Expansion Valve

Calorie counting is the only diet method you ever really need to know

2011-12-15T22:00:00.000-08:00

Caveat emptor. This is only my experience, but in my uncredentialed and completely unqualified opinion, it's probably applicable to most otherwise healthy people.

Before Thanksgiving 2010, I was listening this "The Skeptics Guide to the Universe" podcast, and mentioned among the stories was one called The Twinkie Diet about this nutritionist who held a premise that challenges most of the weight-loss industry's fad diets-du-jour: that you can lose weight on any diet, because it is calories that count. To drive home the point, he set for himself the challenge of losing significant weight on a diet consisting almost entirely of convenience store junk food. Two months and many cans of pop, packets of Doritos, and Twinkie wrappers later he'd done it, down 27 pounds.

Navigation

Background to my experiment
The process in 7 points
Examples: determining calorie content of meals
Further examples: determining a calorie budget and tracking your progress

Well up until I heard this story, I had not seriously considered my eating habits since college. I generally just ate when hungry, until full. Sometimes I got a bit more than full, but...I'd resolve to get smaller eyes next time.

A seriously scrawny boy in high-school, these little revised habits gradually changed me into a thicker dude. I don't believe I looked seriously heavy, I think I wore the extra weight well enough, but I gradually couldn't avoid recognizing that I was overweight. For the longest time, this never bothered me a bit. But once I tipped the scales at 220 pounds I began to wonder when this slow creep was ever going to stop, and if there was any way I could maybe even reverse it.

I then heard the story above and became inspired to try a little experiment to replicate that scientist's results. My wife decided to join me, and with a spreadsheet, a web resource, and some diligence, a year later we've together lost more than 90 pounds. It has been an awesome experience; we've learned so much and now enjoy a secure feeling about being masters of our weight. Today, we're about a month into a coasting phase post weight loss, where we continue utilizing the very same method we employed to guide our loss, retrimmed so as to help us maintain the weight we have reached.

All we did was what Prof. Haub mentioned in the podcast had done, count calories. Would you like to try? I'll tell you how I approached it.

First of all, I didn't want to eat the way Haub did. I didn't need to prove his thesis. I just wanted to eat the way I like to, and still shed some pounds for myself. I was enamored with the idea that a diet didn't have to be about deprivation and radical changes.

In a nutshell—you simply determine how many calories your body is likely using, consider how fast you would like to lose weight, and with the help of some simple math determine a calorie budget which will produce that result. Then you just try your best to eat only up to that budget, tracking your progress by logging the calories you consume and noting your weight. Every so often, you analyze this data to see how you're progressing, which will tell you if and how you might tweak your plan.

By ratcheting the whole level of personal investment and required lifestyle changes down a bunch of notches, I think you prime yourself to be more successful. You turn the relationship between food and weight from a nebulous one you don't really understand and just guess at, into a concrete one that is as plain and obvious as the numbers in your notebook.

Doing this is easy in concept, and fairly easy also in practice once you have experience. Just beginning (especially to a non-technical person) it may seem daunting. Newbies will be more comfortable taking small steps and not attaching any great mental significance to the outcome. Treat this as an experiment. Set it up, give it a try, record your progress, analyze the result. How did it go? Take it another step! Interest and motivation to act like a data-driven researcher makes this method actually fun and exciting. Were you a science nerd in school?

This method does not consider fitness (oh god...I hate gyms, and pretty much the whole American gym-culture). Muscle weighs more than fat, so you can be heavier and still look great when you're a fit person, blah blah. This method shouldn't alter your existing fitness-level negatively if you're eating enough, which you always should...just not more than.

If you had a beer gut before, you'll likely still have one after, it'll just be smaller. You'll be less winded climbing stairs, but that'll be because you're not carrying tens of pounds of excess weight on your bones. If you want to be more fit as well as weigh less, you'll need to add in some exercise...but this is not specifically a must. Exercising will make you hungrier; the more strenuous forms will help you burn more calories, allowing you to eat MORE! My personal data suggest, however, that lighter exercise may increase your appetite more than the increased calorie burn resulting from it. This could make it easier to slip up and eat more than you intend, if you're sloppy with your record keeping. You will have to experiment with that. I make no representations about how you might go about handling your fitness. You're an adult, do what you must and live with your choices.

Also, this method does not consider nutrition. It's left to you to determine the precise foods you want to eat to ensure you get the nutrients you need and not too much of whatever science is telling us is bad. The best thing is probably variety. If you're not eating the same stuff every day, and your plate has colorful foods on it, you're probably doing this part right. Eh, well enough. We all die, eventually.

That said, this is a useful two-edge sword. If it's steak and ice-cream you crave, then you can have it and still lose weight. Since you're controlling the total calories, it'll simply be a smaller steak and fewer scoops. Psychologically, I can see kow this can be helpful to motivate people to actually want to stay with their plan. This was my experience.

So, as Mr. Scientist there showed, this method can work no matter what you eat. You may find that in time, your preferences may get healthier naturally, because fresh fruits and veggies, and made-from-scratch dishes are far less calorie dense than processed ready-to-eat foods. You'll discover that you can enjoy more food when you choose some fresher options made at home, than you could if you ate nothing but frozen dinners or fast-food.

This next idea may be hard to take at first, but if you start to have success, you're likely to adapt just fine:

This method does not stop! It is a permanent lifestyle change which you will establish, and then tinker with at the margins forever-after. Once you've reached your weight loss goals, your reward is that you'll be able to eat MORE again! Hell yeah! But never like you did before, however, that's what got you reading this.

You will be able to bump up your consumption and eat your full daily calorie burn, the amount of which will be evident by the data you're logging. But not more. Further, you'll need to be continuing to record your intake and adjust your calorie allowance to account for the passing of time. With your goal met, you may be able to keep the records on a less-than-daily basis. But, I'd be careful and hold off until you're well established at your goal weight. You'll need this data to identify trends and adjust your calorie budget to continue to maintain the weight level you were so diligent at reaching. The good news will be that this is no harder than the weight-loss phase was, you'll be experienced with the record keeping reducing that burden, and more importantly...you will be eating a little more.

Alright. The simple truth underpinning the whole process is:

if calories burned > calories consumed ⇒ weight will be lost

Your body will use your fat and/or muscle reserves to meet your energy demand that is in excess of your eating.

Calories burned < calories consumed ⇒ why you put on weight you didn't want in the first place.

So to remove the weight, you simply need to learn how many calories your body is burning, then consume less. And that's it.

The rest of this post tries to provide you with ideas for a framework to help you execute on that simple principle, and feel like little has changed in your life, not like you're on a diet.

1. Develop a plan to lose the weight at a reasonably slow rate.
How slow? You can maybe take it off at 10-times the speed you put it on and be okay, but you'll have to work the numbers to know (explained later). In my case, I gained weight slowly over a decade, and I took it off in one year, using a rate of not quite one pound per week. Current health guidelines suggest 2 lbs./week is probably as fast as it ought to go for many people. And, heath guidelines also suggest minimum daily calorie intakes to prevent your body cannibalizing your muscle tissue. Unless you consult a doctor or nutritionist first, don't be tempted to try to eat less. You'll probably only atrophy, feel like your starving (not merely hungry, because you will be starving), and want to binge. You probably won't be able to think and work and react properly either, as you'll not be supplying your brain and body with proper nutrition.

2. You'll have to become a serious data-recorder.

I don't think humans are very good at all at estimating by eye and gut-feel how many calories we're consuming. Evolution has shaped us to feast when there is plenty, for a famine may start after this meal. Technology changed that for most of us. I was certainly shocked to learn at first how much I was eating compared to what my body was using, and I didn't think I was over-eating. American-size portions really are too large for most of us, given the physical work we (don't) do. Felling trees with an axe in the dead of winter to build your 19th-century log cabin justifies a certain portion size that commuting to a desk-job in continual climate-controlled comfort does not.

So, you'll need to learn how to calculate the calorie content of the food you choose to consume, and be steadfast, systematic and accurate about logging these amounts. I think this is the most difficult part of the method, harder than actually keeping to your eating budget. If you get to a point where the data recording starts to feel not overly tedious, then you have probably got this thing made!

For single-serving packets of processed foods, like chips and twinkies, etc. The amounts are right there on the package, and this is simple. That's how it worked for Prof. Haub. For multi-serving containers (like breakfast cereal), it's still pretty easy, you can measure out weight quantities of food and multiply that weight by a calories-per-unit-weight figure you determine by studying the label carefully.

For homemade cooking, however, this is arduous and hard to get accurate unless you're very organized and systematic. I do cook from scratch often enough and in my experience, I found that after a short learning curve I could do this well, even if it is another layer of work on the cooking process. To illustrate:

You have to pre-measure the weights of the cooking vessels you'll use. Measure weights of the ingredients you'll be supplying to the dish, multiply these weights by their calories-per-unit-weight ratios you taken from the label data; total this up to learn the total calorie content of the finished dish. Then subtract the serving/cooking vessel weight from the cooked dish weight to learn the true weight of the prepared food itself. Then you can divide the total calorie content by the total food weight to get a figure you can use to begin to portion out a specific amount of food for yourself. Decide how many calories of the dish you want to consume, divide that value by the figure you just obtained a sentence ago, and that's the weight of food you should take. Place plate on scale, tare it, and scoop your homemade cookin' until the scale readout is showing this value.

See what I mean?! It is easy to forget stuff and make mistakes, but if you're the sort of geek who loved high-school/college chemistry lab (like, everyone lusted after you as their lab partner), and took pride in mastering the demonstrations, then this is probably making you rather excited right now (it did me). Otherwise, you're ruing this godawful torture!

The most difficult/impossible situation is dining out or eating what someone else has prepared and not having this information available. There's often no easy way to get an accurate estimate in these situations, and you may be left with simple gut-feeling. On the bright-side, you might develop a better sense for making an estimate this way once you start learning how you feel after regularly consuming known quantities of calories. But the more you can avoid getting stuck making these crude estimates, the better off you'll probably be.

Fast-food chains often publish calorie data as separately available literature, on the tray liner, or online. You can use this to great effect to record your eating experience after the fact, or better yet, pre-plan a meal before you visit the restaurant. I altered the menu items I chose, and split the fries and drink with my wife, but I still love my Burger King.

3. As implied by point 2, you'll need a precise and accurate scale.

I got a $20 cheap-o digital thingy at BedBath, and it's been perfect. It was probably so cheap because it uses those expensive little coin batteries. This hopefully will turn into a lifestyle for you, so you might want to consider a fancier unit that runs off wall-power, but it isn't strictly necessary. I'm still swapping coin batteries.

4. You need to get a good estimate for what your body is actually burning.

This is your basic metabolic rate (BMR). Actually, the figure you'll use is multiplied by a number that characterizes how much physical activity you're doing, called an activity coefficient (AC). And so BMR * AC is a figure which represents how many calories in food you should eat to maintain your weight. Because you're making a log, you can accurately ensure you're eating less by enough of a margin to have weight loss.

BMR decreases as we age, all else equal. This means if you ate the same relative meals and portions all your life, you'd naturally grow slowly fatter. I ate pretty much like I did as a teenager, with maybe one downshift in portions after college, so...now I know why I slowly got fat.

BMR is also smaller, the less you weigh. Ah ha! This is why most folks try to diet, experience a great result early-on, but then never seem to loose the last 10 lbs. If you eat a fixed amount of calories throughout your diet, you'll see the same effect. Your best results will be up front, and your slowest progress will occur near the end.

To avoid these difficulties, you'll might calculate a plan that periodically adjusts your intake amount over the course of your weight loss progress, and over the course of time.

This site supplies BMR estimates which appear to work well in my experience, bookmark it now, it's the centerpiece of this method:

http://www.bmi-calculator.net/bmr-calculator/

Also be sure to click the link for the "Harris-Benedict equation" and study that page, plus the links you find there on intakes to gain or lose weight. The information on that site formed the basis of a spreadsheet I made to help me track my own progress.

5. Determine your eating budget.

Among the items to note on the site is your activity coefficient (AC) which your BMR is multiplied by to give you a maintenance calorie budget. You then shave this budget down based on the rate of weight loss you want (respecting the minimum amounts for health), and eat so as to meet this level as closely as possible, each day.

When choosing an activity coefficient, be brutally honest and hedge your bets toward the sedentary side. I chose purely sedentary to start. It's easier to see yourself exceeding your targets and later reward yourself by tweaking this value upward, than scratch your head when things aren't working and have to move it downward.

6. Understand normal variation when measuring your body weight.

Weight measurement is the important feedback which makes the process work.

Our body's weight can vary by two pounds or even more throughout the day as we absorb and give up water, eat our meals, and release wastes of various sorts. So you'll need to understand that reaching a specific weight target on a single measurement is not quite good enough. The average of repeated measurements will confirm if a given weight-level has truly been achieved, while the individual measurements can be studied or plotted to determine if a favorable trend exists.

I like to weigh-in as I wake up, after doing any morning business, just before hitting the shower. More important than when is consistency in how you take down your weight.

If your consumption plan is slow enough, it's not necessary to weigh-in every day. I typically did this weekly or bi-weekly or even monthly. It should be often enough to identify trends, but not so often it's a burden. Your recorded weights serve as an important feedback to the process. Remember, the BMR you obtain from the website above is an estimate based on human averages. Your true BMR will vary. Plus your activity level may vary too. If you're eating your target amount of calories, but your weight is not coming off at the rate the Harris-Beckman equation predicts, then you'll know to tweak the activity coefficient downward slightly to produce a lower eating budget. Then, eat that for awhile, measure weights, see if the trend matches up better.

7. Don't invest your whole self-worth in this.

Keep it lighthearted, fun, and make it an experiment. If you're trying to lose a large amount, break it up into smaller goals and take it a bit at a time. I did 50 lbs in 10 lb targets over spans of 1.5 to 3 months each. You don't gain weight all at once, so you can't expect to lose it that way either, but lose it you can.

But, do please just be honest with yourself in your recordkeeping. If you want to say, "eff this, I'm going for a heapin' bowl of ice-cream," give yourself permission to say that's OK. If you honestly record those calories, you'll be able to look-back and have a truthful explanation for the weight-loss rate you're achieving. With each meal you can reassess your values and consciously choose what's more important to you, enjoying a heftier meal, or delaying that gratification and enjoying the sexier jeans later on. There is no wrong choice, because only you have to live in the body you're in.

I was perfectly fine with being a little husky. 40 lbs overweight and I was still fine with it. 50 lbs over and getting winded on a simple outdoor trek suddenly flipped my value proposition over, and at that point I decided it was now worth more to me to be lighter. And so I did that. My focus moved from shorter term comfort, to longer term comfort. It's okay to make the sacrifice as small as necessary to get you through the day. The goal may take longer to achieve, but each day is a blank page of calories not yet eaten and new choices you could tweak.

I started my "experiment" by just taking a few days to a week or so and eating as I normally would. I only logged the calories I was consuming. I plugged those calorie totals into that Harris-Beckman equation and worked it backwards to discover at what weight and by what timeframe that pattern might ultimately land me. It was years into the future, but I didn't like seeing 300+. Good motivation to change course now, before things actually got out of hand. I'm now at a stable 170 after hitting a peak of 220. It took a year (I gave it a year), but each day was a day closer to the target, and measuring that progress on a spreadsheet helped keep me in the game. After a week or two to adapt to the changes I committed to, I wasn't hungry. Though I've rarely felt "stuffed", and only occasionally even seriously full, now since the changes I am just comfortable after meals. I give myself time to enjoy what I prepare rather than wolf it down. I wait to see if I become satisfied before automatically stepping up for seconds. It feels amazin'! And with this success in-hand, I have security to know what to do if I notice my weight start to trend the wrong way.

The holidays are here for the second time since adopting this strategy, and I try to be sensible, but I also grant full permission to enjoy the food and treats on hand. No deprivation helps me to embrace moderation, and I find it's really not hard.

That's it.

Some examples to illustrate the counting and set-up process:

How do you count-up the calories, exactly, as mentioned in point 2 above?

Some stuff is easy.

Lunchtime: all prepackaged/heat-n-eat foods

1 Cheddar cheese hotdog: 170 calories/link (as indicated directly on the package)
1 bun: 100 calories/bun (indicated directly on bag)
mustard: 0 calories/serving (hey, bonus!)
ketchup: package indicates 20 calories per 1 Tbsp (17g) serving

Notice the serving weight in parentheses. Most products indicate serving sizes by volume measure (clumsy to use), or by weight in grams (super easy when you have a gram-accurate digital scale). You just need to reduce the package data to a simple factor you can multiply to your weight to get your answer. In this case: 20 calories / 17 g serving = 1.176 calories/g

Now, place your plate, bun, and dog on the scale and tare it to read zero, squirt on your ketchup and multiply the weight shown by the figure you just calculated. And that's it.

You know what, do yourself a huge favor and get a notebook to record any such figures like that for future quick-reference. Who wants to dig around the package labels hunting for these key numbers and to that math every time you want a bloody squirt of ketchup on a hotdog!?

So where are we:
ketchup: 5g squirt = 5.88 calories
Doritos (from a big bag, a single serve packet has the total calories printed right on it):
(140 calories / 26 g serving) * 35g dumped out onto my plate = 188 calories
A can of Mt. Dew Throwback: 170 calories (read directly off the can)

Tally it up: 634 calories
Jot it in your log for the day.

Now when I was in the weight-loss phase of my own program, I tried to target 1800/day for most of the time. 1800 / 4 = 450 calories per meal, plus another 450 to spread around the day for snacking. Now you start to think like an economizer. How can I get 634 down closer to 450 and feel fuller too?

With experience with different foods, you start to figure it out. You begin to learn that fresh foods tend to be less calorie dense compared to various prepackaged or ready-to-eat options. Do some tradeoffs.

Start with the pop. I hate diet soda!! I love the real-sugar in the Throwback stuff from Pepsi, vs. the HFCS in normal pop. But sugar or HFCS pop is calorie dense. Luckily for me, my taste genetics are amenable to the reformulated 0-calorie alternative colas that are trying harder to preserve the flavor of their sugary counterparts. Whereas Diet Pepsi to me tastes awful, Pepsi Max is great! Pepsi One is pretty great also, but slightly different from Max. I've also tried a 50/50 mix of Max and One, which is even more authentic to my goofy tastebuds. Coke Zero is very close to regular Coke to my taste, and I love it to death. So that's 150-170 calories saved! To my wife, splenda, Ace-K, and aspartame all taste like dog vomit. It's a genetics thing I think. Too bad for her.

I've learned you can eat a whole half-pound bag of baby carrots for 91 calories (that's 227g of carrots)! That's less than half the count for the Doritos, and is a lot of carrots. You'll be feeling full after that one, so there's some play to shave the weight back to something like a quarter-pound and throw on some ranch dressing (don't skimp on taste, you'll grow to resent yourself, use the regular stuff and just portion appropriately).

With these two changes, my example quick lunch is now 367 calories. The savings translates into an extra scoop and a-half of Blue Bunny - Bunny Tracks ice-cream tonight. You see where I'm going with this?

But dang-it, I love Doritos! Sometimes I just have to have 'em. Fine, eat it! I hope you can skip the ice-cream and settle for a couple-a squares of Dove chocolate tonight instead.

Or don't, have it all! Just be honest about recording those calorie counts and measuring them up against your limit for maintaining your weight, or your target for losing some weight. I got in the habit of noting these two figures down when writing down my log. If I felt the urge to splurge, then so long as I kept my splurging underneath that maintenance limit, I might this day be sacrificing losing some weight to the ice-cream gods, but at least I wasn't gaining weight. I also know precisely and immediately what the consequences of my actions will be, and this is important feedback.

When you see the numbers, it's far easier to restrain yourself. When you fail to summon the discipline to at least record your numbers, however bad they might be, it becomes far too easy to really overdo it without even realizing what you're doing.

Some stuff is harder: The Breakfast Cereal Configuration

If you love your cold cereal in the morning, chances are you're blowing your meal budget first thing off by having too large a bowl, or more than one bowl (before trying my plan, I was doing this constantly!). Rarely are the suggested serving sizes and the calorie counts printed on the labels something I can live with. People like their cereal wetter or drier. I like to add raisins to Grapenuts. You know your preferred proportions, but how do you size the whole bowl to keep it within your calorie budget?

You start out by determining the calories/gram factors of the components of your breakfast bowl and noting them down.

Let's use Grapenuts, checking the labels give us this information:

200 calories per half-cup (58g) serving = 200 / 58 = 3.448 calories/g
(and because I don't drink no 2% rinsewater)
Whole milk = 140 calories per 1 cup (240ml) serving
(I need a weight, but have volume. So I poured some into a measuring cup and took a weight down.)
=140 / 239 = 0.586 c/g (heh, whaddya know, milk volume in ml is about the same as its weight in g)

Alright, all you know is how wet you like your cereal, you don't know the relative weights of cereal and milk to pour out yet. What should you do? Start by just having a normal bowl the way you like it, just noting down the weights of the components you pour out. Say...

Grapenuts = 120g; Milk = 365g

I'll discount the sugar I sprinkled on top, it wasn't much. That was a delightful bowl! How many calories?

120 * 3.448 + 365 * 0.586 = 628 c

Okay, tasty, but this is too much for my budget tomorrow. What if tomorrow, I wanted to enjoy the same proportion of cereal to milk, but limit the total calories to 450; what weights should I pour out to?

There's more than one approach to solve this problem, here's mine:

(120 / 628) was the proportion of cereal weight to the total calories in the resulting bowl, and
(365 / 120) was the proportion of milk weight to cereal weight in that bowl. So

450 * (120 / 628) = 86g grapenuts suggested for tomorrow's new lo-cal bowl, and
86 * (365 / 120) = 262g milk

Let's check to see if this does work out to 450 calories:

86 * 3.448 + 262 * 0.586 = 450 yes, pour to these weights, and you'll have the same quality bowl, but with only 450 calories.

What if I wanted to add raisins now, how can I keep it to 450?

Raisins: 130c per 40g serving = 3.25 c/g

I took out a handful which seemed to me to suit the size of bowl I am eating, it weighed 19 grams. So, using our prior knowledge worked out above:

19 * 3.25 + x * 3.448 + x * (365 / 120) * 0.586 = 450

Where x represents the weight of the grapenuts to pour, and (x * (365 / 120)) represents the milk.
Solve for x (hey, you're using basic algebra now, and it's useful to your everyday life!).

(if you're scared, copy the equation into the box on Wolfram Alpha to have it solved for you)
5.23042x = 388.25
x = 388.25 / 5.23042 = 74.2292 (grapenuts)
x * (365 / 120) = 225.7807 (milk)

So now we're ready to pour: 74g grapenuts + 226g milk + 19g raisins = 449 calories
(just slightly off due to rounding errors and available measurement precision, but that's insignificant, fugeddaboudit)

In your notebook, you can carve out a section to record "recipes" like this for the common types of meals you want to assemble. Then you can just pour to the numbers on the scale and be assured of a consistent level of calories.

Just now, I won't go through an example for cooking from scratch, but the same principle applies. Refer back to my earlier paragraph illustrating that process. If you record your ingredient weights as you go, future meal preparation will be greatly simplified. You won't use measuring cups and such so much, instead you'll start relying on your scale, dumping ingredients until the proper weights show up, assembling, and cooking. For fresh produce which may not come in packaging with nutrition facts data, I found this website very, very useful.

This is the most difficult part of the method. Master this and you will be on easy street.

Some further planning examples: how many calories should I consume?

Use the BMR calculator site to determine this. You can structure it in shorter-term step-down targets to offer intermediate goals and more opportunities to measure your progress and make adjustments. This results in more calculation and analysis work, but offers a sharper picture of how you're doing. This is what I did.

You could also try a simpler approach and work with one goal based on the weight level you're trying to achieve. This results in only one eating budget, the budget which you would use to maintain your weight at the final goal level you set. You won't have as much feedback, it's harder to ascertain if the activity coefficient (AC) you chose for yourself was accurately representing your physical activity level, and you will notice the traditional diet of diminishing returns, where the first 10 come off easy, and the last 10 seem to almost never come off. However, assuming the AC is adjusted well, and you update the calculation once a year, you'll get to that weight, eventually.

Let's first see how that looks, then try using the stepwise approach with intermediate targets.

Let's say you're a 220 lb. man, age 34, and would like to lose 50 lbs. Go to the BMR site, and supply your data, but enter your final goal weight of 170 lbs., instead of your actual weight. You'd get something like this:

Estimated BMR: 1796
Chosen activity coefficient: 1.2
Daily calorie budget to maintain 170 lbs.: 1.2 * 1796 = 2155

So, simply plan your daily eating to total no more than 2155 calories/day, and you will see weight loss. Over the long run, if you estimated your AC correctly, you will gradually trend toward 170 and then hover there. You will need to update the calculation each year as you age, and if you're not achieving your result, you would also need to try tweaking the AC downward. Once at your goal, you don't get a reward of getting to eat more, this is your reward level of eating. You'll forever retune it at least annually to account for the effect of aging and physical activity level changes. It won't be very clear when you'll achieve the goal, but it should happen. If I did my diet this way, I estimate that my own weight loss would have required about two-years, rather than one.

Now let's say you would like a clearer picture. You want to try to achieve your ultimate goal in a more specific or shorter time frame. How could you approach that? With short-term step-down intermediate goals, each with their own BMR calculation, as we did above, and more frequent analysis of our data.

Let's again say you'd like to lose 50 lbs. as above, let's shoot for it in 10 lb. increments. This time begin with your current weight in the calculation.

Starting weight: 220
Estimated BMR: 2107
Activity coefficient: 1.2
Daily calorie budget to maintain 220lbs: 2107 * 1.2 = 2528

Minimum intake recommended for men is 1800 calories/day. You can choose any value between 1800 and 2528 to control the rate at which those first 10 lbs. come off (if you want to go lower than 1800, I suggest talking this plan over with a health professional, they'll be impressed you're so serious).

Say this person eats 1800, then he will eat 728 calories less than his body needs to maintain 220lbs, each day. Body weight is 3500 calories/lb. 10 lbs. is 35000 calories, so:

35000 / 728 = 48 days to expect to reach 210 lbs.

Next he should recompute his BMR at 210 lbs, and work the numbers again.

New BMR = 2045; new maintenance daily calorie budget = 2454; Eating target = 1800 for a 654 calorie/day deficit.

35000 / 654 = 54 days to reach 200 lbs once 210 lbs has been achieved.

You can continue this way, forecasting your planned progress through each ten pounds of weight loss, and arrive at an overall timeframe of around 10-12 months to lose the full 50 lbs., along with a schedule that predicts when you should see each specific target.

Ten months is long enough that you might wish to advance the age input to the BMR estimator by one year somewhere in the process, to account for the fact that aging reduces your calorie needs. You can also see how a spreadsheet would help you document this plan and let you tweak the parameters to taylor it to a specific goal timeframe. It's very handy for determining if your activity coefficient is reflecting reality.

Now, the activity coefficient becomes a useful fudge factor, since you can adjust it to force the numbers to work a given way, it can help account for measurement biases and somewhat sloppy record-keeping, so long as these errors have some consistency. We'll see how that works in a moment.

Also the daily calorie allowance should be broken up into budgets for meal periods. I divided mine by four, so I had a uniform amount to plan to consume with each of three major meals, plus the same amount again distributed among the meals as snacking. Be smart about your eating. Resist the temptation to skip lunch to have a big dinner, for example. If you're eating regularly throughout the day, you don't allow yourself to get hungry, and keeping on pace should feel easier. Just the same, you don't have to be a nazi about your plan. One day save the snack budget and have a decent bowl of ice-cream after supper, for example. Play around and try to keep it fun.

With a plan for for eating in-hand, you can now go about trying to execute that plan and analyzing the results as you go. Here's how that can look:

220 -to- 210 lbs. plan.

Referring to the plan worked out above, he logs his calorie consumption each day, and once in awhile does a weigh in to add to the raw data. At the end of the 48 day period, he totals and averages his daily consumption and finds he managed to do only 1925/day, a little short of the plan, but a nice effort.

At 1925, he's shaving 603 calories off the maintenance budget, for a total of 28,944 calories over the 48 days.
28,944 / 3500 = 8.3 lbs of weight loss predicted by the plan, based on his chosen AC

He now compares his measured weight to the prediction and finds that it appears to agree, he's at 212 lbs! This suggests his chosen activity coefficient is a fair estimate for reality. How much longer to loose the last two pounds, if he at least continues eating based on the present average? (2 * 3500) / 603 = 12 more days.

So, he continues on, logging his consumption, and stops to reanalyze his progress after either the 12 days has passed, or he notes his weight has reached the 210 lb goal. He finds he finished after just 10 days by achieving the target of 1800 calories/day for that period, which pushed his overall average for the entire 58 day span to 1903 calories/day.

Next he does a sanity check on his chosen AC, to see if it's still making sense:

2528 calories/day to maintain 220 lbs - 1903 calories/day achieved = 625 calorie/day deficit
(3500 * 10) / 625 = 56 days predicted to loose 10 lbs vs. 58 actual

This is pretty close. Close enough, because remember BMR is a function of weight and age, and his weight and age did not remain constant over this period. Calculus could help us be more precise about this, but what you find fun, and what I find fun, are likely two different things!

If a significant discrepancy developed between what was predicted compared to what was achieved, the activity coefficient can be adjusted to compensate for the variance and force the prediction (now a post-diction) to match the data, and then this new value is carried forward for the next and future 10 lb targets to hopefully yield a better picture of the time required.

For the sake of argument, let's say 58 was a big discrepancy, what activity coefficient would yield a prediction of 58 days to lose the 10 lbs., given the 1903 avg. daily intake achieved?

(3500 * 10) / 58 = 603.4 calorie/day required deficit + 1903 avg. daily consumption achieved = 2506 required daily maintenance budget.
2506 / 2107 estimated BMR = 1.19 activity coefficient

Now... this new activity coefficient can be carried forward into the calculation for the next 10 lb target to hopefully get a better prediction.

Starting weight: 210
Estimated BMR: 2045
Activity coefficient: 1.19
Daily calorie budget to maintain 210lbs: 2045 * 1.19 = 2434

Let's say he found it a little too strenuous to try to limit himself to 1800 calories/day, but thinks he can do 1900 better (given he averaged 1903 in the prior target period).

2434 - 1900 = 534 calories/day deficit
(10 * 3500) / 534 = 66 days predicted to achieve next goal weight of 200 lbs.

And our example guy just continues on like this, iteratively, until he's reached his final goal of 170 lbs. Simple, right?

You can reset this process at any point and begin again. This if helpful if you go on a long vacation or something and decide to just have fun and not think about food, or if you have a major lifestyle change. For example, say during this next block our guy gets a new job moving refrigerators. It's hard work, shuttling them about on a dolly. So make some new assumptions and start anew (again using the website linked above):

Starting weight: 205 lbs
Estimated BMR: 2014
Assumed AC: 1.55 (he's got a labor heavy job, but this factor has a powerful effect, so let's take it slow)
Daily intake to maintain 205 lbs: 2014 * 1.55 = 3122

Now he knows he'll be hungrier after all that effort, so he sets himself a budget of 2500 to see how he feels. Let's work the prediction:

3122 - 2500 = 622 calories/day deficit over body's need to maintain 205 lbs. based on the assumptions above.
35000 / 622 = 56 days to lose 10 lbs.

Hey, that's similar to what happened last time. Sound's like a winning plan!

After 30 days of data collection, he's become puzzled because he's only lost two pounds and believes he should be down more like 5! What's going on? Obviously our assumptions have been in error, and/or the data indicate we're not meeting our targets. Let's see:

Totaling and averaging his daily calorie count log for the past 30 days, he discovers he's been achieving an intake of 2480 calories/day. Good job, this plan target is getting met!

According to our assumptions, 3122/day was required to maintain 205. 3122 - 2480 = 642
(642 * 30 days) / 3500 calories/lb body weight = 5.5 expected weight loss. So he should be at 199 lbs. by now.

His measured weight is 203. So...we must have the AC turned up too high (heh). What should it be to more accurately reflect the labor involved in his new job moving refrigerators?

(2 * 3500) / 30 = 233 calorie/day deficit achieved over intake required to maintain 205 lbs.
233 + 2480 avg. daily intake achieved = 2713 calories/day suggested to maintain 205
2713 / 2014 est. BMR = 1.35 suggested AC based on the actual results obtained so far

It's at this point he realizes that he's been making use of the company forklift more than expected. Regardless whether this realization were true or not, 1.35 is a value he ought to use now to help get his weight loss plan back on track. -RESET-

Starting weight: 203
Estimated BMR: 2001
Activity coefficient: 1.35
Daily intake to maintain 203: 1.35 * 2001 = 2701

But now he want's to make up for lost time now and reach 195 within twenty-six more days (meeting the original goal timeframe). What should his target intake be?

2701 - ((8 * 3500) / 26) = 1624 calories/day for 26 days to reach 195 lbs.

Oops! This value is below the recommended 1800 calories/day minimum suggested for men by health guidelines. Without professional medical advise, this goal is too aggressive and would likely leave him starving. Plus he is still working harder than he did before taking his new job, and back then he reported struggling to feel satisfied with even 1800/day. Perhaps he ought to get comfortable with the idea that this will take a little more time to do well, and try for a more modest goal of 2000/day. How long to 195 lbs. now?

(8 * 3500) / 701 = 40 days

And he should just keep on proceeding in this way.

Make some assumptions about your activity, develop a short-range plan to reach an interim target, take data for awhile, then analyze that data to monitor performance, tweaking as necessary to maintain or regain the desired trajectory to the ultimate goal, or modify that trajectory based on a more realistic assessment of what's going to be feasible.

As you can see, there's an awful lot of number tallying required here. And the time required to weigh out your foods and be accurate about logging them down doesn't have to be significant, but it will slow down your meal preparation at first, as you gain the needed experience. However, mustering the discipline to learn how to record your calorie consumption and stick to some target intake WILL result in weight loss. And if you choose reasonable intake levels or goal time frames vs. your existing comfort level, you will find that it's not really hard to accomplish at all. Trade speed for the ease of getting it done, as needed. The easiest of all is simply bringing any existing weight gain trend to a halt.

But to do any of it means you'll have to get religion on counting calories, and practice that religion forevermore.

Whew, well this has been perhaps the longest blog post I've ever written. I hope it is inspiring and of use to you. For myself, I am really enjoying the weight loss I have achieved, and the secure feeling about being master over it. I have proven to myself that this tool works for me, and so I will only ever weigh as much as I choose to weigh, and now I know precisely what that will be.

Readers are welcome to offer their comments and experiences if they try this. If you find success, share your experience with other people you know. You will eventually get people who know you asking, "hey, um, have you lost weight?!" Let the fun begin!

Notes from Happy Harry's 2011 Oktoberfest Beer Tasting

2011-09-30T22:36:00.000-07:00

Jane and I thoroughly enjoyed the Oktoberfest beer tasting, yesterday at Happy Harry's. Some surprising newcomers impressed me greatly, and I found fault with one of my ol' standby favorites this year.

Winning!

Empyrean, Grand Teton, Crow Peak, Spaten

I am on a drug. It's called Charlie Sheen (a/k/a not winning).

North Coast, Lucky Bucket

I never met an Oktoberfest marzen I didn't like--until this year. I encountered a few breweries that tried mixing styles: marzen + IPA. Eww. Why the hell? Par exemple:

Widmer Okto Festival
New Belgium Hoptoberfest

I just don't understand why you'd wreck a good marzen by making it excessively hop-y and bitter like an IPA. I can get IPAs anytime, but Oktoberfest marzen is almost always seasonal.

Notably absent from the tasting and the stockroom was celebrated German brewer Hacker-Pschorr, whose Oktoberfest has been my personal favorite, par excellence, since I first tried it some years ago. I think this makes it the third season in a row where Hacker-Pschorr was absent as a taste-able or even stocked offering up here in the north. A shame.

To my chagrin, my go-to trusted 2nd to Hacker's Okto, Spaten Oktoberfest, shocked me with disappointment. My instant reaction was, "hey, something's missing here, something's off."

Spaten has always been available at all the tastings I've attended, and have produced a most excellent Oktoberfest in past years (just behind Hacker). But not this time. I'm so surprised by this that I'm going to assume that the case out of which we were served got excessively hot or something. It was not bad, but well, lacking. Thankfully, Spaten redeemed themselves in fine style with their classic Munich Lager, just delicious!

In the middle I tasted serviceable Oktoberfest offerings from Shiner and Schell. I consider them reasonable seconds when your first choices in an Oktoberfest are unavailable.

In the high-tier, I tasted very good offerings from Sam Adams and Boulevard. I haven't exactly cared for Boulevard's other beers. I tend to avoid them like I do Sierra Nevada. They do good work, it's just my taste preference. However, Boulevard Bob's Oktoberfest was excellent. I would personally put it above Sam Adam's offering, which itself has always been "a Good Decision" (sm).

This year's pinnacle for me was an offering from a label new to the Red River Valley: Empyrean Aries Marzen - Oktoberfest. Empyrean Brewing hails from Lincoln, NE, and has never had distribution into my area before. I'd never heard of them. At this tasting, they were prospecting the market.

Aries Marzen was smooth, golden, and very well balanced. It also had a unique sensation I'd never experienced in an Oktoberfest before: a gentle field-ripe wheat flavor. In farm country, then the sun's low in August and the temperature's coming down, you can stand beside the ripened ready-to-harvest wheat fields and almost taste a certain wholesomeness in the air. To me, growing up close-by to such places, this is memorable. The essence of farm country at harvest time has been masterfully brewed into this product, it's just amazing! Well done Empyrean!

Also served were a number of Empyrean's other brews, all great, including their Burning Skye Scottish Ale. I didn't expect to enjoy this one, as my only other experience with a scotch-style ale was McEwan's, and I found the syrupy taste of the unfermented sugars objectionable. This was much better, still sweet, but not sickly-so. I could get into it, whereas I don't think I can normally with this style.

At another table I was introduced to Pilsner Urquell, the famous Czech lager whose claim to fame is to have invented the pilsner style. I am not a beer expert, but I love learning, and so I was pleased to learn that this beer has much in common with Oktoberfest marzen, a cousin style in the bottom-fermenting lager family. I've always seen this stuff around at the better stores, but never tried any. I'm glad I did this time! I found much similarity between the flavors in Pilsner Urquell and Empyrean's Aries Oktoberfest. What's better for me, who wishes Oktoberfest seasonals were available year-round, is that Pilsner Urquell is available year-round. Jane commented she found something slightly off-putting about the aroma of this beer, but hastened to add that the flavor was very nice. I didn't notice an off aroma myself, but this beer had a the same or stronger character of field-fresh wheat as the Aries, which might cause a strange nose in a warm glass at anything warmer than refrigerator temp.

Talking to the table servers, I guess the company distributing Empyrean also handle some other labels I've not seen before in the RRV. Crow Peak Brewing hails from close-by in Spearfish, SD. _Why haven't I see your stuff up here?_ Their IPA was on offer, in a can, and I must say it was my favorite IPA of the tasting, and there were many to choose from. It's exceptionally balanced with no single flavor lording it over the others. It's hop-y, it's bitter as any IPA will be, but also refreshing, easy to drink, not thin and watery, but full bodied, but not harsh. A fine brew. I hope I see more.

The biggest looser, however, was another of this new distributor's tables featuring the Lucky Bucket and North Coast labels. I surely hope something went wrong, horribly horribly wrong, with the transportation of these beers, because they were all skunky and sour. Wall of shame:

North Coast Old Rasputin Russian Imperial Stout (gosh I had high hopes for this, dashed)
North Coast Red Seal Ale
North Coast Acme IPA
Lucky Bucket Lager
Lucky Bucket IPA
Lucky Bucket Certified Evil Ale (and it was...dagnabbit)

If you can't cheaply get a taste to see if it was just our stock that was wrecked, then I'd say move on, nothing to feel good about here. A shame, as absolutely everything else this distributor brought to the tasting, Empyrean, Grand Teton, and Crow Peak, were wonderful!

I recommend:

Tallgrass IPA
Tallgrass Buffalo Sweat
Redhook Wit
Spaten Munich Lager (the Oktoberfest is still good, but on probation)
Guinness Foreign Extra
Empyrean Chaco Canyon Honey Gold
Empyrean Burning Skye Scottish Ale
Empyrean Third Stone Brown
Empyrean Dark Side Vanilla Porter
Empyrean Aries Marzen Oktoberfest (Andrew's all-show winner!)
Crow Peak IPA
Grand Teton Sweetgrass Pale Ale
Grand Teton Bitch Creek ESB
Grand Teton Black Cauldron Imperial Stout
Boulevard Bob's 47 Oktoberfest
Sam Adams Octoberfest
Pilsner Urquell (do try if you liked Empyrean Aries Marzen)

I recommend against:

Molson Canadian
New Belgium Belgo
New Belgium Hoptoberfest
Lucky Bucket Certified Evil Ale
Lucky Bucket IPA
Lucky Bucket Lager
North Coast Acme IPA
North Coast Red Seal Ale
North Coast Old Rasputin Russian Imperial Stout
Manger's Irish Cider
Manger's Pear Cider
Widmer Okto Festival
Boulder Kinda Blue
Shock Top Pumpkin Wheat (if this is your thing, try Blue Moon Harvest Pumpkin instead)
Shock Top Raspberry Wheat

Getting a replay on my ReplayTV

2011-07-19T19:26:00.001-07:00

In 2003 I purchased a ReplayTV DVR unit after watching an interesting show on the now defunct TechTV network about DVRs and hacks available for the ReplayTV units.

The ReplayTV has a lot of faults, but the technology was quite new for the time, and its execution was better (in some respects) than the generation one Tivo DVR units. Generic ReplayTV systems made their way into numerous cable and satellite system customer premise equipment, becoming the basis for early DVR receiver/decoder offerings for these systems.

I purchased the nearly $400 unlimited service activation (required to get access to electronic programming quide data, without which a DVR becomes little more useful than a traditional VCR), figuring I would own the unit more than two years, the time necessary to earn back the money spent on the month-by-month service option.

Overall, it's been a really good experience. The unit fulfilled its promise to change the way we watch TV. It did that instantly. At my house, we were chained to the TV schedule. A VCR alleviated some of this, but programming it successfully required error-prone transcription of a paper or web schedule. Even then, you only had 2-7 hours of recording time to work with, assuming you start a new tape.

VCR technology was game-changing for its time, and DVRs like the ReplayTV re-revolutionized the TV viewing experience, allowing one to watch-pause-instant replay live TV. Traditional VCR-like functions of recording individual shows were made an order of magnitude simpler by integrating a guide grid into the unit's user interface. No more scanning a paper or web table and manually entering times. Scroll to your show with the on-screen guide and press record. Done.

The DVR further revolutionized TV by harnessing the power of database-driven scheduling of recordings. The ReplayTV and Tivo units diverge slightly in this area, and some regard the Tivo as being stronger in this regard. But, the ReplayTV is pretty decent at this too, allowing for variable-priority theme channels, which attempt to record shows on supplied criteria, giving way to other such themes you set at higher priority (record Scrubs, unless Mythbusters is on, then record that instead), and giving way once more to specific individual or repeated-timeslot recordings you specify.

I was able to pore over a generic TV lineup at the beginning of a season, and setup this database to essentially automate our TV watching. After a few days, the ReplayTV started to fill up with a library of constantly updating shows of my interest. I stopped watching TV and began watching the ReplayTV. I was unchained from broadcasters' schedules. If there was first-run programming coming on which I was desperate to see that night, I made sure to wait at least ten to fifteen minutes into the show before starting to watch the recording as it was being made. This way, I could watch the show from start to finish without waiting during commercial breaks (advertisers note: I often found myself entranced by some commercials, and never skipped them, even though the skip button was always under my thumb).

While groundbreaking tech for 2003 on, here in 2011, much has advanced. Were it not for some specific hackability of my model unit, I would have lost the use of my ReplayTV within the first two years. Its original hard drive failed rather alarmingly quickly, and a replacement drive I installed myself failed after several years in service. In both cases, thanks to backups I made of the unit's software, I was able to return the unit to service after replacing the drive and its factory software.

My ReplayTV unit was designed before HDTV standards were solidified, and almost no providers were offering HD programming. Today, over-the-air TV has transitioned to digital broadcast, and most broadcasters have adopted an all HD format. I am a cable customer, and my provider, in addition to having a standard-def. lineup, over the last few years has made continual improvements such that essentially the entire lineup is available also on HD channels further up the "dial." There are also plenty of the earlier special-purpose HD channels which originated from day-one as an HD only offering (when HD was still new and quasi-experimental), and have no SD equivalent.

Anyone who has bought a TV set in the past few years has purchased an HD model, with QAM digital tuners able to get the OTA broadcast and in increasingly-many cases even new digital cable programming without the aid of a special receiver.

I am still using a quite serviceable SD tube-type analog TV. And ReplayTV, designed for the analog SD TV world, is becoming increasingly irrelevant in this universe of digitally delivered HDTV. However, if you don't mind the SD, this legacy equipment still works great when paired with a receiver from my cable provider.

I was saddened then to hear the news that after many years of near-trouble-free operation of my ReplayTV, the corporate entities behind it were going to finally switch off the internet servers delivering the electronic program guide data that make the DVRs so useful. Forever.

After July 31, all ReplayTV units still functioning out there will lose guide data, and will (gracefully, we all hope) fall back to functionality equivalent to a VCR, just with random-access digital storage.

The die-hard user community has been working tirelessly toward an alternative solution to deliver guide data after this date, and with ReplayTVs corporate stewards offering some modicum of help (or at least not standing in the way), appear to have forged a likely workable path forward.

Your home PC, with special software, will stand-in for the outgoing ReplayTV guide data servers. It will get its guide data for a minor fee paid to a non-profit company with a mission to promote open-source DVR technology.

Last night I endeavored to set this software up on my home PC and give it a test. After a lengthy series of hiccups and other not-insurmountable minor gotchas and snags, I was ultimately able to start my own server, and get my ReplayTV DVR to accept it. The server ingests schedule data from a third-party (right now I am testing it with software known as an XMLTV scraper, which reformats publicly available TV listings into a format which this server software can ingest), and offers it to my ReplayTV upon request.

The result? So far, it's working beautifully! I have cut-ties 100% from the corporate-sponsored ReplayTV guide data servers, and have every expectation that after July 31, I ought to continue to be able to run this way.

The server need not run continuously, but often enough to keep the ReplayTV DVR's schedule database populated as far into the future as data availability and convenience dictate. On the server-side, the experimental XMLTV scraper doesn't download much data, but requires a good 15-20 minutes to assemble and reformat it, making it the slowest and weakest link in this chain.

During this testing-phase, I imagine initiating a manual update about once-or-twice a week, given this. After July 31st, assuming everything continues to work, I will likely buy a cheap subscription to the third-party data service, replacing a 20min free scrape with a cheap download lasting only seconds.

One problem likely solved, but still uncertain, is the ability of this home surrogate-server software to set the time-of-day clock in the ReplayTV units. I believe this has been solved, based on an experiment I did.

As part of its nightly network connection, the ReplayTV units use the NTP protocol to reset their clocks by polling an NTP server also maintained by ReplayTV's corporate stewards. You wouldn't want this clock to become off, or the DVRs idea of the current time would yield partly or completely missed recordings.

The community forums speculated that the NTP time updates were cryptographically signed with a key maintained in the corporate servers, and the DVRs would not accept unsigned NTP time replies. I don't know if this is the case or not, but I did notice that the home surrogate-server software came preconfigured with the address of the ReplayTV corporate NTP server, but that this was changeable.

I updated the configuration to point my server at my favorite NTP source: north-america.pool.ntp.org, a domain-name that reverses (in the load-balancing mechanism of DNS) to any of a number of publicly available NTP servers aimed at covering the continent.

The server software accepted this address without complaint, appeared to use it in the logs, and offered the time derived from it to my ReplayTV DVR, which likewise "appeared" to accept it (there's no easy way to tell, except to enter a hidden code to get the unit to display its clock onscreen, which had previously been 5 seconds off, but is now less than one second offset from my radio-controlled wall clock).

So I have every reason to be optimistic that after July 31st, I will be able to continue enjoying my ReplayTV experience in all its 2003 analog standard-definition shininess!

In the future, I expect that once my existing SD TV goes, I will modernize my whole viewing experience. I expect to become a Roku box customer, perhaps even playing with the idea of ditching my cable-TV subscription in favor of a combination of OTA digital signals and a more expensive, but higher-bandwidth cable-internet offering with a Netflix account riding on top. To be the best, the Roku or similar solution would need to be able to ingest OTA HDTV signals in addition to having connectivity with my home network to play media stored their or stream content from the internet. That way I get full DVR-style flexibility with local broadcast content too!

Until that heady future, I'll enjoy a replay of the future circa 2003, and continue enjoying my ReplayTV, faithfully (more or less) recording content for presentation on my analog TV!

(My analog TV is a 32" model from Sharp. I bought it in 2000, and it's still bright and saturated, undistorted and color accurate. I've been astonished how many newer-model tube-type analog TVs have degraded to unsuitable picture quality after far fewer years in service! It's only problem is a stuck relay, which prevents it from being turned off occasionally. I have to get up and pull its plug, but other than that, it's still going strong. In fact, it's outlasted a couple of Sony Trinitron models my folks have owned!)

"Blue Bloods" Blues: how CBS can't do drama.

2010-10-13T20:48:00.000-07:00

"Blue Bloods" You know the TV's bad when you find yourself wanting, trying hard to like the show...but the magic is not there. It feels like there's something special about to happen when the opening title music rolls, but the intensity is doused.

The actors/casting is perfect. The character stories underlying the episodes are intriguing and have huge dramatic potential. But the meat...the main plot each episode...uugh! I want to gouge my eyes out! What is this, CSI:Miami, in NY dress? It's all point and tell, rather than show, imply, and feel. There's nothing for the viewer to do, nothing to think about. "This feels like TV," I said to my wife. "Law and Order, at its very best, that felt dramatic. You got lost in the show."

With this, I'm just watching the clock, hoping it breaks through and becomes spectacular. TOO BAD! Put Sellick and Wahlberg into some stuff they're worthy of. When there's been TV out there like Nip/Tuck, Mad Men, Sons of Anarchy, 24, Rome, The Tudors, Deadwood...heck even great cop shows like Third Watch, this simply doesn't measure up.

I watched the 3rd episode, "Privilege" tonight, waiting for a spark. There was a scene near the end where the young cop, Jamie Reagan (Will Estes), is on the couch looking through old photo albums with his grandfather, Henry (Len Cariou). As Jamie notices a photo of his detective older brother, Danny (Donnie Wahlberg), wearing a lapel pin emblem of the mysterious "Templars" cop-club, a thought occurred to me: why is the show spreading itself so thin trying to be seen giving all these great characters something to do each week?

Why not stop trying to do everything at once, and narrow the focus? Let each episode be a vignette more zeroed-in on just one of these major characters, and the work they must do to execute a case, from their perspective. Make the story more about these characters. Not about these so far ridiculous crime plots. You can allow one or two of the other major characters to intersect in the story, if it becomes the obvious and logical thing to do, but stop trying to FORCE it together for everyone, in every 10 minute segment!

Think how much more rich and engrossing you could make the stories then. You'd have time to carefully orchestrate the scenario that's going to propel the story of that week's character forward. Think about "Homicide: Life on the Street" in that sense. The show didn't try to cover everyone in the whole homicide squadroom each week. It used the squadroom as a touchstone, opening and closing the show, coming back to relieve the tension. We get to see everyone there. But then, for the real story and plot development, the show narrowed the focus and kept on just a couple of the major characters for the evolution of the episode.

Like that.

CBS's got a really great concept here, with Blue Bloods. I don't want to stop watching, because the underlying characters, and the larger picture that is tying them together, is so captivating. But the weekly stories and scene setups that these characters must wade through...so far it's just devastatingly BORING!

I don't have any faith that'll get better. So I best stop with the show now, or grow bitter over the future of serial disappointments that await.

The VOR Visualised (as a lighthouse)

2010-05-31T19:44:00.000-07:00

Last night, I watched the recorded video session of TWiT.tv network podcast, "Maxwell's House" (which is currently undergoing a slow redevelopment along strictly aviation lines).

The topic for the episode (74) was aviation navigation. Ray Maxwell tried to explain how a VOR beacon worked using a visual metaphor. I found his explanation a bit confusing in the moment, but after re-listening today, I now have his visual idea burned into my head, and it's so elegant that I now just have to write it out!

Ray kept expanding the acronym as visual omnirange, but VOR actually stands for VHF Omnirange. However, a search of the interwebs revealed quite a few aviation authorities who use the word, visual, as the first word encoded by the acronym, strangely, as the signal is entirely radio.

I suppose they're meaning "visual" in the sense that interpreting the signal in the cockpit for navigation is normally done by visual reference to an instrument (In the way way back, there were aural navaids that depended on your listening to a certain formatted sound for changes to determine your location in relation to the signal).

A VOR is an improved radio beacon which, by the way of it's construction, permits the user receiving its signals to determine with great precision their exact bearing from the beacon's perspective (called a radial in the parlance).

Before VORs, most radio navaids were NDBs (non-directional beacons). So called because they provide no directional cues. They are simple AM stations. An ADF (automatic direction finder) receiver in your aircraft (or boat/ship, they were also commonly used for coastal navigation at sea) used a directional antenna to localize the NDB, causing a pointer on your aircraft instrument to literally point to the direction from which its signal was strongest (presumably co-incident with the station's transmitting antenna...but this is radio).

Because an NDB's signal can tell you nothing about what direction you happen to be from the station, it's use for fixing your position is less accurate. Its direction from your perspective must be estimated with respect to a compass reading and the ability of your ADF equipment to precisely pinpoint the azimuth of the strongest signal.

To get a sense of how this might not be the most accurate thing, take a handheld AM radio (its internal bar antenna is directional) and swivel it around while listening to a station. Notice how the signal fades? Notice how the strongest signal occurs over a rather wide span of arc?

With a compass, you can compute a compass bearing to the NDB. And with such a reading from two NDBs, you can plot a position fix, and thereby know where you are!

Unfortunately, accuracy is limited by your compass and ADF equipment. Magnetic variation is also a factor, possibly a major one, because it varies with location. When you measure your compass bearing to two NDBs, it's with respect to the magnetic variation at your location, which cannot be known precisely because you don't yet know your location.

This is its own interesting problem to think about, but suffice it to say that if you're following a constant compass track toward or away from an NDB, the varying magnetic variation along your route will cause this line of constant bearing to be curvy, perhaps significantly so in areas on sectional charts called out with special warnings about magnetic disturbances.

With VORs, the variation programmed into the station will be the same or often similar to the actual variation at the station's location. It actually doesn't matter because the programmed variation is depicted on your chart, evidenced by the differing cant of the north-arrow for different VOR stations. Since the unique signal of a VOR lets you determine in what direction you lie with respect to that station, you can use those values to much more precisely plot your location when you take readings from two or more stations. You don't need to take magnetic variation into account (in fact you don't even need a compass) because the bearing being determined is referenced from the station, where the variation is known, to you. Not the reverse, where the variation is not known.

The way a VOR does this is where the novelty of Ray Maxwell's description comes in, re-imagined now by me into hopefully clearer terms. This is so cool, and so simple, it blew my mind!

Imagine a VOR station, not as a radio beacon, but as a lighthouse. It has a bright white rotating beacon, which emits a powerful beam in a single direction and rotates at a constant speed, say one RPM, sweeping clockwise when viewed from above. Now, imagine that as the beam rotates through north, a red beacon on top of the lighthouse flashes at the instant the rotating beam hit 360 degrees.

If you were standing due north from this lighthouse, staring south back at it, you would see the white beam rotate past you giving you a flash of white as it hit 360 degrees. You would also see the red beacon above flash at the same instant. Now, the steady white beacon is still rotating, one RPM, or in other words, six degrees per second.

If you were now at some random location nearby the lighthouse, knowing its configuration as we do, once you sighted the beacon on the horizon, you would be able to quickly determine your location relative to the beacon by timing the appearance of the red and white flashes. Start your stopwatch when you see the red beacon flash. Stop timing when you see the steady white rotating beacon sweep past you. Then, your location relative to the lighthouse is:

time	from the lighthouse
simultaneous red+white flash	due north
white 15 seconds later	due east
white 30 seconds later	due south
white 37.5 seconds later	due southwest

For each additional second between the red and white flashes, you are located someplace along a bearing from the lighthouse, 6 additional degrees from the north reference. These bearings radiating away from the station are then known as radials. If you know the timing between the red and white pulses, you know which radial you are on.

This can be plotted accurately on your chart because the depiction includes the station's north reference. You can draw a line away from the station corresponding to the radial you observed. Repeat this with a second station and you have an accurate position that's immune to the effects of compass accuracy and magnetic variation!

As you travel along, by keeping the radial indicated by a given station constant, you are assured to be travelling along that radial, either toward or away from the station.

For the real VORs, the signals are radio, not light. The signal analogous to our flashing red timing beacon is broadcast omnidirectionally, while the signal analogous to our rotating white beacon is a tight directional radio beam, rotating through a full circle, just as our light beacon was. On old VORs, there is a directional antenna inside the VOR housing that physically rotates. Newer VOR stations have a circular array of antennas that are electrically modulated to create a tight, directionally focused radio beam which rotates without moving parts.

Simplifying slightly, these two VOR radio signals are modulated differently so the VOR receiver in your airplane can tell them apart. The receiver handles comparing the two signals to determine their timing with respect to each other, as we did by looking at the lighthouse in our example. And in this way the receiver knows which radial it is located on from the VOR it is receiving. Because of this fact, no special directionally tunable reception antenna is required for a VOR receiver, unlike ADF. This makes VOR navaids more accurate, and the airborne equipment is simpler and cheaper.

A technical discussion is available on Wikipedia, but this simple and intuitive visual analogy just made so much sense to me that I decided I had to share it here.

On doppler VORs, or D-VORs, I think both radio signals are omnidirectional, but the phase of the modulation of the "rotating" signal varies around the circle of antenna elements, creating a unique phase relationship between the two signals as one travels around the circumference of the station. There is no directional beam, but the VOR receiver computes the radial you're on by referring to this unique phase relationship between the signals that couldn't be received along any other radial from the station. I think... The Wikipedia article started to get math heavy at that point.

To my knowledge, our visual lighthouse analogy for VOR operation has never actually been used for real navigation by nighttime visual reference, but it could be. An additional light signal would be required to flash out an identifier signal, so you could determine which lighthouse-VOR you were looking at on your chart.

An audio morse-code identifier is part of a radio VOR's signal, to which you listen after tuning the station to confirm the signals you are receiving are from the station you wanted (and these days, more advanced avionics monitor this morse ID code for you and present the three or four letter code on your navigation display, saving you the trouble).

The lighthouse example did remind me of my coastal navigation days, where different signal lights and lighthouses do indeed flash various ID codes at you, to which you can reference on your nautical charts to determine which light you're looking at. But in this case, the signal lights are the visual equivalents of NDBs. The flash pattern contains no embedded directional signals. Taking a bearing to the light from the pelorus, and along with the ship's heading you can draw lines of position on your chart radiating from lights sighted, a process essentially the same as using an ADF with NDBs in the air, with the same accuracy pitfalls from compass and magnetic variation variances.

Later in life I observed that the visual airport beacons for different airports in my local area tended to rotate at significantly different speeds. From my earlier nautical light knowledge, I assumed that aeronautical charts might have timing data for each airport's beacons so that one might confirm the identity of the field they have in sight at night. Alas, it's just a coincidence. The timing is crudely specified, a slower range of flash rates for airports, a faster range for heliports. There are also color codes in the flashes which serve to differentiate civil, military, land, water, and emergency services aerodromes, but specific aerodromes are not positively identified by this signal.

I should note that terrestrial radionavigation aids are effectively obsolete now by the extremely accurate, increasingly cheap, and highly available satellite navigation systems. It's expected that these satellite constellations will become more numerous and feature rich, increasing the likelihood of guaranteed signal access for civil navigation uses. It's practically this way already for lower accuracy positioning, but for the most precise uses (i.e. for instrument landing systems and automated landing) there are periods of unsuitability due to the configuration of the orbits of the satellites, or maintenance of the error correction mechanisms (check RAIM and WAAS). Most of the time though, you can get accuracies of a few feet, anywhere with a decent view of the sky. That's better than any terrestrial system.

The FAA desires to shut down most VOR stations as soon as the GPS system is deemed available and precise enough, as they are expensive to maintain. But if the decommissioning of LORAN is any guide, we'll probably have access to VOR signals for some years to come.

In the event of a major space storm disabling a good deal of orbiting satellites (plausible, but not very likely), access to such terrestrial systems would become highly desired again.

Most VORs and NDBs are used for navigating from one station to another, or along specific VOR radials. The better GPS based systems allow one to specify any GPS waypoint for use as a "virtual VOR", whereby traditional VOR-style course-deviation-indication (CDI) and omnibearing-selector (OBS) controls allow you to precisely fly a given course to or from the waypoint. Such functions can be helpful when given random holding fixes to fly, for example. Today, however, much of the emphasis is on database navigation. Where any and all possible waypoints and procedures for flying between them are encoded in a database stored inside the GPS navigator, and you fly by querying the database for the route between desired waypoints and procedures for instrument approach. The navigator, if coupled to an autopilot, can then navigate the aircraft all the way through the approach with little for you to do but monitor and assure yourself it's going where you expected and intended.

With the newest "highway in the sky" features available as part of the synthetic vision systems of avionics like Garmin's G1000, flying complex procedures with curving approach and departure paths and tight glidepath and obstacle restrictions is as easy and ubiquitous as using the flight controls to guide the little computer airplane through the series of hoops on the video display. It's becoming literally as easy as a video game. Remember Pilotwings for the SuperNES? Or Independence War on the PC? Or the dropship sequence from Aliens on the C64? Like that.

You just have to be sure you programmed your navigator correctly before you start out!

This is one area where general aviation has advanced (temporarily) ahead of the airlines. Most airliners do not have avionics as advanced as a G1000 system with synthetic vision. A rare instance were the smaller guys were able to be more nimble, thanks to ever cheapening computer technology. The airlines are catching up, however, and G1000-type systems with synthetic vision are going now into business jets, with similarly featured systems planned for the latest iterations out of Boeing and Airbus.

That's all, thanks for reading! Hope you had fun!

Busted Trades

2010-05-07T21:11:00.000-07:00

Fun times were had last Thursday (6MAY10) as the stock markets saw some really wild volatility occur in the mid-afternoon. At one point, the Dow was down around 1,000 points, the biggest intraday decline in the history of the index.

In the aftermath, there's a lot of blather going on about what exactly happened and who's responsible, as nobody believed the declines were real or that markets could really move that fast. Plenty of finger pointing as the heads of the highly competitive exchanges blame each other for the event.

The trading behavior and price movement of the markets are a collective emergent phenomenon, a large-scale effect of individual entities (large and small) behaving according to their own local rules (personal tradeplans, automated trading platform configuration, values of parameters, etc.). In this sense, the price action and movement of the indexes is more like the weather. Back away a bit, and you can get a general gist of what's happened and what may be likely to happen in the short term, but you just can't predict where bolts of lightening will strike, or when and where a tornado may form.

I don't think in any way that Thursday's price action was the result of any one thing, or even a small collection of things. Rather, I'm inclined toward the notion that it was probably a phenomenon that emerged when great masses of various individual conditions happened to line up just so, and trigger a storm. To me, that's what this felt like, a market storm.

By the end of the day, the market recovered much of the staggering afternoon meltdown, but was still down sharply. The NYSE Composite started that day at 7259, and took most of the day to trade down to 7000, then within 15 minutes it moved down, then back up, over 300 more points, touching 6667 at its lowest.

Apparently, the action in individual equities was quite something to see. Jim Cramer, on with Erin Burnett in his usual afternoon CNBC segment, reacted in a manner that was probably consistent with quite a few traders out there.

Jim watched P&G start to trade far away down from it's opening price, and failing to understand why such a price was justified, exclaimed that if he were still at his hedge fund, "Forty-nine and a quarter bid for fifty-thousand Procter" would be his order, and "Just buy it, who cares?"

Jim's a believer in the fundamental picture of P&G, that it's a good long-term type of stock to have in a retirement portfolio, and that it's also attractive due to it's relatively good dividend yield, make unnaturally juicy by Thursday's downward action. So on those merits, Jim's in there thinking, 'I don't know why it's down here, but it's a great company and WOW, THAT'S A LOW PRICE!'

As he talked over the course of the next couple of minutes, P&G traded through 49 to 42, and back to 59. By the end of his segment, he was saying, "I now flip it at 59 and I've just made 500Gs."

You might have been able to do that trade, if you were watching the market all day and right in front of a trading screen. I'm sure plenty of people did do precisely this sort of trade.

So, now comes the crux of why I decided to write this post. After-hours, word came down from the NASDAQ and also from NYSE that trades which executed 60% or more away from the last market print between 14:40 - 15:00 eastern time, would be canceled.

In the vernacular, this is known as "busting trades" and typically occurs when exchanges can point to obvious system breakdowns, corruption of price data, or intentional fraudulent market manipulation leading to faulty reporting of trade data.

Well, I suppose it may turn out to be the case that the first snowflake to start the avalanche was the result of intentional manipulation, but the way things are playing out, I highly doubt it.

Duncan Niederauer, CEO of the NYSE, speaking before the opening bell on CNBC Friday gave me some great food for thought about the implications of busting trades.

Picture Jim Cramer's hypothetical trading in PG the previous afternoon. Now, presumably he's watching the prices print on the "tape" and reacting in his own interest. He's playing completely open and by the book, barking a limit order for 50k PG at $49.25. Let's say he got filled, saw the tape print prices around $59-$61, as it did a few minutes later, and he flips with a new limit order, selling at $59 we'll say. Let's assume he got filled there too, and made his $500,000 profit.

It's certainly possible, and this very type of thing probably did happen to many traders Thursday night, that the first trade in that pair was found to conform to the "busting" criteria and reversed. However, the second trade in the pair, perhaps due to other executions at nearby prices happening within milliseconds of Cramer's hypothetical order, was deemed fair and not busted. What is the result Friday morning as you log onto your trading platform and await the opening bell?

Well, those 50k shares you sold did "sell", but the preceding "buy" never happened. Through no fault of your own, that $500,000 you thought you'd made Thursday afternoon has turned into a liability. You sold shares you never owned. You're short PG to the tune of $2.95 million worth of stock, and the market's about to reopen!

Talk about a shock! What do you do now? Do you buy back to cover the short right away, or wait a while to see if the stock resumes the prior day's downtrend? No time to think about it...here's the bell and PG's about to print is first trade, and it is: $60.61 (crap!)

You decide to sit on your hands a moment and call your broker and try to get some answers...you sit on the phone awhile, your broker is fielding hundreds of calls like yours perhaps. By the time you're off the phone at 10:20, you've learned that you in fact ARE short PG for 50k shares, and the last trade now is a throat-grabbing $61 (maybe other traders who awoke to find themselves unintentionally short are scrambling to cover...how many of them could there be? This might be bad if I don't act now, a real serious short-squeeze). You squelch further risk and buy-to-cover at $61. Rather than having a great Thursday $500,000 wealthier, you now have a disastrous Friday, having closed out your position (for real this time) for a $100,000 loss!

Who was at fault in this scenario? You played by the rules, placed your orders, and got filled according to exchange rules. How is it that for playing fair, you have to part with $100Gs? Now perhaps the decision by the exchanges to bust some of these trades save some people serious bacon. But these folks would've placed those orders eyes-open too, expecting them to execute if the conditions for their triggering were satisfied.

It seems to me, since someone is on the other side of every trade, that for every potential $500Gs-winning hypothetical Jim Cramer out there, there was a $500k loser (or collection of tiny losers, whose losses summed to $500k as they became part of the other side of Cramer's trade). Going in and intervening has the effect of converting some of the losers to winners, and some winners to losers.

The rule then ought to be, were the counter-parties acting in good faith, relying on the exchange to match their orders and execute their trades, was the data they were relying upon accurate, and did the system perform as designed? If so, the trade should stand. PERIOD.

From the evidence I've come into contact with in the aftermath of Thursday's action, there doesn't seem to be any malfeasance behind the price movements. It does in fact appear that all the price action was the direct result of the various exchanges acting precisely correctly (that is: precisely in keeping with SEC regulations, and their own published exchange rules for how trades and exchange data are to be handled and what procedures will be implemented when unusual price action develops). In short, the system behaved as designed. It did EXACTLY what we asked it to do, matching orders from buyers and sellers.

Exchanges and the market-makers and specialists at them, compete by trying to keep their assigned stocks liquid and trading. But this service comes with risk, and when the market starts to move at the same time that participants start to leave the venue, as a market-maker you have to be thinking about saving yourself at some point and cutting off your exposure to being stuck with stock at prices at which you cannot afford to trade.

On the human-side of the NYSE, this is exactly what happened. Volume began to trail off. The fastest price moment often happens when there are significantly fewer market participants, because within order books of bids and offers, the different price levels awaiting execution tend to get more spaced out and thinner. As this is happening, if someone comes in with a market order, particularly a large enough one, he'll start sweeping through those thin layers of supply at each booked price level very quickly. The exchange gets an order to sell 50k of XYZ at the market, and it's sending stock away to the first buyers it can see, starting at the highest bid on the order book. When that demand is used up, if supply in the original order still exists, the system sweeps down to the next highest bid, and so on until all the requested shares have been sold, or the buy side of the order book is used up completely.

This, in some sense, happened Thursday. The order books got thin, and consequently prices started to move about faster. (I think it's a common enough practice for many traders out there to put out speculative bids or offers far away from the last trade, "just in case" this exact sort of situation develops. If I have a new position in some stock, I'll frequently place a GTC sell limit order on at my target price, so I can be assured of booking the profit I'd hoped to realize, if the market trades up to me for ANY reason.)

On the NYSE there is a feature to help control fast markets known as liquidity replenishment points (LRPs). LRPs are trigger prices set into the order books for stocks at specific distances away from the last-traded price. They're there to control volatility such as we had on Thursday. The NYSE's designers recognized that high-speed data networks and electronic trading made it possible to execute trades so fast, no human could follow the price action. And "quant" systems are designed to exploit this fact, analyzing trade data and submitting orders on behalf of an individual or institution as fast as possible according to pre-programmed rules for behavior. These systems are human designed to try to make profits by trading quickly or according to complex dynamic criteria, and work because they can see and adapt to market conditions faster than humans can type in individual orders. It's a perfectly legitimate way to put technology to work for you.

The NYSE recognizes that one side-effect of this type of assistive technology is that unanticipated feedback mechanisms could become set-up as automated trading systems start to react to patterns generated by other automated systems. Market liquidity could suddenly dry up or flood in, and prices could start moving faster than humans could react to really understand the situation.

So when an LRP is triggered at the NYSE, the electronic execution temporarily flips into a slow, manual or auction-type mode to allow the human beings on the exchange floor, and at home or the office at their computers, time to see what's just happened and react as they think appropriate. It's a kind of "circuit-breaker" to ensure that markets don't move into absolutely absurd price territory for reasons nobody can make sense of, or have time to act upon. It's a good idea! This IS about the humans after all, and our technology is there to try and serve our interest.

And here's where I get to put my anti-regulation libertarian hat on: Thursday's market volatility was magnified by our very own SEC, and a recently new bit of regulation they imposed called "Reg. NMS" (for National Market System).

A few years ago, the SEC (in their porn-surfing-all-day kinda infinite wisdom), decided that investors needed to be "protected" from "unfair" price activity that might be happening on the exchange they're dealing with, when prices might be better outside that exchange, on another exchange or wholly electronic order matching system. The rule was hotly debated during its gestation, but the SEC planted its feet and dragged the exchanges along, who eventually acquiesced to the new order of things.

Reg NMS was supposed to protect market participants by seeking to ensure that the best displayed bid and offer (the top of the book) were protected and unable to be ignored if they came from an electronic system. Manual quotes and hidden orders are exempt. What that means is that if an order comes into the NYSE, but on the other side of the trade, another exchange is displaying a better price at the top of its displayed order book than exists on the NYSE order book, the incoming NYSE order must first "trade around" the NYSE to match with the order on the away exchange or system. If the incoming order wasn't fully satisfied by that away quote, then it can continue executing back on the NYSE, where it had been sent to begin with.

This was supposedly to protect smaller traders using brokers. Such traders don't interact directly with an exchange to execute their orders, and rely on market data typically presented in a consolidated stream representing the best bid and offer available within the entire market system, not just one particular exchange.

Before this rule, you might see an offer quoted on your trading platform, and this might prompt you to send out a bid to your chosen exchange (this is from a broker's perspective, from your perspective, your order goes into your broker's system). The exchange might have been able to execute your order completely from their own order book, and in many cases this would happen, ignoring (or trading-through) the quote you saw on your screen, as it was from another exchange. On the other side of things, the entity on the other exchange with the superior offer might wonder why he saw a trade print which executed at a price inferior to his offer. He's just been traded-through on a foreign exchange. Reg. NMS was designed to prevent this situation, at least for the displayed quotes at the tops of each market centers' order books.

So as the markets in certain stocks started to get volatile, at the NYSE, LRP points started to be hit. At NYSE, these stocks then flipped into manual or auction mode for a set time. Electronic execution stopped, and quotes from there were designated as slow. Specialists now have time to examine the market and decided if they're going to add or change orders on behalf of themselves or the institutions they're representing. Since automatic execution stopped, if pricing becomes superior at the NYSE compared to other market centers, these superior quotes will still get disseminated, but other market centers are permitted under Reg. NMS to "trade through" them if they wish. So if a new order comes into a different market center, that order might get traded through the NYSE's superior (but slow) quotes and execute on that market center fully. How this is controlled must depend on the order type that was sent to the market center. I believe it is the case that, using the proper order type, if you sent an order to a given market center away from the NYSE, and the NYSE was showing a superior price, you could control whether the order was forwarded over to the NYSE for slow execution, or executed directly at the center you'd sent it to, using the quotes on that center's order book.

Meanwhile, back at the NYSE, electronic orders coming in can start participating in an auction system which determines at which price the first execution will occur once the LRP halt time limit expires. In addition, floor specialists can manually execute trades at any time during the LRP halt period. Automatic electronic execution resumes immediately after such a manual execution.

So as trading volume diminished and liquidity bled away from certain stocks, the increase in their price volatility started to trigger LRPs at the NYSE, causing this market to slow down. This had the effect of isolating the other market centers' automatic electronic execution from the liquidity which might otherwise have been available at the NYSE. These market centers had some degree of choice of either continuing to match trades from their own order books, or, when the NYSE began showing superior quotes, route orders to it with the knowledge that execution will be slow (nothing will happen until a manual floor trade takes place, or failing any manual trades, until the auction price is determined by the end of the LRP halt period).

As I interpret Duncan Niederauer, it seems that most of the time, the other market centers chose to continue automatic electronic execution from their own books, eschewing the liquidity building up at the NYSE during the LRP periods and trading through NYSE's superior quotes. In one sense, these other market centers were preferring speed of execution and transaction rate to execution quality.

Choosing this path meant trades were executing off of thinner books with less available at each price point, and the result seems to have been very very rapid sweeps through those order books down to price points that, to a slow-acting human trader, would be completely baseless and silly. Because the all-electronic market was so fast and efficient, prices moved totally outside of a rational range before any human could recognize an opportunity was available and step in. Now, with last trades printing well beyond normal, such human traders on the sidelines are thinking..."is something wrong? Was that a real price? Perhaps I should just sit on my hands a moment."

Now, you can see why the NYSE's system of LRPs is such a good idea. It applies a brake when all-electronic algorithmically-driven trading causes the market to move more quickly than seems rational, giving the humans time to react, notice the prices, and start placing "bets" in a manner they think appropriate.

Duncan's thrust during his CNBC interview before the bell, was that pricing almost certainly would not have become so irrational if other market centers had policies similar to the NYSE's concept of LRPs, and that in any case, once LRPs were hit at the NYSE, movement would have been more rational if other market centers chose instead not to trade through superior NYSE quotes.

Reg. NMS worsened the situation once the NYSE isolated itself, by forcing the other electronic market centers to respect the superior top-book quotes of other electronic venues, which by this point were certainly all algorithmically generated orders, not based on human judgment or rationality.

Now, it's all algorithmic, all electronic, but it's also all still REAL. These are REAL trades, valid trades, placed by and crossed by computer programs at the request of their operators. Regardless whether the operators might have understood what their programs were up to exactly, these operators chose to run these programs to post these trades.

Finally, humans start reacting to the absurd last-trade prints coming in. The Jim Cramers out there are seeing the absurd prices and sensing opportunity. They step to their platforms, and place their trades, which also execute properly according to the rules of the system. Maybe they profit at the expense of the silly people who commanded their "quant" systems to trade on their behalf. Good! This is how a free market works! If algorithmic traders come by later and discover their beloved "quant" program did a bad bad thing to them, then they ought to take the pain and rethink their trading strategy a bit. It was a FAIR TRADE.

So who wins? Well from here, it appears the industry organizations which determine if a trade ought to be busted clearly stepped in to bail out the users of algorithmic systems...perhaps at the very very dear expense of later-reacting human traders who, in good faith, and in accordance with published rules, placed their own trades seeking to profit from what they rationally saw were stocks priced for opportunity. It IS the case that ANY TIME a trade is placed, the traders are placing orders because they think the price is wrong and will move a certain way. They place the trade with an aim to make the move toward the price they think is more correct yield a profit for them. If this were not so, NO TRADES would ever happen.

So just because the price seems by some vague unquantifiable measure more wrong than usual, the regulating agency is going to bust trades made honestly and intentionally?

If it comes to light that there was real fraud intentionally committed by some entity or group out there, then I will feel less indignant. The Jim Cramer hypothetical still would get no satisfaction, as he would've been acting in good faith to data presented as valid and trustworthy. If you busted his buy, the only proper solution would then be to also bust his later sell, and follow those shares and bust every other single trade involving them from that point forward to the close (a daunting data mining challenge).

But I am thinking that it will be the case that there will be no boogeyman found on this, no actual fraud committed, and no actual corruption of data discovered from some sort of system fault. In the end, my money is on the notion that the system operated precisely the way it was set up to operate, only that in this instance, the system's configuration led to a period of unexpected behavior. That might be a necessary condition to start going in and busting trades, but I argue it is not a sufficient one.

To any traders from Thursday who acted openly, seeking as always to profit from prices they think are wrong, and wound up in a position similar to my hypothetical Cramer scenario, losing serious money solely because a regulator thought the price movement was somehow too wrong to be real, I feel for you.

It's been suggested that perhaps a large institutional trader entered into a large trade or started a significant algorithmic process in error (the fat fingers excuse) and never intended to enter that trade or start that process, and the price avalanche was the direct result of a cascade of effects occurring as a result of that unintentional action. If that scenario turns out to be the case for this mess, then tough bounce for that guy! If I setup an order with my broker, mistype a number on the computer form, and before realizing my mistake, I push the send button, is the broker going to make me whole? NO WAY! It was my bad, my error, and I'll have to live with it. Perhaps it's not too late and I can get in quick and hit the cancel button on that order. Maybe that works, but brokers are always careful to point out that canceled trades are subject to prior execution, the news of which might still have been making its way toward your terminal while you were pushing the cancel button. If so, too bad, they say. And we accept this before choosing to use the platform. Why should Mr. Fat Fingers, in this instance, get a pass and see trades busted in his favor?

It was interesting to me to see, Thursday night, notice come down from the exchanges about some industry-wide consensus to go on this trade busting plan, followed quickly with the statement that there would be no appeals. How could you be so sure so soon that no one would have valid grounds to appeal unless you know the cause of the problem? You can't. A statement on Friday from the SEC included a closing comment I found to be quite telling:

"Market clearance and settlement processes functioned well and without incident."

Translation: the system behaved as it had been designed to behave. Now that to me suggests we can rule out a system fault or data corruption as causal.

These trades are what they are. If no explicit fraudulent actions or direct data corruption due to system fault is found, then shame on you, regulator. Your meddling might be what we really need protection from.

Coming soon: Prohibition

2010-03-05T00:24:00.000-08:00

(video torrent)
The Stossel Show on FBN tonight was his best so far, especially "the button" he put on the end of it. There was so much ground covered, I found myself wanting to react in writing every few minutes. So, expect in coming days a post or series of posts exploring this show and the concepts and practices associated with prohibition.

Reaction to STOSSEL, "Hands Off My Meds!" or "Government in My Medicine Cabinet"

2010-03-03T01:01:00.000-08:00

Reaction to the STOSSEL program, on the Fox Business Network, of 2010, February 25. (video torrent)

In the show open, we hear John's opening thrust, then from dissenters who argue they want protective government intervention to assure safety. You know, I'm not opposed to their idea necessarily. But, why not make the FDA an advisory body in that case. Concerned folks like they can choose to rely upon an advisory-only FDA to determine whether they'd consider a given drug option.

These folks get the government's blessing of safety inspection, and their assurance. The rest of us get the right to choose any alternative, regardless of FDA stance.

The little girl in the opening vignette broke me apart. I think about what her life could have been, what she might have imagined for herself, the forever lost opportunity that, if you were going to lose your struggle to live, that you let go knowing you tried everything you were willing to try.

Stories like hers, what a ~~shame~~ crime! The mandatory nature of FDA regulation tortured that girl to death. Her disease may ultimately have killed her, but our government, in striving to provide guaranteed safety to all, sacrified her and bloodied its hands in the process. And her case is not rare, nor unique. She died laboring for freedom from our government's oppression, and in the video you see how that oppression tortured her sense of well being. How despicable! That makes me feel ashamed for the sort of America we've allowed ourselves to be steered to.

Especially (but certainly not limiting) in cases where the alternative is certain death, there cannot be any harm in the freedom to choose a thing, eyes open. If the choice kills you, well, you were dead anyway, and you made the choice of your own volition, and knowing the risks (including the risk of unknown/unlimited risk). If you die this way, from an experimental treatment that went wrong, the government remains clean, and can operate with clear conscience. That cannot be said of the present state of things.

The story of the FDA vs. Thalidomide was a fluke of timing. How about Vioxx? Remember that one? The FDA didn't kill Vioxx, market pressure and lawsuits from harmed users did that. The FDA had approved Vioxx; only after an irreparably tarnished reputation, and a commercial decision by Merck to remove it to salvage some credibility with consumers, did the FDA belatedly steal credit for getting it removed from the market.

John Stossel pointed out in his blog that Mediaite criticized his libertarian viewpoint on the basis that only a government body like the FDA has enough impartial authority to coerce honesty from drug makers.

Well, the Vioxx fracas proves that exactly the opposite is true, and that's just one example that came to my mind. I'm sure there are plenty more. In a vacuum without an FDA, a free and unfettered marketplace would have done at least as well as the FDA did on the Vioxx matter. Probably much better, and much faster. In fact, our non-free and much-encumbered market of government restricted choice was already way ahead of the FDA, and the FDA merely played cheerleader, and bad cop to the market's good cop routine.

I know a few folks who would've taken Vioxx anyway, even knowing about an increased risk of heart attack or stroke...the Vioxx contribution to which is still being researched and it's still controversial.

The truth is that once you damage the trust of your customer base, they are likely to reward you by voting with their wallets, and going toward a provider who has proven more trustworthy. What better coercion can you get? Serve the customer or die. If you're a smarmy operator, your career will be short. In our internet-connected age, word of mouth is now everything. People will learn, if they need to, to be wary.

I also know a few folks who are in the aftermath more wary of the fancy new drug treatments they see marketed on TV (like myself). These folks have become more reluctant to try something new if an older treatment exists which gives good enough results (in their judgement) and has more experience and data behind it.

An advisory FDA would allow those who for any reason prefer to have the government as their expert vetting agent, use it in that way. The rest of us who might feel inclined to become more informed than we believe the government could be, or who feel have special circumstances the government's accounting cannot factor, or who plainly would rather put our trust into some other party or parties, can still choose to do so.

In the current climate of aggressive agitation for socialized medicine, it seems obvious that optional or advisory regulation couldn't be allowed to exist. If the government is going to pay for your health care (whether you want it that way or would rather keep your tax dollars and pay for yourself), it must be allowed to dictate what the approved treatment is to be. It (quite rationally) cannot be expected to pay for your holistic, pseudo-scientific, homeopathic, faith-based cancer treatment, because it cannot prove the efficacy of such crackpot treatments.

To me, this would be a loud argument against such socializing efforts.

However, with advisory bodies making recommendations, and free people paying out of their own pockets for their own care, they would have the freedom to choose what works best for them...even if, rationally and scientifically, the treatment they decide upon cannot possibly work at all. We would still have the precious freedom to choose to be irrational.

Markets clear. Let them. It is the only truly humane option.

2010-01-16T01:47:00.000-08:00

Letter to a Christian Nation by Sam Harris

My rating: 4 of 5 stars
This is a fast read: about 90 pages in a conveniently small, pocket-book, format (even for the hardcover). A useful synopsis of the modern debate for the uninitiated, review points for current atheists. While designed to be inviting, honest, and sincerely challenging to Christian readers, its quick trend from friendly invitation to stark reasoning demands the reader think critically, and when the hand-holding is over, the truly devout may become too offended to grant fair consideration.

It's aimed directly at Christians in America, however, particularly those of the less moderate sects who tend to have a more literal and inflexible bible interpretation (say evangelicals, Pentecostals, and some of the more traditional baptists).

He's careful to gently point out that if there can be no objective way to measure the validity of each religion's claims on various matters, but only taking such claims on faith, then true believers in each conflicting religion are positively doomed to stay locked in conflict. Conflict which gets ever bloodier and does more collateral damage with time's passing.

Despite the perhaps self-evident nature of pure logical reasoning, new human relationships aren't always motivated by rationality, and require a period of assessment and trust-building between the participants.

While Harris takes care to respect this at the beginning of the book, as it progresses he comes on increasingly strong. I expect that the truly devout readers will quickly become offended, and the politics of human emotion in relationships will blind these folks to giving dispassionate consideration to his ideas. Some more moderate believers could become a bridge, as they might be deemed more trustworthy by devout people than declared nonbelievers. It's an argument from authority, but for the devout to be operators-in-faith, at some point arguments from authority started to hold their sway.

It's a great opener to the debate from the atheist's perspective. For newcomers to the debate, the newly atheist, the longtime faithful or agnostic, it represents a way to get up to speed on the modern challenges in short order, and be cogent in following argument.

It's also a great gateway for people struggling to answer their own faith questions. The reading list at the end of the book is invaluable for those who wish to investigate the atheist perspective in greater detail.

The first book in that list, Dawkins' "The God Delusion" was my very first introduction to the atheist perspective. Raised in the Lutheran tradition, before reading I already considered myself agnostic and a lassez-faire spiritualist. Being very scientifically minded and already open to the critical thinking process, Dawkins' book sunk in readily, deeply, and exploded utterly my preconceptions.

I recognized I was actually an atheist before its conclusion, and the wisdom of that book's presentation still resonates for me. Dawkins itemizes and deconstructs all the major arguments for belief (or against atheism, evolution, scientific thought and critical reason) and hints at knowledge and understanding as its own reward which can develop and sustain a human need for spirituality.

To Harris' reading list, I would add:

Christopher Hitchens, "God is Not GREAT"
- views of conflict inspired by religious zeal, presented in a style unique to Hitchens, and that's made him (in)famous
Mary Jane Engh, "In the Name of Heaven"
- historical primer on 3000 years of documented religious conflict
(by this point you really start to see a pattern in humanity)
Sam Harris, "The End of Faith[...:]"
- adds in relevance to today's world conflict; how to approach religion-inspired terrorism; adds philosophy and shows how atheism does not exclude being spiritual
John Shelby Spong, "Eternal Life[...:]"
- great for current Christians, a lifelong Episcopalian minister reveals his how his Christian-inspired spirituality ultimately lead him to adopt an essentially atheist viewpoint, and without discarding his Christianity, transcends its Biblical verbiage to discover a spiritual perspective that redefined what is meant by the Christian concept of eternal life and ultimately what the full expression of Christianity must be, freed from human-generated dogma. Spong holds Harris in high regard, acknowledging his statements on spirituality, but says he goes further.

For the OTHER side of the argument, you may wish to consider Ravi Zacharias' "The End of Reason" (which now scares me).

View all my reviews >>

Andrew's Temperature Adjectives

2009-12-06T18:03:00.000-08:00

I'm getting prepared to start writing in here a little more. Meanwhile, the mercury has finally begun dipping into more normal wintertime levels up here. It made me think about giving some regularized descriptive terms to common temperature ranges. I've created this list to standardize on some adjectives for the hot and cold!


Temperature Characterizations

C      F      Character
-------------------------
 40+    104+  Death Valley! (routine summer dry-heat temps in the major deserts)
 35     95    Scorchio!            (exceedence rare for hot North Dakota summer)
 30     86    Hot                  (typical summer North Dakota)
 25     77    Warm
 20     68    Room temp
 15     59    Cool
 10     50    Chilly
  5     41    Very Chilly
  0     32    Freezing
- 5     23    Frosty
-10     19    Cold
-15      5    Very Cold
-20    - 4    Frigid
-25    -13    Cool Arctic
-30    -22    Arctic               (typical cold winter North Dakota)
-35    -31    Cold Arctic          (rare North Dakota cold)
-40    -40    Frigid Arctic        (unlikely except for winter polar regions)
-45    -49    Extra Frigid Arctic
-50    -58    Super Frigid Arctic
-55    -67    Ultra Frigid Arctic
-90    -130   World Record Cold (Vostok, Antarctica: -89.4C 1983, current record)

I Am Your Keeper, Brother

2009-08-21T00:10:00.000-07:00

As your master, I am worthy of your respect. And to the extent you know me to believe this as a core moral and ethical value, then so you ought work all the harder for me.

I've taken some liberty there with chapter 6 of 1st Timothy in the New Testament to shed some light on how I'm feeling with Obama's irreligious religiosity.

I do not take the President to be a religious man, or a believer in the Christian faith, nor do I care that much. America, however, is populated with a heavy number of religious and faithful people. It seems to me that Obama believes it's worth a shot at using the faithfulness of America's religious as a lever to shove them toward his side in the healthcare debate.

Obama turns to faith leaders
Holy O Turns Faith Healer
Amend the Constitution to Include the Separation of God and Obama

It causes me to wince when I see religion manipulated to then go out and try to manipulate people. The line he uses, "I am my brother's keeper," extended into political-correctness with the further addition, "-I am my sister's keeper.", is once such wince-inducing agent.

What's he getting at here? On the surface it's the common-sense sensibility that we each have a certain ethical duty to help out those needing help around us, if we can. I think that just about goes without saying, and I further think that scarcely anyone in the whole frakkin' world would disagree!

By couching that sentiment in apparently biblical phraseology, he's seeking to add weight and imperative to this obligation, and to elevate its stature in the minds of religious Americans. To shift responsibility to fulfill this obligation from the individual to the state, he's attempting to attach some of the bible's authority to his own cause, and he does this by simply making stuff up.

I think one steps onto a vast ocean of quicksand when one attempts to debate the meaning of the Bible. It's broad and contradictory enough to mean almost anything to anyone at anytime. But, for the sake of my indulgence, I shall now see if I can swim in quicksand.

The only mention of "brother's keeper" in the Bible comes out of Genesis 4:9, where Cain indignantly responds to God's query as to the whereabouts of his brother Abel (who Cain has just murdered), "I don't know, am I my brother's keeper?"

God never appeared to imply at any time that Cain was the keeper of his brother. In fact, it was that God appeared to favor Able instead of him (for reasons that appear to have been beyond Cain's control) that drove Cain to murder.

The charge by God, "You are your brother's keeper." doesn't exist in the Bible; Obama's public injunction to that very end is simply something he's made up for political expedience.

Most religious traditions somewhere advocate for families and more broadly members of social orders to look out for one another. But I argue that this moral precept didn't arise because religion taught it to us. Though religious expression can be reflective of it, we did not receive our inbuilt sense of morality from religion. Rather, we evolved it.

To me, it makes perfect sense. Our species (and its progenitors) had a better chance of surviving (as individuals, families, orders, and even a whole species) if it was magnanimous toward other members whenever possible. This serves as a helpful buffer against the uncertainty of daily life and experience. If I'm strong and can assist someone who could use the help, if fate should ordain that I get into trouble at some future point, it will be all the more likely that I will then receive the help of others too. By being magnanimous and practicing reciprocating behavior, we help better the total odds of our survival as a whole.

Now such a population would also be vulnerable to the parasitism of freeloaders, and so that does happen, and a freeloader can exist or even exploit the charity of his social group to his own advantage. But only to a point. If the parasite load becomes too heavy, the parasites will threaten to kill off the host and both parties will die off. So past a certain threshold, the charity flowing toward more parasites will end. Both the hosts and the parasites have an interest in keeping the parasite population under control. (For more on this, I recommend Richard Dawkin's, The God Delusion.)

In this way we evolved an inbuilt ethical sense. It's natural, and while certain religious practices reinforce this, we weren't given it by religious edict.

Let me wade into the quagmire of the Christian holy book once more: regarding 1st Timothy again, chapter 5:3-4 obliges the able children of widows to help support their family's needs, repaying the support given them by their parents and grandparents. Further along in verse 16, women with widows in their family are also compelled to help them out, so as to free the church to help those others who are truly in need!

You can interpret this to convey the sort of sentiment Benjamin Franklin made famous on early American coinage, "Mind Your Business!"

It's both a command and a retort. You can think of "mind your business" in the usual way you might rebuke someone interfering in your affairs. But you can also think of it as an obligation to put yourself first.

Think about that for a second.

Doesn't it make for the soundest of advice? It's far from selfish. If you've seen to your own interests (not at the expense of others, mind you) to make sure you can live in a self-supporting manner, then you won't be dependent on others for support. Moreover, you will then have the ultimate freedom to be magnanimous to others who need supporting around you. You can judge for yourself who is most deserving of your charity and sponsor those, the better they might be able to soon regain their footing and again become self-supporting. By making yourself up the best you can, you'll also have the freedom to take pity on some lost-cause case if you choose.

There are always those among us who will never survive without our charity, but perhaps deserve that charity out of basic human dignity. Or the promise, however fleeting, that they might be able to contribute to someone something of noble value.

Our modern, progressive-inspired government has wed itself to the idea of a social-contract with the governed in which it will care for the needs of the people if the people will see to its needs, taking a perverse abstraction on the principle of individual reciprocal support.

I do not believe this slowly built-up development had been the intention of the framers of our system. They labored to extricate themselves from such an overarching government, whose demands upon them were increasingly preventing them from becoming self-supporting, and had coerced them into a sort of co-dependence. Because they couldn't support themselves, they had to depend on the government to help them out, and the price of that support would be their willingness to become chattel for the government.

President Obama has made a crutch of his "I am my brother's keeper," line. He brings it out anytime there is a need to reinforce his notion of a social-contract wherein the government shall provide for you, so long as you provide for it.

2004, 2006, 2008 (1) (2) (3) (4), 2009

He massages the speechifying to suit the audience, becoming more suffused with religiosity when before faith-based groups or clergy, and appealing more to simple secular progressivism elsewhere.

But underlying this is an implication to each group that government will step in to ease your burdens if you help it forward its agenda to coerce property from the others who aren't yet committed. And, some are motivated simply by that prospect alone (i.e. Wal-Mart, which very surprisingly acquiesced to the Obama healthcare plans only because it offers them an advantage by forcing expenses up for their competition).

I think our framers were trying to craft a system which left the business of social-contract making to society itself, collectively and individually. It would have no role here, except to protect the ability for this to naturally arise by protecting property rights (you have title to what you've earned).

Only by each of us first looking to our own self-interest, will there ever be any surplus with which to be charitable. The extent to which each of us achieve success in this regard, makes for one less person which government needs to support.

And by moving in this direction, we deprive the government of this role of "keeper" its taken for itself. Without the depredations of an impossibly capricious and inefficient government largess machine, we regain the ability to more readily satisfy our own necessary self-interests. In the surpluses we accumulate, we finally reserve the individual freedom to be charitable to those few of us who might remain to seek out our help minding their business.

Then, brother, I can be your keeper.

A Prayer to Government

2009-07-10T03:36:00.000-07:00

Oh Government, you rain down upon me with benefits to provide for all my needs. You have programs to redress nearly every social injustice, and provide for most wants. The scope of your magnanimity grows day by day.

Oh Government, though I know not where from which these numerous blessings flow, I beseech thee to not staunch them, for out of loyalty to thee I have rightly cast off my old ways and means,

and now depend upon thee for my daily bread. Only You have the power to make all things affordable.

Into your wise administration, I commend my freedoms, for what use have I of they, if by their exercise I am forced to live outside your gracious providence?

I shall shut out the heathen influcences of skeptical thought and critical analysis. Apparent failures of your many programs are due not to inefficient and corrupt execution, but lack of true faith in Your wisdom, and the solution to failure is bigger and more.

I humble myself before you and acknowledge my personal inability to provide for my own desires.

Forgive me, and give to me...gimmie gimmie gimmie gimmie!

Yes we can (has cheezburger)!

Amen.

The mystery of N10TM

2009-06-21T23:13:00.000-07:00

So, I'm out driving to get groceries here in the south-end of Grand Forks, ND, and down the avenue comes this heavy pickup truck with a kingpin thingy to haul this semi-sized flatbed trailer. What's on the trailer immediately gets my attention, I mean, you don't just see stuff like this every day. It's a wrecked airplane! And by the looks, it had been a really nice medium GA airplane.

I see the trailer turn into the parking lot of the Super One strip mall area. It appears the driver's going for a break or pizza at the Pizza Hut or something. I cross over the lanes and follow him into the parking lot and then come to a standoff distance alongside, gawking over the awesomeness of the man's cargo.

He jumps out of the heavy pickup, and heads for the Hut. I want a picture, but I don't have a camera on me, but it appears I'll have some time, so I complete my grocery shopping and return 30 minutes later with a camera.

I arrive just in time to meet the driver as he's emerging from the Hut. He proceeds to check the straps securing the load of wrecked airplane: mangled engine pods forward, mostly intact fuselage in the middle, and wings, bit of gear, and empennage at the back of the trailer.

I quickly go for my camera and approach, snapping a few shots on what's about the end of my memory card (still nearly full after a wedding shoot).

The driver notes my interest and I engage him with questions. He's hauling salvage. This airplane wrecked in 2007. Ran out of fuel and crashed into a truck in a parking lot almost exactly like the one we were in now. I didn't recognize the model immediately. The driver tells me it's a King Air, and I mentally note from the three rows of cabin windows that it must be a C90 King Air. I note the tail number. Since it wrecked in 2007, the NTSB probably has an accident report up on it by now.

The driver shows me pictures of the accident scene. I note to him how the cabin is squished a bit under the nose, but is otherwise fully intact and ask if there were serious injuries. "Yes," he replied, "pilot and three passengers got thrown around pretty bad."

"He ran 'er out of fuel," the driver explained.

"Wow, do you know how high he was when he ran out, I mean, was he on approach to an airport?", I asked.

"Oh God no."

I gave a grimace in acknowledgment. The driver offered all he knew, which was that he appeared to run out of fuel at a bad moment, and didn't seem to have the height necessary to execute any better a forced landing, like on an airport or away from people and cars and buildings. Considering this, some unoccupied wrecked cars and no fatalities seemed to be a decent outcome to a bad situation.

He explains that the stalling speed of this airplane is something like 90 mph, so coming into the parking lot would be like wrecking your car at full interstate speed.

He's preparing to depart, so I quickly walk around a shoot a couple more pictures, filling the memory card and hoping for the best, and then thank him and allow him to be on his way. This was a privilege. The airplane crashed in Chattanooga, TN and sat around there, and now was sold for scrap and though I didn't catch the final destination, I got a little insight into the life cycle of downed airplanes.

So, curious to know more about the circumstances, once home again I plug the tail number into the NTSB's database and get the accident report.

If you're reading this, skim the report and come back. Okay? Now it felt to me that the NTSB didn't care all that much about this incident, doing a phone interview of the pilot. It doesn't appear anyone else was too much involved. An FAA inspector confirmed the absence of fuel in the wings, but the pilot's story begs some questions in my mind:

He reported gauge readings between FULL and 3/4 and estimated by this he had fuel for 3 hours at least, more than enough for the 1h20m flight. Now...I don't know the preflight procedures for this type of airplane, but I do know that aviators generally regard fuel quantity gauges in GA airplanes to be liars. I guess certification standards are such that they must read accurately when the fuel tanks are full, and when they are empty, but the middle indications that come during operation may mean only that the tanks are neither full, nor empty, but by how much...? Are you timing your flight? Do you have any sort of totalizer measuring fuel burned?

Well, I was almost right on my guess as to aircraft model. It was a B90, the late 1960s forerunner of the C90 which I had guessed. The changes amounted mainly to perhaps a slightly buffed engine model and longer wingspan, so I mostly nailed it.

Pulling some B90 performance specs off the internet, I see that in cruise the airplane ought to burn about 64 gallons/hour. Now if the gauge indications are anything like my car's, when the gauge reads 3/4, the actual level is more like 1/2. And having half-full tanks in this airplane at that cruise burn rate would yield something close to 3 hours cruising time. So the pilot's estimate of flying time available seems to check here.

To my total surprise, Flightaware.com still had the accident flight's history in its database! Humorously, it listed the destination as Chattanooga (it was really Georgetown, KY), and that the airplane had "arrived." Yeah, I'll say that's true. One way or another, they always arrive. This data features prominently later.

According to the report, the airplane had reached its cruise altitude of FL210 when the pilot noticed that two of the four gauges suddenly read practically empty. Reassessing his situation, he reported to the NTSB he estimated having about 50 gallons of fuel aboard at this point, and opted to make a diversion to Chattanooga.

Okay...no emergency. It's quite strange that the left side gauges went from nearly FULL to empty in just 22 minutes, but...maybe there's some sort of electrical fault with the gauges. Who knows?

Do I dare to call shenanigans on the pilot, and on the NTSB for not making this clear in its report? Not being a real-world pilot myself, just an enthusiast (for now?), I'm about to get pretty presumptuous. But, this is the internet after all.

Again, according to the data on the B90 from the internet, in cruise power the airplane will burn approximately 64 gallons per hour. So that means with 50 gallons estimated remaining he ought to be able to continue up there in cruise for another 45 minutes at about 200 knots.

According to the report, it's with this estimate in mind that our dear pilot elects to prudently divert to Chattanooga, about 45 nautical miles away. If he stays at altitude and cruise power, he'll get there inside of 14 minutes, leaving 30 minutes to descend and execute an approach (at cruise power, which he wouldn't use of course, so he may have even more absolute reserve).

But instead, he's out of gas and crash-landing on some guy's pickup in the middle of a strip mall parking lot! How could this be?

Well now I turn to the Flightaware data for N10TM on the 19SEP07 incident flight. Flightaware gets its data on aircraft position from the same data network air traffic controllers use to monitor the skies. Radar sites get controllers the raw data. Their terminals process it for their needs. After that it goes into a network to which other entities may acquire special access for fleet monitoring, ground service planning, traveller updating, etc.

From this data, I noted that the airplane never reached its cruising altitude, and entered a turn toward Chattanooga near the apex of its flight, around 19600 feet. From this point the flight proceeded more or less direct to the field in a continuous descent. The descent rate and airspeed appeared to be not always stabilized, but averaged 1300 feet/minute at 180 knots groundspeed. That's enough height and speed to go 45 nm, and the straight line distance between reported radar points was in fact 45.6 nm. The field was about .6 miles further along.

It appears from internet sources that a best glide speed isn't published in the POH for the B90, but one source inferred one from data published for a C90 and listed it as about 125 knots. I don't know what sort of descent rate that would translate into, but 1300 fpm doesn't seem out of the ballpark to me.

Now in his report to investigators, he'd estimated having 50 gallons aboard about the time he noticed the two empty gauges and elected to divert. In descent, the power is normally pulled back somewhat, in some cases (certainly for jets, but maybe less so for turboprops like this) all the way to idle. This allows essentially a gliding descent and initial approach, making up for the excess fuel used on the climb to altitude by now using very little on the descent back down, certainly much less than that used on cruise. So the picture should still be okay.

Somewhere in this descent he reported he ran out, and too late to do anything but strap down tight and pancake on the nice pickup truck, like it was a last minute happenstance. I don't buy it. If his estimate had been right, he ought to have ample fuel to make a normal approach and landing. Maybe even enough to afford one go-around if he messed up flying his approach path. How could this be?

In my view, simple: he's shading the truth to investigators. He doesn't appear to have made it to cruising altitude at all (about 1400 feet under it). At the time he decided to divert he was probably already out of gas or very close to it. He didn't methodically consider and then execute a diversion while still carrying at least some reserve of fuel. He hastily and with OK, but somewhat less than perfect form beat a hasty retreat to the nearest suitable airport that came to his mind.

He turned direct from his climb heading, to the airport at Chattanooga, and didn't even try to line up for an approach to the closest runway end. He appeared to be trying to make a B-line for the field and I think he hoped to kick the airplane 'round at the last second to line up and touchdown on the runway there.

Only, he didn't even make it that far. His groundspeed and descent rate suggest a path that might not be unreasonable to expect from a gliding aircraft of this type. Surely if he were still powered, as he suggests when he elected to divert, I would expect he'd want to keep his altitude until he was certain of making his diversion airport. This would mean a delayed descent by some amount.

Even in normal circumstances, one wouldn't choose to make a continuous descent from the point he had, as obviously it's still too far out, and the data doesn't suggest any level flying segment. I think under normal circumstances one might plan to be in the airport vicinity at around 3000 feet, so as to have some flexibility to set up a normal approach.

In my armchair cockpit, I think I'd keep at cruise altitude to benefit from the fact that my fuel burn would be more efficient up there. I'd start down only if an approach and landing was assured, and for utmost margin, I might even fly until overhead the field at cruise altitude, and then enter a descending holding pattern above the field and inbound to a holding fix lined up with the landing runway. You can be certain of gliding in, in that situation.

None of this happened, and I believe that's because he'd already lost power. And while the outcome was a fair one for he and his passengers, he got lucky that no one was injured or killed on the ground. The track data had him near a golf course just before the parking lot. That might have been a safer forced landing site. I think he was fixated on just trying desperately to make it to that field.

The NTSB might have been wise to this pilot though. They didn't seem to care about the obvious possibility that there might have been a gauge problem when the gauges seem to be showing close to FULL, or maybe some sort of fuel leak. A conservative assumption of 1/2 full tanks at this stage would, as the pilot mentions, rightly given him at least 3 hours of cruise flight. Yet only 22 minutes after takeoff, he's noticed two gauges reading about zero (it's not reported what the other gauges read). And fifteen minutes and 45.6 nm later, he's glided that bird to the deck. I'd say his gauges were all probably reading closer to empty all along.

Using ATA over Ethernet saves the day (and data)!

2009-06-19T17:10:00.001-07:00

Hey... a non-political post for once!

Welp, this week I got an unrequested opportunity to put my PC technologist hat back on and fikits my laptop, whose hard drive had gone nearly tango-uniform.

I flexed my dusty skills and, after much mafipulation, managed to extract the win! Dead 40GB drive out (hey, it's like a 2002 model!), new inexpensive 160GB drive in, all data salvaged, unit operating like nothing ever happened.

My wife and I share the laptop and use it considerably. She noted earlier in the week that it was making strange noises. I didn't hear them, but ran SpinRite across the disk to verify its integrity. That passed and no problems were noted. The hard drive is OEM, and my rule of thumb is that one ought to expect a HDD failure in a laptop at least once in a 5-year ownership period. They have to take lots of mech-destroying bumps and jolts, and so are more at risk than a well isolated desktop unit. I've never owned a laptop that made it from purchase to trash without a drive dying.

A few days later, the most horrible noises did begin to emit from the unit. Not the clicks of head-resets, not the ray-gun of stuck platters or stuck head armature. This was a lower pitch metallic growl which sounded almost exactly like a large sleeve-bearing case fan whose aforementioned sleeve bearing has become contaminated and is now loose and buzzing.

During these growls, the drive couldn't move any data, and Windows halted. The situation was serious. I powered down immediately, hoping to preserve a chance to salvage the data, and resigned to procuring a new drive.

We had backups, mine were up-to-date, Jane's were weeks old. Just the same, I was hoping not to have to play endless hours of setup reloading Windows and Ubuntu and getting all the apps reconfigured and so-on.

I had no access to a 2.5" IDE drive adapter cable for a desktop or USB enclosure. So instead, with a cold drive, the plan was to boot the laptop with the failing drive to Knoppix and connect it to my network. Then, I would also boot my wife's Windows desktop PC with Knoppix and use it as a repository for rescued data (all my big drives were too full!).

I cleverly hit upon ATA over Ethernet as an expedient means of accessing the faulty drive and moving its content to an image file on the desktop PC.

The process for setting up ATA over Ethernet was as follows:

Both PCs:

Verify AoE support in the kernel

grep ATA_OVER /boot/config-`uname -r`

A result denotes support. If you've ever configured/compiled your own kernel, this bit seems self-explanatory.

Assuming support's been modularized, insert the module

modprobe aoe

Target PC (the PC whose block device you want to make available on the ethernet):

Install the vblade EtherDrive emulator. This software exports any local block device, partition, RAID, LVM volume, or even flat image file, as a network block device.

aptitude update

aptitude install vblade

Then export the chosen block device to the LAN

vbladed 0 1 eth0 /dev/hda

In this case, the above line exports my failing hard drive to shelf 0, slot 1. This concept of shelf and slot numbers is how you differentiate various block devices that might be available on the same LAN. Most PCs have only one connected ethernet interface, but if you have more, you can specify each one you want to make your device available on, and if your initiator PC has multiple interfaces to the same network, you'll get automagic channel ganging for faster throughput, if your device's native interface throughput is faster than a single interface.

Anyway, on the initiator PC (the PC which is going to access the remotely shared block device):

aptitude update
aptitude install aoetools
aoe-discover
aoe-stat

That should install the needed support software to attach an AoE-shared block device, and the status command should show you the device which was discovered and made available to you, in my case e0.1.

The system's already attached to the drive at this point. There's no security or per-machine restrictions. If there is more than one machine which may want to access the device, I think you'll have to manually coordinate access. While I think many could simultaneously access a device for reading, mounting a filesystem shared this way read-write on more than one initiator is going to result in damage to the target's data structures.

Everything that happens next is from the initiator PC. I used GNU ddrescue to image off the failing drive in a manner that would allow me to backup and retry unreadable areas if necessary.

ddrescue /dev/etherd/e0.1 fail_drive.img /home/knoppix/transfer.log

Specifying the transfer logfile allows ddrescue to record its progress, skip over errors, resume if interrupted, and using extra options, go back and retry previously failed areas.

Ddrescue is a super handy tool. If SpinRite's dynastat sector reading abilities were available to this tool, it would be perfect (sidebar: I consider it a big failing that SpinRite has no convenient means of redirecting successful sector reads to another device or imagefile. Often, when dealing with a failing drive, you next good read is likely to be your last, and the mechanism may be continuing to degrade around you. In such situations, the less you have to touch the source drive, the better. You want to transport Scotty's pattern out of the damaged transporter buffer and into a fresh one you've got waiting. You don't really want to just reconstitute the degraded pattern inside the same degrading transporter. What if after all it's many hours of beautiful dynastat recovered and reallocated sectors, the mechanism's occasional clicks become a permanent repeating clank, rendering the drive inaccessible? Steve, think about this for SpinRite 7. Consider the wealth of block device connection options a live Knoppix environment gives us. That's the rich platform for attaching revival storage, and spinrite's internals would be the muscle.)

Well...this tool ran for about 90 minutes, and the drive occasionally emitted those painful shrieking buzzsaw sounds, but eventually ALL the data was salvaged. Hooray!

The second act was to be far more thorny. The original drive was 40GB and held a majority Windows partition with system volume Truecrypt encryption (to protect private personal data in the event the laptop was ever stolen), a minority Ubuntu partition, and a few hundred MB in a partition at the end as linux swap.

To be sure that was getting quite cramped, and a happy side effect of the drive replacement was the prospect of much more space to work with. But, how to transplant these bootable partitions onto the new drive in such a was as to ensure they would remain usable (in the case of the Truecrypted Windows system volume), bootable, and enlargeable.

This turned out to be a more formidable task than I'd originally bargained for. I think I won't go into fail details, but simply report that in the end, after much experimentation and head scratching over partitions that then failed to boot, I was finally totally successful. Here instead is the shorter story of the process which worked:

I began by using the previous AoE process to write back the 40GB drive image to the new drive.

In my prior failures, I learned that the best my BIOS was going to do was 32bit LBA, meaning that only 137GB of the 160GB drive capacity would be addressable by the BIOS (28 bits are used for the sector address, the rest for other junk). This had bearing in my repartition plan. Prior experimentation moving the Windows partition around left it unbootable for unknown reasons, I decided to leave it in place, but later would expand it. Ubuntu would exist below the 137GB barrier, to give Windows the most space, and prevent boot problems by way of a partition which straddled the barrier. To boot Ubuntu then, required a small boot partition which could load the kernel. Once running, the kernel could do 48bit LBA and so mounting the root partition past 137GB would be no problem. After expanding the Ubuntu partition some, the remaining space could be allocated to additional NTFS storage and Linux swap.

I started by noting down the sector layout of the partitions. Frak cylinders, sectors are just fine in LBA, so ignore cylinder boundary warnings when partitioning.

The structure was:

[30GB Win/Truecrypt][8GB Ubuntu][2GB swap][**unallocated**]

To move the partitions around, I needing something sector precise and unafraid of JFS or crypted garbage. This ruled out parted. It insists on knowing the underlying filesystem to do moves and resizes, but this isn't strictly necessary. I went manually.

I would define a temporary 4th partition at the sector positions I desired for my destination, then use ddrescue to copy the data from the current location to the new location. After test mounting the filesystem on the new temporary partition, I would note the sector locations, then delete that partition, and use #4 for setting up another new partition location.

In this way I first setup a 250MB boot partition spanning so as to end precisely on the last addressable sector inside the 137GB boundary. I next, used fake 4 to reposition the Ubuntu root partition to its new home starting after the boot partition. I next mounted both and transplanted /boot to the new boot partition, made arrangements in root to splice this partition back onto it's normal /boot location within the VFS once Ubuntu was booted (so automatic kernel updates would work), and then used the grub shell to install the grub bootloader into the superblock of the boot partition, pointed properly at the needed files in the partition.

Once satisfied, I could delete all the partitions, recreating them one-by-one in their new larger sizes.

Now the structure looked like this:

[136GB Win/Truecrypt (30GB filesystem)][.25GB ext2 BOOT]|137GB Boundary|[16GB Ubuntu root (8GB filesystem)][6GB extended -> [4GB NTFS][2GB Linux swap]]

At this point, I tested bootability and was pleased to find both OSes bootable by normal grub selection. The Truecrypt MBR password dialog to open up the Windows partition for use worked as normal.

Finally, to resize the filesystems to encompass their entire partitions. With the Truecrypted Windows volume, I thought orignally I'd have to decrypt, resize, and recrypt, but I cleverly worked around that inside Ubuntu.

I booted into Ubuntu and installed the ntfsprogs (for ntfsresize util). ntfsresize works on the filesystem inside a partition. To get it access, I used software by Jan Krueger which does the truecrypt authentication magic and passes the results onto dm-crypt, which can then handle the realtime blockwise encrypt/decrypt. The output is a mapped block device which gives decrypted data and accepts clear data for encryption, and works just like any normal, unencrypted block device.

Under normal circumstances, this is what I do to get access to my documents on the NTFS filesystem, as I store finance data there, which I use in Ubuntu on GNUCash.

I passed this device as the argument to ntfsresize, which WAS able to then resize the encyphered filesystem to span the whole partition! No laborious decryption necessary for the tool to work! Sweet!

Resizing the Ubuntu partition was far simpler, thanks to the "resize" remount option for jfs. I booted the Knoppix live-CD once more, mounted the Ubuntu root partition, then remounted it with that option specified. Leaving off any size specification to the option causes it to expand the underlying jfs filesystem to fit the whole partition. Unmount.

Finished!

I now have a secure Windows partition with much more free space, a larger Ubuntu side, and some residual swap and unencrypted NTFS storage. Best of all, aside from the space benefits, it's like nothing bad ever happened to the lappy.

Finally, a tidbit if you ever need to very quickly create a large image file for the purpose of storing or preparing a filesystem.

The tradition is use of the trusty dd program, with /dev/zero as the source, but this results in a laborious and needless writing of zeros to the entire desired span and size of your diskimage file. The tip uses the sparse file writing capabilities of most modern filesystems.

dd if=/dev/zero of=your-sparse-diskimage.bin bs=1 count=1 seek=1G

Note how the above command uses a single byte as a block, writes just one single-byte-block, and then seeks 1 gigablocks (1GB since a block = a byte, now) further out on the new diskimage file. This results in a file which is 1GB in size, but actually uses only 1 cluster (generally 4KB for most filesystems) on disk!

By seeking to the desired end, you cause the filesystem to generate a hole between that endpoint and the last written byte. The file appears to be the size of the full seek, but its size on disk in this cast would only be one byte. Cool! Of course once you put a filesystem into the image file, mount it, and start throwing data into it, its size on disk will grow to approach the reported size.

While I've posted this mainly for my own future reference, to any passers-by out there who happened to read it, I hope you found it of interest! Cheers!

Prudent Virtue

2009-06-15T16:42:00.001-07:00

While reading, "What has Government done to Our Money?", by Murray Rothbard and available on mises.org, I was enchanted by Rothbard's use of a quotation, uncredited, "Liberty is the Mother, not the daughter, of Order." (see pg. 49)

I thought about this for several minutes, and decided that it was self-evidently true. I wanted to know what man was so brilliant as to have uttered this phrase, selected by Rothbard as I'm sure many others before him, to with great brevity capture the proper relationship of order to liberty.

How masterful. Government would have us believe that to enjoy liberty, we must first order our world. Government then ~~offers~~ insists to do this for us by its regulation and coercive power (often by appealing to our base sense of envy, and offering to use that power of coercion against some fashionable "them" to the popular benefit of poor "you"). But in so doing the order which results only confers more liberty to the state, not its people, by restricting the liberties of the people.

Some internet searching yielded an answer as to the identity of the originator of that quote, and also an expansion of its idea to yield a sort of family tree of the virtues which generate individual liberty. Foremost among them is prudence.

Today I offer that article as a source of inspiration to you, dear reader.

It is my hope that this humble blog helps convey some of these Libertarian ideas which your own curiosity impels you to explore further.

On the political talk circuit, folks are always calling the likes of Glenn Beck and Rush Limbaugh and Mark Levin and pleading with them about what possibly they could do that would make a difference in the present situation. It seems hopeless that mere individuals of limited means could have any power to frustrate the plans of enlarging state control. But, I think it must be far simpler than we imagine.

If we all practice prudence in our lives, relationships, and economizing, then prudent culture will naturally spring forth. And that culture will have the awareness and expectation necessary to naturally diminish state control and restore natural individual liberty. We know how to behave, and we know what's good. Thousands and millions of small, individually prudent actions in all facets of life naturally have the effect of restraining government authority.

Demand for the services of a coercive government will be reduced, because we assert our ability to govern ourselves, and by prudence extricate ourselves little by little, from our imprudent reliance on government, instead of ourselves, as a provider of all our needs.

Prudence begets Thrift. Thrift begets Liberty. Liberty begets Order.

Maybe I can suggest one more offspring to this tree of virtues: Order begets Peace.

If you hadn't already, do check out this article.

It's Fascism we're moving to, not Socialism

2009-06-11T08:25:00.001-07:00

For a progressive, subordinating your will to the will of the state is the second-noblest goal to which you can aspire. Becoming part of the thin circle of thoughtful, expert, progressive men or women of action, rightfully ready to represent the public, is the noblest goal.

That public's consent of your good governance doesn't matter. Your credentials attest to that. If the public could govern themselves there would not have been need for your ascendance. You may then assess matters and, representing the nation, dictate the best course of action. One that will produce to your highly educated and comprehensive judgement, the greatest good for the greatest number. Social justice.

Many of you will endure some pain. In the eyes of those people of just action who represent you, this is unavoidable and necessary to provide for those whom are judged more worthy. You wouldn't have been able to help yourselves anyway, for you haven't been ordained with the wisdom and intellect for the just application of power which those who represent you can claim. Subordinate your will to the state. The state can expertly judge your worth, and thus weighed, care for you as that worth deems appropriate. Thus, ensuring a fair and just distribution of limited resources to those who are most deserving, in the sole judgment of the progressive elite, and preventing inefficient waste on individual desires.

Critics of the policies and politics of the present administration, and opponents of progressivism more generally, often comment that we appear to be on the road to socialism or Marxism.

I beg to differ a bit. It's more unsettling to me than this. You might be simply looking around and seeing a diminished importance and role of private enterprise and free (unfettered) markets in our economy, and calling that socialism. Socialism as the opposite of a private, free market approach.

But we need to be more clear. While socialism prescribes a state-run economy, the state owns the factors of production, and dictates their use. All workers work for government owned and managed concerns, for the benefit of their fellows and themselves.

We (probably) won't ever have that in America, I believe. What we're getting now is a gradient into fascism. Fascism prescribes a state-run economy, as does socialism, but under fascism, the factors of production remain in private hands. The government doesn't own the factors of production per-se (Obama's said he doesn't want to be in the car business), but it does dictate to the owners how they will run their companies, invest their capital, market their products. Bureaucracies and departments will take in economic data, operate on it according to their desired objectives, and generate a compulsory program to be taken up by the owners of firms to direct production and attempt to satisfy the wants of the economy as those wants come to be expressed by the progressive policymakers (not by individual buyers).

It is and will remain General Motors after all, not Government Motors. But, it is now obliged to acquiesce to the will of the state and produce those sorts of cars which the state desires, in volumes the state determines appropriate, and pay the wages the state shall determine though its "pay czar".

This is done not to satisfy the desires of the consumer, but for the good of the state. Whatever the state's objectives might be (low-cost models for increased car ownership by the poor, or better environmental friendliness, perhaps even lower utility to encourage use of public transport alternatives, etc. and whatever).

Suppression of individual will and desires for the good of the state. "We have determined, it's for your own good." "It's for the good of the nation, by our decree." "You must buy a private health insurance package from one of these two government sanctioned private providers, because it's for your own good, and for the good of all Americans." That would not be socialism, that would be fascism.

In the end, I believe this is the destination of all progressive ideology, whether supporters of such ideas and policy understand it or not. One need only look to 20th century history. During the golden-era of progressivism, American progressives were supremely enamored of the action and efficiency which seemed to embody the fascist personalities and governments of the 20s, 30s, and 40s. To them, people like Mussolini were take-charge kinds of folks who imposed their will and got things done. Because such action was in their view in the best interests of the state. It wasn't a dirty word then, and many progressives openly expressed their support for fascists and lobbied for fascist-inspired policy here in America.

How is this so different from the Obama administration and its pantheon of extra-Constitutional czars? Or the Bush administration's Hank Paulson, crafting the TARP program and dictating its compulsory acceptance and program features to major banks?

The individual? Who cares about him? He must make is desires subservient to the needs of his nation. He must learn to give up a little for the good of his country, so that others may instead benefit. It's what JFK extolled. We must act to save the whole economy! It's for the good of the nation! (And by extension, you.)

Quick Hit: The Forgotten Man

2009-05-07T01:05:00.000-07:00

So, I'm currently reading Amity Shlaes' work, "The Forgotten Man," which for those who are in the dark is a fresh revisit of the history of the US Great Depression era. Her telling is enjoyably very narrative. She's telling the stories of the people who figured prominently in the era as agitators or policymakers or movers/shakers/experimenters and so forth.

Her real goal, however, is to in this way tell the story of the Depression's "Forgotten Man," the part of the public which was not a direct target of all the activities of the people above, but whose lives were impacted the most because of them. These were the vast majority of people who were not given a choice about whether or how best to help their fellow men, down and out. The starlets of the Depression era would re-cast this notion of the "Forgotten Man" to instead represent those who needed help. Hardly forgotten, these people were most of what the Depression was about. It became a major turning point for the nation onto the politics of meaning.

Now for the Quick Hit: early in the book, Amity recounts that from the founding through the 1920s, the size, spending, and influence of the Federal Government was barely as large as any one of the nation's large cities, like New York or Chicago. After the Depression, the Federal Government blossomed to become the very biggest economic entity in the nation. This single era so fundamentally changed our country. No longer was a limited government working to protect the interests of the nation. The nation was now working for the interests of government.

Now the book: "The Forgotten Man" so far has been reading more like a period piece private detective novel than an the academic treatise that my present comments might paint it. It's an easy and informative read, and I'm having much fun with it. Anyone liking history and a good story ought to get a kick out of it.

Becoming schooled in Austrian economics as taught to me by the Mises Institute, I find myself taking somewhat strong exception to Amity's direct economic opinions and statements, in the rare occasions they've so far presented themselves in the book. This I find fascinating, as she's so followed by media conservatives like Hannity, Beck, and others. On this point so far I think I find her right for the wrong reasons. There will be more on that later, I'm sure.

How Three Mile Island informs us about our current economy

2009-04-24T10:25:00.000-07:00

For this post, I muzzle myself and let a real pro take over. This is a good read. Engineering-minded types reading ought to get excited. Robert X. Cringely reminisces about personally witnessing the TMI incident thirty years ex post facto; steps through why it was all to likely to happen; how we dodged a bullet while struggling to regain control, and how all this seems to mirror and serve as an instructive model for our present economic situation and our handling of it.

I, for one, haven't feared nuclear energy, but have been fascinated by it. Chernobyl is a favorite subject of mine.

In the end, it's all about risk management. Example: we fly in the sky. We weren't designed for that. Technology enabled it, and disregarding the limits and risks associated with the technology has led to fantastic disaster, but we've never turned away from human flight. We strive to absorb as much as we can from tragedy and let it inform us on how to improve and manage the technology and risk, to make the process ever safer.

Today, it's the safest form of human transport. Failure still occur, and sometimes that means a sizable cluster of deaths, but on average, it's the least deadly mode. Hardly any of us seriously considers not flying, even in the face of news of air disasters. We see the benefit, it outweighs the risk. We also see management improving the odds. Disaster incidents are far less numerous now, and when disaster does strike, it tends to be ever less deadly. Reference the recent US Airways water ditching after bird strike. Not a single life lost!

For nuclear energy, we can manage the risk and develop the technology. We don't even have to repeat the mistakes of other industries first if we just look toward them and absorb the lessons they have learned.

Development of very-high-voltage DC transmission links will enable future nuke plants to be located further away from the rest of the populated grid, diminishing the NIMBY effect. Development of advanced breeder reactors like the Advanced Liquid Metal Reactor concept will enable re-use of current spent fuel to extract the remaining 95% of presently unrecoverable energy contained therein, as well as consuming our dangerous Pu from decommissioned weapons.

Developed as fully as air travel has been, this sort of nuclear energy could get very close to the ideal conceived in the 1950s, of nuclear power becoming plentiful, cheap, and ubiquitous. Replacing coal-generated electricity and used to charge up future electric vehicles, this would be very green indeed. I don't subscribe to the Gorey idea that global warming/climate change is anthropogenic, or that we even have the present capacity to influence climate much even if we really wanted to, one way or the other. However, if human-generated CO2 is something you want to minimize, this is the way. It may be the only way.

What ended the Great Depression?

2009-04-03T09:40:00.000-07:00

Since becoming a student of Austro-Libertarian economic and political thinking, I've been intrigued with the Great Depression. How did it occur, why, and what transformed it from the typical sort of depression America had previously and regularly seen, into something which was truly Great?

Murray Rothbard's, "America's Great Depression" is a wonderful book for answering all these questions. If you're the sort of standard-candle Keynesian product of our present economic post-secondary education machine, this book will provide you with the first major cracks in your Keynesian castle walls. If you don't consider yourself much of an economic thinker, or just haven't travelled in such circles before, Rothbard's book will lay for you a sound small foundation and likely pique your interest in learning more about what the Austrian School has to say on the fundamentals of any economy.

If "America's Great Depression" has a fault, however, in my view it's in failing to address the question which naturally follows after reaching its end, "What ended the Great Depression?"

Although not obvious from the start of the book, apparently it was not the book's aim to talk about the end of the depression, but to explain how it happened and why it became so intense.

Whenever I get into discussions with family and friends on these sorts of topics, however, my potential converts to the Austrian School always want most to know, "What ended the Great Depression then, huh, smartypants?"

To them (and me too in my time before learning about Austrian School theory), of course the New Deal led us though the dark years and eventually returned us to prosperity.

One thing Rothbard's book does show, is that the New Deal did nothing of the sort, it added the Great to the depression.

Only by integrating the knowledge I'm building up on Austro-Libertarianism, am I slowly coming to the answer to that question on my own. That quest got a nice boost this week while watching the Glenn Beck TV program.

I watch a lot of Glenn Beck, so the specific people to credit are lost to me now, but one of his guests, when confronted in interview with that question said that Franklin Delano Roosevelt's death was what ended the depression. That and the offshoring of unemployment.

So I thought on that a moment, and it makes sense. WWII gets the credit usually for ending the GD, but I think often for the wrong reasons. The conventional wisdom is that massive gov't spending to wage war juiced up the economy, and that this coupled with the New Deal programs already ongoing, lifted the USA out.

No. The New Deal only made things worse, before the war. But though the war harmed us, the war did set the stage to pull us out, but not the way we normally think.

Military service was a viable option to many otherwise unemployed Americans. Initially, there was tremendous enlistment. Later we instituted a draft, but the effect was to sweep virtually all the unemployed out of the economy and set them to work fighting the war.

I think, ultimately, this is no different than the idea of using gov't funded public works to end unemployment, and in that way is unsound from the Austrian viewpoint. But for now, I will give wartime offshoring of unemployment a little bit of credit because of its sheer scale. People had the opportunity to mentally reset and view labor properly again as another marketable good.

Scarce domestic labor led to reflating of wages and demand for women to enter as replacements. This was an apparent prosperity boom for them, were it not for the fact that rationing for the war effort cause there to be little the women could do with the money they were making, other than buy war bonds, or pay dramatically up for goods made more scarce by the war on black markets. Real wealth was hardly any better than during the pre-war depression period.

With the end of the war came the realization that the country would soon be flooded with labor, and the gov't demand for military materiel (financed with wealth transferred from the public) would drop off. This should have had the effect of resuming the effective depression. It didn't, and the argument Glenn Beck's guest made was that with the demise of FDR, the public understood that the private sector would be allowed to operate more freely and less encumbered by gov't regulation than had been the case during his Presidential tenure.

It was this reality, ignited by the flush of optimism having just won major victories and the banishment of uncertainties which would've continued to linger had FDR still been around to command the economy, which actually pulled the economy out of depression.

My argument is that the depression persisted all throughout the war period itself. Americans still at home had to work long and hard and sacrifice much to enable the war machine to be funded. This was not wealth creation, but a transfer of wealth to the gov't to rain down as needed on the war machine.

But this work ethic decayed slowly after the war. Americans allowed themselves a little rest of course from that austere grind, but that productive effort was not all dissipated, and the fruits of that labor were now allowed to be redirected back at the working people via a less encumbered free-market. Investment in longer-dated factors of production made possible grander economies of scale and great productivity boosts, allowing people to get what they desired, while at the same time working less.

The result was the new modern American middle class. The hard-work and savings ethos took time to fade over the post-war span. While it largely endured, private saving and investment in business (the stock market became popular again, with stocks bought more with cash than thin-air created margin, this time) financed the productivity gains needed to make future life incrementally better.

So it wasn't the New Deal, or the war itself, but rather the knock-on intangible effects the war period induced in people. It primed us mentally. FDR's death and the war's end then set the stage for renewed real growth via lowered uncertainties about future gov't interference in the market, and a willingness (even eagerness) on the part of the public to continue to work and save for a brighter tomorrow.

-----

Later...gov't would step back into the picture with Cold War era spending. This would distort the market yet again and foster an illusion of greater prosperity via increased economic activity in the military-industrial complex.

Once again, though, that's not real, it's just transfer. Conspicuous consumption by gov't in this period translated into ceaselessly growing gov't debt, borne on the public by increasing taxes, persistent inflation, and the post Bretton-Woods era of pure fiat money, in a final decoupling of the US dollar from gold by Nixon. This has lead to staggering inflation, and necessary busts have been succesively sold into the future via increases in interventionism and inflationary monetary-base expansion. Each time recession hearalds our arrival in the present, to that point to which the prior treatened bust was sold, a new and larger gov't effort is undertaken to sell the bust still further forward. The ossilations growing each time, to the present crisis.

-----
Adjunct comments on inflation.

My dad grew up in the early post-war years. As a child I was amazed by his tales of Coke and Pepsi available for 15 and then 20 cents. In my childhood, this was more like 50 cents at the vending machines. Now, it's more like $1.50-$2 at many vending machines, or around 75-99 cents in the grocery.

Assuming no benefits from improvements in the cola industry, $1 USD, in cola terms has lost as much as 92.5% of its value ($1 buying 6 2/3 Cokes from the vendor in my dad's day, vs 1/2 a Coke from a vending machine today)!!!

Family legend has it that my grandfather has stashed away a small fortune in cash in some unknown location in the basement of his home (the regular production of musty-smelling fivers from the 50s in birthday cards being the fodder for the legend). To think of that rumored pile, buying now less than a tenth of the stuff it could have bought when it was stashed...debilitating. Government and public policy have passively removed the other 9/10ths of real stuff that cash could have bought, and squandered it on largesse and social programs.

This is inflation. If the dollar were not merely paper, but backed up by something impossible to counterfeit, like gold, the real economies of scale and productivity increases we've actually seen in the cola industry would have translated into less expensive drinks, perhaps say 10 or 12 cents. We'd all also be making way less money in dollar terms, but if one translates wages into colas (or any other real commodity), you can then see how even though you appear nominally worse off in dollar terms, you're actually much better off because what few dollars you have would actually buy you way more stuff than they do in our present, inflationary, reality.

Law and Order | UK - Part 2

2009-04-03T09:16:00.000-07:00

In my earlier post, I wrote of the potential of the new spinoff of L&O, the UK edition. It was off to an auspicious early start, but rapidly lost momentum as it couldn't seem to find a voice to communicate the same level of drama as its American forebears.

Happily, two additional episodes' play after writing that post, I'm pleased to report that the ship is righting itself, and its promise to be a great addition to the L&O franchise, is renewed.

The characters are finding voice, the plotlines are less 2D, and there is reason to be optimistic that it will quickly approach the level of production quality we see in the American versions.

It's not now being run on BBC:America, so about the only way to see the show is via the BitTorrent scene. There's a great private community which is easy to join called "TheBox" which promotes sharing of exclusively British generated television content. You can find the show there.

Off topic: One thing I hate about BBC:America is it's complete disregard for the integrity of the production season for the shows it rebroadcasts. Once a show's run long enough on the BBC, BBCA may pick it up for the American audience, but will only run a smattering of selected episodes from a mix of various production seasons already in the can. Only after discovering TheBox, did I realize just how much "Top Gear" I was missing, and how its ongoing UK run was not getting any sort of timely pickup by BBCA.

Also, if BBCA makes a mint reselling BBC content into the American market, why must brit taxpayers continue to subsidize the BBC via their insane "yearly priviledge of owning a TV" type taxes! To the extent American's find the content popular and pay cable and satellite operators to carry it, I think the brits who pay those TV taxes are entitled to some dividends.

But then, don't get me started on this, because the whole way in which TV in the UK is state-controlled and socalized, while the brits can put out _some_ good content in spite of themselves, if it were wholly privatized, there would be soo much more to love!

Law and Order | UK

2009-03-04T18:58:00.001-08:00

I've just finished the second episode of this newly launched series on Britain's ITV. As a huge fan of the US franchises, how is the UK version stacking up?

Not well, unfortunately. But it's still early days.

A reviewer on IMDB wrote that he didn't expect a spin-off of a show to be as good as the original. But, this is Law and Order we're talking about! In my opinion, each of the spinoffs (exception to the ill fated "Trial by Jury") has taken on its own unique flair and become just as successful it their own right.

Before I comment on the UK show per se, I would like to quickly recap what to me makes the US franchises continually successful:

The original L&O has run nearly 19 years now. Crap! And it's still fresh as ever, because it's allowed to evolve but the production crew also remains true to the elements that give it its verve.

The platform upon which the characters act is going to be what draws you in and gets to interested. It's why some like L&O but not Battlestar Galactica. You have to enjoy the surroundings. In this case it's the legal process. Curiosity about crime, motives of perpetrators, process of investigation, the working of the legal system. The legal maneuvers are always great TV. Courtroom dramas aren't new, but we enjoy watching the system.

But, character development is key to any successful series, above pretty much everything else. The L&O staff in the US have deeply understood this. The pains taken to weave the complex stories of the lives of the characters gives them depth and dynamism. It's part of the acting. It helps the acting to be more subtle, and then often better, because we know the thoughts occurring behind the characters eyes.

The L&O staff also are not afraid to gamble their characters. We see them in challenging situations which, at first, may not seem to fit into the greater premise of the show, but when they pay off (as happens more than not), it's big. There have been many character swapouts over the life of the franchise. Each time I've approached the new character with guarded suspicion (how could they be better than Lennie Briscoe or Robert Goren?), but after a few shows grew to love the new people just like the old. Chemistry between the pairings is important also, in this regard.

The other major aspect which L&O gets right consistently is storyline. They are adept at having simultaneous threads weaving a tapestry and having multi-episode arcs featuring an overhanging plot, or having some bit of plot return regularly, perhaps many episodes later (like DA McCoy's struggle with the Governor and his political machine, or Goren's battles with nemesis Nicole Wallace).

The overstory elements add richness, continuity to the characters lives, and believability overall. The episodic plots are never ordinary, even when they appear so at the outset. A subtle twist of purpose, situation, or reveal of the mundane bit as piece in a larger and more interesting framework is frequently involved. Above all, it's captivating and believably plausible. Their technique of "ripped from the headlines" story ideas has helped them beat out writing doldrums to great effect. As you watch, you realize the action feels as though it's mirroring a well publicized real dramatic crime.

The last bit for me is the operation of the system. The narrator's sole appearance is to tell you in a few seconds that you're about to enter into the specially structured world of criminal justice, here are the groups, and these are their stories. Hook!

Now: the UK version

My first thought as I watched the titles and the narrator spoke a variation on those famous words was, "Oh boy! I'm going to learn all about the UK system. Virgin territory!"

Well so far, the show's plots haven't helped illuminate how the mechanics and structure of the UK system differ from the US. That may not be the goal, I understand, but the US show is better at showing you how the US system is organized...and that's for the US audience. I mean, not all of us came out of public school with perfect scores in our American civics classes. If the UK show gave the same treatment to it's audience, both they and myself as a foreigner, would likely learn a thing or two, and find it more entertaining.

The first episode featured too much ragged camera work. Handheld shots are good for building tension in the field, but more polish of setup dolly and steadycam shots for office, interior, and building work would give the visuals more credibility. Episode two was an improvement in this regard.

"Dun-dun!" Any fan knows that trademark breathy, ominously dramatic clink-clank sound. It serves to keep the tension up, while linking widely diverse settings. But UK...don't overdo it. Frak! In episode one, it was "dun-dun"-ing with practically every cut (except, strangely, the very first cut from the titles to scene one, which is mandatory on the US shows...it serves to be the opening of the doors to the start of the story). You have to know when to hold back. In the US, the dun-dun sound is reserved for major setting shifts, primarily between the groups of actors, like the police vs. the DAs vs. courtroom. It usually also signals a shift between whole plot aspects. More minor or naturally following scene changes do not require it. Use sparingly for best effect UK! Episode two was better at this.

Most disappointing of all so far have been the central plots. What a letdown. There may be a bit of culture distinction to this, but I've found them contrived. Mundane overall, but also preposterous in certain aspects. Passerby finds unattended bag, notices it wriggling, thinks its a bomb? Police find baby inside? Well...obviously he'd've been crying like crazy, huh? And...bombs don't wriggle. At worst, they tick. The episode was based on S02E18 from the US version, and the US plot is much better and better executed by the action (even then, it wasn't the best the US either).

The plots also would be better if they were designed to connect with and be more relevant to present real life situations and current events. This is why the "ripped from the headlines" episodes in the US versions have been very popular. The audience can easily relate to what they're seeing.

The second episode dealt with the nature-nurture question, but in a clumsy and ham-fisted way. The interaction with the young child murderer was well acted, but over-dramatic and assumed a more adult style of relationship which was inappropriate for a boy.

Time is growing short for me tonight, so let me wrap by saying this: with a great show, you know it when you see it. You feel it. It finishes and you say, "dang, that was awesome!" For the US series, my wife and I have exchanged these moments often. If it's particularly good, we find ourselves continuing to talk about plot points well on after the show.

So far for the UK version, I've found myself wanting, badly, for it to be good. I realized it hasn't so far been working out when I noticed that during the show, I was mentally trying to convince myself it was good. In short, I wasn't "feeling" it.

On characters, so far I don't care for DI Natalie Chandler. She doesn't have much chemistry with the DS's and saps their energy. This is an important role. Think of Lt. Van Buren, Captains Cragen, Deakins, and Ross. They're all hard-bitten career veterans of the force. You sense their history in the way they herd their "cats" and act as liason between the political worlds of the chiefs and DAs, and the raw realities on the ground faced by their officers. The relationship can be poignant at times, as all of these characters have fallen on their swords to protect their people at one time or another.

I get none of this energy out of DI Chandler. See seems a simple gov't bureaucrat to me. I don't sense a history of a veteran cop in her. The police force also seems to end with her. She makes it seem like the post office. In the US, the police are a force, not merely an institution. You sense the overhang of an organization which extends far beyond the Lieutenant or Captain in the squad room.

DS Devlin...well, we've got the star power in Bamber. But in the US, not all the Det.'s were obvious stars, but if they weren't noteworthy before taking their role on the show, they certainly became so because of it. I can't write Bamber off, but the stories haven't played well to him (or any of them, frankly) so far. DS Brooks, however, has character which is seeping out. I'm growing to like him much faster.

The whole team on the Crown Prosecution is great. Fells much like the US shows here. But they're all being let down by the poor plots at the moment.

Writers, writers, writers! Listen up! The show is ready to roll. The team need you to bring it for success to happen. Steep yourselves in the best eps from the US versions and then translate that into the UK sphere. I want depth, I want outrageous, ethically challenging, yet believably plausible stories. Take the most sensational of your true crime and stamp its elements into this mold. How about: confronting the nanny state, struggle against islamofascism, touchy political relationships (aren't their thorny conflicts at times between England and Scotland and Ireland? What are the hot-button political issues in the UK? Craft a stories that probe deep into them unapologetically and without fear at-all of being politically correct!) Challenge the viewers! We're smart. Hide details and create dramatic revelations. Make it hard on the audience. One of the things we love to do with the US show is guess about the plot developments to come. It's become a social game when we have friends over!

Intrigue! We need intrigue!

Meh... I'm hopeful it will find its legs. I want it to be good. But within a few more episodes, if I'm still not feeling it, I'll need to write it off. Season 8 of L&O:CI is coming, and I cannot wait for it!

On the measure to seal our destruction

2009-03-03T14:43:00.000-08:00

The yeas have it, motion carries. Enjoy your new tax hike to pay for the "free money." While you were so busy voting yourself some money at the expense of some other group, you missed your own pocket getting picked.

Just because the majority wants something does not mean that the greater good is really served; just because the majority wants something doesn't mean that anyone has the right to expropriate it from the owner; and just because the majority wants something doesn't mean that the process itself is "sustainable" — the new catchword used to limit all innovation and progress.

(excerpted from "Voters Hate Socialism Except When They Love It," by Tim Kern on Mises Daily.)
Text or MP3 audio version of the article available via the link.

If you check out the article, I think it pays to keep in mind that voters can, with equal validity, refer to the voting public, but just as importantly to our elected representatives. These who so often think that their vote causes stuff to appear or disappear as desired, like magic. Delusion of the first order. So many of we the average citizens voted for the hopey-changemas promised by "O." We failed to understand the costs and ramifications.

We believe in global ~~warming~~ climate-change and we want tax relief for 95% of us, and help with our car payments and mortgages, and changes to government for a more hopeful tomorrow. Thus, rapt in awe, you cannot wait to vote for Obama, the promissor of your desires. Congratulations! Through Obama, you've just voted for a carbon-tax on business and energy producers which will more than consume any temporary tax relief you are or expect to receive when you open your future utility bills. Any products requiring energy to produce will likewise cost more, and those added costs will be passed along to you.

As Tim's article demonstrates, In the long run, voting doesn't produce things, it only sanctions taking. People having their production taken by coercion will naturally try to shield it, or will give up and stop producing. Unable to beat 'em, they'll start to consider joining 'em in voting for further sanctions on taking the production from others. And, we'll all end up impoverished for the effort.

This is called, rent-seeking [PDF].

comments on: The Crisis of Credit Visualized (a video)

2009-02-20T10:00:00.000-08:00

I watched an entertaining and fabulously animated video, derived from link to a Digg story via tweet from Kevin Rose.

The Kevin Rose/Twitter/Digg effect are, as of this writing, overloading the original site and the Vimeo mirror of the video, so you can catch it on YouTube:

Part1
Part2

While oversimplified, the video's explanation is better than your drive-by news has given, but not perfect. However, the graphics and presentation are sooo slick, I couldn't resist sharing!

The video either doesn't or under represents the role government played via promotion of loose-lending by various homeownership programs (Community Reinvestment Act), via applying funding to pressure groups like ACORN to agitate bank lending, and via the Federal Reserve (the base of the inverted monetary pyramid, and chief engine of magic money creation).

The video properly characterizes the idea of leverage used to magnify the returns of mortgage originators and investors in the securitized products.

(Incidently, MBS refers to pure mortgage backed securities, depicted in the video as CDOs. While MBS are a form of CDO, CDOs can and did include other types of debt, like consumer loans and automobile loans. The video mischaracterizes the risk of the CDOs issued to investors. While it's true that different risk pools existed, frequently, some prime mortgage debt would be mixed into a batch of CDOs containing mostly junk consumer debt or low-quality subprime mortgages, so as to garner a AAA rating from Moody's or S&P. This was an exploitation of lax standards of the ratings agencies, and their cloudy debt-type requirements. This is why these securities are now called toxic. It is now very difficult to separate the quality and worthy debt from the junk debt in any given traunch of CDOs, making them all the harder to value on the open market.)

The situation goes bust because it was credit expansion which supplied the $ to underwrite the mortgages. Up to $40 would be magically created from each $1 from an investor or investing institution. 39 of the $s were not real, they were bank magic. Even some of the $1 coming into the banks weren't real, they were Fed magic. Prices go up so long as the _rate_ of this magic money creation remains fixed.

The process of securitizing mortgage debt for resale to individual and institutional investors was a signal of the end-game.

See, the banks ran out of reserves, having levered 30:1 or 40:1 (the prev. limit of about 10:1 to 15:1 having been extended by Congress at the request of Hank Paulson, when he was Goldman Sachs' CEO, before he became Treasury Sec'y!), and needed more investment. Investors buy the CDOs, and the banks could take the proceeds and underwrite new mortgages up to 40x again.

Eventually the supply of dollars at the bottom of this inverted pyramid of inflation dries up and is fully invested. There are no new dollars to buy the next round of packaged mortgage CDOs. Thus the rate of money creation slows, bringing about the bust. Magical "paper" dollars evaporate and start to change back into the tiny pile of original real dollars, with the effect of falling home values (the inflated high values weren't real), bankruptcies, and investment portfolio loss.

That's fractional-reserve banking at work, and a boom-bust _always_ occurs with this system. Perversely, free-market forces act as a check on this leverage, keeping it small by magnifying the risks of bankruptcy by banks magically creating money. Banks don't want to be bankrupt (and it's this fear that helped _contract_ the magic money supply!).

Our gov't is embarked on its plan to try (in vain) to keep unsound banks solvent by puffing them with magic Fed $s (via Fed interest rate reductions and "quantitative easing"). The idea is to keep the highest levels of the inverted pyramid from contracting any more by injecting money into lower levels.

This money comes from TARP and other programs. And it came to those programs via our taxes or (more properly) via foreign investment and outright "printing" via Fed FOMC purchases.

You can think of that foreign investment as like a 2nd tier of CDO selling. Our gov't is absorbing the mortgage debt, and repacking it into gov't debt "CDOs" to sell to China.

As the 1st tier was an end-game signal for Wall St., unless we reverse course this 2nd tier signals the end-game for gov't!

The proper course is for government not to be involved, because this is the only way we will vanish away all the magic dollars on paper, and come back to actual dollars. The banks don't want to lend today because they understand this, that to do any more lending would cause them future bankruptcy, and that to secure solvency in the face of their existing bad debts means hoarding onto deposits and seizing any chance of selling the bad assets to someone else (though I disagree with any plan for the gov't to buy them, as this socializes the risk, and creates future moral hazard).

Allowing failures to occur will make for a very sharp, but also very short depression, like 6-18 months, as all depressions were prior to the Great one.

Our fear of the pain, and for purely political reasons, our government's fear of allowing us to feel that pain, is prompting the present bailout and stimulus effort.

The best-case outcome for our gov't intervention is a delaying action as the _rate_ of magic money creation is temporarily stabilized (or worse, reflated) and prevented from further contraction. This can be perpetuated only to the extent that we can continue to get ever more tax and foreign funding.

When we use up that credit, gov't will be forced to tax to crazy levels (unpopular, ultimately riotous), or monetize the debt ("print" the needed dollars to repay). Given the quantity of debt outstanding and forecast future debt, this monetizing would cause the money supply to become truly monstrous, meaning Zimbabwe-type inflation (an indirect sort of tax).

Bottom line as I've said in this blog elsewhere, is that we got here via a government-subsidy of business risk, leading to excessive risk taking which wouldn't have happened in a free and unfettered market. By a now decades long government culture of preventing failures, we've interrupted the free-market feedback mechanism that limits risk and contains leverage. The longer we continue this trajectory, the more we trade smaller amounts of present pain (peversely, even pleasure in the case of reflation), for greater amounts of future pain. By dialing back government involvement, we reconnect the risk-mechanism, experience more pain now, but are rewarded with a future of honest prosperity, rather than looming and protracted depression.

For more, read on:

Jaguar Inflation - credit expansion illuminated entertainingly
The Bailout Reader - for more on the mechanics of the crisis and our efforts to overcome it
(also contains excellent gateway articles into the Austrian theory of business cycles)

A couple degrees of Twitter

2009-02-16T03:20:00.000-08:00

Yep, so I was scrolling the Twitter feed overnight, seeing what had to be said by the folks there I'm following. I harkend upon an exchange between Leo Laporte and a dedicated follower of his media, who was shocked by a bit of liberalism Leo had espoused in a show. Leo had taken the interesting tack of kindly answering this man by citing Christian gospel.

But, Leo has missed a crucial element. Christian gospel socialism is voluntary. According to some Christians, you might be placing your soul in jeopardy if you don't play along. Nevertheless, it is still voluntary, just the same. Publicly eschewing the brand of socialism in Christianity is likely to get you prayers for your salvation.

Eschewing a government program of socialism...that's likely to get you fined or jailed, or perhaps worse. At least it will earn you additional deprivation of freedom.

The magic of Twitter, linked me back to the gentleman's own blog, where he commented eloquently on his experience.

I responded in the story's comments, in solidarity.

The kernel of the argument: liquidate the Federal Reserve

2009-02-02T10:22:00.000-08:00

[...the supply of money is indifferent or "neutral" to the real processes of the economy. But, unfortunately, changes in the supply of money can have untoward and even devastating effects on the real processes of production.]

The Federal Reserve System is a central bank created to manage our currency. It's creation was supposed to be for our benefit, among its roles is one to ensure that cash can be obtained by banks to satisfy demands for cash from a bank's depositors. It was conceived as a way to "help" the free market operate.

Its very presence offered a new tool of influence by our government on the economy of the nation. It enables the government to change the supply of money within the economy. While this was possible even under a money made of and/or backed by gold (and silver) coin, the final disconnection of our US dollar from such intuitively limited and scarce commodities as precious metals finally allowed our government to control the supply of money with full, unrestrained freedom.

In a free and unfettered market (one in which regulation may either not exist, or exist only to facilitate exchange, enforce lawful agreements and protect property) grounded on hard money (such as gold coin), the money substitutes we enjoy for convenience (electronic bank card transactions, paper checking, paper banknotes) self-regulate and attain a stable equilibrium and purchasing power (or value) with respect to their backing.

Market forces beneficially conspire to keep participants and banks from magically creating too much credit. If people begin to feel that their checking deposits and private banknotes on a bank are going to be difficult to redeem for real, hard money, such individuals will act quickly to compel redemption. A bank run may ensue as rumor spreads, in the aftermath of which the bank will be found to be solvent and trustworthy, or it will be found a fraud and its assets seized upon by depositors and quickly liquidated, thus rapidly removing fraud.

In such an environment, it becomes very difficult to change the money supply. Only the convenient substitutes can be manipulated, and then only to the extent that a wary public is willing to trust their financial institutions to conduct business honestly.

With a stable money supply, the value of money is likewise stable. Inflation vanishes permanently (to be rigorous, inflation would only occur to the extent by which new supplies of the underlying hard money commodity, i.e. gold, could be mined, and even then, only a finite amount of the metal exists, whether in accessible bullion, coin, or inaccessible in minuscule ore deposits). To the extent by which technology and population available increase supplies of goods and services and productivity by which they're produced, a natural and gentle deflation persists!

We've been taught in the mainstream to believe that both inflation and deflation are bad things. What's bad is manipulation of the money supply! In the aggregate of the whole economy, with a fixed and unchanging money supply, modest deflation represents increases in efficiency and productivity with respect to production. The value of your dollar would be increasing. You savings, whether in a bank or under a matress, would still reflect the real value of our work when saved, and an appreciation of the increase in bounty that better productivity has afforded.

Rather than tales to your grandchildren of a can of Coca-Cola costing $0.75, and they being in awe of how cheap that price level seems to them in the present, they could instead be in awe of what it says about our economic fitness and vibrancy that Coca-Cola is now less expensive at, say, $0.40.

New young employees entering into the workforce to do your job would be hired at lower wage rate in dollar terms, but those dollars would be stronger and represent an increased purchasing power to what they had when you started.

Arguments for central-banking and its supposed necessary roles of fostering price-level stability and lender of last resort to banks are all nonsense. If a money supply is fixed and an economy growing, that growth will be manifest to the extent to which natural deflation is occurring. An economy that's stagnant will have a naturally stable price-level. And one which is shrinking will see inflation.

The Keynesian model views an economy and seeks to maintain an economy in a fixed state. Even if that could work, which it cannot and does not, a fixed economy would represent the end of human growth and achievement. We would have thus reached the limits of our abilities and from that point on, any improvement in any one area would have to be paid for by effacement in one or more other areas. Nobody could become rich without making others poor.

It's that last part to which Keynesians play for your political support. Every gain is another's loss.

But this isn't true. You participate and buy what you want to satify your own needs and desires. You're happy to make the trade because, to you in that moment, it represents a better alternative than remaining as you were. Maybe that was a new, more comfortable pair of shoes. Maybe that was at last a satiation of long endured hunger. Whatever the circumstance, you benefitted. In the end you may be compelled to work to earn money to facilitate similar exchanges. You want to work (even though there is a possibility you might not "like" your work), because the alternative is less appealing. Perhaps you striven and sacrificed and succeeded finally in finding work you absolutely love. Congratulations! And still this truth holds, you want to work because the alternative is less appealing. In so doing, whether you're enjoying your work or not, you're providing others with the things they want, and enabling yourself to acquire what you want in exchange.

Keynesianism, in the final analysis, is only a mechanism facilitating a race to live at the expense of, rather than in support of, others. You become dis-incentivized to support your fellow man because some or all of your wealth will now be given to you without any contribution on your part. Or, from the opposite end, some of the wealth derived from your work (which supports others) is now confiscated to support still others without your consent. You're deprived of the benefit your work earned. The harder you work the more you're deprived of those added benefits, so your incentive is suddenly to work less.

Both the wealthy and poor are similarly incentivized to work less. Now we all become poorer, because as a result of less work, there will be less stuff available. The best Keynesianism can hope for is stagnation, but more often you'll see recession and a growth industry in misery.

Economist warning: Democracy may be bad for your wallet.

2009-01-26T12:49:00.000-08:00

Our political leaders love to speak about democracy. It's a subject universally popular with the people. So politicians universally enjoy its use as a rhetorical wrench to sway the people to their ideas. I confess that I'm not fully immune to that rhetoric. GWB declared a secondary mission of our fighting in Iraq was to bring the blessings of democracy to its people. That's good, right?

I was thunderstruck today while reading Peter Schiff's book, Crash Proof, by a passage in which he argues that China is better off without democracy, and that democracy can actually be dangerous to the economic well being of the public. Here's an excerpt from the chapter I've just read:

What is of vital importance for economic success is economic freedom, meaning the protection of private property, the rule of law, and minimal regulation and taxation, not the right to vote. One could reasonably argue that with economic freedom, free elections are of secondary value, and without it, voting (suffrage) has no value. A choice between oppressors is tantamount to no choice at all. Remember, the old Soviet Union had elections and almost everybody voted, the alternative being frozen toes in Siberia.

The word democracy is used loosely these days, and it is useful to remember that one of the primary reasons for America’s early economic success was that our founding fathers recognized a distinction between democracy, which they understood as populist government with counterproductive implications for capitalism, and republican government, which stressed checks and balances, such as the Electoral College and staggered senatorial terms, designed to keep the evil forces of democracy at bay. James Madison, the father of the Constitution, writing in the Federalist Papers, said, “Democracies . . . have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their death.” After the Constitution was ratified, Benjamin Franklin was asked, “What form of government have you given us, Mr. Franklin?” His answer: “A republic if you can keep it.” Perhaps if we could have kept it there would have been no need for me to write this book.

For those of you who incorrectly believe that the United States is supposed to be a democracy, just check the Constitution. The word democracy does not appear once. However, Article IV, Section IV, reads, “The United States shall guarantee to every State in this Union a Republican Form of Government.” If you are still unclear, just recite the “Pledge of Allegiance” and listen carefully to the words.

We all take our understanding of democracy pretty much for granted, I think. I believe many of us also have some rather deep-seated misconceptions (myself included) about the role of democracy in this country, and the virtues of efforts to spread it abroad.

Democracy alone is simply populism, and I think that most of us can agree that doing what's popular is not always going to be in our best interest.

Our founders seemed to grasp this notion, and took great pains to develop a system where the national government is prescribed an exclusive short list of very limited powers essential to nationhood, and everything else is left up to the States comprising the union. These States then had representation within the national government to come to agreement on national policy, but the individual was not so explicitly considered.

It was left to the States for the most part to decide how they should govern themselves, internally. The model was bottom-up. Your main civic impetus as an individual was to your local government. Your local government was represented in the state where the self-interest of the entire state was integrated, and the states then sent representatives to the national government to integrate and hammer out policy and action in the interest of the whole nation.

At some point in our past, and perhaps this has been a rather recent thing in our national history, we started to break down this bottom-up arrangement and replace it with a top-down one (Often by invoking notions of grassroots movement, how ironic!). In so doing effectively centralizing power at the federal level, and making state and local government less relevant. This is not what the framers intended.

The 17th amendment gives a good example of the transformation. It provides for the direct, popular election by the people of each state's Senate representation. It was ratified not all that long ago in 1913 (a recognized "progressive" era where, worldwide, experiments in socialism and fascism were developing). We take it for granted today that this is how our ~~democracy~~ republic is supposed to operate.

Before this, the legislature of each state had the power of choosing the state's senators, thereby recognizing the authority and importance of each state. The state legislature then could codify a popular election as its desired selection means, or it could specify some other process where it would choose for itself (recognizing the importance of your local representative to the state government). The federal government dealt primarily with states, not with individuals.

The 17th amendment takes the power invested in the government of the state, and transfers it to the people directly, with the (intended?) effect of causing the federal government to become stronger because the will of the people as expressed by the representatives making up their state government is set at odds with the will as expressed by their senators at the national level. The senate now has the ability to undermine the will of the States via the state legislatures.

The framers categorically rejected the notion set by the 17th amendment, as this amendment directly re-writes language they had set down in Article 1, Section 3.

The framers desired this segmented republican form, with its segregated branches of government, separating powers, generally making it very hard...but not impossible, to change things. In this way they imbued government with the flexibility to adapt over time, with sufficient rigidity to stand firm against passing fancies which would jeopardize the liberty of the public. They saw this as the best way to embody the assertions of the Declaration and allow the will of the people to be represented, prevent over-centralization of power, while at the same time give the states and then the nation the ability to decide upon difficult choices that frequently are very unpopular, but in the best-interests of the whole.

And this...is decidedly not democracy, but republicanism (and no, not the party either!). And, it has helped us to become our best as a nation, by allowing us generally to act in a manner that tends to be best for us in the long run.

The pure will of the people, on an individual basis, can be very shortsighted. You may be ignorant of all the salient facts, or struggle for the discipline to fore go some present pleasures for the opportunity for a greater future reward.

Like eating your vegetables and exercising and working hard to save money for the future, some decisions may not be popular, but the republican form served as a kind of mommy or conscience, compelling us to do what's for our own good.

Who doesn't want the most direct power possible? Democracy in the populist sense is an appeal by our politicians to our more base desires. In the process they accrue the power to themselves by using populist rhetoric against us as a whole. Dividing and conquering us as a nation by pitting our individual self-interests against one another. The framers understood that this could only result in a race the the bottom.

Their conception of a republic, decentralized in important ways, allowed for individual liberty to be guaranteed, allowing localities the most power to act in their best interests, while still allowing the national will to be felt and shape the nation's direction.

Peter Schiff's book, Crash Proof, was written in 2006 and published in 2007. It's so far been pretty spot on in predicting the economic fallout we've seen in 2008 and will likely see in the future. The logic is very sound and inescapable, in my opinion. If all else were to remain constant, only the timing is open to debate. I heartily recommend you pick up a copy and give it a read!

Make it your civic duty to read and consider its merits or demerits. Above all, think!

Wine Tastings at Happy Harry's

2009-01-02T17:22:00.000-08:00

Jane and I in the back-half of 2008 were keen on trying to attend all the offered wine tastings at Happy Harry's south-end bottle shop in Grand Forks, North Dakota.

In the last two of the season, we decided to ditch the cumbersome clipboard and notebook, and record our impressions on my Cowon iAudio U3. This opened up the possibility of using these events as a soundseeing opportunity, as well as a record of our uncomplicated tasting notes.

I'm still post-processing the audio, but check back in before the end of January to have a look at our notes and a listen to event.

First Night 2009

2009-01-02T16:46:00.000-08:00

Every new year's eve, my city of Grand Forks, North Dakota, holds a modest festival to ring in the new year. It's capped with a fireworks demonstration at the stroke of midnight, which is usually successful in bringing out the stout folks to brave the cold and watch some big booms!

Here's a bit of soundseeing of the 2009 demo for your listening pleasure.

(Recorded with a Cowon iAudio U3 and its internal condenser mic. The audio has about a 30 dB wide dynamic range to preserve the effect of the loud bangs relative to quieter speech and background sounds. Therefore it may be hard to make out the background in noisy listening environments.)

A bit of review on "The Mystery of Banking"

2008-11-08T19:25:00.000-08:00

I recently finished Murray Rothbard's, "The Mystery of Banking."
That was such an eye-opening and exciting book (if you are the type of person who _can_ derive feelings of excitement from a book on economics)!

The overall aim of the book is to discredit the worth of the US Federal Reserve System, and fractional-reserve banking as facilitated by central banking in general.

In this, Rothbard puts forward some very well-reasoned and common sense practical arguments. I came away from the read with a new appreciation for economics as a field, and recognized now that the subject is perhaps overthought by most modern scholars. Economics isn't any sort of system so much as it's what results when groups of people act when influenced by just a few rather simple rules.

Anyway, Rothbard sets up his critique of the Fed and central banking by offering an easy-to-follow primer on some basic economics and history of money: how it developed, how people use it, how it is both supplied and demanded just like other products in an economy, and how those forces influence prices.

This first section of the book is crucial for non-economist folks to at least review. It assumes zero starting knowledge, and in short order will have you up to speed with a working knowledge of the mechanics of money. It also gives thorough treatment to the concepts it introduces. Once they become clear to you, it may start to feel redundant. I was able to skim over the final pages of this section. It begins historically, and you'll understand how a society gradually comes to the use of a modern coin-commodity money as its culture and technology and sheer size develop.

After the concepts primer, the following sections deal with how an evolved commodity money system is gradually influenced and ultimately usurped by government to transform into a fiat currency. This can only be done in complex societies where trust in institutions has been built up with the people for eons, or the culture will not ascribe value to the currency and merely recognize it for what it intrinsically is: valueless slips of paper (albeit with fun and artful printing).

A scholarly worth with detailed footnotes and citations, the book wonderfully fuses history with the theory to demonstrate and support concepts. The reader learns about the development of paper currency; its backing by hard money in gold and silver coin; and its use in banking to make hard money more convenient and secure.

The reader then is shown how the backing on paper currency, which makes it acceptable as money stand-in, is gradually removed via various mechanisms and interests until one is ultimately left with a money which a value "declared" by government, or fiat, rather than a thing with some intrinsic worth all on its own, the mere stand-in for hard money is declared to itself be the money, by fiat.

We then are shown how, after the conversion over to a fiat currency is complete, how now there exists possibilities for its value to be manipulated, and how these manipulative effects generally tend to harm society by subjecting it to booms of credit expansion, followed by busts as worthless credit is exposed and recessions and depressions result.

We by this point get to a crucial and cynical rub. Who benefits from a fiat currency? No one but government. Its unique properties offer levers of control which power-brokers may use to influence people and business. It also enables government to more readily pay for its operation. If all else fails, it may simply print more paper money and spend it. So long as the population continues to accept it. In this way fiat currency is the true source of inflation (along with fractional-reserve banking) and represents a hidden tax on populations as the purchasing power of their fiat paper slips is eroded.

The book does not necessarily advocate movement away from paper money or checkable deposit accounts, these do provide great security and flexibility benefits. Rothbard's concluding section does, however, advocate replacing the fiat nature of our currency with its former commodity backing in gold, re-imbueing true intrinsic worth to our dollar.

To this end, the book lays out a surprisingly straightforward plan to return our money to a gold-coin and bullion standard (note: not a gold exchange standard, which is very different). If implemented, we would wake up with the ability to go to our bank and redeem our paper dollars and checkable deposit amounts for a share of the real gold held in our treasury. This gold would be distributed to banks to back our deposits and to be offered in exchange for our paper notes.

Once done, our current paper money (in its current Federal Reserve Note form) would be redeemed for the gold and retired. The Federal Reserve System would then be liquidated and done away with. Our money would be gold on deposit with our local banks. Paper money could and probably would still exist, but as a type of gold certificate (like it had been before the Great Depression). Gold would be the real money, on deposit at a bank of our choosing (a competitive process) and used to back any contrived paper or card or electronic system we might develop to serve our desired for flexibility and convenience.

The point is that the heavy hand of government would once more be divorced from the value of money. We would be free to redeem our gold deposits and transfer them to another bank at any time and for any reason. Loan and deposit banking would again be separated. Fractional-reserve banking might not be outlawed (it would be difficult to enforce even if it was), but market competitive forces and depositor faith would keep banks honest about the redeemability of their gold reserves, lest customer fear of the irredeemability of their gold start a run and force a bank to reveal their insolvent standing.

The first section of the book shows you why such a state would be a good thing, if you don't see now the advantage. Among the claims by Rothbard is the notion that the business cycle is a side-effect of fiat money and fractional-reserve banking's ability to create new money out of thin air. Without this, all money has real worth, so business cannot be puffed up by "Monopoly" money for the relatively short boom periods when we ascribe this "thin-air" money the same temporary worth as money backed by real reserves. The waking up we do to the true valuelessness of this thin-air credit expansion is what drives the bust which follows.

After reading the book, my cynical nature cannot believe a time where we might ever return to hard money from government fiat money. Nothing short of a revolution and formation of a new nation could achieve this, in my view. Once government aquires the power to print a fiat money from its people, the vast new power this confers makes it a practical impossibility for government to then be asked to give up. It's like the "One Ring to Rule Them All".

To the government it is, "the precious." Even the honest reformers within government would come under grave pressure to keep the scope of their ideal reform strictly limited. What government voluntarily gives up its own power? The best we could hope for would be some sort of "custodial" relationship where government merely pledges not to use the power it will still have. That'd be like letting the alcoholic keep their Scotch bottle if he agrees never to take the cap off again. At some point he'd have himself a three-fingers of the delicious liquid, and he'd have a great excuse why.

"The Mystery of Banking," makes a great, entertaining, and enlightening introductory book to the Austrian School of Economics.

Duality of States

2008-11-05T16:54:00.000-08:00

I am amazed sometimes by the duality of our nature, in ourselves and in our institutions.

This evening, after waking up to a stock market party with a clear Obama hangover, I catch the evening's Investor's Business Daily and read about California's measures.

California is universally known to the rest of the nation as the archetypal liberal state. After all, it's home to Hollywood and San Francisco. And while it's true that they fulfilled their role in renewing their liberal voice to the nation in yesterday's voting, internally it's a different voice.

Voters had previously voted in legislation which clarified and asserted the definition of marriage, as being between a man and a woman. It was a big issue at the time, and achieved significant popular support at the polls, and general detraction in the press.

Rebuffed by the apparent will of their fellow Californians, those affected by the statute mounted challenge, and ultimately the State's supreme court rule the new law contrary to the State's constitution, and struck it down. Rebuffing the rebuffers.

Last night, Californians dug in their heels and took their will a step further, voting passage of Proposition 8 to amend the California constitution such that the effect of that previously passed, then struck, statute can be finally the law of their land.

This was a rather conservative move, and so the development of this story from a state with outspoken liberal representation nationally, and a sure win for the New New Deal Obamanians. And they kept it up too, striking down two rather liberal alternative energy proposals.

Contrast this to my home state, North Dakota. Recognized as a state filled with common sense conservative thinking self-reliant rural stalwarts. You want steady hands on so many tillers? We're your people!

We in North Dakota generally send-up Republican presidents and tend to favor conservative principles in our internal government as well. We do favor Democrats for national representation, but more the blue-dog type. We're mostly farmers, and we're acting in our own self-interest to bring home the farming pork. Dems are usually good at this.

In a second major surprise to me, my fellow North Dakotans acted largely liberally at the polls. We did send up our electoral votes for McCain, and Gov. Hoeven and his Republican administrators received large reapproval to go back to work. But in four ballot measures which affect our internal politics, in contrast to liberal California, conservative North Dakota took a liberal tack.

We had a measure to deal with future oil-industry tax revenue in a fiscally responsible way, setting it aside in trust and trying to only spend the interest on that trust, in the knowledge that while the state's blessed with oil, as a nation we won't use it forever: defeated.

A measure to rebalance our tax revenue (which has been generating steady real surplusses of cash) and lower our personal and corporate income taxes: defeated (what sane conservative vetos a tax cut? Not a credit either, but a real rate reduction?).

A measure to establish a new government program devoted to campaigning against tobacco use: passed.

And a measure to take the independent and corporate-style running of our state's workforce safety and insurance program (which had been saving we taxpayers money), and bring it back under the direct control of the state: passed. (Folks I talk to largely blame this one on allegations of a culture of corruption within the non-government board overseeing WSI's operations.)

All actions rather unlike the reputation for conservatism we're outwardly known for to the rest of the nation.

It's a strange and interesting duality. You might say Californians now have a little taste of what it's like to be a North Dakotan, and the same is true for me of them.

Living The American Dream

2008-11-04T21:55:00.000-08:00

As the last of the votes are counted tonight, it appears clear that we awake Wednesday, to an historic new era in America.

It is a truly cool thing to see it proven true (as I've always believed so) that race doesn't matter in America. Obama's election is resounding proof of this, and that's very heartening.

On that historic achievement of his election, I'd just like to cheer up the fact that Obama achieved this victory by his own merits and by winning the hearts and minds of the electorate. He did not have help from a contrived, government-sponsored multicultural initiative. He was not assisted through policies of affirmative-action, nor minority preference.

He got here on his own merits, his own effort, his own belief in our unique American ideal that this nation affords the same opportunities for all its citizens. We care more about what you're about and what you want to do, than what you look like or what life situation you've come from. He took that ideal and set about convincing enough of you that his ideas for leadership were what our government needed, and he achieved.

This is laudable and sweet, and that he now stands as proof of this ideal's reality cheers me up about the enduring promise of America.

I hope now too, that it's instructive to us to look to his example and others like him, and realize that we don't need crutches. People of parts of American society and culture can and do stand on their own. If we, their fellow Americans, like what they're about, we let them show us what they can do, we elect them, we hire them, we accept them on their merits. It's not about race or ethnicity or anything like that. Do not stand for any such mind pollution from here forward. It does not matter. And we can each embrace the freedom of that delicious realization. No crutches.

------

Well if you've read my other posts or internet detritus or encountered me in real life, you know that my personal politics do not mesh with those of our new President-elect, or most progressive Democrats or even a number of popular Republicans.

I've been on my own journey of self-discovery, and am a student of history. The more I absorb and experience, the more refined my views become. I am a Libertarian with some conservative sentiments. My philosophy holds that individuals should succeed or fail on their own merits; that our nation's framers struggled mightily to grant us enormous freedom, and a duty to ourselves and our nation to learn about and protect them, accepting the solemn responsibilities upon which those freedoms rest, and without which they would evaporate.

In keeping with that, my philosophy holds that our government ought to mostly act as referee, handing down standards and enforcing a rule of law so that the free market can work and we can be held to account for our promises to one another.

We are about to take a striking turn, now, to the left in this nation. America is redefining herself. I think we've been down some of these roads before, but we're going to take them again, and this time perhaps travel further along them.

Our culture has been shifting. I am not sure we any longer support the notions of personal achievement and self-reliance as we once have. We were founded on those principles. The emphasis now is on the community; that no one may stand alone. We used to trust one another, with government as arbiter. We now mistrust one another, and see government as provider.

In this culture, we desire to be unburdened. We are willing to exchange freedom for leisure. Responsibility is exchanged for a calmed mind. Freedom means choice and making the best choices require effort, responsibility, education, and critical thinking. I think many of us would just like a rest, to be absolved from the heavy responsibilities and consequences that stem therefrom. Let someone else (government) shoulder the burden. Designate and delegate and set your mind at ease that your hard problems will be solved for you.

I think also that we've grown a (to me surreal) trust and faith in our government, begrudging as it seems to be. We lament it nostalgically on the one had, but then turn round a look to it in the next moment. We trust and have faith in our government to protect us from harms (real, imagined, large, small, practical, individual or societal), establish the solutions to our problems, because we don't trust each other through markets anymore.

In my philosophy, government is not the answer. It can be severely malicious and impersonal, but even when well-intentioned, its actions always have unintended consequences which often make matters worse, or create a new and separate problem elsewhere. But it seems our culture would rather roll the dice on an imperfect government, than hang on to its freedoms and free choice and place trust in ourselves and in individuals around us.

I believe that this way be dragons. My reading of history informs me that such is the easy choice. In our worldwide experience, more pain and less of everything is the result. America and the freedoms her citizens yet enjoy are a precious and unique thing, known scarcely to any other population and then only in fragments.

The culture will go where it thinks best, and it feels as though, whether the majority of individuals within the culture realize it, socialism and relying on society instead of onesself is the proper path.

If we try this path and realize we've made a mistake, will we have the power to go back? Will the institutions of government to which we abdicated and delegated our liberty, allow us to resume it?

I believe the Democrat philosophy in this country is once of progressivism a/k/a socialism (semantics are important to socialists as they must always battle to win your heart over from the natural order of things). The individual and her desires or needs are subordinate to the state and society as a whole, as viewed from the perspective of the government, not from the perspective of the people governed.

It's a philosophy of personal choices and freedoms replaced with government dicta, impressed upon you for your own good, as the government sees you (not as you might see yourself), and for the good of all (not as we might see each other). It may be easier to let government handle the tough and sticky issues, to rely upon it for the things which require courage and self-determination from you. But, when it's left for government to decide, how can government thereafter keep itself in check.

In my opinion, such is a misguided philosophy doomed to fail. Proven to have failed time and again, but so outwardly temping, alluring, addictive. We seem destined to keep flirting with it, experimenting with it, convinced that this time it can be different. It never is, has been, or will be.

Freedom is not free. American liberty is very hard work. It's also the most unique and rewarding gift. You can exchange it for "free" things, but such things always have a hidden cost which you will pay somehow. That cost is always more expensive than had you held onto your freedom and choice and achieved what you wanted on your own.

For socialism to work, eventually dissenting voices and ideas must be eliminated. In a system contrived and apart from what arises natually, dissent is corrosive to the unity and harmony required to make the system turn. People who ultimately do not submit willingly will need to be punished or set apart for the good of the whole, as viewed by the government. After inception, you can't simply allow people to do what they want.

Isn't this the very sort of tyranny our framers sought to protect us from?

-----

I believe in the simple truth of free markets. Restrictions, subsidies or other impediments or attempts to control the free market, by government or by other market participants, merely distort the outcomes generated by the market. Within that contrived structure, the market is still operating. It cannot be stopped, because it's not a thing to be accepted or rejected, but a law of nature, like gravity.

Apply the distortion of subsidy, and the free market will adjust to the new operating environment. Costs of various things will merely move about to positions they would not occupy had there been no external or contrived intervention.

As a quick example: if President-elect Obama's tax proposals he's campaigned on are enacted, the result will be new costs everyone will bear. To take what was earned by one group and give it to another, means the group which earned it has experienced a cost which didn't previously exist. If that's a successful small business now paying a higher income tax, it represents a cost which will be passed onto its customers in the form of higher prices. The business's customers will pay for the "wealth" which was taken and given to another group.

If that business was supplying a thing which served as an input to another business product or service, well, now its costs have increased (not to mention that that business itself may pay the same higher tax which the first business did)...the free market will continue to work with costs being passed along directly or indirectly toward the customers, the free market mechanisms natually finding a new equilibrium, and the thing which appeared to be "free" is still being purchased...but with less efficiency.

Take a look at your phone/cable bill (or utility bill in many locales) sometime. Study it carefully. These industries are rather heavily regulated. Government taxes them directly for the privilege of doing business or for certain regulatory services of the government, or indirectly by forcing them to operate in a manner which would not have come about in an unperturbed free market.

It may grant subsidy on certain firms at the expense of others. These all show up as increases in the costs for the firms to provide you with your services and are not eaten altruistically by the companies but passed on to you. So many special levies exist that many of them are called out directly on your bill, itemized in dollars and cents for you.

All business eventually comes down to the individual, no matter how large the business is, so one way or another, you will pay when companies are asked to.

Heck, even higher taxes on the wealthy are bourne mostly by you as individuals. The higher tax represents a higher cost on the part of the wealthy CEO to provide the work or services for which they are paid so highly. As a result of the tax, he will thus demand more from the business which employs him, increasing the cost of products and services to you or to other businesses, but ultimately...to you.

In conclusion, I ask all Americans to do me this favor: keep score. If you believe in the campaign ideals forwarded by President-elect Obama and supported him, so much the better. You folks keep score too. If, as his campaign suggests, and a new Democrat supermajority congress enables, we begin to implement socialist policies with expanded government services and new forms of tax and subsidy, everyone of us regardless of relative economic standing will become more impoverished. Everything else being equal, some may see themselves lifted into a higher class from a lower class, but my bet is that these folks will at the same time be able to afford less than before, or have fewer choices available than before.

America is about aspiring to be your best. Until you reach an arbitrary limit set upon you by your socialist government. Beyond this point, it declares that you did not earn the fruits of your hard work, and confiscates the excess to be distributed inefficiently and often corruptly (when has any subsidy not involved a dose of scandalous pork?) to someone who did nothing to earn it.

In the final analysis, socialism enslaves by defining limits to your success and achievement in life. It removes freedom and choices by fiat or by causing them to be artificially uneconomic. It serves by an iterative process to bring everyone down to the lowest common denominator.

That's not change to hope for. Keep score.

For Americans to "wake-up" from the glittering promises of the campaign, it may first take a nightmare.

All This Has Happened Before, And Will Happen Again

2008-10-31T15:56:00.000-07:00

Reading Murray Rothbard's, "The Mystery of Banking" Originally written in the 80s and updated over a number of editions for the present.

One theme stands out, quoting from Battlestar Galactica's 4th season: "All this has happened before, and will happen again."

Get a load of this passage from the concluding section, p. 247:

After Fed inflation led to the boom of the 1920s and the bust of 1929, well-founded public distrust of all the banks, including the Fed, led to widespread demands for redemption of bank deposits in cash, and even of Federal Reserve notes in gold. The Fed tried frantically to inflate after the 1929 crash, including massive open market purchases and heavy loans to banks. These attempts succeeded in driving interest rates down, but they foundered on the rock of massive distrust of the banks. Furthermore, bank fears of runs as well as bankruptcies by their borrowers led them to pile up excess reserves in a manner not seen before or since the 1930s.

Wow! That's eerily familiar! Greenspan low rates lead to large influx of cheap money, helped along by over-charged lending. Fear of deposit safety and bank solvency leads to some high-profile bank runs. Fed is right now trying to massively inflate by open-market purchases, loans to banks via its discount window, and now the TARP program. While the public at-large may not fear their banks as much, the banks still fear the public's solvency and won't lend (despite Fed encouragements) as they seek to build up reserves (known to us right now by the buzzworthy phrase, "deleveraging").

Watch the M2 figures (or M3, if we had them).

http://en.wikipedia.org/wiki/Money_supply

As we work our way through our present economic challenges, an election draws near. What I've learned so far has shown me that in our Great Depression, we took a bad, but not untenable situation and made it worse through unsound policy decisions and the meddling of two succeeding presidents who saw problems they believed only government could and only government should solve.

Then, as now remarkably, the economies of the world's nations were fairly interdependent. Our problems were not solely of our own making, and world economic circumstances shaped our government's actions. It's interesting to me, however, that while most of the rest of the developed world experienced a shock and a recovery during this time, none were quite as terrible as our own.

What I hope to learn in the reading ahead is whether we made the problem worse through more government intervention. Could the wrath and anguish and hunger of our depression been blunted if our government had done nothing, instead of trying to micromanage the economy?

Back then, after Hoover we elected a socialist in President Franklin D. Roosevelt. Much was accomplished during his tenure as President. Chances are you live in a town with a bridge built through his Civilian Conservation Corps program.

FDR believed in the government as solution for society's ills. Government was going to fix our economic problems, confer upon you the "right" to a well paying job, guarantee your financial security in old-age via Social Security, and hosts of other ideas and programs. The American Dream became under FDR, the American Promise (as in social contract, not as in vision of potential).

Our government as we live under it today, saw its genesis under his administration. FDR is recorded in crackly audio as well as in writings as believing that our Constitution was a stale and outmoded document. He wanted to modernize it, and he saw it as his duty to help spur that change; spur the change in the relationship of government to the governed. For good or ill, our nation would never be quite the same again. And it's not.

It's fascinating to me to see that these things are tending to repeat themselves in my lifetime now. We're in the beginning stages of another major economic crises. We've just experienced the first (and possibly only) major shock to our stock markets (1929's crash was similar, in that it was over rather fast, but the Depression would follow along in its aftermath). We can see the government beginning to inflate its way out and recapitalize major financial instituions with billions of dollars newly printed.

It remains to be seen if our recession will proceed as in the past few, and gradually fade, or if, like the Depression, reaction and changing government policy help to fashion it into something more ominous and lasting.

Then, as now, we're at a Presidential crossroads. We tipped toward government as a safety net and hoped for change in the bold voice of FDR. In fear of our future we accepted his socialist experiment. As we went to war for a second time, the experiment faded, but didn't ever go completely away. A nation united in the ultimate victory over absolutism in WWII repatriated vast swaths of veterans who has just been to hell and survived. They thought they could do anything, and when they came home, they set out to act decisively on their dreams.

They succeeded, transforming America into a premiere economic superpower. FDR's crutches were no longer needed. But the impact has stayed with us. Our society has come to accept and take for granted some of the government programs which were experimental in FDR's time.

Now...we again are afraid and concerned about out economic future. We're tilting in that fear back toward socialism. Once again we "hope for change" in the person of Barack Obama, whose ideas are much the same as FDR's. Government is the answer. Our Constitution is a stale document in need of retooling for a modern world. In "spread(ing) the wealth around," we look to once again subvert the American Dream into an American Promise. I am not sure why we think it will work out any differently this time, than it did in FDR's time. Our choices are shaped by our environment and experiences. Is it simply that most of us just don't know any better; haven't had those experiences which would teach us the lessons of history?

For me, I still have an innate curiosity for discovering how the world works. I desire to try to be less ignorant, even if that means what I learn might weigh heavily on my spirit. I'd rather die in knowledge than live blissfully in ignorance.

I recommend this book to anyone interested in gaining a greater appreciation for how our economy, and our banks, Fed, and monetary policy function. You'll get an education that will illuminate the meaning behind actions the Fed takes and what's really going on behind the headlines and sound bites over major news broadcasts. It's been a real eye-opener for me during our latest banking/lending/stock market crisis.

What's more is that the Ludwig von Mises Institute has a PDF version available on their website, formatted nicely if you're one of those people lucky enough to have an e-paper reader. I've been reading on my laptop, which has been OK.

Nearly finished with "The Mystery of Banking," my next book will be Rothbard's "America's Great Depression." I'm hoping to get a little inside baseball on why our depression happened, why it was so damaging, and why it took so long to recover.

I am already learning that "progressive" policy had become the trend in the beginning of the 20th century. Such policy helped push us to participate in WWI (also helped along by J.P. Morgan & Co, who had its fingers deep into the war machine, and a war would help bail it out of failing railroad interests). Participation with Britain (through the Genoa Convention) in a faux gold bullion standard after the war led to inflationist money supply expansion throughout the 20s. It appears this heavy expansion of the money supply created the ripe conditions for the 1929 crash.

In any case, if you find financial topics interesting, these books are worth your time, as well as some time spent at the Ludwig von Mises Institute website, which represents the Austrian School of economic thought (which has a very different perspective from much of the Friedmanite and Keynesian ideas taught in most of our colleges).

FireGPG is getting better

2008-10-21T23:06:00.001-07:00

My last post was a test/demo of a bug I had encountered in the way FireGPG 0.5.2 was handling scooping up text from fields to clear sign and dump back. The signed text was in a very subtle way not exactly the same as the text in the field to start with.

Perhaps this was a problem on the order of a plaintext URL typed into the field vs. the URL with some underlying HTML being scooped up by the plugin.

In any case, the result was unreliable signatures. I've updated to 0.6.1, and the test blog entry below now validates correctly once the appropriate public keys are added to your ring.

The original authors and community forming around the plugin is doing a great job!

FireGPG test

2008-10-07T15:47:00.000-07:00

-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA1

João Pinheiro wrote:
> I'm considering the option of adding a Photo ID to my GPG key to make it
> easier for people to identify me and verify that the key does indeed
> belong to me. However, there are a few issues that I would like to clear
> out before doing so.
>
> 1) PGP specifies 120x144 as the maximum resolution while GPG recommends
> the usage of 240x288. What image resolution would you advise me to use
> and how big can/should the actual JPEG file be? Is 6kb for a 120x144
> photo acceptable or should I try to stay below 4kb?

PGP will resize whatever resolution you supply to fit into its Key
Properties window. GnuPG relies on an external image viewer (e.g. MS Photo
Editor or whatever JPEG viewer you have). Resizing a 120x144 image 200% to
240x288 usually results in considerable image degradation. I favor the
higher resolution.

That said, it is almost trivial to get a 120x144 JPEG to fit into < 6KB.
This is not the case with a 240x288 image, which typically takes reducing
the JPEG's compression quality to 20%-30% to obtain an image <= 6KB.

I think if GnuPG is going to go with 4x the pixels they should make an
appropriate adjustment to the maximum image size, e.g. 24KB. I try to keep
my key's photo id images in the mid-teens.

> 2) I know that several keyservers used to have problems with Photo IDs
> some time ago. Are those issues still around or have they been solved by
> now? Do any servers have some kind of a public key size limit?

Those problems existed on the older PKS key servers. The issues are stilla
round on PKS, but have been eliminated by the new SKS key servers (see below).

The only limit on key size is common sense. IF one *REALLY* needs a 4096-bit
encryption key for email, they probably shouldn't even be using the 'Net. At
the present 1024-bit RSA and ElGamal keys are are considered "Standard" and
2048-bit keys are labelled "High Grade" on the X.509 certificate sites.

I'll paraphrase Rob Hansen's general advice here, "Unless you REALLY know
what and why you're doing something, stick with the defaults."

> 3) Which keyserver would you recommend for me to use from now on? I have
> been using keyserver.pgp.com over the past few months and I was
> wondering if there is a better/more widely adopted one out there.

I just answered this last Friday on Gnupg-Users. For simplicity, I'll just
copy that message.

> Is there a recommended(read Endorsed) Keyserver?

There is NO officially recommended or endorsed key server.

> I'm looking at the documentation we have here at gentoo.org and it
> recommends pgp.mit.edu. It has been suggested that this server is old
> and broken. Is this the case?

pgp.mit.edu works fine for older keys. It runs the PGP Key Server (pks). PKS
does not handle V4 key features well. Notable examples of mangled features
are multiple subkeys, a revoked subkey (tag 0x28), duplicate keyids, direct
key signatures (tag 0x1F), revocation signatures on userids (tag 0x30), or
photo IDs. There is also no development or maintenance being done on the pks
platform. One exception to the pks servers is keyserver.kjsl.com, which has
been patched to not mangle keys; however, it drops photo IDs.

The one PKS server at kjsl.com, the old LDAP keyservers (only one is still
on the 'net and it's unsynchronized, ldap://keyserver-legacy.pgp.com), and
the SKS servers handle v4 keys correctly. The new LDAP PGP Universal key
server at ldap://keyserver.pgp.com also handles keys correctly, but its
myriad additional signatures added to keys are often (jokingly?) cited for
the addition of the 'clean' options in GnuPG. It, for obvious reasons, is
unsynchronized.

The current platform of choice is known as the Synchronizing Key Server
(SKS). It is written to fully comply with OpenPGP specifications.

subkeys.pgp.net is a round-robin DNS lookup of four servers. Three SKS
servers and the server at keyserver.kjsl.com.

The address some of my correspondents and myself and refer to most users is
x-hkp://random.sks.keyserver.penguin.de. It's a round-robin alias that is
updated daily with the operational servers in SKS' universe.

For my own use, I use minsky.surfnet.nl. It's easy for me to remember (Yaron
Minsky wrote SKS and its Gossip protocol.) It's also short to type.

- --
John P. Clizbe Inet: John (a) Mozilla-Enigmail.org
You can't spell fiasco without SCO. PGP/GPG KeyID: 0x608D2A10/0x18BB373A
"what's the key to success?" / "two words: good decisions."
"what's the key to good decisions?" / "one word: experience."
"how do i get experience?" / "two words: bad decisions."

"Just how do the residents of Haiku, Hawai'i hold conversations?"
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Comment: When cryptography is outlawed, b25seSBvdXRsYXdzIHdpbGwgdXNlIG
Comment: Be part of the £33t ECHELON -- Use Strong Encryption.
Comment: It's YOUR right - for the time being.
Comment: Using GnuPG with Mozilla - http://enigmail.mozdev.org

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Hash: SHA1

The above signed blog posting did not verify in-place in FireGPG when I encountered it on a different blog site. I selected the original text obtained with the [display original] link in FireGPG, and reposted it here to re-check verification. It does not verify here either.
As a further test, I again took the original text and saved it to a separate file. The file verifies OK. By this result it appears a bug exists in FireGPG.
I am clear-signing this post as an additional test. If you're a guest, you can find the public key in an earlier August 8 post in this blog.
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Comment: http://getfiregpg.org

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It would also be nice to have some type of hotkey or mechanism to temporarily disable FireGPG's mangling of page content.

Monday's vote failed to pass. Let's decide to adjourn.

2008-10-01T02:42:00.000-07:00

I read this article from an economist part of a large like-minded group who is urging Congress not to proceed on the bailout proposals, as laid out by Treasury and the administration. It's worth your while to check it out!

Re: bailout plan. This guy has it right in my view. I've been listening to a lot of folks on the issue. We don't need a bailout, at all. The more the superbanks holding onto "troubled" assets get the notion that the Feds are not going to come to the rescue, the quicker the credit markets will thaw on their own.

The worst unsaavy risk takers (and I'm beginning to think Goldman Sachs has a heavier stake in this than they've let on) will go bankrupt. The article explains why that's actually good. Shareholders in firms going BK will be hammered, and that's good (there are no guarantees in stocks, when you invest, you take on the risk the firm you're buying into might be retarded, and you accept that for the prospect of a nice return). Creditors claim the solvent business units and residual assets.

I think the author is dead right on his point that the freeze is occurring because Wall St. believes a taxpayer-funded rescue is on the way. And of course they'll try to scare the bejezus out of you, me, gov't, and anyone who'll listen, because it means they'll be saved from their bad trades.

If I make a bad trade in my stock portfolio and get wiped out, there's no bailout for me. I knew that going in, and it's top-of-mind when I decide what and how to trade. I want to try and make some money, but I also don't want to be wiped out. So, I try to be careful.

Frozen, because why sell your crap at market prices when you can hold out for the Treasury, who might just buy at 50 to 80 cents on the dollar, rather than settling for 20. Take Treasury off the table, and the market will naturally reliquify.

I'm a big fan of Investors Business Daily. I also generally enjoy CNBC, and I love the can-do optimism of Larry Kudlow, host of Kudlow & Company. He frequently writes in the op-ed pages of IBD and makes a lot of sense to me.

In the 30-SEP-08 issue, page A11, Kudlow makes the case for the bailout plan and urges us and congress to calm down and come back to the table and get it done. Once in place, we'll all be the better for it. By the end of his argument, he calls the idea a, "win-win-win-win," claiming a likely windfall for taxpayers.

I have heard this line of reasoning from a number of folks, not least of all Treasury's Paulson and the Federal Reserve's Bernanke. But I am always left to wonder in plain country-bumpkin logic: If these troubled assets would be such a great thing for taxpayers to finance, likely to yield profit down the line, why isn't private money stepping right up all over the place to buy?

I think the answer is just what the author of the article states. Other sources I've been listening to also warn that we're not just talking about bad mortgages here. Treasury would be buying "mortgage backed securities" and "collateralized debt obligations" (although hashes of the failed bill and of the reformulated bills yet to come to a vote would expand Treasury's power to buy other types of securities than simply the mortgage backed paper defined at the plan's unveiling...sheesh).

I'm learning that a lot of fraud has been going into these securities. The allegation is that lenders would take a helping of junk debt, say auto and consumer loans, credit card debt, etc., and fashion it into a new security, but to make sure the security was rated highly by the investment rating agencies, a couple of mortgages would also be attached.

So we're not only dealing with troubled mortgage debt, but also the types of junk debt that is typically even more risky than mortgages! How likely would the taxpayers be to make back their money on that? I think Wall St. knows how likely, and that's the real reason the market pricing on this paper is so low.

Also developing: The Chicago Mercantile Exchange is hammering out a standardized and regulated exchange for trading credit default swaps, another exotic security tied to this mess.

CDS's "swap" a stream of payments from the buyer of the CDS to the seller, in exchange for a payout of the face-value of the CDS by the seller to the buyer, in the event that a credit default event occurs on the debt to which the CDS is tied. It is like a form of insurance that a firm can purchase to hedge exposure to risky debt.

These have become very popular among the superbanks issuing all this crap mortgage paper. However, unlike stocks and bonds and commodities, which trade on exchanges with explicit rules and standards, CDS's trade between parties "over-the-counter". The parties basically just negotiate a CDS contract and deal. But, because of the economic downturn, a problem has developed. Some firms having written and sold a lot of CDS's to debt holders looking for protection, are popping because they can't make good on the payouts. The chance that a party with whom you trade doesn't hold up his end of the bargain is called counter-party risk. It's booming, and is part of the reason credit markets have frozen.

The CME's new idea of a regulated exchange for CDS's solves this problem. Strict standards would screen parties to insure parties will abide by their obligations. Once screened and approved for trading, the exchange becomes the counter-party to all trades. This adds confidence. By acting as "seller to all buyers" and "buyer to all sellers", the traders of CDS's would have security in the knowledge that their trading partner has been vetted and approved, like they, and in the rare event a party did fail to deliver (necessarily so because the CME wants to stay in business and limit its own risk, ergo the strict standards to be approved for trading) the CME would make good for the counter-party.

Hey! This is the market fixing its own problems! Another reason to keep gov't on the sidelines. We need to give private enterprise the space to work out solutions like this.

Coming back to Larry Kudlow and CNBC in general: their anchors have made so much hay about pushing this bailout through that I'm starting to wonder if there isn't an agenda behind it all. It may only be a rather subconscious result of the workplace culture. It is GE who owns the NBC empire and is responsible for all their jobs, and GE had spread into banking and finance big time over the last few years. Heck, I used to offer GE credit cards to every customer I did business with at my last retail job. GE likely has skin in this game. For some of the anchors and hosts, it's come down almost to the level of insulting the intelligence of anyone who has appeared on the channel with a dissenting view of the bailout.

Finally, I'll close up this post by touching on the safety of your own checking and savings accounts. Much fear-mongering has been made about this as well. Jim Cramer's said that if this doesn't get done, we're headed for Great Depression II, and you'll one day head over to your neighborhood ATM and it won't have any cash.

Even President Bush had made similar comments about the availability of your checking and savings funds at your local bank during his address on prime time TV last week. You know, I thought our top leaders' jobs were partly to offer calm and confident leadership during crisis events. But I found Bush's comments truly scary! You mean, I will walk up to my bank soon and my money might be gone?!

For shame! Put the gun down. Stop pointing it at us, we're the ones you're supposed to be concerned about protecting!

The truth is, our everyday checking and savings accounts are perfectly safe. They're of course insured by the FDIC to $100,000 (if you're fortunate enough to have more, don't be silly and make sure it's spread around). What bank failures (and I'm talking about depository banks here) we have seen so far have been largely triggered by fear on the part of the depositors. WaMu was the most recent notable example. They were shaky and likely would have failed anyway, but depositors' money was never in danger. The mass exodus of depositors' funds just helped speed up the process. Those caught unawares experienced only a name-change as the deposits were later bought up by JPMorgan Chase. After a weekend of important paperwork, it's business as usual. The ATM still has cash to give you.

The rise of large corporations has led to a consolidation of banking. Espcially in the larger cities, you might have your everyday accounts at a superbank with national and even global exposure. These have turned out to be the riskiest banks because their large size meant they could do more toxic subprime mortgage business.

Those folks who are or were scared about their money and pulled it from a superbank, what are they now doing with it? In today's modern economy, hard cash just doesn't work. You need to be able to write checks or more likely, swipe some plastic to pay for things. So, these fearful folks are turning to smaller local and regional banks and credit unions and the like.

These banks are small enough that during the housing boom, what mortgage business they may have originated, they later probably sold that debt to a superbank eager to have it. So, the small local banks have the cleanest balance sheets.

With such fearful depositors streaming over, we are now and will continue to see depository capital moving away from the superbanks and into the locals. There the increased reserves will mean credit for business and individuals will be frozen, rather it will just come from a different bank.

You could make the case that this might be better. Your local bank is probably more likely to know who you are personally, and know about your business. Risk can be more appropriately judged.

So...all this fear-mongering of the past couple of weeks has, for me, become a side-show. I am now more convinced than ever that this is an effect of the fat-cat folks in Wall St. manipulating their levers of influence to try an engineer a bailout for themselves and their own bad trades, at the expense of us all.

Keep the pressure on your representatives, and use the article linked up top and musings like my own to justify your position. If you get pushback, get your representative to justify his or her view in a way that makes sense to you at least.

As the article advocates, the next bill to come up for vote should not be to bailout, but rather to dismantle the faulty government policies and entities which disconnected risk from reward to get us here. And that's all. Free markets were not to blame, because they were being distorted. And as I hope you might be able to see a little bit now, free markets are already beginning to steer us out.

The Bailout Plan - Who blocked the Reform?

2008-09-24T01:04:00.000-07:00

Wow... It looks like the proposals to restructure the mortgage system, and specifically Fannie and Freddie, were all made before... back in 2005. Even then some of our legislators recognized how these organizations were leading us toward crisis, and wanted to take action then to limit risk.

GovTrack.us. S. 190--109th Congress (2005): Federal Housing Enterprise Regulatory Reform Act of 2005, GovTrack.us (database of federal legislation) (accessed Sep 24, 2008)

The bill was introduced by Senators Chuck Hagel (R-NE), Elizabeth Dole (R-NC), John McCain (R-AZ), and John Sununu (R-NH).

It addressed such things as risk, appropriate capital levels, reporting transparency, and even executive golden parachutes!

Talk about prescient!

It was introduced in January of that year, but rather than being debated or voted upon, it was sent back to Chris Dodd's (D-) banking committee. It never got back out of that committee.

On May 25, 2006, an accounting scandal perpetrated by Fannie's management to the tune of $10.6 billion came to light, and Sen. McCain used the news as an opportunity to reiterate to the Senate the risk to taxpayers of these entities and the need for reform, calling for action on Hagel's propose bill.

The response? The Democrat controlled Senate forced the bill to "go-away" by a procedural rule. Dodd's banking committee demanded the bill be returned with an amendment late in the 109th congress. The action was a delaying tactic as the 109th congress then closed session, which meant the bill would be swept off the books. Dead.

It was later (April 2007) re-introduced by Sen. Chuck Hagel, Dole, and two other Republicans in amended form in the current 110th congress, as S. 1100. This revised bill provides for even more reform, including reporting on fraudulent loans, and measures to detect and eliminate conflict-of-interest lobbying.

This bill was read out twice and sent back over to Sen. Chris Dodd's committee, where it again languishes.

GovTrack.us. S. 1100--110th Congress (2007): Federal Housing Enterprise Regulatory Reform Act of 2007, GovTrack.us (database of federal legislation) (accessed Sep 24, 2008)

What can we say now in retrospect? Well, it would seem to me that Republicans in the Senate at least had some inkling about what trouble we were steering toward and tried (in vain) to wake up Democrat leadership to get action taken before it was too late.

It's too late.

I've said previously that Fannie and Freddie are key lynchpins which fostered the climate which lead to this crisis, and were instrumental in disconnecting the risk feedback mechanism which would have caused originating lenders to demand higher credit standards from potential borrowers.

As the Senate and House debate now on the merits of the administration's bailout proposal, just keep it in mind that it was Sen. Dodd's committee which blocked earlier efforts for reform to head off just such a disaster. He helped to break this system and now he is trying to represent himself as your man to champion its fixing. To that I say, bollocks! If it weren't for him, we might have had the reform needed to halt the bubble's growth before it popped. That would have been saving the taxpayer!

For shame. Resign sir, that is the only way for you to preserve any honor.

A check of related bills shows that the House of Representatives a mixed record on the fundamentals of this crisis. To Democrat credit, it seems Rep. Barney Frank (D-MA) was key to spearheading a bipartisan bill to get some Fannie and Freddie reform done. His bill was debated and passed. Republicans largely voted nay, as the bill contained in the opinions of many dissenting, unneccessary earmarks (notably for ACORN, the Democrat voter registration drive organization alledged to have committed certain past frauds) and directed the GSE to set asside $3 billion in funds, creating an effective tax on prospective homebuyers.

But later, Rep. Maxine Waters (D-CA) introduced a bill which sought to greatly expand the GSEs ablity to provide credit to greater numbers of citizens who would fall into the "subprime" category. A horrible bill, debated and passed, perhaps helped to exacerbate (it provided for alternatives to borrowers unable to provide sufficient credit histories, for example) the type of shameful lending practices which have got us here.

GovTrack.us. H.R. 1852--110th Congress (2007): Expanding American Homeownership Act of 2007, GovTrack.us (database of federal legislation) (accessed Sep 24, 2008)

That bill was passed with strong bipartisan support. Only some (less than half) Republican representatives objected and voted nay.

It can be said that while both parties' hands are dirty in this mess, only a brave few Republicans had the fiscal sense to oppose the very type of market distorting policies which got us here.

Keep this sort of thing in mind. Elections are coming.

The Bailout Plan - Fleshing out some Detail

2008-09-23T13:22:00.000-07:00

I dropped in on the TV coverage of Senate Banking Cmte. hearing with Treasury's Paulson, Fed. Reserve's Bernanke, SEC's Cox, and OFHEO's Lockhart. The dialogue concerned the administration's bailout/stabilization plan and its details, effects, benefits, pitfalls.

I previously spoke out vehemently against this type of action, feeling it to be an unjust socialization of the risks taken by entities almost completely beyond taxpayers' influence, and an affront to free market capitalism.

While my foundational opinion hasn't changed, paying close attention to the hearing, the discussion has brought me to understand how the plan might help. There exists a crucial linchpin in this that will determine if this risk socialization effort ultimately becomes a taxpayer burden: the fundamental value of various securitized assets backed by mortgage debt and the requirement that these exotic securities be market-to-market.

Before I start a wordy train of infinite digression, I've heared some financial pundits talk about simple spension of the mark-to-market requirement for valuing these exotic securities as a relief from this crisis. Bernanke's argument is that this will not enhance, but likely erode confidence in their true worth.

I cannot say if a solution involving suspension of mark-to-market requirements would be better or worse in the end, but my inclination is that it would only be of help on a very short timeframe. But since housing is not likely to bottom soon, Bernanke's notion sounds logical to me. It could be at the heart of why no formal exchange was ever created to trade these exotic products in a standardized way. Late stage in the boom there was likely a desire to conceal risk.

The overall scope of this issue is truly vast, but I feel like I now have a grasp of it in toto.

The bailout plan is only one portion of the total issue, and centers around the problem of asset valuation really in a system which grew more clever (innovative) than its mechanisms of regulation could comprehend and feedback into. The real "innovation" was the disconnection of risk from reward, and I feel that while government policy was not directly responsible for the market's action, its policy ultimately distorted the market, and from their the market behaved perfectly normally, in its own self-interest.

As I understand it many of the big Wall St. firms presently under fire hold vast quantities of complex securities whose value is ultimately tied for the most part to real estate.

As the credit boom neared its apex, to keep the wheels turning and make more credit available to the real estate speculators and the general public, firms began to take their debt piles and issue security shares backed by the future value of their pile of debt. As time went by, firms purchasing those securities began lumping them all together and issuing their own securities backed by the value of the securities they had bought. This process of abstracting the original debt fed on itself for many levels and caused leverage by holders to expand, while at each step turning the window on the the original debt and its condition increasingly opaque.

The securities became too abstract to value directly (a clear warning), but with an understanding that they were ultimately backed by real estate (going gangbusters) investors were willing to assent to their represented worth without question.

A modest economic slowdown just slows the growth of real-estate early-on, but this is enough to trigger some minor mortgage delinquencies, and some begin to wonder if the securities they hold will pay off as promised, since payoff is predicated on the boom continuing.

The financial firms holding the securities need to value them on their balance sheets so we all can know the total value of the firms' assets. This is a normal and critical part of determining how much firms can lend, or their ability to make good on their own debt to other firms, or to secure new credit.

In a case like that of AIG, as an insurance company claims are paid by company assets and a certain minimum ratio must be maintained to assure that ability.

If AIG had spent too much of its revenue from premiums on exotic debt securities (in the hopes of gaining a high return and higher net worth) and those securities are now in doubt, would it still be able to make good on policy claims?

With the housing slowdown, the market for the exotic securities dried up as buyers began to realize they might not be buying sure things and their true value was too opaque to assess.

When demand dries up, prices must fall. This is bad for the affected firms, which have to mark-to-market these pieces of paper of increasingly unknown real worth. If firms marked-to-market, the balance sheets would accordingly show a now much lower worth. This would affect operations as it is this worth which guarantees their obligations to others. An effective margin-call is the result.

The Federal Reserve earlier pumped money into these firms in direct and indirect ways, shoring up their balance sheets for the short term and preventing a need to mark-to-market until liquidity returned.

The hope was that housing would rapidly turn back around, and the implied values of the exotic securities would be sufficient to bring back buyers (like soverign wealth funds and hedge funds).

With bids in the market to mark against, balance sheets would reinflate, short-term Fed debt could be repaid, and life would again be grand.

This did not happen, because housing continued to fall and begain causing trickle effects in the broader economy (as too many of us unwisely overspend against the over-appraised value of our homes).

The bailout plan then seeks to create a somewhat contrived market for the exotic securities. To work, it must buy these things off firms above present "fire-sale" prices. This is so because the fire-sale price is what firms have to mark-to-market against now, and is too little to prevent insolvency for too many firms.

Bernanke today spoke of a "hold-to-maturity" price for the exotics. This price would be the true value when all the debt backing the security is paid and foreclosed losses deducted. This value will remain in flux as it is still unclear how much foreclosure will ultimately occurr, and how many folks will dutifully pay their mortgage.

His idea that current fire-sale prices clearly don't reflect the exotics' intrinsic worth, but are a result of the difficulty in discovering their present valueas they are too abstracted from the original debt.

By using some mechanism to pay a middle price (TBD, but a reverse auction, in which firms wanting to sell submit bids and Treasury sweeps all at a specified bid, has been suggested), a market will spring into existence with a fair price to mark against. Balance sheets re-inflate for all those firms not selling, and the solvency problem is eased. In the Treasury, a buyer for the exotics is always at hand if a firm should encounter a need to sell to raise cash later.

The novel hope is by doing this the Treasury will cause a secondary market to soon be spurred for these exotics, whereupon further future sellers can get a better price. Fast forward and as the debt underlying the exotics matures and default risk eases, this market for these exotics will be liquid enough that private buyers will want to purchase the exotics which Treasury has accumulated.

Treasury trickles them back out, and the gov't pockets any profits on the sales (which if present, will certainly fund gov't programs and not be used to reduce the tax burden on the public).

However... all this presumes that the slowing in the underlying real economy and specifically housing begin to level off soon.

My previous comments still stand on the measure, however. The Treasury would, in setting up a contrived market to buy these exotics, make us all stakeholders in essentially a huge new hedge fund. Much money would be spent to buy the exotics. A fair buy means that it would all come back to the Treasury later, and taxpayers would be out nothing. We could possibly even see a gain.

But, if Treasury pays too much (and this price is so very hard to know, again due to the opaque nature of these securities), we are all on the hook for the losses. Tax hikes could result, but more likely in my view, the Federal Reserve would just print sufficient money to make up the difference, depressing the value of the dollar and its buying power.

The resulting additional inflation would be the tax on me and you for your neighbor who fancied himself a big-shot property speculator, or simply made some bad choices and bought a home he couldn't really afford in the first place. Would that make you feel good? Risk was transferred from the dealmakers to you.

The counterargument is that doing nothing at this stage would be far worse. Too many financial firms bought up too much exotic mortgage derived securities and the failure of these firms would translate into an inability to lend to even legitimate business and personal interests, bringing the economy to a halt...period. Jim Cramer even suggests that failure to act as the administration now has, would have meant your local Bank's ATM wouldn't spit out any cash when you slide your card to access your savings or checking.

Excesses beget these exotic mortgage-backed securities. They were inherently less liquid and more risky because no ordered market existed on which to foster their transparent exchange.

*Sigh*

I'm listening to these points. But I remain skeptically open-minded about it. This doomsday scenario could be accurate (and sad if so), in which case what real choice do we have but to go along and hope for the best in the execution of the bailout.

I do not believe the characterization, however, that this problem was a showcase of the failure of free markets. An argument for something "less-free" for the good of all of us.

Freedom and risk go hand-in-hand. The most freedom entails the highest risk, but the greatest opportunity for the greatest reward. The principle that free markets are self regulating stems from the notion that fear of too much risk will keep decisions in some rational bounds.

This crisis did not result from a free, deregulated, market. The housing industry is at the core of all this, and at the core of housing is Fannie Mae and Freddie Mac. Through the practices of these two government-backed entities, risk became disconnected from reward. As housing became frothy in the bubble's final stages, folks entered into deals to continue to lend aggressively to ever lower-income and higher-risk buyers at ever lower rates, with the notion that if it all went south, the government would back them up. The scope of the problem became "too big to fail."

Conservative pundits will blame liberal Democrat policies for the mismanagement of Fannie and Freddie and also for the overabundance of cash generated by a Federal Reserve under Alan Greenspan which kept interest rates too low for too long. I believe there is stock in these arguments, but blame does not rest solely there.

The Bush administration also deserves some blame for its part in also leaning on Fannie and Freddie to keep the cash flowing to lenders. The President himself has spoken about his great desire to great an "ownership society" and promoting expansion of low-rate mortgage options to help more Americans get credit to buy homes.

These housing markets were not free to begin with, but manipulated with considered government policy. Some may argue to great benefit: making homes affordable to more Americans through the greater availability of credit. Bzzt! Wrong. Homes were not made more affordable. The policy manipulation only caused more credit availability, which lowered monthly payments enough to get risky people to buy in. Homes only became more expensive, inflated, as these extra risky buyers (and well-heeled speculators) drove up demand. All fueled and driven by easy access to credit.

In believing in a government backstop, risk became blunted by policy, leading to outsized risks being taken, and it's that which we are reeling from now. Capitalism, hijacked.

In a free market, Adam Smith style, risk and reward are closely linked. You only take on as much as you can handle, because you know there is no safety net for you, no government backstop. The risky low-income home seeker earning $30K annually probably cannot afford a $250,000 home. As a financial firm, if I cannot afford the consequences of his default, I judge him too risky and don't make the loan.

But in our manipulated market, Fannie and Freddie, spurred on by Clinton and Bush, and also by their management (keen on inflating revenue figures to secure bonus pay) was always there to buy the shaky loans in exchange for cash now for more lending. Originating lenders turned into mere brokers for Fannie and Freddie, profitting on the deal getting done, rather than on the future value of the loan. This is one element of how the risk became disconnected.

Just keep this in mind when you evaluate your government leadership. Subsidy, whether outright, through a well-intentioned government program, or in the form of a special deal for a favor, distorts free markets.

Free markets do work. Distorted markets do not. Socialism creates the most distorted of all markets by moving the majority of wealth to the government for patronage according to its own self-interest. In so doing, it can not only disconnect the risk-reward relationship, it also removes the fundamental incentive to productive work. Why try harder, why risk, if your reward will be confiscated and distributed amongst those who haven't risked?

In needing regulation, what we really need are standards which are enforced. Government regulation reduces efficiency and capital will naturally flow toward the most efficient market. But standardization can foster efficiency by creating a level playing field in which all the actors know what to expect and can have assurance in the parties which whom they trade.

Any regulation to come out of this crisis should be viewed in this respect. We need to remove the levers of subsidy which distort an otherwise free market, and then foster standards which promote confidence among the parties, and assure a measure of smooth and efficient trade. That's all.

If you're still reading... *whew*

-Andrew

My PGP Public Key

2008-08-27T16:16:00.000-07:00

This page is obsoleted by my new page, here.

Because I don't want to use a keyserver, and gmail doesn't provide finger.

If you received a business card from me with my PGP key's fingerprint, you can verify the fingerprint of the key you import from here against the fingerprint also listed here, and against my business card. They will all match. If they do not, then the key you imported was either bad, damaged, or does not actually represent me. In that case be careful! If all fingerprints match, then you are assured of actually having my key, and that it is undamaged and secure for your use. Yay!

If you use OpenPGP, I am available to verify and sign your public key, and would request reciprocal service. Send me your request via encrypted mail with your public key attached, and I will contact you to initiate a remote verification procedure and exchange of signed keys.

My public key, listed below, is updated here as necessary (however the datestamp of this post will remain fixed).

At this time, I do not respect the use of keyservers to distribute my public key. If you obtained my key from a keyserver, regard it with suspicion unless its fingerprint matches the fingerprint of my key here and on my business card, if you received one from me. Never trust sending me secure data using a public key which you have not verified is actually mine.

24JUN09	Assigned new expiration date. Revised key prefs to prefer RIPEMD160 hashes, AES cipher, and BZIP2 compression. With FireGPG release 0.7.6, this Firefox plug-in's author advised deprecating SHA1 use, given that the security of SHA1 has been weakened and may soon break the same way that MD5 has now been badly compromised. I could confirm that at least as of 2005, a high-resource attack seemed to have reduced SHA1 security to 2^63 from 2^80. A BOINC project is searching for SHA1 collisions. According to Wikipedia, NIST has plans to phase-out SHA1 use by 2010.
23NOV09	Updated to include new signature.
16JUN10	Updated to extend expiration another year.

pub 1024D/6B451035 2008-07-22 [expires: 2011-06-24]
Key fingerprint = DFB9 A806 8605 9B60 A480 66B8 4533 630A 6B45 1035
uid Andrew Skretvedt (Google)
uid Andrew Skretvedt (Midco)
uid [jpeg image of size 5081]
sub 2048g/EBF5BDFB 2008-07-22 [expires: 2011-06-24]

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OpenID

2008-08-26T18:23:00.000-07:00

This blog may become something worth your visit at some point, but for now, this is a placeholder. I've created this blog for the moment to access the OpenID tied to it. I am investigating OpenID as more web services are employing it.

First to explore, Laconica and Identi.ca and army.twit.tv.