Friday, August 26, 2011

Why Amazon Can't Make A Kindle In the USA

I was going to make this a longer post but I've been swamped with other things and have had no time to write. But this article in Forbes is too important go unmentioned.

As long as I'm posting naked links, I will also note without further comment that Act 2 of this re-enactment of the Great Depression seems to be proceeding right on schedule.

Thursday, August 18, 2011

Stock market reporting is broken

Actually, it's not just the reporting. Recommendations are broken too. Deeply. Fundamentally. It is a structural failure of the highest order.

In ninth grade civics class we we did a unit on the stock market. They taught us how to read the daily stock quotes in the newspaper (this was before the internet. Yes, I'm that old.) And our homework assignment was to take $10,000 in pretend money and put together a stock portfolio that we would track for a week. At the end of the week, whoever made the most "money" got some sort of a prize (I don't remember what it was. Yes, I'm that old.)

The kid who won got a 200% return in one week. He did it by "buying" a penny stock at 1/8 (they still used fractions in those days. Yes, I'm yada yada yada...) and "selling" it two days later at 3/8. It seemed like magic. If you could just figure out how to "pick the winners" you could make money. Lots and lots of money. Money money money money money. And so I, like so many before and after me, started looking at stock charts and thinking wistfully about how to obtain a copy of tomorrow's newspaper.

What they didn't tell us, and what I didn't figure out until many years and many lost dollars later, was that the stock market is (imagine this) a market, that is, a place where people come together to buy and sell stuff, in this case stocks. There is no magic. It's fundamentally no different than any other market. At root, the NYSE is just a bunch of folks with lemonade stands, except instead of lemonade they are selling stocks.

So what is it about the stock market that gets people so much more excited about it than lemonade stands? After all, you can make real money selling lemonade (or at least a synthetic brew that vaguely resembles lemonade, but that's another post). Two things. First, stocks are a virtual good, so they are mechanically and logistically easier to deal with than physical goods like lemons and sugar. You don't have to worry about transportation or storage. All you have to do is buy and sell. And this leads to the second attractive feature: price volatility.

Wait, what? Isn't price volatility a bad thing? Aren't we all getting nauseous from the market's recent roller coaster rides? Well, you might be getting nauseous, but I guarantee you that there are some traders out there -- the ones who have the balls or enough inside information to buy low and sell high -- who are making tons of money. And that is exactly what attracts people, the possibility of getting rich quick if you can just guess better than most people which way the market is going to move. Because of various logical fallacies that humans are chronically prone to (like confirmation bias) it is easy to convince yourself that you can do this. But by definition most people can't.

This fundamental irrationality is insidious. It has given rise to an entire industry carefully designed to take advantage of it. OK, maybe you aren't better than the next guy at predicting the market, but surely a professional who has studied the math can be, so if you can't call the market you can do the next best thing and hire someone who can. Vast numbers of people who would never dream of playing the market on their own hire self-styled "financial advisors" to do it for them. And it seems plausible that such talent should be available for hire. But the evidence is overwhelming that it isn't. Study after study has consistently shown that professional money managers cannot consistently beat the market, not even a little bit.

Here's why. Take a look at the two charts at the bottom of this page. (Go ahead and click on the link. It should open in a new window.) This site is a market for bitcoin but that's irrelevant for this discussion. What matters is the content of the graphs. The first one is a history of recent trades. This is the kind of chart that anyone who has ever followed the market is familiar with. It has the familiar ups and downs and twists and turns that make it oh so tempting to try to discern a lucrative pattern that everyone else has missed.

But the second chart is one that you probably haven't seen. It's a market depth chart. It shows a snapshot of the current order book for bitcoin on this exchange. It shows you how many bitcoins people are currently willing to buy and sell at various prices. The green bids on the left are the orders to buy, and the yellow asks on the right are the orders to sell. Notice that the order volume on both the buy and sell side taper off and fall to zero at the exact same price that the last trade of the day took place at (look at the extreme right hand side of the "recent trades" chart.) This is, of course, not a coincidence. If the two sides of the order book had any overlap, there would immediately be trades consummated that would eliminate it.

Now, it is important to note that the market depth chart is not a time history like the recent trades chart is. It is a snapshot of the state of the market at a particular instant in time. The actual history of the market is not the history of consummated transactions, but the history of the order book, which is vastly more information than the history of consummated trades. The American stock market generates terabytes of history data every single day.

And behind the order book there is an even bigger reservoir of hidden state, which is all of the market analysts and individual traders making decisions about whether to buy or sell.

(At this point stop an ask yourself: what would have happened if my ninth grade colleague had done his trading with real money.)

We are now in a position to understand why reporting on the stock market is so utterly broken. Let's start with the evening news. It's probably safe to say that there is not a single general news outlet that does not dutifully report the closing price of the Dow Jones Industrial Average every single day, and the absolute difference between that price and the previous day's closing price. Sometimes they'll leave out the price and only report on the difference. Even on NPR, which really ought to know better, you will hear regularly throughout the day, "The Dow is up by 27 points, the NASDAQ is down by 3." On tonight's evening news the 420 point drop in the Dow will almost certainly be the lead story, with commentators swooning over the fact that this is the ninth biggest point drop ever in the Dow's history or whatever it is.

All of this is almost completely bogus. For starters, the Dow is only a sampling (albeit a fairly representative one) of the overall market. For afters, the closing price is just the price at which the last trade of the day happened to take place. It is a single data point from a large collection of data points (the trade history) which in turn is driven by an even larger collection of data points (the order book and its history) which in turn is driven by an even larger collection of data points, many (most) of which are simply inaccessible.

The bogosity doesn't stop there. Tonight you will hear that so-and-so-many trillion dollars of wealth were "wiped out" by today's Dow drop or some such nonsense. No, they weren't. The value of the market is NOT the closing price multiplied by the number of shares. That assumes that you could sell all the shares for the closing price. If you did that experiment you would find very quickly that this assumption is false. Stock prices obey the laws of supply and demand just like everything else, and if you flood the market with product the price will inevitably go down.

If you wanted to mislead people about what really goes on in the stock market you could hardly do better than to focus their attention on the current state of the Dow relative to yesterday's closing price. And yet that is what every single news outlet does.


Well, part of it is simple inertia. Daily reporting of stock market closing prices goes back decades. I can remember watching the CBS Evening News with Walter Cronkite (when I was a kid -- I'm not that old ;-) and even Grandpa Walter was doing it, except that back then the mantra was, "The average price per share on the New York Stock Exchange gained an eighth of a point, and a quarter point on the American exchange." Today so many people pay attention to the Dow that it actually matters because of the psychological effects that big Dow swings have on people, which in turn can create market movement on its own. But the closing price of the Dow doesn't really matter. The Dow by now is kind of like Paris Hilton, famous only for being famous. If ever there was a tail that wagged the dog, the daily closing price of INDU is it.

But part if it is because there are people who make money off of your ignorance. Vast, vast piles of money. The "financial services industry" (I put it in scare quotes because it's quite possibly a net drain on the economy at this point) is about 20% of the U.S. economy. Not all of that is waste. You can't have capitalism without capital markets. But around the core capital markets that enable a modern industrial economy has grown a vast parasitic ecosystem of "financial advisors" whose livelihood depends on convincing you that they know more about the markets than you do.

And in fact they do know more about the markets than you do. They know that the best way to make money in the markets is to convince people that they know how to make money in the markets (whether or not it's actually true) so that they can play the market with your money instead of theirs. And collect fees from you.

To be fair, there is one -- and only one -- market strategy that does work. It's called asset allocation, and it can give you a small edge in terms of risk-reward over the market as a whole. The math behind this strategy is a little hairy, but not beyond the capabilities of any reasonably bright math undergrad. But anyone who tells you that they can do better than that is a flim-flam artist. (And anyone who gets a hundred million dollars a year to do this work is a crook.)

So all of those stock picks? Buy and sell recommendations? Almost entirely bogus. And you can tell that they're bogus by the form that they take: buy or sell. A recommendation to buy or sell is meaningless out of context. The only kind of recommendation that could possibly make sense is a recommendation to buy or sell within some particular time window, below (for buying) or above (for selling) some particular price. Every stock is worth buying at some price (unless the company is actually bankrupt). And every stock is worth selling at some other price. A stock recommendation that even had a chance of being worthwhile would take the form of "We believe the actual market value of this stock over a time interval T is between X and Y. So if during T the price is below X, buy. If it's above Y, sell. And if it's between X and Y hold." Or something like that. Whether or not you should actually buy or sell depends on a ton of other factors, like your tax situation, whether or not you need cash, your tolerance for risk, etc. etc. etc. But a naked buy/sell recommendation cannot possibly have any content, and study after study shows that this is so.

Tuesday, August 16, 2011

It's getting crowded in here

The club of people noticing eerie parallels between 2011 and the 1930s welcomes its newest member, Paul B Ferrell from MarketWatch:

Listen to that hissing: The fuse is rapidly burning, warning us. Wake up before the rage explodes in your face. This firestorm is endangering America’s future. From forces outside, yes. But far more deadly, from deep within our collective psyche. We have lost our moral compass. We are self-destructing.

Crackpot warning? No. This warning comes from the elite International Monetary Fund. A recent IMF report looked at “the causes of the two major U.S. economic crises over the past 100 years, the Great Depression of 1929 and the Great Recession of 2007,” writes Rana Foroohar, an economics editor at Time magazine.

“There are two remarkable similarities in the eras that preceded these crises. Both saw a sharp increase in income inequality and household-debt-to-income ratios.” And in each case, “as the poor and middle-class were squeezed, they tried to cope by borrowing to maintain their standard of living.”

But the rich “got richer, by lending, and looked for more places to invest, bidding up securities that eventually exploded in everyone’s face. In both eras, financial deregulation and loose monetary policies played roles in creating the bubble. But inequality itself — and the political pressure not to reverse it, but to hide it — was a crucial factor in the meltdown. The shrinking middle isn’t a symptom of the downturn. It’s the source of it.” Today the consequences of the meltdown still haunt us — there’s more to come.

There’s a new bubble blowing. No one can stop it ... soon it will explode.

Worth reading the whole thing.

Sunday, August 14, 2011

Karl Marx was right

So says Nuriel Roubini, the guy who called the 2008 crash.

[Businesses are] not adding workers because there’s not enough final demand, but there’s a paradox, a Catch-22. If you’re not hiring workers, there’s not enough labor income, enough consumer confidence, enough consumption, not enough final demand. In the last two or three years, we’ve actually had a worsening because we’ve had a massive redistribution of income from labor to capital, from wages to profits, and the inequality of income has increased and the marginal propensity to spend of a household is greater than the marginal propensity of a firm because they have a greater propensity to save, that is firms compared to households. So the redistribution of income and wealth makes the problem of inadequate aggregate demand even worse.

Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That’s what has happened. We thought that markets worked. They’re not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption. That’s why it’s a self-destructive process.


From The Salt Lake Tribune:

The Lottery Economy

Here's how to solve all of the world's economic problems: invent a super-virulent strain of the ebola virus that will kill everyone on earth within a month or two. Voila! No more economic problems. You can't have economic problems without an economy.

What? Not the answer you were looking for? Not surprising. I put forth that extreme position to make this point: underlying any discussion of a solution to a problem are some tacit assumptions, like that you want to cure the disease without killing the patient. Yes, you can get rid of a whole host of problems (cancer, AIDS, hate crimes, athlete's foot) by exterminating humans from the planet, but surely everyone agrees that that is clearly missing the point?

Well, no. Not everyone. There are people who contemplate a planet devoid of humans with varying degrees of seriousness. And actively seeking a world devoid of one's own descendants (a.k.a choosing not to have children) is nowadays not uncommon. And there are a lot of people who argue in all seriousness that things would be better if there were fewer people, even if they stop short of advocating getting rid of them altogether.

Different people have different ideas of what constitutes a good outcome. Some people think that having a big family is the good life, others think it's a yacht and a private jet, and still others think that what really matters in life is getting right with Allah.

What I'm winding up to here is not the usual despair about the intractability of getting people to agree on fundamental issues, but wonder at the remarkable fact that we can afford to have these disagreements. Disagreement is a luxury that most creatures on this planet can't afford. You never see lions arguing about whether it is morally correct to eat wildebeests. They take what they can get or they starve.

It's important to keep things in perspective. Being able to get a banana any day of the year by going to the store and handing someone a piece of paper is not the natural order of things. It is only possible because we humans have built this thing called civilization, on which is layered the amazing system known as the global economy.

I have said in the past that one of the fundamental problems we are having in the U.S. today is that people have lost sight of the distinction between money and wealth. I think the problem actually runs even deeper than that. What people have lost sight of is the relationship between economies, civilizations, and quality metrics.

Civilization at root is based on division of labor. Some people do one kind of work, other people do other kinds of work, and so the overhead involved in learning how to do a particular task and become proficient at it is spread out over a population. Instead of everyone having to learn to do everything, an individual only has to learn to do one thing, and so the whole becomes greater than the sum of its parts.

It's a terrific theory, but it has two problems: first, how do you decide who has to do the dirty work? If everyone decides to be a lawyer and no one is left to fix the plumbing the system breaks down. And second, how do you decide how to distribute the proceeds of the system? And then there is the meta-problem of how to decide who makes the decisions. Obviously, being a decider is preferable to being a decidee (just ask George Bush), which leads to certain conflicts of interest.

In the very earliest civilizations, someone managed to convince everyone else that they should be the decider either by killing all the rivals or convincing people that they were anointed by God (sometimes both). But then we invented trade, which is even more powerful and amazing than division of labor. Division of labor produces dramatic efficiency gains but at the cost of having to solve the problem of decision-making. Trade allows for decentralized decision-making that results in improved outcomes even -- in fact especially -- in the face of different quality metrics. This is an amazing result. It means that you and I can interact in a way that we both agree is mutually beneficial even if we don't agree on what that benefit is! We can have completely different quality metrics and still cooperate to mutually agreed upon mutual benefit. Trade is white magic.

To complete the trifecta we invented money, which makes trade orders of magnitude more efficient. Before money, in order to trade you had to find another person who wanted what you had and who also had what you wanted. It was like dating, with all of its attendant difficulties. (In fact, the reason finding a mate is so troublesome is that it is one of the few kinds of exchange that cannot be facilitated by money.) With the advent of money that problem went away. With money you can buy and sell independently. You still need to find a corresponding seller or buyer depending on which you want to do. But it's a lot easier to find someone who wants to buy a goat and then someone else who wants to sell a pair of shoes than it is to find someone who wants to trade shoes for a goat. (It also solves the problem of how to make change for a goat.)

The upshot of all this is that you can go to the store and buy a banana for the equivalent of about 20 minutes of menial labor. It is truly an amazing thing. Our simian forebears would be incredulous.

Money, alas, is not quite as free of adverse side-effects as trade. The only way to conduct trade is through the provision of mutual benefit (otherwise it isn't trade). Alas, there are two ways to acquire money. One is to produce and sell valuable goods and services. This is the way of Jedi. The other is to game the system. That is the dark side.

There are lots of ways to game the system. You can sell snake oil. You can run a Ponzi scheme. You can acquire a monopoly which allows you to impose tolls.

In the absence of a mechanism to keep people from gaming the system, small disparities in economic power tend to be amplified through positive-feedback effects. If I have enough money I can buy media outlets through which I can influence your thinking. I can give money to government officials so that they will pass laws that unfairly benefit me. I can run my businesses in a way that makes it all but impossible for you to acquire any resources beyond what you need to subsist. The result is the creation of an oligarchy.

This is the problem we have today in the United States. Our country is no longer a democracy, it is a moneyocracy. One dollar, one vote. Which might be acceptable if all those dollars represented the creation of value, but they don't. By and large today, the people making the money are not the ones creating value, they are the ones who are gaming the system. There are, of course, exceptions. But they are a rapidly shrinking minority.

Aside from the fact that the diversion of money to non-productive activity is a drain on the economy, there is an even more insidious and corrosive effect. Those who have acquired money by gaming the system generally live in denial about this. People don't like to think of themselves as parasites, so they invent elaborate stories about how they are producing value by "providing liquidity" or some such bullshit. This begins a process of decoupling decision-making from reality. The end result of this process is a world where the most ridiculous nonsense becomes not just part of the debate but the prevailing view. It begins with investment bankers being in denial about the fact that they are parasites on society. It progresses from there to the belief that the best way to deal with a recession is to cut government spending. It ends with most of the presidential candidates from one of the two major political parties professing to believe in creationism.

Once upon a time we were a country where wealth was more or less correlated with the creation of value. Americans made money building railroads or making steel or inventing computers. There was a strong middle class, so even if you weren't extraordinarily talented you still had a pretty decent shot at a car and a house with a white picket fence if you showed up for work. We had a grip on reality. Science was cool. We invented the Internet and sent men to the moon.

There is still a slow trickle of innovation coming out of the U.S., but the defining themes of this country today are not the latest technological advances but rather shrill ideology about things like terrorism and drugs, epic fiscal irresponsibility, voters who say things like "get government out of my medicare" with a straight face, and political extremism that a few weeks ago very nearly sent us over a cliff.

Above all, we have a tiny minority of people who have won the lottery (myself included) and a huge majority of people who are somewhere between struggling to make ends meet and being on the street. It is no coincidence that gambling is on the rise in the U.S. The entire economy is shifting from merit-based capitalism to a lottery economy. Instead of a pension, you get a 401-K, which may or may not leave you with enough to retire depending on what the stock market does. Instead of a steady job, you get contract work, which may or may not be there next week. Instead of a social safety net, you get your share of a mortgage that you didn't sign up for and have very little hope of ever paying back.

Unless you win the lottery.

If you win the lottery, which nowadays pretty much means being an early employee at a company that goes IPO or making partner at Goldman Sachs, then you don't need a social safety net. You don't need a steady job. You don't need a pension. You get to be one of the people who makes the decisions, buys the politicians, bypasses the security lines at the airport.

But your odds are not good. The top 1% now own about 40% of the nation's wealth. Your odds of being in the top 1% are about 1 in 100. Are you feeling lucky? And do you want to live in a country where that question is the one that decides the fate of your children?

The reason I support raising taxes on rich people is not just because it has to be done to close the budget deficit. There's a much deeper reason than that. Taxing the super-rich provides a vital countervailing force to the natural tendency of money and power to concentrate in the hands of the few people who are most willing to game the system and most able to be in denial about it. The corrosive effects of the phenomenon on the fabric of society are evident everywhere today. Our infrastructure is crumbling. Our people are out of work. The middle class an endangered species. Our government is dysfunctional.

It doesn't have to be this way. We don't have to have a lottery economy. But the first step to recovery from any addiction is always the hardest: admitting to yourself that you have a problem.

[UPDATE: The lead story of the on-line edition of the NYT this morning is "Starved State Budgets Inspire New Look at Web Gambling."]

Saturday, August 13, 2011

Three geopolitical oddities

Did you know that there is a part of the continental United States that it not actually connected to the rest of the continental United States? It's called Point Roberts and it consists of the southern part of a peninsula that sticks down off of southern Vancouver just below the 45th parallel, which marks the border between the U.S. and Canada. I've been there. There is an actual border crossing manned by actual border crossing guards whose salaries are paid for by your (if you're an American) taxpayer dollars. These guards defend the 2,739 residents of Point Roberts from invasion by Canadian militants. They don't do a very good job. I visited the place in 2009 and was able to walk right past the checkpoint from Canada into the United States unchallenged. It was not until I tried to get back into Canada from whence I had come that I was challenged by a guard on the Canadian side.

This bit of geopolitical weirdness is not unique. There is, according to Google maps, a tiny bit of Austria that juts out into Germany. This piece of Austria is technically contiguous with the rest of the country, but the place where it connects is only about 150 feet wide, and there are no road that go through it. To get from this part of Austria to the rest of the country without hiking you have to go through Germany.

But the weirdest example of bits of country in random places has to be Oman. There is an enclave of Oman called Madha that is completely encircled by Fujaira, one of the United Arab Emerates. And completely encircled by Madha is the enclave of Nahwa, which belongs to the Emirate of Sharjah, the main part of which is next to Dubai. And as if that weren't bad enough, there is a third discontiguous part of Oman called Musandam at the northern tip of the Arabian peninsula.

Go figure.

Friday, August 12, 2011

Is history repeating itself?

The NYT thinks so:

The events of the last few weeks — gridlock in Washington, brinksmanship over raising the debt ceiling, Standard & Poor’s downgrade of long-term Treasuries, renewed fears about European debt and a dizzying plunge in the stock market — bear an intriguing resemblance to some of the events of 1937-38, the so-called recession within the Depression, with a major caveat: it was a lot worse back then.


“The parallels to what is happening now are very strong,” Robert McElvaine, author of “The Great Depression: America, 1929-1941” and a professor of history at Millsaps College, said this week. Then as now, policy makers were struggling with how and when to turn off the fiscal stimulus and monetary easing that had been used to combat the initial crisis.

Are we at similar risk today? David Bianco, chief investment strategist for Merrill Lynch Bank of America, told me this week that “the market is collapsing faster than any fundamentals would warrant.” The possibility that the United States faces a recession as bad as 1937’s seems far-fetched. Nonetheless, Mr. Bianco notes that the market is now pricing in an 80 percent chance of recession, one likely to be more severe than in 1991.

Actually worth reading the whole thing. It's an interesting analysis.

Thursday, August 11, 2011

Yes, software patents are evil (and what to do about it)

There's been a flurry of discussion on HN recently about patents. In particular, Paul Graham's 2006 essay on the topic is making the rounds again. As always, I have a lot of respect for Paul, and he usually gets things right, but not this time. He writes:

One thing I do feel pretty certain of is that if you're against software patents, you're against patents in general. Gradually our machines consist more and more of software. Things that used to be done with levers and cams and gears are now done with loops and trees and closures. There's nothing special about physical embodiments of control systems that should make them patentable, and the software equivalent not.

No, that's not true. It's a specific example of a more general fallacy which is sort of the inverse of the slippery-slope fallacy. (This version of the fallacy probably has a name too, but I can't find it.) The slippery slope fallacy argues against a small policy change on the grounds that it might lead to a larger policy change whose consequences are clearly undesirable. (This is used, for example, to argue against gay marriage because it might lead some day to people marrying their pet hamsters.) The inverse fallacy is that because we can't draw sharp lines dividing a continuum into discrete chunks that we should just give up and treat the entire continuum as if there were not distinctions to be made at all. This is Graham's version of the fallacy. Because our machines gradually consist "more and more" of software there's no point in trying to draw a line between inventions that consist of software and those that don't.

There are two reasons this is wrong. First, there is a sharp line you can draw between an invention that consists partly or wholly of software but where the complexity of the problem that the invention solves is driven by features of the physical world. For example, consider an algorithm for generating and recognizing QR codes. The reason this is hard is because to be useful a QR code has to be rendered on a physical medium, and then that image has to be captured by a camera. In that process, the original data can be obscured and corrupted in a large number of different ways. The image can be noisy or partially obscured. The camera can be rotated or held an an oblique angle. All of these things make dealing with QR codes hard. The reason the QR code algorithms are useful is that they solve these problems. That is what makes them worthy of being patented.

Contrast that with this patent on multiply-linked lists. This is a patent that clearly should never have been issued. The prior art goes back at least as far as 1970, probably as far back as 1959, and possibly even earlier than that. But independent of the prior art, it is a pure software patent. The problem it addresses (insofar as it addresses a problem at all) does not arise from the physical world. It is a problem and corresponding solution that exists entirely in the realm of software and abstract mathematics.

Now, there are some ideas in this realm that are also worthy of patents, like elliptic curve cryptography. The problem is that the patent office has shown itself to be singularly inept at distinguishing worthy software patents from worthless ones, and the worthless ones are doing serious damage to our economy. So this is the second reason that opposing software patents is not opposing patents in general. It is arguable that empirically software patents are doing more harm than good, that this is not the case (for whatever reason) in non-software patents, and so one can reasonably oppose software patents without opposing patents in general on purely practical grounds.

But I think there is a happy middle ground that would make everyone happy. I've proposed this before, I'll propose it again: simply open the patent issuing process up to public comment. Before a patent is issued, publish the patent and invite public comment. All the PTO needs to deny a patent is plausible deniability that it should not be issued, and I'm sure there are plenty of volunteers in the software world who would be more than happy to spend some time policing the system. It's a win-win. Which means it almost certainly won't happen.

Now I'm really worried

This made me laugh:

The heads of JPMorgan, Bank of America and Citigroup avow that a repeat of the 2008 financial crisis is not looming. The Dow falls 520 points.

How to fix the economic mess

One of my personal rules is that if you complain about a problem it's incumbent on you to propose a solution. So here goes:

1. Re-regulate investment banking. Investment banks should go back to being what they once were, small partnerships of high net worth individuals. They should not be public companies, and they should not be allowed to invest other people's money. Un-repeal Glass-Steagall. (Banking should be a commodity. No one should get rich from banking. That being a banker is one of the most lucrative careers a person can have nowadays is just one of the symptoms of how badly screwed up our priorities are.)

2. Institute patent reform. Specifically, institute a system of peer-review where the public is invited to comment on, cite prior art for, and opine on the obviousness of patents before they are issued. Most patents being issued today are bogus and only serve to feed patent trolls and stifle innovation. Patents on human genes should be eliminated entirely. These are clearly discoveries, not inventions.

3. Cut defense spending. The amount of money we spend on defense is just ridiculous. Spend the money instead on alternative energy research and development.

4. Let the Bush tax cuts expire. Even better, raise top marginal rates to 50% or more, but allow people to spread windfalls out over several years so that you only get pushed into the top brackets if you make obscene amounts of money on a sustained basis.

5. Raise the retirement age. Index it to life expectancy. Means-test social security.

6. Institute single-payer healthcare. (Hey, a boy can dream, can't he?)

7. Listen to this guy

Since none of these things are likely to happen any time soon (except maybe #7), I'm not going to spend much time elaborating on them. I just wanted to go on the record with my suggestions so that I can carry on complaining without feeling guilty about it ;-)

Deja vu all over again

The NYT wonders:

It feels eerily familiar: Stocks are plummeting. The economy is slowing. Politicians are scrambling to find solutions but are mired in disagreement.

Many Americans are wondering whether they are in for a repeat of the financial crisis of 2008.

No, this is not a repeat of 2008. This time will be worse. Why? Because:

1. All of the problems we had in 2008 are still with us in 2011. We have done absolutely nothing to actually address the underlying problems that led to the crash of 2008. All of the same people are still in charge (I'm referring here to all the Goldman Sachs alums running the treasury). All of the same policies are still in place. All we have done is throw a few hundred billion dollars at the economy, which has been enough to stave off complete catastrophe for the past three years.

2. We have used up what little margin we had. Back in 2008 we had money (well, to be more precise, we could borrow money) to throw at the problem. Finding more money to borrow to throw at the problem to stave off catastrophe this time will be much harder, and in the current political climate, probably impossible.

The result, almost certainly, will be at best a double-dip recession. And we might be looking at Great Depression, the sequel depending on how long it takes for the American People to come to their senses and abandon the tea party.

I've said this before, I'll say it again: the fundamental problem with the United States of America is that at all levels of society we have lost sight of the difference between money and wealth. At every stratum, from the very bottom to the very top, you can find overwhelming majorities of people who believe that having a lot of money is the same thing as being rich. And what these people are about to find out the hard way, like they did in the Weimar Republic, is that it isn't true.

The parallels between what is happening today and what happened in the world in the 1920's and 30's is really getting very eerie indeed, including all of the people who are saying that it can't get that bad. It might not. But it can. And if we don't do something about it, it will.

Saturday, August 06, 2011

The right to privacy redux

I have been prompted by circumstance (don't ask, it's complicated) to read parts of the Constitution of India. It is, according to Wikipedia, the longest constitution of any of the world's democracies, and at 417 pages (including an index) I believe it.

The part that has become of particular interest to me of late is Part III - Fundamental Rights. It's the Indian counterpart to the first ten amendments to the U.S. Constitution, and it includes this:

19. (1) All citizens shall have the right—
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions;
(d) to move freely throughout the territory of India;
(e) to reside and settle in any part of the territory of India; and
(g) to practise any profession, or to carry on any occupation, trade or business.

Ever since Roe v. Wade, American conservatives have been on the warpath against so-called "penumbral rights", those rights that are not specifically enumerated in the Bill of Rights but are inferred to exist under the auspices of the ninth amendment, which Robert Bork famously referred to as "an inkblot."

To those who would deny the ninth amendment's imputation of a right to privacy I put the following question: do American's have the right "to move freely" through the United States? Or is this a privilege granted to the people by the government (like driving) that could legitimately be taken away if the government saw fit to do so?

It's an interesting question in light of the explicit granting of the right "to practise any profession, or to carry on any occupation, trade or business" in the Indian constitution. Americans specifically do not have this right. To be a lawyer or a doctor, even in some places a massage therapist of a hairdresser, you must obtain a license from the government. You don't need a license to move to a different house. But could the government Constitutionally require one?

I think that the idea that freedom of residence (modulo one's ability to afford it) is not a fundamental right is anathema to the American spirit. And yet nowhere in the text of the U.S. Constitution is this right to be found. The Bill of Rights grants us (at least ostensibly) the right to be secure in our houses, but not to change them at will. So if you're a right-to-lifer of the Borkan persuasion, I don't see any way that you can argue that the ninth amendment does not grant a right to privacy without also taking the position that the government can, if it wants to, restrict where you can live.

That is, unless you're willing to be a hypocrite. But then again, hypocrisy is not in short supply on the right these days.

Personally, I can hardly imagine a more un-American attitude.