Archive for September 26th, 2008

A nice change of venue on a grey Elsinore day:

Rincones de catalunya

Read Full Post »

[other days I’m just a libertine….]

The following may exhibit some philosophical inconsistencies, which will be a shame, since it’s partly inconsistency that I’m irritated about. I plead having a sinus infection as my reason for being a little flakey.  Heaven only knows what the bedrock excuse the folks in Washington and Wall Street have for their choices….

One of the traditional questions rhetoricians get asked is about the status of Truth or Reality. Is it all just persuasion?  Why are bandwagon arguments considered fallacies if, in practice, that’s how a lot of things get decided?  This week gave me two really great examples of where Reality [or “Nature”] intrudes on the best-made arguments of human beings: the milk-melamine scandal in China, and the apparent meltdown in the US financial markets.

In the first case, we have a variety of social agreements:  demand for milk products in China have gone up as parents decide breastfeeding is backward or inconvenient, and the profit motive leads some people to ‘stretch’ their supply of dairy material with water, and then boost the protein content back up with a substance that — according to the currently accepted measures — scans as protein.  However, that chemical analysis is not as sensitive — or accurate — as the biological analysis done by a human baby.  All the arguments in the world about how “This milk-like substance should be accepted as a genuine form of nutrition” fail in the face of actual metabolism.

In the second case, it seems to me that what failed was the social agreement: the sub-prime mortgage market always puzzled me [and yes, I have a relative who was in that business; he’s been out of work for quite a while].  Person X is a bad credit risk. So we’ll make him pay three times what someone with good credit would pay for a loan.  While I understand the punishment aspect of that higher rate, what I don’t understand is how anyone thought this arrangement would magically make Person X into the sort of person who paid their bills in full and on time.

Oh, someone says, in that case, we’d just take the asset back, and everything would be fine.

No, that can’t be right — you were counting on principle and a whole mess of interest; just getting the worth of the house itself wouldn’t be sufficiently profitable.

You’re forgetting that by the time Person X defaults, that house is supposed to be worth, like, twice as much, so we do get our expected return on the deal.

Hmmn. How’s that double-your-money plan working for you these days?

I do not wish to talk about it.

But, of course, the banks were behaving like the folks who want to cash out their lottery annuities — rather than wait to get paid over the time period of the loan, they were selling the loans, and then bits of the loans to two friends, and they sold bits to two friends, and there’s a whole 1970’s shampoo commercial in here, isn’t there?

Eventually, people realize that they can’t tell whether they’ve got a bit of loan that has a reliable payback attached to it, or they’ve got a bit of loan that contains scrapple.  [Or haggis, for that matter.  An offal sitution, however you look at it].

So now everyone is scrambling to find where the Reality is underneath all the layers of lipstick.

Whatever happened to ‘making money the old-fashioned way’?  When someone could be called a captain of industry because they had invested in a company that had a physical product, as opposed to IOUs?

Further, why is it economically wrong to help my brother out of a series of bad financial decisions, but it is ‘okay’ to buy up lots of worthless paper so that the wizards of Wall Street get their mojo back?

Maybe they forfeited their mojo when they even started thinking that the government should take over the means of [wealth] production…..

I don’t feel especially obligated to give it back to them, just because they’ve decided that free markets really means freedom to do what they want, as opposed to a system they are willing to follow through the fire.

Burn, baby burn!

Read Full Post »