Archive for the ‘Politics’ Category

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Depending on the cloud

Sunday, October 11th, 2009

Continuing the theme of over reliance on technology, owners of the T-Mobile Sidekick smart cell phone got a rude lesson this week.  The Sidekick stores its data “safely” in a huge storage system loosely termed “the cloud” – meaning some huge mass of data storage on the internet out there “somewhere” storing your data, but you don’t need to trouble yourself with the details.  You’re safe.  (think Gmail’s “2GB of storage for every user” for another example of storing data in “the cloud”)

As those of you with large disks have learned, the more stuff you have, the harder and less practical it is to back it all up – especially if you are backing it up to another computer over the internet.   The remote backup/recovery services you hear advertised can take as much as a month to complete the first backup of your computer if you have a lot of stuff, even on a good DSL connection.  A typical 156kb upstream ADSL connection can transfer about 1 GB of data per day.

So the cloud must be failsafe on its own.   Disk must be in RAID arrays that cannot fail and lose data.   The idea of ever backing up the entire cloud to one central place is not practical, especially if the data has to be up 24/7 for constant updating.  Portions of the cloud must back up each other, and some centrally run control system keeps track of what data is where and what other part of the cloud is its backup.

So the early rumors are the Sidekick server(s) were given a software upgrade, and the upgrade failed and wiped out every server.   The result was a catastrophic loss of all data with basically no hope of recovering any of it.   There is no backup, because it isn’t possible or practical to do it.

[I wonder if the data was encrypted with 128 bit encryption, and they lost the key :)]

Posted in Technology Politics | 1 Comment »

Geithner demands you save more! and spend more!

Thursday, October 8th, 2009

Story

I’m really coming to the conclusion that Geithner is an idiot, not just a misguided globalist who wants the IMF to run the world.

While he and the Federal Reserve’s Bernanke are holding interest rates as close to zero as is possible, Geithner now says he wants Americans to save more.   Why would people save more money to earn 1% interest? or lock in for a longer term when most people expect inflation to come back at some point?

At the same time we are being told to save money, the government is urging us to buy stuff we can’t afford (new cars, houses, appliances) to stimulate the economy.   The government itself is spending money like a drunken Pelosi, and is considering a second stimulus package.

None of this makes any sense.

Posted in Politics, Timothy Geithner Watch | 1 Comment »

How money is made

Monday, October 5th, 2009

Glenn Beck alluded several times to the games being played by the Fed and the US Treasury, and he had a guest on who explained it away as “Oh, that’s a repo agreement – those are done all the time”.

I’ve heard of Repos before, but not really understood them. A Repo agreement is a two step transaction – the seller owns a bond (or other financial instrument) and agrees to sell the bond to a buyer, but with an additional requirement that the seller will buy back the bond at a future time at a fixed price. The only credit risk is if the seller is unable to buy back the bond in the future and the value of the bond has dropped, then the buyer has to resell the bond and eats any loss.

So how does this work in practice? Let’s say you’re a primary dealer for the New York Federal Reserve Bank (a securities firm that trades in US Treasuries and has a special relationship with the Fed).

Here is a scenario – the primary dealer currently has $1 billion in cash on account at the Federal Reserve.

The US Treasury holds an auction and sells $1 billion in Treasury bonds to our Security Dealer (let’s say it is Goldman Sachs, for example). GS transfers $1 billion to the US Treasury and gets $1 Billion in bonds. The US Treasury now has $1 billion more on account with the Fed (until they spend it).

GS now takes the $1 billion in bonds and enters into a Repo agreement with the NY Fed. It agrees to sell the $1 billion in bonds to the NY Fed, and agrees to buy them back at a later date. The NY Fed now adds $1 billion in bonds to its stockpile of Repo agreements, and puts the $1 billion back into GS’s Federal Reserve account. There is of course interest being paid and collected, and that’s accounted for in the pricing of the Repo agreeement.

So at the end of the transaction, the US Treasury has an extra Billion in debt and cash to spend, the Federal Reserve has temporary ownership of $1 billion in US Treasury debt, and GS is back pretty much to where they started, other than they probably make a nice profit on the deal – but the Fed didn’t actually buy any securities directly from the US Treasury.

It’s magic!

Here is the Fed’s explanation of Open Market Operations and how they use Repos and Reverse Repos to control the money supply.   The writeup mentions that Repos are usually done for only a day at a time.  How much money and debt is sloshing back and forth each night between the Fed and the Primary Dealers?

The Fed puts that information online weekly:
http://www.newyorkfed.org/markets/soma/sysopen_accholdings.html

about $1.6 trillion dollars….

Posted in Financial Collapse, Politics, Timothy Geithner Watch | No Comments »

Derivatives: a definition

Sunday, October 4th, 2009

Michael Moore asking people walking in and out of the Stock Markets “What is a derivative” is as pointless as an atheist asking a minister “What is predestination?”. If you don’t have a foundation in the topic, the problem with explaining a concept is not that the person being asked doesn’t understand it – it’s that the person asking the question lacks the ability to understand their answer or is asking the question just to be argumentative – so it is pretty pointless to try to respond. Michael Moore just barely made it out of high school – he quickly dropped out of University of Michigan (Flint), which is little more than a community college.

Derivative: a contract whose value is based on the performance of an underlying financial asset, index, or other investment.

Source: Dictionary of Finance and Investment Terms, 5th Edition
John Downes & Jordon Elliot Goodman, published by Barron’s Educational Services (1998)

It has 716 pages of terms and examples if he really wanted to learn anything. I’m sure the 2009 edition probably has a few more pages.

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The “bad” FDIC

Tuesday, September 29th, 2009

The FDIC is out of money as of this week.

If the FDIC tries to assess banks to raise emergency funds, they’ll push more banks into receivership, or at least make them unprofitable. The FDIC decided today to REQUIRE all banks to prepay their insurance premiums through 2012 to raise cash.

What will the FDIC use for income for the next 2 years after it burns through this cash?
The insurance fee is based as a rate per $100 on deposit – how can a bank prepay a premium when it doesn’t know how much it will owe in 2012?
Don’t let local property tax people think this is legal to do…

Congress has approved allowing the U.S. Treasury to lend up to $500 billion to the FDIC (on top of the $2.5 trillion the FDIC is currently administering for the non-bank emergency bailouts/guarantees). But Tim Geithner wants to control the FDIC and make it play by his rules – as soon as the FDIC takes bailout money, they lose control of their destiny. So the FDIC is looking to borrow money from “good banks” in order to continue the implosion of zombie banks.

Posted in Financial Collapse, Politics, Timothy Geithner Watch | No Comments »

52.2% youth unemployment! – wrongo… bzzzzt….

Sunday, September 27th, 2009

This is a great example of the reason you shouldn’t believe things on the internet, especially sites with an “Agenda”.

It’s listed on Drudge, and that link points to a New York Post Story that says “The unemployment rate for young Americans has exploded to 52.2 percent — a post-World War II high, according to the Labor Dept. — ”

There is just NO WAY that’s right, no matter how much you want to blame President Obama…. that “statistic” is now bouncing around all the right wing blogosphere.

Here was the original press release from the Bureau of Labor Statistics
http://www.bls.gov/news.release/pdf/youth.pdf

It’s talking about summer employment (age 16 to 24) and there IS one number in the report that says 52.2% – it is the EMPLOYMENT rate of young men during the summer. What the statistic said is that 52.2% employment was the lowest employment rate since WW II. Not all 16-24 year olds are looking for work during the summer. A lot are in school, many don’t need or want a job, some are probably working for cash “off the books”… the actual youth unemployment rate in July was 18.5%

Posted in Financial Collapse, Politics | 2 Comments »

Barack Obama, M.D.

Saturday, September 26th, 2009

Barack Obama has declared that it would greatly improve health care if women got more mammograms, and save us a lot of money in reduced health care costs.

While some feminists have been pushing this notion as an agenda item, the science says otherwise.   Routine mammograms INCREASE the risk of breast cancer because of the radiation used in the procedue – which more than offsets the value of detecting a few cancers a little bit earlier.

Study

There is nothing more dangerous than a man who believes things are true soley because he said them.

It will be interesting to see how Dr Dean Edell handles this situation – he’s long been an advocate of keeping politicians away from driving decision making in medicine.   Will Dr Edell take on President Obama’s uninformed statements and beliefs?

Posted in Politics, Technology Politics | 1 Comment »

Market Manipulation

Friday, September 25th, 2009

Last year, when oil prices went nuts, there were cries from everywhere that the government needed to step in and limit the manipulation of prices by speculators that was keeping prices artifically high, and we’re getting close to the point of seeing those new rules become law.

But the Federal Government has done the same thing since the 1930s, and the FDR programs have generally been considered a “good thing”, at least by FDR Democrats.   The Federal Government sets artificial price levels and limits the down side risk to farmers – that if the crops are plentiful and prices would normally drop due to excess supply and low demand, the taxpayers jump in and buy up the excess crops and put them in government storage.   The social purpose is that by protecting farmers from losing money, we make sure there will always be a stable supply of food.

What’s the difference?  Why is it okay for government to manipulate prices?

Posted in Politics | No Comments »

Instinct vs Science

Wednesday, September 23rd, 2009

About two months ago, I wrote a little screed which got me quoted in a newspaper that “I’m fat, I know I’m fat, and I don’t care that you don’t like it”.  The point was that people in talk radio (and some politicians) are feeding the notion that fat people are what are causing health care costs to go up.  The most blatant example of this was Michael Savage advocating that “fat people” be denied  health care insurance by government edict (Mr Conservative?).

This attitude also is widely held in the medical community despite the fact that the science and data says otherwise.  Having just been hospitalized for fainting and immediately being put on high blood pressure medication and cholesterol lowering medications while I was literally strapped in a bed and unable to have a rational discussion, I feel ever more strongly now about this subject.

The “gold standard” for estimating risk of heart disease and stroke is the Framingham Risk Score.   I’m 53, not diabetic, have never smoked, not African American, no family history of premature death due to heart attacks,  my total cholesterol is under 200, my systolic blood pressure is below 140 without taking any medications.   My 10 year risk of having a heart attack is about 5% (that’s 1/2 of 1% per year – most of which is probably when I’m 60+).  That makes my risk of having a stroke or a heart attack significantly less than the average person my age – but people see a 300 pound man and their instinct says “high heart attack risk” when in fact that’s not based in fact.  Add to this that I was on a heart monitor for 4 days and didn’t have so much as a flutter and the sonogram showed my heart being normal in the way it  beats and its size (no early signs of congestive heart failure) and no heart murmer or other indication of heart disease or valve damage.

So now I’m still on a blood pressure medication to lower my systolic pressure from the 140 range to the 120 range, despite the fact that if you look at the Framingham scale that 145 untreated and 120 treated have identical risk profiles for heart attack and stroke.  So maybe you’re thinking, well it can’t hurt anything to take it….   One of the side effects of lisinipril/hctx is that it can cause symptoms of low blood pressure – fainting and dizziness – which is the reason I wound up in the hospital in the first place – in addition to causing weight GAIN.

You’ll notice that weight and BMI (body mass index) are not factors  – there is a reason for that – BMI is not an indicator of heart attack/stroke risk – in fact the highest risk is in the people who have very low BMIs.  To have a low BMI, you have to have very little muscle tissue which means you are highly inactive and a good chance you’re a smoker.  People who are moderately obese have a lower risk than those of normal weight.    The real measurement of risk is comparing the size of your waist to the size of your hips, which nobody has measured yet.

So looking to the future when the Health Care Czar is empowered to make rules based on politics, not science – if I make the above case to my doctor and he insists that I continue to take this medication despite all of the scientific data that says he’s wrong and I become “non compliant” with my doctor’s “orders”, what will the government do next?

Posted in Politics, State of Fear, Technology Politics | No Comments »

Moral Hazard

Tuesday, September 22nd, 2009

Back during the crisis last year, when Rick Santelli – the floor trader in Chicago – first proposed the idea of a second tea party (did you forget that Howard Kurtz?), his helper jumped in saying “Moral Hazard! “.

Video

I don’t think most of the people watching, including the reporters who cover Wall Street got the significance of that shout out – because it is a term of art in the Insurance business, not on Wall Street.

A fundamental principle of underwriting insurance is making sure that you don’t create a “moral hazard” – a reason for the owner or beneficiary of the policy to behave recklessly because they know they have insurance.   In the extreme, they may deliberately cause a loss to enrich themselves. 

For instance, if you sold a disability policy that paid 125% of the normal salary, people would be motivated to injure themselves on purpose.   If you could take out a life insurance policy on another person with which you have no economic connection, you could be motivated to cause the death of that person.

AIG started writing policies (Credit Default Swaps – CDSs) that protected people from the possibility that Freddie Mac and Fannie Mae’s mortgage backed securities (CDOs) would lose value.  Folks started buying the CDSs like crazy because they believed AIG was way underpricing the risk they were taking, and AIG was feeding a moral hazard.   They were incentivizing the entities buying the securities to CAUSE the failure of Freddie Mac and Fannie Mae.   The bulk of the federal bailout funds went right through AIG to pay off the people who benefited from the moral hazard of encouraging the reckless mortgage lending practices.

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Posted in Financial Collapse, Politics, Timothy Geithner Watch | No Comments »

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