My Pix

Someone in the pool, 1982.  Kodak High-Speed Infrared.

All of my photos are on Flickr.

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Never think that war, no matter how necessary, nor how justified, is not a crime.
Ernest Hemingway

Correlation & Causation

Correlation does not imply causation.  Look at that R squared in the top right corner.  Traffic deaths and lemon imports are almost perfectly correlated.  But neither causes the other.  This is a really common cognitive error, nobody is immune to it.  Humans like stories and patterns, they instinctively attribute relationships and process where none necessarily exist.  It is hard for us to accept that many things are random and unrelated.

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"I am" is reportedly the shortest sentence in the English language. Could it be that "I do" is the longest sentence?
George Carlin

Dead Cat Bounce

 

    Dow, last 12 months

The markets are up and Obama is talking about glimmers of hope.  Had the situation turned?  Is the crisis abating?  Nope.  its a dead cat bounce. Even a dead cat bounces if dropped from sufficient high.

Although specific causes like the US sub-prime mortgage market were recognized before hand, almost nobody foresaw the tremendous complexity and global nature of the coming crisis.  Even they didn't see many significant consequences.  The crisis so-far has had several important themes.

1. The US housing bubble.  Asset bubbles always burst, leaving those who borrowed against bubble prices in a ruinous position.  
2. The tremendous over leveraging by countries like Iceland, Ireland and The Ukraine.  This one is significant because it shook up the currency markets.  
3. The uncontrolled growth of European banks.  Iceland, Ireland, Switzerland, The Netherlands, France and UK have banks who's combined liabilities greater than GDP.  Iceland would have to spend all its tax dollars for the next 19 years to pay off the commitments of its failed banks. 
4. The stunning over borrowing by consumers in many key economies, especially the US.  This over-borrowing, combined with housing deflation, means a consumer-led recovery is not on.
   
5. Blatantly illegal activities by US banks.  These people should be charged under organized crime laws rather than bailed out.  Its also worth mentioning the fraud by US ratings agencies like Moody's.  
6. The Bush administration's spectacular corruption.  This may have been the most corrupt US administration of all time.  They pissed away trillions enriching themselves and their friends.  Regulation first became a joke, then a memory.
7. The US' move away from traditional debt instruments that everyone understood, to derivatives that nobody understood.  Important because the traditional instruments have withered.  Reconstituting them will take years and imply an economy with far less available debt (i.e. less growth). 
   
8. The unexpectedly global reaction to the crisis.  Nobody expected such swift or far-reaching consequences in so many different places.
9. The complexity of the debt instruments at the core of the crisis.  Its almost impossible to take them apart to determine the status of the individual loans. Take a lemon, a lime and an orange.  Put them in a blender for 1 minute on high.  Now reconstitute the three original pieces of fruit.

You may notice the overarching theme of debt.  Debt is great, especially in business.  It allows you to rent money to buy an asset.  You pay back the money but still own the asset.   What nobody foresaw was the that providing debt would become so profitable that people would start manufacturing it outright.  US investment banks, became debt factories, manufacturing derivatives like toasters.  Too  much debt pouring into consumer markets creates bubbles.

So the fundamental problem is too much debt.  This is not just a US problem, because of globalization, everyone is involved.  The solution to the crisis is for asset prices to return to sustainable values, for all the bad debt created by the asset bubble to be wound down and for new mechanisms for financing debt. Asset prices have spectacularly re-adjusted over the last year, so that's already underway. What has not happened at all is the resolution of all the bad debt or the restructuring of the debt mechanisms. Hundreds of banks around the world are sitting on piles of worthless debt.  They are like a person on life-support.  The body functions, but they are not viable.  Thus the financial crisis persists.  Obama and the rest of the G20 are frantically engineering a soft landing.  No matter what, winding up all the bad debt will take years, with lots more pain on the way.  Likewise, the re-invention of debt mechanisms will take years.

The currency impact of so much government debt has yet to become apparent.  Europe's restructuring of its banking system to be less vulnerable has not yet begun.  The decision of China and India to re-orient resources on building their domestic markets has yet to be felt in global markets.  So I'm calling recent news a dead cat bounce rather than a recovery.

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Life is too important to be taken seriously.
Oscar Wilde

My Pix

 

Spanish moss at sunrise, Jekyll Island, Georgia, 1988.

Spanish moss is one of those things, like neon signs and flags, that were made for photographing.

All of my photos are on Flickr.

The Penny Drops

I'm usually swift on the uptake, if nowhere else. But its only in the last few days that it occurred to me what Obama is taking about when he says "get the credit flowing again". On the face of it, banks have not stopped lending. If that were the case, few cars or houses would be sold in the US, and a large percentage of businesses would have gone out of business. An apocalypse, in other words. Things are bad, but so-far, not apocalyptic.

The general problem for US banks has been that they have massive amounts of Collateralized Debt Obligations* (CDOs) on their books which have little or no value. These represent unrealized losses. Nobody knows what they are worth, if anything. When the banks have to finally account for these "assets" some of the big ones will go broke. Additionally, interbank lending is said to be down substantially. This cannot be true in the traditional sense, or the whole system would have frozen up. This was a real possibility in October, but less so now. So what's Obama talking about? New CDOs.

Over the last 10 years, CDOs became the vehicle for financing all kinds of US consumer loans, most prominently mortgages. But CDOs came to include credit card debt, student loans, car loans and all kinds of other consumer lending. These loans were sliced and diced with magic tricks that turned them into virtually risk-free investments for mutual funds, hedge funds, retirement funds, schools and municipalities. The process became a money machine for everyone involved, including the consumers that took out the loans. Obviously, the magic tricks turned out to be imaginary, and the slicing and dicing has only served to make the CDOs completely opaque. Take a slice of any CDO floated by anyone in the last five years. What's it worth? Nobody knows. More importantly, nobody can know because their structure is too byzantine for anyone to figure out. It will be sorted out eventually, but that could take years.

In the meantime, nobody wants to buy any new CDOs. The mighty CDO market that brought unlimited debt to US consumers has almost completely shut down. That's what Obama means when he talks about freeing up the credit markets. He's trying to put Humpty Dumpty back together. It probably won't work, but not positively. So there is a clever political calculation involved. As a new President, his choice is to tell Americans that they need to give up the growth and prosperity they enjoyed in the last 20 years, or he can try to restore the status quo. In a general sense, he can't be blamed for trying as long as he doesn't make a mess of it. He could, however, be blamed for not trying. Americans won't accept a new, lower, standard of living unless they believe there is no choice. The political problem is potentially larger than the economic problem, but its not on the mass media radar yet, so nobody's talking about it. But Obama's thinking about it. I like that. It means that even if he is unsuccessful at getting the parade rolling again, he may retain enough political capital for plan B, whatever that turns out to be.

Incidentally, this thesis explains the Europeans' disagreement with the US over how to handle bad assets. Their banks are in the same shape, but most European economies don't depend on easy consumer credit like the US. Those who did, like Ireland, Greece and Hungary, are in deep trouble. Those that didn't, like Germany, don't see the point of spending trillions to resuscitate a discredited system they don't depend on.

*There's a great 11 minute film that explains CDOs, previously posted here.

Chiswick House, London, 1993
A fantastic bit of classical revival architecture, partly designed and built by the very talented Lord Burlington.  Finished in 1729.

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If you can count your money, you don't have a billion dollars.
J. Paul Getty

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Conservatives are not necessarily stupid, but most stupid people are conservatives.
John Stuart Mill

The Republican "Budget"

I don't like to spend too much time on American politics as we have our own here.  But somethings just resonate beyond the American context.  Slightly stung by Obama's sweeping, ambitious budget, the Republicans have released their own alternative budget.  18 pages.  It includes the gem below:

Their explanation of the chart:
"Republicans will be on the side of quality versus mediocrity, affordability versus unsustainable debt, and freedom of care versus bureaucrats in control. And we will be on the side of patients, doctors, and the American people."

I didn't believe this could be real, so I checked.  It is.  Let's just remember that the chart summarizes a very complex a multi-trillion dollar nest of policy problems.  But it looks hilariously like the old Internet meme:

1.  Give product away for free
2.  ????
3.  Profit!!!

Its rare to see such stunning political incompetence from professional politicians.  Some teenagers doing a high-school project could have done better.  If anyone was wondering is the the decline of the GOP is a liberal media invention or really happening, here is your answer.

Via Fark - Caution, this link leads to FARK

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Read over your compositions, and wherever you meet with a passage which you think is particularly fine, strike it out.
Samuel Johnson

My Pix

Lloyd’s Building, London, 1993

My Pix

 

    401 looking East from Don Mills, Toronto, 1987

I remember schlepping out to this spot on the bus.  It was before I had a car.

In the meantime, the streetlights and the cars have changed a lot.

Fun Facts To Know And Share

According to the Chicago Tribune, the median price of houses sold in Detroit in December was US$7500. 

World Airline Map

IMPORTANT NOTE:  This image has a Wikipedia license.  That means you can use it or abuse it in any way you want.  You do not need my permission.  For corporate customers, that applies to you too.  However, some corporate customers have wanted specific licensing, and for a small fee I am happy to oblige.

Oct 31, 2012
--------------------

Here, at long last, is the world airline map. Click for big, for enormous, go here.
Things I learned from doing this map:

• Every country in the world, no matter how small or poor, has at least one airline
• Some of these airlines, particularly in Africa, seem to have only one or two planes, often 2nd or 3rd hand 737s.
• Any country with a plane big enough has a flight to New York and either their former colonial master or London.
• If they have a 2nd flight to the US, it is usually to Washington, sometimes LA.
• There are more airlines in Europe than anywhere else on earth.
• Each European country has a national flag carrier, sometimes a second large airline and two to five budget airlines.
• The big airlines fly to every 1st, 2nd and 3rd tier city in Europe, the budget airlines fly to the same, plus many smaller centers, also to holiday destinations.
• The most popular European holiday destinations are the Canaries, followed by Spain, Portugal and the Caribbean.
• North Americans holiday in Hawaii, Mexico and the Caribbean.
• Asians don’t seem to have a lot of specialized holiday destinations, probably because its either warm all the time, or people don’t have enough disposable income.
• The few obvious Asian holiday destinations seem to be The Philippines, Okinawa, Thailand, Guam and Bali.
• The density of air traffic in Europe far outstrips the US or Japan.
• Highest density of flight to population is probably Australia.
• Every Muslim country has a direct flight to Jeddah, and many to Riyadh.
• Arab airlines are huge. Not just from the Gulf, but North Africa, Jordan, Lebanon and Saudi Arabia.
• Some small countries stand out due to their long-haul business. The Netherlands, Dubai, Kuwait, Abu Dhabi, Belgium, Singapore and Korea, for example.
• Some other small countries have built a good long haul business based on being holiday destinations, Fiji, The Seychelles, Mauritius, Tahiti and The Maldives.
• Countries with a surprising volume of air traffic given economic or political problems: Ethiopia, Egypt, Sri Lanka, Central Asia, Russia, Mali, Togo, Senegal, Ghana, Ecuador, Angola, Bangladesh, Madagascar.
• The most underserved countries for their populations: Iraq, DR Congo, Zimbabwe, Burma, Nepal, Peru.
• Of these, Iraq is close to a black hole. You can only fly to Baghdad from Amman, Tehran, and Kuwait.
• You can fly to almost any city in Turkey from almost any city in Germany.
• By far the densest long-haul corridor is the North Atlantic, traffic there dwarfs Europe>>Far East or Far East>> North America.
• 80% of the International traffic to and from Central and South America is going to the US, primarily Miami, New York, Dallas, Houston and LA.
• South African Airlines dominates the African airspace, South Africa is also the only African country to have discount airlines.
• Surprisingly big hubs (at least to me): Santiago, Moscow, Kuwait, Houston, Bogotá, San Juan PR, Salt Lake City, Honolulu, Bali, Guangzhou, Cairo, Tashkent, Almay, Istanbul.

Edit Aug 29, 2012: the picture was broken, now fixed.

My Pix

Church of the Ascension (1532), Kolomenskoye, Moscow, Russia 1993.
I’m getting deep into the Russian pictures from 1992 and 1993.  Russia was one of the most amazing places I’ve ever visited.  Like a different planet.  I was expecting Soviet drab, but was surprised by the beauty just laying around.  Like this place.  Apart from the rare busload of Germans, Kolomenskoye was the exclusive preserve of the Moscovites. 

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Drawing on my fine command of the English language, I said nothing.
Robert Benchley

TARP Visualized

An interesting series of photos illustrates the American’s bank bailout program.  Get it here.

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A man who carries a cat by the tail learns something he can learn in no other way.
Mark Twain

My Pix

    Admiralty, St. Petersburg, Russia, 1993
    Kodak High-Speed Infrared
All of my photos are on Flickr.

Credit Crisis Visualized

Here is a great video.  More like an animated power point really.  Its 11 minutes long and the best short explanation I’ve seen of the mechanics of the crisis.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Post-Collapse Tips and Tricks

There's a transcript here of an amusing talk given by a Russian-American on how to survive after the inevitable collapse of the United States. He draws heavily on the Russian experience after the collapse of the Soviet Union. Here's a particularly helpful passage:

One final transportation idea: start breeding donkeys. Horses are finicky and expensive, but donkeys can be very cost-effective and make good pack animals. My grandfather had a donkey while he was living in Tashkent in Central Asia during World War II. There was nothing much for the donkey to eat, but, as a member of the Communist Party, my grandfather had a subscription to Pravda, the Communist Party newspaper, and so that’s what the donkey ate. Apparently, donkeys can digest any kind of cellulose, even when it’s loaded with communist propaganda. If I had a donkey, I would feed it the Wall Street Journal.

At Sea

Here’s an interesting and honest assessment of the global economic crisis from Democratic Congressman Paul Kanjorski.  He also reveals that one day in September 2008, the US came within hours of a complete economic meltdown.

Ya know, we're not any geniuses in economics or finances... We're representatives of people. We ought to take our time, but let the people know this is a very difficult struggle.

Somebody threw us into the middle of the Atlantic Ocean without a life raft and we're trying to determine what's the closest shore and whether there's any chance in the world to swim that far. We. Don't. Know.

Full story on DailyKos.

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A thing long expected takes the form of the unexpected when at last it comes.
Mark Twain

Fun Facts To Know And Share

There’s a funny post at Gizmodo about what people search for on Google.  There’s a lot more like the image above, some hilarious.

My Pix

    Church and spanish moss, Darien, Georgia, 1989
    Kodak High-Speed Infrared

My Pix

    More orchids in the living room. This is my first picture taken with RAW.  You can tell the difference.
All my photos are on Flickr.

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And no one brings anything 
Small into a bar around here.  
They all started out with bad directions.
Tom Waits, 9th & Hennepin

Circular Logic at Wikipedia

An amusing first for Wikipedia:
"Germany has a new minister of economic affairs. Mr. von und zu Guttenberg is descended from an old and noble lineage, so his official name is very long: Karl Theodor Maria Nikolaus Johann Jacob Philipp Franz Joseph Sylvester Freiherr von und zu Guttenberg. When first there were rumors that he would be appointed to the post, someone changed his Wikipedia entry and added the name 'Wilhelm,' so Wikipedia stated his full name as: Karl Theodor Maria Nikolaus Johann Jacob Philipp Wilhelm Franz Joseph Sylvester Freiherr von und zu Guttenberg. What resulted from this edit points up a big problem for our information society (in German; Google translation). The German and international press picked up the wrong name from Wikipedia — including well-known newspapers, Internet sites, and TV news such as spiegel.de, Bild, heute.de, TAZ, or Süddeutsche Zeitung. In the meantime, the change on Wikipedia was reverted, with a request for proof of the name. The proof was quickly found. On spiegel.de an article cites Mr. von und zu Guttenberg using his 'full name'; however, while the quote might have been real, the full name seems to have been looked up on Wikipedia while the false edit was in place. So the circle was closed: Wikipedia states a false fact, a reputable media outlet copies the false fact, and this outlet is then used as the source to prove the false fact to Wikipedia."


via Slashdot - full discussion here.

I'm posting this for amusement, not to criticize Wikipedia.  My take-away is that there are lazy reporters who don't properly check their facts (what a surprise), and that someone caught the inaccuracy almost immediately.

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Lies are like children: they're hard work, but it's worth it because the future depends on them.
Pam Davis, House M.D.

My Pix

    St. Basil's Cathedral (1561), Moscow, Russia, 1992

    Kodak High-Speed Infrared

Moscow defenses, December 1941

It looks cold and it was.  Many days during December 1941, the temperature dropped to -40c.  This is close to the spot where the Germans penetrated farthest into the Moscow defenses, about 40km north of the Kremlin.  There are several of these tank obstacles marking the spot on the ring road, just east of the road to the airport.

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There's a snake lurking in the grass.
Virgil

My Pix

    Spanish Moss, Darien, Georgia, 1989 - Kodak High-Speed Infrared