Difference between Wall Street and Madoff?

Q: So, what's the difference between Wall Street and Bernad Madoff?

A1: Madoff will spend time in prison.
A2: Madoff hadn't yet managed to involve the entire world in his Ponzi Scheme.

America is in for a rough ride, it seems. They are currently hit by a "triple whammy", consisting of some independent and interdependent situations.

[I can't seem to stop adding more links as the days go by - this is so interesting!]

The first problem, which everyone has understood, and often also have directly been touched by, is the housing price crash and credit crisis. Extremely simplified, the banks, insurance companies, rating agencies and large investors of wall street has by deep financial black magic "invented" money that by and large simply ceased to exist the second the housingmarket stopped going upwards. What they have done is to leverage their initial stash of money to an amazing degree, apparently up to 35 times. What you do is to take your dollar, get 34 more dollars from banks, and invest that. A 10% increase in the original investment now turns into a 350% increase on your dollar. The problem is that this also works the other way! So, ANY small decrease in the valuation of the underlying assets, which in this case to a large extent were people's houses, would amplify at least 35 times downward in the system. This in itself isn't all that bad - but since there is a huge feedback loop at play, it just continues downward by amplification of itself, in the same way it seemingly never stopped going upwards.

• A rather nice cartoon-style visualization of the credit crisis.


• January 22, 2009, From MIT's "View from the Top": The Future of the Economy.

The next problem, which one sometimes hear some mumblings about, but which largely has gone under the radar of most people, is America's federal deficit, which has become absurdly huge. USA have for several years been needing billions of dollars from external investors every month just to keep the wheels turning - this both because they import more than they export, and because it is expensive running such a big nation (and they even haven't got free healthcare nor education!). The net effect is that they spend more money than they earn - on a national scale. And the existing loans are of course already running an interest. As long as one aren't paying down on ones loan, the interest turn into compound interests - interest on the interests. This can actually lead to the situation where USA don't even have enough tax revenue to pay off the interest of what they have in debt. The root of this problem has nothing to do with the Crisis of Credit, and is of course extremely dangerous in itself.

(Note the dates of these next videos)

• August 28, 2007: A 60 minutes news story (only 8 minutes!) with David M. Walker, the Comptroller General of the Unites States's Government Accountability Office.


• February 08, 2007: YouTube video by the Comptroller General personally, about the deficit of USA, and part 2.

With the current mega crash of the financial institutions, USA feel that they have to bail out these banks, less their entire country would just stop working at all. This is because one needs the banking system for the wheels and gears of the country to turn around - all money are going through them, and if they just fully crashed, it would take months to get the wheels turning again, and in the meantime no-one could basically do any transactions, and nothing could thus be produced. This might have led to a complete breakdown of the society. It has been deemed that this cannot happen.

Since there was such a huge amount of "magicked" money in play, the government have to get hold of some actual money to inject into the supersized holes that opened up when the magic stopped working. This they were hoping to acquire by even more borrowing.

However, USA has, as described above, been living "above their means" for several years now, depending on this continuous supply of ever more new huge loans given largely by China. This is effectively like living on the credit card, and paying the interests by getting a new credit card and maxing out that too.

The recently released TIC data for January shows that there was a net outflow of money from USA. This number swings up and down, and have been negative before too - but the amount of money flow out during January is apparently worrisome compared to the trend. The Fed made a statement on March 18 that apparently can be read in a very dark way: What might have happened just days ago, possibly revealed by "private" TIC data (there is a lag of 1.5 months before this becomes public - while at least drafts of this data obviously is available to the governments before that), is that China has gotten cold feet, and basically feel that USA's credit rating has gone way down, worrying whether the stuff they've already bought might go massively down in value. Hence the money flow from China might already have all but stopped up.

The only way for a government to get hold of money when no one wants to borrow you cash, is to literally start the presses: Print those dollars! That should rationally lead to a marked decrease in the dollar's value, and hence inflation (The "insta-drop" in the exchange rate for the dollar-against-whatever-else a few days ago was most probably due to everybody's realization of this. It should fall further).

• March 16, 2009: Laura Mandaro @ Marketwatch: Foreign debt purchases fall sharply in January.


• March 17, 2009: Chris Martenson: A Funding Nightmare for the US.


• March 19, 2009: Karl Denninger: Bernanke Inserts Gun In Mouth.


• March 23, 2009: Steve Christ: The US Treasury Bubble: The worst kept secret on Wall Street.


• March 23, 2009: Rolfe Winkler @ Seeking Alpha: Added Debt Won't Rescue the Great American Ponzi Scheme.


• March 23, 2009: Jane Macartney @ Times Online: China proposes replacing the US dollar - they want a "world currency" instead.


• March 25, 2009: Karl Denninger: The End Game Approaches.

The third problem comes as a side effect of the credit crisis, and will compound the problems: Since the current crisis leads to people being fired because there aren't anyone buying the stuff they used to produce, the government gets another double-whammy: They have to pay benefits to these people, but even worse, they loose the tax income these people used to produce!

So, all in all: Three very bad effects at work: America is already living above their means, needing a continuous supply of fresh money in form of loans both to keep the system running, and to repay the existing loans. Then the economy suddenly starts crumbling due to a huge fault in the banking system, which means that America needs even more money to "fill in the holes" of the system. But to top this off, this same crisis leads to reduced production and consumption and rather massive job cuts (which also spirals), which lead both to a even bigger need for money for unemployement benefits AND to less income for the country in form of tax.

To round this off, read this Rolling Stone article. It is a lengthy 8 page feature, but I find it an extremely interesting read. It is maybe slightly conspiratorially inclined, but the research seems thorough.

• 19. March, 2009: Matt Taibbi @ Rolling Stone: The Big Takeover. The article starts being very good at the chapter "I. PATIENT ZERO", page 2.

What really is amazing, is that the stock markets around the world is going fast upwards these days. If the above logic has any merit at all, the dollar, and most probably also USA's economy, should be in for quite a ride downwards within a rather short time.

Intense. Wonder how this will pan out.

PS: In the Wikipedia article on Ponzi Scheme, I came across the scholarly article "Optimal Design of Ponzi Schemes in Finite Economies" by Utpal Bhattacharya. It was published in the Journal of Financial Intermediation, Volume 12, Issue 1, January 2003. It was submitted two years before that. This is a pay-article, but there seems to be a possibly earlier version available here for free(Click the "Download" link). Here's a Google Scholar link, and a standard Google Search link. The abstract goes like this, highlights by me: "As no rational agent would be willing to take part in the last round in a finite economy, it is difficult to design Ponzi schemes that are certain to explode. This paper argues that if agents correctly believe in the possibility of a partial bailout when a gigantic Ponzi scheme collapses, and they recognize that a bailout is tantamount to a redistribution of wealth from non-participants to participants, it may be rational for agents to participate, even if they know that it is the last round. We model a political economy where an unscrupulous profit-maximizing promoter can design gigantic Ponzi schemes to cynically exploit this “too big to fail” doctrine. We point to the fact that some of the spectacular Ponzi schemes in history occurred at times where and when such political economies existed—France (1719), Britain (1720), Russia (1994), and Albania (1997).". The thought of what might have happened here is actually rather chilling, if you ask me.

(Thanks to Øyvind Skårland for the "View from the top" and "gun in mouth" link, and Anders for the cartoon-style "CrisisOfCredit" link)

America to the Rescue!

This would have been extremely funny, wasn't it for the fact that it is instead deeply disturbing!

The video is from the Swedish site Bubblare.se, since YouTube apparently had to kill it off due to Viacom International Inc. doing the DMCA dance.

Google Mail - Gmail - have IMAP!

Google Mail, Gmail, have enabled IMAP for remote access! They formerly only had POP, which sucks for remote access.

Yes!

For those that doesn't get it instantly, this means that you may access your email using Thunderbird at home, Outlook at work (you must have a shitty job!), The Bat! at school and the very good Gmail web interface for everywhere else. Everything and everywhere will be synched: If you get an email and read it while at work, it will also pop up (as read) when you open up your Thunderbird at home, in the folder you moved it to when at work.

Many standard users choose to only use the Gmail web access system, as that is very simple to understand yet very flexible and powerful.

Google have choose to handle the tag/folder problem in the most obvious way: if you copy an email to another folder, it will still be the same email, just "tagged" with the new folder. This means that even if you remove an email from every IMAP folder, it will still show in the All mail folder. However, if you move it to Thrash or Spam, it will only reside there, and if you remove it from those, it'll be gone forever.

It was a breeze to set up in Thunderbird, everything just as expected.

For the ones that would get cracking: enable IMAP in the Gmail Settings (and click Save Settings!). The IMAP server is the obvious imap.gmail.com, using SSL (port 993, standard), and SMTP server, if you want your outgoing mail to go through Google instead of your ISP or your job or whatever, is the obvious smtp.gmail.com, using TLS. Since many ISPs block port 25 outgoing, thus hindering you from using another SMTP server than the ISPs' own, Google's SMTP server is also available at port 587. (The reason for blocking port 25 are good - it stops evil hackers from using zombie computers as spam servers).

Actually, using the Google SMTP server is a great option even if you don't use Gmail actively (you'll have to sign up for Gmail to be able to authenticate with the SMTP server, but you don't really need to use the actual Gmail). One reason is that the "outgoing email server settings" won't change if moving a laptop between home, work or a random coffee shop. Also, Google Mail's SMTP services implement DomainKeys and DKIM (same thing, really), so that your emails will get a huge "good score" on most spam-filtration systems on the reception side (your email won't end up in the SPAM folder of the recipient).

Lovely.

I will now change to using Gmail as mail host for my way to many accounts and folders, putting nearly my entire life in their hands..! (I already use Google Calendar!).

Proud America: The Waterboard

You Americans are really a nice bunch of fuckers..

Reading this article by Malcom Nance in the strange "Small Wars Journal" just makes me want to puke.

The above article mentions Tuol Sleng in Cambodia. This is the torture camp that Khmer Rouge employed, often seen in conjunction with The Killing Fields. I've also been there, and one cannot ever forget such a visit. Realizing that the USA actually employs the techniques described on the walls there is utterly atrocious - I have serious problems describing my feelings without resorting to pages and pages of profanities and wishing of imminent gruesome death to all involved.



(Here's a flicker photo set of Tuol Sleng. Have a browse. Tuol Sleng == Guantanamo.)

Jesus Fucking Christ, folks.

Please also take the time to read at least some of the 42 pages of this scholarly paper (pdf), titled "DROP BY DROP: Forgetting the history of water torture in U.S. Courts". The idea is that USA has several times been part of courts where people conducting waterboarding has been convicted harshly, up to life (I've also read somewhere that you gave the death penalty to several Japanese soliders for performing exactly waterboarding). Now all of a sudden you idiots employ the exact same tactics on your enemies, arguing for some insane reason that it is all perfectly legal, nice and ethical, and next to healthy for the victims. It is all thoroughly documented in the paper. It is revolting.

Your ugly leaders (and probably Jack Bauer in the "patriotic" 24-series) has destroyed your moral grounds and ethical foundations.



You have become scum.

I only hope that you some day will realize the HORRORS of your absolutely fucked up ways, and come back to the "western world" begging for forgiveness - which you shall not get, at least not from me.

This piece of history I shall always point to when USA is mentioned.

Quoting from Malcolm Nance's thorough article his three main points (sincerely hoping that he won't mind the context):

" There is No Debate Except for Torture Apologists

1. Waterboarding is a torture technique. Period.
...
2. Waterboarding is not a simulation.

Waterboarding is a controlled drowning that, in the American model, occurs under the watch of a doctor, a psychologist, an interrogator and a trained strap-in/strap-out team. It does not simulate drowning, as the lungs are actually filling with water. There is no way to simulate that. The victim is drowning. How much the victim is to drown depends on the desired result (in the form of answers to questions shouted into the victim’s face) and the obstinacy of the subject. A team doctor watches the quantity of water that is ingested and for the physiological signs which show when the drowning effect goes from painful psychological experience, to horrific suffocating punishment to the final death spiral.

Waterboarding is slow motion suffocation with enough time to contemplate the inevitability of black out and expiration –usually the person goes into hysterics on the board. For the uninitiated, it is horrifying to watch and if it goes wrong, it can lead straight to terminal hypoxia. When done right it is controlled death. Its lack of physical scarring allows the victim to recover and be threaten with its use again and again.

3. If you support the use of waterboarding on enemy captives, you support the use of that torture on any future American captives. ..."

The following video is from MSNBC's Morning Joe, broadcast on October 19, 2007.




Abu Ghraib, Guantanamo, "Extraordinary rendition", "enhanced interrogation techniques" and only the devil himself knows what else you folks have been up to. The horror. When are you ordinary Americans going to tell your SICK leaders to stop?

Dudes - I come exceptionally close to want you all to die horribly, knowing all these facts. What do you think all those "crazy muslims" want?

You are to thank yourself. Seriously - you are.

Update, Jan/Feb 2008: USA finally finally acknowledges that it has waterboarded at least three persons, and defends its practice, stating that it might be used again. An interesting observation from Jennifer Daskal, senior counterterrorist counsel for Human Rights Watch: "Under what circumstances would the United States ever accept as legal one of its citizens being strapped to a board and suffocated with water?".

You double-moral assholes.

Update October 2008: I hope you all saw the documentary "Torturing Democracy" that apparently aired on "PBS Stations Nationwide" on 17th of October. If you didn't, here's a search on YouTube for some snippets, here's the site for the documentary, here you can watch the entire documentary, and here you can "read it" (full annotated transcript with hundreds of references, direct link to pdf here). It should be compulsory education for your children. I mean, you are PROUD of this, aren't you? This isn't something that you'll need to hide away from your next generations, right?

You gave Japanese persons the death penalty for performing waterboarding on Americans in the trials after World War II. How will you go about now, after YOU have authorized all these interrogation tactics as "good to go"? Check this piece out:

Here's something more to read for you, from NY Times.

Check out these movies: Taxi to the Dark Side (torrent), The Road to Guantanamo (torrent). I'll add more as they come - it is nice to know that these acts by The US-of-A won't ever be forgotten by anyone. I will tell everyone I know about it. I will explain to my future children how America is a nation employing torture on grand scales, just like the worst regimes on earth (of course, you also have the death penalty).

I get physically ill, I want to throw up, by watching this, by reading about it. I just can not get myself to understand this: **AMERICA**, a democracy, is going about doing such extreme violations of .. EVERYTHING?? And understanding that many of you absolute assholes are even CONSIDERING voting in for presidential power that party that thrashed you into this, makes me even firmer in my understanding and knowledge about you: Most Americans have exceptionally low ethics and morals, and in addition are exceedingly dumb, having very low IQ. There is simply no other explanation for such completely unetical and irrational behaviour.

As I mentioned: You are to thank yourself.

An English blog too!

YAB - Yet Another Blog - this time in English!

(here's the Norwegian one..)

Since there only are about 4.7 million Norwegians, while about 6570 million people in the world, where between 450 and 2900 million people know some English, I reckon that I can heighten my chances of anyone else reading my thoughts if I also have a blog in English.

Although, zero times whatever is still not a lot, is it?

Some other links:
Worldometers (several interesting numbers about the world!)
ibilio's "worldpop" (another world population estimate)
US popclock (so many Americans - and they're growing!)
Second language (Wikipedia)
Breathing Earth Watch the simulation for a little while - Food for thought!

PS: My girlfriend pointed out that Swedes and Danes might be able to read my Norwegian blog too.. Good point: There are over 5.4 million Danes and 9.1 million Swedes.

PPS: I suddenly realized that the number of people on the earth increase by a good bit more than "one Norway" every month (~6.3 million and more). That's ... pretty intense.