Dana Blankenhorn

My Burma Sorrow

I am sorry about the Burma hurricane. I am sad that its leaders are so paranoid as to refuse aid from the world. I am saddened that so little aid is getting into the affected region and that people are dieing needlessly.

But still...

When I read complaints from our government about the failure to allow aid it's like someone rubbing a balloon before popping it and laughing in my face.

Is it that way to you?

This morning on TV Cindy McCain was complaining bitterly of the Burmese peoples' plight. I have no doubt she felt sincere. But I kept switching back to that picture of her husband, the day Katrina hit New Orleans, standing with our leader, and a birthday cake.

Crocodile tears.

When I see Secretary of State Rice demanding that Burma allow aid in, all I can think of is what she was doing when Katrina hit New Orleans. Shopping for shoes.

When I read about U.S. diplomats bemoaning the destruction of Burmese rice fields, I think about how all they cared about after Katrina was getting the casinos back into operation, and how we're now benefiting from higher rice prices.

Open Source is Parallel Processing on Steroids

I was chatting up a Washington liberal today, and it was depressing.

The subject was computing. The liberal bemoaned the power of corporations to wreck a great, highly-functional government project.

The project was starved for funds, its developers allowed to leave, and now its bones were being picked by lobbyists, all aiming their "best of breed" systems as replacements for bits-and-pieces of what had once been a magnificent computing edifice.

Even if Democrats are elected this fall, he said, they don't understand these technical arguments about open source vs. proprietary. They'll be bought off just like the current crop.

Which is when it hit me, the frame he could use to tear down all those vendors and bring back what was lost, what is in the process of being lost.

Open source is parallel processing.  (Shown is the parallel processing lab at the University of Utah.)

No matter how big a vendor might be, it's still one system. Like the Von Neumann architectures that dominated computing for its first 40 years they have a bottleneck. The only way to speed up the process of finding a solution is to speed the whole process, get more GHz. It's this kind of thinking which led, by the 1980s, to so-called "supercomputers" like the Cray.

Parallel processing was developed in the 1980s at the Sandia Labs in New Mexico. The idea was simple -- to break jobs into parts, to move the parts onto many systems, and then to put the solutions together on the back end.

In the 20 years since parallel processing has come to dominate computing, relegating Von Neumann to a Wikipedia entry. First people stacked Macs to beat a Cray. Then they used parallel processing on the Internet itself, creating distributed computing projects like SETI @  Home. Today parallel processing is used inside chips -- all today's latest AMD and Intel silicon is doing parallel processing. From two to four to eight -- who knows how far we can go with it.

That's sort of how open source works. Only on steroids.

Because with open source not only do you parse out pieces of a project to different companies, or different developers, but their work can cross-pollinate. Not only can you build systems in parallel, but you can also use a vast community of users to find bugs, and another vast army to stamp out the bugs.

The genius of Linus Torvalds lies in his ability to constantly re-engineer Linux' development process, first farming out all the work, then finding new ways to coordinate the massively-parallel architecture which develops in response. And the design of Linux itself responds well to this parallel processing impulse, since it consists of central functions in a kernel, ancillary functions surrounding it, and a host of distribution providers who can build working systems from all the pieces -- sometimes using just parts of the kernel for a mobile system, embracing optional things like virtualization for a server.

Another type of spam victim

Every spam which goes out has millions of victims. (I hope those lovely people at Hormel, makers of this fine canned pork-and-ham product so beloved in Hawaii and Alaska, accept my apology for the picture or, if they wish to complain, do so to John Cleese.)

When sending out millions of spams to e-mail boxes, the spammer hopes this will become thousands of larger victims, those who respond positively to the spam. By including viruses and other malware in the spam, this "success rate" increases, as many people are infected just by downloading the spam. (I learned this after installing a new anti-viral which checks mail as it hits Mailwasher.)

But there's another type of victim, as anyone (like me) who has had the same e-mail address for some time (or worse, their own domain) will attest .

That's the from: victim.

A World Without a Moral Center

As I may have mentioned here before I'm scheduled to visit Chengdu, China next month. Blogging will be sporadic.

Given the recent headlines over the torch run I'm certain you're wondering what I might tell my hosts.

The answer is -- not much.

For one thing I expect few there to know English. But even without the language barrier I'd mainly want to listen. Listen to my son try to puzzle out the language barrier after three years of Mandarin. Listen to people greet me, and try to explain things by speaking Szechuan ve-ry slow-ly (as though that would help).

But there's another, more important reason. I no longer have cause to condemn anyone.

Neither, frankly, do you.

Halfway Through the Process

The first part of our national economic nightmare is over.

But only the first part. (Picture from Cashflowrollercoaster.com.)

What we've seen in stocks is a classic bear market. Prices fell roughly 20% from their highs, from over 14,000 to (briefly) under 12,000. They then re-traced about a quarter of that loss, and if they go higher still it's no all-clear signal. Most bear markets retrace half their initial loss.

What happens next is a test of the lows. This is just what happened nearly a decade ago in the dot-bomb. It's what happened in the "Asian contagion" of the late 1990s, and in nearly all previous bear markets. If the lows hold it's over.

But the lows don't always hold. That was true for Japan after 1987. It was true for Wall Street after 1930. And in this case there is real fear that the lows may not hold.

The reason is that under all this crap is the Big Shitpile, the mortgage derivatives created by unregulated markets over the last few years. Basically investment banks were creating money on their own, with no controls, by simply defining new securities based on these mortgages and selling them as though they were worth something. The ability to do this inflated home prices, because lenders didn't have to consider the risk a borrower wouldn't pay. The unregulated market was hungry for any new collateral.

Federal Reserve intervention staved off the first phase of panic, but there could easily be more to come. Millions of mortgages will re-set this year. Millions more are "underwater," more money owed than the value of the home. These are both opportunities for speculators to get-out, and since the bankruptcy law of 2005 made home debt less important than credit card debt (you have to pay the credit cards in bankruptcy now, but you can walk away from the home) there may be millions more foreclosures to deal with.

Each one of those foreclosures will have a ripple effect. Each mortgage is tied to other securities, all of which default or lose value when a homeowner walks away. How many are there? No one really knows.

So far home prices have dropped about 11%, and newspapers are saying this is a disaster, but it's really not a big deal. I think prices will fall by at least 20%, probably more, meaning lots more mortgages go underwater, as lenders tighten their standards, knowing they may have to hold the paper themselves for a while.

We have yet to see the second leg of this thing, in any market.

Final Warning

After the shiny, happy people feeling you got from reading my last post, now I'm going to bring you down.

Over at Juan Cole's shop, former University of Chicago professor William Polk reads the tea leaves and pronounces the War With Iran to be at go time.

To last week's US News warning he adds the personal recollection that Dick Cheney also made a trip to Saudi Arabia in March 2002 -- ostensibly diplomatic but (we now know) his warning, and assurance, that Saddam Hussein was a dead man.

The article contains the tantalizing possibility that Israel's recent attack on Syria was just a test of its radar and anti-missile defenses, but Polk then adds news that there has been an unprecedented build-up of U.S. Navy assets in the Persian Gulf:

Of course, deploying forces along Iran’s frontier does not necessarily mean using them. At least that is what the Administration says. However, as a historian and former participant in government, I believe that having troops and weapons on the spot makes their use more likely than not.

Instead such forces create a "climate of war" like the one which set off The Guns of August and World War I, a climate which both Bush the Wiser and Bush the Dumber have given in to before. He adds that the rationale for war is contained in the 2005 National Defense Strategy, which asserted America's right to engage in first-strike warfare anytime, and anywhere, it chose.

What can halt the march to war? Just one thing.

It's Not That They're Clueless

Think of this as Volume 11, Number 11 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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My blog friend Oliver Willis calls those in charge of our financial house clueless.

That's an easy mistake to make.

In fact, it's in the nature of our economic system that you go right up to the line of legality in order to maximize profit. Anyone who doesn't do that is an economic loser, either in the short run or the long run.

You want to go right up to the line, peer down over the edge, and maybe move your toes back a bit. That's what your lawyers are there for, to move your toes back a bit.

This is fine so long as the law is reasonable. If the law is reasonable and cops are on the beat, walking right up to the line of legality and staring down into the canyon is both legitimate and good business. It's what makes markets efficient.

The problem in this case is the law was made unreasonable, and the cops chose to look the other way.

All the problems Bear Stearns caused were through the creation of new, "unregulated" markets. An unregulated market is a market that's looking for scandal. Because there is no reasonable line you can walk right up to, it's easy as heck to become Wile  E. Coyote in such a market -- everything is fine so long as you don't look down.

The defaults on sub-prime mortgages last year were when we started to look down.

Too Casual About It

Tinfoil hat time!

I first got this feeling last week, with Bush's dance before his endorsement of John McCain. It was like he didn't care what anyone thought, like democracy (small d) was meaningless. (Picture from Sushimoo.)

Is anyone else out there worried that the Bush Administration is acting a little too casual and flip about its continuing efforts to undermine the Constitution?

To the complete disregarding of Congress' oversight and its treaty-making role, we now have the sudden resignation of Adm. William Fallon, who was thought to be among the few voices in the military trying to tamp-down talk of an attack on Iran.

Every week or so, it seems, I read new blog posts about buying "taser cannon" to control demonstrators, about the growing politicization of our military, even a deliberate refusal to abide by Supreme Court rulings which go against them.

It sometimes seems as if the Bush people aren't even trying anymore to hide their disgust with the popular will.

It's true that this may just be total incompetence, and it's also true that such dark thoughts as these are one mark of a generational crisis. Anyone who remembers the late 1960s remembers fearing for democracy, as their fathers feared for it in the early 1930s, and their fathers feared for it in the 1890s, and their fathers feared for it in the 1850s.

Fear for democracy's fate is a necessary precondition for major democratic change.

But still...

The Manchurian Presidency

The Manchurian Candidate is about a Communist plot to install a dupe, played by James Gregory (left in the photo at right), as President. He claims to be fiercely anti-communist, but he's really controlled by the communists through his wife, played by Angela Lansbury. (Sorry if I spoiled it. Watch it for Frank Sinatra next time -- one of his best roles.)

Ever since the movie returned to vogue politicians have been warning that their opponents are secretly working for the other side. The claim is made this cycle about Barack Obama. That is, Barack Hussein Obama.

Of course, this deliberately misses the plot. The James Gregory candidate is a perfect conservative, a neo-McCarthyite. In 2008 parlance, he's McCain.

But what if the Manchurian Candidate has already been elected? What if, in fact, he's been in office for over 7 years?

Seeking Bottom

Markets are a lot like alcoholics. They can't start their recovery until they hit bottom.

In an auction market, like stocks, this happens fairly quickly. The buyers disappear, and sellers capitulate, those who were burned by the bubble lick their wounds.

The bottom is not reached until you have an honest "buying opportunity," based on fundamentals, usually at a valuation of about half what the commodity was worth before -- often less. Often this bottom will be tested, and for years after a bust your gains will be modest, even if you got what looked at the bottom like a bargain.

The Buried Lede in the McCain-Lobbyist Story

I don't care if he shtupped her. I don't care if he saw her socially. I don't care about the why concerning anything he did. (Find the lobbyist on the page where this picture came from.)

This should not be about John McCain. It should not be about The New York Times.

This should be about us, all of us. Did John McCain serve us well, or serve us poorly?

The buried lede is John McCain's record, as chair of the Senate Commerce Committee, regarding telecommunications issues and media consolidation. The fact is he endorsed monopolization, every step of the way.

Why do you see no more local programming on your TeeVee? Why are all your radio stations canned and controlled in Corpus Christi? Why do you have, at most, two choices for Internet access? Why are your bills going up instead of down?

Media consolidation. And John McCain has endorsed it, enabled it, for a decade now. The why or how is really immaterial.

Does Politics Trump Everything?

I didn't intend on getting into this, but I had the Congressional hearing on, with Roger Clemens, and there's an important point which needs to be made. (Picture from 108 Red Stitches.)

Does politics really trump everything? Does the truth of something mean nothing? Or is everything just a function of which political party you belong to?

Let's be clear. Roger Clemens is a Republican, a staunch one, a charter member of the "jockocracy" who got rich off sports and thus identifies with the rich.

That fact should mean nothing regarding whether Roger Clemens used performance-enhancing drugs. The Congressional committee should be testing the evidence, and acting in an impartial manner as much as possible.

I don't know the truth, but I have suspicions. I know what Clemens looked like a decade ago. I know what he looks like now. His head is two sizes larger. That is one side-effect of steroid use. And his record over the last 10 years, his success in continuing to pitch well into his 40s, also has to be seen suspiciously. Especially in light of the specific allegations contained in the Mitchell Report, and the further evidence offered by former trainer Brian McNamee.

Every case of conspiracy is, as prosecutors say, a piece of shit. That is you depend on members of the conspiracy, criminals, to testify against others. You expect drug dealers to rat on their customers, customers on their dealers, and you don't judge guilt or innocence  based on party affiliations.

Do you?

Why the Smart Guys are Panicky

The mood at the end of the annual Davos retreat of big moneybags was, in a word, scared. (Picture from Freakingnews.com.)
 

They're looking at the world economy the way New Orleanians looked at the TV weather shows a day before Katrina hit. They see the thing blossom before them, they're told it's headed right for them, but there are no freeways out of the money business. You gotta own something.

Why panic? The cataclysm has two components:

1. Big Shitpile, the corruption and greed which created the housing bubble; and
2. Stagflation, our dependence on oil and its suppliers' ability to manipulate the price.

History shows that whenever excess, a bubble, is found within the market, you can't turn things around until that excess is wrung completely out. Think about the dot-bomb. Some of the best companies lost half their value. Some lost 90%. Many went under completely. Now that the housing bubble is obvious that is what has to happen.

And the impact of making that happen is catastrophic. Think about it. You've got a $250,000 house. Before this is over it might be worth $125,000, it might be worth far less. Your buyer has to qualify for a fixed-rate mortgage, and put down a substantial down payment. Now how much do you owe on that house? I'd venture to say very few mortgages are half-paid off. And what happens to a loan when the value of the collateral falls below what you've borrowed? Well, on Wall Street they call that a margin call.

What we're seeing right now might be just the tip of the iceberg. Because all the excess has to be wrung out -- in home prices, in the mortgages underlying them, in the derivatives and other crap made with those mortgages.

Yet that's just half the problem.

Hershey Bars for Rich Kids in Harbour Green

Think of this as Volume 11, Number 4 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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This is my Alex Baldwin story.

Not Alec. Alex. The father.

When I knew him, I was a toffee-nosed rat-faced git of 15, and he was running the summer camp program for the Massapequa Schools. The rest of the year he was a gym teacher at McKenna Jr. High.

We were coming back from some camp trip on a yellow school bus. (I think we'd harassed the gays on Fire Island or something.) We were full of brio (or our own youthful bullshit) and talking up doing a fundraiser. We had lots of ideas to raise money -- car washes, product sales, babysitting.

Mr. Baldwin brought up the question of what we were raising the money for. "Are you going to give Hershey Bars to all the rich kids in Harbour Green?" he asked. He wanted us to think of those less fortunate, rather than other privileged people, who he assumed could get their own Hershey Bars.

I thought this hysterical at the time, and I still get a chuckle out of it. But these days the joke's on us.

Getting an Economy Back

The financial collapse which began with the Big Shitpile continues apace. (Get Super Bubble Pop here.)

Today the Google Bubble may have finally popped. We predicted that two months ago, giving you plenty of time to get out of the way. At its present price, Google still sells at 25 times next year's expected earnings. A reasonable level might be 20-25 times expected earnings, a nice premium over the 15x current earnings stocks are worth historically. Apple and other "momentum stocks" joined in the downturn, and that's good -- speculation needs to be driven out before we can go up again.

But instead of praying to the tape, or attacking those who got us here, how about a brief focus on some potential solutions to this mess? Everyone with a functioning brain cell (even Lou Dobbs) knows the present "rebate" proposal is nonsense. This means both parties, and all major politicians, are Clueless at this point.

So how about some ideas:

Go To Kenya

There's a simple way Barack Obama can take this campaign by the scruff of the neck and do something marvelous at the same time.

Go to Kenya. Or at least promise to go to Kenya. Send Bill Richardson to Kenya, as a personal emissary, and offer to meet the two disputants to sign a settlement of their dispute.

Barack Obama has the same interest in Kenya as Bill Clinton had in Ireland, when he offered help in that dispute.  Moreover, Obama's paternal grandmother still lives there. And the dispute is similar, with tribes substituting for religious groups. A civil war is raging, and it must be stopped.

There's another reason to get into the middle of this, which is to illustrate the damage the Bush Junta has done to America's cause. Since the Supreme Court selection of 2000's loser, we've seen repeated examples of contempt for democratic process, when that process might result in a change of regime.

Message from New Hampshire

New Hampshire has made a habit of this, although the idiots never seem to get the message.

Bill Clinton lost the 1992 New Hampshire primary. So did George W. Bush in 2000.

New Hampshire listens closely to what the "experts" say, and then does the opposite.  They did that yesterday, in spades.

I think it's because they believe in democracy. They generally don't want to make the final decision. God bless them all for that.

But this result means more.

This result was directed more to the press than to the candidates. As I've written here,  we're really sick of the Chattering Classes telling us what we think. We're sick of Chris Matthews, and of Mike Barnicle as well. We're even sick of their DFH equivalents -- yes, you, Markos Moulitsas -- telling us what we think. We'll tell you what we think, and then we'll let you know. And if you ask us at the wrong time -- before the decision is due -- we're likely as not to lie through our teeth.

The Habit of Submission

Having just spent a week traveling by air, following several years of being away, I may have a unique perspective on the way the system has changed.

Whenever I was in an Airport, I was induced to conform. Watch what you read. Watch how you move. Watch your stuff. Be suspicious. Take off your shoes. Submit to inspection. Show us your papers.

This is the price we now routinely pay to travel by air. The people I saw in all the Airports I visited, both large and small, shared the same glass-eyed, vacant expressions. The same resignation.

In today's air system you have no rights. This was made clear to us when we arrived. Our non-stop flight was replaced by a one-stop, no notice, no apology, no nothing. The airline didn't even transfer the reservation correctly. We had to stand at a desk, helpless, for 40 minutes, while someone went into a back room to check, manually. We had arrived in plenty of time to have breakfast after getting through security, but this meant we could barely grab a single overpriced sandwich before being shuttled into our cramped seats.

And of course, the connection was two hours late.

The Energy Fraud of 2007

The Democratic Congress labored mightily, they said, all through 2007, and they brought forth...this?

No new efficiency standards before 2020? A huge subsidy for ethanol, guaranteeing higher fuel prices? No breaks for alternative energy, and the tax breaks for oil stay in place?

Really? Well, if that's a War Against Oil, I got some waterfront property here in Atlanta to offer you. Trouble is, by 2020 it might just BE waterfront property, only sitting in a desert, and filled to the rim with refugees from what used to be Florida, and New York City, and 10,000 other places.

The only thing worse than this so-called energy bill is the self-congratulatory nonsense spouted by the Democratic "leadership" on its behalf.

Memo to Harry Reid, Nancy Pelosi, and Steny Hoyer. See you in hell, man. No, I mean that literally. Because that's what you're turning the whole planet into with this piece of garbage.

The Arctic ice cap is melting even faster than Al Gore warned it would. The Himlalayas may be glacier-free within a decade. Need a Clue what that means to the ocean level? It'll be on your front porch by 2015, Nancy, and over Steny's head a few years after that. Good luck finding a new place.

Ignored in the Big Shitpile

There are three big problems, laid on top of one another, in the financial mess known as the Big Shitpile:

1. Bad loans were mixed with good ones and sold as securities, even options.
2. Millions of adjustable rate mortgages are re-setting to higher rates over the next three years.
3. Homes are priced at twice their value.

There are a lot of "solutions" being proposed by both parties for the first two problems. (Picture from Bayareahousingbubble.)

No one is even talking about the third, because its implications are too massive to contemplate.

But this is the stark reality. What we're reading now, even the pessimists' argument, is not yet even realistic.

When any bubble bursts, the actual value of things gets cut in half. Usually it over-shoots this mark, then it resettles at the halfway line and starts proceeding upward again, slowly.

• This is what happened to the NASDAQ after the tech bubble burst. It fell from 5,000 to under 2,000, but now trades at around 2,600.
• This is what happened to the Japanese stock market after it peaked in 1987 at around 37,000. It now trades at about half that value, and investors are happy to be there.

This is also what happened in the 1970s, the last time we had a housing crash. Homebuilding stopped in most markets -- at least those outside the oil patch. The price you could get for an existing home fell to much less than its replacement cost, and stayed there. Renting made sense.

That is where the U.S. housing market is headed. That's where it has to be headed in order to regain free market equilibrium. That's the way markets operate.

But you'd never know that from the nonsense being proposed right now:

• Easing the pinch on some "sub-prime" borrowers does not make more credit available for new mortgages. 
• Enabling refinancing of adjustable-rate debt doesn't make the value of the underlying home any greater.
• Giving developers incentives to price some homes below-market is useless.
• A moratorium on foreclosures sounds nice, but it's just delaying the inevitable.

Avoiding Nixonism

One of my great fears for 2008 is that Democrats will simply recapitulate the events of the last political crisis, that of 1968. (Picture  of the House Democratic leadership from Firedoglake.)

This would mean the narrow election of Hillary Clinton, slight increases in Democratic majorities, followed by a host of actions supported by the political right.

That's a mirror-image of what happened after 1968. Nixon's win was narrow, the domestic agenda of his first term was liberal, and his battles against the liberal assumptions of his time made him paranoid, resulting in Watergate. The Watergate scandal delayed the changes movement conservatives desired by over a half-decade. The distance between the 57% vote share by Nixon and Wallace in 1968, and the beginnings of the "Republican Revolution," in 1980, was 12 years.

Democrats can't afford this. Americans can't afford this. The world can't afford this. We can't wait 12 years to begin the War Against Oil. We can't wait 12 years for major action against global warming. We can't wait 12 years for a return to social mobility. We can't wait 12 years for honest government.

The Democratic outrages of the present day, their repeated capitulation to Republican demands,  and their delight in power without responsibility,  are not new. The Money Party has dominated American politics almost without let-up throughout its history. What New York wants, New York generally gets.

But not always. When the crisis is deep enough, and when leaders are courageous enough, the Money Party can be beaten back for a time.