Wednesday, September 24, 2008

Where Wall Street meets Main street

A few hundred billion in bank losses typically means a few hundred billion in someone else's pocket. Winners and losers, money sloshing about, but, really, it need not impact the real world all that much. Not like a massive earthquake in, say San Francisco. There you'd be talking about hundreds of billions of dollars of real losses.

Where things meet the real world is when the financial system is so disrupted it can't fulfill it's essential functions including setting prices, assigning risks, and moving money around:
Why the threat of systemic meltdown is real - How the World Works - Salon.com:

... So why should we all be worried? Well, for one thing, if banks start failing, and credit markets freeze up, then any business that depends on rolling over short-term debt to fund daily activities is in danger. Remember Enron? Enron imploded in a matter of days because its lenders suddenly refused to roll over its short-term debt. But it's not just Wall Street investment banks and out-of-control Houston energy companies that depend on debt markets -- a vast number of large corporations engage in the same practices. And if a significant percentage of large corporations can no longer borrow money the implications for the 'real economy' will be substantial. Higher unemployment, slower or negative economic growth, etc...
Less activity means lower economic growth -- which is the equivalent of real, tangible, things getting destroyed.

Nice summary from HTWW. Unfortunately, with Bush/Cheney in power, we can't trust the executive branch to get things right. We've got to rely on the Democrat majority in the Senate to work out the best compromise ...

Will McCain withdraw?

Why would McCain duck a debate he was expected to do well at? He's been a better debater than Obama, and all he has to do is put on a reasonable show to win.

Maybe he wants to exert his will on the bailout bill. There's a good chance he'll be president -- he should have real influence within his party. Maybe he has donors he has to take care of.

Or maybe his Rovian advisors calculate political theater will get more votes than the debate. They could be right, they know their base much better than I do.

Or maybe McCain is not ready to be seen in a debate setting.

I've noted a few times that McCain is at risk, by virtue of age, smoking history and head injuries (Vietnam), of a dementing disorder. His erratic behavior over the past month makes that even more probable.

Cognitive disability in the aged often arises from a combination of the Alzheimer's process and vascular disease, including frequent small strokes. If he's experienced an abrupt drop in his cognition, I'd wonder about a small stroke or "micro-infarct". Typically symptoms will improve over days to a week, but usually not back to the previous status.

I'm not the only one to wonder, of course:
Daily Kos: Has John McCain had a stroke?

...listen to his speech, and look at his left eye. I'm no expert, and this is pure speculation only, but could the real reason McCain has suspended his campaign be because he has suffered a small stroke?
If McCain's health is failing the trip to Washington may also involve finding someone to stand in for him.

The Bush problem: how to rescue without ownership

So now we understand why the Paulson plan is so weird.

It is constrained by the Bushie's ideological aversion to owning private companies (emphasis mine, note Japan is not mentioned) ...
A billion slap in the face - Paul Krugman - New York Times Blog

... let’s talk about how governments normally respond to financial crisis: namely, they rescue the failing financial institutions, taking temporary ownership while keeping them running. If they don’t want to keep the institutions public, they eventually dispose of bad assets and pay off enough debt to make the institutions viable again, then sell them back to the private sector. But the first step is rescue with ownership.

That’s what we did in the S&L crisis; that’s what Sweden did in the early 90s; that’s what was just done with Fannie and Freddie; it’s even what was done just last week with AIG. It’s more or less what would happen with the Dodd plan, which would buy bad debt but get equity warrants that depend on the later losses on that debt.

But now Paulson and Bernanke are proposing, very nearly, to do the opposite: they want to buy bad paper from everyone, not just institutions in trouble, while taking no ownership....
Doing this without ownership is new ground. It's a choice mandated by executive branch ideology, not empirical reasoning.

You can't have it both ways. Either stay hands off and let the economy go where it will (to heck probably), or intervene and accept the scarlet stain of government ownership.

Dark flow - false alarm, right?

I've grown somewhat accustomed to the idea that our universe is far weirder than my brain can comprehend. Even so, this "dark flow" idea is pushing the envelope. For context, the In Our Time Multiverse program spent quite a bit of time talking about how no-one can imagine a way to test the nature of the universe beyond our event horizon.

I'm looking forward to commentary from my favorite physics bloggers. I assume it's a false alarm of some sort ...
SPACE.com -- Mysterious New 'Dark Flow' Discovered in Space

... Patches of matter in the universe seem to be moving at very high speeds and in a uniform direction that can't be explained by any of the known gravitational forces in the observable universe. Astronomers are calling the phenomenon "dark flow."

The stuff that's pulling this matter must be outside the observable universe, researchers conclude...

...Scientists discovered the flow by studying some of the largest structures in the cosmos: giant clusters of galaxies ... observing the interaction of the X-rays with the cosmic microwave background (CMB), which is leftover radiation from the Big Bang, scientists can study the movement of clusters.

The X-rays scatter photons in the CMB, shifting its temperature in an effect known as the kinematic Sunyaev-Zel'dovich (SZ) effect. This effect had not been observed as a result of galaxy clusters before, but a team of researchers led by Alexander Kashlinsky, an astrophysicist at NASA's Goddard Space Flight Center in Greenbelt, Md., found it when they studied a huge catalogue of 700 clusters, reaching out up to 6 billion light-years, or half the universe away. They compared this catalogue to the map of the CMB taken by NASA's Wilkinson Microwave Anisotropy Probe (WMAP) satellite.

They discovered that the clusters were moving nearly 2 million mph (3.2 million kph) toward a region in the sky between the constellations of Centaurus and Vela. This motion is different from the outward expansion of the universe (which is accelerated by the force called dark energy).

"We found a very significant velocity, and furthermore, this velocity does not decrease with distance, as far as we can measure," Kashlinsky told SPACE.com. "The matter in the observable universe just cannot produce the flow we measure."

The scientists deduced that whatever is driving the movements of the clusters must lie beyond the known universe.

A theory called inflation posits that the universe we see is just a small bubble of space-time that got rapidly expanded after the Big Bang. There could be other parts of the cosmos beyond this bubble that we cannot see.

In these regions, space-time might be very different, and likely doesn't contain stars and galaxies (which only formed because of the particular density pattern of mass in our bubble). It could include giant, massive structures much larger than anything in our own observable universe. These structures are what researchers suspect are tugging on the galaxy clusters, causing the dark flow.

"The structures responsible for this motion have been pushed so far away by inflation, I would guesstimate they may be hundreds of billions of light years away, that we cannot see even with the deepest telescopes because the light emitted there could not have reached us in the age of the universe," Kashlinsky said in a telephone interview. "Most likely to create such a coherent flow they would have to be some very strange structures, maybe some warped space time. But this is just pure speculation...
I suspect thse guys are jumping the gun by a fair bit, but looking forward to more commentary.

700 billion fluffy nothings

Sadly, an Obama administration would be bad news for Morford. The modern GOP inspires him...
700 billion fluffy nothings / Staggering bailouts? Body counts? Global warming stats? They're just numbers, silly

... A $700 billion bailout of a Bush-gutted economy by an already nearly bankrupt U.S. Treasury? Two trillion for a failed war in Iraq? Ten trillion in national debt and a $480 billion budget deficit (not counting the $700B for the bailout and it could be much more) and a record trade deficit, with all those numbers nearly double (if not far more) of what they were in 2001? Why, you'd almost think someone -- or maybe an entire administration, perhaps the most irresponsible in modern U.S. history -- was largely to blame. But they're not! Because they're just numbers...

Patents gone bad: slowing science

Patents and copyrights are not a rule of physics, nor a matter of human rights or natural justice.

They exist to benefit society, creating a temporary wealth incentive for the holder to increase scientific and technological progress.

The system is defective. On the one hand we have Nathan Myhrvold's patent extortion scheme, on the other evidence that the patent system is 'stifling science'.

We don't need to throw out patents and copyright entirely. We do need serious reform. I hope China will lead the way if the US and Europe cannot.

Reform begins with the phased elimination of process patents. They were a terrible error. In other domains patent lifetimes must be shortened. Overlapping patents consolidated. The cost of obtaining a patent increased.

We have enough problems without creating more through wrong headed law.

Update: Today is world stop software patents day. Who knew?

Tuesday, September 23, 2008

McCain Flintstone -- the Dinosaurs by Kathy Writes

A friend of ours is managing election trauma through the lens of an old tv show ...
2008 Election: The Dinosaurs

John Flintstone padded through his Sedona adobe abode, one of his seven luxury caves, grumbling.

“Cindy, where are my flag coveralls? Sarah’s going to be here any minute. We’re getting in the Dinomobile and off to Colorado again.”

“Consuela is washing them, you grumpy old man,” Cindy called. She was standing near the fire pit, trying on one of 400 potential inaugural outfits. “It’s in the spin cycle.”

He heard the club hitting the front door bam, bam, bam and stumbled off to answer it. “Keep your mini-skirt on, Sarah,” he yelled. “I was a POW, remember?”

He opened the door. Sarah stood there with her slingshot and club, panting, pointing proudly behind her. On the ground lay a dead moose, bleeding. “I brought you a present, Gramps,” she said.

“Sarah, how much moose do you think we can eat?”

“You have to be ready for end times, John. Hang it over the fire and smoke it.”

Consuela rushed forward with his flag coveralls. She stopped to gape at Sarah, who was wearing a mid-thigh-length skirt made of dinosaur hide, an Amazonian-style brassiere and a boa made of auk feathers....
She's now on episode 2.

Kathy Writes is a pseudonym. Andy, you know who she is!

The Economist is irrelevant. Sad.

I read The Economist devoutly for about 20 years. The last ten years of my subscription were increasingly dismal. Two years ago I gave up...
Gordon's Notes: The Economist 1986-2006. RIP.

... I gave up on the Economist this year. I signed up in residency; it was fabulous back then. Smart, cool, analytic. It weakened in the early 90s, then it took a sudden dive around 1996. Maybe it had something to do with the color photos....
The Economist I loved had turned into a pale imitation of the WSJ OpEd pages.

I still follow a few feeds -- Africa, Science, and the obituary. Mostly though, I don't think about my old friend.

So it was with a start that I realized that nobody I read mentions it any more. I'm not the only one to have forgotten them.

We're in the midst of the biggest financial event since 1930, and The Economist is irrelevant.

Maybe Rupert Murdoch will buy them.

Do they care?

Why I don't read letters to the editor ...

Noteworthy, but not surprising ...
I ghost-wrote letters to the editor for the McCain campaign | Salon News

... Next to commercials and phone banking, writing letters to the editor is the most important method of the McCain campaign to attract voters...
It's a form of spam of course.

Gramm fear - explaining it to Republicans

Krugman tells us how we can explain our fear of Treasury secretary Gramm to Republicans ...
Princeton saves the world - Paul Krugman - New York Times Blog

... I’ve been pointing out that the dictatorial powers Paulson has sought would accrue to the next Treasury secretary, who might well be Phil Gramm. I’ve been trying to come up with a liberal-leaning name who might seem equally horrifying to Republicans, and the only one I’ve come up with is … me.
Treasury secretary Krugman. Let's try it on Limbaugh.

Ministry of Treasury Paulson dials 419

A 419 message received today ...
Egregious Moderation: Ministry of Treasury Paulson

... I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. ...

... After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds."
Brilliant. Unsigned, but I think by Brad DeLong.

Trust the Bush administration?

I'd sooner sign with a 419 scam. At least my money might find its way into an impoverished nation ...

Rescuing Wall Street - No equity stake, no deal

It's the new bottom line for the trillion dollar rescue package:
Getting real and letting the cat out of the bag - Paul Krugman: "No equity stake, no deal."
In other words, we partly nationalize those that need help.

Monday, September 22, 2008

Why aren't other mammals furless?

I'm one of those kids that never grew up. Always been a wonderer.

So today isn't the first time that I've wondered about why humans don't have fur, and, more interestingly, why so few other mammals are furless (no other primates). I guessed it was related to sweating. Being hairless we can use evaporative cooling, being a running primate (the only one) with a big hot brain we need lots of cooling, having a big hot brain we're good at finding water.

Oh, and Vitamin D is easier to make.

There are lots of downsides to losing fur of course. Mosquitoes love us, even if lice don't. Fur is nice in cold weather. Skin must be black to prevent burning - that requires new proteins and evolutionary costs. (Primate skin is pale beneath the fur, so making skin black means expensive evolution is needed.)

The downsides must be severe, because most every mammal has stuck with fur. So it has to be something weird about us. Hence the brain, running, sweating thought.

These days, of course, I can research my wonderings -- esp since the NYT has liberated their archives.

I started with an article stuck in draft since last year. The "aquatic ape" hypothesis is that we lost our fur during an aquatic lifestyle phase. The theory has suffered from "new age" enthusiasms, but it got a boost a year ago (BBC Science) ...

The waste from shellfish dinners discarded in a South African cave is said to be the earliest evidence of humans living and thriving by the sea.

The material was found by scientists working in a sandstone opening at Pinnacle Point on the Cape.

Researchers tell the journal Nature the remains were buried in sediments that are 164,000 years old.

The exploitation of coastal resources is thought to have been key in allowing early humans to move across the globe....

... The team excavated from the cave the cooked remains of some 15 types of marine invertebrate, mainly brown mussels, as well as other animal bones.

The very earliest human species would have been restricted to a diet of plants, such as berries and tubers, and the meat of animals they could catch.

The expansion to shellfish is one of the last additions of a new class of food to the human diet before the introduction of domesticated livestock meat just a few thousand years ago, the researchers tell Nature...

Interesting, but 164,000 years ago is not that long. From another article I learned we've been furless for much longer than that ...

Why Humans and Their Fur Parted Ways - New York Times 2003

One of the most distinctive evolutionary changes as humans parted company from their fellow apes was their loss of body hair. But why and when human body hair disappeared, together with the matter of when people first started to wear clothes, are questions that have long lain beyond the reach of archaeology and paleontology.

Ingenious solutions to both issues have now been proposed, independently, by two research groups analyzing changes in DNA. The result [imply] ... we were naked for more than a million years before we started wearing clothes.

Dr. Alan R. Rogers, an evolutionary geneticist at the University of Utah, has figured out when humans lost their hair by an indirect method depending on the gene that determines skin color. Dr. Mark Stoneking of the Max Planck Institute for Evolutionary Anthropology in Leipzig, Germany, believes he has established when humans first wore clothes. His method too is indirect: it involves dating the evolution of the human body louse, which infests only clothes.

Meanwhile a third group of researchers, resurrecting a suggestion of Darwin, has come up with a novel explanation of why humans lost their body hair in the first place.

Mammals need body hair to keep warm, and lose it only for special evolutionary reasons. Whales and walruses shed their hair to improve speed in their new medium, the sea. Elephants and rhinoceroses have specially thick skins and are too bulky to lose much heat on cold nights. But why did humans, the only hairless primates, lose their body hair?

One theory holds that the hominid line went through a semi-aquatic phase -- witness the slight webbing on our hands. A better suggestion is that loss of body hair helped our distant ancestors keep cool when they first ventured beyond the forest's shade and across the hot African savannah. But loss of hair is not an unmixed blessing in regulating body temperature because the naked skin absorbs more energy in the heat of the day and loses more in the cold of the night.

Dr. Mark Pagel of the University of Reading in England and Dr. Walter Bodmer of the John Radcliffe Hospital in Oxford have proposed a different solution to the mystery and their idea, if true, goes far toward explaining contemporary attitudes about hirsuteness. Humans lost their body hair, they say, to free themselves of external parasites that infest fur -- blood-sucking lice, fleas and ticks and the diseases they spread...

... others could take more convincing. ''There are all kinds of notions as to the advantage of hair loss, but they are all just-so stories,'' said Dr. Ian Tattersall, a paleoanthropologist at the American Museum of Natural History in New York.

Causes aside, when did humans first lose their body hair? Dr. Rogers, of the University of Utah, saw a way to get a fix on the date after reading an article about a gene that helps determine skin color. The gene, called MC1R, specifies a protein that serves as a switch between the two kinds of pigment made by human cells. Eumelanin, which protects against the ultraviolet rays of the sun, is brown-black; pheomelanin, which is not protective, is a red-yellow color.

Three years ago Dr. Rosalind Harding of Oxford University and others made a worldwide study of the MC1R gene by extracting it from blood samples and analyzing the sequence of DNA units in the gene. They found that the protein made by the gene is invariant in African populations, but outside of Africa the gene, and its protein, tended to vary a lot.

Dr. Harding concluded that the gene was kept under tight constraint in Africa, presumably because any change in its protein increased vulnerability to the sun's ultraviolet light, and was fatal to its owner. But outside Africa, in northern Asia and Europe, the gene was free to accept mutations, the constant natural changes in DNA, and produced skin colors that were not dark.

Reading Dr. Harding's article recently as part of a different project, Dr. Rogers wondered why all Africans had acquired the same version of the gene. Chimpanzees, Dr. Harding had noted, have many different forms of the gene, as presumably did the common ancestor of chimps and people.

As soon as the ancestral human population in Africa started losing its fur, Dr. Rogers surmised, people would have needed dark skin as a protection against sunlight. Anyone who had a version of the MC1R gene that produced darker skin would have had a survival advantage, and in a few generations this version of the gene would have made a clean sweep through the population.

... Dr. Rogers and two colleagues, Dr. David Iltis and Dr. Stephen Wooding, calculate that the last sweep probably occurred 1.2 million years ago, when the human population consisted of a mere 14,000 breeding individuals. In other words, humans have been hairless at least since this time, and maybe for much longer...

... From 1.6 million years ago the world was in the grip of the Pleistocene ice age, which ended only 10,000 years ago. Even in Africa, nights could have been cold for fur-less primates. But Dr. Ropers noted that people lived without clothes until recently in chilly places like Tasmania and Tierra del Fuego.

Chimpanzees have pale skin and are born with pale faces that tan as they grow older. So the prototype hominid too probably had fair skin under dark hair, said Dr. Nina Jablonski, an expert on the evolution of skin color at the California Academy of Sciences. ''It was only later that we lost our hair and at the same time evolved an evenly dark pigmentation,'' she said.

... Humans have the distinction of being host to three different kinds: the head louse, the body louse and the pubic louse. The body louse, unlike all other kinds that infect mammals, clings to clothing, not hair. It presumably evolved from the head louse after humans lost their body hair and started wearing clothes.

Dr. Stoneking, together with Dr. Ralf Kittler and Dr. Manfred Kayser, report in today's issue of Current Biology that they compared the DNA of human head and body lice from around the world, as well as chimpanzee lice as a point of evolutionary comparison. From study of the DNA differences, they find that the human body louse indeed evolved from the louse, as expected, but that this event took place surprisingly recently, sometime between 42,000 and 72,000 years ago. Humans must have been wearing clothes at least since this time.

Modern humans left Africa about 50,000 years ago. Dr. Stoneking and his colleagues say the invention of clothing may have been a factor in the successful spread of humans around the world, especially in the cooler climates of the north...

So it ends up that the state of the art isn't that different from my uninformed musings. We really don't know why other mammals stuck with fur, and why that wasn't an option for us. I don't buy the tick explanation, if that were it other mammals would be nekkid.

I'll stick with the running, sweating, brainy bit.

Inside politics - why McCain "wrote" that banking was a good guide for health care reform

Emphases mine. Poignant, and funny. Worth remembering the next time your industry rag features the wisdom of a major political figure ...
James Fallows (September 22, 2008) - Edging back into politics: "My First Kill" (Life)

Many people have noted that this past week was a bad time for John McCain to have published an article promising to deregulate the health insurance industry, "as we have done over the last decade in banking," given the collapse of the banking industry due in part to that deregulation.

... my immediate reaction to the flap was to sympathize with whatever poor schlub had actually cranked out the article in question, which appeared in Contingencies, the closely-followed journal of the American Academy of Actuaries. The article just before it in Contingencies's newest issue was "An Actuary Weighs the Proposals." I love the magazine business.

Two things are 100% certain about this article:
1) John McCain did not write it;
2) Whoever did write it was just trying to get through the to-do deadline list for that day in the campaign office, and knew that the simplest way to do so was to cut-and-paste from existing statements on health policy.
I sympathized because on my very first day as a cub speechwriter in the Jimmy Carter campaign office, 26 years old and ready to inspire the nation, I was told that I had two hours to turn out an article "by" Carter for an important interest group...
Sniff. And we thought they really cared.

BTW, if you remember Carter's hunting rep, it came in part from Fallows cub assignment for a gun club rag ...

(Fallows, btw, is very much in the magazine business.)

Turning Japanese: Krugman on the humbling of the Fed

Paul Krugman's fairly accessible (non-mathematical) explanation of why Bernanke and the Fed are fighting for traction:
The humbling of the Fed (wonkish) - Paul Krugman - Op-Ed Columnist - New York Times Blog

... in March, and again this week, interest rates on T-bills fell close to zero — liquidity trap territory. What does that do to the Fed’s role?

You still see people saying, in effect, “never mind the zero interest rate, why not just print more money?” Actually, the Bank of Japan tried that, under the name “quantitative easing;” basically, the money just piled up in bank vaults. To see why, think of it this way: once T-bills have a near-zero interest rate, cash becomes a competitive store of value, even if it doesn’t have any other advantages...

... Ben Bernanke came into his current position believing that central banks have the power, all on their own, to fight Japan-type problems. It seems that he was wrong
So when you're turning Japanese (apologies to those in Japan who suffered this road in the 80s and 90s), you need more than the Fed. You need policy. That means you need a President.

That means that there's no real hope until next January, then we either flame out with McCain/Palin or hope with Obama/Biden.

Oh well, we knew that the last election was one of the most important in American history. We blew it anyway. So now we the next one is one of the most important in American history ...

PS. Krugman's blog is being overwhelmed by comments, most of them are denial-of-service insults from the enemies of the enlightenment. We need to tell him that others have solved this problem by outsourcing the moderation task to trusted third parties. Of course he doesn't control his blog, the NYT does ...