Year-end recap

Moral: Wherein we look at the year using a worldview that started in August and reiterate the theme that the Marines could run finance better than any that we've seen so far. Sorry, Ben.

--- Foreword

As the Time article said, "There aren't easy solutions" when extolling the virtues of Big Ben. Did we ask for it to be easy? One thing to consider is the influence of technology and computation. Ben's study of what went down in the 1930s is admirable, from an academic sense. But, does his view look at the major differences?

No. He does not seem to allow that common sense can say a lot about the economy or how we expect it to be. That is, being labeled as a 'nerd' implies several things that are not common sense. For instance, he says that he is outraged; where is there any argument about ethics which seems to be a topic antithetical to 'fat cat' thinking?

--- Word

Let's look at a little tale that offers some message to the theme.

Ever notice how some who have taken to the technology of the cell phone have given it a ubiquitous role? That is, we see people all over chatting to someone other than those in the immediate surrounds. In fact, much of this behavior can be consider extremely rude under an older (and more likely more etiquette'd) framework.

Then, once the thumbs got into their punching mode as technology developed, we saw people with their eyes glued to some little screen while they conversed with others, again outside of where they are physically, or while they played games or while they did any number of other apps whose cardinality is increasing rapidly.

And, many of the zombies attached to the one-eyed monster have taken to doing their thumbing thing while being propelled through space in a vehicle (weapon) and in doing so have lost sight of a major principle, defensive driving. Wrecks, with the suffering of many innocent victims, have resulted.

Now, what does that mean for the economy? Well, is it not in the crapper after a wreck? You see, the advent of mathematics, modeling, and computational prowess which was brought forth into the economy by the Sons of Samuelson have created some type of mirage that deflects from seeing properly. Focus on this mirage (house of cards or any other metaphor can work here) as the principal key to control is so problematic that it's very disconcerting to the aware observer. To boot, it was the best and brightest who were taken in; except, their focus on self-gratification was probably reinforced early. We sort of do that in the modern culture.

Any who might have urged caution stood the chance of being labeled as being short-sighted via innumeracy. Ah, the model is the reality according to the brains (map-territory problem, folks). It seems that the Fed, for one, must be laboring under such type of delusion. Yes, Ben, you.

Need we remind them that they put us on the hook, as taxpayers, for toxic instruments of unknown quantity and potential harm?

We all know that talking to those who drive and text about their risky behavior falls on deaf ears, as they have all sorts of arguments, including some diatribe about being more intellectual and forward (progressive). Same goes for those who are caught up in the pandora's box that has been unleashed with modeling and computation. You see, it has lined a bunch of pockets (thanks, quants); is not that what the economy is for?

Now, the need is not to step back and actually be like the world in 1930. And, Ben re-playing those dynamics is short-sighted. No, we must keep going forward. Yet, one has to think that taking over the banks in late 2008 would have been better than feeding our money to the fat cats. These are the people who screwed up the world with their machinations. They really have not been making it any better this year.

But, questions arise, such as, who would be doing the taking over? Well, consider this. That suggestion is no more silly than expecting Ben and his buddies know how to moderate things with their few parameters and instruments created on the fly. Pushing string, indeed.

--- Afterword

Well, plenty of words have been expressed this year, in all types of media, about these issues. In all that, some of the arguments have made a whole lot of sense. Trouble is that Ben is on the hot seat, undergoing pressures that prevent proper reasoning. Yes, any incessant hot-seat experience has reactions, physically, psychically, and more.

Of course, the strain on Ben is nothing compared to that on those who were sucked into the game in which they ended up indentured for now and into the far future. So, not only have savers been sacked, and mocked, the whole economy has been hollowed out (thanks, America Prospect). And, this in 2009?

Ben, you need to consider the advances that have come about in the past 20 years that have allowed an one-sided state of affairs. You buy off the shelf. Ever compare your couture with those with the Milan'd, and other, suits? Do you somehow feel superior to those who have to exhibit such demonstrations of excess and conspicuous consumption?

Or, do you not notice? If that is true, then there's hope!

But, as said before, monks, and marines, could do a better job of running finance and the economy. Except, we must remember what lead to the atrocious conditions at Walter Reed, and other facilities, due to the officer, and political, class letting deterioration run rampant for so long while they lived in the lap of luxury.

Remarks:

12/29/2012 -- Summary - 2012.

01/03/2011 -- Ah yes, now there are demands. The question remains: what growth other than the pockets of these types?

01/01/2011 -- We have two last posts of December under our belt.

01/02/2010 -- More states now have laws prohibiting (or limiting) driving while texting (dwt). Why did it require legal action? Common sense ought to have been enough, yet the appeal of the abstract and computation (sirens abound in the domains) are very strong.

Modified: 12/29/2012

Health care

Moral: Wherein we consider an important part of the economy. Might one call some aspects as bait and switch?

---

We've said that various medical metaphors can be used for the economy. Well, let's look at the thing itself.

For one, we have doctors making oodles of money. Okay, they pay good bucks and energy to get to play the role. So, some type of reward is to be expected.

Yet, one retired from being head of an insurance and HMO group with 800M (thereabouts) collected in his coffers. We have the whole gamut of insurance fat cats raking in the dough, many times by not paying claims.

We can use one example, in the bait-and-switch area of Medicare Advantage Plans (MAPs). You see, for those who are not of the age to care, many use what's called a Medigap Plan (MG). These, essentially, make up some of the 20% that Medicare does not pay which, by the way, can amount to a whole lot in certain situations. So, the MG doesn't have frills but can be a life saver. With the MG, the insured pays a separate premium (apart from the Medicare premium).

Sometime in the 00s (aughts), there was a new scheme to allow an insurance company to handle Medicare for an individual, provide a few benes, and then act as the prime insurer. That is, they billed Medicare. The idea was that they could make money, in fact, they could charge more to Medicare than could than those using MG.

Well, an analyst characterized the thing this way: But tens of billions of Medicare dollars funneled through insurers also pay for extras that never reach beneficiaries: multimillion-dollar salaries, executive retreats in Hawaii, Scotland and Cancun, and massive expenditures on marketing to lure more customers to the privately administered Advantage plans that serve as an alternative to government-provided Medicare.

Those going with the MAPs could get things like eyeglasses, dental, exercise plans, and more which are not available to the MG group since these things are not paid by Medicare. But, in many case, when a real need developed for the MAPs, necessary care was not there, similar to those things that we heard could happen with HMOs.

Well, those who could afford the premiums were much better off, medically, with the MG. Now, that, of course, ignores how the doctors, and other providers, feel about the situation. As, along with the MAPs advent came decreases in what Medicare paid doctors, and other providers, for care. Consider that payments were 50% less on the MG side due to cuts in reimbursement for treatment.

So, that brings up another thing to look at. We have a major shift in the country where the future look of health care is being defined and debated. Personally, there is no disagreement with PhilG's notion of health care being a right. Arguments otherwise do not consider near zero. Except, there are issues of costs which would abate if the notions of personal wealth for providers and insurers were less extreme.

Also, many naysayers (con universal health care) seem to not consider human dignity and seem to favor a worldview in which the 'fat cat' and 'best and brightest' (read banker) are some type of epitome of human existence deserving of endless benes from the rest (indentured servants, essentially) of humanity. The favored few, and elite, supported perpetually by the rest.

Naturally, this discussion leads to what government might have in terms of roles.

Remarks:

01/03/2010 -- In the post about Economics and Medicine, please follow link to the Goldhill article at the New Yorker. Insurance is for risk management, not care. Goldhill suggests a different approach (actually, from Herzlinger) that would separate out the insurance aspect and that would allow us to manage our health care, with assistance as required. Was this even looked at in the recent debates about universal health care?

Modified: 01/03/2010

Bankers IV

Moral: Wherein given that it's the year-end, everyone wants to reflects on what was and what might have been. Trouble is, it's a decade cusp, to boot, so figure that the reviews, of many types, will continue. Bankers are only one of several topics to cover.

---

Ah, bankers made it big over the decade, the fat-cat variety anyway. Those too big to fail, that is; all sorts of littler (and some not so little) banks failed.

Who are these bankers? Well, they are those Ben loves to help. Evidently, so does Obama despite his 60 Minutes little bit of rhetoric. Supposedly, bankers are the heart of the economy which doesn't exist, by the way. How? Oh, they move the money, thereby causing trickle down to the mere citizen.

By the way, did they stage their heart attack in order to screw the taxpayer? Why are they necessary?

Those are a couple of a very large set of good questions that could be asked.

So, bankers began their role as the bean counter and money exchanger. In the former role, they provided some type of security, except the bad guys were always good at riffling the safe. Too, what they took in and gave out was very much fluid (money, itself, an issue) due to political exigencies. Ben knows all about these issues. In the latter role, the banker learned how to play off differences (a type of arbitrage) between their clients and their monies. Also, they excelled at leveraging using that which is described by the grand old notion of multiplier effect (ultimately, we were all gab standard'd). Again, this thing is central to Ben's history.

So, in various ways, bankers became central. Yet, they lost their honesty. It became more important to get hugely monied so as to allow enormous bonuses and to support lavish lifestyles. The lowly saver was sacked way back. Remember, it was more important to allow the best-and-brighest a loose leash.

Not only are they central, some are considered too big to fail.

Have we lost sight of the utility aspect? Did we allow ignorance of near zero to eclipse a proper evolution of the function?

Modified:

12/02/2010 -- Banking is a utility (but we also need plumbers - a few, not an army).

04/16/2010 -- Rotten to the core. Does not have to be!!

Modified: 12/02/2010

The uber-Nerd

Moral: Wherein we take a new look at Ben, our main nerd, who is not into the cult of personality as was his partying predecessor.

---

Yes, this comes from the Time Person of the Year article which does paint him in a better light than many might suppose. To wit, he wears off-the-shelf suits, doesn't party like King Alan, says that he is outraged by the 'fat cats' benefiting from his largese (sheesh, Ben, show some understanding of moral harzardness and jawbone about it, at least), owns a small Ford, and more.

Yet, Ben has to know that he is clumped into the elite set by his position and to realize that this position has questionable necessity. Why? As we've seen this past year, it's mainly casino capitalism that has benefited from his actions, though Ben says that he feels for main street.

How about this? Let's stop the financial games and then restart with monks/nuns (yes, those who have taken the vow of poverty) keeping the playing field level. Think that is idiotic? Well, according to how the Time describes Ben, he's close to that anyway, except the longer he has the trappings of power, the less like the ideal personality he'll become.

By the way, Congress is not without fault. Let's impose term limits there and get away from the professional politician (see Zen Koan for the day). Errors by the common citizen are much less burdensome than what those in power currently impose on the folks.

So, where did Ben go wrong beside apologizing to Milton Friedman? Well, he is, at least in part, a son of Samuelson. That is, given his time of academic introduction, he could not but be influenced. Mind you, this is no criticism of Paul Anthony. His work predated the mess that computation has wroth.

And, we've only seen the beginnings.

Back to Ben. He ought not have gone below 1.0 in his slamming of the savers. Granted he showed creativity, but going off willy-nilly (oh, theoretics, without a proper hypothetical and test framework - sorry, folks, that sham of a stress test was pure spin, do you not think?) with instruments that are piled on a heap (whose dimensions we do not know) of toxic assets laid on the populace by the best-and-brightest was throwing good money after bad.

Tsk, tsk, Ben. You know that those at the top, who you interact with more than the lowly, have essentially mortgaged us (yes, the US) to outsiders while 'hollowing out the country' (thanks, American Prospect) through financialization (ah, such a purty concept yet mostly flim-flam) and globalization (as we've said, another form of colonizing with a new form of colonialist).

Enuf, for now. But, congratulations, Ben.

Remarks:

01/27/2012 -- Ben will continue to sack the savers; he must love the ca-pital-sino.

09/02/2010-- The FED just had their hoe-down.

01/07/2010 -- We need to look at capitalism, closely.

01/06/2010 -- Poor Ben, getting grief and criticism.

12/30/2009 -- Tech Ticker responds to their mailbag, one of which says that Timmy et al bailed out and then talk tough.

In the Time article, we have this quote from Henry, "I shudder to think what the world would be like if Ben hadn't been running the Fed ..." (italics added) Yes, Henry, it was on your watch. But, no, we do not know and cannot now, due to the bailouts which confounded the issues beyond understanding. The article goes on "but there would be far more joblessness, foreclosures and hunger were it not for Ben Bernanke." (italics added) Oh, give me a break. Of course, this is journalism at its best, so what ought we to expect?

12/29/2009 -- In that same article, Timmy Geithner is quoted as saying that this was war. With whom, Timmy? Only your friends, the best-and-brightest who had to be bailed out. Then, they quote Henry as saying that Ben kept us from disaster. Well, Paulson, it was under your watch. Has anything really improved with the worldview of the brains in regard to economic fundamentals? Or, is it a reality that the gamers (casino capitalism) are now the drivers? They seem to have the politicians (those, by definition, who salivate when a buck is passed under their nose) in their pockets. The main fact: things froze because the players know their own ilk and did not trust their own kind. What the FED did was just reinforce the bad behavior and greed. We can really do better, folks, with a dedicated bunch who isn't in it to take your money.

Modified: 01/27/2012

The Econony II

Moral: Wherein we consider several issues related to an economy, now that we know that there is not that which is referred to as 'the' economy.

---

We all know that there was a recent downturn. It got Ben panicked. He, Timmy, and others have been allowed to experiment like mad this past year. How long will it take to deconstruct and analyze all the madness that resulted thereby?

Even Goldman Sachs seems to have taken notice, especially given the public's reaction to the best-and-brightests' shortfalls, in particular not knowing about several things, such as the concepts of on the behalf of, near zero and much more.

J. Bradford DeLong and Stephen S. Cohen have a book out now that will be of interest (The End of Influence: What Happens When Other Countries Have the Money).

Well, we need to think about how we (some) will need to live in a scaled-down manner. PhilG used $2,000 per day as an example of wealthy living, albeit this was being spent to house (alleged) terrorists. Many survive on pennies. PhilG's view is used here in that he has proposed his economic recovery plan that we'll be using from time to time here in the discussions.

Of course, people have looked at frugality at lot as blog space shows. Actually, many live it. We know that 'fat cat' ville is the exception, not the rule.

Savings are an important part, as Ben needs to learn. Of course, 'what does that say about debt and equity?' is something to discuss.

We'll continue this later but, for now, start to think about a sandbox and a change in worldview that will allow realization of the near zero as the best that we can get. Too, how did the 'hype' related to the house of cards get such traction with economists?

Remarks:

09/27/2010 -- Capitalism is for the good of us, let's bring that forward.

01/03/2010 -- More news on Goldman Sachs as the uber example of 'not on the behalf' comes to fore regularly. It'll need to be a separate subject at some point. Thanks to McClatchy: Nov 1, 2009 & Jan 3, 2010 (update). Goldman has to respond, of course.

Modified: 09/27/2010

Grandsons of Samuelson

Moral: Wherein, we remember Paul Anthony Samuelson, the Nobel-winning, and highly influential, Economist.

---

Business Week (12/26/09 & 1/4/10) asks, 'did the followers go astray?' which references a forthcoming paper, Sins of the Sons of Samuelson (PDF at Wellesley, David Colander and Casey Rothschild).

As the adage goes (Biblical origin), the sins of the fathers are visited upon the sons. Well, hopefully, the next generation can take a re-look, even if it is done autodidact'dly.

It has been said before that we're suffering from the over-exuberances that computational prowess brought forth and sustained over the last part of the 20th and the early part of the 21st centuries. Perhaps, we can now take an assessment and be a little wiser going forward (idiocies abound, even those of a highly mundane nature). And, it's not an issue of which side of the pond anymore with the rising of those over the bigger pond being a much larger factor.

In this case, perhaps, we can exonerate Mr. Samuelson and blame the followers. Computation is much different than in his day. That Quants have run wild is only loosely associated with his work.

He, though, is one who worked to get the genie out of the bottle. Can we get it back under control?

Well, we'll continue to consider these types of question, especially as we all share the pains when the economy is malfease'd.

Remarks:   Modified: 01/15/2015

12/29/2009 -- Is the uber-Nerd a son? Also, Paul Krugman says that the 00s were a big zero; well, let's introduce him to near zero. The sons need to realize that gains must have a substantial basis, as in being 'real' and beyond mere model-mania.12/15/2012 -- Coase, on the subject.

02/10/2010 -- We could probably use the auto (and recent events) as a way to characterize the concepts of the blog. Of course, we have the value versus quality mis-think as part of the problem. Business Week reports that Toyota was asking suppliers for a 10% cut. Well, such scrimping would have an effect, even if it was only in looks. However, cutting into the life of a system may appear smart but, actually, relies on the same unstable basis as does a lot of economic thinking.

05/07/2010 -- Out of control, essentially, and not healthy for the backbone.

05/25/2010 -- Who will (or can) lead out of the morass?

01/27/2011 -- The chimera shines.

05/28/2011 -- Lemons problem, dark pools, ... Oh, so much to look at! Avatars, too.

03/23/2012 -- Renewal of the idea (and related energies) via Cooper and CiE.

12/03/2013 -- In a Fortune talk with Larry Summers, there is a mention that he is a nephew of Samuelson. So, that is great to know, as it'll allow some discussion of gene/meme issues (actually, the blogger has been working this topic in another milieu; Ben's thoughts on the failings of meritocracy ought to bring it back to fore here). Too, Larry was in charge when the Glass-Steagall restrictions were relaxed so that the big boys could then play wildly and mess up our banking system. Thanks, Larry. Good to know that he was one of the players in that bad choice. You see, the pusher of rationality had a bit of irrationality; well, was that not a sign of the times?

12/06/2013 -- If only Ben would put a shot across the bow. He's helped the chimera unfold in unhealthy ways. He could, at least, say a mea culpa.

02/26/2014 -- Acknowledgements for Lucio Arteaga.

01/15/2015 -- At last, a series that will establish the basis and extensions, as required. We are going to go back to some simple and come forward to the modern, complicated economy. Why? My long chain of ancestors (inherited via Prof. Lucio Arteaga) is one motivation.

Bankers III

Moral: Wherein one has to question if there is such a thing as an honest banker upon whom the consumer can rely and to ask this question seriously.

----

So, we may not have 'The Economy' but do have some economic reality to contend with. For instance, we know that there is the utilitarian role for banks that is necessary in a modern society. Then, there's the whole thing of banks being creative, misusing financial engineering, and then getting into trouble.

We also all know how the taxpayers are always bailing out the system and losing in the game, though the vast majority of those taxpayers have to scrape by on next to nothing in order to support the 'fat cat' (thanks, President Obama) lifestyle of the best and brightest.

What can be so hard about this stuff, folks? Where has gone common sense? Actually, in light of the current season, where has gone human decency in business?

Actually, in retrospect, we probably ought to have just nationalized these financial entities, straightened them out, and then re-started the game with better oversight. We'll be looking at that further, through time (hopefully, in a hypothetical sense only).

But, for now, let's just re-iterate some of the types of malfeasance that we see with banks. All of the below is paraphrasing but can be sourced easily by web searches.

• Big pay and bonuses - especially is this grating when one entity (actually several) would have been bankrupt without our assistance. Why then the pay for them? Do they not know that both bond holders and equity stackholders have lost oodles due to their manipulations that aren't any better morally than old Madoff's fun and games?
• Picking on the little folk - we all know about the $35 fine for a $10 overspending (those who push payday loans - $15 for $100 -- love this story). However, how about banks trying to rook widows ought of their due. What? Yes, manipulating the situation in order to keep money that may be in IRAs (and CDs) and that was left by the woman's husband for her.
• Hovering like vultures (over the dead peasant) - okay, that animal provides a prime role in clean up, however when did the Insurance industry get so crazy as to allow banks to hold life policies (from the 02/09 time frame, needs to be updated) for someone who does not even work for them any longer? Of course, it's not just banks, as there seem to be many financial minds that want to pick the bones of the hapless dead.
• Mortgage morphing - how about a bank (okay, a mortgage handler, yet of the same ilk) selling out to a 'shark' when the mortgagee is undergoing the trial by using a loophole in the Treasury wording? Here's an example. Home sold in the 300K. Now worth 99K. Sold for 78K to a shark who then is foreclosing. If the firm can take that loss, why not give the homeowner a new mortgage at an intermediate value? Like 150K, or so? Near zero says only close to win-win, but this would be a good example.

Remarks:

02/12/2013 -- We ought to have nationalized these guys' playground.

12/02/2010 -- Banking is a utility (but we also need plumbers - a few, not an army).

05/14/2010 -- Oh yes, smartest guys in the economy.

01/22/2010 -- Bankers IV. Plus, Lordly Prince.

12/21/2009 -- Never easy: Redos failing + underwater'd + some walk + should they? + can they?

Modified: 02/12/2013