After all it's not often one lives to see an event that our mathematical models predict can only occur once in 73-603 trillion billion years!

http://www.eurointelligence.com/article.581+M5f21b8d26a3.0.html

Gives new meaning to the saying "You don't see that everyday!"  So now it is safe & right to sneer at the disgraced "quants"

http://www.wilmott.com/blogs/paul/index.cfm/2008/11/17/Actuaries-Versus-Quants

The math got very very intricate and also very very wrong.

Currently my own wacky little model is predicting an upswing in Q3 2009.  But maybe that's the outcome that won't happen for another few hundred billion years! 

I'm going long on pencils and apples.

(Dedicated to Ellen and Quinn)

Fiat Interview

"We tried every trick in the book".

The Fiat CEO believes we are heading toward a world with as few as 6 automakers.   Right now the 3-month treasuries are trading at negative interest as everyone, including most likely the TARP recipients, flee to a safe harbor.  Congress needs to seriously reconsider its planned holiday recess.  After all, this kind of global economic earthquake doesn't occur very often.

Despite all that gloom, there are a dwindling minority of us optimists who still believe we are going to recover sooner than not.  But the world in one year may look a little like the end-state floating tree in Hayao Miyazaki's Castle in the Sky, denuded of an awful lot of commercial accretions.  And if the experimental economics lab results are right, we will just wind up creating another bubble to follow this one.  It seems to be in our nature.

So this party is over, but it won't be long before we start putting together the next one.   

This one is everywhere now:

(Bloomberg) The Somali Pirates, renegade Somalis known for hijacking ships for ransom in the Gulf of Aden, are negotiating a purchase of Citigroup.

The pirates would buy Citigroup with new debt and their existing cash stockpiles, earned most recently from hijacking numerous ships, including most recently a $200 million Saudi Arabian oil tanker. The Somali pirates are offering up to $0.10 per share for Citigroup, pirate spokesman Sugule Ali said earlier today. The negotiations have entered the final stage, Ali said. "You may not like our price, but we are not in the business of paying for things. Be happy we are in the mood to offer the shareholders anything," said Ali.

The pirates will finance part of the purchase by selling new Pirate Ransom Backed Securities. The PRBS's are backed by the cash flows from future ransom payments from hijackings in the Gulf of Aden. Moody's and S&P have already issued their top investment grade ratings for the PRBS's.

Head pirate, Ubu Kalid Shandu, said "we need a bank so that we have a place to keep all of our ransom money. Thankfully, the dislocations in the capital markets has allowed us to purchase Citigroup at an attractive valuation and to take advantage of TARP capital to grow the business even faster." Shandu added, "We don't call ourselves pirates. We are coastguards and this will just allow us to guard our coasts better."
-----------------------------------------------

Well, what do the Somali Pirates really do with all their capital?  This may be a spoof that comes true!

So goes the nation.  For those who are really in to the functioning of the federal government, the Office of Management & Budget is a place of subtle power and sheer anonymity.  Now Government Executive is reporting that the Congressional Budget Office's Peter Orszag is likely to be tapped by President-Elect Obama to take over the OMB director job--a cabinet level position.

http://www.govexec.com/story_page.cfm?articleid=41454&dcn=todaysnews

Peter Orszag will be a welcome figure there and this confirms Obama is getting very, very astute advice.

Orszag created his own blog while at CBO which I frequent often and those interested should visit and get a feel for his style: a very refreshing and wide-ranging view on government. I suppose we can credit the LSE for that!

http://cboblog.cbo.gov/

Obama is putting together a pretty good team.

He died November 18, 1965 at age 77.  From an obituary written 43 years ago in the ILWU labor newspaper,  The Dispatcher:

Common Man's Prophet

by Sidney Roger

"Somewhat more than two decades past a Vice-President of the United States spoke---in the midst of a fearful war against fascism---to declare to all people of the world that this was "The Century of the Common Man."

He was Henry Agard Wallace.  He died November 18, at age 77 after a lifetime devoted to humanity--Vice-President under Franklin D. oosevelt 1941-1945, before that Secretary of Agriculture, publisher, editor, agricultural scientist--a man not afraid to dream of a better human condition.

Those who set property rights above human rights scoffed at Henry Wallace--a "bubblehead" they said, an "impractical idealist", even a "subversive".

He was called a "visionary" because he believed the US should use its vast food surpluses and productive ability to help feed the hungry world.  He was savagely attacked by the [Westbrook] Peglers and their ilk who sneered that Wallace "wants to give away quart of milk for every Hottentot."

While he campaigned, someone told Wallace the New Deal was dead.  "The New Deal is not dead," he answered. "The New Deal is as old as the wants of man."

There was almost nothing in the lexicon of mankind's aspirations that Wallace did not touch.  Many years before civil rights became a popular subject, and while Southern racists and reactionaries levelled their full measure of venom on him, Wallace delivered his famed December 28, 1947 "Ten Extra Years" speech [at the national convention of Alpha Phi Alpha, Tulsa, Oklahoma]

"I am haunted by one single grim fact...A Negro child born this day has a life expectancy ten years less than that of a white child born a few miles away.  I say that those ten extra years for millions of Americans are what we are fighting for."

---------------------------------------

He ran for president in the tumultuous 1948 election leading a revived version of the Progressive Party.  After Truman won, he retired to private life and agricultural researches that benefited millions of people around the world.

Today the life expectancy gap he spoke of is down to five years.  Because of Henry Wallace and great souls like him, millions of people live longer lives and don't fear to aspire to a brotherhood of the common man.  Not bad for someone the right wing of the day branded a dreamer and a failure. 

In memory ever green.  Henry Agard Wallace,  October 7, 1888 - November 18, 1965

(Dedicated to TheraP)

It was raining a few days ago, and one of our neighborhood cats, took shelter on our porch.  Softies that we are, we let him in and gave him a few kibbles to boot.  Humans are unique in that way.

I want to shamelessly repeat verbatim some things I said on Tom Wright's  Knowledge and Morality  post because they came up in my mind when I read TheraP's  Dignity, Hospitality, Community  but I feared to repost them there as they were to the side of TheraP's goal.

When we talk about morality and ethics and community and dignity we are sometimes unaware of the hillside from which we gaze out at these issues.  That hillside is our definition of our own selves.

His tax cuts for the middle class or for anybody else for that matter.  Now demand-siders may jump on me, but it makes no sense for the government, (which if we really squeezed out the deficit spending wouldn't be able to buy a pair of socks at the local Target), to attempt to salvage this current situation with reduced revenues.  The government needs more revenue. Period.  It needs it like my mower needs gas, like a butterfly needs flowers, like a fire needs wood.  There is no way around this.  We can not, must not, increase the deficit over the absurd, insane, reality-twisting heights it has reached under this departing administration.  Do we really want our government's bonds to be downgraded to AA?  Really?  Well, it can happen and if it does, things will really get ugly.

http://www.reuters.com/article/Finance08/idUSTRE4AB7HT20081112

So my gentle plea to President-Elect Obama is this:  Listen to your financial advisers and if any suggest increasing the deficit....show them the door!

From Genesis:

The earth was formless and void, and darkness was over the surface of the deep, and the Spirit of God was moving over the surface of the waters.

McCain and Palin were strong candidates in some respects but however popular their persons, or however strong their party, they could not prevail.  Another sun is to rise over this country.  The morning is coming; the illness is over.

 

{a modified repost from August but this is how this long night ends}

Barack Obama's election, should it happen,  will have many consequences for us here in the United States, but perhaps the greatest effect may be a drastic change in the world's political climate.  During the Bush era there was a rapid warming and bellicose language and actions seemingly increased almost monthly.  With the election of Obama I hope we will see a period of lowered voices and perhaps decreased military budgets worldwide.  As an example, the two Chinas have just concluded a treaty involving the contentious Straits of Formosa and improving economic relations:

 http://www.guardian.co.uk/world/2008/nov/04/china

This is the kind of thing that we could look forward to in the next eight years.   When the diplomatic temperature cools and militarism is removed from the table I hope we will see an increase in this kind of  rapprochement.

We may see an increase in the strength of the mechanisms of international law and the mechanisms of peaceful conflict resolution.  We may see a re-channeling of budgets from guns to schools, from armies to health care, from weapon development to energy resource.

Already both China and India have indicated interest in exploiting the Moon's hypothesized stocks of  Helium III, a possible major source of energy in the future: India's Chandrayaan 1 probe is already on its way there.  

We are perhaps entering a brave new world.  The McCain defeat, should it happen, really signals an end to an old order and an old vision of power and national purpose and
Obama's rising sun symbol is tremendously apt, not just for us here in the United States, but everywhere...

An excerpt from a public address by a great president addressing an ancient problem that we and our next president still must confront.  I apologize for the length.  Audiences must have had greater attention spans in those pre-television, pre-computer days.  Roosevelt is giving his listeners a brief history:

".......In the half century that followed there was constant war between those who, like Andrew Jackson, believed in a democracy conducted by and for a complete cross-section of the population, and those who, like the Directors of the Bank of the United States and their friends in the United States Senate, believed in the conduct of government by a self-perpetuating group at the top of the ladder. That this was the clear line of demarcation-the fundamental difference of opinion in regard to American institutions- is proved by an amazingly interesting letter which Lord Macaulay wrote in 1857 to an American friend.

This friend of his had written a book about Thomas Jefferson. Macaulay said "You are surprised to learn that I have not a high opinion of Mr. Jefferson and I am surprised at your surprise. I am certain that I never wrote a line and that I have never . . . uttered a word indicating an opinion that the supreme authority in a state ought to be entrusted to the majority of citizens told by the head; in other words, to the poorest and most ignorant part of society."

Macaulay, in other words, was opposed to what we call "popular government." He went on to say, "I have long been convinced that institutions purely democratic must, sooner or later, destroy liberty, or civilization, or both."

Then, speaking of England, he said; "I have not the smallest doubt that, if we had a purely democratic government here, the effect would be the same. . . . You may think that your country (speaking of America) enjoys an exception from these evils. . . . I am of a very different opinion. Your fate I believe to be certain, though it is deferred by a physical cause. As long as you have a boundless extent of fertile and unoccupied land, your laboring population will be far more at ease than the laboring population of the old world, and while that is the case, the Jeffersonian polity may continue to exist without causing any fatal calamity. But the time will come when New England will be as thickly peopled as Old England. Wages will be as low and will fluctuate as much with you as with us. You will have your Manchesters and Birminghams, and in those Manchesters and Birminghams hundreds of thousands of artisans will assuredly be sometimes out of work. Then your institutions will be fairly brought to the test. Distress everywhere makes the laborer mutinous and discontented and inclines him to listen with eagerness to agitators who tell him that it is a monstrous iniquity that one man should have a million while another cannot get a full meal." And then Macaulay goes on to tell his American friend how they' handled such situations in England. He says "In bad years there is plenty of grumbling here and sometimes a little rioting, but it matters little. For here the sufferers are not the rulers. The supreme power is in the hands of a class, numerous indeed, but select . . . an educated class . . . a class which is, and knows itself to be, deeply interested in the security of property and the maintenance of order. Accordingly the malcontents are firmly yet gently restrained. The bad time is got over without robbing the wealthy to relieve the indigent. The springs of national prosperity soon begin to flow again . . . and all is tranquility and cheerfulness."

Almost, me thinks, I am reading not from Macaulay but from a resolution of the United States Chamber of Commerce, the Liberty League, the National Association of Manufacturers [two of these organizations still exist to plague us -LUD] or the editorials written at the behest of some well-known newspaper proprietors in 1936 and 1937.

Like these gentlemen of 1937, Macaulay in 1857 painted this gloomy picture of the future of the United States: "I cannot help foreboding the worst. It is quite plain that your government will never be able to restrain a distressed and discontented majority. . . . The day will come when . . . a multitude of people, none of whom has had more than half a breakfast or expects to have more than half a dinner, will choose a legislature . . . On one side is a statesman preaching patience, respect for vested rights . . . On the other is a demagogue ranting about the tyranny of capitalists . . . and asking why anybody should be permitted to drink champagne and to ride in a carriage while thousands of honest folks are in want of necessaries. . . . I seriously apprehend that you will, in some such season of adversity . . . do things which will prevent prosperity from returning; that you will act like people who should in a year of scarcity devour all the seed corn and thus make the next year a year, not of scarcity but of absolute famine. . . . There is nothing to stop you. Your constitution is all sail and no anchor. . . . Either some Caesar or Napoleon will seize the reins of government with a strong hand, or your Republic will be . . . laid waste by Barbarians in the twentieth century as the Roman Empire was in the fifth."

That, my friends, with all due respect to Lord Macaulay, is an excellent representation of the cries of alarm which rise today from the throats of American Lord Macaulays. They tell you that America drifts toward the Scylla of dictatorship on the one hand, or the Charybdis of anarchy on the other. Their anchor for the salvation of the Ship of State is Macaulay's anchor: "Supreme power . . . in the hands of a class, numerous indeed, but select; of an educated class, of a class which is, and knows itself to be, deeply interested in the security of property and the maintenance of order."

Mine is a different anchor. They do not believe in democracy--I do. My anchor is democracy--and more democracy. And, my friends, I am of the firm belief that the Nation, by an overwhelming majority, supports my opposition to the vesting of supreme power in the hands of any class, numerous but select.

It is of interest to read the whole of Macaulay's letter with care--for I find in it no reference to the improving of the living conditions of the poor, to the encouragement of better homes or greater wages, or steadier work. I find no reference to the averting of panics, no words for the encouragement of the farmer-nothing at all, in fact, except the suggestion that "malcontents are firmly but gently restrained" . . . in the interest of the "security of property and the maintenance of order."

I am just as strongly in favor of the security of property and the maintenance of order as Lord Macaulay, or as the American Lord Macaulays who thunder today. And in this the American people are with me, too. But we cannot go along with the Tory insistence that salvation lies in the vesting of power in the hands of a select class, and that if America does not come to that system,' America will perish.

Macaulay condemned the American scheme of government 'based on popular majority. In this country eighty years later his successors do not yet dare openly to condemn the American form of government by popular majority. They profess adherence to the form, but, at the same time, their every act shows their opposition to the very fundamentals of democracy. They love to intone praise of liberty, to mouth phrases about the sanctity of our Constitution--but in their hearts they distrust majority rule because an enlightened majority will not tolerate the abuses which a privileged minority would seek to foist upon the people as a whole.[italics mine] 

Since the determination of many who compose this minority is to substitute their will for that of the majority, would it not be more honest for them, instead of using the Constitution as a cloak to hide their real designs, to come out frankly and say: "We agree with Macaulay that the American form of government will lead to disaster and therefore we seek a change in the American form of government as laid down by the Founding Fathers?"

They seek to substitute their own will for that of the majority, for they would serve their own interest above the general welfare. They reject the principle of the greater good for the greater number, which is the cornerstone of democratic government.

Under democratic government the poorest are no longer necessarily the most ignorant part of society. I agree with the saying of one of our famous statesmen who devoted himself to the principle of majority rule: "I respect the aristocracy of learning; I deplore the plutocracy of wealth; but thank God for the democracy of the heart."

---------

Last weekend my wife and I went to a beautiful public garden in the Raleigh Hills neighborhood of Portland.  A crystal clear blue sky and the autumn foliage was at its height.  While Phyllis inspected the garden I sat on a bench (I tire easily nowadays sad to say) and looked at the tall trees with their myriad leaves, blowing in the golden wind.

The political season is upon us and there is a financial battle being fought simultaneously: maybe the first world war where everyone is one the same side and the enemy we are fighting is a devil of our own devising...  Late nights, many of us are watching the glowing screens and seeing the openings of the bourses from Australia to Japan to China; what happens there will effect the EU and then us here.  Others of us are watching the poll numbers jump and shift.  Quiet contemplative tasks: seeing the washes of photons that derive from distant battles that will shape all of our lives with tremendous finality.

My favorite place in the world is the Beartooth Plateau.  Hardly a year goes by when I don't visit.   The wind whistles up there and the air is icy cold when a rock wall shuts off the sun. There is an upland meadow at about 3000 meters that I love especially.  If you drive the Chief Joseph Highway and, reaching the pass, look northwest, you will see it: a vast table in the sky.

The tumult of this autumn never reaches that place, just the wind whistling in the little stands of trees that punctuates the grass expanse.  One can look south toward the Sunlight Basin from there and see the austere peaks rising...what does it mean to them that we are entering a new age...perhaps a golden age at that?

I am weary, feeling my age multiplied by illness and responsibility, seeing the changes coming, and knowing how much distress they will cause some on the short term. But the Plateau endures and so shall our species; we are contemporaries after all, and all this tumult is so much wind, so many fleeting photons ghosting through the ringing air.

Obama shall surely win and become one of the greatest presidents this country has ever had. And simultaneously with our country's fall from haughty financial power, may come a new golden age where a great and lasting peace will be shared by all.

Such is my hope and prayer and I contemplate these things late nights as markets tremble in the balance, and the world waits to see what our choice will be, and the eternal winds blow the trees in my city park and those up on the plateau of all of our hopes.

Posting this fairly late in the blog cycle: night, PST.  So perhaps it will avoid the worst criticism that it is bound to draw were it to venture forth in the light of day....

One of the many dismaying things about enduring eight years of rule by a profoundly unintelligent administration was having to see our international friendships erode and our close ties to Europe come under attack.."old Europe", etc.   We adopted a unilateralism and a "do it our way or face consequences" type approach that was a complete departure from the practice of all the administrations since Truman's.  We acted as if we didn't give a fig for the opinion of our old European allies, all the time cozying up to new friends in central asia.

Very shortsighted.

When President Clinton used to visit Europe, tens of thousands would turn out cheering him wildly.  During Bush's visits, tight security was always in effect and cheering crowds were completely absent from the silent streets down which his heavily guarded motorcades would travel.

When Barack Obama visited Europe, the crowds had returned.  Europe liked him and through him, us.

I look forward to a change in our attitude toward the EU and international law and toward internationalism in general.  We will, hopefully, become a member of the world community again during the next eight years.

And so the modest proposal.

What happens here in America affects our allies profoundly.  Why don't we recognize that fact and give those allies a say in our presidential races?

We have this antiquated electoral college everyone would like to see abolished.  We could retain it and give the EU and Japan and OAS, Russia, China, etc. small voting positions. Perhaps a vote each...

This would be to the utmost horror of the conservatives, but actually it makes sense in a global community.  It would give the rest of the world a small say in who becomes our president. would be an unparalleled precedent in world history, and I think point the way to the future of the world political arrangements.

What say you all?

 

In 1950 during the height of the McCarthy era, Republican senator Margaret Chase Smith with five other Republican Senators issued a Declaration of Conscience that denounced the tactics the McCarthy factions were employing in their efforts at attacking the Democratic administration of Harry Truman with the aim of preparing for an electoral victory in 1952.  At that time the Republicans were using the spectre of the COMINTERN and internal communist subversion as a way of garnering votes while crippling a Democratic administration.

From the Declaration:

"Surely these are sufficient reasons to make it clear to the American people that it is time for a change and that a Republican victory is necessary to the security of this country. Surely it is clear that this nation will continue to suffer as long as it is governed by the present ineffective Democratic administration.

Yet to displace it with a Republican regime embracing a philosophy that lacks political integrity or intellectual honesty would prove equally disastrous to this Nation. The Nation sorely needs a Republican victory. But I don't want to see the Republican Party ride to political victory on the four horsemen of calumny--fear, ignorance, bigotry and smear.

I doubt if the Republican Party could--simply because I don't believe the American people will uphold any political party that puts political exploitation above national interest. Surely we Republicans aren't that desperate for victory.

I don't want to see the Republican Party win that way. While it might be a fleeting victory for the Republican Party, it would be a more lasting defeat for the American people. Surely it would ultimately be suicide for the Republican Party and the two-party system that has protected our American liberties from the dictatorship of a one-party system.

As members of the minority party, we do not have the primary authority to formulate the policy of our Government. But we do have the responsibility of rendering constructive criticism, of clarifying issues, of allaying fears by acting as responsible citizens. "

So, back in 1950, the Republican Party still had national office holders who were brave enough to criticize their party's tactics.  Where are the Sen. Smiths now?  Why haven't we heard from any moderates of that faction brave enough to criticize the thuggery of their party's presidential campaign?  Short answer: fear.

This may well be premature, but I am assuming Obama will be our next president and how joyful that will be.

But after the exhilaration and emotion recedes, then there is surely coming a titanic battle with the Republican Party.  As I wrote in my Fat Man in the Doorway blog a while back, the modern GOP is interested in only one thing, keeping our government from functioning in the way it was designed to.  As Bill Clinton found to his sorrow, the Republicans are quite ready to hamstring government and any democratic administration when it is in their power to do so.

And it is in their power to do to Barack Obama what they did to Bill Clinton-- put the administration on the defensive with constant legal attacks.  They don't need the House to harass the next president, nor is impeachment the only weapon in their armory.

The coming Obama administration had better be ready for every kind of harassment and obstructionism from the Republican Party.  We are all hoping for a new Camelot, a new bright day in American politics, of reaching across the aisle and bipartisan comity.  But what we are far more likely to see is a barrage of assaults on the administration, originating from all around the country and avidly reported by a controversy-hungry media.

My belief is that Barack Obama is uniquely able to handle such battles and that the GOP will fail; but forewarned is forearmed and we cannot trust the Republican Party, so haughty and over-mighty in ascendancy, to grasp any olive branch of peace we extend to them once we have dethroned them.  They are Strife personified and the next years will show they cannot change their nature.

Or such is my opinion and fear.

We all remember that famous line: "If fascism comes to America, it will be wrapped in the American flag" (or words to that effect-this is a much quoted and phrased sentiment)

But fascism isn't the worst of all fates.  No, not by far.

Slavery is far worse and we banished it explicitly with the Emancipation Proclamation and with the reconstruction era constitutional amendments.

But bad things live on, albeit in hibernation.

There is something called debt peonage that persisted in the South after Reconstruction.  It was a system of enforced subordination based on credit/debt arrangements.  It gradually came to an end under persistent legal attacks.

Flash forward to the nineties and the last eight years.  Do you remember getting literally scores of credit solicitations in the mail?  Various credit card companies offering you attractive terms to get one of their cards, or to transfer your existing "balances" to them; various banks asking you to re-finance your house under attractive terms or even to refinance your automobile loan...

And the commercials of the era, making the same enticements, the good life in exchange for credit indebtedness.

A lot of institutions wanted us to enter into conditions of indebtedness.

And once there, particularly in its depths, our behavior, our lives,  were no longer our own.

If slavery was ever to return to America, it would come wrapped in terms of easy credit.

The credit industry literally wanted to make debt peonage return to these shores.  And they almost succeeded.    To break free from the system, people in very large numbers will lose their homes and a financial world will be shaken.