Category Archives: Politics

Are B-Schools Paying Attention to this Fiasco?

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The dam burst of banking disasters and federal bail-outs of firms “too big to fail” has brought to light the fragility of our banking and investments system. Like a tropical depression that forms in the eastern Atlantic ocean and gradually feeds on the warm waters and moist air until it makes landfall as a rampaging storm, the combination of greed, financial deregulation, and enthusiastic liquidity on the part of the Fed has now spun up into a full fledged economic storm.

In an essay posted on CNN.com, Columbia Professor Joseph Stiglitz, among others, points to some causes of the present calamity on the banking and financial businesses. Stiglitz says-

“One can say the Fed failed twice, both as a regulator and in the conduct of monetary policy. Its flood of liquidity (money made available to borrow at low interest rates) and lax regulations led to a housing bubble. When the bubble broke, the excessively leveraged loans made on the basis of overvalued assets went sour.” 

“The new “innovations” simply hid the extent of systemic leverage and made the risks less transparent; it is these innovations that have made this collapse so much more dramatic than earlier financial crises …”

The mess that taxpayers and investors are left with is the result of greed and recklessness on the part of elite “business leaders” in conjunction with Federal officials only too anxious to deregulate and discount. This is not a failure based on physical reality. It is a failure based on greed and poor judgement. It rests on a morally shallow and sadly misguided philosophy that mere acquisition of currency is reason enough for being and is the sole measure of success.

As a start, it is my hope that the Deans and faculty of our business schools can summon some kind of movement to reform their admissions standards and refine their ethics curricula.

Perhaps certain finance practitioners need to be trained and certified in a manner similar to actuarial professionals?  Seems to me that the people who launch financial instrument schemes with the potential to collapse an economy should be at least as well trained in risk management as an actuary.

A firm proposing a financial instrument for sale to the public should be required to prepare a mathematical model with macroeconomic inputs to model the potential for instability. The kind of discipline needed to do this modeling could help people refine the fund structure so it remains manageable in a broader range of economic conditions. This would also provide for a real transparency to regulating agencies and possibly even investors.  But most importantly, if you want to model it, then you have to understand it. And that is part of what has been lacking.

Palin Delivers to RNC Smugfest

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Until last night, I thought that an Obama win was uncertain only by how big the margin would be. After listening to the speech by VP candidate Palin, I’m not so sure now.  Palin delivered what can only be regarded as a superb speech in terms of a crisp delivery and scrappy rhetorical barbs. With the best speech writers PAC money can buy, and with a large dollop of natural Ability, she delivered at the big event. Check out Mudflats for a fun post.

The St. Paul event center was packed to the rafters with plump, pasty-faced plutocrats and a few blond Barbie-Doll delegates within easy camera range. Conventions are engineered specifically for television and both the DNC and RNC have talented empressarios to put on a memorable show.

No matter what you think of any of the candidates, it is bound to be an interesting home stretch to election day.

I have a dream too!

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I have a dream. I dream of a time when election crazed talking heads find some new metaphores. I dream of a time when networks lengthen the news sampling interval from 5 minutes to something greater. I dream of a time when microanalysis of the faintest political nuance is recognized for what it is- gossip. I dream of a time when broadcast news people understand the concept of signal to noise ratio.

Finally, I dream of a time when people focus on the core of MLK’s dream- nonviolence- rather than the attention deficit parroting of the 4 words for the sake of loftiness.

Self-Imposed Complexity and the Ratchet Principle

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The portfolio of laws that American citizens are subject to seems to grow without bounds. Every year our congress drafts a new collection of laws to submit to the process of enactment. State legislatures, county and city governments all are able to add new rules and constraints on our degrees of freedom. As if that weren’t enough, people willingly move into convenant controlled communities where they sign away basic freedoms like the freedom to choose house paint or to leave the garage door open.

We are gradually fencing in all of the free space where conduct is unregulated. Our Nanny State leaders are scaring the bejeebers out of us through defense initiatives and dire warnings about what could happen if terrorists took an interest in disrupting industry and infrastructure.

Our town of 6,000 has to comply with Homeland Security requirements by fencing in the town water tank in a certain way.  Some terrorist could poison the water. In fact, that fiend would probably be a psychotic local citizen bent on retribution, not a Shiite saboteur in sandals. Collectively, we are at much more risk from fellow citizens than from foreign bad guys. Perhaps that is the hidden agenda.

Citizens are turning over priceless freedom artifacts in exchange for promissory notes claiming to protect the bearer. Once we give up degrees of freedom in the conduct of our lives, we can never get them back. Govennment will not refund units of control.  As we increase the complexity of our world through an ever increasing statutory web of control, we forfeit degrees of freedom. It is like a ratchet. You can click forward, but there is no going back.

New subject. Read Jim Kunstlers post “Reality Bites“.

Bacevich on Consumerism and the Imperial Presidency

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While I have been struggling in my usual caveman way to express my frustrations with our national governance, whom should I stumble into but Andrew J. Bacevich, Boston Univ professor of history and international relations, who has been working on this matter for some time. Bacevich has written a book called The Limits of Power: The End of American Exceptionalism.  This exceptionally articulate fellow was recently interviewed by Bill Moyers on public television. 

His thesis comes down to the notion that American demand for consumer goods and credit has resulted in a kind of consumer imperialism. To facilitate this “domestic disfunction” or “crisis of profligacy”, the executive branch has acquired an excessive reach that exists only by the wither and atrophy of congress. By fiat of the executive, and the mumbling consent of a passive congress, our military adventures have distracted Americans from an examination of our continuous and undisclipined consumerism and indebtedness.

Georgia on my mind

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I’m glad that the USA is able to scold CCCP Russia for its invasion of Georgia from our lofty position on the moral high ground. I suppose that the irony of our warning to Russia could be discounted as the delerium of a petroleum besotted empire in decline. While it may not be that bad yet, we certainly have been driven by our political leaders to a remote location in the desert and abandoned.

Western Civilization classes of the future will note that the inability of the USA to constructively engage post-communist Russia was perhaps one of the greatest opportunities lost of the 20th Century.

From NIMBY to BANANA

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The 2005 government report entitled Peaking of World Oil Production: Impacts, Mitigation and Risk Management, by Hirsch, Bezdek, and Wendling, is a sobering tally of the current picture of oil production and consumption in the world today. Often referred to as the Hirsch Report, the authors take a “now shot” of the global oil production scene and speak directly to the matter of mitigating the approaching economic disruption that must usher an unprepared nation into a future of peak and declining oil production.

If you read the Hirsch Report and pay attention to current events, you may be gripped by a kind of cognitve dissonance, or a haunting sense resembling a schizophrenic episode of contradictory voices in the collective consciousness.  While the global warming showboat is paddling up and down the Mississippi blowing steam and calliope music, nationalized oil producers are failing to answer calls for increased production in reply to a dramatic ramp-up in petroleum demand. Some call for increased exploration and others call for drop in replacements for petroleum. All the while, evidence accumulates that the ecosystem suffering from consumption and waste generation.

As with any discussion involving economics, it is possible for people to speak imprecisely when discussing supply and demand. Econobrowser takes Hirsch to task in this manner. It seems that many of us confuse demand with desire.

Supply equals demand today, supply will equal demand in 2025, and supply will equal demand in 2050. Whatever Hirsch means by “peaking of world conventional oil production,” it certainly isn’t the condition that “production will no longer satisfy demand.”

Our news media, now almost fully morphed into a perverse mix of gibbering Bill O’Reilly clones and entertainment news programming, prattles endlessly about the hurtful gasoline prices and truncated vacation plans. Government makes flatulent noises about more drilling, but hardly a peep about reduced consumption.  Where is the journalist corps? Who is asking the tough questions?

In isolation, either climate change or an exponential oil shock are more complex than nimrods leaders in the Bush administration can process. Together, these stresses add up to a major challenge to the way we live.  Maybe the situation is more complex than any nation can reasonably respond to. With global prosperity comes global demand for resources.  Western nations have built a house of cards based on cheap petroleum. Instead of wage growth in the past 20 years, we have been given easier access to credit. Instead of increased savings, we have found ways to burn up discretionary income.

A major part of what has to happen to adapt to the new reality of petroleum scarcity is a remodel of our infrastructure. We need more passenger rail lines and terminals with the necessary right-of-way issues taken care of. Workers need to live closer to their place of employment. The airlines have to figure out how to operate profitably with reduced passenger miles. We must upgrade our electric power distribution system to accommodate the increasing reliance on electrical energy. If wages do not change, we must adapt to having less discretionary income to spend. 

But a remodel of infrastructure will require that we adapt to living nearer to it. In the past, a proposal to build a power plant is met with a chorus of outrage or “concern”. It used to be called NIMBY- Not-In-My-Back-Yard.  The latest acronym is BANANA- Build-Absolutely-Nothing-Anywhere-Near-Anything. New power transmission lines and generating plants will have to go up and it will have to happen somewhere. People naturally fret about real estate prices and their view from the dining room window. I foresee more exercise of eminent domain in the future.

Farewell George Carlin

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June 22, 2008, Santa Monica, California. Comedian and satirist George Carlin died sunday evening after checking into a Santa Monica hospital complaining of chest pains. He was 71.

Carlin was a brilliant social satirist and comic. He had the ability to look at ordinary things from a different angle and see the obvious obsurdity in things most of us accept as simple background noise. This is one of the key attributes of a successful satirist and comedian.

I think it’s the duty of the comedian to find out where the line is drawn and cross it deliberately. 

The very existence of flamethrowers proves that some time, somewhere, someone said to themselves, “You know, I want to set those people over there on fire, but I’m just not close enough to get the job done.”

I went to a bookstore and asked the saleswoman, “Where’s the self-help section?” She said if she told me, it would defeat the purpose.

There’s no present. There’s only the immediate future and the recent past.

Not only do I not know what’s going on, I wouldn’t know what to do about it if I did.

-George Carlin

Carlin was a serial quipster who pushed the boundaries of social norms. His Seven Dirty Words ended up as the center of a 1978 Supreme Court ruling that affirmed the right of the state to bar “indecent” of speech on the public airwaves.

While it is common for contemporary comedians to exploit “indecent” speech for shock value today, few seem to have the facility with language that Carlin had. He was able to reduce to a few short humorous sentences the dark uncertainties that many of us have with common subjects.  Carlin’s observations on taboo subjects put him well ahead of his time.