March 31, 2009

Prison Reform: Bravo for Jim Webb

The prison system American gulag is a national disgrace (as is the vile War on Drugs). Consider the fraction of the population that's incarcerated. Consider the public attitude: don't bend over for the soap nyuk nyuk hyuk. Reminescent of the Roman mob.

To his great credit, Jim Webb, to whom I donated when he knocked off the Great Theocratic Hope George MacacAllen, is risking significant political capital on doing something about it. See here, here and here.

Addendum. Webb was mentioned as a vice-presidential nominee and has campaigned with Obama. Is he doing this with Obama's support or at his instigation? (Because Obama does not want to get accused of playing racial politics.) The possibility warrants mention.

Whatever. I strongly support what Webb is doing.

March 30, 2009

Tax Havens

A month ago I commented at Dinocrat:
Why is the government choosing now to hound a major, fragile Swiss bank about confidential American deposits? It reminds me of the Bush administration’s sending Drug Warriors to eradicate Afghan poppy crops–just as the Taliban is making a comeback. (Presumably the Chinese would be more than happy to pick up where the Swiss may be forced to leave off, and they could make the Swiss look like small-time operators.)
The AP reports:
However, experts such as Florida tax lawyer William M. Sharp say the victory some are claiming over tax havens may be short lived. While the flow of untaxed money to places like Switzerland and Liechtenstein will diminish, new destinations are emerging in Asia and the Middle East that will be harder to crack, he says.
The Middle East hadn't crossed my mind, but it makes sense.

March 29, 2009

The GOP's Numberless Budget

The GOP House leadership held a press conference to present a Republican alternative to Obama's budget.

Except they didn't have any numbers. (H/T: LGF)

How can the GOP be so incompetent? Maybe it's because they won Congress at the beginning of the peace dividend and holiday from history. They take these conditions as facts of nature.

The Democrats also take them as facts of nature, but their time as the minority has made them hungrier and more politically adroit than the Republicans. Unfortunately for the country, they are looking even less fit to govern.

March 24, 2009

T. Boone Pickens' Father in the News

He is quoted:
My dad once said to me, "Son, a fool with a plan can beat a genius with no plan."
sigh What do you call a company run by a planless genius who reflexively meddles in any project that shows promise?


The Complexity Bubble:
It Keeps Growing and Growing...

Live free or die, my ***:
Ban on Feet-Nibbling Fish Leaves Nail Salons on the Hook
Mr. Ho's Import From China Caught On, But Some State Pedicure Inspectors Object
The U.S. Agency for International Development distributes condoms overseas. It is switching from American-made condoms to offshore ones:
"Of course, we considered how many U.S. jobs would be affected by this move,” said a USAID official who spoke on the condition that he would not be named. But he said the reasons for the change included lower prices (2 cents versus more than 5 cents for U.S.-made condoms) and the fact that Congress dropped “buy American language” in a recent appropriations bill.
I'm all for free trade, but I wonder why Congress dropped the buy American language during a serious recession[1].
[1] Note the scare headline: "U.S. to buy Chinese condoms, ending Alabama jobs." In the text:
In a move expected to cost 300 American jobs, the government is switching to cheaper off-shore condoms, including some made in China. [emphasis mine]
In fairness, there's this from the USAID spokesman:
Besides, he said, the sole U.S. supplier — an Alabama company called Alatech — had previous delivery problems under the program. (p)It's clear that Alatech's problems over the years, which apparently have been resolved, may have driven U.S. officials to seek much less expensive foreign-made condoms in the first place.

March 23, 2009

FDR's Restrained Use of Power?

I didn't know he refused urges to assume dictatorial powers.

March 19, 2009

My Reaction: Nausea, Shame, and Fear

The House voted to retroactively tax the AIG bonuses.

It's claimed that the people who ruined AIG are long gone and in effect the bonuses are being given to the janitors hired to clean up the mess.
If they did walk out the door, who would volunteer to work at the Chernobyl of the financial world? And what would become of the mammoth portfolio that remains?

"It would become the biggest naked position on Wall Street," one longtime Financial Products executive said, "and everybody would exploit it."
"Nobody is going to give it back and then stay," said one of the firm's employees. "If they give back the money, then they will walk. And they will walk into the arms of AIG's counterparties."
Failure of AIG was said to imply the collapse of the world financial system…

These people are receiving death threats, and politicians like Cuomo and Frank are pushing to have their names made public.

Is this the worst Congressional abuse we've seen since the McCarthy era?

(To be sure, the rulebook gets thrown out the window when the national interest is seriously threatened. But that's obviously not the case here. Or it wasn't.)

Is this the worst abuse of Congressional power since the McCarthy era? The effects could be even more destructive. Who will trust the United States after seeing this? I’m appalled. I’m ashamed. I’m scared.

Even if the effects are not apocalyptic, note that they’ve set the precedent of a 90% tax.


And half of the Republicans went along.

Corrupt gutless morons.

Divided government is the only reason I see to vote Republican.

Addendum. Connecticut's Republican governor, Democrat Attorney General, and Democrat legislature are piling on, issuing subpoenas to the AIG bonus recipients and CEO. And the NY Attorney General has demanded and obtained the names. Their names and home towns are being published. Voices of sanity are being ignored.

The American political class is threatening and ripping at the AIG people while they are literally struggling to save the world.

March 17, 2009

I Recant

I voted for Obama. I was wrong. I recant. If I could do it over, I would vote for McCain.

I will not vote for Obama in 2012. I will not vote for him even if his opponent is worse--which is entirely possible in this declining nation. (May Heaven lead us to a renaissance.)

Some things are more important than temperament. Some things are automatically beyond the pale, with no questions asked.

I didn't want to believe this. I waited for clarification. It came. Obama is serious about requiring wounded veterans to use private insurance to pay for their medical care.

This is more disgusting than the Lewinsky scandal.
More here.

Update. Retraction of the plan was too reluctant to make a difference to me.

March 13, 2009

Alas, Babble On

There's discussion of John Derbyshire's How Radio Wrecks the Right.

Not twenty years ago the Republicans were the party of ideas.  The party of the future.  The party of insight. Now it's the party of Rush Limbaugh and Mike Huckabee.

What happened?  A Christian conservative poet might have an explanation:

...Think now
History has many cunning passages, contrived corridors
And issues, deceives with whispering ambitions,
Guides us by vanities. Think now
She gives when our attention is distracted
And what she gives, gives with such supple confusions
That the giving famishes the craving. Gives too late
What's not believed in, or if still believed,
In memory only, reconsidered passion. Gives too soon
Into weak hands, what's thought can be dispensed with
Till the refusal propagates a fear. Think
Neither fear nor courage saves us. Unnatural vices
Are fathered by our heroism. Virtues
Are forced upon us by our impudent crimes.
These tears are shaken from the wrath-bearing tree.

I don't turn Limbaugh off when I chance on him, but I don't seek him out either.

IMHO serious conservative and libertarian thought acknowledges the necessity of difficult compromises between legitimate but conflicting values and aspirations. You don't win elections or a mass radio audience by talking about the tragic sense of life, but a political movement that ignores these things altogether will ultimately be trivial.

March 11, 2009

Back to the Uptick Rule

Daniel Aromi and Cecilia Caglio, economists at the SEC in Washington, said in a December report to former Chairman Christopher Cox that the so-called uptick rule was less effective when needed most, during panics that drive prices down and volatility up.
Who cares? We have to Do Something. Scapegoats must be found.

I'm about as persuaded about the uptick rule as I am that Global Warming is an urgent threat.

March 10, 2009

Good Point About American 'Meritocracy'

From Dinocrat commenter Paul:
It’s what you get from a team of glorified clerks, Yale/Harvard system gamers. They’ve grade grubbed, networked, sniffed their way to the top and now out in front, in the clear and separated from their elderly, formal mandarin institutions are clueless.
Like Churchill said, a very bad system, but...

March 6, 2009

Huh? The What Was Where? When? Why??

Ray Kurzweil's book "The Singularity is Near" (TSIN) came out in 2005. Columnist Kevin Drum wrote positively about the book but quibbled slightly. He extrapolated a log-log plot in the book and wondered why the immminence of the Singularity wasn't already obvious in 2005. Kurzweil emailed Drum:
It isn’t valid to extend a log-log plot. A progression is valid by showing exponential growth along a linear time axis, so a graph with a linear x (time) axis and a log y axis can be validly extended (provided of course that one has analyzed the paradigm being measured and shown that it will not saturate to an asymptote)...

So the point of the log-log plot is simply to show that a phenomenon has in fact accelerated in the past. It is not valid to extend the line. For one thing the log-log plot cannot go into the future because that is the nature of the log time axis...
In 2006 Kevin Kelly took up the issue and reposted Drum's extrapolation (click on the image to view a nontruncated version):Kurzweil responded to Kelly like he had to Drum:
You cite the extension made by Kevin Drum of the log-log plot that I provide of key paradigm shifts in biological and technological evolution...This extension is utterly invalid. You cannot extend in this way a log-log plot for just the reasons you cite. The only straight line that is valid to extend on a log plot is a straight line representing exponential growth when the time axis is on a linear scale and the a value (such as price-performance) is on a log scale...But it is not valid to extend the straight line when the time axis is on a log scale. The only point of these graphs is that there has been acceleration in paradigm shift in biological and technological evolution.
Unfortunately, by the time Drum appended Kurzweil's email to his review, I had lost the URL. By chance I recently rediscovered it on Singularity disbeliever PZ Myers' blog.

What to make of all this? sigh I've already spent too much time--and not enough time--thinking about it so I'm going to stop arbitrarily. My apologies to Kurzweil and other authors & commenters if I'm unaware of relevant insights. The following is way too speculative for my liking, but here goes:

For the purposes of this post, I ignore Myers' contentions and accept Kurzweil's chart as valid. I assume that his plotted 'events' were chosen a priori without using a preconceived mathematical model. Upon scrutiny, the plot reveals interesting properties and implications[1].

a. It resembles a log-log plot of a power law. Curiously, TSIN's discussion of the figure does not mention the power-law interpretation.

b. There are constraints on the "times to the next event": between any two events A and B, the sum of the 'times to the next event' equals the total time elapsed between A and B. That is obvious of course, but it has implications for the spacing of events that obey a power law or any formula for that matter. (Cf. Myers' harsh criticism of Kurzweil's selection of events.)

c. The overall slope of the 'line' is more or less consistent with a value of -1. A(n approximately) unit slope is noteworthy (each event is half as close to the Singularity as its predecessor), but why not some other number? I won't give equations, but basic engineering math suffices for handwaving arguments that the number of events will multiply logarithmically as the Singularity is approached. A logarithmic Singularity is not Kurzweil's preferred scenario, but he mentions it on p. 495.

d. Like commenter dreish at, I am unpersuaded by Kurzweil's criticism of Drum's extrapolation. Extending a line segment over a distance smaller than its length is plausible on its face. Kurzweil should make a better argument.

e. Drum's extrapolation begs a question that neither his post nor Kurzweil's response addresses. It seems reasonable to try to use 'countdown' data to forecast when the Singularity will occur. If that's not the case, why not? (Per 'dreish', consider the time axis, i.e. "years before today's date as of writing". If the 'date of writing' were the Singularity onset date, then events should have multiplied and clustered as the Singularity approached in real time; the x-axis of a log-time plot would have to be extended to display the real-time clustering. For a date of writing slightly before the Singularity onset date, I'd expect Kurzweil's existing log-log plot to depart from a straight line when the time between events becomes smaller than the time to the Singularity. [For a date of writing after the Singularity, the straight line would change to a "waterfall" near the onset time.] If the data is good enough, the deviation from a straight line might yield an estimate the time of the Singularity. Kurzweil does not discuss the issue. In fact, he describes the World Wide Web as an 'event' but, surprisingly, does not predict the time to the event that will follow the WWW.)

f. Afterthought. Note that if, as a function of the time to the Singularity, the time between events scales with a power less than one, the total number of events will necessarily be finite. (For sufficiently small positive x, x to a power is less than x if the power is less than one. Thus, it would be impossible to pack an infinite number of events close to each other as the Singularity approaches.) It's not clear how to interpret such a situation.

There is more to the Countdown plot than meets the eye at first glance. It's not entirely apparent whether the chart is meant to be descriptive or quantitative. If it's quantitative, it points to more information than has been extracted to date. Addressing Myers' criticism might be happen as a byproduct of digging such information out. How will the chart look when drawn at the Singularity? Will it retain its current linear form, or will the shape change? Either outcome would be interesting.
[1] NB: in TSIN, the chart that Drum noticed is followed by over 600 pages including 100 pages of annotated footnotes. IMO the Drum-Kurzweil kerfluffle is interesting precisely because new things can be said without tangling with the interlinked sprawl of the overall book.

Buyer-Remorse Bumper Sticker

Maybe some enterprising person will start printing these with the current year thereon, if you get my drift. I'm thinking of ordering a few and sending them to my Congressman, governor, the DNC...

March 5, 2009

Panic Mongering or Incompetence?

I increasingly see annualized numbers reported as monthly or quarterly ones. David Gergen at AC360:
Last Friday, we learned that the economy contracted in the 4th quarter by over 6 percent.
During the evening of March 3, I submitted a correction that the rate was annualized. No correction has been made.

Layers and layers of editors and fact checkers...

Laura Rowley, a Yahoo "financial columnist", writes:
...If I take out a mortgage whose terms I don't understand, and my home value doesn't rise as I expected, then that's my responsibility. If I buy mortgages or other debt, bundle, securitize, and sell them, and fail to properly assess their risk (or lose the paperwork), that's my responsibility and my institution's responsibility.

And if I issue credit default swaps to insure collateralized debt obligations and never actually had the collateral to back them up, that's not only my responsibility -- it's fraud, and I should be arrested for a crime.
The text moves from sensible to deranged. Let's see: if all of a bank's loans are not paid back and the bank goes under, is that fraud? If the Yellowstone Caldera erupts and wrecks half the country, is that fraud on the part of the insurance industry? Is a bank supposed to hold a dollar in cash for every dollar it loans? Should an insurance company keep the cash value of all its outstanding premiums?

Reader rating on the article is 4.5/5.0.

March 4, 2009

Who are the Short Sellers?

The uptick rule has been a whipping boy in the market decline, but some skepticism is emerging as people examine the issue in detail.

Like Jim Cramer, Jack Risko has been criticizing short sellers and the uptick rule in particular. Supposedly they act like a pack to bring down a weak stock, and this is imperilling the financial system since big banks are currently weak.

I'm unconvinced that short sellers are not revealing the true value of overpriced banks and thereby legitimately contributing to price discovery. If short sellers are involved in a vicious circle, I'm unconvinced that it's a deliberate conspiracy; it could be emergent behavior that mimics conspiratorial actions.

But another interpretation altogether crossed my mind: the short-selling could be legitimate hedging.

IMHO the picture underlying option valuation is that the reward/risk ratios of a stock and its options should be the identical. Accordingly, under idealized conditions, you can construct a combination of stock and option such that the risks cancel each other out: this recipe leads to the Black-Scholes valuation equation.

Suppose you're a market maker who sells a put option on BankAmerica. You have taken the risk that the stock will be sold back to you at a higher price than the market will charge. To reduce that risk, you hedge by shorting the stock. The more the stock drops, the more you should short in order to minimize the risk. If the stock develops a strong downward trend, you the put seller will act so as to reinforce the trend, and you could become a participant in a vicious circle.

Moreover, it turns out that a "sophisticated" put shopper can dispense with the market maker altogether. If the market maker can cancel his risk by shorting the put and the stock, a put shopper can equivalize the risk of holding an unhedged put by trading like the market maker would. This is the notorious portfolio insurance that was a prime suspect in the 1987 crash.

Now consider that the financial system, expecially the big insitutions, are highly leveraged. Suppose it's June 2008 and you have bought a "diversified" package of concocted illiquid "AAA" securities from Wall Street. You are getting worried. How do you protect yourself against the decline of illiquid composite instruments that are so complicated that no one understands their details?--By shorting liquid instruments that are related as closely as possible to your holdings. You protect yourself against systemic risk by shorting the system. So you're ready to go: when trouble appears, you short the stocks of large-cap financial institutions.

The amount of money in these holdings is many times the net worth of the financial system, the potential for a vicious circle is compounded many times.

If I had a case, I'd rest it with a flourish now, but all I have is a plausibility argument so I'll mundanely stop.

My Dinocrat comment is here.

Addendum 20090806. Suppose the value of those illiquid securities is many times the value of the issuing institution, and people try to hedge with the value of the stock...

March 3, 2009

Tea and Antipathy

I never liked the goo-goo left, but neither have I ever been entirely comfortable with the religious right as a political force.

People are holding tea parties to protest Obama's economic policies. Salt-of-the-earth Americans. They've been there all along.

Yet the religious right has ignored them all along. Instead it has allied with the Bush/Rove/Lott/DeLay/Cunningham/Abramoff crowd to get working control over the GOP.

It confirms my suspicion that they want to force an illegitimate agenda on the country via government.