It is generally agreed that our current financial mess was precipitated by the sub-prime mortgage fiasco. The system was already burdened by too much debt to absorb those new losses. The commentators have moved on to the American hobby of assigning blame: to President Clinton and the Democrats for forcing the banks to offer high-risk loans to the poor, the bi-partisan officials for deregulation, and to the poor themselves, for accepting 'free' money.
To me, a finance ignoramus, the real questions are:
a) How did a few million bad loans bring down such a huge system?
and
b) How did the system get so much debt?
The answer to a) seems simple. While the government could have paid the $500 billion or so in bad loans, or Wall Street could have given up bonuses for a couple of years, the way that the debt was securitized meant that each bad dollar in investment was multiplied by factors in the hundreds. All on paper, of course.
As for b), I note that Robert Rubin states that 'this could not have been foreseen'. I can only attribute this to a quasi-religious belief in the magic of the market. Several people that I know were worried at the trends over 15 years ago. Nominal house prices were rising faster than inflation and incomes combined, and too many people were using their homes as cash machines by re-mortgaging.
This fiat money was magnified many times by the system through derivatives, until we reach the current state. With a world's annual production of goods and services at about $55 trillion, there is an estimated $1000 trillion in derivatives. That is, we have mortgaged everything on the Earth for the next 18-19 years. That's what I call a sub-prime loan!
Homeopathic 'medicines' are made by diluting active chemicals with distilled water until no molecule of the ingredient is left. We appear to be actively approaching homeopathic wealth, diluted by paper.
Thursday, November 19, 2009
Sunday, November 15, 2009
Strangling the goose
When the dust has settled on the Keydata case...
when Keydata and its directors no longer pay the taxman on profits, wages and dividends derived from a business that had, until the tax office got zealous and technical, apparently paid off all its debts, was showing a profit and had cash in hand;
.. will this really look like a win for the Shylock approach to revenue gathering, and to regulation?
when Keydata and its directors no longer pay the taxman on profits, wages and dividends derived from a business that had, until the tax office got zealous and technical, apparently paid off all its debts, was showing a profit and had cash in hand;
when the former employees are claiming a complex array of benefits instead of paying income tax and National Insurance;
when PriceWaterhouseCoopers have sent in their final massive bill for services rendered;
when the investors, many worried half to death for months, finally (most of them) get massive collective financial compensation from the Government..... will this really look like a win for the Shylock approach to revenue gathering, and to regulation?
The British taxman has become a laughing-stock
Following the ridiculous 2001 sale of the taxman's own offices to a property company that smartly transferred the ownership to the tax haven of Bermuda, the British Treasury has made itself into a charity case and is asking for tax-deductible donations to reduce the National Debt.
Saturday, November 14, 2009
In a tizz about guns
I have enjoyed firing rifles when a youth in the Combined Cadet Force (joining was compulsory at my school in the 60s), but away from a range, firearms scare me. Their power has a deadly fascination, just as the Ring has, even for the good Gandalf. (It's said that the samurai swords made by Muramasa tempted men to shed blood.)
However, here in the UK post-Dunblane, we haven't actually banned handguns; only legal ones. What now?
The National Rifle Association in the USA (htp: John Lott) obviously has its own quite clear agenda, but their arguments don't seem easy to dismiss out of hand. Here are some extracts:
... Researchers, both public and private, have estimated total defensive gun uses at between 800,000 and 2.5 million times per year. To many, that's a difficult reality to accept since we don't hear the hundreds of armed citizen stories that should be reported daily...
... One of the first things we learn through analysis of media-documented self-defense episodes is that no place is "safe"—no matter the place, time of day, neighborhood or crowds, no matter how unlikely an area is for a violent confrontation...
...The most frequently reported crime prevented by armed citizens has been home invasion... Approximately 25 percent of documented defensive gun uses occurred in places of business...
... Many anti-gun advocates would grudgingly allow ownership of rifles and shotguns if they could ban all handguns. Armed citizens, however, beg to differ. Of stories identifying defender firearms, 79 percent involved handguns. Shotguns were used only 15 percent of the time, and rifles 6 percent. The message is clear: Banning handguns would remove the most common means of self-defense for most people...
... In confrontational shootings, studies show police hit their targets between 13 percent and 25 percent of the time. Of the incidents analyzed in this study, civilians hit their targets 84 percent of the time. This comparison does not account for the number of shots fired, only hits or misses. Nevertheless, it gives us a statistical basis to refute claims that only police should have firearms or that civilian shooters are largely ineffective in emergencies.
I'd like to pooh-pooh it all as gun-nuttery, but if opposing the right to bear arms, where would one begin?
What an irony that (allegedly) a man can single-handedly kill 13 and wound 31 on the biggest Army base in America, and be stopped only by a policewoman's pistol (or maybe a sergeant's, we're not sure).
However, here in the UK post-Dunblane, we haven't actually banned handguns; only legal ones. What now?
The National Rifle Association in the USA (htp: John Lott) obviously has its own quite clear agenda, but their arguments don't seem easy to dismiss out of hand. Here are some extracts:
... Researchers, both public and private, have estimated total defensive gun uses at between 800,000 and 2.5 million times per year. To many, that's a difficult reality to accept since we don't hear the hundreds of armed citizen stories that should be reported daily...
... One of the first things we learn through analysis of media-documented self-defense episodes is that no place is "safe"—no matter the place, time of day, neighborhood or crowds, no matter how unlikely an area is for a violent confrontation...
...The most frequently reported crime prevented by armed citizens has been home invasion... Approximately 25 percent of documented defensive gun uses occurred in places of business...
... Many anti-gun advocates would grudgingly allow ownership of rifles and shotguns if they could ban all handguns. Armed citizens, however, beg to differ. Of stories identifying defender firearms, 79 percent involved handguns. Shotguns were used only 15 percent of the time, and rifles 6 percent. The message is clear: Banning handguns would remove the most common means of self-defense for most people...
... In confrontational shootings, studies show police hit their targets between 13 percent and 25 percent of the time. Of the incidents analyzed in this study, civilians hit their targets 84 percent of the time. This comparison does not account for the number of shots fired, only hits or misses. Nevertheless, it gives us a statistical basis to refute claims that only police should have firearms or that civilian shooters are largely ineffective in emergencies.
I'd like to pooh-pooh it all as gun-nuttery, but if opposing the right to bear arms, where would one begin?
What an irony that (allegedly) a man can single-handedly kill 13 and wound 31 on the biggest Army base in America, and be stopped only by a policewoman's pistol (or maybe a sergeant's, we're not sure).
Rude funnies that made my wife laugh
... especially the first and last. (htp: Paddington)
But as I once said to a lady, "If our needs weren't simple, how could you satisy them?" "Spot on," said a fellow male, breaking the thoughtful silence.
But as I once said to a lady, "If our needs weren't simple, how could you satisy them?" "Spot on," said a fellow male, breaking the thoughtful silence.
Friday, November 13, 2009
Frustration
Several international studies show the the US and UK populations perform woefully in science and mathematics, when compared with other industrialized nations. I have no doubt that this is contributing to our economic decline, which is supported by Sackerson's recent post on the health of the German economy.
Neurological studies show that talent in these areas seems to be genetic. However, the disregard for those with the talents, and the simultaneous embracement of the technology that results, is a cultural issue.
One does not have to look hard to see some of the enabling elements:
Popular culture has elevated all opinions to the same level. Sometimes, the level is based on the volume of the holder, or the number of adherants. Thus, the majority of the US public holds creationism at the same factual level as evolution theory, chiropractic as equivalent or better than evidence-based medicine, astrology equal to astronomy, and homeopathic medicines as better than those with active ingredients.
Our leaders make decisions based on the current polls and personal bias, even when the issues are highly technical, like defense, energy, medicine and education.
Our colleges of education teach that pedagogy trumps knowledge base. In other words, a 'good' teacher supposedly can teach material that they do not understand. Business colleges teach similarly that management skills are independent of the industry involved.
In higher education, we pretend that logic and analytical skills really don't matter, while claiming to teach 'critical thinking'.
I can give no better example than to summarize the discussion at a college meeting that I attended today. One highly-educated individual said: "It is all very well to have technical training (in science, technology, engineering and mathematics), but that is not 'real' education".
Neurological studies show that talent in these areas seems to be genetic. However, the disregard for those with the talents, and the simultaneous embracement of the technology that results, is a cultural issue.
One does not have to look hard to see some of the enabling elements:
Popular culture has elevated all opinions to the same level. Sometimes, the level is based on the volume of the holder, or the number of adherants. Thus, the majority of the US public holds creationism at the same factual level as evolution theory, chiropractic as equivalent or better than evidence-based medicine, astrology equal to astronomy, and homeopathic medicines as better than those with active ingredients.
Our leaders make decisions based on the current polls and personal bias, even when the issues are highly technical, like defense, energy, medicine and education.
Our colleges of education teach that pedagogy trumps knowledge base. In other words, a 'good' teacher supposedly can teach material that they do not understand. Business colleges teach similarly that management skills are independent of the industry involved.
In higher education, we pretend that logic and analytical skills really don't matter, while claiming to teach 'critical thinking'.
I can give no better example than to summarize the discussion at a college meeting that I attended today. One highly-educated individual said: "It is all very well to have technical training (in science, technology, engineering and mathematics), but that is not 'real' education".
Thursday, November 12, 2009
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