Tuesday, February 14, 2012

FROM ANGRY BIRDS TO ANGRY DAD (with special abilities) ...

I'm not sure what to make of this, but as a father with tech obssessed teenagers I can definitely understand the sentiment here.


I'm not sure I'd use the gun (that's an expensive target), but I can see myself having a beer with the guy ...

- Mark

P.S. Hat tip to Brian for the link.

Monday, February 13, 2012

THE POLITICAL LESSON(S) OF THE BELL EXPERIMENT

The finger-pointing, scapegoating, jingoism and ideological aggression we're seeing during this presidential primary season is disheartening for many Americans. With so many problems confronting our nation I'm often asked why do politicians talk at each other instead of to each other? Why don't they take the time to understand and really discuss the challenges that confront us instead of trying to score political points by blaming each other?

The answer is actually quite simple, and can be tied to the swirl of our modern world. Simply put, the complexities of our modern world leave many Americans incapable of understanding or appreciating the things we should.

To help students understand what's happening, in my introduction to American Politics class I like to begin my discussion on American institutions by explaining why things don't get done the way many of us think they should ... i.e. with negotiation, compromise, civility, etc. Specifically I try to explain the roots of the ideological aggression and the bitter partisanship we see today.

To do so I discuss how our world has become so complex and fast paced that the vast majority of Americans are simply overwhelmed. The end result is that, in spite of living in the information age, large segments of American society have become disconnected and, ironically, uninformed citizens. Unfortunately, this leaves many susceptible to mindless bumper sticker answers to complex problems.


And, yes, it's happening on both the left and the right side of the political spectrum.

To deal with the complexity, increasingly many Americans are engaging in any number of "displacement activities." Displacement activities are viral forms of procrastination in that it involves doing something entirely disconnected to the task at hand. In the animal kingdom birds may peck at the grass instead of fleeing in the presence of a predator. Applied to the human condition it involves doing something to avoid confronting serious issues that everyone knows must be addressed. It becomes a lifestyle for many.

Among the displacement activities we see around us include mindless consumerism, reckless alcohol and drug use, self segregation through cultish or militia groups, the glorification of a mythical past, and the pursuit of superficial and self-indulgent relationships, among many other activities. Apathy, political tribalism, and faux movements are the result.

The worst of our displacement activities may be the return of religious fundamentalism because of how it helps absolve followers of responsibility for virtually anything. You don't have to listen to anyone because God's on your side. All you have to do is follow or elect the person who claims to be "Godly." Why learn anything if it's in God's hands and all you have to do is affirm what you already know? Lessons on tolerance and understanding are jumbled in the process.



All of these displacement activities have created a disconnected society full of disorders and aggressive ideologues. This, unfortunately, undermines our democracy and social cohesion on many levels. Worse, as long as we're engaged in these activities, it helps keep many Americans from understanding or appreciating the activities that help to make our world a better place.

This is why this story about a man playing the violin on a cold January morning is so revealing (kudos to Sheri for bringing it to my attention).




In 2007 a man played six classical Bach pieces for about 45 minutes. During that time, since it was rush hour, it was calculated that thousands of people went through the station, most of them on their way to work.
Three minutes went by and a middle aged man noticed there was musician playing. He slowed his pace and stopped for a few seconds and then hurried up to meet his schedule. A minute later, the violinist received his first dollar tip: a woman threw the money in the till and without stopping continued to walk.

A few minutes later, someone leaned against the wall to listen to him, but the man looked at his watch and started to walk again. Clearly he was late for work.
The one who paid the most attention was a 3 year old boy. His mother tagged him along, hurried but the kid stopped to look at the violinist.
Finally the mother pushed hard and the child continued to walk turning his head all the time. This action was repeated by several other children. All the parents, without exception, forced them to move on.
In the 45 minutes the musician played, only 6 people stopped and stayed for a while. About 20 gave him money but continued to walk their normal pace. He collected $32. When he finished playing and silence took over, no one noticed it. No one applauded, nor was there any recognition.
No one knew this but the violinist was Joshua Bell, one of the great violin players of the world. He played one of the most intricate pieces ever written,with a violin worth 3.5 million dollars.

Two days before his playing in the subway, Joshua Bell sold out at a theater in Boston and the seats averaged $100.


Joshua Bell playing incognito was organized by the Washington Post as part of a social experiment about perception, taste and priorities. But it also tells us how the pace of our lives can lead us to ignore excellence, truth, and even each other (you can read the Post's article on the experiment here). It tells us that we've conditioned ourselves not to care. The political implications abound.

The Bell experiment tells us that we're so wrapped up in trying to make our way through life that we don't have the time to stop and listen to one of the world's greatest musicians, playing the best music ever written. So how many other things are we missing? How many of us take the time to search for the truth instead of accepting empty slogans and embracing bankrupt ideologies?

There's a reason why many Americans embrace scapegoating, ideological aggression, and mindless single-issue politics. And it's not because the other side is necessarily evil. It's because it's easier to see them that way. It's easier to put ideology above the facts.

More to the point, it's easier to ignore the other side when we've convinced ourselves that they don't matter. The fact that we don't care is the political lesson of the Bell experiment.

- Mark

Saturday, February 11, 2012

MORTGAGE SETTLEMENT = PAYOUT AND THE CHANCE TO DO IT AGAIN



OK, it looks like a settlement on the mortgage mess has been reached. Rather than go into the details, or discuss how "wonderful" the $26 billion penalty is, the good people at nakedcapitalism.com have put together a wonderful list of 12 Reasons to Hate the Mortgage Settlement.

It's pretty much what I've been writing about our real estate and banking mess for years now, but it's nice to see it synopsized.



Because the article at nakedcapitalism may be a bit long, I've synopsized the first seven points here:

1. FORGERY HAS A PRICE: The price of forgery and fabricating documents is now officially $2000 per loan. Not only is this amount a fraction of the cost of the legal expenses when foreclosures are challenged, but no one goes to jail for forgery. Take that, 300 years of real estate law.

2. TAXPAYER PAYS (again): The $26 billion sticker price penalty actually involves only $5 billion of bank money. The rest is your money. Mortgages that have been securitized will be written down, which means CDO investors will get Fannie and Freddie (who are now backed by the American taxpayer) to pick up the tab for their losses. Unfortunately, the size of your pension funds, 401 (k)s, etc. will take a hit too, which means reduced assets and income for your portfolio and retirement account(s). So you actually pay twice. Nice.

3. BANKS GET OFF: $5 billion divided among the big banks means nothing. Freddie and Fannie putbacks to the major banks have been running at that level each quarter.

4. BANK BAILOUT (again): $20 billion makes bank second liens sounder. This deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. ENFORCEMENT IS A JOKE: The first layer of supervision is the banks reporting on themselves. Seriously.

6. SERVICERS WON'T COMPLY WITH THE AGREEMENT: The history of servicer consent decrees is clear. Even though the banks said they wouldn't engage in criminal acts again (like forgery for paperwork they couldn't locate) in exchange for not being prosecuted, the banks and the servicers have failed to comply. Robo signings, among other activities, continue because the industry wants to bury the bodies.

7. CONSENT DECREE RENDERED TOOTHLESS: When Nevada and Arizona caved on the Countrywide settlement suit Bank of America rejoiced. It proved that failing to comply with a consent degree has no consequences 

You should read the entire article, and the follow up pieces too. Long story short? No penalties, another backdoor bailout, and another market collapse in the future. Only the next one will be worse than in 2008 because the banks haven't learned any lessons.

Oh, and they're going to try and do the same thing on a global level with the emerging markets

- Mark

Thursday, February 9, 2012

THE COLD WAR IN PERSPECTIVE

In my American Foreign Policy class we're discussing the roots of the Cold War this week. I'm making this available for my students, but thought some of you might enjoy the history lesson too.

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If we want to understand the beginning of the Cold War we need to understand, as George Kennan argued, the roots of Soviet conduct and how this affected American foreign policy after 1945 ...



This helps us understand what drove American foreign policy immediately after World War II, and led to the Containment policy, which the Marshall Plan helped make a success from 1945 to 1990 ...



- Mark  

Wednesday, February 8, 2012

Tuesday, February 7, 2012

YES, THE JOBS PICTURE HAS IMPROVED

The jobs picture since President Obama entered the White House ...



Long story short? We're still climbing out of a hole, but things have definitely improved.

- Mark

THE FINANCIAL STD HANGING OVER EUROPE

Let's say you earn $21,000 per year. Would your bank grant you credit and loans that total more than $600,000 to "invest" on long shot bets in Vegas? Sounds ludicrous, right? And it is, until you realize this is how our global financial system is currently structured.

Thanks to some fancy (but rigged) modeling of market instruments, market players have been able to convince some incredibly stupid people (though there are some smart ones in the bunch) that their bets will pay off. What the incredibly stupid people don't understand is that the entire house of cards can only function if lines of credit are kept open. The problem here, as Hyman Minsky warned, is that it's one thing to borrow when you have the assets to back things up, but it's an entirely different thing to borrow when the collateral is full of financial holes.

This is precisely the situation Europe faces today, and why efforts to fix their banking system will fail.


Mirroring what I've been writing and talking about for years, Money Morning's Keith Fitz-Gerald explains why Europe's banks are going under, in spite of the the seemingly never ending trillion dollar rescue efforts from the U.S. central bank, and others. Specifically, Europe's financial system is confronted by three big challenges.


UNCERTAINTY: Thanks to the murky system of cross derivative (i.e. Vegas-like) bets European Union (EU) ministers are reluctant to put money into a banking system that has the financial consistency of Swiss Cheese (why Ben Bernanke is doing it is another issue). And they should be reluctant. Because derivative markets are so murky, the ministers don't know how much is going to be needed, or who's going to need it.


FINANCIAL STDs: Because of the cross pollinization of derivative bets even healthy banks have been exposed to the financial STDs of the financial world. In what will (no doubt) be described as a pre-emptive effort, all banks will be provided with back up funds just in case (i.e. when) their partners drag them under. It's kind of like an STD screening. But in this case you get the penicillin shots too (a process that resembles the U.S. banking "self-esteem" efforts too).


GOOD MONEY GOING AFTER BAD: Money from strong banks will be diverted to weaker banks. This is bad news. Why? Because in order to backstop the bad bets, even bigger (worse?) bets will be placed because they offer the promise of higher returns. This will only serve to keep the derivative lunacy going until the stupidity collapses on itself, again.

So why is this all a problem? Because the banks have lent or provided $600 trillion against market (derivative) instruments that are valued at $21 trillion. Total exposure here is 28.4-times. Go into a bank and ask them to provide you with a loan or credit totaling 28 times what you earn/own.



The bank's rationale for rejecting you is exactly why the financial stupidity in Europe cannot be sustained.

- Mark  

P.S. If you want to know how derivative bets get started click here.