Door To Hell

Paul Solman of PBS conducted this interview with Nassim Nicholas Taleb and Benoit Mandelbroit.  It is very sobering and somewhat scary, mainly because of the fact that they are scared.  Mandelbroit is known for his work in fractal geometry and Taleb works in the financial industry and is the author of Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
and The Black Swan: The Impact of the Highly Improbable.  I've read both works and I highly recommend them.  They are treatises on uncertainty and our knowledge of risk.

Unfortunately, that's what is  being discussed and applied to this current global economic crisis and the two's take on it is frightening.  For those who don't have the time to listen to the interview or prefer to read the summary, Mandelbroit and Taleb make the following comments and assertions:

- First, both feel vindicated since their work has been primarily on the complexity of the current economic models and human inability to assess the risk.  That being said both are not basking in their vindication and are very frightened, stating that this could be worse than the Great Depression and the biggest period of turmoil since the American Revolution.

- Taleb states that never in history have we had so much complexity in our economic system coupled with so much incompetence and misunderstanding.  This system leads to less crises but when they do hit they are far more disastrous.

- The system is Over-Optimized and therefore much more fragile, mainly due to the consolidation of many banks.  Instead of in the past having 10 banks and some failing, now we may have one huge bank fail making things 10 times worse.

- Mandelbroit likens the economic system to the weather.  Using the analogy that forecasters may see an already formed storm coming but due to complexities and turbulences cannot predict a storm forming.  Except he says that the actors in our global economic system are even more difficult to predict and account for than the liquids and gases in the weather system.

-  Mandelbroit also goes on to assert that we can't take into effect multiple little storms forming and rapidly evolving into a bigger and bigger crises because of their interrelated complexity.  The rapidity is overwhelming.

- Taleb says the 700 Billion bailout is pocket money for what is about to come.  He asserts that hedge funds will not be able to get lending from banks and will be forced to sell off positions, that in turn will impact other entitites, prices will drop, businesses will not make payroll.  Everything is tied in intricately in ways we were not able to see or predict these impacts.

-  Admitting that although the worst is possible, it is also possible for recovery as well.  Their is no scientific model to account for what is happening and therefore predicting probabilities moot.  Everything is possible, uncertainty is certain.

I highly respect both of these men, and to hear them speak about the current crisis and be so scared (Taleb is not sleeping) is sobering.  They both hope they are dead wrong about their thoughts on what may happen, however, I too think that we are entering a time of major turmoil.

                In the midst of the 2008 Presidential election, awareness of
America’s foreign policy should be at its height.  Unfortunately after reading Noam Chomsky’s Failed States,I have become almost despondent at the state of our country.  This is not my first foray into Chomsky’s
writings.  Having read Hegemony or Survival
and What We Say Goes: Conversations on U.S. Power in a Changing World, I am familiar with his
perspective.  Failed States once
again reiterates what those books state, that America is first and foremost
concerned with Hegemony and protecting the interests of the privileged and
elite.

                Chomsky’s
writing brings relentless logic, page after page.  His writing, although brilliant and
illuminating, is also repetitive and overwhelming.  If reading a nice enjoyable novel is like
floating down a stream, then reading Chomsky is like trudging through
quicksand.  My review is not an attempt
to capture point by point Chomsky’s assertions, that would entail me writing a
book.  Instead, I will proceed by taking
a couple of broad overviews that I found interesting.

                As one
may imagine, Chomsky is extremely critical of Bush II.  In fact much of the book highlights Bush’s
failings and misguided stances.  What may
surprise most about Chomsky is that he is critical of almost all U.S.
Presidents and their policy.  In Failed States Chomsky goes as far back as Andrew Jackson and the atrocities
committed toward the Seminoles.  Bill
Clinton is not spared either.  In fact,
Bush II stands out not for his policy but instead how he conducts it.  Whereas past Presidents were subtle and
feigned respect for the rest of the globe, Bush II has become the outlaw cowboy
doing as he damn pleases under the guise of some “moral vision.”

                Another
claim that Chomsky makes, that we all need to increase our awareness about, is
that the U.S. has done more to enhance the threat of Nuclear proliferation and
a Nuclear disaster than any other global state. 
The U.S. throughout history has had many opportunities to decrease the
likelihood of a nuclear disaster yet insists on taking policy stances that
force the hands of other countries to nuclear weaponry.  These are areas where the government rather
than looking out for the survival and wellbeing of mankind, is instead more
concerned about U.S. hegemony.  The
problem is they take it to the point of irrationality.  Hegemony could still be attained, without
ramping up the threat of nuclear destruction. 
Chomsky points this out several times.

                Well
known by readers of Chomsky is his distaste for the US-Israeli relations.     Chomsky
delves into this subject again extensively. 
Chomsky paints Israel as the lapdogs of the US.  Israel pursues its own ugly foreign policy by
continually taking more and more Palestinian lands and refuses to honestly
negotiate a peace.  However, still bows
down when the master speaks. 

                Chomsky
takes on the subject of democracy promotion. 
This is typically the red herring that allows us to justify our actions
in third world countries.  The problem
is, we only truly allow democracy if the “right person wins.”  If the democratically elected leader of
another country is at all a perceived threat, then the principles of democracy
are thrown out the window.  In addition,
our own democracy is failed.  The leaders
of the country do not follow the general will of the populace.  This is shown extensively in Failed States
when Chomsky addresses the issues that matter to the population, such as health
care, reducing military spending, signing the Kyoto protocols, and generally
accepting International law. 

                Chomsky’s
vision of a just foreign policy is one that adheres to the principle of
universality.  In other words, the Golden
Rule.  We, as a country, declare
pre-emptive wars, interfere in the democracies of other countries, carry on torture,
allow inhumane treatment, and yet at the same time declare moral superiority to
ourselves and the rest of the world.  I
enjoy reading Chomsky, though at times it is a chore and at times it is
discouraging to my hope for the future. 
Whether you agree with him or not, he must be acknowledged.  His thoughts and ideas are important enough
that they merit discussion.  This is what
saddens me the most.  That in the current
climate, to state the ideas Chomsky promotes is heresy.  Americas has come to a point where it is
necessary to examine ourselves as a nation. 
Examining the faults will be the most important thing going forward.  The virtues of America are well known and
hopefully appreciated.  I know I am
thankful everyday to be born so lucky. 
However, examining our faults is what will allow us to progress to a
more humane and just society.

Finally it's going to come out.  The baseball player's union is going to take it to MLB Owners for colluding against Barry Bonds.

Wasn't it obvious they colluded to keep Bonds out? Freaking Infuriating.  I
hope MLB gets nailed to the wall for this.  This really pissed me off
this season, Bonds should have gotten a fair chance to play.  As a fan
I wanted to see him play.  You know he's clean for sure, so let's see
what he can do clean and in his early 40's.

I have no vehemence
to Barry Bonds, Roger Clemens or anyone else they slimed.  Well, maybe
Palmeiro was a little sleazy but I feel bad for people like Clemens and
McGwire.  I wanted to see Bonds play.  If Florida was going to pull the
trigger on the Manny Ramirez trade and decided not to because of the
cost, WTF?  Why not pick up Barry Bonds, pay him league minimum (which
he was going to donate to charity anyway)?  It's a no lose, if he sucks
drop him – no cost, if he is disruptive, drop him – no cost, can't play
defense, drop him – no cost.  Tampa Bay, a DH AL team, same thing when
Longoria went down.  No Crawford and no Longoria, in a pennant race,
why not?

Biggest sham in the world, do they think everyone is stupid? 

Here's the deal and the parallel with Wall St.  The players in baseball most likely used some enhancing drugs, but the rules allowed it.  In fact there were no rules.

1)  In an extremely competitive atmosphere players used performance enhancers to get ahead.  Why?  Because others were doing it and their livelihoods depended on it.
1a)  In an extremely competitive atmosphere banks leveraged gaboodles of money to make risky investments.  Why?  Because others were doing it and making even more gaboodles of money.  If not them it was going to be their competitor, livelihoods depended on it.

2)  The result of an increase in performance enhancing drugs in the league caused more offense and as a result more attendance and as a result more money for the owners.  Times were good, players were chasing records and attendances were finally coming back from the dismal 1994 strike season.
2a)  The result of the increased investing and leverage for the banks allowed for everyone to be happy, the economy grew, the market went up and the corporations made lots of money.  The economy was coming back strong after the dismal recession after 9/11.

3)  This was the direct result of the MLB rulers, namely Bud Selig, turning a blind eye to the performance enhancers.  There were no rules or testing in MLB for performance enhancing drugs.  Why bother, everyone is doing well.
3a)  The increased investments made by banks were a direct result of the Fed giving out money.  Interest rates were so low, you were stupid not to use it.  The government and Fed had no reason to step in, instead turn a blind eye and delude yourself.  Everyone is doing well.

4)  Finally alarm bells start to go off.  Ken Caminiti, Jose Canseco, Balco.
4a)  Alarm bells go off.  Defaults, foreclosures, mortgage companies failing.

5)  Public turns on players using steriods, attacking them from moral stances.
5a)  Public turns on Wall St.  Calling them greedy and immoral.

6)  MLB cleans up its system and persecutes the stars of its game, whom they ALLOWED to use performance enhancing drugs.
6a)  Treasury attempts to clean up its system and will try to persecute the banks and bankers it ALLOWED to leverage so high and make risky investments.

Are the players and bankers guilty?  Yes, but they only did what the system allowed them to do.  The people that deserve the wrath in both situations are the rule makers of the games, not the players of the games. 

If Sarah Palin were the manager of the Red Sox right now in their attempt to come back from a 3-1 deficit in the ALCS agains Tampa Bay.  A little jest during playoff and election time.

On Boston being the more American team:
"Look at their name, Hussein Obama the DEVIL Rays!  You betcha, promoting the work of the Devil, what kind of American does that?  They don't use that Hussein Devil anymore, but they can't deceive us!"

On being down 3-1 to Tampa Bay in the ALCS:
"Look were not going to quit now.  We're doing this for every Joe Six Pack in America Boston, to give him a voice amongst the overwhelming Liberal Yankee Press.  We will fight and play hardball slander against our opponents."

On opposing manager Joe Maddon:
"Do you know who Barack Obama Joe Maddon is?  Did you know he associates with former terrorists Yankees, like Bill Ayers Joe Torre?

On her job as manager of the Red Sox:
"As for that VP manager talk all the time, I'll tell you, I still can't answer
that question until somebody answers for me what is it exactly that the
VP manager does every day?"

On her dedication to the Red Sox winning the World Series:
"Pray for our military men and women Red Sox who are striving to do what is
right defeat the Rays. Also, for this country Boston, that our leaders Epstein, our national leaders John Henry,
are sending soldiers players out on a task that is from God. That's what we
have to make sure that we're praying for, that there is a plan and that
that plan is God's plan."

EDIT (10/17/08):  After seeing last night's game, Boston coming back from a 7-0 deficit with 7 outs to go, it may just be God's plan.  Sorry.

With the Final Debate within hours, just a short political thought:

The Republicans made a deal with the devil when they seriously
started to court the religious right. Instant Gratification, 1994
to present, but it's going to have some serious long term
consequences. The public is not as stupid as some people peg them
to be, the Republican Party schtick is coming to an end.

There are plenty of people like me that agree with old
republican values like less government, high priority on civil
liberties, free market, less socialistic tendencies etc.

Guess what though, I am a staunch Obama supporter. Obama doesn't
speak down to me. He is intelligent and has a civil demeanor, he
assumes that you "get it." If you don't well then your not going to
vote for him anyway. I trust someone that I believe to have a high
level of intelligence and character, despite my disagreements, over
a blowhard that caters to ignorance and lies. Our views may not
mesh perfectly but two things:

1) I consider I may be wrong in my views,

2) Even if I am right, at least the chance of rational
interaction exists. As opposed to the recent Republican stance that
rational discourse is not worthy.

I would rather vote for a Democrat that has an ideology that I
may not fully agree with, then a Republican who willfully exhibits
their ignorance and demeans intellectual discussion as
"elitist."

Hopefully soon the Republican Party will understand the drag
that the religious right imposes on them. Then we can go back to a
rational discussion of governmental ideology, not moralistic
platitudes.

This article examines how life would be without a bank account.  First one caveat, this is from the BBC and the article concerns the British culture, however it's essentially the same here in the US.

I have long been anti-bank and pro cash.  My thoughts are the further you subject yourself to their system and rules, the more you subject yourself to their power and whims.  This paragraph is absolutely horrifying to me:

Intrinsic to my identity?  No, not at all.  In fact there was a time where I did live as bankless as possible.  Relying on cash, no credit cards, no debit cards, and virtually no credit history.  Guess what?  It can be done.  It is more difficult and more costly, that's a result of allowing ourselves to be sucked into a no cash culture.  This ultimately benefits the banks.  It benefits them by allowing them to set the rules.  They, like organized crime, skim off of everything.  If you're a merchant, they charge to process transactions, which ultimately get passed to the consumer.  The banks set unreasonable and arbitrary fees.  Why does it cost $39 dollars if I am one day late on my credit card payment?  How many of us ask these questions?  What is the rational behind needing a checking account in order to rent
a place?  As long as cash is a form of currency it should be accepted
as payment.

Furthermore, the article makes no mention, most likely because it is British, of a gigantic class of people who make due without the banking system, illegal and legal immigrants.  Many immigrants come from countries without reliable banking or currency and tend to distrust the banking system.  They also fear that they may jeopardize their status in the country.  They get along without the banking system, of course it can be more costly and also shut people out from certain financial products.  The solution should be not to incorporate the bankless into a banking culture, instead create a more accepting culture for the bankless by accommodating cash.

Cash allows for freedom and privacy, it should not be shunned, but embraced by a society that proclaims freedom as it's highest

See Video.

This place in Uzbekistan is called by locals “The Door to Hell”.
It is situated near the small town of Darvaz. The story of this place
lasts already for 35 years. Once the geologists were drilling for gas..
Then suddenly during the drilling they have found an underground
cavern, it was so big that all the drilling site with all the equipment
and camps got deep deep under the ground. None dared to go down there
because the cavern was filled with gas. So they ignited it so that no
poisonous gas could come out of the hole, and since then, it’s burning,
already for 35 years without any pause. Nobody knows how many tons of
excellent gas has been burned for all those years but it just seems to
be infinite there.

Were in a financial crisis or so I've read.  I've also been led to
believe that this is, in large part, due to the breakdown of the US housing
market.  I've actually just been reading a report, "The Panic of
2007" by Gary Gorton which goes into great detail regarding the subprime
market and the housing crisis.

In essence these banks and investment banks were "banking" that
housing prices would continue their ascent and keep rising.  All their
risk safeguards were bet on this fact.  Laid out so simply it seems so
foolish, however, many of consumers/citizens were under the same spell.  I
explicitly remember the conversations I had with people who urged me to buy a
house, stating that I was foolish to keep renting.  Maybe they were right
but their reasoning was flawed, they used the same assumptions that the banks
did, believing that housing prices would continue to move higher with time and
considering their house an investment rather than shelter.  Obviously it is
not rational to believe that certain things are going to continue in
perpetuity, I argued this about house prices, yet people would look at me like
a rambling fool.

My point is not to say I was right, or to delve into the causes of the
financial upheaval, but rather to question how we tend to believe, so easily,
that things will just continue as they have.  Or the famous "this
time is different" statement.  I suppose it is a coping mechanism to
get us through our lives, I mean if we really had to concern ourselves with
whether the sun will come out tomorrow it could be devastating.  However,
here are some assumptions that I think many people make without really
questioning them:

1)  The US will remain the strongest nation state for as long as we
know it (our lifetime). -  Look, it's very possible that our hegemony
will not remain static.  It's inevitable that the empire we have built
will fall from power.  I think most people will concede that point when
addressed in a rational manner.  However, nobody *really* assumes that
they will ever see it in their time.  Sure, people speculate about it, but
it's mostly the fodder for science fiction and conspiracy theories.

2)  Along the same lines, that the US will always be among the
richest nations. -  Once again, rationally people might be able to
admit that along with a loss of power, a loss of wealth should be a
given.  It is a very real possibility that in the days of globalization,
we will never be as wealthy of a nation as we were in the mid to late 20th
century.  We are truly competing in a global marketplace for finite
resources, inevitably the average American will be much worse off than in the
past without some kind of radical change to the way we currently govern. 
This is once again ignored, assumed that it is not applicable to someone now.

My point is not to question of possible surprising event.  These are
examples of events that their possibility is almost a foregone conclusion it's
just a matter of when.  It's my assertion that most people live under the
"not anytime soon" thought process, therefore not even acknowledging
the possibilities and consequences.  Pretty soon when you're most secure
in that mode of thinking, mostly because everyone else is thinking that way,
BAMMM!  You get hit by the Mack Truck of "Oh Shit."

I wanted to write about Edgar Martinez and his worthiness for the Hall of Fame, believing that he would not be highly represented.  Well I was wrong, Martinez has a nice grassroots campaign and many are coming to the realization that he was an extremely good player.  Here are two links that fully explore his merit:

http://seattlepi.nwsource.com/baseball/356292_edgar25.html
http://www.abarim.com/edgar.htm

Since those links do a great job of explaining why he should get in, I want to explore a couple of reasons why he may not or why it may take a while.

1. Edgar Martinez's career spanned from 1987 to 2004.  During the majority of this time it was traditional stats that were paid attention to, BA/HR/RBI.  Now Martinez still put up respectable lines in the traditional stat line, however, his real strength was in his Sabermetric stat lines, BA/OBP/SLG/OPS.  Sabermetrics are still a recently new phenomenon, or at least newly recognized.  As Martinez was retiring people began recognizing value in the stats that he excelled at.  Had his career taken place in present day, we would have heard about the virtues of Edgar Martinez more often, making him more of a mainstream star.
2. Obviously playing in Seattle is more of a hindrance for Martinez than a help.  First, If Martinez had played in any of MLB's large market, Northeast US teams he would be an auto Hall of Famer.  Much of our opinion, despite the abundance of statistics is based on perception.  Martinez lacks a great story.  Believe me, the press of NY or Boston would have created a story for Edgar Martinez which they would have burned into our sub conscious, our opinion of Martinez would be quite different.  Fair or not, this is an obstacle Martinez will have to overcome.
3. His position of DH.  This topic is covered well in the links above.  However, this contributes to Martinez being an under the radar player.  There is no magical catches or defensive plays that voters can harken back to in order to help justify a vote.  By all standards, Martinez is a great player but pretty boring.

If given a vote for the Hall of Fame, which should happen, I would vote YES for Edgar Martinez.  I've always liked him and thought he was under recognized.  After seeing his stats in comparison with other Hall of Famers, I feel vindicated.  Damn it, I was right all those years, Martinez was better than just good, he was legitmately one of the game's best.

This article struck me as fascinating and at the same time repulsive.  In brief:

1. Germany has a law against the denial of the holocaust.
2. Dr Toben allegedly violated this German law by publishing his beliefs on a website.
3. Dr Toben is a citizen of Australia.
4. Dr Toben was arrested in the UK, detained by a European Arrest Warrant issued by Germany in 2004.

The situation is fascinating for several reasons:

• Freedom of Speech – First, this case brings up the issue of Freedom of Speech, how we define it and to what extent do we value it.  Germany obviously believes it's in its self interest to limit free speech in reference to the holocaust.  Dr. Toben's ideas are misguided and wrong, however, if he is not making any call to action or sedition it truly is thought control.  The government, in this case Germany, is clearly dictating what ideas are ok and which are not. 
• European Union – Even more fascinating is how the EU is affecting these nations that comprise it.  UK believes in total free speech and Germany believes in limited speech, they agree to an expedited extradition process, should now the UK be responsible for fulfilling its end of the obligation?  Even if they fundamentally disagree with the law and no crime was perpetrated in the UK?
• Expanded Governmental Powers – This is a prime example of why all powers granted to the government have to be thought out with ultimate care.  The Warrants were supposed to apply to "terrorists and drug dealers", as you can see Germany has expanded it to Website Publishers of questionable ideas.  Yet another example of a government overreaching its powers at any opportunity.  Now the UK is in a difficult position because they agreed to the Warrant policy.
• Applicability – So now, in theory, German laws apply to all citizens of the world.  If I decide to publish ideas that the German government decides to outlaw, I become a criminal.  Fine, I'll just never visit Germany, but Woahhhh, hold up, that was most likely Dr Toben's line of thought too and it did him no good because Germany came after him!  Germany invoked European Arrest Warrant to come after Dr Toben in another sovereign nation, a country where he is not a criminal and his actions are not criminal.  In addition, am I going to have to have a working knowledge of all these different countries legal code in order not to ignorantly break some law and somehow find out about the law as I'm being arrested.

If I were a European citizen, I would be extremely interested in the result of this affair.  It has long ranging implications in the laws of those countries.  I will be interested in seeing what happens as I believe it's a fascinating quandary.