The Smartest Guys in the Room

Goldman Sachs' Lloyd Blankfein famously said that, far from being dangerous and corrupt, his firm was doing "God's work". I was delighted to read that Jeffrey Skilling once said his own company Enron was doing "the Lord's work".

I read it in The Smartest Guys in the Room; a very interesting read about the fall of Enron (and the baleful effects of securitization).

Saw the movie of the same title but hadn't read the book; if anything this 400 page book is even more accesible than the film - almost to a fault. The authors are excessively conversational, and don't show much faith in their reader's understanding. I wonder if they imagined their words being read aloud at a Wal-Mart and wrote accordingly.

Even the jacket design gets the spirit of it. This blurb from Jim Cramer is at the top on the back cover:

"...those who want to learn what happened here, you don't have to read anything but this."

Now, I appreciate being able to learn something quickly, which is why I appreciate this TV-investing-infotainer's ability to capture the essence of the anti-intellectualism at root of modern culture and learning. When did we lose the idea that learning something has a price?

When was the last time you re-read a book, just to appreciate what you may have missed or forgotten the first time?

That's what I thought.

Everyone - go out and read Oedipus Rex, then read it again two weeks later. It will be a totally different experience the second time.

Or Androcles and the Lion, though to my shame I haven't actually finished my second reading.

Enjoy the Sun While You Still Can

This lady claims that she owns it. Check out the article, it also has a very helpful photo of the sun in question.

You may think she's crazy, but consider this. From the article:

Duran, who lives in the [Spanish] town of Salvaterra do Mino, said she now wants to slap a fee on everyone who uses the sun and give half of the proceeds to the Spanish government and 20 percent to the nation's pension fund.

She would dedicate another 10 percent to research, another 10 percent to ending world hunger -- and would keep the remaining 10 percent herself.

"It is time to start doing things the right way, if there is an idea for how to generate income and improve the economy and people's wellbeing, why not do it?" she asked.

Did you get that? She is shrewdly proposing a new income stream to the government of her nation. That's a lot of things, but crazy it isn't. Governments like tax money a lot, and like this lady they are willing to pretend that it is good for the economy.

As for me, with the down economy and all I don't think I'll be paying her sun tax. She'll have to turn off my service.

Politics + Reality TV Continued

Here is the state of politics in the US today:

http://news.yahoo.com/s/ap/us_tv_kate_meets_sarah_palin

The wiser and wordier than I have talked about what this means so I shouldn't expend too many words on this, but: TV allows us to have relationships with people we don't know. Sarah Palin will be a test case for politicians' abilities to form those relationships and get elected. If it works, then the producers for reality shows and the networks that host them will be the new political power brokers in America.

And what a world that will be!

Politics + Reality TV = this guy

I think this sort of thing is the present and future of politics:

Link

His non-sequiter was delightful:

“As a karate expert, I will not talk about anybody up here. Because our children have nowhere to go.”

Why the bizarre and irrelevant claim of karate ability in the middle of impassioned pleas for the children? Well, he's a smart guy who knows what will get the public's attention. From the Yahoo Buzz Log:

No sooner had McMillan finished listing his credentials as a karate expert (who knows that the rent is too damn high), then his searches started to soar (kind of like the rent). Online lookups for "the rent is too damn high" jumped from nil into breakout status, quickly becoming one of Yahoo's top searched terms.

Don't be surprised to see this guy get his own show in the near future.

More Poetry

Wendell Berry is about as radical as John Beecher, though not nearly as angry. Here is probably his best-known work. As it has been posted in hundreds of places all over then internet, perhaps I can get away with sharing it with you:

Manifesto: The Mad Farmer Liberation Front
by Wendell Berry

Love the quick profit, the annual raise,
vacation with pay. Want more
of everything ready-made. Be afraid
to know your neighbors and to die.
And you will have a window in your head.
Not even your future will be a mystery
any more. Your mind will be punched in a card
and shut away in a little drawer.
When they want you to buy something
they will call you. When they want you
to die for profit they will let you know.

So, friends, every day do something
that won't compute. Love the Lord.
Love the world. Work for nothing.
Take all that you have and be poor.
Love someone who does not deserve it.
Denounce the government and embrace
the flag. Hope to live in that free
republic for which it stands.
Give your approval to all you cannot
understand. Praise ignorance, for what man
has not encountered he has not destroyed.

Ask the questions that have no answers.
Invest in the millenium. Plant sequoias.
Say that your main crop is the forest
that you did not plant,
that you will not live to harvest.
Say that the leaves are harvested
when they have rotted into the mold.
Call that profit. Prophesy such returns.

Put your faith in the two inches of humus
that will build under the trees
every thousand years.
Listen to carrion - put your ear
close, and hear the faint chattering
of the songs that are to come.
Expect the end of the world. Laugh.
Laughter is immeasurable. Be joyful
though you have considered all the facts.
So long as women do not go cheap
for power, please women more than men.
Ask yourself: Will this satisfy
a woman satisfied to bear a child?
Will this disturb the sleep
of a woman near to giving birth?

Go with your love to the fields.
Lie down in the shade. Rest your head
in her lap. Swear allegiance
to what is nighest your thoughts.
As soon as the generals and the politicos
can predict the motions of your mind,
lose it. Leave it as a sign
to mark the false trail, the way
you didn't go. Be like the fox
who makes more tracks than necessary,
some in the wrong direction.
Practice resurrection.

We Don't Handle Obsolescence Very Well

Dead Carriers

This commentator points out very convincingly why the US Navy can never expose its main carrier groups in a conflict with nations like China or Iran, because it means they'll all lose their jobs.

Which means they can't be used the way they're intended. Which means they are enormous, expensive floating boondoggles that keep no one safe and will win no wars.

It isn't until engagement with the enemy that you find out whether your plans and technology really work. By avoiding that crucial confrontation we don't validate our strategies and tactics, and refine them for future conflicts.

Not that THAT is such a bad thing; it would definitely suit me if we never find out whether the carrier groups still have legitimate military value. But you could get rid of them entirely and still know just as much about their usefulness...

Careful Choice of Words

Okay, think of a bad word. One that you definitely wouldn't say to your grandmother. Pretty bad, isn't it? Perhaps unambiguously so. It may have something to do with bodily functions, excretions, or reproductive activities - or perhaps it is an ethnic slur.

Now, say what that word is in a way that's not offensive, to your grandma or most anybody else. It's not very difficult - there are plenty of substitutes at hand for even some very vile words and concepts. Sometimes those substitutes were developed specifically for use in polite company in the place of their vulgar counterparts.

What is this? Every offensive idea has a non-offensive way of expressing it? Believe it or not, in our society we don't take hardly anything itself as offensive. Rather we have duplicate terminologies - one for polite use, and one for when we intend to be offensive.

Thus to us it is the word and not the thing that is bad, and we inoculate ourselves against the sin of profanity or vulgarity by a careful choice of words. Is this proper? If we angrily and vehemently hector another driver who makes an incautious error on the road, does it matter whether we use good words or bad ones? Arthur Henry King once pointed out that it makes little difference whether he gives voice to his frustrations with "fiddlesticks" or something worse. What matters is the thought and sentiment that gives wings to the word. What matters is what's in his soul. If THAT is vulgar, then so is anything he says, no matter how polite.

Fearful Bargain

"The bond salesmen from the forty-first floor who spoke to us were by definition leaders in the firm, and they might have provided me with a role model, but their smooth metal surfaces offered nothing to cling to. They expressed no interests outside selling bonds, and they rarely referred to life outside Salomon Brothers. Their lives seemed to begin and end on the forty-first floor; and I began to wonder if I wasn't about to enter the Twilight Zone.

More different types of people succeeded on the trading floor than I initially supposed. Some of the men who spoke to us were truly awful human beings. They sacked others to promote themselves. They harrassed women. They humiliated trainees. They didn't have customers. They had victims. Others were naturally extremely admirable characters. They inspired those around them. They treated their customers almost fairly. They were kind to trainees. The point is not that a [aggressive, ambitious trader] was intrinsically evil. The point is that it didn't matter one bit whether he was good or evil as long as he continued to swing that big bat of his. Bad guys did not suffer their comeuppance in Act V on the forty-first floor. They flourished (though whether they succeeded because they were bad people, whether there was something about the business that naturally favored them over the virtuous are separate questions). Goodness was not taken into account on the trading floor. It was neither rewarded nor punished. It just was. Or it wasn't."

-Michael Lewis in "Liar's Poker", describing the sorts of people he encountered on the trading floor at Salomon Brothers in 1985.

It's no surprise to us that sometimes the bad guys win in life. What's startling is to realize that the so many of these systems we humans organize our efforts around are structured in such a way as to make virtue and kindness superfluous, because other qualities matter more to the goals of the individual and the goals of the group. We promote values that don't make people better people.

Rather reminiscent of a military band whose members honor and respect the most fearsome warrior of their number even though he is a bad man. His skill and energy strengthen them as a group, and hopefully make it more likely that they all get home.

Get home you may - perhaps even weighted down with riches and glory. But what sort of person will you be when you get there? That matters far more than most people seem to realize.

Silent Angry Poets

I read an interesting work in an anthology of poems by ever-angry poet John Beecher:

"No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from the publisher."

Well, that's from the copyright page. I don't think Beecher wrote it. Unfortunately, that sentence is probably the only thing in the book I am allowed to quote fully.

However, according to my understanding of fair use I can noncommercially quote a small fraction of the work I really am interested in without exposing myself to prosecution for copyright infringement. Since poems are pretty short to begin with, here is a single word from Beecher's poem, "Homage to a Subversive":

peoples'

It's not much, but hopefully enough to help you grasp the essence of the work. As you can maybe tell from the excerpt, Beecher has a rich and pungent descriptive language, and bundles out the word-bombs as fast as a B-52 on a mission of metaphor. But don't be fooled - this poem is the best of the best. He worked really hard on this one I think. Most everything else is overdone and trite, 2-D cliches about the suffering of the working man or the myopia of the self-righteous hypocrite. (The latter is particularly cloying and annoying, stuff along the lines of "I hit a black dude for looking me in the eye and now I'm going to church because I'm SO RIGHTEOUS!")

But good or bad, no one reads them. That's because about the only John Beecher book in the valley is the one sitting next to me right now. I got it from the library. The book is 35 years old, and does not look heavily used. And I can't quote anything from it for you because of the beautiful poem on the copyright page.

You'd think an angry idealist like John Beecher would have wanted as many people as possible to see his work - read it, memorize it, ponder it. Instead his commercial interests pretty much guarantee that as few as possible read it. Funny how that works.

Every author balances the desire of having people read what he has to say with his desire to get paid for it and not have to do a real job.

Not White

"...reliefs and statues were always painted; the ideal of ancient sculpture was the painted plaster statue of France's village churches. Ancient cities were never white. In Pompeii the columns of one temple were painted yellow and white, the capitals red, white, and blue. The Parthenon was painted to cover the marble sheen, and what we now call the Pont du Gard was painted red."
From "A History of Private Life: From Pagan Rome to Byzantium"

What a startling thing to read. How can we imagine Roman cities in anything but white? I have walked the streets of Pompeii, and it will be difficult to think of it as anything other that what it appeared. Over centuries we have slavishly imitated the Romans and Greeks by planting forests of unadorned columns throughout our finest mansions, churches, and capitals. Trying to match our architecture to ruins rather than any genuine article has certainly led us astray. Turns out a bucket of paint was also needed.

What would an ancient Greek have thought of the US Capitol building or the White House? "Look at this terrific building we built! It's just like the Parthenon!"

Real American Heroes

A video of several Iraqi citizens and two Reuters correspondents being murdered by American soldiers was released to the public today:

http://www.collateralmurder.com/

There's no gore but it's difficult to watch.

We haven't heard as much about American war crimes and atrocities lately. Such things have seemed less relevant because a Democrat's in the White House (And he even has a Nobel Peace Prize - hope he doesn't just settle for one!). In our peculiar sliding scale of modern values, the military isn't evil so long as it's led by compassionate progressives.

Still, this video is pretty bad and will probably get a lot of attention. It's from an engagement in Baghdad back in 2007, evidence of which had been surpressed by the military. The video was leaked out despite the military's efforts to prevent it, and you can see why it was surpressed. The video paints a much different picture of the event than does the official version.

What's fascinating about the lead up to the attack is how the soldiers in the two attack helicopters feed off each other's nerves and perceptions, turning an innocent gaggle of chatting guys into a band of heavily armed insurgents. Remember that two of the victims worked for the Reuters news service. One was carrying a camera and was actually doing his job at the time of the attack. But the US soldiers could only see enemies. One soldier thinks he sees a gun, then another sees one, then all of a sudden there's five or six gunmen, next a soldier thinks someone's got a rocket-propelled-grenade, next another soldier is sure of it, and now they're pointing their launcher at the helicopter and now the soldiers are asking base for permission to blow them up. Permission is granted, and as soon as there's a clear shot, the helicopter opens up with a powerful 30-mm cannon that tears the bodies of these men apart.

One of the victims survived the initial attack, but was badly wounded and couldn't get up. A passing motorist saw him at the side of the road and, being a good samaritan, stopped to help. He and another man got out and lifted the wounded man up to take him to the hospital. At that point the helicopter gunship opened up again, and blew up the vehicle, killing the good samaritan, the wounded man, and injuring two children in the van.

Our military papered this event over with lies, one representative saying "There is no question that Coalition Forces were clearly engaged in combat operations against a hostile force." This sort of thing makes it difficult to accept "official" versions of stories without corroborating evidence.

I have a lot of strong thoughts and emotions about this. Like who are the good guys here? I have a much higher regard for the fellow who sealed his doom by stopping to help than I do for the GIs who begged their base for permission to shoot and laughed and celebrated their kills. Which of these people was making the world a better place? More to the point, what kind of soldiers would you prefer to see in the military - the kind that are regretful and reluctant to use their deadly force, or the kind that treat combat like a video game?

Speaking of how soldiers are, the military wants a soldier who obeys orders unquestioningly - kills whom he is told to kill, and spares whom he is told to spare. Such a man has given over his humanity to his leaders - his moral sense is subsumed into theirs.

So that's what the military wants. Is that what God wants? What can we say about a machine that functions best when its participants play the parts of unthinking cogs? It is hard to respect any soldier who could not disobey an order he knew was morally wrong.

I feel bad for the kids in those helicopters. The Iraqis may have left their body parts strewn around that scene, but the soldiers left parts of their own souls.

War is hell for making enemies out of decent men.

What Should Have Happened With the Bailouts and All That

What should have happened?

I have written before about our government’s foolish, wrongheaded and sometimes corrupt responses to our ongoing economic crisis. I have described how I think their measures have actually made things worse, not better.

So far it’s been a difficult year for us Cassandras. Nowadays people seem somewhat pleased, if not downright optimistic, about business and economic news. Hiring is up (even if unemployment is unchanged). The Dow Jones is creeping towards 11,000. Large and influential companies declared substantial profits for all of 2009. Housing prices are holding steady and inflation doesn’t seem to be eating anyone alive. Could we have turned the corner?

I do not disown my previous pessimism. I’d rather double down at this point. I think it beneficial to also take a little time to describe what our government was actually trying to do to revive the economy, and whether those efforts have paid off. This will help me illustrate for you all my belief that we are actually in worse shape now than we were during the dark times of 2008 and 2009.

If you recall those dangerous days in the summer of 2008, there was a great deal of fear and insecurity surrounding the collapse of one of the world’s most powerful investment banks. Lehman Brothers (which had existed since 1850 and had almost $20 billion in net revenue in 2007) went from hale & hearty to bankrupt & broke in just a few months. Lehman’s problem wasn’t that they were evil or that they were greedy, but rather that they were stupid. The bank’s assets were not worth anywhere near what they (and everyone else) had thought they were worth when they bought them. With worthless and nonproductive assets Lehman would not be able to meet their obligations to creditors and shareholders, and the company had to declare bankruptcy.

This collapse was a frightening event, and affected a lot more than just Lehman’s shareholders, because people knew that the sorts of things that Lehman owned a lot of (complex instruments known as Credit Default Swaps, or CDS’s) were also owned by the other big investment banks on Wall Street. Investors realized that Lehman’s demise prefigured the rapid demise of EVERY SINGLE OTHER BANK on Wall Street, organizations such as JP Morgan, Goldman Sachs, Citigroup, and pretty much any other big bank you have heard of. In September 2008 all of these banks were technically insolvent, their assets absurdly worthless.

This was the situation facing our leaders in Washington. They decided that these banks were too important to the economy to be allowed to fail (thus they received the moniker “Too Big to Fail”), and that those banks should receive all the support that our government had the ability to give them. This support came in two crucial ways:

1. First, our government gave trillions of dollars to these various banks to plug the gaping holes in their balance sheets. They did this through methods that you have probably heard of such as the enormous TARP bailout, and also through methods that are more obscure, like comparatively enormous interest-free loans from the Fed, government guarantees of bank liabilities, and even some peculiar backdoor bailouts that were disguised as other things so as to not upset the public.

2. By the spring of 2009 it was clear that our trillions of $$$ were not enough to fill the hole created by the banks’ foolish incompetence. Therefore the US Financial Accounting Board (called FASB) was pressured into changing one of the accounting rules that corporations are bound by. Banks would now be allowed to pretend that their assets were actually worth what they paid for them, rather than recognize that they were now almost worthless. This was intended so that the banks would have time to sell off these bad assets, or recognize the loss in value, over a longer period of time rather than all at once.

So that’s what our government did. Here is what was SUPPOSED to happen as a result:

Since they were allowed to make-believe that their assets had value, the banks didn’t have to be in a huge hurry to solve the problem. They could take all the free money from the government and strengthen their operations, and use the cash to cover the losses from their bad assets, and progressively return their companies to good health. Their stock value would go up, they’d be able to issue more stock, and get even more money to smooth their path.

(Incidentally, one of the most crucial things these banks were also supposed to do was lend their money. This is the main reason they were allowed the tag of “Too Big to Fail” – because people believed that, once rescued from the brink of disaster, these companies would lend or invest their money to homeowners, small businesses, other banks, and anyone else that was a good risk. This free flow of credit is viewed by many influential economists as being very, very important for a healthy economy; and the banks were viewed as being crucial for that flow of credit.)

That’s what was supposed to happen, but that isn’t what actually happened.

What actually happened is that the investment banks took all the free money from the government and became giant casinos. They never lent the money (except back to the government, which is worth a blog post in itself). They made risky investments, played the stock market, and declared enormous profits. They took these profits and, rather than sell or write down the bad assets on their balance sheets, they pretended that those things weren’t even there and instead gave themselves really big bonuses. Goldman Sachs, for instance, gave its employees over $15 billion in bonuses.

So here we are, coming up on two years later. These Too Big To Fails are in exactly the same boat they were in September 2008. Nothing has changed, except now we’ve churned through trillions in public $$$ with nothing to show for it – money we may wish we had when the next inevitable crisis hits. The banks’ ability to pretend that they are viable institutions is not infinite. The only thing keeping them in business from day to day is our government’s implicit promise to protect them no matter how stupid or wasteful they are. As soon as that guarantee is ever in doubt, there will be a painful day of reckoning.

Father or Rich Neighbor?

“With liberal grace and serene naiveté, the pagans modeled relations with the gods on political and social relations among themselves. It was the Christians who substituted the paternal model, basing relations with God on relations within the family, which is why Christianity, unlike paganism, would be a religion of obedience and love.
…
If God is a father, there is little to do but pray to him. But if the gods are patrons, one can offer them gifts and receive gifts in return, symbolizing a friendship between unequal partners, each with a life of his own; indeed, there would be no reason for men and gods to enter into relations at all were such relations not in the interest of both parties. If the human partner behaved any more humbly, he would not be acting like a free man. People smiled when women went to temple and told the goddess Isis their troubles. Such intimacy with the gods was plebian. A free man knew how to maintain a proper distance between himself and other men and between himself and the gods. He did not abase himself before his deity. Leave it to the common people to spend all day in the temples waiting on their gods like slaves, behaving like valets and hairdressers before the statues of their deities.”
From “A History of Private Life: From Pagan Rome to Byzantium”, chapter Tranquilizers in the section on Pagan Rome.

Such a temptation to think that everyone is like us, only (in this case) they wore togas and liked fighting Gauls. This is why period pieces in film and literature are so convincing, when they should really be anything but. To interact with such people would probably be a disorienting experience.

These two worldviews, Christian and pagan, would seem virtually irreconcilable, and yet a couple hundred years later they ended up in a rather peculiar forced marriage!

You need a happy family, or an example of one, to formulate a positive image of God. Otherwise Heaven is as frightening as a drunken parent. No problem for the Roman, reconciling earthly disfunction with heavenly perfection - heaven was as dysfunctional as Roman society!

Through a Glass Darkly

“Meanwhile, the disciples had returned from the city, and wondered to find Him talking with a woman [the Samaritan woman by Jacob’s Well]. The relations of the sexes, even in common life, were very narrow and suspicious among the Jews. That a woman should allow herself to be seen unveiled was held immodest, and for any woman to let herself be heard singing a song was almost unchaste. In Judea a bridegroom might be along with his bride, for the first time, an hour before marriage, but in Galilee even this was thought unbecoming. Trades which brought the two sexes in any measure into contact were regarded with suspicion, and no unmarried person of either sex could be a teacher, lest the parents of the children might visit the school. In Rabbis especially, even to speak with a woman in public was held indecorous in the highest degree. “No one” (that is, no Rabbi) says the Talmud, “is to speak with a woman, even if she be his wife, in the public street.” It was forbidden to greet a woman, or take any notice of her. “Six things,” we are told, “are to be shunned by a Rabbi. He must not be seen in the street dripping with oil (which would imply vanity); he must not go out at night alone; he is not to wear patched shoes (which in certain cases would be carrying a burden, when it was unlawful to do so); he must not speak with a woman in a public place; he must shun all intercourse with common people (for, not knowing the Law, they might be ‘unclean’); he must not take any long steps (for that would show that he was not sunk in the study of the Law); and he must not walk erect (for that would display pride).” Though higher in position and respect among the Jews than in other Eastern nations, woman, at the time of Christ, was treated as wholly inferior to man. “Let the words of the Law be burned,” says Rabbi Eleazer, “rather than committed to women.” “He who instructs his daughter in the Law,” says the Talmud, “instructs her in folly.”
- The Life and Words of Christ, by John Cunningham Geikie

After typing that I looked at the yahoo homepage and saw an advertisement for sexy underwear with seven mostly naked, heavily photoshopped ladies standing in a row. Treating the models so overtly as sex objects, the image is pornographic even if it is not explicit. Extra credit for the banner’s title: “I love my body” – astonishing that the examples they show us are of women who didn’t like the bodies God gave them and got new ones through fanatical activity and elective surgery. Look how different our cultures are. How can I relate to their world and experience across such an expanse? They, narrowly channeled through life by stultifying rules and laws – hedges and walls that divide humans and prevent closeness. Too many of us, imagining we have full liberty of action and interaction between the sexes, instead reduce those around us to mere objects, fulfillers of cultivated fantasies, and set up elaborate fashion systems that are so rigorous that no more than a handful can fulfill them. Giving and receiving of love between the sexes is only on the most physical and superficial level.

Who is more restricted by rules and mores?

How foolish these old-timey Jews seem – outward signals that one is free of pride can be just as prideful as any other action that “looks” prideful. But how would they judge us? They would judge our ethic of self-worth-through-sexuality harshly.

I think their “hedge about the Law” has a lot in common with our rules of fashion. It’s a way for a self-selected elite to establish social standards of value and importance that put them at the top and others below. It is a competitive system, never about inclusion, only exclusion. One is always being judged against others, and the continual amplitude of effort and zeal leads to the most maddening and ridiculous brinkmanship.

Alternate Ending to 1984 Where Winston Becomes a God Instead of an Animal

Picking up the action in Room 101. First paragraph is from the book:

The mask was closing on his face. The wire brushed his cheek. And then - no, it was not relief, only hope, a tiny fragment of hope. Too late, perhaps too late. But he had suddenly understood that in the whole world there was just one person to whom he could transfer his punishment - one body that he could thrust between himself and the rats.

He was suddenly struck with a curiosity so powerful that he nearly forgot where he was. What was Julia’s worst thing in the world? What hidden fear, known only to O’Brien, stalked her hidden thoughts? Winston remembered his love like a hazy, half-forgotten dream slipping back into memory. With ferocious affection he imagined her alone and afraid in the same chair he was now in. He imagined throwing himself between her and some huge, dark, dreadful thing.

The rats were right before his eyes. The wire pressed into his cheek, and the cage snapped into place. O’Brien had only to depress the lever. Winston saw the end. If he waited a few seconds it would all be over.

He clenched up his will and resolved to wait a few seconds. He imagined that by waiting he might somehow protect his beloved from that same dreadful thing.

A few seconds passed. The door of the cage tremored and lifted a centimeter or two, and then stopped. One rat shuffled madly trying to get through the narrow space while the old one stared at him with malevolent eyes, but to Winston the world froze in place. Moment after moment the worst thing in the world was about to happen.

O’Brien broke the impasse by casually releasing the lever, snapping the cage door back shut, as if something had occurred to him that he wanted to say before causing the dreadful thing. “You are,” he said, “perhaps -

Winston shut out the words and closed his eyes. Why wouldn’t the dreadful thing happen? Then he realized – this was the worst thing in the world! This was Big Brother’s greatest and final claim to his loyalty! If this was not enough to make him love Big Brother, nothing would be. It was a dangerous thing for his tormentors to give him this final choice, for beyond it they were powerless. This was an act of desperation on their part.

In Winston’s mind he and O’Brien switched places. They were weak and he was powerful. He was doing the worst thing in the world to O’Brien. They needed him to love Big Brother. They needed him to agree with them, while he needed nothing from them.

He opened his eyes, and everything fell away from him: the rats, the walls of Room 101, the halls of the Ministry of Love, the bunkers, buildings, guns, tanks and floating fortresses, the secret police with minds like machines, the careful beetle-like men crawling through the Ministry of Truth, and men like O’Brien with their calculated madness. Every inch of it was a cruel façade over the face of the universe, obscuring all real meaning and value. It dropped away, and he was left with himself. He was free. The fear and hatred that had animated him so long were gone.

He loved Julia.

There’s a confusing and conflicting array of data and numbers being bandied around about the state of the economy. Reports on this or that new number give a wide variety of pictures about how things are going.

Oh no! Job numbers are down!
Oh yes! Manufacturing orders are up!
Oh yes! The stock market is up!
Oh no! Housing starts are down!
Wait…but home prices are up!
We’re losing our shirts!
No, the recession is actually over – everyone celebrate!

What does it all mean? It seems like the more information we have, the more confused we get.

There’s a problem with the way we are using all these numbers. Before explaining, I’d like to introduce a concept:

THE REAL ECONOMY

The economy is actually split into two different parts – factions we might describe as real and fake. The “real economy” is exactly what it purports to be – the portion of the economy that is real. The fake economy is, in certain crucial ways, artificial. What’s the difference? The real economy is what people themselves are willing to do with their time, energy, and resources. The fake one is dependant on what government does with the resources that it gets from borrowing, printing money, and confiscating from us.

I should be clear that not everything that the government does is “fake economy”. There’s nothing fake about a government takeover of health care, for example. That portion of the economy will be real regardless of who is running it. I am talking about things that, if government wasn’t doing them, they would not be done at all. That is the fake economy.

Example: Recently our leaders in Washington decided that Americans weren’t buying enough cars. American auto manufacturers were already being kept on life support by tens of billions of government largesse, but still people weren’t buying enough of their cars to make them healthy again. So, to support those companies and their unions, government pledged three billion dollars of our money to subsidize the purchase of new autos.

Predictably, auto sales during this time were extraordinary, as consumers either advanced a planned auto purchase to take advantage of the program, or were convinced to buy autos they didn’t need and couldn’t otherwise afford.

Due to the prominence and popularity of this program (which you probably remember as Cash for Clunkers), there was no risk of people thinking that improved auto sales meant the economy was recovering. But government is spending trillions of dollars every year right now to prop up the economy, and its activities are affecting things in ways that are very difficult to measure.

(This, by the way, is the role government tries to play in economic downturns. Rather than tough it out through the trough of a depression before things eventually improve, government papers things over. People are too poor and scared to buy anything right now, so government steps with loads of money, spending to make up some of the difference. Essentially, government deficit spending replaces consumer spending and investment, in hopes that this will lessen the severe parts of a depression. By providing artificial demand for cars, houses, stocks and so forth, the government hopes to gin things up until the storm is over and the real economy has recovered.)

Now we can circle back to the confusion about what’s really going on in the economy. We already know that the fake economy is doing great – free money from government for people to do things that no one else is willing to pay for. What we really want to see is an improvement in the REAL economy – people being willing and able to spend more of their OWN money and invest and work hard and so forth. Unfortunately, these two economies are very difficult to separate and the economic numbers that get reported usually include the fake numbers as well. Thus, when (for example) home sales go up, it is hard to tell how much is because people really want new houses and are willing to sacrifice to get them, or if they were just doing it because government made it practically free and riskless to buy one. It’s like holding a magnet next to a compass and then trying to point which way is north.

This is something people have a hard time perceiving. We are very used to relying on certain measures to describe economic progress. Numbers that describe unemployment, real estate, and the stock market used to give a somewhat more trustworthy indication of how things were going, but right now they are largely reflecting the effectiveness of various government programs, rather than any underlying strength and optimism. Housing and stock market numbers in particular are so heavily reliant on government money and support that they have almost no meaning right now.

So, if all the various measures of economic productivity are tainted by meddlers in Washington, what SHOULD we be paying attention to so we can understand how things are really going?

Well, one of the main causes of our ongoing depression is the over-indebtedness of the American consumer. Beguiled by easy credit and the false promises of an ownership society where everyone owns a house and gets rich, Americans have gone into debt at levels that haven’t been seen since the run-up to our last great depression. (Our government is also assuming trillions of dollars of debt every year, but here I am talking just about private non-government debt.) Over-leveraged and deeply in debt, Americans have had no stomach for the investment, indulgence and consumption that are such a large part of our economy. Certainly American debt levels will have to decrease – a lot – before the sort of recovery Wall Street and Washington are waiting for can happen. See the graph.



It shows the total debt held by Americans, in trillions of dollars. Since 1997 the amount has more than doubled, before finally leveling off at the start of the depression last fall.



So at least it isn’t going UP any more, but it’s rather distressing to see that, in more than a year, the number hasn’t moved down very much. There’s still a long way to go, and Americans, jobless and living in homes worth a fraction of their previous value, are having a hard time managing it. Until we work off a significant portion of this debt, it will be hard enough for people to pay for food and mortgages, much less the conspicuous consumption that fueled our chimerical global boom.

For all its importance, this important statistic has been largely ignored by government and the media. Instead, our leaders are wasting time and trillions of dollars trying to maintain an artificial status quo. In fact, by subsidizing and encouraging big-ticket purchases, government programs like the first-time homebuyer’s credit and Cash for Clunkers have served to INCREASE consumer debt. They are pushing us in exactly the wrong direction right now.