoid “riding bareback”, as she calls it. That’s good advice for young couples. (It’s an “advice” column.) Other than abstention, which few take seriously, promotion of the use of condoms is good public policy.

I’m a long-time observer of the way people behave, and become shrill and annoying when I see powerful people bombing and killing weak people and stealing their stuff. It’s all part of being the youngest child in a family, sensitive to injustice. Humans are capable of all forms of depravity, and also of justifying that depravity, and of even going so far as to claim that depravity is virtuous.

That’s part of what driving the professors – the notion that depravity is taken for granted. They are Victorian in their outlook, and open talk about sex, free indulgence – it’s all depraved in their eyes.

But sex is hardly something to get upset about. Since the 1960’s and the advent of the pill, it’s become easier to have sex without consequence, and social norms have softened. Many enlightened men now understand that women enjoy sex too, and occasionally have orgasms. So I’m told. And women are more open about it now, and men are taking this openness as an invitation. In olden days a girl who openly enjoyed sex was considered either a tramp or the “town pump”; now it is now understood that even good girls have sex, and enjoy it, and want it to be safe and protected.

But some things don’t change, and the current Bess Sex column hits on an age-old theme – honesty in a committed relationship, and trust. That part, it seems, has not changed. Women still want men to be faithful, and Bess acknowledges that men are often not faithful, and urges the use of condoms. Buzzkiller.

What little I know of computer programming can be put in a bean bag and still leave room for lots of beans. But I do know this – higher quality accounting software keeps a record of all transactions, including those in which transactions are deleted. There’s always a trail for the auditors to follow. They know who did what, and when it was done.

Election machines have such audit logs. But Premier Election Systems (formerly Diebold) machines have an additional feature – a built-in “Clear” button that allows traceless deletion of the audit logs. (And five of the company’s models delete the first deck of ballots automatically – it’s supposed to be used to delete the test deck before actual use, but in practice deleted real votes.)

So the machines don’t count votes correctly, and can easily by tampered with.

No self-respecting voting machine manufacturer would allow such sloppiness. It’s so common, so basic, so well-known, that such a flaw could only be there by design.

Current versions of Premier Election Solutions (formerly Diebold) have such design flaws. All of them in 34 states.

How ’bout that.

Vodpod videos no longer available.

Colbert means to be comical, but the idea of wealthy people “Going Galt” is in itself laughable. They should do so, if only to learn that wealth production goes on without them.

I have an idea for a novel – it will be called “Atlas Shoveled”. In it, all of the garbage collectors in the country go on strike, and the country slows to a crawl and eventually comes to a dead halt. They agree to come back to work on one condition – that they be paid a living wage and given some benefits, like health care. We give in. The country goes on as before, and wealthy people again undertake their wealth-producing activities.

I’m trying to get my feeble mind around this – in the current meltdown, one thing was obvious to any who even casually observed: Deregulation was in whole or in large part responsible for the mess. But there existed in ancient Greece and in our country today people who are very good at the art of obfuscation. They were then known as Sophists, and though once admired for their skills, “sophistry” today is not something to admire. In fact, it is the root of the words “sophomoric” and “sophisticated”, the latter not intended as any kind of compliment.

So I happened by Dave Budge’s the other day, expecting the sophists to be hard at work, and came across his most recent entry, How Regulation Is “Killing” Banks. If I may be so bold as to summarize, at the root of our failure to contain the financial meltdown is a law passed in the wake of Enron’s collapse, Sarbanes Oxley. Part of that law requires that public financial institutions use “mark-to-market” accounting for valuation of assets.

Mark-to market has been the Financial Accounting Standards Board (FASB) standard since December of 1991. It’s not new. Sarbanes Oxley did not create it, but simply moved it from Generally Accepted Accounting Principles to public law.

What is Mark-to-market (m2m)? It is simply a requirement that assets be valued at the their fair market value on any given day. If a bank owns a stock that it purchased at $100 a share, and it is only worth $25, it has to value it in its financial disclosures at $25. Similarly, if the stock is worth $150, that is its mark-to-market value. (It should be noted that Enron got in trouble in large part by inflating the value of its off-book partnerships by deliberately setting them up in such a way that they could use m2m to overvalue them.)

Well and good. It runs contrary to the previous standard accounting practice, which conservatively required “lower of cost or market” in asset valuation, never allowing companies to recognize gains until realized. That’s too conservative, probably. The problem with m2m arises, however, when we have a meltdown, a panic, when investors won’t touch supposedly toxic assets, when their immediate value is zero. In that situation, m2m creates a huge vacuum, and entire companies are sucked under. It may well be that their assets will fetch considerably more down the road than now, but m2m won’t allow for future valuations, or even for a discounted present value of future cash flows from those assets. So the requirement that banks use m2m, in effect, killed the banks.

So, sayeth the Budge. Hence, “Regulation is “Killing” Banks.” The problem with this line of reasoning is that it is obfuscatory rather than revealing. It pushes off to the side all of the problems that led us to the crisis we are in, and lays it all on a practice meant to inspire transparency in accounting. M2m is but a small part of the problem – the larger problem was lack of transparency – trillions of dollars in unregulated financial assets that were mostly invisible to people outside the banks. When real estate prices began to collapse, when mortgagors began to default, we began to become aware of the problem of these assets. They were not assets at all. And they were not insured in any meaningful sense. M2m did not cause that – in fact, m2m was a neutral force in the matter, as few knew and even fewer stated openly that the exotic-toxic asset valuations were suspect.

Even so, FASB and the SEC relaxed m2m requirements late last year. It’s no longer an issue.

There’s really very little that can be done in a meltdown but to do what we have done – start bailing. Investors are a panicky lot, but mostly savvy. They were fooled by the banks, but not by m2m. In fact, had we had true m2m, we would have known about the problem long before we did. Investors now are mostly scared by the fact that we seem to be in the midst of a collapse. Me too.

In the comments section of the post, The Budge says

I’m say[ing] that it [Sarbanes Oxley] may have exacerbated the problem taking it from a manageable market event to a $8 trillion dollar bailout.

A practice that came about in 1991 exacerbated a meltdown in 2008? Where was the Budge in 2006 and 2007, when m2m was showing the investing public huge financial gains?

And it was a “Manageable market event”?! I have accused him in the past of generally putting all market failures in the lap of government. In this post, I accused him of putting his eggs in a “non-disproveable hypothesis” in order to obfuscate. Later, he tells me (before a shunning) that

The reason the investment banks became too big to fail was because of the collusion with government…

Got that? I’ll do a sterile translation – the reason we had a meltdown is because the regulators failed to regulate, allowing financial institutions to become too big to fail. The Budge believes in regulation. I can take that to mean nothing else. If the regulators had not colluded with the bankers, there would have been regulation, and perhaps no meltdown.

But let’s not forget, regulation is “killing” the banks, and this was a “manageable market event”, so absence of regulation was really not that important anyway.

The Budge is educated, smart, erudite, seemingly well-reasoned. And a practitioner of the art of sophistry, in my ever-so-humble opinion.