Thursday, October 30, 2008

Stop the Hate

I'm quoting my fellow blogger, D.B. Echo (at Another Monkey). It's getting really scary. I've already commented about Sarah Palin's apparent pleasure when people at her rallies scream, "Kill him!"

I got another example yesterday. I have a friend who lives in a suburb of San Francisco and has an Obama/Biden sticker on her car. The other day, she said "a couple of guys" made "ugly remarks" at her as she drove past them. Then she stopped at a light, and a well-dressed, prosperous-looking woman in a prosperous-looking car stopped next to her, rolled down the window and screamed, "Traitor!"

When did it become treason to disagree with someone? When did it become treason to want to change the government? This is what the Republican tactics of the last eight years have brought us to - they've been telling us, ever since 9/11, that anyone who disagrees with them is unpatriotic and possibly treasonous, and we must support them so we'll be "safe."

Do you all feel "safe" now? Is that why tens of thousands of people turn out to see Barack Obama and cheer for him, because they feel "safe"? I certainly don't feel safe if my neighbors feel they can scream insults at me because they disagree with me.

And the conservative commentators hammer this home on Fox News daily - Limbaugh. Hannity. O'Reilly. Coulter. In any organization, the tone comes from the top; and the top of this organization tells us that dissent is treason. The whirring sound you hear is Thomas Jefferson, spinning in his grave.

I don't claim they're treasonous (although they'd say I am). I say they're wrong; but what's really distressing is that they're so rude. Those who disagree are not merely wrong, they have to be
insulted, and assailed as stupid and treasonous. And the conservatives lie - the oft-repeated McCain claim that Obama sponsored legislation authorizing giving sex education to kindergartners is a barefaced lie, repeatedly debunked by; and yet McCain keeps saying it, and claims it's true. This is Orwellian.

When did we lose civil discourse? When did it become impossible to discuss certain issues without falling back on slogans and insults? I have to admit my generation, the Baby Boomers, carry some blame for this. We were the ones who screamed slogans at rallies and labeled anybody we disagreed with as "pigs." So, we had something to do with the demise of civil discourse. But we weren't alone.

The most important question about civil discourse is not who stopped it. It's - how do we get it back?? I hate this. I hate conflict and screaming. But if I don't scream back, I'm leaving the field to the liars.

Poetry on NPR

You never quite know what you'll hear when you tune in to NPR. I tuned into All Things Considered on Tuesday night on the way to the gym (after spending $70 to get my car radio working again - blown fuse - this is the week everything breaks), and found myself listening to a discussion of the election with a group of people from a job training center in St. Louis. And at the end of the section, there was a remark that brought tears to my eyes.

Checking the web site for the transcript, I just realized I didn't even hear all of it, but here is the whole thing, which was sent as a text message to the training instructor:
"Rosa sat so Martin could walk. Martin walked, so Obama could run. Obama is running so our children can fly."
'Nuff said.

Tuesday, October 21, 2008

The Heat is Off

Our furnace is dead. This is less critical than if we lived in, say, Wisconsin or Maine, or even Washington state; but the tag end of October is a bad time for the heating system to go Tango Uniform, even in California.

It's only a relatively new furnace. We put it in 20 years ago (almost exactly 20 years), to replace a gravity-feed gas furnace dating from 1938, which took 40 minutes to warm the house up. It's run like a clock since then, we never even serviced it except to change the filter. The other day we turned it on, and it began to cycle - on, and on, and on, and on, about once a second. We turned it off and waited, and it was OK. Then it did it again.

Today the furnace man came. His name is Mike. It took Mike about 5 minutes to find the smoke stains on the control board where a resistor burned out. (He didn't call it that, but it looked like a resistor to me, and I used to sell 'em.) He took the board with him, so he could order the correct replacement. It was a period classic - I haven't seen a breadboard hookup with individual transistors and resistors for years. Mike assured me that the replacement board would be "all digital." He'll also bring an elbow joint for a 4 inch pipe - the one we have has had a segment crack loose and fall off, which Mike tells me has been flooding the basement with carbon monoxide. Maybe it's a good thing we don't spend much time in the basement.

Mike will be back "in a couple of days," with the new furnace motherboard; he'll change the filter and "give it a bath" (OK, after 20 years, I guess it needs one). In the meantime, we have no heat. Today is a lovely warm autumn afternoon in the mid-70's, but mornings are getting colder, and all the
windows downstairs (where I prefer to spend my days, as the view of the garden is better) are single-paned. Time to break out the sweaters, and the wool socks. And I think I'll take my travel kit to the gym tonight, and take a shower there instead of at home tomorrow morning. The heat works in the gym.

Monday, October 13, 2008

Strategy and Tactics

Driving home today, I listened to Talk of the Nation, on which Bill Kristol urged John McCain to fire his campaign staff because it isn't working. Apart from the fact that I want McCain's campaign to fail, I was interested in one remark Kristol made. Loosely paraphrased, he said that McCain had some good ideas (choosing Palin as VP, suspending his campaign to go to Washington to create a miracle for the bailout), but they weren't followed up. They're all tactical, said Kristol; there's no strategic thinking.

No strategic thinking. Isn't that an interesting suggestion? McCain isn't a strategist; he's a tactician. Think about his military career - he flew ground-attack aircraft off carriers. You need tactics in that role; other people take care of strategy. McCain retired from the Navy in 1981 (after 23 years), as a captain, and went into politics, where issues of strategy versus tactics are somewhat diluted. A Navy captain is the equivalent of an Army or Air Force colonel, which I'd argue is the lowest possible command level at which you need to begin to think strategically. Below that level you're dealing with much more day-to-day stuff: tactics and logistics. McCain reached captain; then he retired.

This campaign is the most important operation of McCain's career, and he isn't thinking strategically. Why should we assume that he'll start thinking strategically if we elect him President? And what would be the implications of a President of the United States who is driven entirely by tactical considerations? I wasn't going to vote for him for a number of reasons, some making more sense than others; but frankly, this one seems to me to be quite potent.

Is Sarah Qualified??

I got an email link from a friend that I'm reposting here (with some of the capital letters toned down):

Subject: PBS Sarah Palin poll
PBS has an online poll posted asking if Sarah Palin is qualified. Apparently the repulican party platform knew about this in advance and are flooding the voting with YES votes.

The poll will be reported on PBS and picked up by mainstream media. It can influence undecided voters in swing states.
The email, of course, urged me to vote on the poll, and send email to all my Democrat voting friends. I've sent it to a few, but I'm also posting it here; here is the link to the PBS poll:

When I voted on it, the poll was running dead even at 49% to 49% - quia absurdum est.

Saturday, October 11, 2008

Shame on You

Shame on you, Sarah Palin. For shame. You stand up in front of a crowd, rouse them up with lies about Barack Obama (yes, they're lies), and when the crowd yells, "Kill him!" - you smile. You encourage them.

This is disgraceful. You claim to be a Christian - this is unChristian. This is what Adolf Hitler did when he encouraged his goons to attack the Jews, before Kristallnacht. Nobody has been hurt yet because of your rabble-rousing - but that's no thanks to you.

And shame on you, John McCain, for allowing your campaign to act like this. Who's in charge, you or she? You weren't ignoring threats of violence from your crowds before she joined you; you weren't hearing threats of violence from your crowds before she joined you. You tried to calm things down the other day; I read about it. You need to try harder.

What a Week

I haven't been blogging this week because I didn't know what to say. There's a horrible fascination in watching everything fall apart. I remember the sensation from 9/11, we were all unable to stop watching the instant replay of the falling towers.

However, as the government took step after step to staunch the bleeding, and the credit markets remained stubbornly frozen, my suspicions grew that nothing is working because the Feds are fighting the wrong war. Part of the problem, of course, is that no one believes (I certainly don't) that Paulsen knows what he's doing. He's just hoping that if he throws enough money, something will open up. Injecting capital into the banks may help. But I believe the true problem is the credit default swaps; and until we solve that, the credit markets are going to stay frozen.

For those of you who haven't listened to last week's This American Life, as I recommended, here's a brief summary of credit default swaps, as I understood them from the show:

The basic credit default swap or CDS is insurance against a bond issuer going bankrupt and defaulting on the bond. Just like Lehman Bros. is about to do to me. Company A issues a bond; company B buys it, because the interest rate is so good. Company B, however, is worried about the stability of company A; so they turn to company C, who writes them a credit default swap. Company B agrees to pay company C a percentage of the income stream it's getting from company A's bond; in return, company C agrees to pay company B the full face amount of company A's bonds that company B bought, in case company A goes Tango Uniform (as they say in the military).

Obviously, company C (who wrote the CDS to company B) has more faith in company A's financial soundness than company B does. And they really like that steady stream of income.

Now it starts to twist. Investor D decides that company A isn't a good prospect. So he goes to company C, and says, I want a CDS against X dollars' worth of company A bonds. Investor D doesn't own any company A bonds; he's just betting on the come. He's doing the credit equivalent of a short sale: he's betting that company A will go broke; and he's paying company B an income stream, some percentage of the interest he'd be getting if he owned the bond, in exchange for company C's promise to pay him X dollars (the amount of bond he's buying a CDS on) in case company A goes under. And company C sells him the CDS; another steady stream of money.

Company C has now promised to pay two different parties the face value of a bond that only one of them owns, in case company A goes broke.

Now multiply that by hundreds of deals, all over the U.S. and probably all over the world. And add to that the final twist: thanks to Sen. Phil Gramm's Commodities Futures Modernization Act of 2000 (remember the guy who said we are "a nation of whiners"?), all these deals are unregulated. They're "over the counter."

That means they are all private. There's no central place, like a stock market, that has a record of who has written what CDS against what debt obligations. We can be pretty sure, however, that some or all of the major institutions were writing CDS's against the AAA rated sub-prime backed securities that everybody was buying. After all - they're not going to default, and the housing market will never stop rising. Until it didn't. Until the loans everyone was pushing began to default.

Because if you wrote CDS coverage for, say, a mortgage-backed security
worth half a million dollars, you're on the hook for the dollars if that security ceases to pay interest. Do you have the dollars? Or are you so leveraged that you'd have to borrow in order to meet the obligation? Remember, all these people operated on borrowed money, all the time.

Now it's the end of March 2008, and Bear Sterns has just gone under. Immediately everybody who wrote CDS's on Bear Sterns debt has to pony up cash. They know who they are; and their counterparties know; but nobody else does, because CDS transactions aren't regulated and are private. You didn't see any news about people paying off CDS on Bear Sterns.

Every time since March that a major financial firm has gone under to the point where they default on their debt, more of these chickens have come home to roost. Every bank knows what their own position is; but because of the private nature of the transactions, they don't know what anyone else's position is. And nobody knows what the real position of the mortgage-backed securities is.

And that, compadres, is why banks are not lending to each other. They don't know who's sitting on CDS obligations that exceed their entire net worth.

I'm not an economist; I'm just a techie, and nobody's going to listen to me. But frankly, I see only one thing the government could do that would really open this up: Force an audit. Require every financial institution to compile and publish a list of all the CDS they have written. Only then will we be able to estimate the real scope of the damage, and make realistic plans about how to deal with it.

The truth shall make you free.

Saturday, October 04, 2008

Little Flittering Things

It rained last night, for the first time since oh, March? February? It's been a dry year. However, last night or this morning, something responded to the rain, or something. We looked out the window into the back yard this morning, and the entire airspace over the patio was full of small white flittering insects, orbiting around the area and each other. I don't know what they were, but something hatched.

They're gone now, whatever they were.

The Sorceror's Apprentice

I've concluded this is the appropriate metaphor for the mess the economy is in. The financial geniuses who have been running things, more or less unconstrained by any regulation whatever, developed a set of "tools" that they thought would allow them to hand off risk to other people. They didn't think through all the possible scenarios, and a worst-case scenario has occurred, and now they don't know what to do. See the parallel with Mickey and his brooms??

I'm not sure I want to go so far as to say that Hank Paulsen is the Sorceror, who will step in and wave a wand and make it all go away. I don't have that much faith in Mr. Paulsen.

I have a recommendation, however, for anyone who wants to understand how we got here. I don't normally listen to Ira Glass' This American Life. Today, however, they had a full hour program, Another Frightening Show About The Economy, which I recommend to anyone who wants to understand why that $700 billion bailout may really have been necessary. You may have heard the term "credit default swap"? This broadcast has the clearest description of credit default swaps, why they exist, and why they are a problem, that I've ever heard; and I worked for a major bank. There's also a solid description of the commercial paper market and why that is also frozen.

It'll take an hour of your time. It's worth it. They did a show in May called Giant Pool of Money, explaining the subprime mortgage mess, which I also plan to listen to, and they're putting out a daily podcast on the mess, Planet Money, which I think I'll add to my list as well.