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Sunday, October 12, 2008

Mail 539 September 25 - October 2, 2008







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Monday  September 29, 2008

First the good news:

SpaceX Successfully Launches Falcon 1 to Orbit

If this were only 1960. Never the less, it's a start.


Begin forwarded message:

From: SpaceX <news@spacex.com> Date: September 28, 2008 11:16:13 PM PDT T

SpaceX Logo

Post Launch Statement


Wow, this is a great day for SpaceX and the culmination of an enormous amount of work by a great team. The data shows we achieved a super precise orbit insertion — middle of the bullseye — and then went on to coast and restart the second stage, which was icing on the cake.

I will have a more complete post launch statement tomorrow, as right now I'm in a bit of a daze and need to go celebrate :)



A. Launch of the Falcon 1 Flight 4 vehicle from Omelek Island, in the Kwajalein Atoll, 2,500 miles southwest of Hawaii. Liftoff occurred Sunday 28 September 2008, at 4:15 PM (PDT), 23:15 (UTC).


B. The critical stage separation sequence began about 2 minutes and 37 seconds into flight with shutdown of the Merlin first stage engine, then separation of the first and second stages, followed by ignition of the Kestrel second stage engine.


C. A few seconds after second stage ignition, the fairing (nose cone) that covers the payload section separates from the vehicle and falls to Earth.


D. About nine and a half minutes after launch, the second stage engine shuts down, and the Falcon 1 becomes the first privately developed liquid fuel rocket to orbit the Earth.


Phil Tharp 


Newt Gingrich proposes NASA changes, prizes

New Gingrich published an op-ed in Aviation Week, June 30 edition. "We must rethink the very concept of NASA if we want to save it from certain obsolescence. Government funding of NASA has been absurdly cost-ineffective." And this on prizes: "We should dedicate at least 10% of the money in every research field to funding prizes."

There is considerably more, but this is transcribed from the print edition and I couldn't find a reference to this article in the AW web sites. Worth reading and it sure looks like Gingrich reads your blog.

John Witt


Subject: Copybook headings sighting in MSM


[quote] We have become used to this sort of thing. We've come to prefer comforting lies to hard truths born of observation and experience, thinking that in our brilliance we had somehow escaped the iron law of necessity. Rudyard Kipling satirized this arrogance nearly a century ago in his poem, "The Gods of the Copybook Headings" (a copybook was a primer in which British schoolchildren learned handwriting by copying familiar proverbs).

Here's a verse rather relevant to the current moment:

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew, And the hearts of the meanest were humbled and began to believe it was true That All is not Gold that Glitters, and Two and Two make Four – And the Gods of the Copybook Headings limped up to explain it once more

As it turns out, the moralistic platitudes you learned at your grandfather's knee – What goes up must come down; you can't get something for nothing – hold up better than the obscure incantations of Wall Street's pinstriped deities, those Masters of the Universe who have flattered their genius on the financial pages during our latter-day Gilded Age. [end quote]


And the gods of the copybook headings, with terror and slaughter return.

We have sown the wind, and we shall reap the whirlwind.


Harry Erwin's Letter from England

Register story: "Britons should be subjected to random carbon spotchecks and intensive surveillance of their diets, transport and waste disposal habits, says the Government's architecture and design quango in a new report today."


Related Register story <http://tinyurl.com/4264qo>


How the debates played here

BBC story <http://news.bbc.co.uk/1/hi/world/americas/7639102.stm>

Guardian (liberal) commentary <http://tinyurl.com/3px2sf> Independent story <http://tinyurl.com/52nqyg> Telegraph (conservative) story <http://tinyurl.com/53eocf>


When you have them down, put the foot in Telegraph story on tax bills <http://tinyurl.com/4caqyk>


No evidence school targets work here. "We found no quantified evidence of the effect of sanctions and rewards on levels of performance for the programmes in the survey."

BBC story <http://news.bbc.co.uk/1/hi/education/7638091.stm>

Related Independent story <http://tinyurl.com/3wfpka>


Feeding the birds (nanny state story)

BBC story <http://news.bbc.co.uk/1/hi/england/humber/7638726.stm>


The Congresscritter's Dilemma:

Nation (liberal) blog that makes some relevant points:



Fire-bombing of publisher in London foiled:

London Times story <http://tinyurl.com/4jbets>


Problem with lasers being targeted on aircraft cockpit windows while landing in the UK.

Daily Mail story <http://tinyurl.com/3el93n>


Lack of safeguards in new Mental Health Act has organisations concerned.

Independent story <http://tinyurl.com/4m45pd>


UK ID card revealed.

Telegraph story <http://tinyurl.com/4oa4yu> Financial Times story <http://tinyurl.com/3hsyz6>


Originally I used the reference manager in LaTeX, but most of my coauthors use Word, and I eventually had to match them. Endnote is the standard reference manager for Word, but my experience that they charge an arm and a leg for bug-fixes, let alone upgrades. Endnote also breaks every time MS Word is upgraded with the fix taking months for release, so my policy has been to upgrade only when I absolutely have to. See this Slashdot article about the suit against Zotero.



Website censorship in Europe. (In at least one case, a website was censored for criticising censorship.) Slashdot discussion <http://yro.slashdot.org/article.pl?sid=08/09/27/2250224>



Harry Erwin, PhD

"Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety." (Benjamin Franklin, 1755)



Air Force as Third Leg

Dear Dr. Pournelle,

I would like to reply to your comments of June 7th concerning the Air Force.

I can agree with your arguments about the problems the Air Force has created, but I do not believe we are better off without it as a third service.

Simply put, in politics three legs is better than two. And the armed services are political to their cores.

We have not had great problems in the past with our armed services creating political power bases, unlike many other countries.

Having the Air Force as a separate service makes it more difficult for any service to even potentially cause such problems.

Two services could conceivably plot mischief. Three makes it much more difficult to insure loyalty in any plot.

This is the kind of balancing of powers that has helped the US retain whatever republicanism we still have.

Thank you,

-- Tom Bridgeland


"The Chinese are not here as investors, they are here as invaders."


--- Roland Dobbins


Subj: Bailout bill failure

I think one could argue that Pelosi knew *exactly* what she was doing, to wit: enraging the Republicans so they'd vote against the bill and the Democrats could then blame the Republicans for its failure.

It's an old Bolshevik strategy for frightening the People into giving Absolute Power to the Party: "The worse, the better."

Rod Montgomery==monty@starfief.com





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Tuesday,  September 30, 2008

I do not usually get involved in local politics on this web site, but every now and then I do:

Sales Tax Increase for Los Angeles County Transportation


The voters of Los Angeles County will be asked to approve a sales tax increase this November to fund transportation projects.

Since the recipient of this money would be the Los Angeles County Meretricious Transportation Abomination (MTA) I would urge a careful review of how this Agency has used tax payer monies in the past.

They built the light Rail Green Line to nowhere running from Norwalk to El Segundo. This line passes within a mile or so of LAX but does not go there. It passes over the light Rail Blue Line that runs from downtown Los Angeles to Long Beach, but forces passengers who have destinations on the Blue Line or vice versa to disembark, go up a long staircase or escalator and board another train. Even if the two line were joined it would not be possible to operate Blue line trains on the Green Line or vice versa since the train control systems are incompatible

They built the Red Line subway and did not build a station to serve a venue that attracts more than 1,000,000 people a year, Hollywood Bowl. The nearest station is more than 1/2 mile away.

Rather than extend the Red Line through the San Fernando Valley, they built the Orange line Busway. All street crossings of the busway are at grade and accidents have been frequent.

They built the Gold Line light rail from Pasadena to Union Station. In order to transfer to the Red Line subway a walk of more than 1/4 mile is required. Once the Gold Line is South of Green Street in Pasadena all crossings are at grade.

I seems clear that the MTA are builders not providers of the transportation services that Los Angeles County requires. As a consequence it does not seem prudent to provide these bureaucrats with more of our tax dollars to squander.

Bob Holmes

Not that both Bob Holmes and I are supporters of reasonably designed mass transit. I would take the mass transit to the Hollywood Bowl if there were any, but in fact it goes to Hollywood and Highland and it's a mile uphill to the Bowl.

And of course I would prefer to take mass transit to LAX rather than fight my way through the 405 traffic, and of course I can't.


Regarding Mr. Dobbins' cite re: Chinese Invasion of Africa

An apposite quote from J.S. Mill springs to mind.

Despotism is a legitimate mode of government in dealing with barbarians, provided the end be their improvement, and the means justified by actually effecting that end. Liberty, as a principle, has no application to any state of things anterior to the time when mankind have become capable of being improved by free and equal discussion. Until then, there is nothing for them but implicit obedience to an Akbar or a Charlemagne, if they are so fortunate as to find one.

Given Africa's poor record of self-government, a Chinese invasion might well be the best thing for them. Somehow I doubt that the Chinese will have the improvement of Africa as one of their higher priorities though.

Jason B.

Indeed Zimbabwe and South Africa and most of the failed states in Africa would count themselves fortunate to find themselves an Akbar or a Charlemange.

     It is, perhaps, hardly necessary to say that this doctrine is meant to apply only to human beings in the maturity of their faculties. We are not speaking of children, or of young persons below the age which the law may fix as that of manhood or womanhood. Those who are still in a state to require being taken care of by others, must be protected against their own actions as well as against external injury. For the same reason, we may leave out of consideration those backward states of society in which the race itself may be considered as in its nonage. The early difficulties in the way of spontaneous progress are so great, that there is seldom any choice of means for overcoming them; and a ruler full of the spirit of improvement is warranted in the use of any expedients that will attain an end, perhaps otherwise unattainable. Despotism is a legitimate mode of government in dealing with barbarians, provided the end be their improvement, and the means justified by actually effecting that end. Liberty, as a principle, has no application to any state of things anterior to the time when mankind have become capable of being improved by free and equal discussion. Until then, there is nothing for them but implicit obedience to an Akbar or a Charlemagne, if they are so fortunate as to find one. But as soon as mankind have attained the capacity of being guided to their own improvement by conviction or persuasion (a period long since reached in all nations with whom we need here concern ourselves), compulsion, either in the direct form or in that of pains and penalties for non-compliance, is no longer admissible as a means to their own good, and justifiable only for the security of others.

J. S. Mill On Liberty http://www.constitution.org/jsm/liberty.htm

[Emphasis added.]


Searching: Google and the search-directive site:jerrypournelle.com works well!

Dear Jerry,

In response to suggestions on how to find things more easily on your website, I use Google and the "search directive":

| site:jerrypournelle.com 

included along with my search words.

Works well. Last week I found all the references I needed for my daybook from your site using just this search method.

Again, your site is *easy* to access, navigate, and search.

I regularly read three things each morning: Your Current View and Current Mail pages, and Google News. Your pages are always the most edifying.

[And, as well -- your pages format nicely on my small portable devices (Nokia's N770 and N800 Internet Tablets).]

Again, thanks for the most educational and thought-provoking discussions! I think you have been mentoring me, unknowingly, all along.

Thanks for all you do.

Sincerely, Richard H

Indeed I use Google to search my own site...


Not all children are created equal

Both left and right say every child can excel academically. Nonsense, says a leading social analyst, that's like thinking we can all be gymnasts



Well -- yes.


Re: Climate Models and Alternate Energy Sources

Dear Dr. Pournelle,

one thing I have often wondered but about which I have little been able to find any information, and for which you and you readership are certainly in a better situation to suggest reasonable hypothesis:

When alternative "renewable" energy sources are taken from the ecosystem (wind, hydro, solar) obviously the total energy balance must become altered (can't make something from nothing, if I remember correctly). Are we not risking a gigantic "butterfly effect" by heating the earth less, having less wind energy to push cloud systems in certain areas, ecc.? Either on a micro, or quite possibly macro level on the long term?

The fossil fuels have laid dormant underground for quite a while, and except for creating holes that probably fill with water almost as quickly as they form, would seem to have the least environmental impact during their extraction.

It would seem that without more information, as you are constantly asking, we are risking playing god without the slightest idea of the possible consequences.

Best regards,

James Siddall jr

P.S. I can agree to some extent with the comments of the "anonymous webmaster", in that I personally find your parchment background at times difficult to read over (not as bad as Mr. Thompson's bluish orange-rind texture background though) depending on lighting and reflections, but I think you are much better off to dedicate the time you do to the quality contents than waste it on aesthetic embellishments, which are more taste than else. When I have difficulty reading, I just cut and paste the whole thing into a word processor and with a couple of clicks have your good contents and a more readable form.

I may be alone in finding my parchment yellow preferable to black on white (which just has too much light coming out of the screen for me), but since I have to spend a lot of time looking at it....

I suppose I could experiment with other color schemes. And some have said my left margin is too small; I fail to understand why a larger left margin would be good.

As to your main question, I have often thought about that myself. We know that dams have very large unintended consequences (some beneficial, actually). We know that coal mining has som bad consequences. Careless use of nuclear energy can be a disaster, although the actual consequences of careful design (as in the US rather than in the USSR has so far been very mild. (TMI was terribly expensive, but no one off site was harmed, and those on site didn't have anything happen other than being sent home for exceeding the badge counter doses.) I don't have a good model on what happens if you remove wind and tide energy. I suspect no one else has one either. But I would think those consequences small.


Stock holdings of congressmen

This is what a Bloomberg writer found for disclosed holdings of Congress members:

Pelosi, Kerry May Share Pain as AIG Stakes Evaporate (Sep 18)


Pelosi's husband - AIG, $250,000 to 500,000 Kerry's wife - AIG $2,000,000

My guess is, these holdings are about what you'd see by default in a diversified portfolio. Teresa Heinz-Kerry's fortune is estimated at $1 billion, so her AIG stake is 0.2% of that.

The article leads to more data.



Subject: U Chicago economist Robert Shimer's case against the Paulson Plan


I like Shimer's analysis, but he seems to miss one aspect of the situation: he says prospective buyers of a MBS need "an independent assessment of the value of the security, which is time-consuming and costly." What he doesn't say is that, given the abysmal recent performance of the supposedly-expert independent assessors of the values of such securities, nobody in his right mind would believe any such assessment.

A similar consideration applies to individual mortgages, given the outrageous behavior of those supposedly expert in evaluating the creditworthiness of prospective mortgage borrowers.

Rod Montgomery==monty@starfief.com

The original plan was to invest in mortgages at some guestimate of the intrinsic value of the property so that the government would eventually recover that investment. It was also a confidence building measure: the holder of that mortgage might think twice about unloading it.


French Surveillance Database Draws Fire 

The French police have been attracting a lot of criticism recently for the detailed (Stasi-style) political dossiers they maintain on everyone in France. This is just the latest story: BBC story <http://tinyurl.com/3qv7w6

Chinese lawyers seeking redress for poisoned infants under official pressure to back off. Telegraph story <http://tinyurl.com/3zhjgw

-- Harry Erwin, PhD, Program Leader, MSc Information Systems Security, University of Sunderland. <http://scat-he-g4.sunderland.ac.uk/~harryerw> Weblog at: <http://scat-he-g4.sunderland.ac.uk/~harryerw/blog/index.php>



He's so right.

"We need to get back to making stuff, based on real engineering not just financial engineering"

Which I think I've heard you say a time or two....



What we need is cheap energy and an absence of crippling regulations. The Internet allows crafstmen to offer their wares for sale. Now make the paperwork easier. And build nuclear plants so their power bills will be low. Then get out of the way.


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This week:


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Wednesday, October 1, 2008

Lumley 'Thrilled' With Gurkha Ruling

http://www.imdb.com/news/ni0576069 /

"Latest: Actress Joanna Lumley <http://www.imdb.com/name/nm0525921/>  will stay in Britain after former Nepalese Gurkha soldiers won their battle to remain in the country.

The Indian-born British actress, whose father fought alongside the Gurkhas in the British army, had threatened to leave the U.K if former Nepalese Gurkha soldiers lost their battle to stay in the country.

But after taking their fight to the High Court in London, it was ruled that up to 2,000 Gurkhas were allowed to stay in Britain.

And Lumley branded their victory "utterly, utterly thrilling".

She says, "I am so proud of British justice and so proud of the Gurkhas. At last we can begin to put this great wrong right.""

So, apparently it is still mathematically possible for the right thing to be done in England. Good to know.



Empty space 


Time in a bottle...er, bubble.

Instead of dark matter and dark energy, it may just be that there is more ordinary matter elsewhere...


Scientists: Earth May Exist in Giant Cosmic Bubble

Wednesday, October 01, 2008

By Clara Moskowitz


Earth may be trapped in an abnormal bubble of space-time that is particularly devoid of matter.

Scientists say this condition could account for the apparent acceleration of the universe's expansion, for which dark energy <http://www.space.com/scienceastronomy/080804-mm-dark-energy-superclusters.html> currently is the leading explanation.<snip>

"If we lived in a very large under-density, then the space-time itself wouldn't be accelerating," said researcher Timothy Clifton of Oxford University <http://www.foxnews.com/story/0,2933,430943,00.html#> in England. "It would just be that the observations, if interpreted in the usual way, would look like they were."<snip>

"The regular cosmological model is based on the idea that where we live is a typical place in the universe. This would be a contradiction to the Copernican principle." (that there is nothing unique about Earth's place in the Universe). <snip>


UK Death Tax

Dr. Pournelle,

Neither Harry Erwin nor the linked article reveals the full spitefulness of the UK Tax Authorities' stance.

To clarify - you can't get "probate" (that is, official approval of the will) until you've paid the death tax - which is 40% of the estate, above a fairly modest threshold.

And you can't get the assets until you've got probate!

Result - you inherit a valuable property, so you owe the State £100's of K's, and you can't sell the house to get the money to pay the tax - until you've paid the tax.

Oh, and who do you think decides on the value of the house you can't yet do anything with? Yes, you guessed - the very same State.

This is life under New Labour.

Make sure you Americans don't slide any further down the slope to socialism, because believe me you will regret it in the end.

Andrew Duffin


US 'casino' mentality blamed for planet's meltdown 

Doctor P,

US 'casino' mentality blamed for planet's meltdown

Just when I was ready to accept most of the blame, the Europeans and Third-World Tinpot's start telling me it is all my fault.

I guess I must have been wrong, if they agree with me!


"Astounded by the U.S. government's failure to resolve the financial crisis threatening the foundations of the global free market, fingers of blame are pointing at America from around the planet."




Putting science fiction to work on the battlefield:




Has Wall Street Already Gotten What It Wanted?

 Little noticed over the weekend of September 6-7, what with the Fannie Mae + Freddie Mac takeover...was the essentially-simultaneous issuance of a new line of credit to the FHLB member banks.

Now consider what has happened since:

1. J.P. Morgan Chase was given Washington Mutual (largest co-owner of the Seattle FHLB).

2. Citigroup was given Wachovia (largest co-owner of the Atlanta FHLB).

3. Wells Fargo (largest co-owner of the San Francisco FHLB), through its dominant shareholder Warren Buffett, was given a slice of Goldman Sachs;


4. A consortium of foreign-sounding banks (I'm not sure the actual domicile of Nomura) was given a slice of Morgan Stanley.

Overlooked in the fanfare about GS and MS now being able to take deposits, is the fact that they can presumably, as commercial Federal Reserve chartered retail banks, now also originate mortgages. Hence, New York's Big Four now suddenly have access to that September 7th line of mortgage credit, courtesy of Mr. Paulson and the helpful folks at FDIC.

Does anyone know how large that line of credit is?

Does anyone else significant the timing, that petroleum and gas futures were flat-to-down on Monday September 29, and T-bill yields at the Sept. 29 auction were essentially indifferent to the failure of the bailout...but it was only on Tuesday the 30th, when the campaign renewed for passage of a bailout, that GS and MS began manipulating the price of oil upwards, while the 12 member banks which set the LIBOR (Citigroup foremost) spiked it up 4 points?

[From Europe; Name withheld]

I have no data on any of this. I do know that a desire for vengeance seems to be stronger in influencing the American populace than any understanding of the seriousness of the crisis.


Subject: One Trillion Dollars poorer

You keep saying that and I keep not accepting it.

Have the factories disappeared? Have the houses shrunk? Did the cars stop running? Did the engineers, computer programmers, designers, plumbers and other trades get enstupidated or lose their skills? Are you suddenly unable to buy a nice steak? No. The assets, the real wealth, are still there. Money just measures them, and...it's an arbitrary measure.

Many of those assets will get new owners. Toughers, that's how the market works.

Take a look at
2008/09/lenders-have-to.html.  Lenders must lend. The money does them no good unless they do.

Will this 'crisis' cause some problems? Probably. Will they be worse than further socializing business with massive government intervention? Not in my judgment.

Please don't forget your Mencken: "The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."


Fred Zinkhofer Canada

All I can say is that my holdings in one account were down by about 15% over the past couple of months, and the payments from the CREF retirement fund are lower by about the same amount. Perhaps I have not lost that money? It's still there, only I just can't see it? And if the value of some of the stocks in the CREF fund fall to zero, it will be all right?

The factories were still there in 1933. No houses shrunk in 1933. When I was growing up I remember soup kitchens and long lines for any announced job, even though no houses had shrunk and the factories were still there. Farms still grew crops and those who lived on farms had food to eat, but if they had tractors they had no money to buy fuel (fortunately those who had mules could grow food for the mule...)

So the remedy is to do nothing, and thus avoid government interference; and allow the market to find its own level. After the recovery yesterday we have only lost $500 Billion rather than a Trillion. I don't know what will happen Friday if there is no government action. I sure hope your optimism is the correct view.

After all, insurance has a negative expected value for the buyer. It has to or the insurance company would go broke. Does this mean one must not buy insurance?


the bailout

If, as you say, its the poor people's fault for buying houses they can't afford, let's get the 750 billion from them.

Brian Gulino

Not entirely sure I ever said that. In fact I am certain I did not. It is the case that people bought houses they could not afford, with no down payment, at inflated prices; then when they found they owed more money than the house was worth, walked away from it. This included not only people like the kids down the street who strained to buy a house and camped out in it without furniture, worked their tails off, and really tried to own a nice house, but simply couldn't keep it up; and the people who bought a book on getting rich flipping houses. It included the illegal alien who bought a $450,000 house on a stated income of $40,000 a year as a gardener and then was interviewed in The LA Times about how he had "lost his dream."

I am not sure how one gets the money from them. Perhaps we reinstitute indentured service and slavery? Many cultures have allowed people to secure their debts by pledging their own bodies; is it time to do that here?

In fact, the Investment injection proposed last Monday did something like that: it had provisions for allowing the government to hold the mortgages it bought and set terms for repayment more in adjustment to the ability of the occupants to pay. That is sort of like getting the money from those who bought the houses.

It wasn't a good bill; but it did seem to do something.

Of course if the goal is to get revenge on those who brought us to this pass, and we don't care what happens to all of us so long as we can do that, the problem is a great deal simpler.


Not A Disaster

As far as I can tell, the bill that failed yesterday would have had as bad an effect as doing nothing.

It soaked the taxpayers, apparently for full face value of the bum mortages plus back interest. Then it left the purveyors of said mortages free to incur additional taxpayer obligations and did next to nothing to satisfy Freddie, Fannie and AIG creditors.

Sounds like Depression to me once that liquidity squeeze hit home.

Solution? Pay their debts for them. Have their income sent directly to you, give them a limited allowance to live on after you pay their bills for them and take your cut. See the guys whose names end in a vowell for how to collect.

Revenue bonds, anybody?

 Dave Hanley

I think you have misread the bill rather thoroughly.


Thoughts on Our Financial Crises


I am mad as hell and I am not going to take it anymore!

That was my initial reaction to the current financial mess and our less than incompetent Congress. After some reflection I decided to try and dispassionately determine where we are and where we need to go and leave determining the blame for later. My thoughts are below.

Bob Holmes

The financial system in the United States and the World is, currently in serious trouble. How it got that way should be a topic for future discussion. Why it is in trouble and what to do about it should be of immediate concern.

Most major financial institutions in the world are suffering from Capital Impairment. What this means is that assets in their portfolios are not currently worth what was initially paid for them and as a consequence more capital is required to support their current loan portfolios. Without additional capital they cannot make additional loans.

The assets that are currently “underwater” are primarily bundles of mortgages, many of them sub-prime. The current market values of these bundles are, in most cases, far below the value of the discounted cash flows if these bundles were held to maturity. (As an example Merrill Lynch sold some 30 to 40 billion dollars of these bundles at 22 cents on the dollar in July, 2008.) Selling these bundles at current market prices will not help the current capital positions of the sellers.

In the absence of buyers for these bundles at “reasonable” prices, the Treasury Secretary recommended that the US Government become the buyer of last resort. He recommended an investment of some 700 Billion Dollars to restore a reasonable level of capital to these financial firms. While these purchases of these mortgage bundles would be made at prices higher than the current market they would be substantially below the face value of the bundles and the Financial Firms would end up realizing significant losses on the sales.

Since the Government purchases would be higher than the current market prices the Financial Firms would see an immediate increase in capital and the crises might be alleviated enough for the Firms to seek additional capital in the private market place.

The Government would not be giving money to the Firms. It would be purchasing assets with the possibility of profits depending on the price paid and how long the assets were held. (There have been estimates that the Government could realize profits of as much as 300 to 500 billion dollars on the 700 billion dollar investment.

Time is of the essence and the proposed investment must be identified as what it is, an investment, not as a bail out. What it truly is is an investment designed to rescue financial markets and the Economy.

Bob Holmes

Pretty close to my view. It's a bad investment but not doing it is worse. A collapse of the financial system is too grim to contemplate. What's needed here is to get the economy moving again. Perhaps it's too late. But I do note that the Irish have moved swiftly and massively.

I am thoroughly of the view that the government ought not meddle in the economy; but Fannie Mae and Freddie Mac and the Community Reinvestment Act very much DID meddle, forcing banks to make bad loans to people unlikely to pay them back. If we let the economy collapse because of this, who pays?


The failed bailout

You wrote

the nation would be One Trillion Dollars wealthier today

I don't understand this comment. Wealth doesn't get created out of thin air. If this had been done it would have inflated the currency to the tune of a trillion dollars, making us all poorer. One of the problems right now is the liquidity that is hiding the fact that a number of these financial corporations are insolvent. That needs to be resolved somehow. How would adding more currency to the mix fix anything?


What's to understand? Last Friday I could sell my stock holdings for X Dollars. Monday night I could sell them for X - 10%X. How have I not lost money?

You say it needs to be resolved somehow. Suggestions?


Subject: The bailout failure

Doctor Pournelle,

I agree with you that there were things to be said in favor of the bailout. But one thought kept going through my head - that the very people who created this mess by spending taxpayer dollars are now trying to fix it by spending more taxpayer dollars.

You've spoken often enough about government's failure in trying to fix social problems by throwing more money at the problems, with predictably zero results. How can this problem be fixed by continuing to prop it up with more hastily printed, inflationary dollars? We'll spend the money and still have nothing to show for it in ten years, except more inflation and more grandiose thinking politicians.

If we really want to inspire confidence in the economy, let's do it the right way, i.e., by sponsoring investment in our own economy. We might start by cutting federal spending, cutting capital gains taxes, and by business-friendly legislation to bring manufacturing back to our country. Yes, it will take a while to get this done - but we need to do it anyway.

And doing something real and positive will enhance the economy far more than passing yet another huge spending bill that we cannot pay for.

BTW, just as an exercise, you might look around and see if you can find the basis for the estimate of $750 billion. I've heard it was just a bureaucratic blue-sky number with no real basis in fact.


Regards, Brian Claypool

The Bill I saw rejected Monday did much of what I think you are advocating. Of course it didn't send the Fool Killer after all those CEO's who left with their golden parachutes, and I expect that's far more important than halting the financial crisis?

If we wait for the Democrats to cut taxes and pass business friendly legislation, how long do you think that will take? I surely agree that were I dictator I could probably solve this crisis with an Adenaur-like announcement of suspension of regulations and a plea for everyone who has an idea for a new business to go out and try it -- I make no doubt that the US is as smart as Germany was back in the days of the German Economic Miracle -- but I do not think that will happen.


Subject: Lost stock value

Dr. Pournelle,

I'm sure you're getting plenty of e-mail on the subject, but I thought I'd throw in my 2 cents.

You say that 1 trillion dollars has been lost, and some regained. This seems incorrect for a number of reasons.

The first I've seen mentioned on your site: stock is only money when you sell it. Hold onto the stock and it will eventually come back up, and thus you've lost nothing. If you need income today (or in the next 10 years), why is your money in stocks? Invest in low risk funds, rolling CDs, or an FDIC insured savings account if the market is particularly volatile.

Second, the much of the 'value' of these stocks is not actually gone when the stock price drops. It has just been shifted to the person who sold their stock when it was at a higher price. The money hasn't disappeared, it's been transformed from stock into currency (probably quickly deposited into those CDs or savings accounts I mentioned).

Finally, the whole argument of creating and destroying wealth is rather silly on this scale. You stated that the Irish government is "injecting" $563 billion into their system. The problem here is that they aren't creating $563 billion of product (gold, computers, crops services, whatever), they're printing $564 billion in paper money). They've stolen $563 billion from the CDs and savings accounts and given it back to the banks.

The problem here is the nature of fiat currency in general. Our money is based on human confidence, not on actual stuff. We've shown this week that human confidence makes for a really bad currency. If people only loaned money that actually exists, we wouldn't be in this mess. The governments of the world are desperately trying to create human confidence, and that doesn't seem to be as easily created as paper currency.


Ryan Brown

Hold on!  Hold on! Do nothing. Have confidence, and hold on! That's one set of advice. Some will take it. If the market recovers they will have done well. If it tumbles more, they will not. Which will happen? Do we know? Rationally the factories are still there and the houses have not shrunk. Nor had they in 1935.

Our money is based on human confidence, not on actual stuff. We've shown this week that human confidence makes for a really bad currency.

I thought I had been saying that for months. Nothing is going to be decided by rational thought. It is all going to be done by guessing what the effect will be on public confidence, but tempered with the irremovable desire of the political leaders to wet their beaks in the flow of money. That's what will happen.



Subj: Command Post of the Future becomes Command Post of Right Now


>>CPOF is basically a PC based software and communications system that enables users to collaborate with other units and officers, and plan and run operations in real-time. Each CPOF PC has three flat screen displays, which is unusual for your average PC user, but quite common for corporate heavyweights and Wall Street operators. There are now over 500 of these CPOF PCs in use at brigade and higher headquarters in Iraq and Afghanistan (and worldwide). ... CPOF showed up in Iraq four years ago, and emerged from beta (was officially "released") two years ago.<<

But the neatest thing is the way it was developed. There had been blue-sky/science-fictional R&D projects, and a few subsystems -- like Blue Force Tracker -- deployed. But it really came together when several individual combat divisions, and later some HQs in Iraq, and supporting ops in Iraq, put together their own improvised CPOFs using commercially-available components. *Then* the standardization and procurement bureaucracy started trying to catch up.

Rod Montgomery==monty@starfief.com



Mr. Pournelle,

Seeing as you have a dog, I think that you might enjoy this true story (try putting a version in one of your books!):



One of my co-corkers, Craig Tenhoff, has a wife (from Canada) who, prior to their marriage, raised and sold Irish Wolfhounds (imagine a Greyhound 3 times as big and with long heavy fur and a long, pointed, teeth-lined muzzle like a mammal alligator -- they were bred to take on wolves one-on-one and WIN!!). This story occurs during that time.

One day she was driving and stopped at a stop light. She did not have her doors locked and a man, for some unknown -- but probably nefarious -- reason, opened the front passenger door and jumped in.

This might have been a bad thing for my friend's future wife, except for the fact that the would-be trespasser had not looked in the back seat of her car prior to jumping in.

Now for the G-O-O-D part!

In the back seat was her favorite Irish Wolfhound pet. Now, if the dog had attacked the man, this would not be a very unusual or interesting story, but that did not happen.

What happened was that the dog, very calmly, pushed his head into the open space between the two bucket seats in front and then turned his head and LOOKED at the man, not growling or anything. The dog simply used its body language to say: "YOUR MOVE..." (or possibly: "ARE YOU FEELING LUCKY ... PUNK?")

The man exited the car and almost tore the door handle off in the process...

Now THAT is a "JOE COOL" dog!!!



Nathan Okun


regarding the dog story

Dr. Pournelle,

Regarding the dog story...

A while back I dropped my wife off at an appointment in a very small Minnesota town. Not having anything to do, I drove down to the little tree-filled town park, sat in my car, and read a book while I enjoyed the quiet fall day.

After a while I noticed about four 5 to 6 year old kids playing in a little clearing, far from any house, and got kind of concerned. There was no one else to be seen. The kids were too young, in my opinion, to be unaccompanied. I was willing to play protector if needed, but I couldn't tell who was their parents and who was not.

While I was thinking about this, I got a very eerie, physical feeling that I was being watched. There was no question, it was an actual sensation, not a suspicion. I looked around carefully, paying more attention since I knew someone was out there...

...and about thirty feet from the kids, it's mottled bark-colored body curled up next to a tree in the shade, was a very large dog. It's head and ears were up, and its flat brown eyes were staring intently and directly at me. I didn't get any language messages off of the dog - it was more like being in crosshairs than being talked to - but it was crystal clear I didn't have to worry about the kids, and that I should stay in the car. There was a capable and attentive adult already guarding the children, and it not only didn't need my help, it didn't really want me around. So I stopped worrying, and went back to reading.

The thing was, you could tell it hadn't just laid down in the shade, it had picked a duty station where it could watch the children and the surrounding area, with the tree at its back, in a place where a bad guy could not easily spot it. And the sense of ownership it had towards those kids was palpable. I still feel good about that dog.

Name Withheld


Sable and I saw a coyote the other night. She knew it wasn't a dog.

Huskies ar the friendliest animals in the world, but they are wolf dogs, and if they think there's a real threat to the pack, they don't look like friendly dogs any more. They look like wolves. Sasha (Sable's predecessor) was that way. One day a guy up on the trail yelled at Roberta. Sasha stopped being so friendly looking. The yelling stopped and frantic apologies began.


Now Foreclosure Law

Hi Jerry

i do not know how to get the idea out there and acted on but what now needs to happen is a new foreclosure protocol or law that is enacted simultaneously with the bailout.

this involves a first intervention whereby the borrower surrenders fifty percent of his equity on the property in exchange for a new mortgage at market rates on 75% of the value of the remaining fifty percent.

the balance of the debt is eaten by the lender in exchange for a clean fifty percen ownership stake and the borrower retains the right to purchase that stake at market price upon paying of the new mortgage, perhaps years later.

In this manner the lender retains a viable customer who is incentivised to maintain the property. it may even be possible to revisit properties now owned by the banks.

The majority of borrowers will be able to manage this and most will eventually prosper.

only when this fails does the lender have the right to final foreclosure.

In this way the bailout extends to the all the victems and has a good chance of been a very good solution now and forever more.

And no one seems to understand that the trillion dollars has already bedn lost. the question is now we are going to pay for it without collapsing the economy.


And for those whose equity is negative? (That is, they owe more than the place is worth.) Of course if prices go back to bubble level that won't be true. What's needed is magic: a means of getting housing prices to something like intrinsic value, whatever that is. And since no one knows what that intrinsic value is -- is my house worth the $30,000 I paid (as a professor I only had to put up 10% down) plus the $100,000 in improvements (Footfall windfall, mostly), or the $1.4 million I was offered at the height of the bubble? Probably somewhere in between, but just where? It takes a market to determine the real value; and at the moment we don't really have one.


Tuesday's Boyles blog has neat pic of something really large hitting Earth. It looks like a sombrero.


R Hunt

P.S. After the Wachovia collapse I hope you can still feed the dog.

P.P.S. The new Alaska postage stamp will show the classic Iditerod scene with a dog team in the middle of an endless plain with mountains in background. Out Jan. 2.

Like most people my actual savings are for rainy days; I live off my income or try to (and thanks to subscribers I managed to do that this year while getting zapped with 50,000 rad and my writing income essentially vanished); so we can still feed Sable. Being somewhat wolf like I presume she could hunt gophers if she had to, but he's a bit of a primadonna and thinks of that as a hobby.

Now if I can get through the next couple of months so that I can finish some income producing work...


Dr. Pournelle,


The moral of the story is: Don't be too efficient, or we'll cut your budget!


Ryan Brown

'Twas ever thus.


I periodically clean out the junk mail folder. This came in last week:

Hi Jerry

It is hard to avoid commentary in the current crisis situation. First off, we all need to recall that all the bailout money has been lent out over the past five years and the banks have no way of recovering it. If this bailout were not to happen they would have to go under and massive amounts of good mortgages would need to be called in the midst of a collapsing housing market as happened during the depression. You will wake up one morning and find that your house is worth ten cents on the dollar and that your employer who relied on inventory loans is out of business.

This is a first step that will at least allow a slow painful recovery while it all sorts itself out.

A second step is to impose a mark to market strategy as I have described on my blog. That would restore credit to those forclosed on and create a strong housing market right away.

However, no one is going to understand what I am saying in enough time to make it happen, so this is academic.



This was also hiding in junk mail

This one comes from James P. Hogan's website.


"A Los Alamos-based company called Hyperion Power Generation, Inc. is developing and commercializing a design pioneered at Los Alamos National Laboratory for small, factory-sealed, mass-produced, transportable nuclear power module based on training reactors that have been safely operated for years in universities and laboratories around the globe."

"A unit delivers 70 megawatts of heat, which equates to 27 megawatts of electricity when driving a steam turbine--sufficient to power 20,000 typical American homes--and is small enough to be transported on a truck, There are no moving parts to wear down, and units are never opened on site. The design precludes any possibility of the reaction going supercritical or resulting in a thermal runaway type of emergency situation. The waste produced after five years of operation is approximately the size of a softball and is suitable for fuel recycling."

Disruptive technology with a VENGEANCE.

Can you IMAGINE the looks on the Green faces, when you point out the inherent safety, near-zero waste, and zero CO2 emissions (aside from the delivery trucks, once every five years)?

Can you IMAGINE the looks on the coal miner's WIVES' and MOTHERS' faces, when you tell them "No more black lung disease, EVER!"?



Different people affected different ways by the current financial crisis

Doctor Pournelle:

I see that some of your mail correspondents seem to think that the current financial mess isn't a big deal. I can see why, too, and it isn't because they are complete "maroons."

I'm 47, and I'm willing to bet that a lot of your fans are within five years of that. We started reading you in high school and in college. Most of us probably look at this as the "down year" for our 401k. On the other hand, you're my Dad's age. He retired a few years ago and is getting money from his retirement. Market fluctuations directly reflect the value of a fund, and the subsequent disbursements. Folks closer to my age will think, "I'll just keep contributing to my 401k" and this isn't a major problem. Dad is 72. He's grumpy. He's ticked. Market fluctuations such as Monday's and Tuesday's affect him directly in the wallet.

The young, used to financing their ways through life, see the current crisis as an inconvenience. Your generation sees it through the prism of actual past events. While I'm relatively young, I'm the son of a stockbroker and recent events have me worried.

For the guy who asked why someone wanting disbursement didn't invest in CDs or savings accounts? Because the return was less than the inflation rate! Why didn't he ask if those folks didn't stuff their savings into mattresses or bury it in the back yard.

I'm actually considering a career change in the near future. Twenty years of tech writing has gotten a bit stale, and I'm sure not using my MBA. The thing is, a friend is looking to open a pizza and kebab shop in a great location (across from a large high school in an upscale area), and I'm developing his business plan. The way things are coming together, I might just want to run his business. He's asked me and I've begged off. The big question facing me is, "Am I nuts to change careers during economic upheaval?" We'll see.

Anyway, continued recovery from your cancer!


Bill Kelly

Houston, Texas

Depends on what you are changing from, but the food service industry is fiercely competitive and operates on very thin margins.

You are of course correct; it's going to take a while to recover from this mess, and in the long run we are all dead.

To the best anyone can tell I am no longer recovering from cancer which is gone, but simply trying to catch up on all the work I didn't do in the last year or so. Thanks.



 read book now




CURRENT VIEW    Wednesday


This week:


read book now


Thursday, October 2, 2008

Several friends have asserted to me that McCain is "doomed" as a candidate because of the sub prime financial crisis, and resultant Wall Street Crash. Driving home, I heard the same forecast from an NPR pundit. I don't get it.

Obama is the "Senator from Acorn," an activist lawyer working for Acorn who litigated to prevent banks "redlining" to block home loans for those who couldn't repay them. Conversely, McCain opposed these "affordable housing" programs -- against the flow, often in opposition to his own party, and sometimes as a lone voice. These were the policies of a Democratic Congress.

I recommend the 10 minutes to watch this, it moves very fast, so you may need to keep your finger on the pause button like I did.


So why blame Bush for "failed economic policies" that Congress mandated? And -- the part that I truly don't get -- Why does the failure of the Democratic programs that Bush didn't oppose, but McCain actively did oppose for many years, sponsoring bill after bill to prevent this crisis, "doom" McCain's campaign?

If anyone can explain this, I'd sure like to hear why McCain's" doom" and Obama's election is being stated as an obvious, self-evident truth of the sub prime crisis. I simply don't get it. It makes no sense to me. And why isn't the media talking about Obama's Acorn connection to sub prime loans? Thanks.


John D. Trudel


Obama on your iPhone...


On my phone, the application ranked contacts in Colorado, Michigan, and New Mexico at the top; at the bottom was a friend whose cell phone has a Texas number, though she actually lives in California.

The application anonymously reports back the number of calls made this way: "Your privacy is important: no personal data or contacts will be uploaded or stored. Only the total number of calls you make is uploaded anonymously."

The software is the latest effort by politicians to capitalize on technology, joining other examples such as ads distributed through YouTube, Web-based fund-raising, Facebook pages and fan groups, and e-mail recruitment drives.


Subject: David Mamet (producer of the unit)


David has become a believer in America:



A remarkable document. Indeed.


Pushing water uphill

Both American and European lawmakers need to hear and ponder the following:

What caused the bubble and collapse of the credit system was not inadequate oversight and regulation, it was excessive involvement (derigism, if you will) in the fundamentals of the system. Credit granters were told, "Make bad business decisions, and do not charge anyone for the costs of taking on such huge risks." Freddie and Fannie were nothing if not engines of stupid credit decision-making, and they were made and held virtually untouchable and unaccountable for the consequences.

But Reality Bites, and it bit. Stupidity remains the only capital crime in nature.


As far as alternatives to the purchase of underwater assets, many economists have recommended following the frequently-employed strategy of taking near-majority preferred equity positions in troubled banks and institutions, thereby recapitalizing them, and selling the stock back to the firms or market when conditions make it desirable to do so. This leaves the nitty-gritty valuation and asset management in the private sector's hands rather than inventing a huge bureaucracy to somehow do so. This should be accompanied by elimination of the mandate to make bad loans up front which blew Freddie and Fannie out of the water.


Similar to the Swedish recovery.




 read book now




CURRENT VIEW    Thursday


This week:


read book now


Friday,  October 3

Another interesting piece on the mortgage meltdown


It's a transcript of this show:


in which people who were making all those bad loans explain why they think it all got started and how it developed.

Entertaining if you can keep your lunch down while reading it.

. png

Fascinating in fact. The Global Pool of Money....

As I have said. Left to itself, capitalism will end with human flesh sold in the market. After all, everyone else is doing it.

(Morning: the more I think on this one, the more I recommend you read it). Do understand it is not the entire story. First came the CRA urging more loans to minorities meaning lessening verification of income requirements; and of course that meant equal opportunity bad loans for all races, and for all purposes including house flipping. Once that camel's nose was in the tent...)


Punishment for efficiency

Hello Jerry,

Further on the following note from one of your readers:

Dr. Pournelle,


The moral of the story is: Don't be too efficient, or we'll cut your budget!


Ryan Brown

When I was working for a Government Agency Which Shall Not Be Named, there was only one absolutely unforgivable, unrecoverablefrom, career ending sin (other than getting in diversity trouble) and that was arriving at the end of the fiscal year with money in your project budget. You may get away with it once, early in your career when you are young and green and don't know any better, but twice and you are toast. NO amount of screwing up a project, wasting years and cubic acres of money, while producing nothing, could equal the stigma of not spending all your money.

Bob Ludwick

The Iron Law in action.


"California is so large that our short cash-flow needs exceed the entire budget of some states."


-- Roland Dobbins


Senate Bailout Bill 

Here is an interesting take on how the Senate manhandled their bailout bill: http://online.wsj.com/article/SB122295529395598169.html 

Those Wacky Senators

The financial crisis inspires a sublime legislative pun. By JAMES TARANTO

By a vote of 74-25 <http://www.senate.gov/legislative/LIS/
110&session=2&vote=00213>  , the U.S. Senate last night approved a bill aimed at "providing stability to and preventing disruption in the economy and financial system and protecting taxpayers"--popularly called the bailout.

Or, as it is formally known, the Paul Wellstone Mental Health and Addiction Equity Act of 2007.

When the House rejected the same measure Monday, it was known as the Emergency Economic Stabilization Act of 2008. The Providence Journal <http://www.projo.com/news/content/
patrick_kennedy_bill_10-02-08_PEBPTH3_v12.19778fa.html>  explains what happened:

In part, it has to do with the U.S. Constitution. Article 7, Section 1 says tax bills must originate in the House of Representatives.

In order to improve chances that the bailout bill, which the House defeated on Monday, would be approved this time around, the Senate tacked on several popular provisions, such as extending the life of business tax cuts that were set to expire and changing the alternative minimum tax, a much-loathed part of the tax code intended to ensure that the well-to-do pay their fair share but that in recent years has increasingly affected the middle class.

And an element of the tax package was legislation advanced by [Rhode Island's Rep. Patrick] Kennedy that requires health-insurance companies to offer coverage of mental illness on a par with that of physical illness.

Once the Senate added those provisions to the rescue bill, it qualified as a tax bill, which the upper chamber is constitutionally prohibited from originating.

In order to get around the Constitution, the leaders turned to the time-honored stratagem of finding a live but dormant House bill--Kennedy's mental-health parity bill--to use as a shell.

"They take out the entire text" of Kennedy's old bill, "and then, by amendment, they substitute the other bill," said Don Ritchie, an assistant Senate historian.

So the bailout ended up attached to a measure that extends benefits to people suffering from depression and is named after a lawmaker who died in a crash. Never let it be said that the U.S. Senate lacks a sense of humor.



A dialogue

Subject: Bailout 

I've been reading your take on the bailout for the last few days and find very little to disagree with. You are spot on that many of the same scoundrels who created this mess are now going to use it to not only create an even larger mess but grab more power in the process. The Iron Law is in full force here. The sad part is I don't see another answer except letting them get away with it, which may have been their intent all along. If they do nothing it is very likely that many pension funds, my parents and many others included, will be severely depleted. This will be a much greater disaster than bailing out a few 'rich cats'. At least by doing something, they may mitigate some of the pain for my parents.

Unfortunately, it also has soured me on voting for Senator McCain in the upcoming election. I had given his campaign money and even hosted a few parties with friends to discuss why we should vote for him. I now regret that. I understand why he voted for the bill. I probably would have done so myself had I been in his shoes. I would not have been a vocal supporter of it, however. I would have decried it all the way to my yea vote and made sure everyone knew I was only doing this because Jimmy Carter and his ilk had built the coffin, Clinton had laid on the lid, Democrats and Republicans alike from Carter until today had been driving in the nails, and to not vote for it would be helping to dig the hole and tossing in dirt on top of the many Americans who listened to and believed the empty promises of We Will Take Care of You coming from Washington.

I can't vote for Senator Obama. Though some of his ideas sound good on paper they fail miserably in the light of reality and the human condition. My only choice therefore is Bob Barr and to therefore let the deluded and utterly bought American people do what I would not - put Senator Obama in the White House.

I am very glad that you are very much your old self again. As usual, your comments and ideas inspire and challenge me. I look forward to reading Escape from Hell and the 5 or 6 dozen more books you will write in the coming years.

Braxton S. Cook

I replied

If you don't like McCain wait for Obama's New Deal

I was never really thrilled with either and only contributed cash to McCain because I REALLY don't want Obama to win. Looking at his record and now with his enthusiastic vote to increase Democratic control of our financial system, I'm not really sure there is a difference.

A friend of mine has said many times that a single president can't mess up the country that much. Looking at history, I don't think that's true, but I certainly hope it's true for the next 4 years because I think we're in for a very bumpy ride no matter who wins. Is there really any difference between a New Deal and Conservative Big Government?


It is useless to vote for a bill to increase confidence and at the same time denounce it. If the goal is to build confidence, then one must act confident .

That is not what I was suggesting. I was suggesting he denounce by name those who got us into this mess while voting yes to what appears to be the best solution. I listened. I never heard him say this was something caused by government that had to now be fixed by government. It's still a crap shoot as to whether this will have any lasting impact at all, but doing nothing will almost certainly lead to very rough times for people who don't deserve it; my parents being two of them.

Close to my sentiments. I cannot guarantee that an investment bill will prevent th panic, nor can I guarantee that having none will bring ruin. I can only make estimates based on some 50 years of reasonably intelligent observation plus what I hope is a sense of history.

These are matters of what I call real uncertainties; we have no reliable statistical data. Read the transcript that opens today's mail about the misuse of statistics.


Have you seen this?

Karl Rove as the author of the financial collapse?



A Clinton time bomb left for Bush? And poor George couldn't figure out the combination.



Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring. Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''






This week:


read book now


Saturday, October 4, 2008

I posted a bunch of mail last night, so go look at that while I put up today's... And if you didn't see the transcript of the radio inquiry into just how we go into the financial mess, read that.


Subject: Ups and Downs


View full size Here is a graph from the 1948 book Cycles, by Dewey and Dakin, that I believe Heinlein used in writing "Year of the Jackpot." It shows the 18.33 year cycle in building activity, projected forward to ca 1970, with the various financial panics noted. (There was a minor panic in 1910, not indicated.) Interested readers are welcome to project to the present day to learn that there ought to be a Panic round about 2008 just before the cycle hits bottom.

Mike Flynn

Stefan Possony alerted me to Dewey's "Cycles" publications, and I have those books here although I have to say I have not seen them since the Earthquake scrambled my library; I probably ought to go find them. I suspect that you and I are the only people left who ever heard of them now that Steve is dead. I was never able to decide which of the cycles plotted is grounded in some kind of real world causes, and which are something else. And of course because something is "real" with many confirming observations doesn't mean that underlying causes haven't changed so that the prediction isn't valid. See Bayes' Theorem ...

(For a breezy explanation of Bayes' Theorem, see http://yudkowsky.net/bayes/bayes.html )


Subject: Honesty and Transparency in Government


I didn't realize just how underhanded and dishonest the US Congress was. I knew it was bad and getting worse, but I had no understanding of how badly Congress was screwing the American people.

I think that I am fairly knowledgeable. I have read the LA Times and the Wall Street Journal every day for more than 30 years. Imagine how in the dark the average voter is. This is something that just isn't known by the average voter and isn't being covered very well by the press.

The "bailout" bill signed by the President today is really the last straw. The ability to purchase assets from financial firms in order to restore some semblance order to their balance sheets and allow credit markets to clear is in there. What is also in there is a bloated mass of festering garbage that will more than likely have the opposite effect in the mid to long term. It is nothing short of criminal that our elected representatives allow this kind of scam to be perpetrated on the Citizens of this country.

In California, the initiative process limits an initiative to a single subject. Would that the US Congress modify its rules to require the same for its resolutions. In the absence of Congressional Rules changes, perhaps a Constitutional Amendment might be in order. If a rule like this were in place 4 pages might not have become close to 500 pages and Washington would be a little less of a toxic dump requiring super fund clean up.

Bob Holmes

Welcome to the sausage factory... Most of that cruft is courtesy of those who originally voted against the bill, thereby lessening it's credibility and effectiveness, and then were induced to get aboard. As I said would happen.


Subject: Bill Whittle on the bail out bill


You will enjoy and be horrified by this.




Nuclear plants and Congressional corruption

Hi Jerry,

You write:

"Interesting statistic: if all the nuclear plants on order at the time of Three Mile Island had actually been built, the United States would be in compliance with Kyoto or very nearly so. I do not believe I have ever heard Al Gore or any of his supporters, or any of the Kyoto supporters, mention this."

This is an aspect of something really irritating about environmentalists: pick any particular technology (nuclear: too dangerous, hydroelectric: destroys habitats, coal: horror!) and they are against it. Ask what they are *for* and the only answer you get is "conservation". They are are a classic example of wanting to have your cake and eat it to - apparently enough conservation would let us do without electricity altogether...

On the subject of the bailout bill, it's a shame it passed (I know you differ). What's more of a shame is that the original bill was a sleek three pages, but the final bill was somewhat larger. It contained dreadfully urgent provisions such as the tax deductions for donations of unsaleable crops by farmers, a subsidy for the United Mine Workers union, tax credits for corporations in American Samoa, and on and on.

Link: http://www.taxpayer.net/resources.php?

Sickening corruption, up front and in your face. Our Congress at work.



If conservation alone would create wealth, Bangladesh would be the wealthiest country in the world.


What else is in the bailout bill? 

If you look at page 180 of the 451-page monster bailout bill that easily passed the Senate yesterday (PDF here <http://banking.senate.gov/public/_files/latestversionAYO08C32_xml.pdf>), you will see that it includes at Section 116 language about the tax treatment of “industrial source carbon dioxide.” It also provides, at Section 117, for a “carbon audit of the tax code.”

What could a provision about the tax treatment of “industrial source carbon dioxide” and another provision about doing a “carbon audit” of the tax code possibly have to do with restoring confidence in Wall Street’s troubled credit markets?



Just what did you expect giving Congress a week to play with the lobbyists?


Bail outs etc.

Hi Jerry,

I have been following the discussions on the bail out and would say two things first to you Jerry-Despair is a sin, secondly to every one "When trying to get out of a hole first stop digging"

The west is in a financial hole, you refer to the Depression and Soup Kitchens, but the worst possibility is much worse. The final cure for the Great Depression was WW2, do the people who are against government action to solve the problem really want to go down that road. This side of the Atlantic the quickest solution would be to Nationalise all banks placing the State behind them and guaranteeing all deposits and loans. The EU will not like this but one useful result of the mess may be the demise of that despicably institution. The Banks can be sold back into private ownership later ...at a profit it is more difficult in the US given the objections to "Socialism", why when you all ready have it I do not know,( what was the CRA and Americans with disabilities?). The "bailout" may work but in the absence of sane action from Washington perhaps the States should combine to act

There is one thing I would add to the list of cures your readers have suggested, "The use of commissions to remunerate salesmen, being an inducement to corruption, is prohibited"

Incidentally, as I am not totally knowledgeable about the US constitution perhaps your readers can tell me what authority Congress had to pass the CRA and other acts.

Finally as some one who works in what is left of British Manufacturing industry it is humorous..black humour.. to see the commentators trying to explain the mess after telling us for years that we didn't need to make things as the financial industry was a sufficient base for the economy.

Yours Andrew Deacon

Your solution is more government restrictions and less freedom. Perhaps so, but I suspect there will be vast and harmful unintended consequences. And if the State owns all the banks, I think you will soon regret that.


US Marines in Lebanon, 1982-1984 

Dear Doctor Pournelle,

While I respect Joel Rosenberg's opinions on Middle East matters, as he has proven his bona fides therein repeatedly, he made an error in his recent informative post on the whopper of a fable Biden told about Hezbollah/Lebanon in the Veep debate.

Mr. Rosenberg wrote:

"I thought that it was a mistake for US military folks to be put in harm's way to protect the PLO evacuation, but a much worse mistake to retreat once that -- wrong, IMHO -- decision was made.):

Mr. Rosenberg correctly recalls that the initial deployment of United States Marines to Beirut, which was on August 25, 1982 was to assist in the evacuation of PLO personnel from Beirut.

However, the Marines were then completely withdrawn from Lebanon on September 16, 1982, and were only a day away from their home port of Naples, Italy when:

" A day away from Italy, however, on 14 September, all hands were shocked to learn of the assassination of President-Elect Bashir Gemayel, who, just five days earlier, had reviewed a combined MNF honor guard and had visited with Colonel Mead. The Americans perceived that a return commitment to Beirut was imminent. This perception was sharpened by the news of the massacres on 16 September in the Palestinian refugee camps of Sabra and Shatila in west Beirut."

("U.S. Marines in Lebanon, 1982-1984" - Benis M. Frank. This is the definitive history, based on extensive interviews with the principal USMC officers and staff involved in the 1982-84 Lebanon deployment. Highly recommended as a study in the futility of such "missions", it even has a short section on the 1958 deployment of Marines to Lebanon. The author is an official United States Marine Corps historian.)


The official mission of the subsequent second 1982 Lebanese deployment of U.S. Marines was NOT to protect any PLO forces; The mission was (from the Frank history)::

". . . a presence in Beirut, that would in turn help establish the stability necessary for the Lebanese government to regain control of."

It' interesting what the Marines at the time thought of their "mission":

"...the American mission of "presence" was repeatedly discussed and analyzed by Colonel Mead and his staff. The concept of "presence," as such, was not taught in any of the military schools Marines have attended." (Frank)

Please note that Frank himself served as an enlisted man in the Marines during World War Two, as well as in Korea as a Marine Corps commissioned officer, and had been an official USMC historian since 1961 to the writing of this book in 1987. Presence: was not in any field manual. However, Marines do what they are asked, and make do with what they have. Even when that involves dying because you are sent on a foolish mission for which you never trained. "Semper Fidelis", indeed.

By the way, one reason so many Marines were in one concentrated location, and so vulnerable to a single bomb, and thus died, was (again from Frank):

"The building also provided a safe and convenient location to brief the large numbers of U.S. Congressmen, Administration officials, and flag and general officers who visited Beirut from September 1982 to October 1983."

This all reminds me of former Secretary of State Madeline Albrights; (in)famous question to then Chairman of the Joint Chiefs General Colin Powell, "Why do we have a military if we are not going to use them?"

(Ms. Albright apparently never absorbed the wisdom of the old Roman proverb: "Si vis pacem, para bellum*.*")


I noticed that also but it hardly makes any difference to the substance of what Joel said. As to my own position, I have always thought that you don't urinate on an enemy, you kick him in the genitals, and I said so at the time (back when some in Washington actually listened to me; that is, send in a lot of troops, or send in none. And I did ask what their mission was. This was prior to sending in any at all in the first place. The second deployment made even less sense to me.

The reasoning was that was that we didn't need many troops; that this was demonstrating our interest in Lebanon and peace in Lebanon, and "presence" was all that was required. I pointed out that this wasn't much of a tripwire. In Europe we not only had American troops in Giessen and other places just west of the Fulda Gap -- we also had their dependentes. American women and children. That was presence; that was commitment and the Russians understood that. In Lebanon we had Marines in barracks.

But I will say I wasn't terribly concerned. I wasn't, after all, a foreign policy or Marine deployment advisor; my role was as chairman of a committee on space and national security and strategic defense and my main thrust was trying to substitute a policy of Assured Survival for that of Mutual Assured Destruction. I was content to leave Marine deployment policy to others, which is just as well, because I doubt anyone would have paid much attention to my thoughts on deployment policy and tactics. And had anyone asked me, I would have pointed out that Eisenhower had stabilized Lebanon with an American presence.

In any event few of us thought of suicide bombers in those days. If we had, perhaps the Marines would have put up sturdier and more distant barriers, and the sentries would have had stronger orders.

Semper Fi.

And see below, on Biden, and Rosenberg.


While you're right that my error doesn't affect my main point, Petronius is utterly right that it was an error; if you could pass on my thanks for both the kind words and the detailed correction, I'd appreciate it.

-- Joel Rosenberg

"Miscellaneous is always the largest category." -- Walter Slovotsky


Observations on the collapse 


While I don't often comment, I am always glad to hear that you continue your recovery from cancer and from the consequences, and are now working through the aftermath to full recovery and production as a writer.

There may not be much new here, but I'm trying to build a summary from my perspective.

Observations on the collapse:

1. Anyone who believes that this collapse was a surprise hasn't been watching. There have been news stories for years about sub-prime mortgages and interest-only mortgages throughout the housing bubble, and warnings that the house of cards was headed for collapse. This was only possible by collusion between "Wall Street" -- which is being used as a convenient shorthand for the financial community, not without precedent -- and the government.

2. Wall Street is not in the business of losing money, and Wall Street managers know when they are playing a shell game -- and if they didn't, see point one above; they don't ignore the financial news. Wall Street managers -- at least most of them -- realize that the negative consequences of losing money start with losing their jobs and proceed on a short path therefrom either to jail or to one-way trips through upper-story Manhattan windows. These are powerful counter-incentives against greed as a short-term motivator. They don't always work, but

3. Consequently, if decisions were made that were assured of losing money -- that is, of taking risks that were not compensated by the obvious rewards -- it is because there was false information in the system.

4. The obvious sources of false information are: (a) "community organizations" such as ACORN which demanded risky mortgage investments as one of the costs of allowing banks to expand into their communities, using the strength of the Carter / Clinton era Community Reinvestment Acts as their motivators; (b) "signals" from Fannie Mae and Freddie Mac that the government would insure the risk; and most of all (c) Congress and the Senate refusing several requests to investigate the practices of FM2, lead by members who received substantial contributions from FM2. Conversely, the Administration does have oversight responsibility -- why did they refuse to exercise it despite Congressional inaction. It sounds like there is plenty of bipartisan blame to go around.

5. The "rescue" or "bailout" bill has become a necessity precisely because nothing has been done for years despite warnings. Democratic obstruction has been a major factor in that delay. But again, where was the Administration; the current financial crisis is much bigger than the money spent in Iraq; was the "Bush brand" was so damaged in pursuing the war (which I still believe was a good decision based on what was known at the time, though perhaps not the best possible decision in retrospect) that the Administration couldn't provide a proper level of financial oversight and had to look the other way?

7. Last, but not least, our economic system has come to rely on short selling, hedge funds, investment reinsurance, and other "schemes" which are designed to "spread" risk and to profit from failure. We've just had a massive failure; who profited?

Note this current NYT article:

Then this one:

"Alarmed by the unfolding crisis in the financial markets, (George Soros) once again began trading for his giant hedge fund — and won big while so many others lost."

The August story ignores that Soros was instrumental in fomenting -- and profited immensely from -- the British financial crisis of the early 1990's that it blames on Thatcher's policies. Note which party Soros is publicly and expensively backing. It's much easier to see him as a representative of the Wall Street fraud that politicians are railing against, than as the magnanimous figure he is portrayed by the NYT.


I suspect you overestimate the intelligence of the Masters of the Universe and greatly overestimate their steely nerves. The collapse was coming, and there had to be retraction, but like St. Augustine praying that the Lord would grant him chastity, but not just yet.












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CURRENT VIEW     Saturday

This week:


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Sunday, October 5, 2008      

Regarding Biden and Hezbollah:


are you that f***ing stupid?

(having read your BYTE reviews

I guess I already had the answer )

Biden was talking about early 1980s

muslim groups against Israel

France and US troops together what they did

so it was PLO and not hezbollagh

so f***ing WHAT!

nick werle

[Bowdlerization by the editor.]

I am at a loss to understand where in the 1980's Barack Obama published his views on the situation and his recommendations on US policy in Lebanon; Obama was born August 4, 1961  and would have been about 21 years old at the time; and since Obama was explicitly mentioned in Biden's statement, it's confusing.

In Thursday night’s vice presidential debate between Senator Joe Biden and Governor Sarah Palin, Biden said “When we kicked — along with France, we kicked Hezbollah out of Lebanon, I said and Barack said, “Move NATO forces in there. Fill the vacuum, because if you don’t know — if you don’t, Hezbollah will control it.” Now what’s happened? Hezbollah is a legitimate part of the government in the country immediately to the north of Israel.”

I have been unable to find any references to Biden's policy suggestions at that time. It would be futile to look for Obama's views since he was an undergraduate, I think at Occidental in Los Angeles (I lectured there on Bronze Age and the Dark Age about the time he was there; I wonder if he heard my lecture?) Perhaps it was a simple confusion of Hezbollah and the PLO, but at the time Barack was not likely to have had views on the subject, and I can't find Biden's. Perhaps my stupoidity blinds me.

But even if this is what he refers to, it's not at all clear that it would be a simple thing to move NATO troops into Lebanon. The Israelis and their Christian Lebanese militia allies were active in the south. I had not heard that Biden (and Barack?) urged NATO intervention. At the time I still had contacts in the White House and I recall one discussion in which my advice was to stay out of Lebanon unless we intended to go in strength and do some actual national building, converting Lebanon into a kind of protectorate; and after the bombing of the US Marine barracks (and an attack on the French encampment, which has been overlooked in modern discussion) I did think we ought to go back in force; but that was in Cold War times.

But anyone who understands Lebanon is more of an expert than I am. Possony spent some time there and he didn't believe he understood it. Taleb of Black Swan fame is from Lebanon and his explanation is that a Black Swan ruined his country. Perhaps Biden and Barack Obama understand the situation, and those of us who do not are nuts, but I do know that in 1982 moving in NATO wasn't an option. Also I would have thought that Hezbollah wasn't a major factor in Lebanon in 1982; it was just being formed at the time. If Biden was aware in 1982 of the importance that Hezbollah would later assume, he was prescient indeed; but I find no evidence of that.

I understand why Sarah Palin didn't call the Senior Senator from Maryland, who is supposed to be a foreign policy expert, on this during the debate. I would have been reluctant to do it: when someone who is supposed to be expert says something totally inexplicable, one had best be a lot more confident in one's views than I would be, and if I'd be a bit wondering, I'd imagine that the Governor of Alaska (or just about any state governor) would be reluctant to challenge the expertise of Senator Biden without some fact checking.


Joel Rosenberg on the 1982 incident.

After Joel sent his reply to my query about Biden, I sent him a short message:

> Actually your views were mine: we probably should not have been there in the first place, or if we were we ought to have been there > in force with a purpose; but to retreat under fire was a mistake. I told Reagan's people -- they listened to me then, although more > for space and high tech than military -- but nothing came of it. > > Thanks!!

He replied:

Re: query

You're welcome, of course.

I wrote to the National Review at the time of the "redeployment" that it was a horrible mistake, and got a letter back from Bill Rusher explaining that Reagan's only problem in this was "hysterical conservatives" like me. :)

I've been following some of the futile attempts to explain this gaffe, and, well, none of them make any sense. The closest thing that he (very weakly) arguably meant was something that I was arguing, back in 2006, was the least bad possible outcome from the invasion (after it became clear that Olmert was an incompetent boob, who really thought that fighting along Hezbollah's line defense was not only not insane, but the right move): insertion of a massive, expendable (read: FFL, to fudge on the "massive" part, if not the expendable part; there's only nine regiments, after all) as a buffer between Hezbollah and the Israelis. The combination of non-Hezbollah Lebanese and sufficient outside forces could have destroyed Hezbollah, but the folks who found the Israeli attack unstomachable wouldn't have had words for the bloodletting that would have ensued.

Biden and Obama, of course, wouldn't have supported anything like that, and would have been screaming bloody murder if the Bush administration had suggested it, much less were standing around urging it. And there's no reason whatsoever to think that the French were interested in expending the entire Foreign Legion in Lebanon.


I suppose I was also considered an hysterical conservative, although Buckley never told me so. If Biden refers to the 2006 Summer War (widely discussed here by Rosenberg and myself) it's even less comprehensible, and it's hard to find any references to Biden's advocacy of NATO intervention. Did the Israelis ask for NATO intervention? Would they have allowed it? Would Lebanon?

Boden's attempt to snow Palin becomes even less comprehensible for a foreign policy expert.









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