The Water Boarding Challenge.
I came up with a fun game to play with all those who say water boarding isn't torture. Anyone who says it isn't, can come over to my place, and I will water board them until they admit that it is torture. Everyone breaks eventually. The fear of drowning is hard wired to cause panic in your brain in a way you can't control. Once my subject learns that the only way I will stop water boarding them is admit that water boarding is torture, they will then admit that water boarding is torture.
As a thought experiment, this nicely shows the two purposes of torture. Number 1: torture people you don't like. Number 2: extract a confession to what the torturer wants to hear as condition for stopping the torture.
See how long this brave journalist lasted under water boarding:
http://www.huffingtonpost.com/2009/04/20/playboy-journo-bets-he-ca_n_189280.html
Friday, May 1, 2009
Tuesday, March 24, 2009
The New Geithner Treasury Plan is so abominable that two radically divergent ideologies can agree to hate it. The Keynsians see in the Treasury Plan a massive giveaway to those that need it least and that this giveaway will not produce economic recovery or value. The Austrians see wasteful spending rewarding bad behavior to create a false government conjured price for assets that are worth zero dollars. This is an unusual agreement between the Krugman faction and the Paultard faction.
Geithner's plan is to create a reverse auction for the toxic assets by using taxpayer funded loans to convince investors that buying these toxic assets at inflated prices is worth it. This is the exact same plan Paulson initially had in October, and the same plan Geithner had in February. But this time the stock market loved it! The only difference I read was that this time instead of the treasury doing the buying at ridiculous prices, there would be loans to private parties who would bear almost no losses if the purchased toxic assets went bad.
However, these assets are already bad. Toxic assets have a price already, zero dollars. No one will buy them. These assets are mortgage contracts that are supposed to have money coming in on them, but the person who was supposed to pay stopped paying. No one wants to buy that. That is crap. That is why the banks are insolvent, because they are holding these pieces of paper as collateral for all their money changing games, but these pieces of paper are worthless. The Geithner plan gives huge FDIC backed loans to a narrow class of investors that promise to buy some of these toxic assets. This will get the assets off the books of the banks, and radically increase their value since the government is on the hook for 85% of the price paid for the asset if the asset turns out to the worthless. This is supposed to be a "market oriented" plan since private investors will set the price. But that price is created by government distortion! And what if the banks collude with shell companies to bid on their own assets and simply pocket the loan money and then let the shell companies implode? Enron did similar things and no new regulations have been passed under the Obama administration. The incentives created by this plan are horrendous.
The most dangerous thing about this plan is that it suggests that Obama's team thinks the banking crisis is merely a crisis of price, not of value. If this plan works, the only thing is accomplishes is massive government distortion of the price of assets the market has already determined are worthless. This has not affected the value crisis in this country. The value crisis is that homes really aren't worth as much money as we thought they were. And that companies that traded in such paper weren't really producing any value to anyone. There is a common refrain amongst the economiclly angsty, "America doesn't produce anything anymore". That is better stated as "America doesn't produce anything of VALUE anymore". Toxic mortgage trading, credit default swaps, collateralized debt obligations, stocks, mutual funds, all these things were price games. There was no value behind what they represented, merely the promise that someone else would one day pay more for that piece of paper you bought than you did. That is a price game. A thing of value is something like a car, or a toaster. A car saves the human effort of having to walk to work. A toaster saves the human effort of having to make a fire to make a piece of toast. There is value in those objects, and the price of those objects directly links to their value. There is no damned value in a credit default swap. I am going to spend more posts trying to make this value / price distinction a fuller concept.
Geithner's plan is to create a reverse auction for the toxic assets by using taxpayer funded loans to convince investors that buying these toxic assets at inflated prices is worth it. This is the exact same plan Paulson initially had in October, and the same plan Geithner had in February. But this time the stock market loved it! The only difference I read was that this time instead of the treasury doing the buying at ridiculous prices, there would be loans to private parties who would bear almost no losses if the purchased toxic assets went bad.
However, these assets are already bad. Toxic assets have a price already, zero dollars. No one will buy them. These assets are mortgage contracts that are supposed to have money coming in on them, but the person who was supposed to pay stopped paying. No one wants to buy that. That is crap. That is why the banks are insolvent, because they are holding these pieces of paper as collateral for all their money changing games, but these pieces of paper are worthless. The Geithner plan gives huge FDIC backed loans to a narrow class of investors that promise to buy some of these toxic assets. This will get the assets off the books of the banks, and radically increase their value since the government is on the hook for 85% of the price paid for the asset if the asset turns out to the worthless. This is supposed to be a "market oriented" plan since private investors will set the price. But that price is created by government distortion! And what if the banks collude with shell companies to bid on their own assets and simply pocket the loan money and then let the shell companies implode? Enron did similar things and no new regulations have been passed under the Obama administration. The incentives created by this plan are horrendous.
The most dangerous thing about this plan is that it suggests that Obama's team thinks the banking crisis is merely a crisis of price, not of value. If this plan works, the only thing is accomplishes is massive government distortion of the price of assets the market has already determined are worthless. This has not affected the value crisis in this country. The value crisis is that homes really aren't worth as much money as we thought they were. And that companies that traded in such paper weren't really producing any value to anyone. There is a common refrain amongst the economiclly angsty, "America doesn't produce anything anymore". That is better stated as "America doesn't produce anything of VALUE anymore". Toxic mortgage trading, credit default swaps, collateralized debt obligations, stocks, mutual funds, all these things were price games. There was no value behind what they represented, merely the promise that someone else would one day pay more for that piece of paper you bought than you did. That is a price game. A thing of value is something like a car, or a toaster. A car saves the human effort of having to walk to work. A toaster saves the human effort of having to make a fire to make a piece of toast. There is value in those objects, and the price of those objects directly links to their value. There is no damned value in a credit default swap. I am going to spend more posts trying to make this value / price distinction a fuller concept.
Thursday, March 19, 2009
Remember how I called for Summers and Geithner to the fired? Now the rest of the country agrees with me. Yay me! The tale of those two working against our country grows more sinister with every day. Remember in Mid February with the ardent left wing Democrats suggested 500k paycaps for executives at bailed out firms? Remember how that was Socialist? Remember how is was Senator Dodd who advocated such Socialism? Now reality has reversed itself within a month. On the news you see hardcore rightwingers on Fox and major Republican senators decrying the bonuses AIG paid out to their employees. What the hell happened there? How can you call the fix to a future problem Socialist one month, then decry the problem it was designed to prevent after it occurs? Normally people can't get away with such flagrant deception, but something is deeply wrong at the top levels of the Senate and Administration, and it is Geithner and Summers.
The Obama administration leaned on Dodd, and Dodd caved to Geithner, Obama, and Summers and stripped the limits he has in place in the bill. Obama sided with the Republican opposition and turned on Dodd. Now that the bonuses are a scandal, the Obama administration has blamed Dodd for the bonuses, but it was Geithner and Summers that did the lean job! Dodd should have resisted the Obama administration, and ignored them. But that does not absolve the Obama team from responsibility here. Democratic senators will capitulate to Democratic presidents. The buck stops at the president's desk, not a senator's. Obama is in effect giving cover to the republican's about face on the issue of bailed out firm compensation caps. Until Obama takes responsibility for what his team did, the republicans will continue to defeat Democratic senators in detail. This is very ill news for the economy because without executive leadership and massive structural reform on Wall Street, the banking sector will not recover.
The Obama administration leaned on Dodd, and Dodd caved to Geithner, Obama, and Summers and stripped the limits he has in place in the bill. Obama sided with the Republican opposition and turned on Dodd. Now that the bonuses are a scandal, the Obama administration has blamed Dodd for the bonuses, but it was Geithner and Summers that did the lean job! Dodd should have resisted the Obama administration, and ignored them. But that does not absolve the Obama team from responsibility here. Democratic senators will capitulate to Democratic presidents. The buck stops at the president's desk, not a senator's. Obama is in effect giving cover to the republican's about face on the issue of bailed out firm compensation caps. Until Obama takes responsibility for what his team did, the republicans will continue to defeat Democratic senators in detail. This is very ill news for the economy because without executive leadership and massive structural reform on Wall Street, the banking sector will not recover.
Monday, March 16, 2009
All these videos are from a Noam Chomsky interview in late February 2009. I just watched these videos today, and all four of them are on the previous four topics I talked about in my previous post. It just so happens that all my positions sync up precisely with Chomsky's. If you want to hear ideas I agree with, but articulated in a far superior way ... watch the Chomsky!
On Domestic Policy:
http://www.youtube.com/watch?v=TE2LSkrPoCQ&feature=related
http://www.youtube.com/watch?v=kULoiaFDh_8&feature=related
On Foreign Policy:
http://www.youtube.com/watch?v=YqqpzTqPoo4&feature=related
http://www.youtube.com/watch?v=2IFytxep-s4
(He talked more about healthcare than I did, but it is worth hearing what he has to say on the matter)
On Domestic Policy:
http://www.youtube.com/watch?v=TE2LSkrPoCQ&feature=related
http://www.youtube.com/watch?v=kULoiaFDh_8&feature=related
On Foreign Policy:
http://www.youtube.com/watch?v=YqqpzTqPoo4&feature=related
http://www.youtube.com/watch?v=2IFytxep-s4
(He talked more about healthcare than I did, but it is worth hearing what he has to say on the matter)
Sunday, March 15, 2009
The Obama administration is not making policy according my every whim even though I voted for him. I find this infuriating and am going to make furious POSTS with arbitrary CAPITALIZATION to emphasize how my ideas would be better than Mr. "President of Harvard Law Review" Obama's.
Economic Advisors:
Fire Larry Summers and Tim Geithner right now. Don't wait. They won't get smarter. They won't change their ideas. Just fire them now. Summers was the Treasury Secretary under the Clinton Administration when Clinton signed the Commodity Futures Modernization Act and the destruction of Glass Seagal. The CFMA brought us the Credit Default Swap, which more than any single financial innovation has destroyed western finance. The Credit Default Swap destroyed AIG. The CFMA also allowed for deregulated oil markets, which lead to the commodity overpricing we saw last summer. The destruction of Glass Seagal allowed CitiBank to become CitiGroup. Citigroup has proven itself to be too big to succeed. They played with Credit Default Swaps, and have immolated themselves. Summers advocated both of those legislative acts to Bill Clinton. Summers has not learned his lesson. Summers has not stated he was wrong to advocate such legislative wealth destruction. Summers must be removed.
Geithner. Geithner's entire plan to save the banks, give them more tax payer money to make sure the bond holders don't lose their shorts. This has been tried twice already. It failed both times. The bank losses are around 10-15 trillion. The public treasury just can't bail out that much. Another round of bondholder bailouts won't get us anywhere. The only way the banks can survive is if people start paying their mortgages again. But the people don't have the money. The banks gave loans to people that couldn't pay, then they sold those loans as investments to investment bankers, then the investment bankers sold credit default swaps to banks to get the leverage needed to buy these toxic assets. Unless you give the banks 10-15 trillion, you will not fix the problem. Geithner is wrong on this issue and will serve only to deplete the treasury for the benefit of the bondholders of the banks.
Economic Solutions:
Increase worker bargaining power. The employer free choice act must be passed. By strengthening unions, workers across the country will then be able to bargaing with their employers for higher wages. Until the working man has enough bargaining power to get a decent wage the economy will never recover. The American economy is 70% consumer spending, those consumers must have money before they can spend it. That money comes from wages. And thsoe wages are derived from bargaining power. The Reaganomics solution was simply to give the common man credit and take away the worker's bargaining power. This has lead to our current predicament of gilded age wealth distribution, collapsing demand, and incredible household debt.
Take the banks under government receivership. This has worked with IndyMac, it will work with the other banks. It also worked in Sweden. The bailouts the banks need exceed their market capitalization on their stock. That means it would be cheaper for the government to simply buy all their outstanding shares than to hand them enough money to cover their losses. The banks must be nationalized, and carved up. No longer may banks grow so large that they can bargain with the government. The only reason these banks can demand bailouts is because they are so large that their failure can cripple our economy. The banks must be carved into component companies that are small enough to fail.
Anti-trust laws must be expanded and applied to the financial sector. Never again may a financial sector company grow so large and powerful that it is too big to fail. Once a company is too big to fail, it can go to Washington and extort the congress out of money by threatening its own death. See Behr Stearns, AIG, CitiGroup. This allows the mega banks to pass all their risk onto the public treasury because they can threaten us all with their own failure. Anti-trust laws must be expanded to reach out and carve up such mega banks.
Afghanistan:
Stop all cross border activities in Pakistan. With every 1 Taliban we kill over there, we turn 1000 Pakistani's against their America-enabling government. The numbers just don't add up. We killed about 100 or so high value targets in Pakistan this year, and Pakistan is now on the the verge of civil war again. All our drone strikes couldn't stop the Taliban from seizing the Swat valley and implementing Sharia law. Our mission in Afghanistan should be limited to propping up the Pakistani government. The Taliban have wisely decided to fight the Afghanistan war inside of Pakistan, and it is about time the American government recognize its limited ability to fight in that terrain. The fight against the Pakistani Taliban must be fought by the Pakistanis. Obama should substantially increase the money and arms we give to the Pakistan government, and commit our drone fleet to reconnossaince solely for the benefit of the Pakistani military.
Iraq:
Announce that the war was worse than a crime, it was a mistake. We went to war on stove piped intelligence that fit the policy. Our invasion of Iraq was criminal aggression, but even worse it was criminal aggression based on willfully ignorant intelligence. Our continued presence in Iraq must be limited solely to repairing the damage we have wrought, and no more. Obama must announce as such, and limit our mission to fixing what we broke. If Obama were to renounce all geopolitical motives in remaining in Iraq, Obama could redeem our mission there and give us a path out of that foolish invasion. Iraq will descend in civil war. It took every troop we had to quell the civil war of 2006-2007, and it will come back. Once we leave Iraq will fall into civil war. There must be an armed struggle and a winning side for a new nation to form. For evidence of this see the formation of the USA, Israel, France, Germany, UK. Nations are born of armed struggle amongst the people, and an eventual victor decrees what the law will be. The USA should set a date on which we will leave Iraq, and leave. Look at how Vietnam turned out. They are a modern country now. Their nation was born of armed struggle against a century of colonialism. Yes Cambodia was a bloodbath after we left, but that bloodbath was inevitable after we wrecked that country. And just as in Cambodia, some kind of bloodbath is inevitable in Iraq, and from it a new state will form.
Economic Advisors:
Fire Larry Summers and Tim Geithner right now. Don't wait. They won't get smarter. They won't change their ideas. Just fire them now. Summers was the Treasury Secretary under the Clinton Administration when Clinton signed the Commodity Futures Modernization Act and the destruction of Glass Seagal. The CFMA brought us the Credit Default Swap, which more than any single financial innovation has destroyed western finance. The Credit Default Swap destroyed AIG. The CFMA also allowed for deregulated oil markets, which lead to the commodity overpricing we saw last summer. The destruction of Glass Seagal allowed CitiBank to become CitiGroup. Citigroup has proven itself to be too big to succeed. They played with Credit Default Swaps, and have immolated themselves. Summers advocated both of those legislative acts to Bill Clinton. Summers has not learned his lesson. Summers has not stated he was wrong to advocate such legislative wealth destruction. Summers must be removed.
Geithner. Geithner's entire plan to save the banks, give them more tax payer money to make sure the bond holders don't lose their shorts. This has been tried twice already. It failed both times. The bank losses are around 10-15 trillion. The public treasury just can't bail out that much. Another round of bondholder bailouts won't get us anywhere. The only way the banks can survive is if people start paying their mortgages again. But the people don't have the money. The banks gave loans to people that couldn't pay, then they sold those loans as investments to investment bankers, then the investment bankers sold credit default swaps to banks to get the leverage needed to buy these toxic assets. Unless you give the banks 10-15 trillion, you will not fix the problem. Geithner is wrong on this issue and will serve only to deplete the treasury for the benefit of the bondholders of the banks.
Economic Solutions:
Increase worker bargaining power. The employer free choice act must be passed. By strengthening unions, workers across the country will then be able to bargaing with their employers for higher wages. Until the working man has enough bargaining power to get a decent wage the economy will never recover. The American economy is 70% consumer spending, those consumers must have money before they can spend it. That money comes from wages. And thsoe wages are derived from bargaining power. The Reaganomics solution was simply to give the common man credit and take away the worker's bargaining power. This has lead to our current predicament of gilded age wealth distribution, collapsing demand, and incredible household debt.
Take the banks under government receivership. This has worked with IndyMac, it will work with the other banks. It also worked in Sweden. The bailouts the banks need exceed their market capitalization on their stock. That means it would be cheaper for the government to simply buy all their outstanding shares than to hand them enough money to cover their losses. The banks must be nationalized, and carved up. No longer may banks grow so large that they can bargain with the government. The only reason these banks can demand bailouts is because they are so large that their failure can cripple our economy. The banks must be carved into component companies that are small enough to fail.
Anti-trust laws must be expanded and applied to the financial sector. Never again may a financial sector company grow so large and powerful that it is too big to fail. Once a company is too big to fail, it can go to Washington and extort the congress out of money by threatening its own death. See Behr Stearns, AIG, CitiGroup. This allows the mega banks to pass all their risk onto the public treasury because they can threaten us all with their own failure. Anti-trust laws must be expanded to reach out and carve up such mega banks.
Afghanistan:
Stop all cross border activities in Pakistan. With every 1 Taliban we kill over there, we turn 1000 Pakistani's against their America-enabling government. The numbers just don't add up. We killed about 100 or so high value targets in Pakistan this year, and Pakistan is now on the the verge of civil war again. All our drone strikes couldn't stop the Taliban from seizing the Swat valley and implementing Sharia law. Our mission in Afghanistan should be limited to propping up the Pakistani government. The Taliban have wisely decided to fight the Afghanistan war inside of Pakistan, and it is about time the American government recognize its limited ability to fight in that terrain. The fight against the Pakistani Taliban must be fought by the Pakistanis. Obama should substantially increase the money and arms we give to the Pakistan government, and commit our drone fleet to reconnossaince solely for the benefit of the Pakistani military.
Iraq:
Announce that the war was worse than a crime, it was a mistake. We went to war on stove piped intelligence that fit the policy. Our invasion of Iraq was criminal aggression, but even worse it was criminal aggression based on willfully ignorant intelligence. Our continued presence in Iraq must be limited solely to repairing the damage we have wrought, and no more. Obama must announce as such, and limit our mission to fixing what we broke. If Obama were to renounce all geopolitical motives in remaining in Iraq, Obama could redeem our mission there and give us a path out of that foolish invasion. Iraq will descend in civil war. It took every troop we had to quell the civil war of 2006-2007, and it will come back. Once we leave Iraq will fall into civil war. There must be an armed struggle and a winning side for a new nation to form. For evidence of this see the formation of the USA, Israel, France, Germany, UK. Nations are born of armed struggle amongst the people, and an eventual victor decrees what the law will be. The USA should set a date on which we will leave Iraq, and leave. Look at how Vietnam turned out. They are a modern country now. Their nation was born of armed struggle against a century of colonialism. Yes Cambodia was a bloodbath after we left, but that bloodbath was inevitable after we wrecked that country. And just as in Cambodia, some kind of bloodbath is inevitable in Iraq, and from it a new state will form.
Monday, December 31, 2007
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