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View 536 September 14 - 20, 2008

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Monday, September 15, 2008

If you missed yesterday's View there are a few things worth your attention.

REMEMBER! Friday September 19 is International Talk Like a Pirate Day!   Arrrr!

I seldom make political pitches or ask for political donations. I agree with every word of the following:

 

Rohrabacher Campaign

Dana Rohrabacher has done more for commercial space than any member of Congress, perhaps more than anyone in government. This election Dana has a tough opponent and needs to raise money for his campaign. Regardless of how one feels about the rest of his politics, losing Dana would be a huge blow to the commercial space industry. If returned to Washington Dana will continue to be the voice for those who believe a competitive space industry is crucial to our nation's future.

His campaign has set up a separate web page for those interested in space to contribute to his campaign.

<http://www.rohrabacher.com/space.html

I hope you pass this message onto your readers and if possible can make a contribution yourself.

Truly yours,

Rich Pournelle

=========

For those who do not know, I have known Dana since I was a professor and he was an undergraduate. To the best of my knowledge, which in this case is pretty direct, he is honest, ethical, and actually listens to what others say.

=============================

Eric is here and we will be building a very high end enterprise Vista machine. I have been poking around the stuff here at Chaos Manor. I have to say that much of it is a surprise. For about a year I have been in a large fog and I am a bit astonished at just how well I managed to cope. I do hope I am back, but I sure have holes in my memory.

But I'm pretty sure I'm back.

================

I found this in another discussion group. The subject was Palin and her prayers for the success of her pipeline; also other prayers. It sparked me to say:

Is there any President in the history of the US who did not pray, openly and
publicly, for victory when the US was at war?

Has there been any President in the history of the US who did not invoke
God's blessing on whatever project was at hand?

When I was young there were almost no public ceremonies of any kind that did
not open with an invocation by a Protestant Minister, and a blessing by a
Roman Catholic; and if it was important then there would also be a rabbi on
the program. That's still the case in small town America.

Of course we are all far too well educated and sophisticated to do anything
like that, and maybe we none of us know people who do, but that may not make
us realistic in our appraisal of our fellow citizens.

Half the population is below average. We know there is not a single below
average person in this discussion, and I'd wager that among us we have not
spent more than a few hours in the company of anyone below average in the
last month.

The trouble with democracy is that they let darned near anyone vote who
wants to, and we keep making it easier and easier for them. Having done
that, we then start acting pained when political managers begin to appeal to
those voters who aren't as smart as we are.
 

Which, on reflection, isn't all that bad an observation.

 

 

 

 

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Tuesday, September 16, 2008   

REMEMBER! Friday September 19 is International Talk Like a Pirate Day!   Arrrr!

A new mailbag went up at Chaos Manor Reviews last night, and part one of the September column went up last week. I am slowly catching up.

Train Control

I have been thinking about the train wreck. In particular I have been thinking about the claims that it will take a billion dollars -- if they estimate that you may bet that they're planning on spending a lot more -- to revamp the train control system. By my reckoning I would be hard pressed to spend $100 million on doing this, and in fact it shouldn't be anywhere close to that.

We have the problem of controlling perhaps 200 trains at a time out of a total of about 500 trains. If those numbers are off they aren't off by all that much. Think of this as 500 gamer accounts with about 200 players logged on at a time. The location of the "players" is sent by a DeLorme GPS through a wireless wi-fi attached to a Mac Book Pro. In addition there are perhaps 15,000 objects such as switches and signaling lights, some of which have several states. Add in some actuators attached to the laptops: these have the capability to sound horns, make big lights flash, activate the train's Deadman switch, and in extremis cut the excitation power to the generator that runs off the train's Diesel engine, thus cutting the electric power to the wheels, and also the power that keeps the air compressor running. Without air compression the Westinghouse air brakes will activate (that was the big innovation of air brakes: they're on unless the air compression keeps them off; at least it was that way when I was a train buff about 50 years ago, and I can't think they have changed that much).

At 500 trains we might spend $5,000 a train on modifications including the laptop, redundant Wi-Fi, big lights in the cabin, and attachment to the Deadman switch. That's $2.5 million. Double it. Call it $5 million. Now as to integration software: what I have described is a very small  MMRPG with no more than 500 players at one time. Each player has a few states and a location, all very limited: think more like Pong than World of Warcraft. There are also perhaps 5,000 non-player characters each with rather limited action capabilities, and another 10,000 objects, each with a limited set of states.

This is a very limited MMRPG game and there must be 20 small game design companies that could build it nearly in their sleep. There are a lot of games out there that can already to this. Sid Meier's Railroad Tycoon, a DOS game, could probably be scaled up to do it. I personally know Blizzard programmers who command teams that could do this in under a year. It's not as if there were anything new involved.

So: will someone please tell me why they are telling us it will cost a billion dollars to revamp the train control system?

I will take the best letters and incorporate them into the next column, which will repeat the above but with a bit more attention to details and more on the present system that somehow failed.

===========================

If you want to know why Fannie Mae and Freddie Mac were able to make campaign contributions and do lobbying, Google Barney Frank + Fannie Mae.  I got this as one result. There are many more. It is quite true that the country club wing of the Republican Party has its fingers in that pie; so do the Democrats including their current leadership.

The current financial crisis will continue, and there's much that needs to be written about it. Alas, I'm digging out from a year of functioning at half speed or worse. For some insights on what is happening see today's mail.

The important points to keep in mind is that the system is broken, and both parties had many chances to fix it, and when given the opportunity, each made things worse, not better.

It is obscene that the bosses of Fannie Mae and Freddie Mac were fired -- and given $20 million in bonuses for running their companies into the ground. The masters at Lehman got tens of millions on the way out. You will find that the people who caused the messes are being well paid to have done so.

That has nothing to do with regulation and government, because adding regulations simply makes it harder and harder to function if you are not a BIG company. Adams Smith said that two capitalists never got together without conspiring to have government reduce or eliminate new entries to their line of business. Regulation does precisely that, and the current regulatory environment makes it insane for any company to expand to larger that 49 employees.

Karl Marx predicted that competition would end when all the capitalists merged into one company. (Well, that's not precisely what he said, but it's a first approximation.)  My favorite economist David McCord Wright noted that one reason Marx's predictions didn't come out was the American anti-trust laws. Both political parties have used anti-trust not to prevent Marxian consolidation, but as a weapon to punish those who don't play the game. The upshot of the Microsoft prosecution, for example, was that Microsoft, which had no Washington Lobby because Gates didn't believe in them -- the Washington office until the anti-trust thing was a sales office -- was that Microsoft established one of the largest and most effective lobby operations in DC.  And suddenly neither party was interested in any serious anti-trust actions.

We have in effect one publisher and a couple of book distributors in the US. HP has just devoured another company and will fire 26,000 employees according to this morning's paper.

Consolidations are "efficient" at first, but the consolidation of industries is precisely what Marx predicted --as is the enormous spread between what workers make compared to what those in charge of dismembering companies and driving them to bankruptcy while getting enormous bonuses (until the company dies of being eviscerated).  We now have companies that are too big to fail, all this for "growth" that shows in annual statements. We have enormous Price to Earnings ratios on companies that are actually doomed unless the government steps in after the bubbles break.

Each party blames the others, but the truth is that almost one one in government or who could conceivably get into government really wants to change the situation; they want to get in on it. We don't have any Mr. Smith going to Washington and if we do they get sucked into the octopus. 

If this looks like an endorsement of either party for President, it's not really. Yes, I favor McCain who seems to like putting it into the eye of the Country Club Republicans from which he came, because while I fear unrestricted capitalism I fear huge government programs (which are usually eternal -- Das Buros steht immer! saith Metternich -- even more.

Despair is a sin. But it looks more and more like the world Marx foresaw; but with this wrinkle: Yes, there is a growing proletarian class.  Alas, that proletarian class that contributes little because the education system doesn't teach them how to contribute anything; but they do vote.

Despair is a sin. This is fixable. We even know how to do it. Whether or not we will is another story. Despair is a sin.

================

I have medical appointments this afternoon. I also have a great deal of important mail on a number of subjects, and Robertas's web site has some stuff broken in the ordering system. I need to work on that. Meanwhile, if you have a child about to go to kindergarten; a child in school who can't read newspapers and hates to read books because "it's too hard;" a child in later grades who has problems reading real books; an adult friend who can't read this web site; then go to Roberta's web site and pay attention. Her reading program really works, and for a reasonable cost you can cure reading problems for every case mentioned above and many others as well. It takes about 70 lessons at about half an hour per lesson, and when the course is done the student will be able to read. By read I mean see words like polyethylene and Constantinople and Timbuktu and pronounce them if the word was never seen before. Of course that doesn't automatically mean they know what the word means; but at least it can now be looked up in a dictionary, or, more likely, the student can ask what it means.

The program works. The details with statistics and studies are given on Roberta's web page.

I would be astonished if anyone who reads this page knows anyone over 5 years old who cannot learn to read English from this program. The ability to read is pretty near universal. When I asked my mother, who taught first grade in rural Florida in the 1920's, if any children left her first grade class without learning to read, she said "Over the years there were a few, but they didn't learn anything else, either." Which is about what the data from the Army's conscription records show: until about 1945 the illiterates were almost all people who had never been to school at all. It was only later after the "reform" of reading education in the teacher's colleges, that we began to see people who had been through 4 grades of school, were not noticeably mentally handicapped, and yet could not read.

Most of today's teachers do not really know how to teach reading. If you are a teacher and have illiterate students, think about that. There is a vast literature proving that today's reading teaching is wonderful, but what that literature doesn't do is look at the results. Roberta has taught more than 6,000 students to read. This includes children in reform school; children in expensive private schools; adults; children in public schools. The program works. Now we have to work on fixing the ordering mechanism, and I need to get at that, Meanwhile the only problem we have isn't dangerous to you; the encryption and security work, and ordering some versions works perfectly. I need to track down what doesn't work, but in all cases there is no harm in trying: if you do order the program and encounter a problem send me email. We'll come up with a workaround if I haven't managed to fix the problem in the first place. Meanwhile, look here.

==================

 

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Wednesday,  September 17, 2008

REMEMBER! Friday September 19 is International Talk Like a Pirate Day!   Arrrr!.

I have several letters recommending

THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS [9.15.08]
By Nassim Nicholas Taleb

http://www.edge.org/3rd_culture/taleb08/taleb08_index.html

Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the "logic of science"; it is the instrument of risk-taking; it is the applied tools of epistemology; you can't be a modern intellectual and not think probabilistically—but... let's not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let's face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).

The current subprime crisis has been doing wonders for the reception of any ideas about probability-driven claims in science, particularly in social science, economics, and "econometrics" (quantitative economics). Clearly, with current International Monetary Fund estimates of the costs of the 2007-2008 subprime crisis, the banking system seems to have lost more on risk taking (from the failures of quantitative risk management) than every penny banks ever earned taking risks. But it was easy to see from the past that the pilot did not have the qualifications to fly the plane and was using the wrong navigation tools: The same happened in 1983 with money center banks losing cumulatively every penny ever made, and in 1991-1992 when the Savings and Loans industry became history.

[Emphasis added]

Taleb is the author of The Black Swan, which I reviewed in June. I don't call many books or authors important; both Taleb and his book are important and if you have not read The Black Swan you really ought to. His new essay applies his principles to the current financial crisis. And keep remembering: the people who did not pay attention to The Black Swan have just lost more money than all the banks in history have ever made from risk taking investments. And they were quite certain they were the smartest guys in the room.

==

I set that up last night before I went to bed. It seems appropriate this morning. The government is bailing out AIG, and the government is running the company. I wonder if the people running it for the government will be paid millions and millions.

Think about it. Due to Barney Frank, Fannie Mae and Freddie Mac were able to lose more money and transfer more money to the stockholders, executives, and of course the recipients of campaign contributions and lobbyist favors. How in the world is it in the interest of the US to have outfits intended to facilitate "affordable housing" be allowed to make enormous risky loans, bundle them in with other loans, sell them off, and use the proceeds to make even more risky loans? Is this a way to get the middle class into affordable houses? Is loaning money for a $475,000 house to an illegal immigrant who makes $25,000 a year as a gardener in the national interest? And should those who authorized those loans be rewarded?

=================

Subj: Statistical methods and the Two-Span Bridge of Inference

John Tukey used to say that every bridge of statistical inference has two spans. One is constructed of data, the other is constructed of assumptions. If the data-span is longer, the assumptions-span can be shorter, but there are always at least *some* assumptions. It's important to understand what those are and how much of the structure depends on them -- and will collapse if they fail.

I recall Herman Kahn writing something similar about Systems Analysis. The right use of SA is not to make prophecies about what will really happen in the future, it's to make explicit the assumptions the decision-makers are making and to explore what might happen if some of those assumptions turn out to be false.

Rod Montgomery==monty@starfief.com

Hurrah. And precisely. I once spent a weekend with Tukey at a live-in conference, and since I was there with Minsky we ended up having breakfast with Tukey quite a bit. I was much impressed and have read most of his works since. Boeing hired Herman Kahn to come teach the techniques of systems analysis to the systems analysis staff which included me, and that's probably the most important lesson I got: that the process is mostly useful to show how you came to a decision and what assumptions they are based on. I have Herman's book Techniques of Systems Analysis; it's a RAND document and I think has not been published elsewhere. My attempts to find it at the RAND site have failed but it may be I am not all that good at such searches. I would recommend the book to anyone involved in complex decisions.

 

=================

What's the way out of the financial dilemma? Well, first, understand that consumption is not adding to PRODUCT even if economists think so. Making ever more risky loans never was a way to increase wealth even though it showed up in the GDP estimates.

We have to start making things. In my case I make stories and novels. I may also make tomatoes this summer: I have a bit of land. At one time I had a hydroponics setup here and produced a lot of vegetables; I am a bit old for that now, but for a modest investment (I used gravity and lifting buckets rather than pumps) I was able to make beans and tomatoes that didn't show up on the GDP but couldn't be taxed either.

American have got to understand that moving money around in circles is not actually production; that most "services" in the service economy aren't actually need or producing much -- did we need 100,000 sales agents for high risk mortgages that put illegal immigrants into $400,000 houses on interest only loans? Sure there are real service jobs, like mechanics and plumbers, who take things that don't work and make things that do work, but that's not the same as selling bad mortgages to people who shouldn't be borrowing money in the first place.

Spengler is an astute observer of the US economy, and in his essay on Lehman Brothers and the crisis

http://atimes.com/atimes/Global_Economy/JI16Dj08.html

has some observations worth your attention; and over in mail we have a couple of letters worth your while. The fundamental principle, though, is that before you can have distribution of products, you have to have products to distribute. Borrowing money on rising housing prices to buy Chinese goods doesn't produce much that can be seen.

We need to make things. Produce things. Create wealth, don't just move money around in circles. Of course the smart people understood that making things isn't the thing to do: the Lords of the Universe are those who sit in offices on Wall Street.

But we stand here representing people who are the equals before the law of the largest cities in the state of Massachusetts. When you come before us and tell us that we shall disturb your business interests, we reply that you have disturbed our business interests by your action. We say to you that you have made too limited in its application the definition of a businessman. The man who is employed for wages is as much a businessman as his employer. The attorney in a country town is as much a businessman as the corporation counsel in a great metropolis. The merchant at the crossroads store is as much a businessman as the merchant of New York. The farmer who goes forth in the morning and toils all day, begins in the spring and toils all summer, and by the application of brain and muscle to the natural resources of this country creates wealth, is as much a businessman as the man who goes upon the Board of Trade and bets upon the price of grain. The miners who go 1,000 feet into the earth or climb 2,000 feet upon the cliffs and bring forth from their hiding places the precious metals to be poured in the channels of trade are as much businessmen as the few financial magnates who in a backroom corner the money of the world.

That, of course, is Bryan's Cross of Gold speech. There was some wisdom in it, which is why it impressed people and won Bryan the nomination (but not the election) for President. I would add that those who write software, build computers, make diaper pails, sew clothes -- well you get the idea. And yet we enrich people for gutting the factories, firing the workers, and sending their jobs overseas.

I said a while ago that if our schools taught people on the left side of the bell curve things they might actually do instead of making them endure college prep courses designed to allow them to go to college which most will not, we might yet have a thriving economy -- particularly now that transportation costs are so high. One friend said that was silly -- there isn't anything for those people to do. There are no jobs for those with IQ below 100.

That's silly on the face of it: if it were true why would there be so much resistance to closing the borders? We are importing unskilled laborers by the tens of thousands. But it's dead wrong in another way: there is no reason why American ingenuity can't manage to make American workers productive at making the things we now import from China (and borrow the money in order to pay for them; if they were made here the money would stay here, no?) We actually are smart enough to do these things.

Of course we won't. The schools won't reform, and the education system will continue to be designed and ruled by people who either don't know the students or don't give a damn about them, leave the classroom teachers stuck with No Child Left Behind to try to get more IQ 85 students to get a passing grade in algebra rather than teaching them something they might actually apply to their future lives.

And so it goes.

=====================

Monty found this:

Herman Kahn's Techniques of Systems Analysis

http://www.rand.org/pubs/research_memoranda/RM1829-1/

Available on line as a pdf file.

However, I have had real problems trying to download this. In Internet Explorer an Adobe reader opens, the file downloads, and I can read it but I cannot save it. In Firefox the system blows up. I am beginning to be really annoyed with Firefox which seems unable to do anything but tell me about how wonderful Yahoo is, and send me unwanted popups about Yahoo, and in general not work very well if anything associated with Adobe and pdf is involved. It's enough to get me to Internet Explorer, except that I can't save the file I have downloaded. Now I have copies of Harman's book, so it's all right for me, but I am not sure how well that link above will work for you.

I do say that all those interested in decision making will profit from reading this ancient document.

I am going to restart my machine and see if that makes Firefox work better.

All right. By installing pdf download, a Firefox extension, and then RESETTING MY VISTA COMPUTER, I seem to be able to handle pdf files in Firefox. I'm still learning. But I am not happy with Yahoo popping up stuff I didn't ask for.

 

============

ENOUGH on the Kahn downloads!!! Thanks. My problem was that I needed to add something to Firefox, then restart Firefox only it wouldn't restart without resetting the whole computer. Once I did that I seem to have what is required to handle pdf files. I already had the file; I just wanted to test the download.

In any event I very much recommend that anyone interested in decision making get the document and read it. Herman was a great teacher. I learned a very great deal in the week he spent coaching us at Boeing. I later worked with him on other matters. As a result of my recommendations Robert Heinlein spent a couple of weeks at the Hudson Institute, and became friends with Kahn.

Anyway thanks to all. And this works: http://www.rand.org/pubs/research_memoranda/RM1829-1/

It isn't the first time it has been listed on this site, but my memory isn't always so good.

====================

Incidentally, Roland and other Mac people remind me that Firefox handles pdf files in a Mac without these problems. Having said that, I have to say that if you add the proper extensions, Firefox works well with Vista. And then I learned:

Saving PDF Files

I am sure someone has already told you this, but in case they haven't, to save a PDF file from a web site right click on the link and then left click save link as in the context menu.

 Bob Holmes

I am sure I've known this and forgotten it. Savc Link As actually saves the file, not the link. I suppose that is obvious to everyone but me. So I relearn something every week....

Fortunately it's not Alzheimer's. But I do feel a bit like the absent minded professor sometimes.

 

 

 

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Thursday,  September 18, 2008

.REMEMBER! Friday September 19 is International Talk Like a Pirate Day!   Arrrr!

I put up a lot of material in Yesterday's View. If you missed it, it's worth your attention.

Fred and Fan and the Financial Crisis

I see that Obama has written to protest the massive payouts to the CEO's of Fannie Mae and Freddie Mac. Of course Obama already got his in the form of campaign contributions; and of course the usual lobby benefits. Long Time readers will recall I have been in opposition to Fred and Fan for many year.

Monty save me the trouble of saying I told you so:

Subject: Futurology: Peter Drucker saw the collapse of the big investment banks coming - in 1999!

My memory is no longer what it was, but every once in a while a little voice whispers reminders about things I once read.

As I watched the big investment banks collapse, the voice reminded me that Peter Drucker had *predicted* it in 1999, in his book, _Management Challenges for the 21st Century_, starting on page 55.

Drucker's reasoning is somewhat different from the "Greedy Bastards!" explanation the politicians and talking heads have been throwing around. (I keep expecting someone to re-coin the old phrase, "Malefactors of Great Wealth", in complete ignorance that anyone had used it before.)

Drucker starts with the observation that, as of his writing, demand for Financial Services had been increasing, but the demand was for *retail* services to affluent, aging populations in developed countries, looking for safe places to stash their wealth to protect their retirements. The fraction of the Financial Services market that consisted of traditional big-corporation deal-making and money-making, though, was flat, maybe even declining.

Alas, the response of the old investment banks was to expand their capacity for big-corporation services, leaving the market for such services tremendously over-supplied. "And as their legitimate corporate business became less and less profitable ... these corporate-banking giants ... have increasingly resorted to 'trading for their own account,' that is, to outright speculation, so as to support their swollen overheads. This, however, as centuries of financial history teach (beginning with the Medici in 15th-century Europe), has only one -- but an absolutely certain -- outcome: catastrophic losses." [p. 56]

Now if Drucker was right, are not attempts to preserve the excessive capacity for big-corporation services, that the failing investment banks represent, fundamentally misguided?

Rod Montgomery==monty@starfief.com

My objections were technical and structural as well. I pointed out that a Price to Earnings Ratio of 80 meant that it would take 80 years for the company to earn back the money you just paid; that in some cases the stock prices in essence predicted that a company would have more than 100% market share in a growing market! In those days the stock brokerage houses sold the stocks and pocketed their commissions. Some firms began to cut commissions. The brokerage houses responded by getting into the gambling game themselves. "Playing the market" was always considered a high risk suckers game. For those who wonder why, see http://www.edge.org/3rd_culture/taleb08/taleb08_index.html and in particular see Figures 1 and 2 in the section titled The Dangers Of Bogus Math. I hesitate to give an indication of those sections because you may be tempted to read those and not all of that essay (which is a summary of  The Black Swan, which I also recommend  (http://www.chaosmanorreviews.com/open_archives/jep_column-323-c.php).

Of course much of the efforts to get out of this situation are misguided. But the most misguided of all is the notion that massive government action can make it possible for great many people who otherwise could not own a house will be able to afford one if the government gets in the act. It was the enormous expansion of Fannie Mae and Freddie Mac's ability to consolidate the mortgages they held into packages, sell those packages using their quasi-government status as a guarantee, and use the proceeds to make even more mortgage loans. This was a formula for disaster.

If a person cannot afford to pay back a loan, then government guarantees to the lender will induce the lender to loan the money anyway. That will put one more buyer in the market. Sellers will accordingly raise prices, and qualified buyers who would have been willing to buy at the lower price find they can't do so on their current incomes. Mortgage companies are hesitant to loan the addition sums -- which often went to Jumbo status. But comes now Fannie Mae and Freddie Mac to say "Sure you can! We'll help you do it! Let your customers join the American dream." And the companies make the marginal loans. Salespeople get the idea. Go push those no-down no-principal payment no-income-verification loans until we have the spectacle of a $25,000 a year illegal immigrant put into a $475,000 house with no down payment. And of course the price of the house goes up, so that people who might have been able to buy it will be unable to do so; and since builders make more from high priced houses rather than "affordable housing", they build the more expensive houses.

This is no way to get more people owning houses.

It might have been better to have national lotteries, heavily subsidized by public money so that the expected value of a lottery tick was positive, in which the prizes were a house given in fee simple to the winner. Depending on the proportion of the subsidy to the ticket price, this would be a form of distributism, an alternative to socialism championed by Hillaire Billoc as remedy to the Servile State which Socialism almost certainly would become. Distributism literally redistributes wealth: it does take money in taxes, but it does not keep it; it hands it to citizens in fee simple, and they are not dependent on government for keeping it. They may have voted for property taxes  before being given some property, but there will now be a change in attitude.

This is not an essay in favor of distributism; I am pointing out that there are better -- and much cheaper -- ways of seeing to it that more people own houses than to deliberate bubbles while paying out obscene amounts to money to mangers and using obscene amounts of money to lobby Congress for even more money to prime the bubble pump.

=================

See above for a link to information on Fannie Mae, Freddie Mac, campaign donations, lobbying, and who got what. Note that there's plenty of blame to go to both parties. Note also that is was the Democrats who opposed stripping Fred and Fan of their lobbyists and other political powers.

For those interested in the campaign on this subject:

Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

John McCain  May 25, 2006, on behalf of the Federal Housing Enterprise Regulatory Reform Act of 2005

The bill died in committee.

=====================

As to where we can go from here? It is clear that there is far too much power concentrated in Washington; that campaign funds dominate all our government policies; that increased regulation won't fix things, what has to happen is to change the policies and get the government out of much of this business. It was the government guarantees that allowed the bubbles; without those there would be less of our capital in play in very risky enterprises, and investors would understand that investing through brokerage houses that play the market themselves might not be a great idea.

Deregulation is not a great idea in many areas of out nation; but it is a proper vector. Decreasing the power of government is a good idea. Putting more power in the hands of regulators subject to political rather than market pressures is a bad idea, and a vector in the wrong direction.

And if you must have government interference in the housing market -- and FHA did work pretty well back when it stuck with marginal cases where people were very nearly qualified for mortgages -- you need to be darned careful just what powers you give these institutions. When the profits go to executives and investors (usually in that order) and the losses go to the public to pay off, no regulations will ever prevent  greed,

See Pournelle's Iron Law of Bureaucracy.

=================

GIGO.

<http://bits.blogs.nytimes.com/2008/09/18/
how-wall-streets-quants-lied-to-their-computers/>

-- Roland Dobbins

Gives some information well worth your time. The comments show that many did not understand the problem. The centralization of all this with what looks like government guarantees of ignoring improbable risks that can WIPE YOU OUT (something we once knew after 1929) is only slowly sinking in to the smartest guys in the room. But if the government will bail you out and let you keep all your bonuses for destroying the company, then who cares?

====================

A nice piece on Janissaries at the Tor blog: 

http://www.tor.com/index.php?option=com_content&view=blog&id=5776 

dave h

I preen! Thanks! And I am working on Mamelukes, the next book in the series. This very day.

===================

 

 

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Friday,  September 19, 2008

ARR!

0430: Sleepless in Studio City.

The next time some Mac enthusiast tells me about Windoze and how slow it is I am not sure what I will do, but it may not be pleasant.

[NOTE] This problem is fixed. You don't have to tell me how to solve it. Thanks to those who did.

I don't listen to music on my telephone so I have never tried to install anything from the iStore on my iPhone; and while I own a couple of iPods which I used to used to listen to lectures, that was all done back in the days of the PowerBook, and I don't even know where the iPods are hiding in the Chaos here. I suppose I ought to find out but I never carried one after I got the iPhone. But tonight I couldn't sleep, and it happens I found an article in a Mac magazine about the iPhone App Store, and I thought it was about time I looked into some of those new applications for the iPhone. Boy was that a miserable experience.

I have just tried to access the iPhone App Store. That takes a LONG time. For that matter Safari is pretty slow on my iMac 20 compared to Firefox on my Vista Quad 6600, and I thought there were some delays built into that.

Eventually I managed to get to the App Store, select "Stanza" which is said to be a book reader for my iPhone, and try to download it. It's free. It appears to download although I can find no indication anywhere that it did so -- my only clue is that when I try to download it again I am told that I already have it. Only when it came time to install it on my iPhone I am told that it didn't install because I am not authorized. Specifically, "The application Stanza did not install on the iPhone "iPhone" because you are not authorized for it on this computer."

At this point I think I'll go back to reading books on my Kindle. I sure don't seem to be able to install them on my iPhone.

It won't tell me who IS authorized, either.

This seems to happen to me with Macs. They don't like me, I think. Just as I begin to like using a Mac, it does something mysterious like this, leaving me feeling inadequate. I must have done something stupid. A person of reasonable intelligence would understand and love it. OK?  And I particularly hate having to check OK to signify that I am not authorized to install Stanza on my iPhone. But it does kindly offer me the option of not being warned again. Isn't that informative?

So who IS authorized? How do I persuade it that this is MY computer and MY iPhone? Is the problem that I didn't give my computer password to Apple? That is, to log in to the iStore I tell it I am -- well, me -- @mac.com and give the password for that. But of course my user name to my iMac is not the same name, and I don't use the same password; so has the iStore somehow told the iMac that I am not me? I don't understand this, and it's infuriating because there is no possible way to find out. All I am told is that I can't install the damned application because I am not authorized for it on this computer. Good luck finding out more, Fat Boy.

Maybe I'll have to take the damned thing to the Apple Store in Fashion Square and let them teach me how to do it? I am not sure it's worth it. At this point I am not sure Mac is worth the effort. I suppose that's the lateness of the hour, but I can't find any way to authorize myself to install Stanza on my iPhone. For that matter I can't even find any evidence that I have Stanza on my iMac. There's a little "downloads" menu item that appeared after I ordered the download, but there doesn't seem to be anything in it, and the word Stanza never appears. The problem is that while it's easy -- well inconvenient, but at least possible -- to carry the iPhone there, I sure ain't going to pack up no iMac 20 and do that.

Now it's true I messed about with the iStore and downloaded Stanza before I connected the iPhone to the iMac. Could that be it? Will restarting the iMac cure this imbecility? I'll try it. Hmm. The iPhone is chirping at me, but there are no meaningful messages.

I am now looking at a recently restarted Mac. Now the screen fills with stuff, and it's trying to synch my iPhone. And now here's the message. The application Stanza was not installed on the iPhone "iPhone" because you are not authorized for it on this computer."  Truly informative. And in its Fascist manner, the iMac insists that I click OK to signify that I am stupid and unauthorized.

If this is the wave of the future, maybe we ought to rethink DOS.

Meanwhile I'll try to get back to sleep. Maybe I'll be in a more charitable mood toward Apple tomorrow.

=====

1045:

Quick follow up:

Another thing to try: inside iTunes, in the "Store" menu click on "Authorize computer" and enter in your itunes account information (usually your .mac email address and its password - NOT the computer's password). The email address for your itunes account appears in a box underneath the search field in the top right, if itunes is logged into the account.

This *shouldn't* be a problem, but there's always the chance that the iMac got de-authorized somehow.

Monty

That did it and the problem is fixed; but I have yet to find anything that tells me I should have done that. When I downloaded the program from the iStore it asked for my .mac user name and password and I gave it. How was I to know I had to go to the Mac Menu, pull down STORE, and "authorize" my computer?

And they say Microsoft is weird?

But see Roland's letter in Mail today. (And other mail.)

==================

I have a haircut appointment and then I'm going up to the Monk's Cell to work on Mamelukes.  I recommend Kimberly Strassel's column in today's Wall Street Journal if you're interested in what's happening in finance. Apologies but I can't find a URL and I have to run.

=======

I am back and headed upstairs. I look good. Lou is a great barber. I still can't find the URL for Strassel's column today, but it's still worth looking at. And there is a lot of mail worth your time. Now I am headed up to tell the King he's got problems as Rick Galloway begins to examine his options.

============

Several readers have found Kimberly Strassel's column on line. http://s.wsj.net/article/SB122178430722754827.html

 

 

 

 

 

 

 

 

 

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Saturday,  September 20, 2008

0245: Sleepless in Studio City

Considering that I didn't get a full night's sleep last night and took no naps, you'd think I'd manage to get to sleep tonight, but it's not happening. I'm fooling with applications on the iPhone.

My first observation is that compared to Amazon on Vista, the iStore is incredibly slow. I mean, wait a minute to change pages slow. I'm using Safari. Perhaps I need to change to Firefox, although that has it's latencies in Vista. But Firefox with 20 tabs open is a ball of fire compared to Safari on the iMac 20. Anyway I am looking for YouNote, a utility that allows the iPhone to be my note taking device. It takes a while to search for it. I will say that once found, downloading and installation on the iPhone take almost no time. Now we will see if I can learn to use it. It is said to allow me to take notes by voice, or by scribbling with a finger, and integrate with photographs. Not quite OneNote but in a pocket computer. Potentially wonderful. More in the column as I use it.

Getting books is painful, though. It takes over a minute to change pages, and the book summaries leave a very great deal to be desired. Apple could learn an awful lot form Amazon and Kindle.

However, it does work: and with Stanza books on that tiny screen are astonishingly easy to read.

=============

1045: Time for our walk. I managed about 6 hours sleep and got up at 1000. More another time, but amazingly even with my eyesight you can read books on an iPhone. How well, and whether I'll use it much, remains to be seen, but I'm more favorably impressed than I thought I'd be. And although the iStore is tedious and slow, it does work.

==========

I now have Stanza and YouNote installed on the iPhone. More in the column, but they do work, and the iPhone may take the place of my Olympus WS-100 voice recorder for most days; one less thing to carry.

 

 

 

 

 

 

 

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Sunday,  September 21, 2008

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This is a day book. It's not all that well edited. I try to keep this up daily, but sometimes I can't. I'll keep trying. See also the weekly COMPUTING AT CHAOS MANOR column, 8,000 - 12,000 words, depending.  (Older columns here.) For more on what this page is about, please go to the VIEW PAGE. If you have never read the explanatory material on that page, please do so. If  you got here through a link that didn't take you to the front page of this site, click here for a better explanation of what we're trying to do here. This site is run on the "public radio" model; see below.

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