Thu 19 Mar 2009
Posted by editor under money
, societyAdd a Comment
Inside this Newsweek story about AIG, via Atrios, is a nugget that gets at our own larger house of cards, into which they are few ways in – but once you’re in, they are literally no ways out. To wit:
Most of this as-yet-undiscovered problem, Gober says, lies in the area of reinsurance, whereby one insurance company insures the liabilities of another so that the latter doesn’t have to carry all the risk on its books. Most major insurance companies use outside firms to reinsure, but the vast majority of AIG’s reinsurance contracts are negotiated internally among its affiliates, Gober says, and these internal balance sheets don’t add up. The annual report of one major AIG subsidiary, American Home Assurance, shows that it owes $25 billion to another AIG affiliate, National Union Fire, Gober maintains. But American has only $22 billion of total invested assets on its balance sheet, he says, and it has issued another $22 billion in guarantees to the other companies. “The American Home assets and liquidity raise serious questions about their ability to make good on their promise to National Union Fire,” says Gober, who has a consulting business devoted to protecting policyholders. Gober says there are numerous other examples of “cooked books” between AIG subsidiaries. Based on the state insurance regulators’ own reports detailing unanswered questions, the tally in losses could be hundreds of billions of dollars more than AIG is now acknowledging.
Think concentric economies of scale without the redundancies. When one ring goes beyond what it’s able to support on it’s own, it leverages an outer ring to “insure” itself against loses. I don’t know any other way but to use the scare quotes around insure, and neither do they.
This insurance examiner happened to be from Mississippi, so take that area as a case in point. When you hear about all the beach front property that gets threatened or actually destroyed from storms, huge dollar amounts invariably get tossed around. Small enclaves of precarious oceanfront property could theoretically be insured against loss, say by a local firm or even Lloyds of London (if they still exist), if the property owners had sufficient capital to pay incredibly hefty premiums to insure property that is, for all intents and purposes but especially in plain old chances-of-anything-happening kinds of risk, built in the wrong place. Lovely perhaps, but fleeting. (For more on this, see love, definition of)
Now, for one thing, this would likely limit the number of houses and towns built in precarious geographical areas, and we wouldn’t want to do that - celui sera UnAmurican. But anyway… stop anywhere here along the way, economically speaking, and the vista is much the same. Once you go beyond those who can afford to build, live and rebuild in danger-prone areas and extend the opportunity to the rest of anyone who wants the lovely, the insurance companies can’t guarantee these investments, even though they will write policies saying that someone* will. We send the risk spiraling outward, trying to leverage the power of the outer rings. But even there, the big firms can’t even write down their actual liabilities – because they wouldn’t be able to cover them in the eventuality of anything catastrophic across scales happening, otherwise known as the events they’re writing insurance to cover.
*Now, what if we stipulated from the outset that this someone was the government, aka the taxpayers? And what if as a part of such ventures other responsibilities were attached the ‘parties of the first part’ that raised the bar for how we go about insuring things? What if, in other words, everyone had to be honest about all of this, what would be different? Less beachfront property? Would the U.S. be a third-world backwater without the necessity to Pyramid-scheme at every opportunity? This is what we would have ourselves believe, that without such security and assurances, such as it is, we would wouldn’t be so prosperous.
I’ll leave it to you to re-assess the shifting definitions of those last few words in light of recent events.
Wed 18 Mar 2009
The maelstrom and convulsion we entered some time ago, which we have been so slow to notice even as the passing scenery has begun to repeat like the same bunch of clouds and mountains, documented in the incredibly shrinking newspaper sense, here. Maybe cartoon language is one of the few we still understand. It’s got to have something to do with that ‘all I ever needed to know I learned in kindergarten’ sort of thing. If that’s true, good for you. Anyway, that’s an excellent piece above, so thanks, Andy.
You might wonder, and I can only hope you do, why the clockwise newspaper drain swirl, financial melt and eco/energy colossus are all coming of age at the same time. It could make you curious about what we’ve been feeding them. Born mostly at about the same time – say at or near about the time governments began insuring East India companies in their forays into the New World – all of our societal sub-structures are breaking up into mini ice floes, drifting out to Dieu knows where, as we struggle with how to tie them together again. As much as that might be an unfortunate metaphor, it can’t help but seem – even to a kindergartener – like practice for something.
To that end, and pardon the pun, it’s always better take in a geographer-anthropologist matinee:
PAUL SOLMAN: Of all the cultures you’ve studied that have tried to deal with severe economic dislocations, what’s the marker of resiliency?
JARED DIAMOND: It seems to me that one of the predictors of a happy versus an unhappy outcome has to do with the role of the elite or the decision-makers or the politicians or the rich people within the society.
If the society is structured so that the decision-makers themselves suffer from the consequences of their decisions, then they’re motivated to make decisions that are good for the whole society, whereas if the decision-makers can make decisions that insulate themselves from the rest of society, then they’re likely to make decisions that are bad for the rest of society.
That last bit via the Poorman.
Tue 17 Mar 2009
Posted by editor under societyAdd a Comment
Been noticing the Acela advertisements across the banner of the NYT. It seemed like a good time to note the formerly diverted attention being paid to Amtrak. One hopes this is just the beginning of significant funding.
Good news for rail supporters. Last Friday, Vice President Joe Biden and 12 members of Congress gathered at Union Station in Washington, D.C. to discuss prioritizing transit. Standing outside in front of an Amtrak passenger car (whose aesthetically displeasing exterior reinforced the message for much needed funding), a purposeful Biden made the case for his favorite mode of transportation:
“Amtrak is a national treasure, For too long we haven’t made the investments we needed to make it as safe, as reliable, as secure as it can be. That ends now.”
I love how Republicans counter with charges of “wasteful spending!” Apparently, an interstate highway has a capacity of about 2,000 cars/hour and thereafter begins to resemble a parking lot.
The South seems so very far away from the rail-connected cities of the Northeast. Because it is. But you can still take the Silver Meteor between Boston and Miami, and the Silver Crescent from NY to New Orleans and many points in between. The line switches from diesel to electric at DC, then you can take commuter lines in various directions. In addition, the drive between Richmond and Atlanta is very long and hardly enjoyable. And in one direction, you arrive in a city where you really don’t need a car. Would be great if Atlanta (originally called Terminus, as it was the place where many train lines ended) became known as a place people left their cars.
We’ve planned an upcoming trip to NYC by train. When you price the four airline tickets, getting to the airport, parking, then the trip into the city from La Guardia vs. arriving directly into Penn station, the prices are comparable. Maybe the more people do this, the more trains they’ll add to the route, ultimately moving the price downward.
Plus, besides being able to leave my shoes on until I want to take them off, it should be fun. And it you get to see all those backyards otherwise hidden from view.
Mon 16 Mar 2009
Posted by editor under societyAdd a Comment
Ah, the question. The answer is self-evident but we will continue to provide it.
The master’s of business administration, a gateway credential throughout corporate America, is especially coveted on Wall Street; in recent years, top business schools have routinely sent more than 40 percent of their graduates into the world of finance.
But with the economy in disarray and so many financial firms in free fall, analysts, and even educators themselves, are wondering if the way business students are taught may have contributed to the most serious economic crisis in decades.
“It is so obvious that something big has failed,” said Ángel Cabrera, dean of the Thunderbird School of Global Management in Glendale, Ariz. “We can look the other way, but come on. The C.E.O.’s of those companies, those are people we used to brag about. We cannot say, ‘Well, it wasn’t our fault’ when there is such a systemic, widespread failure of leadership.”
With apologies to the Thunderbird School of Global Management, all of the time, energy and soul expended separating you from your money has taken a toll, with interest compounded annually somewhere in the range of 8-10%, when the margin for error was minuscule. We/they didn’t have that much time, energy or soul to spare and now it looks a bit pathetic to say we need to tweak the edges of how we were doing things and somehow tack back toward some mythical center. Systemic means systemic and there is no polite way to systematically factor out people and planet as liabilities in pursuit of higher profits. So fond are we of the quote that sums up our civilization with two words and a contraction, “It’s just business.”
What’s left when that’s all that’s left? In an inconvenient bit of symmetry, no polite route will right this no-future course. Change your ways or have them changed for you. Smartest guys in the room, indeed.
Sun 15 Mar 2009
In the category of parallel universes, consensus continues to jell around the idea that measures to counter catastrophic climate change are really a bothersome nuisance thinking people would be better off ignoring. And while there is some psychological credence to accepting this plan, the downsides are also a tad unsettling.
How should one navigate this quagmire of conflicted opinion? With an automatic locking rear differential and an EPA est. 15/21 city/hwy? By contracting a conglomerate’s Greek Letter-plated consulting arm in order to reduce your company’s energy and water waste? Or how about an individual bubble all your own to ride out all those frosty Inland mornings when the tide washes in over the Handy-mart parking lot and you can’t find your crocs in time to leap over the puddles for your first Burp-y of the day? Okay… went a little too far with that last one, but for a Sunday we’re really putting our best cognitive dissonance on display.
While we’re putting our commercial proclivities to such good use, we might imagine a few ways to distract ourselves with causes that matter. Or the gymnastic possibility (nimble, strong) exists that we might not be able to this on our own. In tribute to an equality of possibilities, where no great consequence may outweigh another, where time is a mere illusion, a subtle question rests: when is a distraction not a distraction?
Fri 13 Mar 2009
Green business is through the roof! What does that mean, asketh thee? (scoff) It means all kinds of things.
But mostly it means that we need to get on top of this thing before it gets away from us. That means healthcare trains between central cities; that means whole suburban enclaves recycled into biodiesel; it means tilting at chicken litter windmills and staring directly into the solar fireball until your eyes burn and night falls, and we have to feel around for Braille texts to get our daily ration of Turgenev. Yes, Turgenev.
This is from his short story Enough, a fragment from the note-book of a dead artist.
It was at the end of March before Annunciation, soon after I had seen
thee for the first time and–not yet dreaming of what thou wouldst be to
me–already, silently, secretly, I bore thee in my heart. I chanced to
cross one of the great rivers of Russia. The ice had not yet broken up,
but looked swollen and dark; it was the fourth day of thaw. The snow was
melting everywhere–steadily but slowly; there was the running of water
on all sides; a noiseless wind strayed in the soft air. Earth and sky
alike were steeped in one unvarying milky hue; there was not fog nor was
there light; not one object stood out clear in the general whiteness,
everything looked both close and indistinct. I left my cart far behind
and walked swiftly over the ice of the river, and except the muffled
thud of my own steps heard not a sound. I went on enfolded on all sides
by the first breath, the first thrill, of early spring… and gradually
gaining force with every step, with every movement forwards, a glad
tremour sprang up and grew, all uncomprehended within me… it drew me
on, it hastened me, and so strong was the flood of gladness within me,
that I stood still at last and with questioning eyes looked round me, as
I would seek some outer cause of my mood of rapture…. All was soft,
white, slumbering, but I lifted my eyes; high in the heavens floated a
flock of birds flying back to us…. ‘Spring! welcome spring!’ I shouted
aloud: ‘welcome, life and love and happiness!’ And at that instance,
with sweetly troubling shock, suddenly like a cactus flower thy image
blossomed aflame within me, blossomed and grew, bewilderingly fair and
radiant, and I knew that I love thee, thee only–that I am all filled
full of thee….
I think of thee… and many other memories, other pictures float before
me with thee everywhere, at every turn of my life I meet thee. Now an
old Russian garden rises up before me on the slope of a hillside,
lighted up by the last rays of the summer sun. Behind the silver poplars
peeps out the wooden roof of the manor-house with a thin curl of reddish
smoke above the white chimney, and in the fence a little gate stands
just ajar, as though some one had drawn it to with faltering hand; and I
stand and wait and gaze at that gate and the sand of the garden
path–wonder and rapture in my heart. All that I behold seems new and
different; over all a breath of some glad, brooding mystery, and already
I catch the swift rustle of steps, and I stand intent and alert as a
bird with wings folded ready to take flight anew, and my heart burns and
shudders in joyous dread before the approaching, the alighting
Then I see an ancient cathedral in a beautiful, far-off land. In rows
kneel the close packed people; a breath of prayerful chill, of something
grave and melancholy is wafted from the high, bare roof, from the huge,
branching columns. Thou standest at my side, mute, apart, as though
knowing me not. Each fold of thy dark cloak hangs motionless as carved
in stone. Motionless, too, lie the bright patches cast by the stained
windows at thy feet on the worn flags. And lo, violently thrilling the
incense-clouded air, thrilling us within, rolled out the mighty flood of
the organ’s notes… and I saw thee paler, rigid–thy glance caressed
me, glided higher and rose heavenwards–while to me it seemed none but
an immortal soul could look so, with such eyes…
Another picture comes back to me.
No old-world temple subdues us with its stern magnificence; the low
walls of a little snug room shut us off from the whole world. What am I
saying? We are alone, alone in the whole world; except us two there is
nothing living–outside these friendly walls darkness and death and
emptiness… It is not the wind that howls without, not the rain
streaming in floods; without, Chaos wails and moans, his sightless eyes
are weeping. But with us all is peaceful and light and warm and
welcoming; something droll, something of childish innocence, like a
butterfly–isn’t it so?–flutters about us. We nestle close to one
another, we lean our heads together and both read a favourite book. I
feel the delicate vein beating in thy soft forehead; I hear that thou
livest, thou hearest that I am living, thy smile is born on my face
before it is on thine, thou makest mute answer to my mute question, thy
thoughts, my thoughts are like the two wings of one bird, lost in the
infinite blue… the last barriers have fallen–and so soothed, so
deepened is our love, so utterly has all apartness vanished that we have
no need for word or look to pass between us…. Only to breathe, to
breathe together is all we want, to be together and scarcely to be
conscious that we are together….
Thu 12 Mar 2009
So… I’m flipping through Corn & Soybean Digest the other day and… this image sort of jumped out at me.
Actually it was the cover story, so I flipped over to the article.
Depending on field conditions, the DB120 should plant 90-100 acres/hour at the recommended 5-5½ mph, according to Rippchen.
Near the end, the reporter gets to the essential question:
So, is this the limit for planter size? At least for a while, according to Rippchen and Bauer. “At this point, 120 ft. is a practical limit. You need to go in 30- or 40-ft. increments and I have a hard time getting my head around a 150-ft. planter,” he says. “The issue isn’t the weight in the field, but transporting the unit down the road. That puts the most load on the drawbar at the highest speed. We won’t introduce anything that our tractors can’t handle.”
I have a hard time getting my head around taking this seriously, even though I know it’s a real piece of machinery, written up in an honest-to-goodness, real live magazine with a masthead and a sub-title (’Maximizing Production and Marketing for Profit’). Aren’t we all, buddy.
I also know that we’re about as interested in what takes place behind the grocery store shelves and where the food comes from as we are what happens on the other end of the line when we flip on a light switch. The orange juice commercial comes to mind, where the lady reaches her hand through the empty shelving all the way back to the tree in the orchard just on the other side of the wall. We’ve got other things to communicate in truncated language about, after all.
Like how we’ve got to feed the world, and that to do so, we’ll need, among other things, the world’s largest planter. Also, a gigantic reset button for the nitrogen cycle would be nice, while we’re at it.
Wed 11 Mar 2009
Posted by editor under column1 Comment
New Flagpole column is up on the intersphere. I’ve always wondered about those ‘trust, but verify’ caveats in major arms control treaties and prenuptial agreements. They make a lot more sense when you see them as mere, though hardly just, contradictions.
Wed 11 Mar 2009
Posted by editor under energy
, society1 Comment
So, it’s funny how this oil derrick just looks like an I-beam with a few other chunks of steel welded to it, connected by a hinge to a sort of gallows. If you spend any time at all examining the picture for its constituent parts, it almost begins to break itself down. What other kinds of things might be made with these materials?
Many more pictures here of what happens to a place when a boom goes bust, especially one based on oil production. The sociological connection to everything required for extraction is not far removed from this idea; but neither is the way we shield ourselves and our tender sensibilities from the extraction costs when they include exploding bodies and flag-draped coffins. It’s scandalous how we permitted the government to ban photographs of soldiers returning home in cargo planes. That’s the extent of our honor right there. Look away, indeed. These are the costs of our dependence strategies, the further externalities, if you will, and if we can’t handle them then we should perhaps think twice about tying our liberty and freedom to gassing up.
These are among the cautionary guidelines we should consult in our decision-making. Without them, we’re just walking in front of cartoon scenery. You can’t section off moral hazard as though it’s a completely separate consideration. Unless you’re able to do that. Then, you’re all set!
I hope they’re making this up. According to wikipedia, the derrick device was named for its resemblance to a hangman’s gallows; the derrick-type gallows was itself named for an Elizabethan Era executioner.
Tue 10 Mar 2009
I try to resist the impulse to use pop songs in post titles, but I’m only human. My disdain for Wally what’shisname, however, remains in tact. S’why I get feverish in certain airports, methinks.
So Krugman believes we are fiscally morphing into our seemingly reserved and genuflective brethren. But if you look at what is meant by the words Japanese, economic and model in the 1990’s vintage, you’ll see that what people refer to as the ‘lost decade’ was merely a decade of flat growth. Well, tell you what:
Get. Used. To. It.
Otherwise called a starting place, for most of what is going to follow. The dissonance of what’s happening in the financial economy right now, talk of recovery and longing for normal times is all due to the fact that there’s no going back. And we shouldn’t see this as a bad thing. Our pent-up imaginations have all the rough stuff shoved to the fore, and we’ve conditioned ourselves to be righteously afraid of it. But it’s just us, our dogs, cats and cattle, and back in there somewhere also is the idyllic train rides to see your lover and long walks to the park, stolen flowers, broken kisses and other things you can’t put on a price tag on without them seeming like an old lady’s hat. The fact is old ladies are people and hats are things they wear out in the sun.
We’re trying to understand the tunnel of love from a technical standpoint and well, the two just don’t mix. You can’t say where or how we’ll come out of this, but seeing that as the fun part takes a little more than the promise of low, low prices or assembly-line built excitement. Sorry.
Technical note: I discovered posterous, and am trying to make the most out of the sweet spot of not knowing what it’s for before that, too, passes.
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