As an existentialist ...

As an existentialist I adhere to the idea that my highest calling is to break free of the narrative of existence ingrained in my psyche, and altered by my conscious interaction with life's experiences. Existence both biologically and culturally preceded my awareness ... and I came into being assuming the reality of my environment.

That is not being naive, that is the ground out of which I came ... and being able to examine it for what it is becomes the individual's brave journey into the future ... never for one's self alone, but for those who follow also ... even though most around us fear what we reveal about ourselves and try to shut us up.

Note: A thought written to an emerging friend. -ncs

Experts without a clue?!!!

The morning's -- Saturday, October 25 -- Star-Ledger headline read "Market panic leaves experts without a clue".

Without a clue? Are these brilliant idiots kidding us?

The United States while continuing to consume -- what? 25%? -- a large share of the world's products, sold offshore it's industrial base to make the products necessary for exchange in a functioning market where goods and services with value (others want what we produce) are traded. (Please note that the pieces of paper such as money and instruments of debt increase the market's efficiency thereby adding value BUT only in relationsip to REAL goods and services. If you are only exchanging the pieces of paper ... well, what can I say?)

Note: "According to the International Monetary Fund, the U.S. GDP of $13.8 trillion constitutes over 25.5% of the gross world product at market exchange rates and over 19% of the gross world product at purchasing power parity (PPP)."

-wikipedia.com

So we -- the U.S. -- can no longer sustain our consumption of the share of world's goods and services we have been consuming ...BECAUSE we no longer produce good and services the world wants!!! Dah!!! That is, we don't produce enough to pay for what we have been buying.

And you don't think that is going to take a serious realignment of the global economy? Until we once again get back in balance?

And this is hard to understand? I think someone needs to go back and read that book about learning everything we need to know in kindergarten.

On patents and the role of good government in markets

I am always somewhat amused when folks talk about "the government" as something outside ourselves. I view "government" as a way of our ordering the overarching collective -- the "state" -- of which we are members. Wasn't it a Republican president -- Abraham Lincoln -- who penned and then spoke the words "... "this nation, under God, shall have a new birth of freedom--and that government of the people, by the people, for the people, shall not perish from the earth"?

Let's take an economic example, the issuing of patents ... and explore the idea a wee bit.

Market concepts inform us that unless society develops some way to reward new ideas, there isn't much incentive to come up with them ... because -- as in the case of the wheel AND the printing press -- as soon as it is invented, the item can be replicated by anyone with the ability to do so ... and that level of ability was not a very high hurdle in the scheme of human ability.

History tells us that after the creation of government -enforced patent rights in Western Europe in the 18th century, economic growth based on new technologies took off.

The problem fallible humans face is that "more" government regulation is not synonymous with "better" government regulation. So how do we improve government? Certainly we now know that we shouldn't let anti-government ideologues of limited intelligence appoint "Heckuva Job Brownie" to head FEMA ... don't we?

The new economics - Post X

Well ... some folks are thinking right now, maybe we should rethink some of these economic things ...

Kind of like, maybe gravity isn't all there is to Physics ... even though gravity is part of it. Kind of like Adam Smith is soooooooooooooo Newtonian.

I mean after Katrina shouldn't we have realized that we didn't have the concept of what we can expect from each other nailed down? Is national security (our military) the only thing we socialize adequately? (No, I am not saying we should run everything like the military, but can't we stop and think a little ... stuff ain't going so good, y'know?)

And yes, there is a real problem with the type of collectivizing that leads to the gulag ... but there is also the real problem of a so-called freedom that let's the rich get richer until we wind up on banana republic plantations. Folks used to understand the concept of "the butcher's thumb on the scales".

The old economics led the global financial gurus to believe they were modern alchemists who had actually discovered how to transmute lead into gold ... printing pieces of paper with complex functions that gave them real value ... aka instruments of debt and their derivatives ...

Anything could be "borrowed against" and then the document of the loan had the value of the amount borrowed. The more you could get other folks to borrow, the more value was created.

You mean, you didn't have to worry about the value of whatever it was that was borrowed against? Hell no! Just buy another piece of paper called a credit default swap (CDS) that was insurance that the other piece of paper, the instrument of debt, would have value no matter what.

But I digress ...

Back to the new economics ...

A house retains its real value if it is maintained in a neighborhood of maintained houses ... (staggers the imagination, doesn't it?)

If I let my house deteriorate, my house is not the only one that loses value.

Who then pays for the loss of value in my neighbors houses?

What if the "bank" repossesses my house for whatever reason AND the abandoned house starts to deteriorate AND the cumulative loss to the houses in the neighborhood is always greater than the loss in value of the abandoned house ...

And what if maintaining the now abandoned house would have cost far less than the either the loss in value of an abandoned house OR the cumulative loss in value in the neighborhood ...

Now, it seems rational to me that there should be some form of REAL VALUE insurance to kick in to protect the neighborhood homeowners ... so, would their forming a cooperative to provide themselves that kind of insurance be "socialism"?, or only if they did it through their government? And what if it is done after the fact, after the neighborhood homeowners realize it is cheaper to maintain the abandoned house? Is it socialism for them to cooperate on reducing their losses?

Farmers in the midwest formed cooperatives to bring electricity to areas not served by the "private" sector ... was/is that socialism?

Just asking.

From NPQ, the New Perspectives Quarterly:

Free Markets and the End of History

NPQ | In the end, your ideas have triumphed over Marx and Keynes. Is this, then, the end of the road for economic thought? Is there anything more to say than free markets are the most efficient way to organize a society? Is it the “end of history,” as Francis Fukuyama put it?

Milton Friedman | ... "Free markets" is a very general term. There are all sorts of problems that will emerge. Free markets work best when the transaction between two individuals affects only those individuals. But that isn't the fact. The fact is that, most often, a transaction between you and me affects a third party. That is the source of all problems for government. That is the source of all pollution problems, of the inequality problem. There are some good economists like Gary Becker and Bob Lucas who are working on these issues. This reality ensures that the end of history will never come.

http://www.digitalnpq.org/archive/2006_winter/friedman.html

Interpretation: Because transactions using the medium of money ALWAYS affect a third party, there is no such thing as a "free" or "unfettered" market in terms of the customary definition of the economic term. The reason for this is the clear fact that all costs incurred in the production and distribution of goods and services are not paid for out of the monetary selling price of the goods and services ... only the reimbursement of "ownership" costs ... so what is "free" about free markets is their being free of the costs they incur to others than the legally defined owners of the goods and services for sale--sellers and buyers.

We are entering a new age of economics

The world has already entered a new age of economics ... and simply hasn't brought the "science" of it up to date.

We need to rethink a few things ... for instance does leveraged asset ownership simply keep extending the asset owners out over the cliff until they fall? ... because the strength of an asset being held up by an instrument of debt as an anti-gravity device is reverse to the leverage involved?

In rethinking economics, the first concept we need to nail down, is the "I, thou" relationship, don't you think? What is our responsibility to others, and theirs to us? Like, when is it every person for him or herself? And when is it that we watch each other's backs? I mean, Katrina and New Orleans and now the global economic meltdown with

First, we need a market where goods and services of real value (others want or need them) are produced and then exchanged or consumed as efficiently as possilbe.

Second, we need to pay ALL the costs of producing these goods and services out of the profits earned by selling/exchanging the goods in services in the market.

Third, we need to sustain our communities as renewable resources for our future,

The current economic meltdown under the warping of the old economics will demand a review of what when wrong ... and I dare say some new concepts will emerge.

Put the Invisible Hand behind us

Let's put this "Invisible Hand" to rest once and for all.

What some call the Invisible Hand is the creative imagination of the human being that invents ... everything from the spear, fire, the wheel, stories, medicine, math ... a narrative of our existence ... to steam engines, electricity, wireless, space stations, the internet, books, plays, movies, heart transplants, ... biology, chemistry, physics ... psychology, sociology ... beyond my ordering of the jumble of "products" pouring forth from the minds of humans.

The "spirit" of America -- the collective energy of individual motivation -- is providing each and every individual human being the opportunity to get a fair share of his or her inventiveness in applying his or her effort -- their being able to direct their own effort, mental and physical -- to "earning" a living, providing the needs of living. Unleashing this spirit produced the greatest country for the common man AND the greatest country itself, that the world has ever known.

The radical change of moving away from slavery and indentured servitude -- where the benefits of individual effort accrue to someone else -- to individual autonomy in our economic lives -- and to all areas of our lives (did it start with the Protestant belief of the individual's direct connection with God?) -- has transformed the nature of government and all other forms of human endeavor.

In one sense, the human narrative of existence can be described as an expanding balloon. The interior is our history, the exterior is our future, and our experience of now is the skin ... it's elasticity, our inventiveness.

I would suggest that a primary role of government is to foster the creative imagination of the individual human being, thereby blowing into and expanding the balloon of human experience.

Credit bailout: Adding quicksand to the quicksand pool

It is incredible that intelligent people think that extending credit is going to pull us out of the "credit quicksand" in which we are sinking. "Hell yes, dump another load of quicksand in that pool of quicksand, big guy."

In a market economy, wealth is being able to produce goods and services that have real value ... goods and services that OTHER folks want so they will exchange THEIR goods and services for ours. That's what gives these goods and services value.

In a "free" nation (you know, "liberty and justice for all", "life, liberty, and the pursuit of happiness") labor is paid a fair share of the wealth it helps create, building a strong middle class and the strongest of all possible nations -- this I believe, and I also believed we proved it in and following WWII.

Credit and money have no intrinsic value EXCEPT the value of adding efficiency to the transactions of exchanging goods and services that do have intrinsic/real value. AND that is based on trust between the parties to the transactions that they will honor the value of the instruments of debt (credit) and money used in the transaction.

Even an idiot can see where this is leading.

When we failed to hold our leaders feet to the fire -- even though the American people tried mightily by deluging Congress with emails and phone calls -- and get them to enact a jobs stimulus program building infrastructure that adds real value to a mature economy like ours (and HAS to be produced collectively either as a private consortium or government program), thereby keeping us from sinking deeper into the credit quicksand.

And to have the Republicans who have the awesome example of President Eisenhower and his federal highway program as a gigantic monument to prosperity looming in the background, come up with a $700 Billion blank check extension of credit as a solution ... was so absurd it, it was unfathomable by we the people.

Notes:

First, I do not believe in a "free market" (as a macro concept). There is no such thing, not even hypothetically.

Second, markets emerged out of a world filled with natural resources already here and religious beliefs, hence the "Invisible Hand' bs. As these natural resources have been wedded to the creative imagination/inventiveness of the human mind, a whole new world has emerged ... a world that now requires the human creative imagination to take it to each new level.

It used to be the opening of new trade routes to new cultures and war that give us new products. Now it is programs like going to the moon and the internet -- which are extensions of military/national security initiatives -- which open new "resource" horizons for creating new goods and services that others want ... and therefore add real value in a market economy.

It is our faith in our creative imagination when given the opportunity for inventiveness that should guide us ... ESPECIALLY us, a nation born out of the creative courage of a man sailing west into the unknown ... looking for new trade routes ...

Finally, it is only in an unfettered market that you learn what people want ... but that is a different concept then this "Invisible Hand" crap that is so outdated that we should be laughing. Yes, Newton described why an apple falls from a tree ... but we are a ways beyond that these days in understanding the dynamics of our universe. Likewise should we be beyond Adam Smith.

In my opinion ...

Posted by hglindquist on 10/05/08 at 8:38PM

Ah, folks ... I have a little egg on my face right about now. Just found out from 60 Minutes that the math for slicing and dicing the subpirmes was done by Physicists ...

Well ... my guess is that some economist most likely told 'em that home prices had never decreased in value since the recovery from the Great Depression.

You can see how that would screw up a function, can't you? ;-)

The meltdown: Thelma & Louise, Part II

Nobody put a gun to the heads of these global financial gurus to invent virtually unfunded credit default swaps (CDS, aka default insurance), sell them ($60 Trillion+ dollars worth?) to foreign investors along with the sliced and diced instruments of debt, and take their humongous fees and bonuses upfront ... fees that fed the campaigns of the politicians of both major parties who would rewrite the laws and regulations to accelerate the greed frenzy ... while steering the whole shebang so far out over the ledge that it was Thelma & Louise, Part II.

All the while telling some poor dumb bastard, "You can be part of nirvana by buying a house and having it go up in value." (Which the "brilliant" gurus actually believed as shown by their failure to adequately fund the CDS's.)

You know, economics is the only "discipline" (it ain't no science yet) that uses antiquated principles ... well, besides religion ... Thomas Hobbes and Adam Smith are soooooooo Newtonian ...

But things are a-changing ... this meltdown is getting folks to say, "What WERE we thinking?!"

Did you happen to read This Economy Does Not Compute By Mark Buchanan, on the October 1, 2008, OpEd page of the NY Times?

http://www.nytimes.com/2008/10/01/opinion/01buchanan.html

From the column:

"For example, an agent model being developed by the Yale economist John Geanakoplos, along with two physicists, Doyne Farmer and Stephan Thurner, looks at how the level of credit in a market can influence its overall stability."

Notes:

Nobody around here is blaming Bush 43 personally ... that I know of. We -- in the general sense -- acknowledge he's too dumb to be culpable.

Here's some wisdom that HAS stood the test of time:

For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows. - 1 Timothy 6:10, New Testament, KJV, blueletterbible.org

http://www.blueletterbible.org/kjv/1Ti/1Ti006.html#10

And regarding the fair share for labor:

For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? - 1 Corinthians 9:9, New Testament, KJV, blueletterbible.org

http://www.blueletterbible.org/kjv/1Cr/1Cr009.html#9

Keeping the Paulson-Bernanke bailout plan simple ...

A couple of things ... to help keep things simple on the $700 Billion Paulson-Bernanke bailout plan:

The bailout is the Wall Street/Beltway Gang holding a gun to the head of average hard-working citizens and saying give me your money or else. The gun and the "or else", of course, are all the calamity that will befall the average person if we don't turn over the money ... loss of jobs; loss of home, student, car loans; etc.

Well ... guess what? ... us folks were holding a gun on them ... "You're going with us, you bastards. And we'll see who can work their way out of this. 'Cuz if you think you can just keep robbing us blind, you got another think coming. We're ALREADY losing our jobs, our homes ... "

Hoo boy!, Americans still have grit!!! God, I love my country!

Next ... these so-called economic geniuses keep saying what they did to get us here is too complicated for common folks to understand. Well, it ain't. It's really quite simple. In fact it so simple that once you realize how simple it is, you (if you haven't understood it before) are going to be really, really pi$$ed off.

It's a concept called "leverage". And it's called that because it can be described as a pry-bar or teeter-totter ... using force on one end of a lever or plank to match the force on the other.

OK, let's think of the back-yard teeter-totter where you place a long plank over a drum or something in the "center" as the "fulcrum". If you have done this in the past with your kids, you know an adult can teeter with a child by giving the child "more plank" on his/her side of the fulcrum. That adds to their "leverage" to lift you easily. It also means the adult can hold them up when they are far out on their end of the plank ... and the more plank the adult gives the child, the lighter the child has to be to hold up a particular adult.

Now, say there was a rule that you the maximum multiply of plank you could put on the child's side was "adult side times 12". This was a safety rule, because if the adult had a heart attack and fell off, the child wouldn't be injured or even killed by their fall at their end.

Now, say the teeter-totter manufacturer came up with an anti-gravity braking device that countered gravity on the child's side so -- the manufacturer said -- no matter what happened on the adult's side, the child was safe ... even to a multiple of say, "adult side times 35". (And that put the child pretty damn high ... as they say ... What a feeling!)

Wow! Joy and celebration all around ... even little, little kids could teeter-totter with the adults! And even sickly adults could now teeter-totter with the little kids. So what if anyone they fell off? ... on either side? ... the system would NEVER crash! (So read the anit-gravity braking device manufacturer's sales brochure.)

And if you combined healthy adults with sickly adults on the adult side ... the system worked even better for sickly adults. (Now we were really rolling!)

That is until too many sickly adults started losing weight at the SAME time, then the system got overloaded in a hurry ... BECAUSE there WAS a flaw in the anti-gravity braking device system: each individual teeter-totter was hooked up to a central playground machine that could only handle a limited number of teeter-totters at a time ... and anybody with half a brain would have see the overload starting from the edge of the playground. Shouldn't they have screamed immediately: "STOP TEETER-TOTTERING!" ... BEFORE everyone crashed? (Just asking ... but I digress ... as is my wont)

The basic question in the design of this anit-gravity braking device system was (should have been?) "What would happen if the sickly adults started losing more weight than the anti-gravity braking device system could handle at any given time?" BECAUSE the plan was to allow sickly adults to teeter-totter, so the question SHOULD have been obvious ... don't you think?

Don't you think any playground supervisor would have asked that question? AND asked for proof from the anti-gravity braking device system manufacturer? Unless of course, the supervisor was being paid off.

The average American citizen can smell a pay-off (a rat?) from a mile off. Even if the Wall Street/Beltway Gang kept saying it was too complicated for us ordinary folks to understand. (Yeah, and I have a bridge to sell you ... [That bridge thinger takes on a whole new level of meaning ... don't you think?])

OK, the "adult side" of the teeter-totter is the bundled loan package of healthy and sickly instruments of debt. The "child side" is a combination of the "child" -- the investment bank or whatever -- and the "extended blank" -- the money borrowed by the "child" to help hold up the adult side.

In the Balance Sheet equation of Assets = Liabilites + Capital (aka Owner Equity), or also expressed as Capital = Assets - Liabilities, equation, the "adult side" is the Assets, the "child" is the Capital, and the "extended plank" is the Liabilities.

The "anti-gravity braking device" is the credit default swap designed to pay for the instrument of debt in case of default ... cover any loss.

No one had to know what is inside the "anti-gravity braking device" ... they just had to have proof that it would work. Kind of like any other brake ...

Unless ... like I said ... someone was being paid off to look the other way ...

Also like I say, doesn't take a genius to figure THAT out.

What's wrong with this picture?

Another thing ... what is this about having to do something, anything before Congress goes on vacation? What's wrong with their staying in session until they get it right this time ... like the rest of have to when a crisis hits us.

This whole scenario is so absurd ... we are facing the equivalent of an economic Pearl Harbor -- according to a number of credible authorities -- and the US Senate passes a pork laden Paulson-Bernanke bailout plan so they can go home as early as possible?

What's wrong with this picture?!

On reversing the meltdown ...

There is only one strategy that will reverse the meltdown ... in my opinion ... and the sooner we get there, the better.

It is following Ireland's lead (as I understand it anecdotally) and put the full faith and credit of the United States behind our banks and their issuing of debt -- at least home mortgages. Something like the way the FDIC works ... with adequate regulation ... and having ENOUGH fees to pay for any losses ... AND an experience rating system so banks that make faulty loans are charged higher fees.

Our home mortgages are the strength of our communities, hence an underlying pillar of our nation. And the combined economic strength is more than enough to recover from the greed of Wall Street ... without paying those criminals one more penny in bailout money.

Now the caveats/disclaimers: I do not think it will be as simple as that ... but I am writing in the bloggosphere trying to provoke thought ... to encourage tossing anything related to Secretary Paulson's bailout plan on the dung heap and then working something out around the Ireland plan.

I will be emailing my Congressperson, the Honorable Donald Payne, and asking him to vote "NO" on this bailout bill, noting that I have strong opinions on it.

It is un-American to cave with a gun to our heads.

Let's see if we have the grit to get this right.