Friday, February 29, 2008

Cartoons

Here and here.





Dear Leader

Has to be seen to be believed.

Brilliant

You've got to see this.

"An abridged history of American-centric warfare, from WWII to present day, told through the foods of the countries in conflict."

Frickin' hilarious.

You Shaft Me, I Shaft You

In this case the initial "shafting" being the pushing of mortgages on folks who could not, in any rational universe, be expected to afford them. Details here:

Facing Default, Some Walk Out on New Homes

A similar article in the New York Times is Facing Default, Some Walk Out on New Homes.

When Raymond Zulueta went into default on his mortgage last year, he did what a lot of people do. He worried. “I was terrified,” said Mr. Zulueta, who services automated teller machines for an armored car company in the San Francisco area.

Then in January he learned about a new company in San Diego called You Walk Away that does just what its name says. For $995, it helps people walk away from their homes, ceding them to the banks in foreclosure.

Last week he moved into a three-bedroom rental home for $1,200 a month, less than half the cost of his mortgage. The old house is now the lender’s problem. “They took the negativity out of my life,” Mr. Zulueta said of You Walk Away. “I was stressing over nothing.”

In recent months top executives from Bank of America, JPMorgan Chase and Wachovia have all described a new willingness by borrowers to walk away from mortgages.

Carrie Newhouse, a real estate agent who also works as a loss mitigation consultant for mortgage lenders in Minneapolis-St. Paul, said she saw many homeowners who looked at foreclosure as a first option, preferable to dealing with their lender. “I’ve had people say to me, ‘My house isn’t worth what I owe, why should I continue to make payments on it?’ ” Mrs. Newhouse said.

The same sorts of loans that drove the real estate boom now change the nature of foreclosure, giving borrowers incentives to walk away, said Todd Sinai, an associate professor of real estate at the Wharton School of Business at the University of Pennsylvania.

“There’s a whole lot of people who would’ve been stuck as renters without these exotic loan products,” Professor Sinai said. “Now it’s like they can do their renting from the bank, and if house values go up, they become the owner. If they go down, you have the choice to give the house back to the bank. You aren’t any worse off than renting, and you got a chance to do extremely well. If it’s heads I win, tails the bank loses, it’s worth the gamble.”

Poor bankers and financiers. Who could possibly have seen this coming? Profits are supposed to be guaranteed and made without effort!

20% down will soon become the new black...

A Change In Perception

It's interesting how this works. Lots of anecdotal examples of consumers cutting back on even small things. In an economic contraction even an extra $5 or $10 can seem like a frivolous expenditure, if avoidable. Deflation begins with a change in psychology. It is also interesting that frugality is habit-forming. Each time money is successfully held on to makes it that much harder to spend freely in the future.

Thursday, February 28, 2008

In A Nutshell

This parody is substantially correct and results from years of empirical study.

Monday, February 25, 2008

Any Business That Needs An 'AAA' Rating To Survive, Doesn't Warrant An 'AAA' Rating

Desperation.

Unclear On The Concept

Michael Shedlock:

Let's review the Washington Post story Homeowners Losing Equity Lines.

In one brief phone call, Nancy Corazzi's lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago. The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth. "I got off the phone and I was shaking," said Corazzi, who was using the money to pay preschool tuition for her twins ."I was near tears. We needed this credit line to get us through some tough times."

My Comment: If this is a typical reaction, and it might be, many consumers are still in denial. Home prices are not going up and attempting to meet ordinary expenses by tapping lines is not going to work.

...


Returning to the Washington Post article...

Maggie DelGallo did not realize that when she took out a home equity line a few years ago on her home in Loudoun County. Her lender recently froze the line.

DelGallo, a real estate broker, has used some of her credit line over the years. Had she known the freeze was coming, "I would have drained it," she said. "I would have taken every dime and possibly placed it in a money-market vehicle."

DelGallo said she does not think she is in dire straits. "It's more like a huge disappointment," she said. "I have this line of credit attached to my home that's useless."

My Comment: Attitudes like DelGallo's give banks all the more reason to shut down lines of credit. The point of an equity credit line is to tap equity. DelGallo is proposing tapping non-equity as if that was some God-given right.

By showing willingness to borrow money at 8.5% or so, and putting it in the bank at 3% or so, DelGallo has proven the willingness to get into "dire straits" even if she is not there now. Banks reading the Washington Post article like likely to become even more spooked.

Five months ago, the [Corazzi's] Ellicott City house was appraised at $560,000; the lender says it is now worth $469,100.

"I told them, 'You guys are wrong,' " Nancy Corazzi said. "They said, 'Sorry, this is what we're doing in the entire area.' "

Corazzi said she was blindsided by what's happened. "I didn't know they could do that. I thought I was too smart to have something like this happen to me."

My Comment: This is a clear case of denial, not understanding the law, not understanding the housing market, and refusal to live within one's means.

Like it or not, both DelGallo and Corazzi will be forced by the market to live within their means. Should they refuse, they will go bankrupt. It's that simple. Hundreds of thousands of others may be forced to make a similar choice.

...

Clever readers will quickly see why Professor Depew's socioeconomic thesis is indeed correct. In this case, cautious (even fearful) bankers are tightening credit. Why? Because it all started with cautious consumers refusing to play the greater fool's game with home prices. The attitude change by consumers caused an attitude change by banks. The attitude change by banks will cause a souring attitude in those who were still in denial and still willing to party.

And so the cycle feeds on itself, and will continue to do so until it reaches an extreme in caution and fear.

Attitudes are like pendulums. Momentum carries both pendulums and attitudes to extremes. The pendulum of consumer recklessness has now reversed, having recently reached a secular peak. It will not stop at equilibrium on the way down. Instead, momentum will progress to a point of complete exhaustion marked by cautious saving instead of reckless spending.

The attitudes of DelGallo and Corazzi from the Washington Post article just may be an indication of how much more attitudes need to change before things bottom. We are a longs ways off in terms of both time and price.

Sunday, February 24, 2008

A Financial Fisking

By Michael Shedlock. Good stuff.

Morphing

This is cool.

And Yet I Didn't Find You

From my various readings (and attempted debatings) on the internet, I find myself genuinely grieved by the attitude of my atheist brothers. The mildest attempt to invite them to think more seriously about the arguments in favor of theism, and more critically about those in favor of atheism, are generally met with complete incomprehension, contempt, the spouting of worn-out, philosophically invalid cliches, general derision, and often, after a furious display of intellectual superiority, the immediate demand to rigorously prove everything under the sun. It is my fervent wish for these brothers that they avoid finding themselves in the following logically possible position:

=========

A Parable

SCENE: The last day. The atheist soul finds itself face to face with The Lord, and the following dialog takes place, between The Lord (J), and the atheist (A):

J: Depart from me. I do not know you. You have spent your life diligently avoiding me, and now I shall fulfill this wish for you.

A: But Lord, I spent my entire life diligently searching for you, and expended a great effort, but I didn't find you.

I took the utmost care in my search! For instance, I cannot count the number of times I demanded a proof for your existence from a blog comment.

Yet none was forthcoming.

I diligently read from a wide range of arguments, counter-arguments, and opinions. I read everyone from Dawkins to Harris to Dennett, to Hitchens, casting my net wide.

And yet I didn't find you.

I scrupulously and skeptically examined and criticized every jot and tittle of arguments in your favor (always with the background premise that you do not exist--because I had the absolutely pure and virtuous desire of achieving complete logical rigor), while-- always making sure I held the same background premise of your non-existence in order to be consistent--hastily, triumphantly, and whole-heartedly embracing any argument not in your favor that looked good at first glance.

And yet I didn't find you.

I studiously sought out and catalogued evidence and arguments against your goodness, while ignoring all evidence and arguments in favor of your goodness (because I wanted to err on the side of caution, given the stakes).

And yet I didn't find you.

I limited my queries exclusively to only the wisest minds on the internet, such as those at Panda's Thumb, Pharyngula, Talk.Origins, and Internet Infidels. I limited my fellowship only to other earnest seekers on those sites. All minds inferior to these, I stayed away from, unless to mock.

And yet I didn't find you.

I'd ask theological questions of these inferior minds, and when they offered theological answers, I mocked them. Because theology is not science.

And yet I didn't find you.

I searched carefully amidst all the material beings of the universe.

And yet I didn't find you.

I insisted upon seeing you as nothing but the conclusion of an argument, and never as an actual person I could query for myself and come to know.

And yet I didn't find you.

I studiously avoided anything resembling an attitude of hope that you might exist, because I did not want to bias my careful search in any way.

And yet I didn't find you.

You see, I earnestly and honestly searched for you with all my heart and with all my mind and with all my strength.

And yet I didn't find you.

The truth is, there was just no good evidence for you.

J: Amen, amen. I say to you again. I do not know you. Depart from me.

Atheist begins his recession to an infinite distance. He can be heard murmuring.

A: This isn't fair! Nobody ever warned me about this! If you designed everything, WHO DESIGNED YOU?!? Prove to me that there is not a teapot orbiting Saturn! Where are Thor and Jupiter? I want to worship them! You can't have made me because I have a back-ache and almost choked on food once!...I demand an appeal! Take me to see the Flying Spaghetti Monster!!...I don't see Santa Claus, the Easter Bunny, or any invisible pink unicorns here, so why do I see you?!?...I didn't need you to be good! And I was good!! I stood up for a woman's right to choose! I stood up for sexual freedom! I....never...hated...anybody....who....didn't...deserve it!!

=========

I do see the above as a logical possibility. And I would not wish it upon anyone. I appeal to atheists to take the question much more seriously. And to take the stakes much more seriously. For those who think they've "seen through" or "refuted" Pascal's Wager (which is not a proof of God, but merely advice on where to place the benefit of the doubt), please reconsider. And if none of the above resembles you in any way, then no harm, no foul, and no worries.

Friday, February 22, 2008

Belief And Proof

I liked this:

Before diving into all that is wrong with this addition to the general form, I must note that the argument is no longer about whether there could have been one resurrection in the past, or whether God could have worked miracles in the past. And Carrier has not engineered anything to make this flawed formulation stand with any more integrity. The argument is now about the evidence for a miracle-working God. This is an enormous question—perhaps it’s the question as it is simply another way to ask, “How do I know that an all-powerful God exists?” In the remainder of my essay, I do not intend to offer any positive answer to this question, only a defense that explicates why Carrier’s specific objection is not effective.

Carrier writes, “All that is needed is the demonstration that God, like the laws of nature, is a regular, functioning part of what exists today, and that he actually has powers sufficient to work a resurrection.”

So. . .Carrier’s standard of evidence is that miracles—which are by definition exceptions to natural law—be as “regular and functioning” as natural law? How would he then define “miracle”? This is the first big problem with his standard of evidence.

The second is that, though an obviously confident man in his own thinking and writing, Carrier does not give enough credit to his fellow skeptics’ intellectual capacity. That is, specifically, their capacity for doubt. What would max-out Carrier’s own capacity? What would push him from doubt to belief? If God were to go about “turning all guns in the world into flowers, rendering the innocent impervious to harm, protecting churches with mysterious energy fields” then Carrier’s standard of evidence would be met. Let him speak for himself, though. This evidence would not convince all.

My guess is that other skeptics would suffer from Indiana Jones Syndrome. This is a malady so named for the famed action hero who opens his eyes at the end of the first movie to find throngs of nazis lying dead with cannon ball sized holes shot through them. Even though he did not actually see the power of the Old Testament God melt a man’s flesh from body and face, we would still expect him to chalk up the events of his rescue to the supernatural. Yet, in movie two, Indie is not a Christian. He’s not even a convert to Judaism who’s traded in his felt fedora for a yarmulke. It’s clear from the beginning of movie three that he’s not a theist at all.

If God were to turn all of the world’s guns into flowers, Indiana Jones Syndrome manifested in skeptics would lead them to question the historicity of the event. Some would doubt that the guns themselves morphed into flowers, and would consider themselves more reasonable to conclude that the gun-owners of the world were either part of an Operation Flower conspiracy or were themselves deceived. Other skeptics would grant that the guns did turn into flowers, but would postulate that it was more likely the handiwork of aliens than an as-of-yet unproven God. Still others would grant that it was God who turned the guns into flowers, and that it is unethical to worship such a God who would so callously leave millions and millions of soldiers around the world unemployed as their militaries were suddenly out of business. And, two thousand years into the future, skeptics would point to the “Story of the Rifled Roses” as a legend circulated by a superstitious people—a majority of the present world’s population (depending the source, 60-80%) is, after all, theistic.

And if God were to turn all new guns into flowers, making it a repeated event, and not just one of history, then scientists would investigate the matter with the scientific method, searching for the new or previously-un-discovered natural law that was causing the phenomenon. They certainly would not allow a supernatural explanation to suit the events while the scientific investigation was so young.

Meanwhile, other sufferers of Indiana Jones Syndrome would be working on the “Un-Harmed Challenge to Atheism,” arguing for why the sudden protection of the innocent does not constitute proof of a loving, powerful, good God. “I’m innocent!” they’d be yelling, “And this so-called God didn’t protect me from getting mugged last night.” If the Christian pointed out that God’s Un-Harmed umbrella of protection does not extend to people who don’t worship Him, the skeptic would throw up his hands and ask, “How could you worship such an ego-maniac???”

Just like Indiana Jones, these skeptics, in the face of what others consider adequate evidence, would sally forth to their next adventure, un-changed by the revelation given to them.

One might charge that I’ve been silly. But the point of this silliness is to demonstrate that if miracles were as common as natural law, skeptics would search for a natural explanation for them. If God performed a huge one-time-only miracle, it would become part of history, and therefore subject to some degree of doubt. If God performed a huge, one-time-miracle that created a permanent result, such as the carving of “Jesus Lives” into the moon, the result might be indisputable, but the cause of it could still be questioned. God could give us overwhelming evidence of His existence—and there are some of us who believe He has—but He cannot force people to reach a conclusion. Or, if He can, He refuses to, as doing so would revoke a significant chunk of our free will.

Maybe Richard Carrier, or another, would claim that any such skeptical objection made in response to evidence like this would be dogmatic, or unreasonable, or both. But this is just another way to declare how much evidence is enough for him personally. And, once convinced, the skeptics he’s broken company with would be wrong, and demanding of too much.

Then the converted-Carrier would be faced with a choice: either address these skeptics’ objections in person, in print, on-line, and in debates, or ignore them and go about living as the Christian he’s still surprised to find he’s become. With the line of evidence so far behind him, he will wonder how it could still lie in front of others.

Cartoons

This one's old, but I like it.



These are good, too:









and this:



and this:

The Adolescent (Or Is It Toddlerish?) Mind Not So Great At Even-Handed Treatment

This.

Thursday, February 21, 2008

Good Thread

An interesting post and discussion at Uncommon Descent. The post:

Merely a Theory

William Dembski

Evolutionists continue to be much exercised about evolution being treated as “merely a theory,” arguing that to identify it as such is as disreputable as treating gravity or the second law as “merely a theory.” But consider, as a close colleague recently reminded me:

The late Ernst Mayr, a Harvard professor called “the Dean of American Evolutionists ” wrote in his 1976 book Evolution and the Diversity of Life: Selected Essays:

“When I lectured in the mid-1950’s to a small audience in Copenhagen, the great physicist Niels Bohr stated in the discussion that he could not conceive how accidental mutations could account for the immense diversity of the organic world and its remarkable adaptations. As far as he was concerned, the period of 3 billion years since life had originated was too short by several orders of magnitude to achieve all of this.” (Quoted from page 53; the book is online at Google Books.)

Stanislaw Ulam, with Edward Teller the inventor of the thermonuclear bomb (the Teller-Ulam mechanism) wrote in his paper given at the Wistar Conference on Mathematical Challenges to the Neo-Darwinian Interpretation of Evolution in 1966:

“[Darwinism] seems to require many thousands, perhaps millions, of successive mutations to produce even the easiest complexity we see in life now. It appears, naively at least, that no matter how large the probability of a single mutation is, should it be even as great as one-half, you would get this probability raised to a millionth power, which is so very close to zero that the chances of such a chain seem to be practically non-existent.” (Ulam’s remark on page 21 of the Wistar conference Proceedings.)

In other words, Bohr and Ulam both believed that Darwinism was a false theory. If Darwinism is false, then it cannot be a fact. It can only be a theory.

Do evolutionists think that Bohr and Ulam were anti-science crackpots? Did they doubt the validity of the law of gravity or the second law of thermodynamics? Were they ignorant of these laws?


Some of the comments:

Darwinists never seem to come to grips with the power of combinatorial explosion. This is a mystery to me, because it’s a very easy concept to grasp.

In order to demonstrate the power of combinatorics, when I was a kid my dad asked me if I’d rather he give me a million dollars all at once, or give me a penny today, two pennies tomorrow, four pennies the day after, eight pennies the day after that, etc., for a month. Of course, 2^30 pennies is more than 10 million dollars, so I’d ask for the doubling pennies.

Another example is the game of chess, which has a branching factor of 35 (that is, a statistical average of 35 possible moves on each player’s turn during a typical game). There are 10^120 possible chess positions and 10^80 possible legal positions reachable over the board in actual play. This is why games like chess last for centuries without being played out.

A single 100-amino-acid protein represents 20^100, or 10^130, and there are only an estimated 10^80 elementary particles in the known universe. But this is just the beginning, because most functional proteins must interact with other proteins, which function within higher-level machinery in the cell, which interact with each other, etc. Michael Denton calls it “wheels of complexity within wheels of complexity.”

The blind-watchmaker thesis is pure nonsense on its face. The numbers become so huge so quickly that no amount of fancy footwork will allow you to dance your way out of an obvious fatal flaw. Belief in blind-watchmaker Darwinism really is blind faith in the beyond-miraculous.

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

Obviously you have no understanding of the hierarchy in science. Biology is explained by chemistry. Chemistry is explained by physics. Physics is explained by law and statistical mechanics. If a physicist tells a biologist that something doesn’t make sense in the light of physical law and statistical mechanics you’d better pay attention to it rather than ignorantly accuse the physicist of speaking outside his field of expertise. This is why engineers are more likely than anyone else to scoff at creative evolution by pure chance and necessity. We (speaking for myself and the other engineer/authors on UD) are employers of law and mechanics for purposeful, practical ends. We don’t need to see a designer to recognize a design. Design is what we do for a living so who would know more about it? Not a biologist, that’s for certain. Any biologist who claims it a fact, or even likely, that the origin and diversity of life is pure chance and necessity is so contradicting physical law and statistical mechanics that, if they weren’t so arrogantly wrong, it would be a pathetic display of either ignorance or gullibility to to group-think among their peers.

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

Oh, no! I hoped I would not have to see again someone posting here the example of the deck of cards!

Anyway, supposing that you are in good faith, and still available to reasonable discussion, I give you the standard (and perfectly true) answers:

1) Of all the crap arguments of darwinists, the deck of cards argument is the most crap of all. Please, understand that I don’t mean to be offensive towards you, just towards the argument which, I hope unthinkingly, you have raised.

2) First af all, the deck of cards argument can be raised “only” for OOL, and has nothing to say about the successive increase of CSI in biological information.

3) Even for OOL, the deck of cards argument is nonsense all the same. First of all, it is obvious that, if you shuffle a deck of cards, you get an unlikely (and therefore complex, in the ID sense) configuration. Even darwinists understand that. But it seems that their understanding stops there.

Let’s see, the complexity of a deck of cards configuration space is the factorial of 52, which is of the order of 10^67. That is not bad, although it is still very far from the complexity of a single, small protein.

Well, it is very easy to get one random configuration of the 10^67 possible ones. All you need to do is shuffle a deck of cards. Even darwinists understand that.

What darwinists don’t understand (and yet it is not so difficult) is that it is almost impossible to get a “specified” sequence by a random shuffling. Let’s put it that way: if your purpose is to get an exact pre-specified order, for instance the natural ascending order of cards, you will never obtain it, even if you have been shuffling cards for 5 billion years, even if a billion people have been doing that. That’s because 10^67 is a very big space, and your random search, even in good company, has practically no chance of finding the single result which we have pre-specified (let’s call it “the functional result”).

Is that clear? It’s not too difficult. So, please, don’t go on saying that an unlikely result is easy to obtain. We all know that. It’s an unlikely “functionally specified” result which is practically impossible to obtain, if the search space is big enough.

4)So, let’s leave alone our useless decks of cards. Let’s talk life. You say: “Abiogenesis isn’t about the first cell. It’s about the first “life”, which is simpler than a cell”. Now, that’s a very interesting sentence. So, what would that first “life” be? Please, specify. And while you are specifying, please tell us where that “life” has been observed, or what evidence, even remote, there is of its existence at any time. What are you saying? RNA world? Primitive negative entropy systems? Pseudo-membranes? What else?

I know, these things exist: in darwinist writings, they exist, and only there. I am in no risk of exaggerating if I say that there is absolutely “no evidence”, direct or indirect, that any autonomous life simpler than bacteria or archea has ever existed. So, please, if you want to go on talking fairy tales, speak to other darwinists: they seem to appreciate them very much, if they are of their kind. But here, it will be of scarce utility. Here we are talking science.

So, let’s talk of life seriously. The simplest life we know of are bacteria and archea. Let’s take a very bare minimum bacterial genome (although probably not enough for autonomuous life) and, for the sake of simplicity, let’s put it at 10^6 base pairs. That’s a search space of about 4^(10^6). Now, I can’t tell you how much that is in powers of 10, because the highest number that my spreadsheet is able to calculate is 4^500, which is about 10^300, infinitely more than the deck of cards space, and than Demski UPB. In other words, it is a completely unconceivable complexity. And we are speaking of 500 nucleotides. Imagine one million, that is the simplest bacterium!

Are you still thinking that our planet won that kind of lottery? No. Never. Perhaps you understand, now, why some of the few darwinists who still know their math have revived, recently, the “infinite universes” hypothesis to “explain” how such a “lottery” could have been won, without invoking anything supernatural. You need “infinite” universes just to make the thing seem plausible. Just to give a single, totally unreasonable chance to OOL (or, if you want, even to the fine tuning of universal constants, which is already unlikely enough, although certainly not at the same level of the first living cell).

And even if you could explain, by infinite useless universes, the random aggregation of a simple bacterial genome, still you would not have the first living cell. Nobody, even today in an organized lab, can “create” a living cell starting with a complete bacterial genome (very easy to obtain, “now”), and nothing else living. You still need, at least, another living cell, its cytoplasm, its metabolism, its structures.
And you still have to explain how that primordial genome, won through the sacrifice of infinite universes, could synthesize even a single protein (the final target of its information, after all) without pre-existing enzymes and proteic machines. How it could duplicate itself. In the bizarre hypothesis of an RNA world, how and why the first living cells shifted to syntesizing proteins, instead of using their hardly gained information for its natural purpose, that is synthesizing ribozymes.

And you have still to explain how eukaryotes came into existence, and then multicellular beings, and then sexual reproduction, and so on. All of them, believe me, “lotteries” which would each require a new supply of infinite universes and infinite time.

And for now, that will have to do.

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

You know the thing I like the least about chance & necessity theory? It’s that it’s a science stopper. It makes absolutely no predictions about the future course of evolution. It’s throwing in the towel and saying everything is dependent on a process we can’t predict in advance. The capabilities and limitations of chance and necessity are unbounded. All it can do is explain *everything* after it already happened:

- some things evolve and adapt, except when they don’t evolve and adapt.

- some species spawn new species and some go extinct without spawning anything except their own demise.

- natural selection modulates random change except when it drifts free without selection

- molecular clocks agree with each except when they don’t

- evolution has no trajectory and is not repeatable except when it converges on the same result and does repeat itself

What use is that? ID at least attempts to place some bounds on what chance & necessity can and cannot do with reasonable certainty and by bounding the process it enables some predictions to be made about the future instead of throwing in the towel and saying we can’t predict anything because it’s all a matter of inscrutable chance. Behe had the courage to drive some stakes in the ground that bound what chance and necessity can and cannot accomplish in given circumstances. HIS theory can be falsified by observation. What predictions about the future can be made by the chance & necessity theory that could potentially falsify it?

This is what happens when scientific theories become scientific dogma immune to contrary evidence and criticism by virtue of being uncontestable fact. It happened to Sigmund Freud’s theory, it happened to Karl Marx’s theory, and the last holdout of post-modern enlightenment is Darwin’s theory. Two down, one to go. It shouldn’t be much longer now until it’s just a theory again and a rather poor one that can’t reliably predict anything in the future at that. It’s a failed hypothesis which is now really no more than a narrative reconstruction of history resting on the momentum built up by a century of ad populum fallacy.

Good Quote

John Derbyshire as quoted here:

“Wherever there is a jackboot stomping on a human face there will be a well-heeled Western liberal to explain that the face does, after all, enjoy free health care and 100 percent literacy.”

The Wages Of Folly

Another good financial piece.

excerpt:

I have one more item of bad news related to the mortgage meltdown: It'll likely provide lots of ammunition for advocates of more government regulation, in the mortgage industry and everywhere else. I'm afraid we're getting what we deserve.

Three things have become clear as the mortgage/real estate debacle has unfolded: 1) Left to their own devices, millions of people (and some pretty sophisticated lenders and investment banks) will do some profoundly stupid things; 2) The effects of those stupid things spill over to affect everyone else; 3) Lots of Americans expect their government to do something about it. (Let's not pretend that it's just Democrats; the White House was pretty darn quick to roll out its bailout plan.)

Rational Debate

One of the fundamental debates within economics concerns the degree to which individuals make fully rational decisions. Do people always act in their own best interest? Or can government help prevent them from doing things that they'll later regret?

This debate over "rational man" isn't just academic -- it lies at the heart of what government ought to do. Should government treat its citizens as informed adults or semi-rational adolescents?

...

This all strikes me as a load of new evidence for the "government for semi-rational adolescents" camp.

Pick a Side

But there's a second reason that we're probably not ready for Friedman's elegant small government: When people who play with matches burn their houses down, we're generally not pleased if our political leaders pull up lawn chairs and watch the flames. We expect them to do something about it. We want a plan.

Have you heard any presidential candidate from either party explain why the appropriate response to the mortgage debacle is to let the culpable parties pay the price for their mistakes? Nothing teaches you about debt like losing your home to foreclosure. I'm still waiting for that speech. (OK, Ron Paul has probably given it -- which is one reason he'll never get more than 10 percent of the vote.)

Everyone loves small government in theory. We're tired of being told that the coffee we're about to enjoy is hot. But then we burn ourselves and expect someone to show up with ice. You can't have it both ways.


There's plenty of good stuff in the body of the article.

If this whole thing really does snowball into an economic cataclysm, history shows that we can expect a fundamental reigning in of the financial sector. Securitization of debt will become illegal. Most derivatives will not be legal. Some historical examples of this: after the Tulipmania in Holland in the early 1600's, the futures market became illegal. After the South Sea Bubble in 1720, I've read somewhere that even publicly traded stock was banned for a time. There is no law of the universe that says financial markets have to work the way they currently do. Finance is supposed to be a servant of industry and enterprise, and not the whole show.

I Couldn't Agree More

Another sign of a secular change in attitude toward finance (in the WaPo):

Time for Wall Street to Pay
By Steven Pearlstein

As a responsible business columnist for a respected newspaper, I know how I'm supposed to respond when people say that government shouldn't try to stabilize the banking system or bail out the bond insurers or put a floor under the housing market.

"Of course we don't want to protect investors or lenders or borrowers from the consequences of their own bad judgments," I'm supposed to say. "But it's probably not a good idea for government to let markets spin out of control in a way that triggers a nasty recession and causes lots of innocent people to lose their jobs, their savings or their companies."

I'd be lying if I didn't admit there's part of me that takes some perverse satisfaction from the ever-widening crisis that has engulfed Wall Street, humbling its most powerful institutions and exposing its hypocrisy and corruption.

I don't ask you to join in this schadenfreude, or even excuse it, so much as understand it. In a way, the feeling has been building since the days of Michael Milken and the junk bond craze.

Looking back, few would doubt that high-yield bonds helped to democratize corporate finance and began to shift power from banks to capital markets as the primary intermediary between savers and borrowers. Through the magic of the leveraged buyout, these junk bonds helped to make companies more responsive to shareholders and laid the foundation for the growth of private equity.

Over the ensuing two decades, Wall Street has been brilliant at dreaming up other financial innovations that picked up where junk bonds left off. These included complex futures and derivatives contracts; loan syndication; securitization; credit default swaps; off-balance-sheet vehicles; collateralized debt obligations, or CDOs; and blank-check initial public offerings.

As the industry and its cheerleaders constantly remind us, these innovations have helped to lower the cost of capital and make the business sector more efficient and globally competitive. But what we are now discovering -- or perhaps rediscovering -- are all the ways in which all this glorious financial innovation has weakened the economy and the society it serves.

For starters, these innovations have helped to create a cycle of financial booms and busts that have a tendency to spill over into the real economy, contributing to a heightened sense of insecurity.

They have shortened the time horizons of investors and corporate executives, who have responded by under-investing in research and the development of human capital.

They have contributed significantly to massive misallocation of capital to real estate, unproven technologies and unproductive financial manipulation.

They have made it easy and seemingly painless for businesses, households and even countries to take on dangerous levels of debt.

They have given traders a greater ability to secretly manipulate markets.

They have given corporations clever new tools to hide risks, liabilities and losses from investors.

And by giving banks the tools to circumvent reserve requirements and make more loans with less capital, they have enormously increased the leverage in the financial system and with it the risk of a financial meltdown.

But far and away the greatest damage from all this financial wizardry is the obscene levels of compensation it has generated for a select group of Wall Street executives and money managers.

For when you look over the long term, at the good periods and the bad, it is obvious that the pay collected by these masters of the universe has been grossly excessive -- out of line with the personal financial risk they have taken, out of line with their skills relative to the next-best performers and certainly out of line with the returns earned by investors.

There are lots of reasons for this: lack of price competition, herd behavior by investors, an "arms race" among firms to attract a handful of supposed superstars. But probably the biggest reason is that the huge bonuses paid in the good years are never required to be paid back in the bad years, creating an asymmetric compensation system that encourages excessive leverage and risk-taking.

Wall Street's hypocrisy on this topic is nothing less than breathtaking. When times are good, its champions will claim that their brilliance and hard work account for the spectacular returns. But when markets turn and investors lose their shirts, these same brilliant managers are sent off with golden parachutes and invariably scooped up by rival firms that are only too willing to chalk up their mistakes to bad luck.

It would be bad enough if the consequences of this excessive pay were confined to Wall Street. Unfortunately, it has not worked out that way. For the prospect of earning untold wealth also has attracted an enormous amount of young talent that could have been more productively used in science, engineering, medicine, teaching, public service and businesses that generate genuine long-term value.

Is it not fair to ask whether the United States can remain the world's most prosperous and innovative economy when half of the seniors at the most prestigious colleges and universities now aspire to become "i-bankers" at Goldman Sachs?

So I hope you'll forgive me, dear readers, when I say that the best thing that could happen to our economy is for a dozen high-profile hedge funds to collapse; for investment banking to enter a long, deep freeze; for a major bank to fail; and for the price of a typical Park Avenue duplex to fall by 30 percent [70% would be more like it]. For only then might we finally stop genuflecting before the altar of unregulated financial markets and insist that Wall Street serve the interest of Main Street, rather than the other way around.

Yes, I know it's harsh and vengeful solution, and there will be lots of collateral damage. But as I look out over the destruction sweeping across the financial sector, I just can't silence the small voice in my head that keeps repeating that old '60s expression, "Burn, baby, burn."

Wednesday, February 20, 2008

The Facts

Good comment:

Often, on this blog, I have tried to affirm, withour any possible compromise, that the darwinian attempt to mess with the categories, and to pass the theory evolution as a fact, even on so called “peer reviewed” journals, is one of the greatest sins of our fellow enemies, a shame for rational thought and a complete degradation of scientific debate.

If darwinian dogmatism has so plagued the minds of its supporters that they are no more able to understand, or simply accept, the difference between theories and facts, then we are really in full epistemological tragedy. If you add that these same people hold all the scientific power and resources, and prevent any due opposition to their cognitive ramblings, then it is obvious that a paradigm shift becomes, more than a revolution, an absolute necessity if we are to intellectually survive.

For the nth time: facts are facts, and theories are theories. Facts are observed (well or badly); theories are inferred (well or badly).

Facts are descriptions and recordings of sense perceptions, more or less direct. They are shared through sensory control and validation. Their “truth” depends only on how much the observation can be controlled and shared. Facts are true if they have really happened, and if they have been correctly observed. Our reliance on facts is dependent on our reliance on the existence of an external world, and on our reliance on the ability of our consciousness to correctly perceive and represent it. The “truth” of facts is empirical, not logical. It depends on perception, not inference.

Theories, on the contrary, are logical connections between observed facts, often of mathematical nature, which try to build cause and effect structures. Theories rely on innate functions of consciousness, like logics and mathematics, and are not empirical, although applied to the empirical reality of facts. The purpose of theories is a double one: “explain” what we have observed (the facts) by logical and mathematical connections and, if possible, predict new observations. Theories are inferences, and not deductions. Theories infer new contents which cannot be deducted with absolute certainty from the premises. That’s why theories are never ultimately true. There are better or worse theories, according to how much they can explain or predict, and to how much they can’t explain or predict. But they are never, never ultimately true.

A theory can always be overcome, or falsified, in at least two ways: 1) another theory can explain what is known in a better way, or 2) new facts can falsify the existing explanation.

Therefore, all theories can always be challenged.

There are very important theories (such as newton’s mechanics, relativity, quantum mechanics), controversial theories (such as string theories), and, worst of all, very inconsistent and unsopported theories which are forcibly and dogmatically passed as non controversial (such as the theory of darwinian evolution).

But that was not enough. Darwinists were not satisfied that their theory was falsely acclaimed by almost everyone as non controversial. They were not satisfied that their theory had practically become a new, widespread religion, and one of the most dogmatic. They wanted more. They wanted something else.

And so, they changed their theory into a “fact”, achieving the supreme alchemic success of our depressing culture.

Obama Will Require You To Smile At Your Neighbor. He Will Require You To Keep Your Room Tidy. He Will Demand That You Have Only Happy Thoughts.

The good is all. Landru is gentle. Are you not of the body?

Michelle Obama continues to be frightening:

Last night I appeared on Hugh's show, and his producer Duane mentioned a Michelle Obama speech at UCLA. Captain Ed talked about this a bit, but I hadn't seen anyone transcribe the part of the speech where it gets a little... unnerving. It starts at about 8:41 in the audio.

Barack Obama will require you to work. He is going to demand that you shed your cynicism. That you put down your divisions. That you come out of your isolation, that you move out of your comfort zones. That you push yourselves to be better. And that you engage. Barack will never allow you to go back to your lives as usual, uninvolved, uninformed.

I'm sorry, nowhere in the Constitution does it authorize the President of the United States to demand anyone shed their cynicism. And I'm all for people pushing themselves to be better, but I don't think the President demanding it is the way to go about it.

And what if we kind of like our lives as usual? What about Americans' freedom to be uninvolved and uninformed?

Darleen at Protein Wisdom transcribed what follows:

"You have to stay at the seat at the table of democracy with a man like Barack Obama not just on Tuesday but in a year from now, in four years from now, in eights years from now, you will have to be engaged."

Ah. Apparently apathy will be criminalized, then?

Does anybody on the left side of the aisle find this rhetoric a little creepy? Isn't this describing an authoritarian presidency way beyond anything George W. Bush has done or proposed?

Do the powers of the presidency really encompass everything Michelle says Obama wants and plans to do? Based on this rhetoric, isn't he actually running for messiah?

UPDATE: A great line from reader Mike: "That tingle going up Chris Matthews' leg is a shiver going down my spine."

ANOTHER UPDATE: For a contrasting view, Dan Riehl thinks it's not creepy, just high-minded political rhetoric. "I don't think Lincoln was thinking term limits when he invoked the better angels of our nature."

I don't know. I know presidents don't like cynicism. I know they often urge us not to be cynical. But I don't know if I like talk of a president "demanding" citizens "shed their cynicism." Liberty isn't just about the good stuff; we ought to be free to be cynical. Our leaders demand enough as is in income taxes.

And while presidential candidates are always going on about building bridges to coming centuries and building a better tomorrow, etc., I think pledging to end "life as usual" ought to be sending up red flags. Barring us from going back to our "lives as usual" is not in the job description, and shouldn't be.

Weird, Wild Stuff




H/T Lileks.

Also, in the same post highlighting the above video, Lileks touches on the unbearable lightness of Obama support:

On the radio today Medved and Hewitt both asked Obama supporters to call and say why they were supporting their man. Specifics, please. The replies were rather indistinct. He would end the division and bring us together by encouraging us all to talk about common problems, after which we would compromise. He will give us hope by giving us hope: for many, the appeal has the magical perfect logic of a tautology. It's a nice dream. But compromise is impossible when you have a fundamental differences about the proper way to solve a problem. I believe we can achieve a fair society by taking away your house and giving it to someone else. I disagree. It is my house. Then let us agree to give away half of your house. Compromise! But that is not a compromise. You have taken half my house. We have compromised on your behalf with those who would have taken it all. Let us not return to the politics of division. There are strangers living in my spare bedroom. Then we have truly come together. Look, this isn’t a matter on which we can compromise, because we have conflicting premises. You’re pretending matter and anti-matter have the same relationship as Coke and Pepsi. They don’t.

If he wins, I do look forward to dissenting; since it’s been established as the highest form of patriotism, I expect my arguments will be met with grave respect. Shhhh! He’s dissenting.

Among the arguments offered by the callers:

* He will help save the planet by encouraging everyone to recycle cans and bottles and paper (the caller discussed a local drought, and said she did not think that recycling would stop it, but if everyone recycled - something she thought Obama would bring about through a general new era of ecological concern - future droughts would not occur.)

* He will pay for college tuition (the caller thought tuition was too expensive, and did not want to be burdened with loans)

* He will meet with the Iranians, personally, and conduct a frank personal interrogation about their nuclear intentions

* He will inspire the Youth of America to get involved in politics again

* He will prevent American companies from moving manufacturing overseas (The caller was unsure how this could be done, only that it would be done, because it should be done)

* He will not raise taxes on anyone except maybe millionaires (The caller was surprised to be asked if Obama would raise taxes; it was a strange, peculiar, irrelevant issue)

* He will give everyone health care (This would make American industry competitive, since companies would be freed of the obligation of making it an employee benefit)

* He will talk to the Europeans

And so on. There is tremendous faith in his ability to just wave a love-wand and get things done. I remember the same zeitgeist afoot in the land in 1992; change was the mantra then, too. Odd how things turn out – I’d be happier with Hillary as President than Obama, simply because she seems a bit more seasoned and realistic. And I do find it interesting that people who have decried the shallow, theatrical, emotion-based nature of contemporary politics are now so effusive in their praise for someone’s ability to move crowds. Perhaps they don’t mind a fellow on a white horse if he promises to nationalize the stables.

Tuesday, February 19, 2008

And All This Time I Thought Displaying Swastikas Was Uncool

On the freeway this morning I saw a car with a big homemade sign in the side window that said "Bush Is A Nazi", with the 's' in Bush replaced by a swastika. And it occurred to me for the first time that perhaps certain people actually have a deep and fundamental psychological drive to be displaying swastikas. Protesting Bush is just a convenient excuse. The long and the short of it is that the guy is driving around with a big swastika on his car, with tacit approval from many.

Hiding Disconfirmatory Evidence

A long history of forthrightness and honesty:

What should scientists do when they encounter evidence of the history of life that does not fit their expectations?

Physicist Gerald Schroeder recounts a remarkable example of a scientist who faced just this problem: Charles Doolittle Walcott, secretary (director) of the famed science centre, the Smithsonian Institution in Washington.

He stumbled on the Cambrian explosion fossils in the Burgess Shale in British Columbia, Canada.

As Schroeder tells it, paleontologist Walcott was combining a summer holiday with a field trip in the mountains of eastern British Columbia in 1909, on a ridge that connects Mount Wapta with Mount Field, at 5000 feet elevation.

Walcott noticed something unusual, and stopped to investigate. It was unusual. It was a fossil of a crustacean that was over five hundred million years old.

He did not have a problem figuring out how the fossil got there. At one time, the area was part of an ocean shelf in a warm climate.

His problem was accepting that this fossil would be there: As Schroeder tells it,

Some 550 million years ago, at the start of the Cambrian, the only life on Earth was the most simple of forms, one-celled bacteria, algae, protozoans, and some pancake-shaped life of uncertain definition known as Ediacaran fossils. There was no way evolution could have advanced life from one-celled protozoans to the complexity of this crustacean in the twenty or so million years of the Cambrian. There had simply not been the time for that development. Well into the 1970s, evolutionary theory assumed that in excess of 100 million years were needed for the basic body plans of advanced life to evolve from the simplicity of pre-Cambrian life. (p. 36)

Perhaps this was a fluke? No, it was no fluke. Walcott found more and more fossils. He shipped over sixty thousand back to the Smithsonian. He had found the equivalent of Noah's Ark. He found every animal phylum, or - as Schroeder puts it - the "basic anatomies" of all animal life forms today.

Cause for rejoicing? No, because there was a problem. The problem was that the find obviously did not support Darwin's theory of evolution:

"Eyes and gills, jointed limbs and intestines, sponges and worms and insects and fish, all had appeared simultaneously. There had not been a gradual evolution of simple phyla such as sponges into the more complex phyla of worms and then on to other life forms such as insects. According to these fossils, at the most fundamental level of animal life, the phylum or basic body plan, the dogma of classical Darwinian evolution, that the simple had evolved into the more complex, that invertebrates had evolved into vertebrates over one hundred to two hundred million year was fantasy, not fact. (pages 36-37)"

So the reigning theory was probably false. Walcott, remember, was the director of the Smithsonian Institution. And he had just discovered something very inconvenient for the Institution. So what did he do?

Well, he mentioned his spectacular find in Smithsonian Miscellaneous Collections, a publication read by few people. And then he put them in drawers and left them there. They did not receive the attention they deserved for eighty years.

Many people have tried to understand and explain why Walcott ignored the significance of his Cambrian fossils, but the most likely reason is that the fossils were not what he had expected to see. He ignored them in order to preserve a belief system.

Great Interview

Financial blogger Michael Shedlock is interviewed here. The main topic is the deflationary train wreck now in progress.

Monday, February 18, 2008

Quiz






Which theologian are you?
created with QuizFarm.com
You scored as Anselm

Anselm is the outstanding theologian of the medieval period.He sees man's primary problem as having failed to render unto God what we owe him, so God becomes man in Christ and gives God what he is due. You should read 'Cur Deus Homo?'


Anselm


93%

Augustine


87%

Karl Barth


80%

Charles Finney


60%

Friedrich Schleiermacher


40%

John Calvin


33%

Jonathan Edwards


33%

Martin Luther


27%

Paul Tillich


20%

Jürgen Moltmann


7%


Evolutionary Reasoning

Joe G captures the essence:

Stonehenge without Intelligent Design

Stonehenge- built from stones. Big stones. Stones made by mother nature. Thanks mom.

Now if we follow the evolutionary logic- the only reason we infer that Stonehenge was designed is because we couldn't imagine how mother nature could have built such a thing.

That would mean that if someone could imagine how mother nature could have "built" it, then the design inference fails.

OK so we know that mom can build stones, big stones. Check.

We know that glaciers can carry stones, even big stones.

Mom makes glaciers. Check.

Glaciers can also carve out stones and shape them.

Glaciers melt and the stones fall. Some may be carried back a little before being deposited.

So a glacier forms, carving out big pieces of stone and deposit them in England. Some of the massive stones are verticle and the wet, muddy ground was soft enough to let them sink in a bit such that they stood upright once the glacier had passed.

The horizontal pieces could be deposited during that same glacial period or during a later one.

Then primitive man, just out of his apeskin suit, saw the structure and set up camp.

The rest is history.

That scenario is more likely than the origins of living organisms from non-living matter via mother nature and father time.

Sunday, February 17, 2008

Thought For The Day

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Bigger version here.

A Ludicrous Farce

Good Zombietime photo essay about the recent goings-on in Berkeley between the Marines and Code Pink.

Thursday, February 14, 2008

A Dour Downer Of A Message

Funny thing when you examine what Obama is actually saying. Which is what Daniel Henninger does in this piece.

Wednesday, February 13, 2008

Fisking The Psalms

There's a lesson here.

I've Never Heard It Expressed Like This

From a comment to this post:

fully believe that a woman has the right to do with her own body what she will. I may not approve of all of those choices, and I think that many of them will make her unhappy, but I support that right as fundamental.

Likewise, I believe, quite firmly, that no one - man or woman - has a right to dictate to an unborn child what shall happen to its body. If there is no other body involved, the woman is not pregnant.

If there is no other life involved, she was never pregnant or has miscarried. The sole purpose of abortion is to end a human life.

"Understanding the complexities of life, birth, and death" does not give you a right to abort, nor give anyone a sanction to end the life of a child, no more than your poetic sensibilities would justify any other violent crime. A rapist does not "understand the complexities of sex, consent, and love"; he is hell-bent on abusing another person's body for his own sexual gratification.

Last time I checked, pro-choice advocates admit that the reason they support abortion rights is because sex is more fun when you don't have to worry about pregnancy. The parallels between the ideology of abortion and sexual assault are stunning. With abortion, it is merely that the object of gratification differs from the victim.

Sounds Like A Chuck Norris Fact

Just saw this at Mark Shea's site:

In 1953, as a G.I. intercepting Russian Morse code transmissions, Johnny Cash became the first American to learn of Josef Stalin's death.

Wesley Mouch Owns The Future

The future's so bright I have to wear night-vision goggles. Arnold Kling on what we can expect economically from our prospective new Democratic overlords.

Tuesday, February 12, 2008

Some Tripod And Compositing Work

This image turned out well:

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Bigger versions here.

The image required compositing 4 different exposures by hand.

Mark Shea Quote

Here:

Supernature abhors a vacuum. Extreme secularism is the pause between the moment a culture exhales the last vestiges of the Holy Spirit and inhales Something Else.

Why Republicans Are Happier People

Some interesting study results.

Monday, February 11, 2008

It's Funny What You Might Miss If You Don't Ask

This is rich:

In the 2008 election, media organizations and pollsters are relying on an outdated script by treating evangelicals as a monolithic voting bloc. The exit polls (sponsored by the major networks, CNN, Fox, and the Associated Press) provide the data for nearly all post-election analysis. Yet, thus far, exit polls have only asked one party’s primary voters whether they considered themselves “born-again or evangelical Christian.”

A new post-election poll in Missouri and Tennessee, commissioned by Faith in Public Life and the Center for American Progress Action Fund conducted by Zogby International, demonstrates the diversity of evangelical voters and the need for more thorough polling and careful analysis. Large numbers of white evangelicals participated in the Republican and Democratic primaries; majorities of both Democratic and Republican evangelical voters want a broader agenda that goes beyond abortion and same-sex marriage, and like other voters, white evangelicals ranked jobs and economy as the most important issue area in deciding how to vote.

One in three white evangelical voters in Missouri and Tennessee participated in Democratic primaries. Comparatively, only one in four white evangelical voters in Missouri and Tennessee supported Senator John Kerry in the 2004 general election.

While this year’s exit polls in both states identified all Republican white evangelical voters, the Missouri exit polls failed to identify 160,000 white evangelical Democratic voters, and the Tennessee exit polls failed to identify 182,000 white evangelical Democratic voters. In both states, this group of overlooked white evangelicals represents a figure equal to or greater than all African American voters, all voters over 65, or all voters who said the Iraq war is the most important issue facing the country, according to the state exit polls.

But what use would such questions be, if they don't follow the "everyone knows" script? It's not, after all, the job of the news media to discover pertinent facts.

If Every Player Thinks They've Hedged Away Their Risk, They Will All Then Act In Such A Way To Exponentiate Overall Systemic Risk

That's the upshot of our current situation. Now the risk turkeys are coming home to roost. This article has an interesting discussion of some of the "micro-level" details of what's going wrong.

excerpt:

This cross-dependency on other institutions is why counter-party risk may be the next problem child to raise its ugly head and may be the greatest risk of them all. We have been hearing the murmurs of counter-party risk for the last several years. The last measure of the credit derivatives market is $45 trillion (yes with a T) which didn't happen overnight. Like any big disaster, it didn't reach its tipping point in an instant but rather built up over a substantial time period where warnings were not heeded.

The risk isn't just that the other party to your derivative trade suffers a financial meltdown and can't pay. Counter-party risk really seems to take on three types of events. In the most widely understood event, a trade in which you are winning and are owed money by the counter-party isn't paid to you because of their inability. This first risk is pretty simple, but even so these kinds of failures may cause you enough pain to pass the problem down the line by creating an inability on your part to pay your obligations. This is a daisy chain effect.

The second kind of counter-party risk is that these private transactions which are agreed to in complicated legal documents have not been properly documented. Many credit derivative transactions don't simply involve two parties but are often times the risk is passed from one party to the next several times. When an event occurs it causes a careful examination of the complicated legal documents which spell out the specifics of solving a default event.

In a legal case from last year, Bear Stearns loaned $10 million to a development in the Philippines which was backed by a Philippines government agency. In order to protect itself from default, Bear Stearns purchased protection from AON for about $425,000. AON was then short exposure to the Philippines government agency, and so then purchased protection from Societe Generale for $328,000. Offsetting the risk gave AON an easy $97,000, right? Well the project went bust, the developer did not pay and neither did the Philippines government agency. Bear sued AON for $10 million to reclaim their loss under the Credit Default Swap it had purchased from them and AON paid. AON then went and sued SocGen for $10 million asking for a summary judgment claiming that since the one CDS had been resolved it should automatically create a resolution for the second CDS. After several courts opined on the case, AON lost their case, and lost $10 million. The final court ruling was that the language in CDS1 and CDS2 were not identical and that the risk was not purely offset. So instead of making $97,000 they lost $10,000,000. Seems like documentation is a real counter-party risk.

The third kind of counter-party risk is one of hesitation. When you are in the finance business you require funding and counter-parties in order to produce your products and to keep a massively leveraged balance sheet in place. Even if your funding and transaction sources simply hesitate to do business with you for fear of creating additional risk for themselves, you can suffer nearly instant insolvency. We saw this with Drexel Lambert, Long Term Capital Management, and a host of others over the years. Currently we are seeing this with the SIVs and the CDOs that require continuous short term funding in order to keep the balance sheets alive. We nearly saw it with Countrywide late in 2007, and I fear that we are going to see it again during this credit unwinding. But with the leverage in place today, these possible events will likely be much larger.

This issue has reached a critical state which is term reserved for events that have built up enormous pressure and cannot be relieved gently. Only three things can happen to debt. It can be paid off; serviced (pay the monthly interest) or it can be defaulted. We have long since passed the point where there are enough financial resources to pay off the debt, and we are probably nosing past the point where the monthly minimum can be covered. This only leaves us with one more possible event and that is default. The intricate web of risks that criss-cross the financial world and have been cleverly distributed among the players will be difficult to resolve.

...

The big question now is, if you have a derivatives contract, CDS, or CDO with another institution, you may start to wonder if your counter-party is sound, and if it is properly documented. I have a sinking feeling that this may be the next, and biggest shoe to drop, and the shoe that will potentially wreak havoc on credit markets and even the global equity markets. Your derivative trade may have turned out to be a great idea and conceptually there is a positive payoff due to you. But what if your counterparty is embroiled in some other mess with AMBAC, MBIA or some exotic basket of CDO's and they cannot make good on your trade? Do you have recourse? Even for a simple trade, with no leverage, based on liquid markets like S&P 500, these are private deals between two parties, and the trade was an obligation of your counterparty.

This is the largest risk we see going forward for the financial markets, when investors do not trust their counterparties, when counterparties suddenly decide to pull your financing due to 'balance sheet constraints' (this has actually happened to many funds, corporations and municipalities of late), and when financial institutions do not trust each other that 'the other side of the trade will settle'. This helps explain the large spike in LIBOR versus the effective Fed Funds rate last summer, a situation that was eventually corrected by the ECB injecting $500 billion into the money markets to bring LIBOR rates down in line with the Funds rate. LIBOR spiking versus the Fed Funds rate is likely the most reliable sign that financial institutions fear counterparty risk. Unfortunately, we think that was Act I in a larger story that will unfold in the future and we will be closely monitoring LIBOR rates in relation to the Funds rate. While the $500 billion injection by the ECB and the emergency measures taken by our Fed (such as emergency discount windows, surprise rate cuts, unlimited cash and other rhetoric) worked for a short time, Act II will likely be much more hostile and catch many unseasoned, poorly positioned investors by surprise.

Sunday, February 10, 2008

Good Analogy

Don Surber:

Queen Hillary demand’s Shuster’s head. No one tells her to buzz off.

Imagine if a TV host at NBC said, “Yesterday President Bush came out against human cloning. If anyone knows how much trouble twins can get into, it’s President Bush.”

Now imagine that host apologizing and NBC suspending him.

Now imagine the president protesting and saying, “I found the remarks incredibly offensive. Nothing justifies the kind of debasing language that [the TV host] used and no temporary suspension or half-hearted apology is sufficient.”

Now imagine Dana Perino, the White House spokeswoman, saying that the president would never go on NBC again.

In other words: Fire the S-O-B.

Would the press just sit back on its collective can and let George Walker Bush bully NBC like that?

Of course not.

Left and right, we would raise the First Amendment as our banner and march on the White House demanding satisfaction.

But since it is Hillary, the press gives her a pass on throwing her weight around as if she were some sort of queen.

The imperial candidacy...

Republicans Run For President, Democrats Run For King

Good Jonah Goldberg piece.

Excerpt:

One thing we’re learning from this election: These really are different parties.

First, look at the Democrats. Listen to the discussion about their strategies. Hillary needs to win more blacks and men. Obama must capture more Hispanics and peel away more white women. Both need to fight for “the youth.”

Now look at the Republicans and how we talk about them. Can McCain win over conservatives? Should he apologize for his support of amnesty or his opposition to tax cuts? Can Romney convince pro-lifers? Will Huckabee ever make inroads with economic conservatives? Were Rudy’s positions on gays, guns, and abortion too liberal?

See what I’m getting at? If substance were water, the Democratic campaign would be a desert.

...

[T]hat debate is almost entirely theoretical, drowned out by the mad scramble to assemble an identity-politics coalition of generic “Hispanics,” “blacks,” “white women,” etc. It’s amazing how complacent the media is in carrying on with this kind of nakedly reductionist analysis. The notion that Hispanics may be voting one way or another for reasons other than their ethnicity seems never to come up.

Meanwhile, on the Republican side, women, blacks and Hispanics vote too, but that’s not how the demographics and coalitions of the right work. GOP candidates actually have to win over people who believe things. (After all, the famed, and tragically frayed, “Reagan coalition” was about different groups of principled people, not a mere hodgepodge of ethnicities and genders.) Exit pollsters ask GOP voters whether they’re committed pro-lifers, whether they think the economy is the most important issue, etc. I’m sure they ask Democratic voters similar questions, but it’s telling how little we hear about that. What Democratic voters actually believe doesn’t seem to be that relevant, in large part because Democrats aren’t voting their beliefs, they’re voting affections.

...

The Republican party is a mess, absolutely. Conservatives are sorting out what they believe, what heresies they can tolerate and on which principles they will not bend. At times this argument is loud, ugly and unfortunate. But you know what? At least it’s an argument about something. On the Democratic side, if you strip away the crass appeals to identity politics, the emotional pandering and the helium-infused rhetoric, you’re pretty much left with a campaign about nothing.

It Is Precisely Because We Never Ask Such Questions That We Have Such Useless Leaders

Some good debate questions you'll never hear asked.

Here's one:

10. Sen. Obama, this question is about global warming, something about which you urge extreme action to fight. You criticize President Bush for going to war in Iraq, even though all 16 intelligence agencies felt with "high confidence" that Saddam Hussein possessed stockpiles of WMD. Critics of Bush say he cherry-picked the intelligence. Hundreds, if not thousands, of scientists consider concerns about global warming overblown. Isn't there far more dissent among credible scientists about global warning than there was among American intelligence analysts about Iraq? If so, as to the studies on global warming, why can't you be accused of cherry-picking?

Saturday, February 09, 2008

Gnarly

Good little mini-documentary about landing a small plane at Courchevel Airport way up in the French Alps. Get it right the first time because you ain't going around. Pretty spectacular footage.

Friday, February 08, 2008

Always Overdressing For The Wrong Occasion

We may be heading into a "Maunder Minimum" i.e. global cooling, such as happened between 1650 and 1715. Perhaps socialists will soon have to search for another excuse to grab power. Details here.

Leftists Brought To Heel By Threatened Denial Of Funds

The Berkeley City Council stands on principle:

BERKELEY, Calif. — As six Republican senators devised a plan to yank $2.3 million in federal funding for Berkeley programs, the mayor of the famously liberal city apologized Wednesday for his hard stance against a Marine recruiting center. …

“That letter will probably be pulled back and maybe more moderate language will be put in place which is appropriate I think,” said Berkeley mayor Tom Bates. …

“Subtly stated in the resolution is perhaps an impugning of the soldiers fighting for us in Iraq and other places,” Berkeley City Councilman Laurie Capitelli. “And that was never the intention but that really needs to be cleared up. As I walked to my car that night I realized I regretted it and I had made a mistake.” …

“There’s really no correlation between federal funds for schools, water ferries and police communications systems and the council’s actions, for God’s sake,” said Bates, a retired U.S. Army captain. “We apologize for any offense to any families of anyone who may serve in Iraq. We want them to come home and be safe at home.”

Come on, Berkeley. You’re where my American side of the family has been based — my mom and dad met there (and she still votes there), my aunt went there, and a number of my cousins have gone there. You’re made of sterner stuff than that, aren’t you? Stick to your guns!

Heads We Win, Tails You Lose

Good point:

Whatever your personal weather, around the planet January 2008 was the second coldest in 15 years. The linked post, complete with graphs and everything, does not suggest that this says anything in particular about the climate or the long-term direction of local temperatures.

To me, the most interesting thing about this story is the complete absence of discussion in the mainstream media, which manages to induce a scientist or politician to blame anthropogenic global warming for any bit of idiosyncratic weather. See, if you can stand it, the latest comedy gold from John Kerry.

If you are going to live by idiosyncratic weather, you should die by it. The cherry-picking of specific weather events to bolster the case for greenhouse gas regulation actually makes the advocates and their propagandists in the media look like fools. Among smart people, at least, there would be less skepticism about climate change if the media and activists were not so disingenuous and opportunistic in their publicity of it. But maybe they are not trying to persuade smart people.

Thursday, February 07, 2008

Good Lileks Rant

Here. Contains the line:

Merit has nothing to do with America; it’s all about white male privilege. Do not be fooled by the rise of Hillary and Obama; put them together, and what do you have? White. Male.

Nuthin' But Blue Skies Ahead!

Not. The article paints a grim picture of the factors which point to an imminent massive unwinding of our glorious credit/"debt slave" system. Also, it turns out that folks aren't gonna just sit there and take it when their survival is on the line. More analysis here. The financiers richly deserve what's apparently about to hit them. Not because they are financiers, but because they have been so massively shortsighted, reckless, and engaged in nothing but magical thinking.

Tuesday, February 05, 2008

A Rolicking Good Read

Mark Shea on the New Atheists.

excerpt:

This curious pattern of trying to have things both ways is on remarkable display among the New Atheists. On the one hand, we run into contradictory explanations that do not explain, such as diabolically clever evangelists who are too stupid to read their own books. On the other hand, we run into a curious role reversal when it comes to dealing with claims of the miraculous, not 2,000 years ago, but right here and now.

Theists, you will recall, are dogmatists utterly closed to empirical evidence that challenges their tidy little universe. The New Atheists, in contrast, are realists who just follow the evidence where it leads, and luckily it leads to what they "simply knew" since they were nine years old [here, Shea is referencing Hitchens]. Yet curiously, we so often meet New Atheists like London Times columnist Matthew Parris.

Recently, Parris wrote his coolly intellectual reaction to the story of Sr. Marie Simon-Pierre, who, as doctors confirm, was suddenly healed of a well-documented case of Parkinson's Disease on the night of June 2, 2005, after praying for the intercession of the recently deceased Pope John Paul II. By way of careful scientific examination of these facts, Parris deployed the following analytical algorithms:

1. Link the story with crazy dispensationalist notions about the Second Coming;

2. Call for "intelligent Christians" to voice their "righteous anger" and "contempt" for this "nonsense" (apparently meaning "any belief in the supernatural");

3. Ridicule the "excesses of Lourdes";

4. Lament "the woeful confusion of faith with superstition"; and

5. Categorically condemn anyone stupid enough to "honestly entertain the possibility that from beyond the grave the late Pope John Paul II interceded with God to cause a woman to be cured of Parkinson's disease."

Parris concludes this dispassionate pursuit of the evidence with the following de fide definition:

"But how can you be sure?" Oh boy, am I sure. Oh great quivering mountains of pious mumbo-jumbo, am I sure. Oh fathomless oceans of sanctified babble, am I sure. Words cannot express my confidence in the answer to the question whether God cured a nun because she wrote a Pope's name down. He didn't.

Simple-minded folk might think that the truly rational first step is to find out if the nun had Parkinson's and then find out if she was cured...

Shea does a great and amusing job in this article of putting atheist arguments into Summa Theoligica-like Thomistic propositions. An altogether great read!

Monday, February 04, 2008

"Thoroughbreds Win Dogshows, But Crossbreeds Win Dogfights"

You haven't read an anti-Nazi manifesto until you've read one by John C. Wright.

Game Over

Mark Shea:

Britons Beg for Conquest and Destruction of Their Civilization

Nearly a quarter think Winston Churchill was a myth while the majority reckon Sherlock Holmes was real.

The survey found that 47 percent thought the 12th century English king Richard the Lionheart was a myth.

Remember: This is the urbane and sophisticated people who have outgrown such primitive superstitions as "belief in God" because they can now see the latest soccer mob riot on Hi Def TV.

I wonder what percentage of Americans would answer the same poll questions with "Who?"

One simple advantage Christians have over the retrograde yobs who account for such poll results is that they actually have contact with some historical memory that is older than the Spice Girls. A system of material comforts and bovine spiritual horizons such as the present UK is hardly worthy of the name "civilization" anymore. When the whole governmental/educational/technological/entertainment complex is devoted, 24/7, to turning human beings into self-satisfied cattle, it makes for a (temporary) easy job for the elites, but there will be a big piper to pay when something throws the system out of gear and the cattle begin a mindless stampede.

Sunday, February 03, 2008

Cool Flash Mob Stunt

I like it. After viewing the video, you can read some background here.

Turning The Tables

Good analysis of the illegitimacy of the Berkeley city council's attempts to shut down Marine recruiting in their Republic.

Maybe Reconsider Using Gay Porn As A Point-Of-Sale Display?

Good.

Good Observation

Seen in comments here, in reaction to the typical "pro-choice" protester coathanger symbolism:

Waving the coathanger is about the most brainless thing. Exactly WHO, pray tell, was supposedly wielding the coathangers pre-Roe, and would supposedly wield them post-Roe? I’ll tell you who: PROCHOICERS!

If you don’t want women to die from coathanger abortions, LEAVE THE FREAKING COATHANGER IN THE CLOSET. Duh.

Saturday, February 02, 2008

Yeah. Like Teddy Roosevelt Knows Anything.

Very interesting quote:

“There is superstition in science quite as much as there is superstition in theology, and it is all the more dangerous because those suffering from it are profoundly convinced that they are freeing themselves from all superstition. No grotesque repulsiveness of medieval superstition, even as it survived into nineteenth-century Spain and Naples, could be much more intolerant, much more destructive of all that is fine in morality, in the spiritual sense, and indeed in civilization itself, than that hard dogmatic materialism of to-day which often not merely calls itself scientific but arrogates to itself the sole right to use the term. If these pretensions affected only scientific men themselves, it would be a matter of small moment, but unfortunately they tend gradually to affect the whole people, and to establish a very dangerous standard of private and public conduct in the public mind.” Theodore Roosevelt, “The Search for Truth in a Reverent Spirit,” Outlook, Dec. 2, 1911.