Tales from the Meltdown: Geithner - Gone by June

Here, in two minutes, Chris Whalen of Institutional Risk Analytics lays out the plan that the Administration has been unable to articulate in six weeks.

Quote of the Day

“ Sex makes people free, therefore, we need to make people ashamed of sex so that even in freedom they’re slaves."

-Siege

Library Porn

Photo: Curious Expeditions
The Philosophical Reading Room of the Szabo Ervin Library, Budapest.


Photo: Marginal Revolution
Reading Room of the Stockholm Public Library, Stockholm.

50 Reasons to Reject Evolution

50 Reasons to Reject Evolution:

11.) Because I think the word “theory” actually means: “random stabs in the dark” when it really means: "an explanation of certain phenomena that is well-supported by a large body of facts and often unifies other similarly well-supported hypotheses" i.e. atomic theory, gravitational theory, germ theory, cell theory, some-people-are-dumb-motherfuckers-theory, etc.

12.) Because the fact that science is self-correcting annoys me. Most of my other beliefs are rigidly fixed and uncorrectable.

25.) Because I don’t realize that saying “microevolution is possible but macroevolution isn’t” is as stupid as saying “I can pick my nose for one second but I cannot pick it for 10 seconds.”

(via Pharyngula)

Brian Eno's School Days

From a Lester Bangs interview:

"I'll tell you the projects we had the first semester. You must realize that this is a real naïve bunch of students, all fifteen or sixteen, that come in with paint boxes thinking that they were gonna do Renoirs or something like that. I was involved by pure accident: it was the nearest art school. In fact, if I could have done, I would have gone to another one that I couldn't get a grant for. This was just a crummy little place in a little country town, and this bunch of students all from the country, and all with ideas about the nice paintings they'd be doing.

"On our second day there, our first drawing exercise was to make a visual comparison between a venetian blind and a hot water tap. It was meant to be in terms of how they functioned, not in terms of how they looked. And this boggled everyone.

"And then the first main project was that the students were put in pairs, and each pair of students had to invent a game, the function of which was to make some kind of psychological behavioral evaluation of people who played it. So they weren't necessarily competitive games, they were games that involved making a decision rather than a number of others, and then extrapolating things about people's personalities on the basis of those decisions. I think there were thirty students altogether, so there were fifteen games made. They varied through all sorts of things: mine was a kind of board game, others were whole rooms that you went through and did various things in. Anyway, all the students went through this, and consequently each student ended up with fifteen so-called character profiles. From those character profiles you had to make what was called a Mind Map, which was a kind of diagrammatic scheme of how you tended to behave in lots of different situations, and then the next part of the project was that you had to then assume a character who was as far as possible opposite to that one, and that was who you were to be for the rest of the semester, which was like eight more weeks. This was very, very interesting.

"And then we were put into groups of five on the basis of these new assumed characters. The meekest person would be like the group policymaker, and the one who tended to talk most would be who got to do all the dirty work, like buying things from the shops. He would be the dogsbody; that was my job, actually. And so you had people working with characters who were quite alien to them.

"And each group of five had another project that was a very complicated one that I can't explain, but we had to make the projects using those characters.

"There were some funny things (that) happened. There was one girl who was very timid, so part of her Mind Map stipulated that she had to walk this tightrope in front of the whole group every morning. This was her own stipulation, you know, these things weren't imposed; having designed your own Mind Map you then worked out a number of behavior patterns that you carried out.

"Another interesting thing was that the whole accent of the course was on working with other people; you could act alone if you wanted, but the accent was on group dynamics and how people worked together. In fact, we went into that in quite considerable depth, about how you got things done in groups and what sort of behavior tended to be counterproductive and so on. It was all very useful. I'm happiest working with other people anyway.

"It was really like early training in Oblique Strategizing, collaborating, all the techniques I use now, and it was certainly the most important thing that could have happened to me at the time. That lasted only two years and then everyone got sacked again, and I went to another art school: one of the staff whom I got on with particularly well got a job in another school and said would I come along and be a student there."

(via Bruce)

Heroic Chocolate

Amanda Palmer is in Australia, where she met Lance:

i owe you a treatise on chocolate, and love, and good, and bad.

here it
is:

good things happen and bad things happen. and also, bad things
happen and good things happen.
it is always like this.

when i got to
sydney, i stayed with lance.
lance is 31, and just came out to his parents
three weeks ago. after living a completely gay life forever that they were
totally oblivious to.
his boyfriend of a while is finally moving in with him
in new york. it’s significant.

his parents aren’t talking to him.
they say he’s going to get AIDS.
they say he’s going to go to hell.

it’s hard.

lance also found out something.
his mother told
him that he was allergic to chocolate when he was a little boy.

he’s
not, and he just found out. she was lying.
i kind of hate her.

there’s more poetry in this than can possibly be expressed.

so
lance has been eating chocolate every day since he came out, trying every type,
every incarnation and savoring like a madman.
in his hotel room there were
bars and bars, we had every kind of chocolate bar floating around, it was like a
drug den, and i helped the cause by eating chocolate first thing every morning.

we went to the fancy fancy chocolate shop on the circular quay in sydney
and we just bought shitloads of praline (the kind shaped like seahorses….i got
to bust his praline cherry, that was exciting)
and truffles and whatevers
and we sat there and we ate them all, one by one, in solemn gratitude.
chocolate had become a full-on symbolic oral celebration.

lance is
lucky, he will always eat chocolate like a kind of a hero, i think.

James Kennedy

"What an eccentric performance."

The Bush Dictatorship 2001-2009

Scott Horton of Harper's Magazine describes the extra-Constitutional activities in the Bush Administration: "We may not have realized it at the time, but in the period from late 2001-January 19, 2009, this country was a dictatorship."

Visit msnbc.com for Breaking News, World News, and News about the Economy

A couple of additional links:

2009 Harper's index

Brian Tamanaha posits that Yoo, Bybee, et al. acted in bad faith in writing the memoranda that effectively placed the President above the law.

The Daily Show Takes Apart CNBC

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

Nanotube Garden

Composite scanning electron microscope image of carbon nanotube structures constructed by John Hart's team at the University of Michigan. It reminds me of a plate from Ernst Haeckel's Kunstformen der Nature.

(via a chain of several people, ending with boingboing gadgets)

Zap

Dark Roasted Blend features a photo essay on creepy power plants. I'm pretty sure at least one of the sites has actually been used for a horror move (Blair Witch II). Power plants are high on both the risk and reward side for urban exploration: neat sights, possible toxic waste and dropoffs.

The Best of the Lone Gunman

The Lone Gunman presents his best links of the year. Some wonderful entrepreneurial stuff in there. I particularly recommend Study Hacks' advice: decide what kind of lifestyle you want, and reverse engineer your career to fit it.

Example Lifestyles

• The Power Broker: You live in a big city in a nice apartment. You climbed the ladder fast in a difficult business. You wield power. You’re good at what you do. You’re well respected. Your job is intense but you are super-organized so it doesn’t drive you crazy. You’re surrounded by good, loyal friends, and when you have fun, you have fun hard.


• The Serial Entrepreneur: You live in a nice San Francisco townhouse. You’ve started several businesses. Some more successful than others. You tend to alternate between an intense year or two growing a business followed by some extended time off for intense relaxation. You’ve got a network of good friends across the country and a bar down the street that you visit every Friday night to catch-up with your closest buddies. You use your off time to develop extreme hobbies and indulge in grand, hopelessly ambitious and wildly fun projects.


• The Virtual Voyager: You live in your dream house in a cozy community-oriented town, surrounded by natural beauty. You work virtually for several technology companies; setting your own hours. Three or four light days a week is enough to take care of your expenses. You and your family spend a lot of time outdoors, barbecuing with the neighbors, and, in general, enjoying small town life. You travel a lot for the sheer adventure of it.

Also, apropos of the "should I go to grad school" posts this month, here's the advice of the Science Creative Quarterly, which suggests that you think twice about it, due to the fact that there's a linear replacement rate for science faculty, but a geometric proliferation of grad students. The Malthusian pressure thus suggests that most science grad students should exit the research universities to do something else (teaching, government, industry). While we're busy redesigning grad school, we need to upgrade these alternative options in the eyes of the people laboring there.

Ways to be Cool

from Shyboyswin
(via a lot of people, until it ended up on boingboing)

Monetary Economics Taken to Woodshed

Mark Thoma on Williem Buiter's commentary on the current state of state-of-the-art monetary economics. Shorter Buiter: it's great at describing stable states, but awful at describing interesting ones.

Tales from the Downturn: the New Urban Landscape

Richard Florida, of The Rise of the Creative Class fame, has an extensive article on the sociological impact of the current crisis in the new Atlantic. He discusses the increasing disparity between hot urban cores and lagging "shallow roots" regions, as proxied by IP production and educational attainment:

Thirty years ago, educational attainment was spread relatively uniformly throughout the country, but that’s no longer the case. Cities like Seattle, San Francisco, Austin, Raleigh, and Boston now have two or three times the concentration of college graduates of Akron or Buffalo. Among people with postgraduate degrees, the disparities are wider still. The geographic sorting of people by ability and educational attainment, on this scale, is unprecedented.

The University of Chicago economist and Nobel laureate Robert Lucas declared that the spillovers in knowledge that result from talent-clustering are the main cause of economic growth. Well-educated professionals and creative workers who live together in dense ecosystems, interacting directly, generate ideas and turn them into products and services faster than talented people in other places can. There is no evidence that globalization or the Internet has changed that. Indeed, as globalization has increased the financial return on innovation by widening the consumer market, the pull of innovative places, already dense with highly talented workers, has only grown stronger, creating a snowball effect. Talent-rich ecosystems are not easy to replicate, and to realize their full economic value, talented and ambitious people increasingly need to live within them.

Big, talent-attracting places benefit from accelerated rates of “urban metabolism,” according to a pioneering theory of urban evolution developed by a multidisciplinary team of researchers affiliated with the SantaFe Institute. The rate at which living things convert food into energy—their metabolic rate—tends to slow as organisms increase in size. But when the Santa Fe team examined trends in innovation, patent activity, wages, and GDP, they found that successful cities, unlike biological organisms, actually get faster as they grow. In order to grow bigger and overcome diseconomies of scale like congestion and rising housing and business costs, cities must become more efficient, innovative, and productive. The researchers dubbed the extraordinarily rapid metabolic rate that successful cities are able to achieve “super-linear” scaling. “By almost any measure,” they wrote, “the larger a city’s population, the greater the innovation and wealth creation per person.” Places like New York with finance and media, Los Angeles with film and music, and Silicon Valley with hightech are all examples of high-metabolism places.

Fight Club Innovation

Tyler Durden's 8 Rules of Innovation

3. “I say never be complete, I say stop being perfect, I say let’s evolve, let the chips fall where they may.”

8. This is your life, and it's ending one minute at a time.

More on Grad School

Penelope Trunk demolishes the "grad school as response to a recession" strategy. In a more succinct version of a previous post here, she says, the "military is the terrible escape hatch for poor kids, and grad school is the terrible escape hatch for rich kids." She walks through the specifics of the various flavors of grad school, with specifics on each. It's an accurate and useful description. Grad school has three major flaws in general:

1. It has high costs, partially in money, but also in time. It requires a vast time commitment, with low payout for bailouts partway through, and high switching costs. PhD's in particular require uncapped time frames (as high as 7-9 years).
2. Most grad school options have highly limited exit options. A PhD outside of academia is a weird thing in the US, and makes it harder, not easier to get a real job. The academic hierarchy is jammed full of Boomers who got their positions in the 70's during the last boom era.
3. Quality of life is low. I don't even want to talk about it.

The best advice I have for grad school is: if you do it, get it over with quickly. There is not a degree on earth, outside of medicine, that should require you to be there for more than three years.

Two years for an MBA. Four for an MD, as at present, but the third and fourth year (ducklings/pre-interns) ought to be cash flow neutral. Law degrees should be compressed down to two in the future; the third year is filler. An MFA should be do-able in one high intensity year. PhD's should be good to go after three, as in some European models. Anything longer, and you're just shining your advisor's shoes.

Honestly, you're better off with a nice one year MA, as commonly offered in Economics or International Relations programs. Looks good on the resume, doesn't take you out of the workforce too long, and gives you some polish.

In any case, you need to make your pick based on the quality of your classmates. The ability to talk to a group of highly ambitious, really smart people with similar interests is the only real benefit of grad school outside of certification.

As for the military option, the upside is that every ex-military person I've interviewed (mostly captains coming off an ROTC pay-off, interviewing to get into an MBA program or consulting job) has two big assets:

1. a candid, can-do attitude toward problem analysis and problem solving


2. a broad emotional perspective. When a bad day is one where someone shoots you, there are no bad days in business

The downside to military life are much like the ones in grad school (long duration post-choice, poor quality of life, difficulty of switching, exit plans) plus the risk of injury or death.

The problem with a recession is that these other alternatives start looking better in comparison, but the decision is likely to outlast the economic crisis.

99 Things

Greg Rutter's Definitive List of 99 Things You Should Have Already Experienced on the Internet Unless You're a Loser or Old or Something

Alan Moore in Wired

Discussing the new Watchmen movie, and the near-impossibility of adapting comics to film. Also discusses the forthcoming Bumper Book of Magic, a grimoire for the whole family.

We were probably complacent because we assumed that we already knew about these things and these people. But we found out an incredible amount of new information.

We found out where kabbalah came from. It's not Hebrew at all, it's Pythagorean Greek. It was Pythagoras who first suggested adding three spheres to the classical seven spheres. He said, Yeah that's great, but you need another three spheres. You need one to represent the Earth, you need one to represent the six stars of the Zodiac, and one to represent the Primum Mobile—the first stirrings, or the origins of the universe, the Big Bang. It still obviously has a Hebrew element in its construction, but what happened is that the Pythagoreans had this system outlined, 10 spheres, each with their correspondencies. But this would have been translated into various languages, including Hebrew, in Alexandria around 100 BC to 100 AD. And there were scholars from all over the world passing through Alexandria. What must have happened is that Hebrew scholars picked up this Pythagorean stuff and realized they had a base counting system of 10, which would have made it appropriate to their mathematics, and that they could draw 22 lines between the 10 spheres, representing the 22 letters in the Hebrew alphabet. And they took it, and ran with it, and developed kabbalah as it is today. But the roots were originally Pythagorean.

...
We want this thing to have a lot of really fun inserts, fun features. Something that would delight a child. We want to make this not only a perfectly lucid and accurate book about magic, but we really want to make it a book about magic that would not disappoint an 8-year-old child if they came across it. Back when I was a child and I first heard about magic, then I kind of knew instinctively what a book of magic would be. It would be unimaginably wonderful. It would have fantastic things in it. It would be much better than the children's comics annuals I got at Christmas, and they were pretty wonderful. That is very much what we've tried to achieve. We want this to be magic that will be accessible to intelligent, modern adults. And we also want it to be magic that 8-year-old children will recognize as magic, as being as beautiful and glorious and entertaining as they had always hoped that magic would turn out to would be.

Warren Buffett Lays Out Some Reason

Berkshire Hathaway's 2008 Annual Letter, featuring a lot of logical thinking.

Stressed

Institutional Risk Analyst released its bank stress index report today. Details at the link.

Chicago vs. the World

Over on Angry Bear: Robert Waldman analyzes the validity of the IS-LM/Phillips Curve model, which Chicago finance guru John Cochrane called a "fairy tale". I am more than a little unclear on what models/assumptions my Chicago guys (Cochrane, Fama, Becker & Murphy; first-rate intellects all) are using that result in such different results from "everyone" else (Krugman, DeLong, et al). It is just a rehash of Friedman vs. Keynes or is there something more to it? Reading Cochrane's paper, it really does look like he's taking the Treasury View with regard to fiscal stimulus, by saying that an injection of $1 of government spending now is immediately offset by increased savings as we prepare to pay $1+interest in the future. An odd side effect of this is that actually paying down the debt in the future should not have any anti-inflationary effect at that time.

Update: Paul Krugman suggests an answer:

In the late 1960s macroeconomists began a search for microeconomic foundations — above all, an attempt to explain why nominal shocks seem to have real effects rather than merely affecting the price level. The 1970 Phelps volume, which suggested that imperfect information could explain a lot of what we see, had a huge impact on the profession. And when Lucas married this insight to rational expectations, it seemed to shake the foundations of Keynesian ideas about monetary and fiscal policy. Business cycles, Lucas suggested, last only as long as price- and wage-setters can’t disentangle nominal from real shocks — and monetary or fiscal policy can’t stabilize the economy, at most they add noise.

But it became clear after a few years that this approach wasn’t going to work: actual business cycles last too long to rely on imperfect information. And at that point the profession divided. One group went down the “new Keynesian” route, arguing that something such as small costs of changing prices must explain the rigidity we actually seem to see. This group isn’t averse to putting a lot of rationality into its models, but it’s willing to accept aspects of the world that seem clear in the data, even if it can’t (yet?) be fully explained in terms of deep foundations.

The other group decided that since they couldn’t come up with a rigorous microfoundation for price stickiness, there must not be any price stickiness: recessions are the result of adverse technological shocks, not demand shocks.

And the latter group, the equilibrium macro side, was so convinced of the logical correctness of its position that schools dominated by that view stopped teaching demand-side economics. (Schools dominated by new Keynesians, on the other hand, did teach real business cycle theory.) I haven’t been able to dig up the quote, but somewhere along the line Ed Prescott declared that his students wondered who Keynes was, because he was never mentioned in their courses.

And those trained according to this dogma were and are utterly ignorant of what Keynes, or modern Keynesians, have to say. They know that Keynesianism is stupid nonsense, because that’s what they remember having been told. But they don’t actually know why they’re supposed to believe that; the serious debates the profession had in the 70s about the microfoundations of inflation and unemployment theory are lost in the mist.

Update II 2/4/08: Brad DeLong reminds us that it's Say's Law , not Milton Friedman, that says that fiscal stimuli will result in immediate, perfectly counteractive measures, rendering fiscal policy useless.

Conversation with a Vulture Capitalist

The good news: some blue chip non-financials have been able to raise debt, and Obama gave a pretty good speech. The bad news: everything else, pretty much. Second lien debt is going at 33 cents on the dollar. Buy shotguns and canned food.

The Dynasty

Karen Crouse has a short profile of Jim Steen, Kenyon College's legendary swimming coach, who has coached the team to the longest running NCAA championship streak in history. At Kenyon, swimming is bigger than football, basketball and baseball put together, and it's all done for love of the sport.

He's also well known for what Crouse calls his "run on sentences" and quasi-zen pronouncements, my favorite of which is, "I don't, but if I did, which I do..."

Quote of the Day

"Richard Dawkins tells an anecdote about how an erstwhile and highly succesful editor of New Scientist was once asked what the philosophy of New Scientist was under his direction and he replied, 'Our philosophy at New Scientist is this: science is interesting, and if you don’t agree, you can fuck off.' "

Link of the day

Nouriel Roubini and Martin Mayer on the banks and CDS's, respectively.

Should I Go to Grad School or Join the Military?

When I first read this, I immediately thought, "I wouldn't recommend that you join the military," and my second thought was, "I can't really recommend that you get a PhD either."

On the whole, I think that this person should do two things: 1)consolidate their $50k in loans (good interest rates), 2)take a gap year (travel, work, lounge about). The long-term options will still be there in a year. There's no rush.

Rupert, Rupert, Rupert

The chief pleasure of a Rupert Everett interview is that he can be counted on to produce 30's & 40's style movie dialog on command.

To see Everett interact with older British women, as I would twice, was to see an exercise in hand-to-hand combat, white-glove division, that doesn’t exist in America. Everett, who grew up a son of a military-officer-turned-businessman, chafes at orders of any kind. Women of that age, no matter how polite, tend to give them. As he resists, Everett’s manners are sterling, but he gives as good as he gets. As she got off her bike, recognition dawned.

“I remember you,” he said, once we were inside the apartment. “I asked a friend to see the house for me, and you screamed at him because I didn’t go. You said, ‘I don’t show to assistants.’ And he was a friend.”

Godson stiffened her upper lip. “You have a bad view of me, then,” she said.

He parried. “No, not at all, very good actually,” he said. “That place brought me luck.”

She recovered. “This place could, too,” she said instantly.

He looked vaguely sorrowful, contemplating the living-room walls. “Not in the same way,” he said, finally. “Avocado could never give me good luck.”

He wandered through the bedrooms, each with child guards on the windows. “It’s a bit family-ish,” he said.

“From what point of view?” she asked sharply.

“From my point of view,” he retorted. Babst and I burst out laughing. This wasn’t conversation. It was dialogue.

She pushed some more. He pushed back. It was time to go. The parting shot was his.

“Be good,” he called as we headed down the stairs. “Careful on the bike.”

Alphaville Calls RBS "the Worst Company in the World"

A la Keith Olberman, or just a general comment?

The 2008 results are out, and RBS isn't doing so well, with £24 billion in losses, and more fun to come:

profits were more than wiped out by credit and market losses in concentrated areas around proprietary trading, structured credit and counterparty exposures. Over 50% of these losses pertained to ABN AMRO-originated portfolios.

The future looks grim, including layoffs and "run rate reductions".

They're also trying to move around current mark to market rules through reclassification:

Following the amendments to IAS 39 ‘Financial Instruments: Recognition and Measurement’ in October 2008, the Group has reclassified out of the held-for-trading category certain loans and debt securities, for which no active market existed in 2008, and which the Group intends to hold for the foreseeable future. As a result of the reclassification, income for the second half of 2008 was £5.8 billion higher than would have been the case had the reclassification not taken place; this was offset by impairment losses of £466 million on debt securities reclassified as available-for-sale. In addition, £2.1 billion was charged to available-for-sale reserve reflecting a reduction in the fair value of these securities.

Dieter Rams's Design Commandments

Rams was the influential designer behind many Braun products and described his design approach as "less, but better". -kottke

Rams' 10 design commandments:

Good Design...

...is innovative

...makes a product useful

...is aesthetic

...helps a product to be understood

...is unobtrusive

...is honest

...is durable

...is thorough to the last detail

...is concerned with the environment

...is as little design as possible

Heads I Win, Tails You Lose

NNT on the perverse incentives of banking bonuses in the downturn:

the incentive scheme commonly in place does the exact opposite of what an “incentive” system should be about: it encourages a certain class of risk-hiding and deferred blow-up. It is the reason banks have never made money in the history of banking, losing the equivalent of all their past profits periodically – while bankers strike it rich. Furthermore, it is thatincentive scheme that got us in the current mess.

Take two bankers. The first is conservative. He produces one annual dollar of sound returns, with no risk of blow-up. The second looks no less conservative, but makes $2 by making complicated transactions that make a steady income, but are bound to blow up on occasion, losing everything made and more. So while the first banker might end up out of business, under competitive strains, the second is going to do a lot better for himself. Why? Because banking is not about true risks but perceived volatility of returns: you earn a stream of steady bonuses for seven or eight years, then when the losses take place, you are not asked to disburse anything. You might even start again, after blaming a “systemic crisis” or a “black swan” for your losses. As you do not disgorge previous compensation, the incentive is to engage in trades that explode rarely, after a period of steady gains.

Credit Crisis Easingut

A look at the credit indicators suggests that we've moved from "possible apocalypse" levels down to what would normally be called "mildly alarming". This is progress, but I'd still like to hear anecdotal evidence that credit is flowing again.

Macropinna

Translucent-skulled, barrell-eyed fish. The green things in the middle of the head are the strangely-shaped eyes. The small white things above the mouth are the nostrils. Pharyngula has the details.

Bayesian Inference

Coma Shalizi over at Three Toed Sloth takes a look at Bayesian methods. Good reading, and includes the always-welcome Attention Conservation Notice at the outset.

(via 3quarks)

"We have Decided not to Die"

by Daniel Askill

We Have Decided Not to Die-Daniel Askill-2003-11'
by TiKris

(via Siege)

The Obama Code

George Lakoff guest posts over on fivethirtyeight.com on the values that underpin Obama's rhetorical method, identifying seven key assumptions or values:

1. Values over Programs
2. Progressive Values are American Values (e.g., compassion)
3. Biconceptualism and the New Bipartisanship
4. Protection and Empowerment
5. Morality and Economics Fit Together
6. Systemic Causation and Systemic Risk
7. Contested Concepts and Patriotic Language

He contends that one of Obama's key strengths is that if you buy the overlying rhetoric, you will implicitly buy in to the assumptions underlying it, and suggests that this approach to progressivism needs to be adopted on a larger scale to counteract the dominance of conservative voices in the media.

Tales from the Meltdown 11: The Quants

The Gaussian copula allows the user to assess the joint risk of a pair of events happening (e.g., the default of two mortgages), given an understanding of their correlation. The method was widely used in the financial world for the pricing of structured products and default swaps. Unfortunately for all of us, at least three things are wrong with the model: there is typically insufficient historical data to assess the default risks of the underlying (we just don't know enough about their behavior under different states of nature), the assumed distribution of these risks is actually non-normal (probably closer to a power law distribution with fat tails, per Mandelbrot), and the correlation between securities is non-linear (particularly true of downside events: as the meteor strike gets big enough, everyone is in for an extremely bad day).

Felix Salmon discusses the widespread use, and ultimate failure of the Gaussian copula method in the new issue of Wired:

"The corporate CDO world relied almost exclusively on this copula-based correlation model," says Darrell Duffie, a Stanford University finance professor who served on Moody's Academic Advisory Research Committee. The Gaussian copula soon became such a universally accepted part of the world's financial vocabulary that brokers started quoting prices for bond tranches based on their correlations. "Correlation trading has spread through the psyche of the financial markets like a highly infectious thought virus," wrote derivatives guru Janet Tavakoli in 2006.

What She was Wearing

What She Was Wearing
by Denver Butson

this is my suicide dress
she told him
I only wear it on days
when I'm afraid
I might kill myself
if I don't wear it

you've been wearing it
every day since we met
he said

and these are my arson gloves

so you don't set fire to something?
he asked

exactly

and this is my terrorism lipstick
my assault and battery eyeliner
my armed robbery boots

I'd like to undress you he said
but would that make me an accomplice?

and today she said I'm wearing
my infidelity underwear
so don't get any ideas

and she put on her nervous breakdown hat
and walked out the door

(via Jonathan)

Citibank Pulls Our Collective Leg

According to the Wall Street Journal, Citibank wants the US to convert its $40B preferred stock investment into common stock for 25-40% of the company, giving an implied valuation of $100-240B for the bank. For comparison, the current market cap is roughly $10-11B. This is preposterous--and insulting.

If we wanted to buy the damn bank, we'd just buy it. I'd like to see them turn down an acquisition offer at this point.

It's time for Citi to go through a pre-planned bankruptcy. Call it a restructuring, call it nationalization, just do it and do it now. Throw the swindlers out of a job.

Helmet Gun

I wonder why this delightful self-defence chapeau never really took off. Perhaps its time has finally come.

Happy Birthday, Mr. Gorey

E is for Edward, Eaten by Eels. Elsewise, he'd be Eighty-Four.

The Interregnum: Rebooting after the Crash

Jon Taplin takes apart the downturn.

Rebellion

[Dhani] Harrison, who went to college at Brown, recalls, "It was even that way at university. Before I proved myself, my teachers saw me as a guy getting a free ride in life because I was George Harrison's son."

In a way, it's understandable. When you look at the son's face and hear his voice, you can't help but be reminded of the father. Because of that, Harrison tried to distance himself from his family as a teen.

"When your parents are cool hippies, the only way to rebel is to get straight A's, do sports and enroll in a military school. That's what I did."

Polaroid Experiments

Peter Miller makes photography that undercuts the everyday use of the medium in various ways: electrocuting polaroids, illuminating them with fireflies, making simultaneous images, using polaroid film as if it were a print or a mosaic. The combination of the standardized format with the unusual production methods yields something beautiful that raises the hair on the back of your neck.

Competitive Yoga

Visit to an oxymoron: the competitive yoga event.

The men's division, for the most part, looked like dudes doing yoga very well. But watching the women, all performing serenely daring stuff, was like staring at water getting poured from a pitcher very slowly. It was lyrical, majestic, composed. Legs folded behind heads, and heads appeared between legs, chin on the floor, after impossible backward bends. Yoginis folded into lotus, balanced on their knees, and shot their legs back while balancing on their arms, smiling all the time. I may have been dreaming but I swear I saw, during the youth competition, one girl draw into a bow, arch back, and place her toes in her mouth. I'd been doing yoga for years, but this was the first time I'd seen poses like the ones I used to gawk at in the Guinness Book of World Records.

She's My Wingman

I went to college between the Second Ponytail Era, and the Time When Football Coaches Were No Longer Enraged By Earrings On Their Players. The hair of the townie girls, once teased into a heavily sprayed fan that made them look in profile as if they had been struck in the face with a frying pan, was deflating like ice in the spring. By the time I graduated, a year later than expected, the gel was gone altogether.

I met Katryn my sophomore year, when she came back from Burning Man with a navel piercing. She claimed to be the first girl in the Midwest with one; I don’t know how you’d check on something like that.

“Check this out,” she said, and lifted the bottom of her hoodie to show me. The metal sparkled among her field hockey manufactured abs. She was a woman who really knew how to make friends with men.

A lot of people think it’s strange that we became so close without hooking up. Instead, we slept around each other, seducing friends, lab partners, frat brothers and sorority sisters. What can I say, she was my wingman, and I was hers.

'This,' Chris announced, 'is going to be the best encore you’ve ever seen.'

'We've just got back from Japan, lost all the Brits, it's been a s**t day, but it's going to get better.'

Coldplay, after losing every Brit Award they'd been nominated for, went over to the War Child benefit, played a set, and were joined by Bono and the Killers for this encore:

David Carson on Design & Humor

"Boy, I hate the ones that are hard to read."

Juan Enriquez at TED

On your extropian future, thanks to cell biology, tissue engineering and robots. Also, why the government budget is frakked.

RIP, John Holabird

John Holabird, Chicago Architect. In the linked article, he talks about his "absolutely enormous grandfather (of Holabird & Root fame), and what an asshole Frank Lloyd Wright was.

The Dubious Joys of Being a Male Model

High rents, bunk beds and low pay for male models in New York's Fashion Week. I hear the buffets are nice, if you're actually eating.

Social Collapse Best Practices

Dmitri Orlov gave a talk about post-collapse culture for the Long Now Foundation, based on his experiences following the end of the Soviet Union. Some of this is good advice:

Here is another key insight: there are very few things that are positives or negatives per se. Just about everything is a matter of context. Now, it just so happens that most things that are positives prior to collapse turn out to be negatives once collapse occurs, and vice versa. For instance, prior to collapse having high inventory in a business is bad, because the businesses have to store it and finance it, so they try to have just-in-time inventory. After collapse, high inventory turns out to be very useful, because they can barter it for the things they need, and they can’t easily get more because they don’t have any credit. Prior to collapse, it’s good for a business to have the right level of staffing and an efficient organization. After collapse, what you want is a gigantic, sluggish bureaucracy that can’t unwind operations or lay people off fast enough through sheer bureaucratic foot-dragging. Prior to collapse, what you want is an effective retail segment and good customer service. After collapse, you regret not having an unreliable retail segment, with shortages and long bread lines, because then people would have been forced to learn to shift for themselves instead of standing around waiting for somebody to come and feed them.

This is a basic restatement of the axiom that all strategies have an embedded strength and weakness. Next, focus on "Food, Shelter, Transport, Security".

The Russian example may give us a clue. Many Russian families could gauge how fast the economy was crashing, and, based on that, decide how many rows of potatoes to plant. Could we perhaps do something similar? There is already a healthy gardening movement in the United States; can it be scaled up? The trick is to make small patches of farmland available for non-mechanical cultivation by individuals and families, in increments as small as 1000 square feet.

At a certain point, the prescriptions Orlov offers start to go off the rails. Essentially, they assume a profound collapse of the social and economic system, not just a collapse in the scale of demand within a working system. It is also pretty clear that the model for that innovation is not post-Soviet Russia, since post-post-Soviet Russia (Putin's Russia) isn't finding their way back to these solutions.

Which means we're back to Dr. Keynes & Co.: the best way to get out of a protracted downturn is to invest in things that will make the situation better.

Dream Journal

I'm Anderson Cooper, who in turn is Nick Fury. We're in a 60's era James Bond knockoff film that involves elaborate driving directions to a fieldstone-built country club and a Kirbyesque space base. Someone plays Unkle's "Unreal", and the credits roll.

Documenting the Tribe

Four young photographers on recording their friends, local party scene.

The Truth about the "Evolution Controversy"

"People disagree [about evolution]. Scientists don't"

-Bill Maher on Larry King Live 2/12/09

Belgian Star Trek Remix

I have no idea what this is any more than Wil Wheaton does (not should I), but it's extremely funny.

Craig Frazier's Sketchbook

98 pages of immacualte drawings. Themes: men in fedoras, birds, crickets, trees.

(via Design Observer)

Parceling of the Sky

A meditation on levitation. Reminds me of Colson Whitehead's Intuitionist cast of elevator inspectors, with their discussion of "uplift", a word used by elevator theorist James Fulton to describe the action of his elevators as well as the development of civil rights.

Aaron Schuster describes levitation here in a similarly laden way. Here he is discussing Blaise Cendrars' book and hypothetical movie, in which flight is escape, journey and mourning:

One of the great literary works of the past century dealing with levitation, combining the technology of aviation with Christian mysticism, is Blaise Cendrars’s Le lotissement du ciel (literally "The Parceling of the Sky" but translated as Sky Memoirs). Begun during World War II and published in 1949, Cendrars’s book presents a kind of literary collage. Prose poetry, exotic travelogues, personal memoirs, and found texts, including scholarly documents, are all pasted together in a complex construction. Cendrars is renowned as an adventurer, and the stories he recounts here do not disappoint: there is his trip across Siberia with a jewelry merchant, his pilgrimage to a strange Brazilian doctor obsessed with Sarah Bernhardt, his voyage from Rio to Cherbourg with 250 tropical birds (none survive the boat ride), his work as a war correspondent for British headquarters in Paris. But it is the death of his son Rémy, a pilot who perished in the early months of the war, that provides the novel’s "center of gravity." Often Cendrars’s "parceling of the sky" is interpreted as an act of mourning. He had spoken with his son about the idea of proposing St. Joseph of Copertino, famed levitator, as the patron saint of French aviators. Though Cendrars’s plan was foiled by the American air force, which adopted St. Joseph as their own guardian angel in 1943, his fascination for the flying priest was unabated. While hiding from the Gestapo in Aix-en-Provence, he spent his time in the library immersing himself in the study of levitation, and in particular the life of St. Joseph.

Cendrars ends the first part of the book with a passionate proposal to make a film about the levitating saint: "If a producer ever feels like making this prodigious film, I—I, who have sworn never again to waste my time making films—will drop everything, give up my solitude, my tranquility, and my writing, to make this film about St. Joseph of Copertino, in memory of my son, Rémy, the pilot, and as a souvenir for his sometime girlfriend, the out-of-work baker’s girl, with whom I lost touch in wartime Paris."

Happy Darwin Day

We're all still evolving, 200 years later.



PZ Myers, predictably, has a couple of good items up, like this:



Or Gary Marcus's excellent WSJ article on the true meaning(s) of "fittest", as in "survival of the".

Give 'em the Hose

Bret the Gremlin interview at 5:15.

This same technique works with bank CEOs and Repblican Congresscritters.

Blade Runner?

No, it's the Mandarin Oriental Hotel in the CCTV complex. The Lantern Festival takes on a different meaning here.

Blade Runner?

No, it's the Mandarin Oriental Hotel in the CCTV complex. The Lantern Festival takes on a different meaning here.

CNBC vs. NNT and Roubini

This video clip is astonishing, because both Taleb ("Mr. Black Swan") and Roubini ("Dr. Doom") are so smart that they literally can't communicate to the airheads on the CNBC panel, who seem to want a good stock tip. As Paul Krugman put it, it's like watching the Monty Python sketch where Karl Marx is asked about soccer trivia.

The Illuminated Astrolabe/ Shiva Mandala

Art Donovan built this great steampunk sculpture. It looks like it's partially under the influence of Paul Laffoley, and partially under the influence of the Chronophage.

Tales from the Meltdown 10: "An Electronic Run on the Banks"

Rep. Kanjorski on the government interventions that have been attempted since September. Particularly frightening is his description of the run on the money market funds that occurred after September 15th.

Kanjorski: "The Treasury opened its window to help. They pumped a hundred and five billion dollars into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn't be further panic and there. And that's what actually happened. If they had not done that their estimation was that by two o'clock that afternoon, five-and-a-half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed."

(via boingboing)

OMG, Attained Enlightenment!

The Dalai Lama is on Twitter, has a lot of followers (~20k), and is following ~16k people.

Apparently, he and Wil Wheaton are Twiends.

Chicago Hellmouth

Where's the Spire?

...one expensive hole on Chicago's lakefront, the one dug for the construction of the Chicago Spire. Because of the economic downturn and the developer's secrecy about a date for the resumption of major work on the building, some have wondered if the hole will remain unfilled, in which case, count another one in a growing list of cancelled prestige projects.

(via BLDG BLOG)

Chicago Hellmouth

Where's the Spire?

Radiohead & USC Marching Band

Stroke one up for the bandies. This was just fun. And it worked better than, say, the Jonas Brothers and Stevie Wonder; they looked like they didn't know what to do with him, and kept running at him as if they wanted to make him flinch or something.

Model Mania

Anatole Kaletsky surveys alternatives to the Efficient Market Hypothesis and Gaussian-based statistical inference. Benoit Mandelbrot, econopsychology, control theory and Imperfect Knowledge Economics get the nod.

Punk Lincoln

Abe Lincoln stole my haircut, proof that everything becomes stylish again if you wait long enough. Flickr noticed this photo of Abraham Lincoln, and Kottke pointed it out.

Bare Ruined Choirs

Tenessee Claflin

Quite the character:

Cornelius Vanderbilt's onetime mistress. Born in a traveling medicine show. She and her sister Victoria Woodhull ran a spiritualist and magnetic healing operation in the Vanderbilt mansion, and were later set up as the first women to own a stock brokerage on the New York exchange. Later, both sisters were part of the sufferage movement and candidates for national office.

Tennessee Claflin was a newspaper favorite, a reliable source of ribald jokes and outrageous quotes. Born in a traveling medicine show, and having sold her body from the Midwest to Vanderbilt's mansion, Claflin was shockingly unapologetic. She was also pretty, smart, and nigh on a force of nature. She refused to be ashamed of her past, and refused to back down when confronted. Her frankness captured the imagination of New York. Over the space of several years, Tennessee Claflin became a vocal advocate for women's rights. She spoke out passionately for the equality of the sexes in all things, including service in the military. She ran for Congress on the "Free Love" ticket, rejecting the subordinate position that American law assigned to married women and arguing that all forms of sex and love should be free from the regulation of either the state or the church.

If all that makes "Tennie C" sound fairly radical for the Reconstruction era, she was, but her older sister matched her note for note. Forced into a marriage with an older man at 14, Victoria soon married again without bothering to discard the first husband. In her private broadsheet Victoria wrote praises to sex for sex' sake, with no intention to conceive children, that drew condemnation (and interest) from across the country. In 1871, Victoria appeared before Congress to demand the vote for women. She even one-up'ed Tennie's Congress run by announcing herself as a candidate for president in 1872, and engineered a kind of instantaneous convention in an attempt to get Susan B. Anthony to support her bid.

"This is Really Bad"

Krugman on the centrists' revision of the stimulus plan: 600,000 additional jobs lost, most effective programs cut.

When will we get to the point where Congress is more afraid of letting down the American people than it is of frustrating the right wing?

Economic Futures

Four scenarios from the Davos Conference on the future of the banking system: Financial Regionalism, Re-engineered Western Centrism, Fragmented Protectionism, and Rebalanced Multilateralism

i am invincible and insane

Objectum Sexuality

I'm sorry, I'm sure I'm supposed to have feelings of solidarity and affirmation with sexual minorities, but Objectum Sexuality is just funny. It's a category error so profound that I don't quite know how to react.

Amy Wolf is in love with a fairground ride called 1001 Nacht, for which she writes poetry. Based on appearances, she seems like an out-and-proud lesbian, but has no interest in humans. She also loves a church banister, a banister in her home, and the Empire State building. Having connected through an OS people forum on the internet, Erika goes to visit Amy. (Both women are said to have Asperger's and share a history of abuse.) They go to the fairground to see 1001 Nacht. In the clip above, Amy is left alone to have an intimate moment with the ride, while Erika goes for a walk. She happens upon a picket fence and feels an immediate attraction.

Erika La Tour Eiffel married the Eiffel Tower and then took its name. But she doesn't like referring to the structure as "it" because "calling something an 'it' instantly means it's inanimate." She gets "a sense" of an object's gender. According to her, the Eiffel Tower is female.

After suffering abuse as a child, and bouncing between foster homes, she joined the US Air Force but during her training, was sexually assaulted, and defended herself with a Japanese sword, which was her lover at the time. She refused to part with the sword, and was discharged from the military for psychological reasons. She then fell in love with an archery bow — she became a US medal champion in archery — but her feelings for the bow waned after time and she moved on to bigger things, literally, as in: tourist attractions. On their one-year anniversary, Erika goes back to visit the Eiffel Tower to consummate their marriage. She lifts up her skirt, and straddles one of the beams with "no barrier" between them.

The Great Multiplier Debate

Mark Thoma comments on Menzie Chin's post "Why Can't We All Just Get Along? The Great Multiplier Debate", which reviews the various estimates and methodologies used to produce the estimates of the impact of fiscal policy. One of the key insights Thoma develops as a result of reading the article is that the models are optimized to deal with the policy questions (and economic biases) of the time when they were created:

...it shouldn't surprise us that most of the estimates on multipliers come from the old style, many equation, structural macroeconometric models, the traditional approach described above. These models were built at a time when questions about fiscal policy were in the forefront, so answers to fiscal policy questions come out of this framework easily. For this reason, because the models were built with this question in mind, there is an abundance of evidence about fiscal policy multipliers, particularly government spending multipliers, from research conducted during this time period. The next approaches to macro modeling and estimation, the micro-founded models and the VAR models, came into being as the fiscal policy question was falling by the wayside (most VAR models do not even include government spending and taxes). Thus, as you may have noticed, there isn't much in the way of evidence from these models that we can reply upon (and that's not even considering the fact that we have very little data from recessionary episodes to inform us on these issues). The models will be built - I guarantee you they are being built presently - but for now we have what we have.

Why Growth is the Best Response to a Downturn

Newsweek rounds up some very smart CEO's, who realize that the best time to build market share and invest in R&D is during a downturn. Playing defensively will set you behind in the long run, but may be the only way out if your finances are askew in the near term.

There is a general rule in business life: market share is won or lost during transitions. These periods can be times of technological or economic change, or when buying habits or other norms shift suddenly with a new generation. For example, the movement to digital from film cameras abruptly moved market share to Sony from Kodak. When Americans switched to fuel-efficient cars from SUVs, Toyota won customers from Detroit.

We should expect to see similar changes in market share as companies respond differently to the financial crisis. The analyst community will be lauding major cutbacks in spending and head counts, and moderating production capacity to align with demand makes sense. But companies that cut back on research and new product development do so at their peril. In the high-tech marketplace, for instance, companies that cut deep into R&D will probably fall behind competitors who continue to invest. In autos, aerospace, consumer electronics and many other industries, the same imperative holds true: you cannot save your way out of a recession, you can only invest your way out.

-Craig Barrett, Recently retired chief executive officer of Intel

Corporate leaders somehow need to judge how long the global slowdown will last. If the slump turns out to be severe but only short-term, companies that reduce inventory and cut back staff too aggressively will suddenly have to restock and rehire just as aggressively. But for most CEOs, especially those running public companies that risk falling stock prices, it seems easier to cut and take the risk. The equity markets are likely to remain unforgiving of companies that are too optimistic and don't cut costs.

-Jim O'Neill, Head of global economic research at Goldman Sachs

The Future Is Now Vol. LXX: Cheaper Nucleotides & Secondary Immune Systems

Rob Carlson notes the falling prices for gene synthesis and sequencing, at about $0.50 and $0.001, respectively, in 2008. Anders ponders whether we'll find the knee for these cost curves, as we did with Moore's Law.

In other news, researchers from the University of Pennsylvania are starting a clinical trial to produce an AIDS-resistant subset of immune cells:

Since the discovery that a small portion of people who are exposed to HIV do not get infected, scientists have been working to discover the secret to those people's resistance and how to make others resistant as well.

It turns out that most people have a gene called CCR5, which makes them vulnerable to HIV infections. The naturally resistant people have mutant CCR5 genes that inhibit HIV.

Previously, scientists found that by cutting the CCR5 gene out of white blood cells involved in the immune response known as T-cells, they could protect a tube full of human cells from the virus. The gene editing technique relies on proteins called zinc finger nucleases that can delete any gene from a living cell.

In theory, zinc finger nucleases could give that immunity to anyone.

The procedure is simple: Take some healthy T-cells out of an HIV patient, clip out their CCR5 genes, grow more of these clipped T-cells in a dish, and then put them back in the patient.

This is the next step in the development of customized secondary immune systems, capable of dealing with specific pathogens, enhancing wound healing, or replacement for immunocompromised individuals. The outstanding technical questions include:

• Will the immune cells be sufficiently active once reintroduced to the host?
• Can the secondary immune system be scaled up quickly enough in every case?
• Could pre-prepared, 3rd party stem cell derived immune systems be deployed?
• If so, how could autoimmunity or other adverse host reactions be avoided?

If all of that can be worked out, this would become a hugely important medical technique in coming decades. I look forward to watching this story develop.

People: Can't Live with 'Em

I've often said that a good night out is one where you wake up with a new name and a new tattoo, but this woman took that statement a little too far. She engraved her name and a few other designs into the flesh of the man she'd met at a nightclub four days before. Now she's on trial. (via Weird Universe)

In other news, this guy survived a parachute jump while strapped to his instructor, who'd just had a heart attack.

Books & Snow

Amanda visits the Clutes' House Made of Books in Camden Town. Do all of her friends have such cool places?

Bad Bank! Bad!

Joseph Stiglitz: "Bad Bank" idea = "cash for trash"

I couldn't have said it better.

Bad Bank! Bad!

Joseph Stiglitz: "Bad Bank" idea = "cash for trash"

I couldn't have said it better.

Fixing Underinvestment

Today brought a raft of comments and articles on the topic of investment in public goods, and the current opportunity to do something about this by way of the stimulus package. The best known prescription for pulling out of a recessionary economy which is too persistent to be solved by monetary policy is the Keynesian prescription for increased deficit spending, and the best option for that in terms of long term results is non-military investment in public goods.

Then, we have to build an economy that is green, innovative, efficient and equitable. These things improve the risk/return profile of the economy; they also allow you to have a successful economy for the long term.

These people get it:

David Leonhardt in the New York Times Magazine:

ONE GOOD WAY TO UNDERSTAND the current growth slowdown is to think of the debt-fueled consumer-spending spree of the past 20 years as a symbol of an even larger problem. As a country we have been spending too much on the present and not enough on the future. We have been consuming rather than investing. We’re suffering from investment-deficit disorder.

You can find examples of this disorder in just about any realm of American life. Walk into a doctor’s office and you will be asked to fill out a long form with the most basic kinds of information that you have provided dozens of times before. Walk into a doctor’s office in many other rich countries and that information — as well as your medical history — will be stored in computers. These electronic records not only reduce hassle; they also reduce medical errors. Americans cannot avail themselves of this innovation despite the fact that the United States spends far more on health care, per person, than any other country. We are spending our money to consume medical treatments, many of which have only marginal health benefits, rather than to invest it in ways that would eventually have far broader benefits.

Along similar lines, Americans are indefatigable buyers of consumer electronics, yet a smaller share of households in the United States has broadband Internet service than in Canada, Japan, Britain, South Korea and about a dozen other countries. Then there’s education: this country once led the world in educational attainment by a wide margin. It no longer does. And transportation: a trip from Boston to Washington, on the fastest train in this country, takes six-and-a-half hours. A trip from Paris to Marseilles, roughly the same distance, takes three hours — a result of the French government’s commitment to infrastructure.

These are only a few examples. Tucked away in the many statistical tables at the Commerce Department are numbers on how much the government and the private sector spend on investment and research — on highways, software, medical research and other things likely to yield future benefits. Spending by the private sector hasn’t changed much over time. It was equal to 17 percent of G.D.P. 50 years ago, and it is about 17 percent now. But spending by the government — federal, state and local — has changed. It has dropped from about 7 percent of G.D.P. in the 1950s to about 4 percent now.”

And:

What will happen once the paddles have been applied and the economy’s heart starts beating again? How should the new American economy be remade? Above all, how fast will it grow?

That last question may sound abstract, even technical, compared with the current crisis. Yet the consequences of a country’s growth rate are not abstract at all. Slow growth makes almost all problems worse. Fast growth helps solve them. As Paul Romer, an economist at Stanford University, has said, the choices that determine a country’s growth rate “dwarf all other economic-policy concerns.”

Growth is the only way for a government to pay off its debts in a relatively quick and painless fashion, allowing tax revenues to increase without tax rates having to rise. That is essentially what happened in the years after World War II. When the war ended, the federal government’s debt equaled 120 percent of the gross domestic product (more than twice as high as its likely level by the end of next year). The rapid economic growth of the 1950s and ’60s — more than 4 percent a year, compared with 2.5 percent in this decade — quickly whittled that debt away. Over the coming 25 years, if growth could be lifted by just one-tenth of a percentage point a year, the extra tax revenue would completely pay for an $800 billion stimulus package.

Yet there are real concerns that the United States’ economy won’t grow enough to pay off its debts easily and ensure rising living standards, as happened in the postwar decades. The fraternity of growth experts in the economics profession predicts that the economy, on its current path, will grow more slowly in the next couple of decades than over the past couple. They are concerned in part because two of the economy’s most powerful recent engines have been exposed as a mirage: the explosion in consumer debt and spending, which lifted short-term growth at the expense of future growth, and the great Wall Street boom, which depended partly on activities that had very little real value.

(via the Big Picture)

Governor Schweitzer of Montana in the Daily Kos:

Schweitzer: What they did 25 years ago is they demagogued "environmentalists" and people who were pro-environment as people that are going to take away your logging job and your mining job. Well, as it turned out it wasn’t environmentalists who took your job away. It was mechanization and trade policy. My gosh, in Butte we’re mining as much ore with 380 as we did with 30,000 people in 1920. It’s mechanization. The timber industry—it’s mechanization and it’s cheap B.C. wood.... But, the Republicans managed to message it that it was environmentalists who took away your job, and it was always a question of the environment or your job, and people had to choose. And people chose, in big numbers, their jobs, and blamed it all on Democrats and on environmentalists.

All right. I don’t use those terms. [I say] "You’re going to be in a position where you can hand Montana off along to your grandkids in as good or better shape as when we found it." Now that doesn’t sound like a guy whose going to take away your job. And I’m not. In fact, with our restoration economy in Montana, heck, we’re creating jobs like crazy, cleaning up the messes from the past. Making the rivers cleaner, making the fisheries better. Improving the roads that we have in the forests so they don’t increase siltation and kill bull trout. All those are jobs. Heck, there’s as many or more jobs doing that than there was digging the holes or cutting down the trees in the first place.... So it turns out it was all a lie—jobs or the environment. To a large extent, what’s driving Montana’s economy today is people moving here to live in close proximity to those wildlands.

Barney Frank on This Week:



These people do not.

Davos '08 Roundup

I admit to a long-term fascination with the Davos Economic Conference. I imagine myself swanning around with the great and the good of the economic world, even though I imagine that the lunches must consist of the same unseasoned chicken that is served at big conferences the world over. What's more, this can't be the best year to be there, what with the meltdown and all. On the other hand, uniformly gloomy and depressed groups of people have a perversely energizing effect on my mood: when everyone thinks the world is coming to an end and that our sad condition is everlasting, I start thinking that our troubles will soon be behind us.

Other people rumored to be happy:

• Indonesians and turkish manufacturers
• Wind farm investors
• Anti-globalism protestors
• The guys at the local patisserie

David Gross mounted a 72-hour effort to find an optimistic CEO, and was asked whether his name was inscribed in the Book of Life from Revelation, found the Davos attendees to be kind of rude, and caught the Kahneman/Ferguson/Taleb off-the-record/on-the record Q&A.

Arianna Huffington schmoozed, while noting the newly sober attitude of many of the attendees. More at HuffPo's Davos News Page.