(Thanks to Torie Atkinson for spotting that...priceless photo before it cycled away on the front page of the New York Times.)

I guess he's decided it's not rational to believe his Dark Queen would reach out from beyond the grave to throttle him if he fails to obey her commands.

Pity that didn't dawn on him earlier.

He looks like the Six Flags guy after seeing a roller coaster collapse kill everyone he brought there.

Is it dissing a classic of children's literature to note that he always looks like Yertle the Turtle to me?

That looks like about 2.75 Claudes on the Rains/Renault scale.

C'mon guys. It's not easy to admit that you've been wrong about the innate benevolence and wisdom of markets for the last 106 years.

I suppose it's just one of them coincidences that just to the left of the screen shot it says “VAMPIRES: Do not accept candy from them”.

When my wife and I were house-shopping five years ago, our mortgage broker more or less told us we would be idiots to get anything but an ARM. I did some research and found that Alan Greenspan recommended them, and that Paul Krugman recommended against them.

Both recommendations played a role in my decision against one.

Next you'll tell me Libertarianism isn't a workable philosophy in real life...

Marko: It worked pretty well for Greenspan, didn't it?

#2:
I always thought there should be a book called We,the Undead by Ayn Rice

fidelio #2:

She should never have taken the Ring of Power from Nathan the Hobbit. Never was the same after that.

Sometimes the aftermath of exploratory surgery feels like burning, but it's a good burn.

Neil @ 7:
Aw, c'mon, you know Vampires always have the best suckers.

My god, Fidelio, you're right. Just after he fell of the stack o' turtles and was all chagrined and stuff.

I keep thinking I couldn't boggle any more, and yet...wrong again.

#15 Madeleine Robins--Now I really feel like I owe the shade of Dr. Seuss an apology.

fidelio at #2

Well, to be fair to his Dark Queen, if she could have done that she would have done it the second he became Chair of the Fed.

You know, Greenspan could personally knock on every door in America, patient explain the situation, profusely apologize . . . follow up with a half-hour all-channel broadcast in prime time . . . and the GOP spin machine and radio hatas will still be blaming ACORN.

* * *

As good a place as any to link to this.

Libertarian fan-boy posts egregiously stupid "Obama is a Marxist" rant on John Shirley's blog, gets his ass flamed:

Fight the Ravenous Beast of Socialism

While it's nice to know I'm more in touch with reality than Greenspan, I'd prefer a schadenfreude that didn't tank the world economy to prove the point

Some form of high risk investing is actually a good thing for the economy, but we just needed to regulate banks form putting everyone's money into the kitty. Let speculators speculate, create bubbles, whatever. Just keep the banks form lending on non-speculative terms to them. Why is that an act of genius to recognize?

Stefan - the John Shirley board isn't available for the general public, it seems.

You'll notice that Greenspan doesn't accept any personal responsibility for the crisis. He's quick to point out that he warned in 2005 that risk was not being properly assessed in the mortgage market. He still hasn't admitted that maybe greed isn't an unqualified good.

If Greenspan had any honour, he'd have disembowelled himself in front of the committee (and so would Paulson, for that matter).

Fragano @ #21: yes, but then we'd be treated to breathless McCain ads on the outrageous cost of government carpet cleaning.

Fragano #21:

Somehow, I'm visualizing the scene where the Imperial officer apologizes to Darth Vader in _The Empire Strikes Back_.

Apology accepted.

(Darth Vader had 95% of the really good lines in those movies.)

snerk snerk snerk....

#2 reminds me that I should really see how far my friends and I can get towards finishing our Rand/Greenspan slashfic.

"Faster, harder!" Ayn shouted. "To take me with any less than your full efforts is a denial of self-interest tantamount to suicide!"

"Such irrational exuberance," purred Alan, as he increased his rate by a quarter of a percent.

Stephanie Leary #22: Well, there is that risk, yes.

albatross #23: That he did!

My favorite comment about this was the subject header of James Nicoll's post:

Elderly Randian Forced to Grow Up

He didn't think that the bankers would favor themselves over their stockholders?

When for 2 decades the GOP has been systematically removing the ability to sue these bankers? Said suit being the only check that is available these days?

The Kicker for me that these a*******s only cared about their own gains was when they were screaming about how mean it would be to limit the executive pay and perks if the feds came into the picture to save those selfsame a***s.

Greedy SOBs.

*I* don't get a 5-to-15 million dollar severance package if the company I work for tanks.

And it really makes me wonder just *what* those maroons who are supposed to be "working class" at these McCain rallies are smoking if they think tools like McCain and Palin are going to look after *their* interests over their own.

And speaking about the Palin, I just love that the national GOP claims that they will give all those clothes (all $150K worth) to "charity" after the election. And that they claim that the clothes are "off the rack" Right. I hate to tell 'em, but they can get some right fine threads right off the rack for a h*ll of a lot less than $150k

Some tool from the GOP was comparing those prices to as if some male candidate was wearing brooks brother's suits.

Except that that would mean about 125 full suits from brooks brothers -- even ignoring that they *would* give a volume discount. Hell, some of their suits are even sold with a "pay $1 more" and you get two suits. (look at their website -- there are several suits at $998 for 1, and 2 for $999)

The first sentence could be shortened by seven words, removing everything from "John" to "of," and remain completely true.

To Randian Economists I say: you based your infometrics on novels written by a person who never understood the geography of the U.S.A.?

Though, full disclosure, confession, when I read The Fountainhead while a farmer's daughter still stuck on the farm in ND, the Roark-Dominique rape-romance-war was really, really, really hot, because, yanno, it was about IDEAS, and I just loved it.

Right. No really. This is full confession. When I was a virgin and not out in the world and living on the farm this was the wildest, most rebellious, sexy stuff I'd ever encountered.

Then I started to grow up. Even before I left the farm.

Love, C.

Craig R.:

I can't find the article right now (my google fu is weak today), but an "on air personality" — who must not wear the same outfit twice — says that she can easily stay within the $500/day allowance for clothes. Clothes good enough for TV work. Using store "personal shopper" services. Palin's wardrobe works out to $1600/day. For a "down-to-earth hockey mom"?

Fidelio @ #4: Thank you! I was staring at the picture trying to remember which Dr. Seuss character he looked like . . . of course it's Yertle!

I made a LOL out of the picture. I think I'm addicted to them now.

(I kept the image private, and didn't submit the LOL to the audience at large over at Pundit Kitchen.)

albatross 23: Darth Vader had 95% of the really good lines in those movies.

Hmm, I'd like to see your calculations. Even counting across all five movies (with DV in them), I can't get the percentage increments to come to anything smaller than 10%.

Harry, #28: I found this down in the comments on Nicoll's LJ, and just had to port it over here:

Yah, it's always a little embarrassing when someone reaches his age and still believes in the laissez fairy.

Constance is right on the button. Never underestimate the influence of hot trashy novels on the lives of the virginal young who encounter them. (A good argument for teen sex, I say.)

John H> -- for what was spent on wardrobe for this "down to earth hockey mom" I could clear all my outstanding "discretionary" debt, pay off my house and car and still have some cash left for the kid's college funds.

I'm afraid the bile and rabid foaming from rage is going to muck up another keyboard over here....

Even now, the kinds of regulation Greenspan thinks might be OK are just bugf*** stupid. Make sure a company holds onto some of the dogfood it sells to others? Yeah, because optimism about when things would hit the fan has never been a problem in the financial industry.

Greenspan made pretty much one good move, which was not panicking in 1987, and for the rest he coasted.

#38
I could double my potential-retirement funds. And have enough left over to buy all the National Geographic topo disks (which actually would be useful).

#25: invisible hand jobs?

Erik@#41: Good one!

Though that might better belong to an Adam Smith/Thomas Hobbes piece, given all the great Leviathan-joke opportunities.

---
Relatedly (?), a little wikiquotes research gets me this, from the old (i.e. less old) John McCain:

"I would not only reappoint Mr. Greenspan -- if Mr. Greenspan should happen to die, God forbid -- I would do like was did in the movie, 'Weekend at Bernie's.' I'd prop him up and put a pair of dark glasses on him and keep him as long as we could."

This is getting to be one of those really weird fics.

Craig R #29:

The interview with Kathleen Parker on The Colbert Report included her making an aside about "I wonder who's paying for Sarah Palin's outfits." The whole thing was kind-of interesting, as I came away with the suspicion that she was at least considering voting for Obama, largely over the Palin VP nomination.

Xopher #35:

I find your lack of faith in my calculations...disturbing.

Lighthill:

I suspect fed chairman is one of those jobs sort-of like president or CEO of GM. Most of the time, if you're not disastrously bad[0], things kind of keep going okay, you behave in ways that burnish your reputation for inscrutible cleverness, take whatever actions seem basically sensible, and take credit for the good outcomes--the US economy broadly keeps going okay, the US manages not to get into a war and lose it, your company remains the biggest car company in the world and keeps selling cars. Your job is simply to keep acting like the wise statesman or inscrutible genius or hard-assed tough guy or whatever you image is, while your underlings handle the daily problems and the large system you're in charge of continues to muddle through.

But when hard times come, often they're beyond your ability to handle--either you're not smart enough to head them off, or you don't have the power to do so, or your starting beliefs and models blind you to the dangers[1], or you see the danger too late to do anything meaningful about it, or whatever. And then, your job is to be the sacrificial lamb, to take the blame. To leave everyone with the idea that, well, someone put in that job could protect the country or economy or company from harm, could lead them to great success. Just not you.

And the reality is, a lot of the time, the job's probably too big for anyone. That doesn't mean Greenspan didn't make a bunch of mistakes. A different guy in the job would have, too, just different mistakes.

[0] The example here is too obvious to mention.

[1] And everyone has blind spots like this, though a different fed chair would have had different blind spots. Those blind spots may be a good argument for having a new fed chair every so often, but then you lose whatever advantage of continuity and reputation he had.

Craig R @ #38.

C'mon, you're being unfair. The gal so a genuine, down to earth hockeymom.

Mind you, I'm not saying which earth.

fidelio @4: Not at all. Yertle was also an asshole who thought reality revolved around his whims.

albatross @43: doesn't surprise me all that much. Parker's one of those women who has to be the only girl in the room - she doesn't like other women much at all, and I imagine that one who gets the dudely applause as much as Palin does just pisses. her. right. off.

On Palin's clothes:

One of the things that is most obvious about Palin is that she hasn't absorbed the very first rule of public service work; that you may not use your position for personal benefit. So. No perqs that would be seen as unreasonable, no string-pulling for your mates, no feathering your nest with office supplies, that sort of thing. Obviously she needed some help with clothes and hair, probably more than someone in a more prominent role would have; and equally obviously these things cost more for women. But still; it's hard to escape the conclusion that she sat down with a personal shopper with the attitude that she'd just won a trolley dash. Which, is, you know, consistent with the notion that she's a redneck hockey mom.

43: I agree with your calculations. "I hope so, Commander, for your sake. The Emperor is not as forgiving as I am."

I actually model my managerial style on Darth. Meetings consist of short sessions without coffee in which I tell people what to do and occasionally strangle one of them. (1,2)

1: THIS IS NOT TRUE
2: Rather like the Duke (3), who later in his career became Prime Minister and complained after his first Cabinet meeting: "Extraordinary thing. I gave them their orders and they wanted to stay and discuss them!"
3: As has been noted before, there is really only one Duke.

25: Lighthill, you are a very, very strange person. Also, thank you for sharing that particular image with the rest of us.

More on the various Palin-uses-public-money-for-own-benefit thing: I remember the post that described Palin as a pathological narcissist. This fits, too, doesn't it? This whole not even seeing that this could be a problem.

And how does 150k make any sense if she wants to project the image of a small-town Hockey Mom? I mean, I'm male, but didn't any of the women watching her go like, "waitamminit, that's a 30,000$ jacket from [obscure brand name that no man ever heard of]"?

Daniel Klein @50
And how does 150k make any sense if she wants to project the image of a small-town Hockey Mom? I mean, I'm male, but didn't any of the women watching her go like, "waitamminit, that's a 30,000$ jacket from [obscure brand name that no man ever heard of]"?

I'm not sure wether you can really tell the difference between a 30,000$ and an 80$ jacket unless you're really close. And, to play advocatus diaboli a bit, some people who see her in expensive clothes might not think "She says she's down to Earth, but she shops like a billionaire- how disgusting!", but "Hey, someone just like me gets to buy all that expensive stuff that I can only dream off! You go girl!"

I think that might be how some politicians all over the world can hold on to a regular, down to earth image while living the life of the rich and famous.

This makes a nice contrast to the Palin wardrobe thing, via Daily Kos.

(Personally, I love having resoled shoes. It's a deep value thing.)

I still think Palin's got enough white trash in her to see the RNC clothing allowance as approval to go shopping for all those goodies she couldn't find in Anchorage/Wassila/whereever, and since there was a great possibility that McCain would lose, was determined to grab as much bling from the goldmine as she could before it was cut off.

But, you would have thought that somewhere in the RNC there would have been some intelligent advisor saying "Ms. Palin, making all these expensive purchases isn't going to look good with your 'down to earth, just like you' persona, so shouldn't we scale it back a bit?". Instead, we get the arrogant "I can't believe anyone actually cares about this kind of thing" from their spokespeople.

I hope that Obama's campaign mentions this in a political ad; it's this kind of arrogance that really riles up the very people McCain hopes to have vote for him.

John L. @53:
it's this kind of arrogance that really riles up the very people McCain hopes to have vote for him.

Or they might be riled up by being called "white trash"

Oh, but the clothes aren't worth $150,000. (There goes Palin's post-campaign Louis Vuitton endorsement.) And most of the clothing never left the campaign plane. And no one said such mean things about Hillary EVER etc. etc.

But my favorite quote (from the LA Times blogs) is:

"It was always the intent that the clothing go to a charitable purpose after the campaign," said Tracey Schmitt of John McCain's campaign.

Schmitt also said: "With all of the important issues facing the country right now, it’s remarkable that we’re spending time talking about pantsuits and blouses."

You say pantsuits, I say Ayres....

Again, I'm a sucker for trashy gossip, so the $150k spending spree is utterly fascinating to me. (For the record: would pay off my mortgage and leave enough left over to redo the kitchen and landscape the front yard.) I mean, "What Not to Wear" is one of my favorite shows, and I often imagine the fabulous wardrobe I could put together if I had five thousand dollars and three days in New York with personal stylists.

But really, I have to admit, it's not a big deal. Who cares? For the people who don't like Palin, it's reaffirmation of what they believe. For the people who like her, it's Teh Big Scary Eeeeevil Media picking on the poor lil' gal. All I've heard is "well, it's both harder and more important for a woman to look better" or "how many clothes have Obama and Biden bought?" or "first they want to paint her as a hick and now they want to paint her as some cosmopolitan - can't they make up their minds? No matter what she does, she loses." No, "wow, I went without x so I could donate it to McCain, and they spent it on what?" (Which would be my first reaction. Not being the type to donate to McCain, my first reaction was, "Ha-ha", and then the calculation of how that amount would apply in my life, which made it a little less funny.) The campaign pays up or donates the clothes or makes good however, and in three days nobody cares.

Although I admit, I nearly peed myself laughing when McCain trotted out the "Georgetown cocktail party set" line after this broke. She may not get invited, but she's got all the outfits for when she is!

Ajay #48 I actually model my managerial style on Darth. Meetings consist of short sessions without coffee in which I tell people what to do and occasionally strangle one of them. (1,2)

1: THIS IS NOT TRUE

You serve coffee?

You don't need coffee to stay awake when you have FEAR, Mr Willcox.

abi @ 52...

You love having rissoled shoes? Things must be tough for the Sutherland family if that's all you can afford to eat.

Getting back to Yertle for a second, I looked at the photo and the headline in the original post again, and I have to agree, he doesn't look very regular.

And meanwhile, the Republican attack men are trying to equate Obama using his campaign plane to visit his sick grandmother with Palin's $150,000 clothing extravagance:

http://www.huffingtonpost.com/2008/10/23/gop-strategist-on-palins_n_137226.html

Bonus: the journalist laughs at him.

Raphael@54: Or they might be riled up by being called "white trash"

Is there a peecee term available?

Adrian Smith @ 62: I believe "Joe Six-Pack" is the latest Repub PC term

Persons of Six-Pack? I like it. Except it sounds like they might have ripped abs, which would be a different demographic AFAIK.

Uhm, bit OT, but I just noticed that apparently McCain has been gaining *a lot* of ground in the Gallup polls in the last two days (5%+). And Obama's been losing some (2%-), leaving him with a lead of just six percent, after October 20th's 11 percent lead. What's happening there? Have I missed the introduction of some crucial gamechanger on or around the 20th?

(I'm asking here because this is a website full of politically knowledgeable people and I'm getting a bit scared now, over here in Europe. I think this U.S. election matters a lot for the whole world, as there are some pretty big things that need to happen in international politics in the next few years if we want to avoid a variety of disasters, and they won't happen without the U.S...)

My poll information comes from here:

http://news.bbc.co.uk/2/hi/in_depth/629/629/7360265.stm

Raphael@54: Or they might be riled up by being called "white trash"

Adrian@62: Is there a peecee term available?

I'm trying to verbalize why this exchange makes me feel like I just heard someone say "What's the PC term for 'n----r'?"

Do we have a fundamental need for the terms "white trash" and "trailer trash"? Is there a valid need to conflate color, economic status, or housing style with undesirable personality traits that these terms are supposed to indicate?

And "trash"? Trash is something you throw away. That has no redeeming values. I can think of very few people who deserve that term (cf. Xopher's list of people whose deaths would improve the lot of humanity), and I cringe at the idea of describing entire economic sectors of U.S. citizens that way.

There is no 'politically correct' way to smear the entire group of people who fit a particular economic sector, unless the 'politics' you want to be 'correct' with are those of McCain's party and campaign, I think.

Albatross @43 and Mythago @46: I don't know much about Kathleen Parker's public persona, but her columns get published in the Chicago Tribune. She came out flatly against Palin in a few of them some time ago, and took quite a bit of right-wing flak for it. I don't remember if she also said that she herself was really considering voting for Obama (hey, I said the Trib publishes her columns; I didn't say I read them all that often) but she certainly criticized McCain for his choice of VP.

Hmph@65:

I get my poll discussion and analysis over at http://fivethirtyeight.com. See what you think.

There is no 'politically correct' way to smear the entire group of people who fit a particular economic sector,

Well, no, smearing an entire group of people would be a very politically incorrect thing to do, but thank you for making that explicit. I'm looking for a way to refer to them *without* smearing them.

"The Working Poor."

albatross 43: I find your lack of faith in my calculations...disturbing.

This bickering is pointless.

Speaking as a pale rural working-class/stumpfarmer/backwoods bozo sort myself, "white trash" is a phrase I use only to illustrate the struggle through the generations not to fall below that line. My grandmother had to take in laundry after her husband died leaving her with eight kids at home; that gave a very unpleasant daughter-in-law (who, it should be noted, came into the family thirty years after Grandma died) a handle to use against her: "dirty washer-woman."

Of course, "Joe-six-pack", the first hundred times I heard it, used to mean a guy drawing labor and industry disability payments for a back or knee injury he got by doing something stupid working in the woods, who sits at home on the sofa and drinks cheap beer and watches soap operas during the week and football all weekend while his wife works to support the family.

71: well, a lot of them aren't working... "poor white folk"? "Rural poor"?

Well, if that's what you mean, why not just say "poor rural whites"? But then you'd have to find another way to characterize Palin's attitude that's sufficiently derisive; I suggest "greedy selfish asshole."

Erik Nelson #41: Fortunately, I had put down my coffee when I read that.

What I don't understand is (from my required annual 5 minutes watching CNN on Tuesday) why the Repubs are trying to claim that "redneck" (from Murtha) is an outrageous ethnic slur?

Aren't most rednecks proud to be called rednecks? For, like, the last 30 years that I can remember?

Raphael @51: [..] some people who see her in expensive clothes might not think "She says she's down to Earth, but she shops like a billionaire- how disgusting!", but "Hey, someone just like me gets to buy all that expensive stuff that I can only dream off! You go girl!"

There is a scene in Pretty Woman where Julia Roberts is getting kitted out and made over by Richard Gere (with assistance by Larry Miller) in preparation for her role as a society lady*. This is what came to my mind imagining the 'dress Sarah' shopping spree.

* The scene via YouTube.

Wow, is there room for a dissenting view? Everyone seems so congratulatory of each other's wit that I wonder if anyone has anything to actually, you know, say about the financial mess that's more than a snarky comment or simply trying to blame one or two people for the whole thing.

When I bought my house my mortgage broker got us a loan for several times what I thought we should have been spending on a house. My ex-wife pushed and pushed to get me to spring for a larger house. They also pushed me to get something other than a thirty-year fixed rate loan. I'm glad I didn't give in on either point, but, you know what? It doesn't make me any smarter than those guys who overextended bad loans to people who couldn't pay them back.
Look, no one person or even group of people are responsible for this mess, unless you count Americans as a whole. The Republicans encourage crooks to push the limits of the law, occasionally too far, to make as much money as they can. Democrats happily wave oversight on agencies that desperately need it so that people with less money can buy houses they can't afford from the previously mentioned crooks. So, who's better? They're both a group of self-serving, bottom-feeders who are more interested in lining their own pockets and saying whatever it takes to get elected, or re-elected, than truly being public servants. And, don't try to tell me that Obama is any better than anyone else. He only seems better right now because we don't know how he'll do in a position of real power. Really, we're just rolling the dice.

Both candidates have given long speeches full of rhetoric about how they're going to fix the economy. If anyone buys what either of them say, they're suckers. The President has virtually no direct control over things that effect the economy. You don't like the way things are economically? Blame your Senators and Congress-people. They're the ones to blame. Can anyone even name them? (Okay, in this crowd, you all probably can, but I bet you had to look some of them up first!)

And, when you're done screaming and shouting about the injustice of it all, go talk to the Japanese. They when through this same thing in the 90's when their bubble burst. They survived and so will we. In fact, maybe it's time we start asking them what they did and emulating it instead of looking for someone to blame.
And, maybe it's time we voted for someone who wasn't either a Democrat or a Republican. There are other choices.

Clifton -
Take what you're saying, and replace every instance of "redneck" with the N-word.

For a lot of rednecks, it's the same idea (if not the same scope, per se) - they can call themselves rednecks - might even be proud of it - but *you* call them one, and you're in for a bruising.

There are a number of insult terms that are "okay" if used in-clan, that are absolutely not okay if used out of clan.

Important safety tip: referring to a Person of Six-Packish Persuasion as a Packi may cause unforeseen difficulties.

Network Geek@78:

"Wow, is there room for a dissenting view?"

Pre-emptory strike on "you're all censoring me" does not win you points. Yes, there is room for a dissenting view. We were just talking about that over in the "Election day unrest" thread.

The guys who overextended bad loans to bad credit risks appear to have made out like bandits. I'd love to walk out of this crisis with any of their compensation packages added to my 401k. This doesn't make them the smart ones, exactly -- any more than the people who were hard-sold bad loans are the stupid ones -- but they aren't the victims.

"And, don't try to tell me that Obama is any better than anyone else."

Obama is better than Bush and he's better than McCain. I can say that because I've seen how they've actually behaved -- more so for Bush, of course. The "everybody is equally terrible" line is just as much a lie as ever; it's *always* a lie, and it's *always* pushed, quite consciously, by the guy who is worse. So be careful about getting your fingers into it.

"The President has virtually no direct control over things that effect the economy. You don't like the way things are economically? Blame your Senators and Congress-people."

I do. And my dislike for Republican policy leads me directly to eight years of being pissed off at Democratic legislators for rolling over on it. (More so since 2006, of course.) But, you may have noticed, the Obama campaign is solidly in the traces with a *lot* of Congressional and Senatorial candidates. These things are not unrelated. Fixing this is going to require a lot of work on both sides.

And maybe Obama -- plus a wave of popular support -- can get a GOP minority to roll over on some *good* ideas. It does happen occasionally.

I'll let someone else pick up the third-party argument. This year, for cleaning up the mess we've got, I see no choices that are not Democrats.

The President has virtually no direct control over things that effect the economy.

He appoints people who do have that direct control. He can't skate (or bike) out of his responsibility and his judgement.

And, when you're done screaming and shouting about the injustice of it all, go talk to the Japanese. They when through this same thing in the 90's when their bubble burst. They survived and so will we. In fact, maybe it's time we start asking them what they did and emulating it doing exactly the opposite instead of looking for someone to blame.

There, fixed that for you.

Palin is not and never seems to have been "poor folks." Her husband's income is far above poverty level. Her income as governor is far above the poverty line. Claims or imputations of her being from low income background, are, perhaps often intentionally, misleading.

Her husband's income when working fulltime is a high one. Hers as governor is high. They're not in marginal income territory, a couple paychecks away from foreclosure threats and proceedings.

She grew up with one or more school teachers as parents? That's not "working class" as in "factory workers, wait staff, etc." working class, that's the government/civil service employment class, educators and paper pushers and academic and federal/state/local government workers.

She and her family are also collecting nice fat checks because they live in Alaska, and she trumpted about how everyone else pays more for Alaskan oil so she could make the checks bigger.

Another point about the $150,000 clothing haul--that's post-tax post-non-discretionary living expenses money. Two $75,000 salaries or three $50,000 salaries or four $37,500 salaries or five $30,000 salaries of six $25,000 salaries, don't yield up those amounts of discretionary spending. FICA takes up a chunk, other federal taxes take chunks, state taxes if any take chunks, there are costs for food, shelter, transportation....

So, how many people making the median per work income, would it take for discretionary spending of $150,000 for a Immelda Marcos Sarah Palin discretionary clothing spree?

@ Ambar: Whoah. Thanks. That site's... impressive. In fact, I think it's probably way over my head - my knowledge of the American political system and of statistics and stuff is not *that* great ;-). But I'll certainly dig around there a bit and see what I can understand...

Where did the money for the Palin spending spree come from? Donations from the Republican Party, or federal funding?

Rule Britannia. 8)

Clifton, #76: "Redneck" is a lot like "n****r" in some respects. The relevant one here is that it's okay for a member of the group to use it, but when an outsider does so, it becomes an insult. But I still have trouble with characterizing it as an ethnic slur; rednecks come from a lot of different ethnic groups. Archie Bunker has little in common, ethnically, with the Hatfields and McCoys.

JESR @72: I hadn't thought of "Joe Six-Pack" in those terms, but that makes sense. I only heard the term for the first time yesterday in a Sarah Palin speech and it struck me then that someone had been searching for a catchphrase.

When I used the phrase "white trash" to describe Palin, I wasn't speaking of her financial background, but her attitude towards suddenly being presented with what was basically a blank check to go shopping with. Everyone here has read accounts of people who won the lottery, and began acting like sailors on shore leave after a long at sea deployment. That was my first reaction when I read about her spending spree; I've seen it happen too often from people who feel that they deserve these frills and benefits, and don't care who pays for them or how it looks to everyone else. That to me is a white trash attitude, and that's what I meant.

I grew up in an area where dirt poor families were called "white trash", but I found that many of those people were just as hard working as anyone else, and in some cases were a whole lot more honest than people with better incomes. To me "white trash" isn't a group of people, it better describes a certain attitude towards money and others in general; it's hard to explain any better than that.

To be fair, "white trash" is a bit of a broad-brush smear.

On the other hand "Militant, right-wing, sociopathic goon" is a much more targeted comment. No worries about the broad brush there!

Well, no, smearing an entire group of people would be a very politically incorrect thing to do, but thank you for making that explicit. I'm looking for a way to refer to them *without* smearing them.

Thanks for clarifying, Adrian. I feel a lot better about the original question now. I understand that what you want is a term that refers factually, at a descriptor level, without indicating disapproval/dismissal/prejudice, to the group of the population people who say "white trash" can be assumed to be indicating. Right? I don't have a good answer for you beyond "low income Caucasians". I'd be tempted to add "in rural areas," because, contrary to the original epithet, I don't think people who use it are too careful about applying to precisely to people who live in trailers. Mostly what I hear when they use it is a close synonym for another epithet, "redneck".

If I seem a little oversensitized... well, the term "PC" has come to trigger some really unhappy reactions in me, for reasons others have spelled out very effectively here, over at Slacktivist, and in other places amongst the liberal blog-o-sphere. Also, my soon-to-be ex-boss recently, during a staff meeting that arose in response to an argument about sexist language, referred to Sarah Palin as "trailer trash", and I left feeling really squicked out by that.

Anyway, the Joe-six-pack follow-up to your question only cemented my original interpretation. If that helps to know.

Hmpf @ 65:

Another interesting place to look is The Princeton Election Consortium, which does a similar kind of thing: aggregating multiple polls together to remove some of the statistical noise and biases that can come from individual polls.

In particular, it's worth reading his argument about the tendency of news outlets to focus on swings in isolated polls, even though aggregating polls gets you a better picture of what's going on (which may not be as dramatic).

(You can see this on that BBC page. Click on the different polls to see how much things vary from one poll to another. Yes, the Gallup poll seems to show an uptick for McCain. But both the Rasmussen and Washington Post polls show slight downticks for McCain.)

To be fair, "white trash" is a bit of a broad-brush smear.

On the other hand "Militant, right-wing, sociopathic goon" is a much more targeted comment. No worries about the broad brush there!

Is that sarcasm? If not, ignore this rebuttal.

"Militant, right-wing, sociopathic goon" at least attempts to lay down an actual description of the subject's own attitudes. It's a terribly negative judgment call, but insofar as "sociopathic" and "right-wing" and "militant" have actual, objective definitions, it's more useful. I'd want to independently verify that it's being applied fairly, of course.

Whereas I'm almost never convinced (exception: Xopher's list, again) that "trash" can be applied to a *person* fairly or accurately, and "white", while being descriptive, is useless for making descriptive generalizations about people.

Shorter me: I call false equivalence.

john l.

To me "white trash" isn't a group of people, it better describes a certain attitude towards money and others in general; it's hard to explain any better than that.

well, ok. but you probably shouldn't be using a racial slur to describe those traits, then.

if one were to say "to me n*r doesn't mean a black person, it means anyone who is dumb, oversexed, & criminally-minded." is that less problematic or more problematic?

Nicole @ 93, you grace me with an elegant, well thought out, proper comment. Whereas I was deploying a mean-spirited snarky smear. Considering my target (The Yukon Vixen), I probably -should- feel rather more guilty than I actually do. I suppose that I shall have to sulk away, a brooding middle-class elitist.

You know, I spent nearly fifty euro on my last jacket??? Feel the elitism!

Here is a YouTube short from Monty Python about what happens if one crams many offensive words within less than one minute.

"if one were to say "to me n*r doesn't mean a black person, it means anyone who is dumb, oversexed, & criminally-minded." is that less problematic or more problematic?"

In my case, the "n" word is a racial epithet, but based on my upbringing, "white trash" is not on that level. I should have realized it had different connotations to others though when I used it, though. I apologize for not thinking of that.

JESR, #72: Sort of like Andy Capp, except that Capp was never shown claiming disability (or, for that matter, having any income at all).

John, #89: Give the kind of person that you're calling "white trash" money, and they become what my partner and I call "Moneyed Persons". This is the subgroup of the well-to-do who also have serious entitlement issues; they drive expensive cars (and drive them like assholes), demand to be served before people who were in line ahead of them, and are a the nightmare of a restaurant server or store clerk, because if everything doesn't go exactly right they will do their best to get that person fired. This is the sort of person who will exclaim, in all seriousness, "Do you know who I am?" as they try to browbeat people into giving them special treatment.

Network Geek @78: The Republicans encourage crooks to push the limits of the law, occasionally too far, to make as much money as they can. Democrats happily wave oversight on agencies that desperately need it so that people with less money can buy houses they can't afford from the previously mentioned crooks. [...] The President has virtually no direct control over things that effect the economy.

Wait, hold on a minute. It was 1995 when the Community Reinvestment Act was substantially revised to eliminate redlining, when the Republicans controlled both houses of Congress. Granted, there was a Democrat in the White House, but if that's important, it further contradicts your point about control of the economy. So you're making two contradictory points, and they both turn out to be wrong.

Now, it was Clinton's Housing Secretary who loosened mortgage restrictions, so you could argue that yes, the Dems do bear a share of the responsibility for the sub-prime mortgage crisis, but than that contradicts your claim that the President has no say over the economy.

Now, I actually do agree that there's plenty of blame to go around for both parties in the fiscal crisis. But what it looks like you're doing here is not so much actually contributing a useful and factual viewpoint, but engaging in some crude I'm-smarter-than-y'all grandstanding.

/no snark whatsoever

Nigger - let us be frank with language, it's worth it in this case - can never be decoupled from it's origins, despite what hip-hop artists, modern comedians, and young people who don't know any better think - This is a brutal, minimalizing word. It's a toxic, poisonous word, one that people will barely say, even vicious racists these days will think it but not say it. This is a word with power and meaning and that should not be minimalized or trivialized or focus-grouped or theraputically eliminated. Nigger. A brutal, bitter word, but know that it exists in the mind and behind the lips, and behind angry hateful eyes that look out on a different face.

And know that people see this word and think it every day, every minute.

It is common to denote the in-group usage of the word by omitting the "r".

I think perhaps that it may well be at least a generation before the culture desensitizes calling someone a "Federal Reserve Chairman".

Editing my #101, --> changing the "er" to "a"

Any time there are identifiable groups you have a reason to disdain or dislike (for good or bad reasons), names for them will arise. "White trash" is a rude term for a certain social group, easily identified in my own experience despite being rather fuzzy. The way I heard it growing up, it means whites whose values are lower-class, who are usually poor, don't much care about education, and often have all kinds of nasty stuff going on--unwed pregnancies, trouble with the law, drug problems, drinking problems, etc. That's distinct from being poor--you can be white and poor and not white trash, and you can be white trash with a bit of money (which you are then expected to spend on boats and cars and motorcycles).

Palin isn't in that group, as far as I can see. But she appeals to that group, in the identity politics sense. That, plus her daughter's situation, plus some of her rhetoric and actions, makes it easy to slime her with the label. The US is a society in which we pretend not to care about social class, but also in which it drives all kinds of stuff. To be seen as white trash is very much something to avoid, at least how I was raised. This drives all kinds of good and bad behavior among middle/working class whites who don't want to be seen that way.

All IMO.

apologies for humorless-twit-ness, but for me at the moment, if you were to refer to a technocratic free-market fundamentalist geek as a real "Greenspan" that would have the same force as the vicious aforementioned N-word. In fact from here on out I think that I shall refer to unapologetic Randians as "Greenspans". Who's with me? (God, I make a rubbish revolutionary.)

Earl, so the in-group version would be "Fedaal Resave Chairman"?

dlbowman76 @ 100

Hear, hear. Also, please note that the issue of such words has nothing to do with what the speaker means by them, but everything to do with what the listener hears.

NetworkGeek @ 78
They when through this same thing in the 90's when their bubble burst.

No, they went through 10 years of flat economy, no growth at all. What's happening now, not just in the US, is a complete freeze of credit on top of a huge surge in home loan foreclosures, all layered on top of a recession (economy shrinks, not stays flat), resulting in growing unemployment.

It remains to be seen whether the disappearance of several trillion dollars in investment value will also have an effect; the money never really existed, but whether its non-existence matters depends on who gets stuck with the bill.

Avram @105:

Only in Boston.

Stevey-Boy @88, at some time in the seventies or so the Joe six pack name got picked up (as Joe Sixpak) to mean a weekend TV sports addict;. Its use to mean "plain working class guy" is pretty recent. Note that the term has always carried a specifically anti-Slavic undercurrent; its relative neutrality in these days is pretty much a sign, to me, that people of Slavic descent are not longer rank outsiders.

Lee @98, Andy Capp very much taps into the same trope as the original usage of Joe six-pack, although for a differing culture and with differing baggage: a northerner on the dole as opposed to a logger or millworker on L&I. A geordy instead of a bohunk.

*sigh* At the risk of inciting flame...
I should never comment at work because I get interrupted with, you know, actual work too often. I didn't mean that I thought I'd be censored for having a view that differed, rather I was wondering if there was anyone else willing to disagree with what seems to be the prevailing view here.

So, that being said, I was thinking of this article by Orson Scott Card:
http://www.ornery.org/essays/warwatch/2008-10-05-1.html
(Yeah, I know, I've put on my flame-retardant union-suit. Really, I'm a network admin, so I'm used to being the hot-seat.)

Nicole@91: Thank you. In the normal course of things I'd look for a term that was used by the group in question (and wasn't a clear attempt at "reclamation of language", a process I feel serves mainly to muddy the water about what is and isn't a slur). Unfortunately they seem fond of "ordinary Americans", which probably chafes a bit with the millions thus rendered extraordinary.

If I seem a little oversensitized... well, the term "PC" has come to trigger some really unhappy reactions in me, for reasons others have spelled out very effectively here, over at Slacktivist, and in other places amongst the liberal blog-o-sphere.

Ah, "PC" is itself not PC. Should probably have thought of that myself, I'm perfectly aware of how Limbaugh and co. use it. "Acceptable", then.

Anyway, the Joe-six-pack follow-up to your question only cemented my original interpretation. If that helps to know.

That's offensive too, then?

Minefield.

Lee@98: That sounds like "nouveau riche" to me, though using French terms in American discourse might...backfire at times.

dlbowman76@100: Well put.

dlbowman76: There's a reason you may not have thought of why we don't tend to type out the N word in full here: searches. Sites that use that word attract a certain kind of person we don't want to attract.

Could a mod fix that, maybe?

JESR 107, 108: As a part-Bohunk (or Bohak, the way I first heard it), I'm astonished by this. I've never heard Joe Sixpak used as an anti-Slavic slur, but then I've heard very few anti-Slavic slurs of any kind. Could you elaborate?

Network 109: With all due respect, Orson Scott Card's article is full of distortions and outright lies, and he can bt m ft gy ss.

Now hear this:

I have released a comment from moderation (Bruce @106 triggered a keyword).

Only Xopher @113 is affected.

#112: The only place I've seen "bohunk" used as an expletive was in a Jean Shepherd story / memoir.

It was uttered by the son of their hillbilly neighbors, who was outraged and disgusted by a teacher's description of Raggedy Andy.

(The same story describes an incident that was reused in Shepherd's A Christmas Story: The Bumpus family hounds invade the house and steal a Easter ham.)

Xopher @113:
I am minded to leave dlbowman76's usage alone, because I think the comment is important, and doesn't work with it munged.

I can think of one other time the word has appeared on this site (a thread I started), and the importance is mainly to be crystal clear that it is a firmly deprecated term.

Don't use it casually, or with reference to its dictionary meaning. But as a subject for dissection upon the table, it was appropriate in that one comment.

The two things that bother me about 'white trash' are, first, that you oughtn't call people trash; and, second, that it's too often treated as an inherited and incurable state. Disadvantaged classes are bad enough, but possibly unavoidable this side of the Veil; consigning newborns to a disadvantaged class is -- well, it's one of this country's original sins. This is where 'white trash' meets n***** for me.

Network Geek @110:

The economic crisis is much more complicated than Card tries to make it*. I haven't the time or energy to pick through that particular farrago of misinterpretations, half truths and chronic omissions, but I will make one large point. Anyone who strives to focus on bad loans without talking about the lack of oversight of banks' investment vehicle creations and capital adequacy is straining at gnats while swallowing camels.

Note that this thread started with the picture of a man with years of experience in the matter saying that the deregulation of the financial markets, which he advocated as a matter of doctrine, critically weakened the economic system. Remind me again which party has, as a key tenet, the idea that government regulation of the markets is a bad thing?

And the media? The media is on no one's side but their own. Thinking that they would not break a story that would sell papers is like thinking that a cabal of editors blocks the publication of wonderful books for nefarious purposes.

----
* Much like the world.

Network Geek @ 78:

go talk to the Japanese. They when through this same thing in the 90's when their bubble burst. They survived and so will we. In fact, maybe it's time we start asking them what they did and emulating it instead of looking for someone to blame.

As Bruce Cohen pointed out (#106), the Japanese economy went into a ten-year-long recession; that's not something we want to emulate, if at all possible. (I've seen arguments that the Japanese government ended up prolonging problems by allowing Japanese banks to quietly carry unacknowledged bad debt for years.)

Sweden, on the other hand, dealt with an ostensibly similar real-estate crash + banking crisis in a much better fashion. (Though they didn't have to deal with a combined worldwide credit crisis and recession at the same time.)

Part of what "looking for someone to blame" involves is, ideally, figuring out what went wrong so that you can prevent it from happening again in the future. The idea is to not just pretend that it was all an unavoidable Act of God, but to actually learn from past mistakes.

#118: I find it particularly telling that when Fed and Treasury officials are asked about the problem, they never, ever mention the contribution of individual borrowers.

They know that the real problem lies with overleaveraging, dishonest ratings, and shabby practices far up the food chain.

The "It's ACORN's fault!" / "Those damn #$%#$%$ shouldn't have been allowed to buy homes!" meme is strictly targeted at the crabgrass roots.

Abi@116: I am minded to leave dlbowman76's usage alone, because I think the comment is important, and doesn't work with it munged.

If search is an issue as Xopher says, couldn't you pseudo-mung it by putting some tags or other around each letter? Unless search engines strip out tags, which sounds like a lot of work.

Xopher, (in Bohunk Solidarity, by the way)- the way that phrase was used around me in my early years (born 1952, remember, so we're talking the late 1950s-early 1960s) it was interchangable with "lazy bohunk/polack." There was a cartoonist in these parts who drew the Joe Sixpak fan character for a while, with kielbasa and saurkraut as part of the fixed image. It's possible that my mother's brothers' aversion to the term and that cariciture is distorting my sense of proportion about it, but that's my understanding of its use in this place, in that time.

When the contractor came to replace our house's heater, he told my wife that a friend of his wasn't doing too well financially and that he had to live in a neighborhood of 'coloreds'. Ouch.

abi (114):
I looked at Bruce's (106), and see no obvious trigger word. I must assume the holdup was for a duck with a $100 bill to drop from the ceiling.

Apropos of nothing at all, I just heard on NPR that economists are predicting that Britain is heading for a deeper and nastier recession than we are. The Brits have been living off more credit and a bigger housing bubble than even the US. Also -- turns out folks holding euros are selling them and buying dollars, because while the stock market is tanking (for a lot of reasons, right now having to do with hedge funds frantically selling their holdings) there is still more faith in the US economy as an engine of growth than there is faith in the collective European economy.

And another comment, which probably belongs in some McCain thread, but I'm too lazy to seek it out: that $150,000 that Sarah Palin spent on clothes? It would completely pay off the mortgage on my house, and leave me enough over to pay for my health insurance premiums and my copays, my dental bills, and my drugs until I hit 65, and qualify for Medicare. Just to put it in perspective.

They ought to let her keep the clothes, though. She's worked for them.

My favorite comment on the Palin wardrobe matter came from one of America's great crusaders for integrity in politics:

The use of campaign funds for items which most Americans would consider to be strictly personal reasons, in my view, erodes public confidence and erodes it significantly.
...
I point out these abuses, in my view what are abuses, because they are certainly not what the average contributor intends for their funds to go to.

In the fine tradition of Dave Barry, I am not making this up.

(h/t Daily Kos)

Weird. I could swear I posted this video, but it isn't showing up on my View All By. Someone said it wasn't working, so I was trying to find the thread. Anyway, here it is:

True friends are friends forever.

Network Geek:

To respond more directly to Card's article: it is true that Fannie and Freddie's buying of riskier loans made the crisis marginally worse, but to pretend that their policies were the underlying cause of the crisis is ludicrous. The sub-prime market was already roaring along before Fannie and Freddie got involved, and even at the height of their involvement they only accounted for 20-25% of the market.

To use a metaphor: Let's say you run into a friend at the bar, and buy him (or her) two or three drinks as you chat, and then leave while your friend stays at the bar. You later learn that your friend was just beginning a massive binge and woke up three weeks later naked in a dumpster in Pittsburgh with no idea of how he (or she) got there. Card's criticism is like screaming at you for having the sheer temerity to do something so terribly irresponsible as buy your friend a drink or two, while absolutely denying that your friend has any problem with alcohol whatsoever and saying that people who want to get him into a treatment program are meddling busybodies who just want to tell other people what to do.

You will search far and wide to find anyone who holds a lower opinion of Sarah Palin than yours truly.

But this clothes and hair - make-up stylist tempest, I am of somewhat, maybe, another mind about it than the prevailing one among my own ilk(s).

It doesn't seem quite that out of proportion to be spending that kind of money on her appearance, when she does have to make so many public appearances all day, every day. And she's in company, at least sometimes, with Cindy McCain, who dresses very expensively.

Even at only 44, and in possession of a fair amount of acceptable prettiness, plus that most fortunate possession, a face that photographs well, it's a lot of work to keep a woman looking fresh when she's supposed to be dressing as a feminine sort of woman.

They could have found an effective stylist - make-up artist who doesn't cost 20,000 plus a week, of course. One equally effective for a whole lot less. She probably could have found an acceptable wardrobe for less, but then they were in a hurry. Additionally, everything in Alaska costs so very much more than down here due to transportation costs, she maybe even felt like she was getting bargains, the way the Euros did here, before their own economies tanked.

She didn't buy jewelry -- Cindy frequently wears an inconceivable bank balance of jewelry.

Of course the very idea that somebody needs that much spent on clothes these days to look good on cameras and in front of crowds in order to campaign is a sad state of affairs.

I'm just sayin', yanno.

That Gucci bag for Piper though ... which also looks very silly in her hand. Having Alaska paying for flying her family all over creation when its personal recreation ... that too is different.

Additionally, that the mvrik's campaign is trying to make something scandalous out of Obama flying to see his dying grandmother on the plane his campaign is paying for, gives them a whole lot less ground to complain about in terms of Palin's wardrobe's costs and other associated cost-shafting of the tax payers she's done as mayor and governor for her travel.

And the mvrik's campaign has even had the cojones to complain that Obama suspended his campaign to see his dying grandmother ... calling it a campaign stunt -- sheesh!

Love, C.

Network Geek @ 110: I long ago gave up on expecting insightful observations from rsn Sctt Crd about the real world, as opposed to the worlds he makes up in his wonderful and not-so-wonderful stories.

And to claim that the risky loans were made mostly to minorities and people buying first-time houses is a claim with no stats behind it that I know of. A large number were made to middle-class people who wanted more house than they could afford. I'd love to see a breakout that shows how much of the loaned money was done at what levels -- anybody got any links for such?

Note about "white trash": I'm pretty sure that this term was originally an African-American expression from at least as far back as Reconstruction. It has that extra edge of both bitterness and scorn: they think they're better than us because they're white, but they're really just trash -- that's what it's supposed to convey.

Constance @129 When I was Piper's age, I would, on the infrequent occasions Mom asked me to carry her purse, be filled with importance and pleasure to be so trusted to not, like, drop it or break it or feed it to stray dogs or rifle it for cookies. So maybe that handbag ain't Piper's.

I'm just sorry the GOP didn't drop 500K on Palin Family outerwear. Plus lingerie. And maybe a couple sled dog teams. The more they spend on irrelevant junk like that, the less they have to video looney attack ads, and the more apparent it is to everyone that this is not the party with a handle on fiscal responsibility.

Network Geek @110, have you noticed that (1) you source is not a factual news article, but an opinion article, and (2) Card's opinion article itself draws upon another opinion article?

Card's article has some of the same problems I brought up before. He says "This was a Congress-caused crisis, beginning during the Clinton administration, with Democrats leading the way into the crisis and blocking every effort to get out of it in a timely fashion", even though the Republicans actually controlled Congress at that point in the Clinton administration.

Card also claims (quoting Thomas Sowell) that Alan Greenspan warned about the subprime mortgage issue four years ago, but neither of them provides any quotes or context. Actually, four years ago Greenspan was telling the Credit Union National Association that "Overall, the household sector seems to be in good shape", and recommending that homeowners get adjustable-rate mortgages.

So maybe you shouldn't believe everything that Orson Scott Card reads in a right-wing opinion column.

Avram @ 134... So this too is the fault of Evil Bill?

The Rsn Sctt Crd comments on Fannie and Freddie are standard right-wing talking points that I've seen on other sites from other sources. There's nothing original about them. It would be interesting, though, to know who the author was and how long ago they were written.

#103 albatross

There is "poor white trash" there is "rich white trash" and there probably is "middle class white trash".....

104-104 dlbowman and Avram:
FR*C[k]'n' Greenspans?!

#107 abi
No, it would be "fed-uh-rull reserve bank". Not all letters r go unvoiced....

#118 abi

You're looking at newspapers through the wrong filter. The newspapers' revenue as with television comes primarily from the advertisers, not from those reading/watching the non-advertising content. There is, even, a term in commercial publishing of periodicals which rely on advertising for the primary part of their income, "space salesman" which is a derogatory term applied to editors who make sure that the editorial content keeps the advertisers happy. What goes in the US new media is that what the advertisers want reported on, is what the editorial departments focus on, and when the big advertisers don;t want talked about, if it appears, gets written to put the advertisers and their agendas get put in trying to do damage limitation usually to the advertiser--and the more important the goodwill/ad revenue from that advertiser is the the publication compared with other advertisers who are competing for the same market, the less unfavorable the commentary about the advertiser will be. If the competitors are more important or about to become more important, then the editorial content can be less favorable to the advertiser in controvery....

#123: Serge:

"... a neighborhood of 'coloreds'. Ouch."

Much depends on tone of voice, certainly, but I've never heard "coloreds" as anything but Polite Usage, common among decent Whites and many middle-class Blacks back before we got on the "what term is In this year?" roller-coaster. I suspect it has retained this status in many social/cultural pockets.

#131 ::: Tom Whitmore:

I, too, would like to see stats, charts, & graphs on the demographics of the mortgage defaults. (I'm lamentably inept with this Net stuff, and have to rely on the help of others.)

I have seen claims that the number of defaults by minorities making modest first-time house purchases is remarkably small, and that most of the money involves higher-economic-class people who ambitiously upgraded much too wildly.

I think that makes logical sense (so far, though things may change as the depression worsens) -- poor people, in general, are quite sharp about spending money, and knew perfectly well that they couldn't make mortgage payments that were higher than their then-current rent -- but it's always nice to have good statistics, from a source that doesn't depend on me to sort the genuine from the fake.

(Actually, as I understand it, most of the astronomical sums involved in the current catastrophy can the thought of as side-bets on whether the loans would default or not -- various arcane financial instruments that are entirely unregulated -- and are essentually fictional sums ... or were until The Government underwrote them. *sigh* )

# 129 Constance

The clothing purchase for Palin and her family for political purposes apparently is specifically illegal, clothing being noted specificially in federal laws about what's allowed and not allowed, as illegal.

How much did Geraldine Ferraro spend on clothing, if anything, when she was running for Vice President? Somehow I doubt the the Democratic National Convention paid the cost of a house for clothing and grooming for her and her family....

#134 Avram

The head of the House Financial Services Committee is one Rep. Barney Frank, Democrat, Massachusetts, and homosexual.

Material from articles and speeches by Barney Frank writing as a federal official on his official Congressional website, meaning they are public domain documents....

http://www.house.gov/frank/secwebster2002.html

The following letter was sent on 10/31/02 to the General Accounting Office (GAO) by Congressmen Barney Frank, John D. Dingell, and Senator Paul S. Sarbanes. They are requesting that the GAO thoroughly examine the vetting process for the members SEC's Accounting Oversight Board.

(from another webpage on the site, URL not here because something crashed the set of browser windows I had on the website and I didn;t copy and paste it before the window went boom....)

Congressman Frank Delivers Speech in House of Representatives on the Serious Problem Confronting the American Economy
(House of Representatives - Congressional Record - March 4, 2004)

[Page: H846]

UNEMPLOYMENT: A SERIOUS ECONOMIC AND SOCIAL PROBLEM FACING THE COUNTRY

....I think it is a moral issue, a situation in which people receive millions, tens of millions of dollars in bonuses, a situation in which profits go higher and higher and the market is now doing well and we are all glad to see that, a situation in which the owners of capital find their wealth enhanced, but working people lose their health care, people are unemployed, children do not have adequate housing and other necessities. That is morally unacceptable to me.

Essentially, we have a combination of economic factors and technological factors and public policies, which mean that a disproportionately large share, nearly all of the increased wealth we are producing, goes to the owners of capital and virtually none to the people who do not own a huge amount of capital and get their compensation from the work they do every day.
...
Ten or 15 years ago, I was representing an area that had a large textile and trade employment base, and we were told, well, stop worrying about that, these people should understand. That is not a good job for an American. We will retrain them.

Well, first of all, the extent to which you were going to retrain some 49- or 53-year-old with a high school education was limited in terms of its appeal to them; but even to the extent that you were retraining, let us note that the jobs that I was being told 15 years ago, for which we would retrain people, we would not only now have to retrain them, we would have to buy them airplane tickets because they are going out of the country. The jobs being outsourced today are the jobs for which we had been told we should retrain people.
Wage and salary disbursements, Mr. Roach points out, are basically unchanged in real terms fully 21 months into this recovery. By contrast, at this juncture in the past six upturns, real-wage income has been up on average by about 9 percent. Absent other sources of support, this shortfall of internally driven income generation could end up spelling serious trouble for the overly indebted, saving-short American consumer. Let me read that a little more sensibly, for the overly indebted, saving-short American consumer. In short, there is a good reason to doubt the sustainability of a recovery built on a foundation of imported productivity.

In other words, when you create wealth and some of it goes, most of it, to the owners of capital and some of it goes to people outside our economy, you are not doing the kind of self-sustaining recycling of economic activity that you need. So that is where we are.

We are at a situation, as I said, which seems to me an inflection point. The normal rules by which a certain amount of economic activity in the country will produce a certain amount of jobs, that has been eroded; and as we have seen high profits, we have seen a fall-off in real wages. We have seen a fall-off in the private sector provision of health insurance which is supposedly the major way we do it. We have seen unemployment staying above where it should be. We have seen profits do very well. We have seen the market go up. We have seen upper income compensation stay up. We have seen the Tax Code change in ways that unfortunately reinforced that. ..

If we were to take some part of the private sector wealth that is now going almost exclusively to the owners of capital and put it in the hands of government, Federal, State, and local, we would have more police officers, we would have more Environmental Protection Administration cleanups, we would have better public transportation and trains, we would have more medical care, we could deal with the terrible housing crisis that we have. And I know to the Republican leadership this might sound like a revolutionary bill, but we might even pass a highway bill. That seems to be beyond their means. Why? Because there is not enough money....

I would just say in closing to my conservative friends, who are currently and I hope temporarily in control, you have the ability to say no to all these things. You can keep wealth-enhancing tax cuts in place, you can continue to cut back on overtime, you can continue to undermine labor unions, you can continue to pursue a trade policy that gives leverage on people to bring down rather than up any kind of protections, and you may win these battles in the short run. But you are every day increasing public resistance to what you think is necessary for overall economic policies.

So if equity is not enough, self-interest ought to persuade those at the top of the private sector, and those who represent them politically, that the time has come to recognize that we have a changed economy and to adopt public policies and reverse the trends of making inequality worse and instead diminishing so that we get both more jobs and a healthier society and a more sustainable economic recovery.

http://www.house.gov/frank/dobbs092408.html

Lou Dobbs interviews Congressman Frank

http://transcripts.cnn.com/TRANSCRIPTS/0809/24/ldt.01.html

....
FRANK: No. Nothing nationalized. The ownership we're going to take is going to have no voting rights. I don't think it's Wall Street -- here is the problem, a lack of regulation going back to Ronald Reagan allowed the private sector to make the mistakes that put us in this situation.

From

...when people see their real wages stagnating or falling, health benefits threatened, and pensions insecure, they're unlikely to support policies that help the economy at their own expense.... a leader of a large financial institution voice frustration with the average American's lack of support for globalization... "globalization" worth $9,000 a yea to the average American family. The problem, of course, is the that average American hasn't seen that $9,000. Instead, many of them believe--resentfully--that corporate executivees have been keeping it all for themselves.... Our nation has both the resources nd the intellect to implement public policies that diminish inequality so that it does not become socially corrosive, without reaching the point where that diminution threatens the needs of the capitalist system. Is Big Business ready to come to the table?"

Paula @141, is there a prize for me buried somewhere under all those paragraphs?

Doctor Science, #132: My mother was born in 1920 in Pulaski, TN -- which is also the birthplace of the KKK. The way she explained the term "white trash" to me when I was a kid was that it was "the kind of white person who's no better than a n****r." I don't use it in quite the same way she did, but one of the things it definitely implies to me is a worldview full of vicious racism, misogyny, and homophobia, frequently excused on the basis of religion.

abi @ 114

I'm curious to know what keyword triggered the sequestering of that comment. When I posted it I got the standard note from the elves in the glass towers, but was puzzled what I said that caused it. I certainly wasn't trying to be provocative, and there wasn't a single URL in the whole thing.

The more I think about the whole economic mess the credit instrument dealers created, the more I believe the original mistake was letting physicists on Wall Street. Sure, computational finance made them a lot of money, but did they have to explain virtual particles to the money people? Gave one of them the idea of virtual money: create it, spend it, and let the guy at the end of the line, where the money turns back into vapor worry about paying for it. And you know, that last guy? That's the rest of us.

The keyword that held Bruce's comment for moderation was...wait for it...

           home loan

Which fact is, of course, entirely relevant to this thread.

(Now I'm going to have to go bargain with the elves to get this comment out of the dungeon. Those suckers bargain hard. Cost me a roc egg last time; fortunately we have a stash of them in the office. And they leave bowls of pomegranate seeds lying around the anteroom. Sneaky buggers.)

Those are some way demented elves! Are you sure they're not actually Drow?

"globalization" worth $9,000 a year to the average American family. The problem, of course, is the that average American hasn't seen that $9,000. Instead, many of them believe--resentfully--that corporate executives have been keeping it all for themselves

$9k a year? NAFTA owes me $135,000. Now, plz.

abi @ 145
h*me l*an

This year's feel-good Xmas movie. On the poster, Greenspan screaming with a hand on each cheek, MacAulay Kulkin style.

SylvieG @ 148... h*me l*an (...) This year's feel-good Xmas movie.

Joe Bob Briggs says check it out!

Those are some way demented elves! Are you sure they're not actually Drow?

Given how much value the Drow have lost in the last few weeks, I'm not sure they're capable of much ...

Oh, wait. Dow, not Drow. Never mind.

(I will now refrain from making dubious jokes about Deep Space 9 and the German stock-market index.)

Doctor Science @132: According to the OED, "white trash" dates back to 1831 in the American South; it's attributed in the first example-quotation to an obviously African-American character, probably a slave (his name is "Sambo"). Later entries would also seem to agree with you, though again the written sources being quoted are evidently by Caucasian writers (no surprise given the time frame, of course).

The word "trash" as referring to "worthless human being(s)" goes back considerably farther, though, which I thought was sort of interesting. (Not particularly relevant, just interesting . . .)

I think it will be a better world when you refer to "white trash" and the kids think you mean the office-paper recycling.

The first time I encountered 'white trash' was in the mouth of Mammy, referring to the Slatterys, in maybe the very first chapter in Gone With the Wind.

Love, C.

Bruce #144:

Actually, one of the important-but-not-urgent issues raised by the financial crisis, to my mind at least, is related to this. Having people smart enough to be physicists and mathematicians going into zero-sum sorts of fields[1] like finance and tax law has got to be a big loss for the world. If you're bright enough to get a PhD in physics, but not quite good enough to stay in the field, for God's sake, can't we find something else for you to do, something that requires lots of intelligence and math background, and which actually makes the world better off?

[1] That is, fields where the smart people aren't making the pie any bigger, they're just fighting over who gets a bigger slice.

Xopher @ 152

What a great idea: recycled epithets. Now let's see ...

"beaner" - in baseball, a pitch that hits the batter in the head
"camel jockey" - a type of robot used in the Arabian Peninsula countries for racing camels*
"greaser" - a very juicy hamburger
"hebe" - an attractive wait person
"jungle bunny" - one of Hugh Hefner's girl friends in a tiger suit
"redskin" - sunbather who didn't use enough sun block

* Note that this usage becomes offensive when the Equal Robots Amendment is passed.

Bruce: I guess I'm thick, but I don't get 'hebe'. I know the epithet meaning, but not the application to an attractive waitperson.

And 'robot'?? Honestly, I'd think you'd've realized by now that the correct term is 'Mechano-American'.

Don Fitch @ 138

I've heard "colored" used many times (though not much in the last few decades, to be sure) as a kind of polite placemarker for "n*****", said by people who didn't want to appear to be "white trash" themselves (the term they would use), but wanted to say the same things as a racist poor white Southerner might. As you say, much is implied and revealed by the tone of voice and the context.

Also, attach "boy" or "girl" to it, and the tone becomes much more derogatory.

Don #139:

IMO, it's important to distinguish between the housing bubble (which was, as far as I can tell, driven largely by US monetary policy and by explicit policy decisions of both parties to encourage widespread home ownership and rising home prices) and the bigger financial meltdown, which seems to have a lot more to do with global, systemic misunderstanding of how to handle some kinds of risk.

Any story that explains how the financial crisis is the fault of bad US regulation or policy needs to account for the global nature of the big crisis. The US housing bubble is plausibly driven by US policy, especially post-9/11 monetary policy and the decades-old policy of encouraging everyone to buy a house. The disaster in Iceland, the bank failures in much of Europe, it's kind of hard to see how that is the fault of Greenspan or Bush or Clinton or Fannie/Freddie or Bernake or the CRA.

I have this vague sense (because this is a terribly complex topic, on which I'm a complete amateur) that one thing that's happening here is that the global financial market is something of a monoculture. The same tools for estimating risk, the same rating agencies, the same broad approach to regulating and overseeing and insuring financial markets, all tend to spread across the globe. It's like we've all got exactly the same antibodies, and they do a good job of immunizing us against common kinds of badness. But then, one day a new virus comes through, and *nobody* has a defense against it.

There's an analogy here to computer security (where I'm not a complete amateur, even if it's not exactly my area of research). If we all adopt the same best practices, the same virus scanners and IDS and patches and settings to lock down our Vista boxes, we'll be relatively safe against the existing known attacks. But a new attack that gets through my defenses will get through yours, and in fact, through everyone's defenses--it can spread almost without bound. Similarly, some kinds of risk may not be accounted for properly in anyone's models, and that won't just swamp me, it will swamp everyone.

Xopher, 156: I don't get it either. *scratches head*

Summer Storms and Xopher: I think "Hebe" was the (female) cup-bearer to the Greek pantheon . . . was that it, Bruce?

Mary Frances, 160: Ah. That makes sense.

Xopher @ 156

Think of Greek mythology. Ok, so it's pronounced differently; I thought it was funny.

albatross @ 154

I've been thinking for some time that the kind of robber-baron capitalism rampant in the US is actually a negative-sum game, that is, each contestant ends up with a share of what's left over after the scrum has wasted some fraction of the whole. I'd say the current crisis is an excellent examplar of negative-sum gaming; the total amount of wealth left is less than the total before the meltdown, even though some players got a lot more out of it than the rest of us did.

Mary Frances @ 160

Yup, you got it. I got diverted into a discussion of dog training* in RL just now, and posted the last comment without seeing yours.

* We recently had an Invisible Fence™ installed, and getting the dogs used to it involves some training. But if it keeps Spencer from running off and getting hit by a car, and allows us to let him run around in the back yard without fearing for his life, it's worth it.

#154 albatross

The world's first space tourist got rich enough to become a space tourist by being in the financial services industry. He went into that industry because he wanted to be a space tourist--he had previously been on the technical staff at I think NASA's Jet Propulsion Laboratory. He did an analysis which indicated that he had a much better chance of getting into space by buying a ride on a Russian rocket than if he stayed employed in the space business and as space scientist/engineer.

So, he went into finance, got, rich, paid $20 million or so to the economically-challenged Russkies, and got his space trip.

The bottom line--financial dealings are much more financially rewarding, by orders of magnitude, than research, development, testing, and engineering, and with financial riches, one can buy access to things one can't otherwise earn access to by merit in the field of endeavor!

Hey, Seth, are you there???? (Seth has a doctorate in math from Yale, did a year as a post-doc, and then moved to Wall Street to program bond margins, at much higher income level than a post-doc stipend provides, much higher than untenured professorts, and higher than most tenured professors, for that matter, earned at the time....)

Factors that determine what people do include:
1) Can they even get jobs? The universities turn out more people with doctorates in math and physics, than there are academic positions for, and than there are research and development opportunities in industry in laboratories that produce new inventions in math and science and engineering for, even at grad student slave labor wages.
2) What are the working conditions and benefits? The financial services industry had been paying exgtravagant salaries and bonues with full benefits packages, many times what someone with the fortune to get a position doing R&D paid, and in places with excellent restaurants, world-class entertainment of stage plays and opera and museums
3) What about job security and/or severance packages? In the academic world, one slaves for years towards tenure, and then might not get it.... and is out without a lifeline. In the aerospace world, it's hire-and-fire. I have a coworker who stayed employed because he dropped out of MIT's Ph.D program in aero and astro--he had a wife and baby daughter and life on a grad student stipend was marginal, versus going into industry and getting paid better. His classmate finished the degree and went to work at the same company, and then it was 1969, and the aerospace industry collapsed, shrinking to a third the size and employment it had had at the height of the Apollo program empoyment. Seattle had a sign, "Would the last person leaving Seattle please turn out the lights?" with Boeing going form 120,000 employees down to 40,000.

Anyway, my coworker and his classmate were working at the same company, coworker having an Engineer's degree as his highest degree, and his classmate a doctorate. The company had the revenue stream to keep one of them. It dumped the Ph.D., because he was getting paid more.

4) What about future prospects? The defense and aerospace business, there is no job security, it depends on the funding profile of the quarter/year, and when the cuts come, they come everywhere. I spent years out of work.... Financial services rarely go down for the count, they're basic to the economy. The present debacle, involves a ballooning of financial kite constructs which employed people to invent and expand more and more and larger and larger kites, but the basics of handling loans, doing accounting, doing actuarial analyses, are basic and continuing. Pension funds continue to exist and need people for customer service, for management... venture capital companies are still in existence, etc. And, the rewards for successful fund managers, brokers, and others, were enormous.

Constance @#129: That was my intuition too, and the other night my sister (who has worked for the Justice Department) agreed that the amount wasn't unreasonable. Of course, the source of the funds is still illegal....

As far as "unwise borrowing" is concerned, one of my closest friends got burned by the housing bubble, and the thing is, this is probably the most responsible, and thrifty guy I know. He sank most of his savings into a home for his new family... at what turned out to be the peak of the bubble. Now he's caught between rising prices, frozen salary, and a mortgage that's well over his house's reduced value.

Paula @ 164

IMO that analysis is spot-on. I've seen that happen in the computer industry, where the best and brightest got siphoned off into venture capital and senior management (and not always staying within their Peter Principle limits). On the other hand, a friend of mine, who was an aerospace engineer at (what was then) Martin-Marietta, go laid off in the early '80s, went back to get an MS in Computer Science, and is now facing the dumbing down of the computer industry into the IT industry. He's managed to find a niche that he's secure in, but I don't think he gets much satisfaction from the job he does, and his pay is sufficient for his needs mostly because he's a bachelor with no children.

From society's viewpoint, this trend has significant negative consequences. Aside from the additional talent added to the pool of finiancial people creating and manipulating more and more potentially-destructive instruments*, there's also the fact that in their original fields, these people were operating positive-sum, providing more wealth in the broadest sense back to the society and to the human race than they got. Moreover, that wealth was knowledge, which is self-catalyzing: each bit of new knowledge can potentially be the basis for the discovery of yet more, and the combination of other knowledge into technology which produces still more wealth. So having qualified professionals leave a positive-sum situation to go to zero- or negative-sum one is clearly a large loss for all of us.

* I'd say offhand that credit-swap instruments and their relatives have caused more economic damage than all the nuclear reactor accidents, including Chernobyl.

#165 David, #129 Constance

Note that airlines I think have bereavement fares, or at least, when someone has to change their travel plans due to bereavement, the airlines don't charge them for the changes.

There is a also bereavement leave time from work, and other accommodations for people who have lost close relatives, or are about to lose them.

Clothing doesn't come under the same social rules and regulations, and particularly not clothing for prices that are more than a decade of the typical wage earner's discretionary budget. What do most people who are working for a living spend on clothing a year, anyway?

Cindy McCain is no working stiff, she's an heir of privilege and big money, and a considerable beneficiary of tax policies which increase social inequity (see Barney Frank writings and speeches about social inequality and generational increases in it, regarding high wealth individuals leaving their entire fortunes intact to their heirs. For that matter, there are people who would have been much better off without trust funds and inherited wealth and could have contributed much more to the world than living a leisured life of no real productivity... Andrew Adams Whyte, known in fandom as Drew Whyte, would have been a lot better off if he'd been raised to work for a living, instead of living off a shrinking trust fund, spending unthriftfully, and investing completely unwisely when the remnants of the trust fund got turned over to him. He had the talent to do some very useful stuff, but the concept of working for a living never got instilled in him.

Anyway, what Cindy McCain wears, is what a woman of large wealth considers appropriate to buy and wear, she hasn't got the contraints of ordinary mortals for ordinary every day living expenses and retirement to consider, to limit her extravagances. the upper 0.1 percent of the population isn;t constrained by marginal savings or no savings while trying to scrape by keeping afloat at marginal levels that most of the populace has... if an ultrarich is struggling financially, it usually really is their own fault, for living beyond the means of what would hundreds of citizens of median income....

Economics, the stuff left out...

Some considerations I've been thinking about for a long time and meaning to write about (there is somewhere I want to go in the next few minutes, but before the vicious case of ADHD kicks in again and I forgot about it until whenever again...)

1. "Faith" and "Values" don't tend to get factored into the standard models. Samuelson's models assume rational behavior, and leave out "I hate that company, and all the money in the world can't make me do business with them" or "I am a loyal Spaghetti Monster worshipper and I follow my religious devoutly...."

2. Hysteris and faith/attitudes tied to it, are major drivers. Belief that something is what it isn't, can be extremely persistent... and holding to false views and sticking with them, makes also for irrational, and often death-spiraling on one extreme, or corollary runaway condition of expansion fueling expansion beyond sustainability to a suddent collapse, behavior. At the moment, the runaway expansion has turned into a near death spiral contraction, all because of the beliefs and values and actions based on beliefes and corruption, that effected the removal of effective control and regulation.

The control system still had some parts intact, but those in charge of applying them shut the control system off, that wasn't dismantled, and colluded with those who built parallel systems that were exempted from control....
(and now I really should get going...)

To me, it looked like the root of the financial crisis was the ability for an institution to set up a loan/mortgage, and then sell off that loan to another institution.

So long as collecting the payments was going to be the responsibility of the institution making the loan, they had the incentive to do the 'due diligence' to determine that the client was able to make the payments. And if the client encountered some later difficulty in making payments, he could go to the loan originator, who might be able to renegotiate the terms of the loan to accommodate the client's situation.

But when the loan is something that the originator can sell off, where is the incentive for prudence on his part? Part of the current crisis is not knowing what 'bad loans' were sold labeled as 'good'. And to whom does the client turn if he has difficulties?

'Balloon mortgages' also struck me as a problematic notion.

Financial regulation should be something like the FDA: there should be limits to what 'new financial innovations' can be put out there without getting cleared by a review board. And some things, like 'balloon mortgages', might be like prescription drugs: available in some circumstances as needed, but not for everyone. A lot of supposedly smart people got burned by derivatives.

But, IANAFinancier, so I really don't know much about the whole mess.

Oh, I guess my (non-joking) response to #8 is still in the bowels of the spam system because it discussed my h*me l*an.

The issue isn't just the ability to buy/sell the established loan itself.

It was the technique of bundling those loans into "securities" and then selling shares in those securities. Because of the way those loans were bundled there was no real incentive for the "bundler" to accurately assess and track just how "good" the actual loan performance would be, as the "better" the stated performance, the lower the risk factor, and the higher the price tier for the resulting security.

And, being "securities" (and yes, I think the whole stock market needs to assume "securities" of whatever stripe are not very secure) these were sold to investors throughout the world, all of whom wanted the shot at multiples of return for every dollar/yen/ruble/mark/franc they put in.

The market bidding on these was not on the actual dollars that had been paid against the loans by the borrower, but on the expected *future* return.

Add in the insane way that the credit default swaps were constructed and marketed, those also infecting the global financial markets, and it was, as we can now see, a disaster waiting to happen.

And this is not any "once a century perfect storm" -- this was just inevitable.

Paula, #167, according to the WashPost Travel section, airlines no longer have bereavement fares. You pay what everybody else does.

Rob #169:

Securitizing mortgages has been going on for quite awhile now, so it seems unlikely that it's the immediate cause of the problem. My sense is that the housing bubble (with many years of rising house prices and a hot housing market) had three really nasty effects at the same time:

a. It taught home buyers that buying a house is a sure path to wealth. This encouraged people to buy houses when it didn't make sense, at prices they couldn't really afford. It also encouraged a lot of people to speculate on real estate--many of those folks lost their shirts on the alleged "sure thing."

b. It encouraged mortgage brokers, real estate agents, and politicians to find ways for normal people to buy houses, even though the prices had often gone up past what they could really afford. The income and down payment requirements were ways to avoid having defaults, but they were put aside, because otherwise, few houses could have been sold at 2005 prices. And crap like "stated income" loans made it easy for fraud to be committed by the mortgage brokers and buyers. (I'm not sure how often the buyers understood they were doing something seriously wrong, though.) ARMs and interest-only loans and such were great vehicles for basically allowing speculators to get a lot of leverage.

c. Those rising prices masked the effects of the lower and lower quality of mortgages being written. First, mortgages where the payments were scheduled to go up dramatically after five years were easy to handle, so long as prices kept going up. You just needed to resell the house or refinance it before the payment went up. Second, if you just couldn't keep up the payments, you could probably sell the house in the hot market, missing some payments but never needing to be foreclosed on. And third, if they had to foreclose, they could resell the house just fine, because the price would have gone up over time.

The problem with all that is that the securities based on mortgages seemed to be performing fine. So even though the big institutional investors who were buying those securities had to know lending standards were going downhill, they didn't measure the effects properly, didn't account for the idea that if prices ever stopped going up, their investments would tank. I think they must have known this was a possibility, but that they didn't have a good way of measuring or estimating how much those investments would tank. And I gather it's not much fun to make the argument, within your company, that a currently very profitable line of business is too risky and needs to be stopped, especially without hard numbers of some kind.

But I'm also not any kind of expert, so I'm probably missing a lot of stuff. And I really don't understand how this relates to Iceland, or Germany, or Spain, or the UK, or Switzerland, all of which have had huge banks run into major problems.

albatross @158:

Any story that explains how the financial crisis is the fault of bad US regulation or policy needs to account for the global nature of the big crisis.

The US financial system's regulatory regime's reach is far wider than US shores. I worked for a British bank that owned an American bank, and therefore had to comply with American regulations. Trading on the New York stock exchange—the stock exchange to be on—also requires compliance with American regulations. (And so it should, but that does expand the reach of the regulations far past American shores.)

Furthermore, many national regulatory schemes try to align with the American system, which therefore sets de-facto standards. And any company held to stricter rules could, and probably did, howl to its regulatory bodies that its international competitiveness was being hampered.

There's no rule that says that just because American regulatory schemes are f'ed up, so should international ones as well. But there is a strong element of contagion in the real world.

albatross @173:
And I really don't understand how this relates to Iceland, or Germany, or Spain, or the UK, or Switzerland, all of which have had huge banks run into major problems.

Because many of the banks were either:

- selling bad mortgages (the US is not the only country with a housing bubble; pretty much everyone who started down the "ownership society" track in the Regan/Thatcher years had run out of good buyers and was into subprime buyers in overly inflated markets), or

- buying mortgage-backed securities, which were the new black in sexy financial instruments. My former employer went from £32bn in the suckers in 2006 to £68.3bn in March of this year. They had a huge rights issue in the spring to try to cover the liabilities, and ended up worth less in total than the cash income from the rights issue by September.

The financial services market is truly global. Even if you can't get products from a bank in Iceland or Ireland, your bank can using your savings. And vice versa; the Irish and the Icelandic banks are invested in the US. When one country goes down, everyone invested in that country goes down too. Then everyone invested there goes down, and bingo! Global financial crisis.

It's the new version of the entangling alliances of 1914, when a bomb in an archduke's carriage leads to the sons of entirely different nations dying in the fields of Flanders.

Abi @ 175... the Regan/Thatcher years

Regan? Wasn't she the little girl possessed by the Devil in The Exorcist?

Would you say that you describe a house that is made not of cards but of rubber bands?

Reagan not Regan. My apologies. (You should have seen what the Goneril and Cordelia years were like...)

Abi... Heh! You just reminded me that I should put King of Texas on our NetFlix queue.

#173 albatross

I suspect that the triggering event was the rise of gasoline prices to nearly $4.00 a gallon in the USA and oil and heating fuel massive increases--it caused people and businesses which had been scraping by to no longer be able to pay the bills. When their wallets started running dry, the flow of cash, however minor it may have seemed as part of the Gross National Product, decreased to the businesses that they had been buying from, which further shrank the monetary flow, that had kept other people in marginal monetary flow situations employed, and the businesses in business. The businesses laid off people if not closing down completely, and the misery spread, spiralling up from the marginers... fuel and transportation cost increases raised prices for everything else except personal computers and hard drives and flash memory (a generation of equipment in a production plant is less than a year in the semiconductor industry, it's one of the reasons that industry is so volatile), which further shutdown the monetary flow...

On second thought, the monetary flow first got diverted to pay a larger and larger share of the flow into petroleum-based products and services--transportation fuel and transportation service, heating fuel and power production fuel and heal and power and lighting, plastics and fertilizer and pesticide, grain and vegetables and meat and processed food--prices driven up by increased costs for fertilizer and pesticide and transportation and power and operating petroleum-based equipment and demand for grain-based ethanol increasing demand versus supply of corn....

But anyway, the shift in spending in the USA particularly, played the role of of a slow addition of straw to the backs of a caravan full of camels.... the caravan had had sufficient extra camels to be able to keep going, until trying to shift the loads around from collapsing camels became impossible and the caravan got stuck.

Until the petroleum products prices shot up and stayed up, the number of people defaulting was within the levels covered by the risk assessments... that is, the assumption that some percentage of loans are going to fail, and that the income from the loans that don't fail, covers those that fail--setting rates that have a built-in spoilage factor, in effect. The overall rates get set not on the basis of direct income and profit, but on the basis of expected rates of return on investment which include statistical factors of loan failure. It's an actuarial thing, the same sort of things that insurance companies do with life insurance and car insurance and house insurance, with actuarial tables and such.

When the monetary flow go redirected because of the petroleum products prices surging, the monetary flow to everything else, shrank. People, again, in marginal situations whose incomes had been barely meeting expenses, stopped being able to pay mortgages, particularly ones that they'd had the expectation they would be able to renegotiate for lower rates, based on having been paying the existing mortgage--credit histories used to matter for getting lower priced loans. There was the old tactic of taking out a loan and paying it back in short order, to establish a good credit rating....

A few houses in an area with "non-performing" loans, that got foreclosed on and sold, were one thing, and were expectation on a statistical basis. Entire neighborhoods full of properties in default, however, in an area where employment base fell over because the "good jobs at good wages" moved offshore or evaporated with monetary flow drying up, stopped being properties anyone still interested and able to swing the financing to buy a house, would be interested in considering buying.

The problem with this process of reflection/schadenfreude is that many people, including committees of senators and congressmen interviewing neo-cons and laissez faire capitalists, are hoping that characters like Greenspan will come to some kind of realisation, say sorry and reverse a lifetime's opinions.

These types of people noted the 80's savings and loan disaster: saw the public robbed and executive salaries raised, and responded with:
no real problem here, other than too much regulation.

In the 90's they saw the UK pensions mis-selling, and endowment mortgage mis-selling, scandals: the public were robbed and executive salaries rose, and they responded with the same:
no real problem here, other than too much regulation.

In the early 2000s they saw the dotcom: the public lost their final salary pension schemes and executive salaries continued to rise, and they again responded:
irrationally exuberant but no real problem here, other than too much regulation.

Now Greenspan sees the world financial system collapse; the tax payer bailing out the banks; Paulson defending, and hiding, executive pay during the bailout; the US heading for insolvency principally because it has spent the public's pensions; and he replies:
oh dear, that's a surprise, no regulation needed other than that Banks should keep a little of what they sell on their books.

Each time the victims are the general public. Greenspan has not once attempted to stop this constant theft from the middle classes.

My question is: why isn't this serial incompetent, and all the others of his ilk, kick out the door as a charlatan. Why are so many people still trying to search for some spark of rational compassion in the ideologically amoral deserts that are the landscapes of their intellects?

The problem with these executives is that they are paid so much, pronounce with such sociopathic dogma, and fail catastrophically with such arrogant disinterest that society sits in awe of their magnificent egos survival of their gross incompetence. Being unable to come to terms with the error of offering them these positions, or the possibility that our democracies do not throw up the right people for these jobs, and assuming that somehow their stunning confidence must be indicative of some equally stunning ability we fail to grasp we never fail to let them continue with their ineptitude and replace them with people with similar intellectual flaws.

My understanding of the housing/lending crisis is as follows:

1) Housing prices were going up. "Normally", that would eventually have leveled off quietly. Specifically, the market would have run out of qualified buyers, who represent the ultimate "demand" in the supply/demand chain.

2) Various corporate actors wanted the prices to keep going up ("just until we cash out"...). The way they chose to do that was by increasing "demand" at their own various levels. Lenders relaxed their standards, which was bad enough... but the securities traders did something worse: They knew that risky loans would not be attractive to their buyers, so they sliced-and-diced the loans into fancy derivatives, and presented the result as "secure".

3) The problem with that was, the underlying risks were still there -- not neutralized or even hedged, but merely "hidden" within the derivatives. The sub-prime derivatives (SPDs) not only weren't safe, they were blivets -- "ten pounds of shit in a five-pound bag".

4) Consciously or not, many of the professional players probably had some sense of what was going on, if only from working experience. But in any case, they had an option to make money off these blivets immediately, and avoid the fundamental risks behind them. So they sold the things far and wide, without too many scruples about "full disclosure". As the risks slowly became more apparent, this developed into a global game of "hot potato".

5) And then the music stopped.... Less poetically, the defaults started, turning "theoretical risks" into all-too-obvious dangers.

6) But by now, the "hot potatoes" had gotten all over the world... and "bad money drives out good". That is, every time the banks and such had bought SPDs, it meant they weren't using that money for genuinely fruitful investments. At many of the US's, and the world's, financial institutions, the SPDs undermined the overall security of their entire portfolios -- which is what supports the institution's own stock price, credit ratings, etc. Enter domino effects and finger-pointing....

There's a guy who is on my train a few days a month. Last summer he was talking about one of his co-workers who is '60 years old and still living in an apartment' and wondering why the guy hadn't bought a house, or a condo. (The real estate balloon in this area has been deflating for more than three years, not that this guy seems to have noticed.) I wonder sometimes if he's even thought that not everyone wants to buy a house at that age.

#181 David

Markets rely in issues of faith--
o faith that under the skin of the fruit on the fruit stand is edible fruit and not fly-infested bacteria-laden toxic-chemical-laden rotting putresence
o faith that the meat at the meat counter in the supermarket is fresh and not rotten meat treated chemically to look good or meat contaminated from contact with with fluids/meat/bacteria from animals sick and/or dead before reaching the slaughterhouse
o faith that the coinage and paper one gets handed in transactions actually got produced by a national mint and not some forger,
o faith that the transactions done when using a credit/debit card accurately update one's credit account and that the information isn't getting siphoned for someone else anywhere in the world, to charge transactions to and stick others with paying the charges you never made
o faith that when you order a product, that the order will get filled and sometime in the future you will receive the product/services you ordered
o faith that when you and another person or party, or you and one or more other parties, enter into a contract, that all parties will fufill the obligations signed for in the contract
o faith that your employer is going to pay you per the employment contract
o faith that your employer is withholding taxes and providing them to the governments as indicated on your pay statement
o faith that the utilities companies are going to continue to provide service to you
o faith that the transportation systems you use everyday aren't suddenly going to stop being there/working
o faith that the bridge you drive over every day isn;t going to collapse (and especially not when you are on it)
Etc.

All this faith rests on assumption of continuing of operations, funding, effort... I was about to use a nail in a horseshoe of the horse in the lead of a critical charge in a battle analogy, but one that's real:

Once upon a time the United States Air Force Demonstration Team, the Thunderbirds, flew a trainer plane designed the T-38. There were four of the member of the team flying in close formation, in a maneuver, in formation. The lead plane had a catastrophic control failure. The pilots of the other three planes, per standard operations doctrine, were following the leader. All four planes crashed, all four pilots died. There was NOTHING that any of them could have done, lacking foreknowledge that the lead plane was about to have a catastrophic failure, to prevent the disaster, nothing. The lead plane and it pilot were doomed, at the altitude and attitude the plane was in when failure occurred. There wasn't enough space and enough time for the pilots in the other planes to get clear of the lead, the other planes, and the gournd in the time that it would have taken them to realize the lead had had a catastrophic failure.

Contemporary life in much of the world relies upon a complex infrastructure base for delivery/availability of fuel, shelter, food, transportation, entertainment, security, safety, and continuing access to them. Government regulation helps in trying to ensure continuing access and availability. Removing the government regulation, means that those who are uninteresting in the effects that their greed and self-aggrandization and featherbedding has on others, get to impose their greed on others, and have no consequences visited upon them, while others die from exposure, from starvation, from lack of medical care, and survive in misery until their deaths.

I haven't come back to this thread because I've been googling around trying to find an article- I think by Jane Bryant Quinn or Robert Samuelson Jr.- from almost ten years ago which pointed out the simple demographic reasons that Boomers were going to be skunked if they looked at their big suburban house as their primary retirement investment: that age cohort is followed by one which is smaller in numbers and different in tastes than its successor.

It's not cheap and easy home loans to the poor which is the central flaw of the economy of the past couple of decades, it's a more pervasive and much more destructive flaw at the center of our cultural assumptions: that there would always be a demand for new, big, expensive houses, and that /l/a/n/d/ real-estate would always appreciate beyond its value as habitat. I'd write a bullet point list of why that assumption stinks like a stormwater pond full of spawned-out dog salmon, but my hands hurt.

The short conclusion is that the idea that everybody can be a landlord is ridiculous on its face (an oxymoron, in fact) but it's been a driving force behind theretirement plans of too many of my generation for too long, and it is falling apart over its own self-contradiction.

Paula Lieberman, Ambar,

You both have comments in moderation due to the use of the Unfortunate Term I referenced in comment 145. Their release would trash the numbering on the thread.

Contact me if you want me to send you the text of the comments, and you can re-post them at the end of the thread.

Sorry about that. Sign of the times, innit?

Abi (185), Firstly, my grateful thanks for not disemvowelling my comment upthread, it would have lost a lot. Secondly, who knew that h*** l*** had even more lethal force within a comment thread? I shall set to work on a home e***** sonnet instantly! (it almost rhymes with iniquity, alright? Hey...that might be quite apropos...)

My love and I, we had but nought to sell
But our home, aye, our shelter above
Our heads. It was a pittance true to tell,
But ever so hopeless, a home to love.
You know, I gave this everything I could,
I suppose that my best couldn't suffice,
I believed that our accountant was good,
Oh god...I took his financial advice...
Now there's nothing left but the horrid shell
Of our home, house lost on a roll of dice.
All that's left, some rats and mice, a strange smell.
We could catch a film at the Hippodrome,
Give us a chance to forget about home.

Three cheers for dbowlman76! An excellent set piece sonnet!

Abi (188) if I may be so bold - Bowman, not Bowlman, vielen dank! and a thousand thanks from not a thousand miles away (Baden-Wuertemberg is not so far from Holland, I think!)

Yrs,
D.-

dlbowman76 @189:

tausend Entschuldigungen! I was so busy getting your number right (I am dreadfully number-blind) that I got the letters wrong!

Google Maps tells me we are 646 kilometers apart (and that it would take 5:55 to drive that distance).

Wa-Hey, less than one tank of gas in our Prius! I eagerly await my first visit to Holland mit meine Frau, und mein Tochter And we shall certainly bring our bicycles (and yes, my German is rubbish).

Abi @ 177

I will refrain from Leering.

albatross @154

If you're bright enough to get a PhD in physics, but not quite good enough to stay in the field,

Not that it's directly relevant, but there are reasons for leaving academia that having nothing to do with being "good enough" to stay in the field. Wanting to live in the same state as your spouse, for instance (that was mine).

Seconding lorax.

(I also feel like this is a peculiarly physics thing -- that if you get a Ph.D and don't go into academia, it means you weren't good enough to cut it, rather than maybe you wanted to do something else instead. I don't know how true it is of other basic sciences, physics being the only one I have any experience with. It is very much not a thing in biomedical engineering; people go into industry R&D, start their own businesses, go into medicine, etc. and it's all pretty well respected.)

Lorax @193: Also, "not quite good enough" may be an unreasonable way to phrase the reality of, say, two jobs being available that year in the entire United States; this is why a fannish friend of mine is not a professional astronomer. (Yes, she could in theory have looked for jobs in other countries, but by the same token, she wasn't guaranteed that either of those two jobs would go to an American.)

Peter Erwin @150 - Not Dr*w, Svartalfar

Xopher @156 - I thought the term was "Ferro-American"*

and Bruce Cohen @155 - I hope "limey" will soon refer to the way my gin and tonic was served last night. (Apparently it's the 150th anniversary of the gin and tonic, although it may have actually been last year. Much discussion and drinking followed)

* According to Top 10

By god, I'm one of the very few members of my newly formed department who *doesn't* have a PhD. My grand distinguishing characteristic: native speaker of English. (And I'll have you know that I can use a *spoon* as well!!!)

delurk

Caroline@194

It's not just a physics thing. You hear the same sort of stuff in biology about people who go into biotech. It may not be on the same scale (difficult for me to evaluate - I know my own field best) but there's definitely a sense of "what a shame they couldn't cut it" attached to not following in your advisor's footsteps. The shear tightness of the academic job market and the realization that partners have a particular problem getting jobs in the same city (as Vicky@195 pointed out) is softening that quite a bit, but it's still there.

/delurk

Bruce Cohen@192:

Abi @ 177: I will refrain from Leering.

An empty threat, Ich glaube.

abi@177

The Cordelia years were very interesting, what with her ascending to become a higher power then coming back to earth and summoning a giant demon-beast and then giving birth to a deity that tried to take over the planet.

Although perhaps that's a different Cordelia... :-)

Touching briefly, again, on the topic of the thread, Greenspan himself did not place substantial blame for the mess on Freddie Mac or Fannie Mae, nor on the Community Reinvestment Act. He felt that the demand for mortgages to package into these profitable securities prompted the excess of bad loans:

"The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of the crisis) would have been far smaller and defaults accordingly far lower."

Michael I @200:

The Cordelia years were very interesting, what with her ascending to become a higher power then coming back to earth and summoning a giant demon-beast and then giving birth to a deity that tried to take over the planet.

Folk mythos, that.

In reality, Cordeila gave up being a "higher power" when Aral ceded the throne. And I admit that Bothari was pretty bad when his mental illness was at its worst, but I'm not sure I'd call him a giant demon-beast.

But please don't call Miles a deity; his ego is big enough as it is. Even more so, don't hint that he is trying to take over the planet. He had that out with Gregor over the Dendarii Mercenaries.

Yeah, I'm not trying to make some bad statement about folks who do a PhD (or leave ABD, for that matter) and then go into another field.

My point is, there is a relatively small set of very bright, capable people available, and much of what they could be doing would involve making the pie bigger for everyone. So I hate seeing them involved in fighting over who gets the biggest slice, instead.

Imagine two societies. One looks like the modern US--smart, capable people can become successful (famous, rich, even powerful) by doing useful things like inventing stuff or providing valuable services or products. The other is the same, except that 10% of the society's wealth is handed out to the cronies of a few oligarchs[1].

Consider the most capable, determined, smart, driven 5% of the population of those two societies. In the second one, many people who might otherwise have become researchers or engineers and started companies, many who might have otherwise become doctors and treated thousands of people, instead spend their time and considerable gifts kissing the asses of the oligarchs, in hopes of making their fortunes by getting a cut of some corrupt deal somewhere.

That first society is going to have a bigger fraction of their most able people doing productive stuff, because the option of working hard to become the crony of some oligarch doesn't exist. The second society will have fewer of their most able people doing that stuff--why spend 10 years becoming a cardiologist, or starting up your own company, when you can instead spend those years befriending the useless second son of one of the oligarchs, and thus be ensured wealth and power? If you personally can get a bigger payoff from fighting someone else for a slice of the fixed-size pie than from making the pie bigger, and so can everyone else, then the pie will not be made any bigger. Instead, all the resources that might have made it bigger will be expended on deciding who gets the big slices.

I'm sure some of the financial innovation is actually valuable--that it makes the pie bigger. But a lot of it looks like zero-sum stuff, where the pie is no bigger when you're done, but you get a bigger slice. As a society, that's a bad thing. We want a society in which making the pie bigger is a better strategy for most people, and especially for the most able people, than fighting over a bigger slice.

[1] I'll leave aside whether this is true in our society. 10% more, say.

The computer game industry could probably use more mathematicians and physicists.

albatross @ 203... doing productive stuff

Creating. That's one of the few pleasures I get out of my job. A lot of it is not sexy, but it makes things run more smoothly. That doesn't keep my higherups from demoting me while the Boys Wonder who screw up big-time are looked up to as if they were geniuses.

#185 abi

Yes, please.
(And thank you.)

We have two new four letter words,
To add to the banned, so absurd.
To put then in concatenation,
Send them to bitbucket location--

A banned idiom idiocy,
And who or what did cretins see,
To take of a home,
And what rhymes with groan,
(The replacement of el by that gee,
you see,
It's sucking and not gravity! )

#204 Earl

As with television shows and films, the gaming part of the entertainment industry, doesn't WANT physical reality to apply. They want their damned WWII stupid dogfights in space (yeah, sure, air resistance and turning and banking and spiralling out of control. Go watch the Solar Max repair mission, that shows what -actually- happens... but that's not what the entertainment industry cares about. they want their stupid inane car chase scenes, female tits showing, etc... (CALLING RED MIKE! Red Mike needs to see the Blockbuster video promo for Blu-Ray. Red Mike probably will like it--it's got female tits showing (thin transparent fabric, nipples clearly, showing), chase scenes, violence... what more can Red Mike ask for?!)

Besides, technogeeks with advanced degrees in math and physics and large amounts of math/math physics otherwise, tend to be interested in the math and physics for the sake of the math and physics, or applications--not for the purposes of making something "look good" that violates basic Newtonian mechanics when not trying to invent a hyperspace model.... too "reality-non-challenged"...

albatross @173: a. It taught home buyers that buying a house is a sure path to wealth. This encouraged people to buy houses when it didn't make sense, at prices they couldn't really afford. It also encouraged a lot of people to speculate on real estate--many of those folks lost their shirts on the alleged "sure thing."

I recall an acquaintance years ago, who said that making money was easy: buy a house, rent it out. We were definitely starting out from different places; that first step was (and remains) beyond me.

What you're describing I'm sure were the people who planned to buy, and resell at a profit; nevermind the messy business of dealing with tenants.

I've never met anyone who made money on the "sure thing" (I've known some who've lost it).

Paula Lieberman @207: Reminds me why Armageddon was such a mind-bogglingly stupid movie.

Albatross @ 203: I like your way of summarizing that.

Come to think of it, it's even worse. Not only are the talented, able people failing to make the pie bigger, the pie actually becomes smaller, because we lose some crumbs every time it's resliced.

Paula @207, this is just to say that it is possible for someone with a doctorate to find gainful employment in the computer games industry; he's an admirable example of that.

Paula Lieberman @ 207... They want their damned WWII stupid dogfights in space

I think I remember an interview with Arthur C. Clarke from a few decades ago where that newly released movie Star Wars was mentionned. When asked about the latter's having ships making sounds in space, Clarke responded "Well, Stanley didn't have dogfights in his movie."

By the way, did you notice that, in Firefly, ships didn't make sounds in space?

Allan #210:

Thanks!

This is something economists have talked about for awhile, though the stuff I've read has been rather narrower in focus that what I'm talking about here. The term is "rent seeking" behavior. I think the classic example is that you have some kind of limited number of export permits for some valuable commodity--one of these permits is basically a license to print money. You almost inevitably get massive amounts of resources spent internally on trying to get one of those permits--people putting lots of money into political campaigns, bribes, advertising campaigns, quid-pro-quo projects to woo politicians or functionaries who can decide to give you a permit, etc.

This all links to abi's #177 in a funny way, as it turns out. He should have told his daughters to go do some impressive thing to make the kingdom better off in order to determine who would get it.

I keep thinking there's probably a way to measure the rewards for being right/doing good stuff in a society, and that this should track with how well a society does over time. And a lot of stuff in our society (determining a lot of your life's path by which school you get into for your undergrad, big gains to be made in cost-shifting and financial gamesmanship that don't make the pie bigger, etc.) goes the wrong way, and encourages both unproductive use of resources, and the rise of elites who got there by connections, good test scores in high school, ass-kissing, and a healthy disregard for right and wrong.

#144 ::: Bruce Cohen (SpeakerToManagers):

"Virtual money" is pretty good-- I've been calling it fairy gold, but at least the fairies didn't make us pay real gold for dried leaves.

However, I don't think the physicists were the problem, and I suspect you were joking.

I read Rich Dad, Poor Dad a while ago, and the underlying point of the book was that anyone who does useful work for a living is a chump. Nothing wrong with doing useful work, mind you, but you should be getting your money by finding some way to shuffle the risk off on someone else. Real estate was mentioned as a good way to do that, but I don't remember if other investments came up.

It doesn't take a physicist to think of that sort of thing. I wouldn't mind knowing whether the folks who invented the more exotic new investments all studied at the same universities, and possibly with the same teachers.

And, like some folks upthread, I'd like to see stats on how proportions of the loans shake out between poor people getting modest houses, decently-off people getting houses they clearly couldn't afford, and people getting house after house to flip them in a rising market. Those categories would *not* cover all the foreclosures-- there were also people who got a reasonable-sized house, and were skunked by unemployment, medical expenses, or the drop in housing prices.

I don't know if this counts, but I'm haunted by a woman who I heard on NPR or the BBC. She was in foreclosure because her mortgage went up $200/month. And she was absolutely convinced that she had a house she could afford, not realizing that anything moderately large going wrong for her could have cost $200/month.

A spooky little thing....NPR just had a story about a woman who was foreclosed and committed suicide. She'd never lived anywhere else. She inherited the house from her parents. After some bad financial decisions, and (I think) medical problems, she was renting the house. Then her landlord got foreclosed. There was no indication of why he was in that situation, but the announcer went on to mention people who bought more house than they could afford. I think it's a reflex.

Here's something I've heard from a couple of independent sources but have no evidence for or against otherwise. The idea is that the financial elite is pathological because it's a meritocracy. The competition for the top spots is so intense that they're full of people who've been trained to focus on nothing but winning the next contest.

But please don't call Miles a deity; his ego is big enough as it is. Even more so, don't hint that he is trying to take over the planet. He had that out with Gregor over the Dendarii Mercenaries.

"There's no way round it, sir," said the fleet accountant, a middle-aged lieutenant - definitely a tech rather than a troop - called Vicki Bone. "Once the Dendarii's main account drops below that level, we start missing interest payments. Then the whole thing collapses and the banks down on Jackson's Whole sends up a squadron of armed bailiffs to seize our ships. And that's the end of the fleet. We need the payment for the last mission within the next ten days, sir."

"Well, isn't there some way you can... shuffle things around?"

Lieutenant Bone looked affronted. "Shuffle things around?"

"You know. Make it look like we have enough money."

"Well..." she said, hesitantly... "you still have the title deeds to that radioactive farmland, yes?"

"Of course," said Miles, "so?"

"Let me introduce you, sir," said Lieutenant Bone, "to an old Earth tradition called the subprime mortgage-backed security."

The Star Wars space battle sounds are audio feedback from the ship's sensor and damage control systems. 'Nuff said!

Backing up Abi's remark at #175, the Associated Press quotes a Federal Reserve economist as saying, "Mortgage-backed securities had historically been a fairly safe investment offering a better return than even safer U.S. Treasury debt. With interest rates near historic lows from 2001 to 2004, investors around the world were trying to earn more on their investments. At the time, mortgage-backed securities, which had been heavily promoted abroad by the U.S. government, seemed like a fairly safe option.

"As global investors demanded more mortgage-backed securities, banks began looking for more mortgages to buy, repackage and resell. This was one of the reasons lending standards loosened. By the time it became clear that many home loans had gone to people who wouldn't be able to repay them, the market had grown large enough to shake investors all over the world - from community banks in California to multi-billion-dollar banks in Germany."

I read Rich Dad, Poor Dad a while ago, and the underlying point of the book was that anyone who does useful work for a living is a chump. Nothing wrong with doing useful work, mind you, but you should be getting your money by finding some way to shuffle the risk off on someone else. Real estate was mentioned as a good way to do that, but I don't remember if other investments came up.

In earlier times this was managed via slaves. Chattel AND liquidity together on two legs. You could work it and take all the profits yourself -- while not working yourself. You could sell it. You could transfer it as a gift. You could get loans based on it, and pay back loans with it.

You could even use it sexually and it reproduced and voila, you increased your wealth that way too -- and shoot, only a whore would call that work ....

Letters and diaries of non-wealthy southerners are filled with dreams, wishes, and schemes for getting hold of 'just one slave,' so I can stop workin' and start makin' money.

Love, C.

Nancy Lebovitz @ 214

I'll cop to being somewhat facetious about the effect of physicists on Wall Street*; I'm much more serious about the effects of Wall Street on physicists, as pointed out by albatross and others, as well as myself. Taking highly competent and innovative out of fields that generate wealth and putting them in fields that divide wealth (and lose some from the total in the bargain) is a Bad Idea™. When those people were vital to the working of the engine that built the economy of your country, it's a Really, Really, Terrible Idea™®©☣☯.

Earl Cooley @ 216... The Star Wars space battle sounds are audio feedback from the ship's sensor and damage control systems

...which were also plugged into someone's 8-track cassette deck, thus explaining the music in vacuum. Speaking of which, there was a scene in Battle of Britain where they did something interesting: while the dog fight was going on, they took away all the sounds of engines and guns and explosions, and instead relied only on music.

One of the things I was reading, some years ago, on the shift in centers of economic gravity had to do with two things.

Mastery of an energy supply, and what one traded in.

The Dutch figured out wind, and they were dealing in trade. But they started to deal in money. It was easier, and had, "less risk" because you could spread the liability around, in ways one couldn't when the investment was in "bottoms". The ship sinks and you might get some of it back on the insurance, but the profits were gone.

Better to become a banker.

Then the Brits figured out steam.

And they got into trade, and manufacture. But they to started to get into making money by moving money. And the US started to make things, and they figured out oil.

One of the things discussed was the problem of investment in infrastructure. The British might have managed to make steam competitive to oil, but that would have been really expensive; and making money by moving money was more profitable than rebuilding factories to make stuff (on smaller profit margins, esp. because the US could undersell them).

Well... oil is slippping, and we shifted to making money by moving money a while ago.

Which implied we were in for a come-uppance. There was a time no one in the world could challenge the British, they had the Navy to beat.

Well...

Somehow, this is related to Dutch disease, a kind of curse that befalls your country when you have some easy source of wealth available. To a first approximation, if your poor country discovers oil, then it's almost impossible for you, as an ambitious and smart person, to do as well building a factory as finding a way to get a cut of the take from the oil ministry. This is true even in industrialized first-world countries, hence "Dutch disease." The size of the pie gets way bigger all at once, but then, the high-reward opportunities for most everyone center around getting a bigger slice of that nice, oily pie, rather than doing some drudgery like building up an industrial business. Within the country, productive pie-growing stuff has to compete for resources (skilled labor, credit, investments, capital) against the vast, profitable fixed-pie-size oil industry or whatever. This somehow feels almost like the other end of comparitive advantage.

Terry's comment makes me think of the extent to which we have become a nation that lives borrowing money or selling ownership of parts of our economy to overseas investors. There's nothing evil about either of these as individual actions. But I wonder whether the money-moving transactions that support that long-term way of living (which obviously can't continue forever) drive the (mis?)allocation of smart people away from apparently more productive stuff and toward finance.

Now, maybe I'm missing something. Maybe those finance jobs really are adding value to the economy, making the pie bigger. I'm sure some are--venture capitalists, much of the credit markets, insurance, etc., all have a pretty clear positive effect on the world, and maybe the rest is just as positive, just more subtle. But it sure looks like a lot of that industry is more like professional gamblers than like people providing a service.

Anecdotally, it seems like many people, especially "young" people* are moving from working in a cube where they don't really produce anything to more production-oriented self-employment. It isn't something we could base an economy on, but my perception** is that there is a significant movement toward making things like small-run or unique clothing lines, jewelry, pottery, books, et cetera.

I do feel like I see the other end of the scale, too, though. It seems like there are a ton of blogs out there describing how they make money telling you how you can make money blogging, and books like The 4-Hour Workweek. (I didn't pursue the book after hearing how Ferriss won his Kickboxing Championship, but I doubt a four-hour workweek does anything other than pay others to work for you.)

You guys are talking about large-scale stuff, and I don't know if it's relevant, but those were the things I thought of as I read the discussion, so I'm tossing them out.

*I think the stories I think I recall*** used this word. I don't actually recall any of the ages involved.

**I imagine my perception is significantly skewed, because I love crafting and am very doubtful that being "wealthy" matters, so I read sources that support my biases.

***I'm pretty fuzzy on the articles. I remember one about a couple giving up their work to become farmers, and I think they were under thirty.

#214, that spooky NPR story you mention was in my neighborhood (they mentioned the area by name). That was really spooky, especially since it was the first I'd heard about it.

And yeah, that story was about as far from the "buying more house than you can afford / buying a house to flip it" caricature as you can imagine.

albatross @ 222

Now, maybe I'm missing something. Maybe those finance jobs really are adding value to the economy, making the pie bigger. I'm sure some are--venture capitalists, much of the credit markets, insurance, etc., all have a pretty clear positive effect on the world

I agree with you, and I don't think you're missing anything. In fact, I'd disagree that all, or even most venture capitalists make the pie bigger; often they're funding the creation of entities to take a slice of the pie away from an already existing entity. That's what causes the fads in venture capital: one new venture that actually will create value gets enough attention that others are created to grab some of the pie it will create.

And how does insurance make the pie bigger? It's just a way to spread the risk over a larger population, so no one insuree takes an overwhelming loss.

Serge, #220, Cowboy Bebop did that, too, and it made very interesting listening.

re: making jewelry, etc.

Is a pitful way to try to make money if no one wants to buy it. I set up an account at Etsy, a hand-made products site and the only thing I've sold is a batch of african trade beads that I'd bought. Still on their raffia stringers. NO original artwork.

People have to want to spend money for an artist to make a living in the decorative arts. My friends in Winter Park (who I work for during our Renaissance Festival here) haven't seen much of a decline at their store BUT the Renaissance Festival only produced about two-thirds as much income as it usually does. And that affects My pay, because I'm on commission.

r m koske,

Anecdotally, it seems like many people, especially "young" people* are moving from working in a cube where they don't really produce anything to more production-oriented self-employment. It isn't something we could base an economy on, but my perception** is that there is a significant movement toward making things like small-run or unique clothing lines, jewelry, pottery, books, et cetera.

yes, but as you hint at & paula points out, it's really no way to make a stable living. i & many of my cohort (from the art school and indie comics communities) are part of that phenomenon.

you work in reception or waiting tables or in shops (or, in my case, kind of burning through my potential inheritance, currently) so that you can make films/comics/paintings/clothes/conceptual photography on evenings & weekends. & you do get a lot of satisfaction out of it.

but what is almost across the board true among this cohort, is that we're not reproducing, & not planning to for the foreseeable future. for me & most of my friends in our late twenties & thirties, we want to have children, but are barely scraping together enough time & money to make art. we don't have the stability or the safety net (even here in canada, where we can at least count on health care) to think we could give a child what they need to thrive.

& a society that doesn't produce children is in trouble, i think, even if another side of the world is overpopulated.

Paula, miriam

My partner Eva has a BFA, which was good for being an art teacher, but not so much after she decided she didn't like working for corrupt school districts where the supervisors took the art supplies and sold them. So we started going to outdoor art sales, trying to sell her work, mostly pen and ink sketches. People kept telling her how good her work was, they didn't actually buy any. Most times we didn't even make back the entry fee. After a few years of this, backed by my going back to work and Eva getting occasional retail sales jobs (I think I'd rather work the black gang in a steamship), she gave up selling the work completely, and went on to other things, leaving the sketches as busy work for her hands while watching TV or cuddling with the dog.

Almost all the successful artists and craftspeople I've known spent at least the first half of their careers supporting themselves with jobs unrelated to their art, or became teachers. The lucky ones we hear about, the comic artists who sign up with Dark Horse for their first book, the jewelry designers who hit a web market that can support them, they amount to maybe one in a hundred.

What miriam is doing is by far the most common approach. That's what my son and daughter-in-law have been doing; he's worked phone company customer support lines *shudder*, and she's a waitress in a local Japanese restaurant.

Paula and Miriam -

Yeah, it's no way to make a living (which is part of why I'm not pursuing my creativity except as a hobby, myself. I don't even have the gumption to try to get paid.)

I suppose what I'm seeing isn't so much a trend from no one buying to someone buying, but instead a trend of people ceasing to be willing to sell their souls for the so-called "good life." It's an improvement, but still discouraging now that I think about it.

(I especially think you're right about children, Miriam, though I don't have much to say but, "ooh, yeah, good point.)

*sigh*

And really, it isn't what the effect above is about - that's about building production capacity and manufacturing and large-scale stuff.

It feels like the problem (the Dutch disease variations discussed above, I mean) isn't something that regular folks can solve. It seems to me that the best we can do* is to be active in the community. Watch and support science education and keeping kids interested in school and learning. Events like the Maker faires may make a small difference too.

Which is frustrating, because I suck at that stuff.

*I shouldn't trivialize it like that. Community involvement is incredibly important and can be powerful if done well. It's the "if" part that's the kicker.

One thing I regretfully pounded into my daughter's head was that if she's in love with music, she should learn a good trade for her day job. My brother is really talented, plays a number of instruments well, and never came anywhere near making a living from music. My artist friends... yeah, same thing.

She did take it to heart and so learned computer programming, and currently has (crossing fingers) a steady job while she tries to finish her thesis and plays the occasional noise rock or experimental gig. She may not have any passion for the computer work, but it's a whole lot better than dishwashing or retail.

And how does insurance make the pie bigger? It's just a way to spread the risk over a larger population, so no one insuree takes an overwhelming loss.

It's much more efficient to spread the risk out like that rather than have everyone "insuring themselves" by saving money - means you don't have to save so much for your personal catastrophe fund, so you can save it for other things instead or just spend it.

My partner's ex was a classic Stage Momma, doing her best to push their daughter into the acting career she'd wanted but never had. He didn't try to fight that directly; instead, he made sure that she was aware of how stiff the competition is for acting roles, and in contrast how many theaters are constantly looking to fill techie and management positions.

Then she discovered power tools (she's his daughter, all right!) and never looked back. At this point she can do lighting and stage design, has been stage manager for a number of productions, and is AFAIK the youngest company manager in Houston's theatrical history -- being still in her junior year of college -- as well as being the media liaison for the Texas Renaissance Faire. I don't think she's going to have any trouble making a living, but I also know that she's very much the exception to the rule even behind the scenes.

ajay, #232: IMO, the insurance paradigm became broken when insurance companies were allowed to sell stock. At that point, their actual clients became product to be sold, and their strongest responsibility was redefined to be the stockholders rather than those clients. A well-managed insurance company should be able to pay its own operating expenses, and any further profit over that should either go into increasing the size of the pool from which claims are paid, or to reducing the premiums paid by the insured.

Note that I'm not saying insurance fraud isn't a genuine problem, but the pissant ways that insurance companies have found to deny so many legitimate claims traces directly back to the need to show a big dividend for the stockholders. If that pressure were gone, I think there'd be a lot better service out of the companies, and a lot less resentment of the field as a whole.

233: No argument there. I too am rapidly coming round to the opinion that the financial sector in general would be better off as a set of mutually-owned companies rather than a set of listed companies. Look at all those building societies we used to have - all mutuals, ticking along fairly happily and boringly. Northern Rock, Bradford & Bingley, Halifax, Abbey National, etc. They all got demutualised and they all got into trouble. The only UK bank that's still relatively untroubled is the Cooperative Bank.

But the basic concept of insurance, which is what I was defending, is a good one. What you're buying with your monthly payments is, essentially, the ability to draw a massive lump sum to cover - say - building a new house after yours burns down. That's quite a valuable thing to buy. The alternative would be having to take out a large unsecured loan, and then repay it - and the interest rate costs would be massive, much higher than your insurance premiums.

Bruce #229:

Dealing with risk is one of the things the financial industry broadly does[0]. Letting people and businesses pay someone to take on some of their risk is hugely important. For example, a company sells some product to GM, based on a contract to buy it--they spend lots of money up front to produce the product and get paid later. This exposes them to some risk, because if GM becomes unable to cover its debts, some of the commitments they have from GM might not get paid off. GM defaulting on its obligations will leave this company with a whole bunch of unwanted product and expenses to cover. If the company can essentially buy insurance (I think one way would be with the much-feared credit default swaps[1]) against that possibility, it can safely be in that business. The alternative is that only very large companies (who effectively self-insure, by being spread out across so many buyers that one of them defaulting won't clobber them) can safely be in that business.

Much the same happens on an individual basis. I might not be willing to commit a large fraction of my future income to a house, if I had to bear all the risk that it might be destroyed or badly damaged during the time we lived in it. That transaction wouldn't take place if we lived in a world without insurance. (Or I or the mortgage holder would have to eat the risk, somehow.)

Now, the thing I used to miss is that the same is true of a lot of very non-libertarian government programs and policies. For example, some kind of decent bankruptcy law is effectively a kind of insurance on people taking financial risks. I don't know if it's well-designed or not, but some kind of limit to how harshly your creditors can deal with you is almost a precondition to prudent people taking on debt. If bankruptcy means you can't get a credit card and you lose your savings and have to live on a tight budget, you might be willing to risk it to get your small business off the ground. If it means you and your kids go to the workhouse, or are sold into slavery to cover your debts, then you'll be much less willing to do so. Similar things apply to healthcare--I have known a lot of people who've stayed with jobs they didn't really like, because they had some family member who was uninsurable, and group-plan insurance was the only thing standing between them and financial ruin. That's a massive loss in well-being, which some kind of national health system would probably fix.

That moving around of risk, liquidity, and time preference (and probably other stuff I don't get) is why I think a lot of the financial industry is doing valuable things. But there clearly are also lots of zero-sum games between financial players, as with ever-more-sophisticated computer support for short-term trading on markets.

[0] Another thing it does is deal with/move around liquidity and time preference, so that (for example) people who want to buy a house today and pay it off slowly can borrow money from people who want to be able to get their money back out from their investment in a year or two. As you may have noticed recently, all this stuff can go horribly wrong, too.

[1] I've heard the claim that without CDS on airline bonds, it might be very hard (or much more expensive) for the airlines to buy fuel. If the fuel suppliers can buy "insurance" on the possibility of a default or downgrade or bankruptcy or whatever by the airline, they can hedge some of their exposure to the risk that the airline will start bouncing checks.

I'm reading this awesome book right now called "Building Suburbia" by Delores Hayden. One of the things that keeps surprising me is how often - in the 1890s, in the 1920s, in the 1940s (that's how far I am in the book right now) two themes keep coming up.

One is the way developers & builders have consistently pushed for riskier mortgages - from the developer offering mortgages when banks considered them entirely too risky in the 19th century, on through changing from short-term mortgages with balloon payments and then long-term fixed, backed by gov't insurance through the FHA. That means the population who buy homes has been growing as a percentage of the public, all those years (instead of renting an apartment, buying an apartment, or living with their parents until they inherit a home, most Americans expect to own their own freestanding home at some point.)

The other is the conviction of real estate developers like Levitt that pouring public money into private companies (developers, insurers, banks) is capitalism, while planning development, requiring sewers, or (gasp!) building housing for people who need it is socialism. It's amazing how blatantly and consistently business people have made it plain that they consider the role of the US government to be funneling money to them, all through our history.

This comment brought to you 8 hours after I (tried to) post it, thanks to Comsifter, the arbitrary net-nanny. *grrr*

albatross @ 235

All of what you say about insurance makes perfect sense, and I agree with your governmental means of mediating risk. I really wasn't saying there was anything wrong with insurance; it's clearly a necessary part of running any complex economy that values the people and enterprises that are part of it. It just seems to me that insurance as a part of the economy is a zero-sum game, since all it is doing is reallocating the cost of negative consequences, rather than generating wealth.

ajay @ 232, 234

Yes, the economy is more efficient because of insurance, but how much additional pie does that create? Over the long haul the insurance company has to at least break even on income in premiums versus outgo in claims paid, so how is it not zero-sum?

I like the idea of mutual companies versus listed ones. One of the biggest problems in Western society, especially the US, is the metastasis of the public corporate ethic, based on requiring short-term thinking and sociopathic values. If companies aren't forced to foul their own environments to meet these values, we'd all be a lot better off.

A few months ago I suggested that my fondest wish of the Politics Fairy would be to change the legal definition of "corporation" from equivalent to personhood, to equivalent to domestic animal, with the CEO listed as responsible owner. You better believe that executives would be a lot more responsive to questions about consequences and ethics if they knew they might be hauled off to court and their companies put down for really egregious behavior.

Bruce, #237: The piece you're not accounting for in the insurance business is that they invest those premiums. The return on those investments is what makes it not a zero-sum game; in a properly-managed world, that return is also what pays the wages of all the company's employees. which is a net addition to the pie.

Bruce Cohen (SpeakerToManagers) @237: A few months ago I suggested that my fondest wish of the Politics Fairy would be to change the legal definition of "corporation" from equivalent to personhood, to equivalent to domestic animal, with the CEO listed as responsible owner.

One of my notions is that the corporation, rather than being considered a legal person, might be considered a vampire (because they suck our life's blood, and are apparently immortal). I haven't figured out what the legal ramifications of this are.

I like your idea.

237: as albatross said (rather better than I did) it's not zero-sum because different people have different preferences about the timing and levels of risk and reward. A bank basically borrows short and lends long. I pay my money into a current account, because I am very risk-averse and short-term; I need to be able to get at my money, definitely, tomorrow, and I don't mind if it isn't earning very much interest. The bank can then invest the money in long-term, high-risk, high-reward ventures like, say, lending it to small businesses.

Now, you're saying that that is basically zero sum because the bank's interest income from those loans, minus its losses on bad debts, has to cover its interest outgoings to me and its operating expenses.

But that's missing the point that, in the absence of the bank, I would never invest my money in a risky, long-term investment like a small business loan. That doesn't fit my risk appetite and it doesn't fit my time horizon. Banks can only get away with it because they're taking the deposits of thousands of investors and putting it into thousands of loans, and so overall they stay liquid.

What banks do is move money around the risk/reward/time landscape from where it's made to where it's needed. That's a valuable service, for which they get paid - just as shipping companies get paid for moving stuff around the real landscape to where it's needed. Trade isn't zero sum - even though you export as much stuff as you import - because you're importing stuff you want and exporting stuff they want. Neither is banking.

Lee, ajay

Yes, you're right, of course. I completely forgot about the investment of the premiums. As long as there's a chance to invest the money before having to pay it out, and as long as the investments are in enterprises which are not themselves zero-sum*, then insurance has to be non-zero sum.

* Investing in the Mafia, for instance, would not qualify. And probably Halliburton as well, on the same principle.

It's well past time to enact corporate death penalty laws. Also, draft executives into National Guard service and pay them based on their rank, with draft dodgers to be punished in the usual way. "Capitalist" is not to be counted as a religion in executive conscientious objector cases.

I'm sure there are logic holes in this plan; I'm working on it.

Just as a random aside, this blog post discusses one apparently clued-in guy's take on useful vs. non-useful financial innovations. It was a response to this post.

Bruce #229

I do know a number of artists who have supported themselves and not starved, from their income as artists....

One went freelance a couple years ago, after a career as a production artist/art editor as mostly a fulltime employee at various times at a defense contractor, as an employee of a commercial trade periodicals publisher, at a toy company, briefly at a weekly newspaper, for a large sales chain company.... the person planned carefully saving up money for going freelance, to be able to paint and draw for the love of it and on the person's own schedule, instead of going into an office each day.... the person has a couple of civic commissions, but it takes a lot of time and effort to build up.

There are those like Bob Eggleton and Michael Whelan and Tom Kidd and Don Maitz and Donato Giancola etc. who earn livings as commercial artists doing paintings on contract.

The only second cousin I have who I am more or less in contact with, has never worked other than as as artist and person doing art production; her husband George Gabon is an artist who's a retired art teacher/professor.

Generally though, the number of people with art degrees, exceeds the employment as full time artists, either as employees, or independent artist...

(For that matter, a first cousin is in her third career--her first was teaching accounting, her second was being a potter, and her third, and presumably the one that's been the most rewarding to her at least financially, is being a nutrionist. I don't remember how many years she worked as a potter, it was a significant amount of time, and for several years she had a studio in a building which eventually got either torn down for that large urban shopping center at Lechmere in Cambridge, or got converted upscale from art studios to white collar professional office space. When that happened, she moved her art operations down to Cape Cod where she was part of one of the arts and crafts communities.)

Paula

Surely, there are artists and musicians and suchlike who can support themselves with their art. But the majority can't, especially in the first half of their careers, before they've sold and/or displayed enough work publicly to be known in the marketplace. There are a lot of artists living in Oregon because it's cheaper than LA or New York, where the markets are, so it's easier to live on low-wage and/or part-time jobs that let them continue to make their art before the market for it grows enough to support them.