Wednesday, December 31, 2008

In Betweens

My eleven year old son and I drove to a nearby town for my doctor visit and so he could have a bigger selection of games on which to spend some Christmas money. On the way we talked about the language of meals.

I am from an in-between generation in the south. My parents ate breakfast, dinner, and supper. Non-southerners ate breakfast, lunch, and dinner. So from my family I got one language and from television I got another language. My kids have much less confusion since their parents are muddled, while the television is clear.

The only thing I cannot figure out in all this is the meal at school when I was young. We ate lunch--I don't know why. Everyone's parents knew that the noon meal was dinner, but their kids ate lunch at school. In fact, Huey Long, noteworthy socialist governor of Louisiana, provided free lunches, not dinners, at school.

I would love to blame the national government for the confusion at school, but in Huey Long's day the federal government stayed out of schools.

The word "dinner" is first recorded in the year 1297 and meant "the main meal of the day." Dinner was originally the first meal of the day, but eventually became the noon meal. "Lunch" is first recorded in 1829, however "luncheon" dates from 1580. In either case, "dinner" predates "lunch" by centuries.

Why did we have to change it!?

Wednesday, December 24, 2008

Nature of God

I read an editorial today about a debate between Christopher Hitchens and Heather Mac Donald as to whether Christians are evil or merely stupid and unthinking. It reminded me of a debate from Catch 22 between Yossarian and his lover, Lieutenant Scheisskopf's wife. The whole scene is great, but I'll start just before the punch line. Yossarian is talking about God.


'You know, we mustn't let Him get away with it. Oh, no,we certainly mustn't let Him get away scot free for all the sorrow He's caused us. Someday I'm going to make Him pay. I know when. On the Judgement Day. Yes, that's the day I'll be close enough to reach out and grab that little yokel by His neck and --

' 'Stop it! Stop it!' Lieutenant Scheisskopf's wife screamed suddenly, and began beating him ineffectually about the head with both fists. 'Stop it!'

Yossarian ducked behind his arm for protection while she slammed away at him in feminine fury for a few seconds, and then he caught her determinedly by the wrists and forced her gently back down on the bed. 'What the hell are you so upset about?' he asked her bewilderedly in a tone of contrite amusement. 'I thought you didn't believe in God.'

'I don't,' she sobbed, bursting violently into tears. 'But the God I don't believe in is a good God, a just God, a merciful God. He's not the mean and stupid God you make Him out to be.'

Monday, December 22, 2008

Scaling The Heights of Stupidity

I should not blog while mad. This is a nerdy rage, though, since I am an indignant economist.

Our Treasury Secretary, Hank Paulson, got $700 Billion to spend buying up toxic securities. He then started buying billions of dollars of bank stock, rather than toxic securities and later announced that he would not buy any toxic securities, which are the root of U. S. financial problems. Few banks were interested in the government buying a share of their ownership. Banks who did not need the money did not wish to appear unsound and did not wish to find later that government string were attached to the money. Most notably, Wells Fargo did not go gently.

Then the treasury department turned the issue around. "Hey, if you're not taking our money you must not be able to meet our criteria, so your depositors better worry about whether you are sound!" So banks started applying for government money.

Now politicians are outraged that many banks who took the money are paying their executives year-end bonuses.

If government goes after these banks for paying bonuses, then government will be revealed as having forced a deceptive, involuntary takeover of banks.

Nerdly steam issues from out my ears.

Saturday, December 20, 2008


Our family's big meal--the one that we cook two or three times per year and spend lots of money on--is gumbo. We were thinking of serving gumbo for Christmas dinner, but we decided to have friends over tonight for gumbo.

For those who do not know, gumbo is often described as a spicy soup. Mathematically speaking, the gumbo space is partitioned into creole and cajun gumbos, as well as into seafood and non-seafood gumbos.

We make cajun non-seafood gumbo, but I like some of the other stuff, too. Creole gumbo is sort of a tomatoee spicy soup. Cajun gumbo is more like a spicy gravy soup.

Seafood gumbo starts with seafood stock--made by boiling shrimp or shrimp shells or some such. Cajun gumbo is made in chicken stock.

A good cajun (non-seafood) gumbo is dark brown or black with lots of little pieces (maybe 1/4 inch dice) of chicken and spicy sausage (preferably andoullie (pronounced ahn-DU-ee)). I have been served this stuff in the best restaurants in New Orleans, but I have never had any that surpassed mine. A few have matched mine, though. The best cooks use a recipe similar or identical to mine.

Here is how I make it. (Don't worry, this is not exactly a recipe. It is cultural theater.)

Rub some chicken with cayenne pepper, garlic powder, and salt, then flour it, and fry it. Heat oil in a cast iron skillet, then add an equal part of flour and cook that over high heat, stiring constantly. The flour will brown and turn nearly black. Just before the flour burns, pour in diced (I prefer pureed) fresh onion, bell pepper, and celery (known as "the trinity" in southern cooking). Continue cooking over high heat. I cook this stuff until the oil starts to separate from the mixture.

Drop this goo, called a roux (pronounced roo), into boiling chicken broth. Add diced sausage and a bit of fresh minced garlic. Simmer for 45 minutes. Add diced fried chicken and serve over rice.

Cooking gumbo takes about three hours. I once sold gumbo as a fund raiser for my son's cub scout pack. My dad and I took an entire day to make seventeen gallons of gumbo. We sold it for an exhorbitant price and made about three hundred dollars profit for the scouts. We cooked it outdoors on two butane cookers. The hard part was making all that roux in the cast-iron skillet. I stood at the stove for three hours. I was wrung out. Everybody raved about it, but I never got to taste it, since it all sold.

More Skepticism

I recently talked about skepticism. A recent news release illustrates what I mean.

The story is here.

My summary is this. Scientists found leaks in the magnetic field that surrounds Earth, protecting it from the solar wind.

The new observations "overturn the way that we understand how the sun's magnetic field interacts with the Earth's magnetic field," said David Sibeck of NASA's Goddard Space Flight Center in Greenbelt, Md., during a press conference today at the annual meeting of the American Geophysical Union in San Francisco.

Al Gore should take note that sometimes we do not know what we thought we knew.

Tuesday, December 16, 2008

Daddy, What Happened To The Dinosaurs?

I am a religious believer.

About man's knowledge, I am a skeptic. Back when I was born, a scientist would say to his son, "The dinosaurs are with us. They evolved into the creatures you see, including us." Back then, everyone thought change was gradual and evolutionary.

Then a few decades ago, a scientist colleague of mine would say to his son, "The dinosaurs were all killed when a massive asteroid hit the earth near the Yucatan Peninsula in the Gulf of Mexico."

From what I have recently read, a growing fraction of scientists are telling their kids, "The dinosaurs were killed when huge volcanoes in India poisoned their air."

I love learning about science. But I do not take it seriously. Science is an interesting detective fiction that is rewritten every so often.

Thursday, December 11, 2008

The Body Cooled Down

In July, August, and September the housing market and investment banking industry was dead and twitching. Now that the body is cold, a U. S. House of Representatives regulatory committee finally put the blame on Fannie Mae and Freddie Mac (the FMs), which is almost where it should go.

I said this stuff three months ago here. The ultimate blame goes to congress, though, particularly to our representatives that prevented oversight of the FMs. Why is congress only waking now? Because they had an election to survive and had to delay blame. That explains the delay. I still do not know why they are even addressing the issue.

The idea that congress was to blame was mentioned (barely) at the hearings. The demons were, of course, CEOs of the FMs. Franklin Raines, at Fannie Mae, certainly did not help the situation by basing executive bonuses not on profitability, but on total numbers of mortgages that his underlings bought. But congress created the FMs and passed the Community Reinvestment Act (creating subprime mortgages); then the Clinton administration forced the FMs to buy subprime mortgages and congress shielded the FMs from oversight.

Government trashed the economy.

Why Didn't Anybody Stop Me?!

I know I talk too much about this stuff, but I could not resist this. C. E. O. Franklin Raines, under whom Fannie Mae's purchases of subprime mortgages exploded*, said to a U. S. House of Representatives committee recently "It is remarkable that during the period that Fannie Mae substantially increased its exposure to credit risk its regulator made no visible effort to enforce any limits."

This is priceless. Back when Bush and some Republican lawmakers were trying to rein in Fannie Mae, apparently Franklin Raines, who spent tens of millions of dollars on lobbyists to buy off congress, was secretly thinking, "Stop me before I buy more unsafe mortgages."


*Somewhat due to Raines's changing the compensation scheme to reward executives not for generating profits, but for acquiring whatever odiferous mortgages they wanted to acquire.

Wednesday, December 10, 2008

Caught in a Truth

The CEO of GM recently got caught telling the truth--that fuel efficiency standards are burying his company. Of course he said this in private--he would never tell that to congress since they can't handle the truth.*

Idiot congressmen, like the ones I talked about here, keep chanting, "Detroit is in trouble because stupid CEO's won't produce green cars." I have difficulty substituting the judgment of a numbskull whose only virtue is his ability to lie (a politician) for the judgment of someone whose paycheck, job, and career are on the line if he does not run a profitable company.

GM makes money domestically on big trucks and vans. They make money overseas, where gasoline costs $9/gallon, on small cars. But congress forces car companies to produce unprofitable cars domestically, which shackles their ability to compete with foreign car companies. Congress's current medicine for the car companies is more of the same. They have applied leeches to the patient until the patient is critical, and now they call for more leeches.

It may be the case that in two years gasoline will cost $6/gallon and the new green cars will be selling domestically. But if the auto companies are going to make it in the meantime, taxpayers will foot the bill.

Since congress will not free the auto companies, I would rather see congress kill the auto companies than turn them into another public utility. Put the auto companies out of their misery. Toyota can produce those big trucks and vans from now on.


*Just like he would never point out that at his rate of pay, the four days that it took him to drive to Washington and back to testify before congress cost his company over $120,000 (and that does not count the executives that accompanied him). Heck, the trip may have cost half a million, all told, which makes a private jet seem pretty cheap. Gorsh, these companies really do operate efficiently if you leave them alone.

Tuesday, December 9, 2008


On Sunday our water was brown. We have seen it before, though not in this town--rust in the lines. As a kid, my family had a well so we did not have to put up with such stuff. But back then the pump occasionally needed priming so the entire family would "pull the pump," lifting the pump from the well and tugging the big pipe that went down into the well across the yard. Dad would prime the pump, then we would put it back in, which was easier because gravity helped us.

Today, we have to put up with brown water now and then. The brown color is from iron--a bit of iron for a day or two won't hurt, but we're finicky so we buy bottled water for consumption.

The brown ended yesterday. Then the water took on a milky cast, which I have never seen. I ran a quart jar of it. The water was opaque. Were those bubbles? I put my ear to the surface of the water and heard it fizzing.

I enjoyed showing the family what was coming from the tap. Then I called the water folks. They said it was just air in the lines and that it would clear up if we ran the water for a while. I ran the water for five minutes and it did not clear up. I took a shower later and it did not clear up.

This morning the water is still fizzy. So we are still drinking bottled water.

Wednesday, December 3, 2008

Beat With The Bible Belt

Today a group of four of us from the school of business went to a luncheon in Atlanta and heard Steve Forbes give his take on the economy. Hundreds from industry, government, and academia attended.

A colleague from the midwest who just joined the U last summer sat in front of me at the table. When the speaker said, "Let us bow our heads and offer thanks for our blessings and the food," my colleague whirled around to me with his mouth open and an astonished look in his eyes. I wished I had a camera. I would have posted his bewildered expression.

Afterward I informed my colleague that he had been beaten with the Bible belt.

Tuesday, December 2, 2008


A colleague has a friend* with unusual ideas about her dog. She is certain that her dog is a virgin.

My colleague is not sure that his friend can know about her dog's chastity. The dog, after all, goes to a doggie daycare four days per week @ $40/day. Anything could happen.

His friend claims that the folks at the doggie daycare are diligent in making sure that no doggies slip off to a broom closet or to an empty bedroom. My colleague is skeptical.

His friend further claims that her dog would never do such a thing. She seems to impute moral virtue to chaste dogs. Did anyone have such odd thoughts a century ago or is this silliness a modern affliction?


*Well, not exactly a friend. The two of them probably disagree on that point, with my colleague certain that they are not friends.

Monday, December 1, 2008

Joy In The Morning

They forcast snow for my town. My eleven year old nearly strained a muscle, hoping for snow. When we walked outside this morning he was elated to see a few flakes drifting down.

On the way to school, he was animated.

When we arrive he usually slumps out of the van and trudges past the teachers who greet him, grumbling politely in answer to them.

This morning he hopped through the school door with both arms raised in a victory salute.

Sunday, November 30, 2008


We spent Thanksgiving with my mother-in-law and nephew. The nephew is evil.

Julia, I, and our three kids arrive with an XBox 360 and two laptops. Combined with the usual Thanksgiving diversions, we had a chance at having enough entertainment to get through three days. Enter evil nephew.

Evil nephew plays WoW incessantly. But he is even more evil than that. Before, when we visited the wireless router gave everybody internet access. This time, evil nephew decided that if he used the wireless router, our laptops would use up some of his WoW bandwidth. So he connected his computer directly to the modem. Of course he could have connected connected his computer via wire to his router. But, no, we might have used up a few bits per second with our web surfing.

So our laptops were mostly paper weights. And three days straight of conversation is . . . way too much. We finally levered his grandmother to pressure him into hooking up the router. There was plenty of throwing and slamming.

At least we did not have to resort to the holy water.

Saturday, November 22, 2008


We drove for over an hour to see my eighteen year old play guitar in his band at a sports bar/restaurant/club. While my son's band was setting up, the club played screaming music from CDs. The groups on the CDs wanted to be as rebellious as they could be. The ultimate rebel is the devil.

So their songs were all about the devil.

Julia and I speculated that these groups knew their songs were alike and boring, but they wanted to stand for something bad, and the worst thing they could stand for was the devil.

Maybe their lead singer said to the guitarist one day, "Man, we need to read the Bible--there's got to be something more evil than the devil."

The guitarist replied, "No, man. My folks were into that religious stuff. The devil is ultimate bad mojo."

The lead singer kicked his TV tray and said, "C'mon. This is boring. Every song is the same. What is worse than the devil?"

"Well," the guitarist pondered, lighting another Camel, "Maybe there was a devil on Krypton. He's got to be worse than the devil on Earth."

"A SuperDevil?"

"Yeah, a SuperDevil," the guitarist replied, taking a long drag.

"Cool, so what is his name?"

The guitarist sat back and looked into the curling smoke. Then he nodded. "Dev-El."

"Yeah! Dev-El! From now on, we write songs about the Dev-El!"

Julia and I can't wait until we can go back to that club and hear their new stuff.

Friday, November 21, 2008

Sterling Astray

Bruce Sterling is the superlative science fiction writer, co-founder of cyberpunk, who wrote Holy Fire. The novel combines advances in medical science that extend life with "the miracle of compound interest" to produce a society in which the old are the "haves" and the young are the "have nots." The novel is beautiful, as are most of Sterling's. And the novel relies on compound interest--which is so unusual, that the story is even better!

But Bruce is barking up the wrong tree with his recent blog post, which links to an interview which blamed the current financial mess on financial engineering. Maybe Bruce does not know so much about finance. Financial engineering involves breaking up various risks and returns from a business activity and selling them off, piecemeal. So maybe you buy a bond and sell off the risk that the issuer might default on the bond, while retaining the risk that interest rates might rise, lowering your bond's price. But financial engineering is in no way to blame for the current crisis.

Bruce, why did financial institutions make loans to people whom they knew could not repay? If you cannot answer this, then the explanation cannot pass the smell test. As I have posted before, the answer is pretty basic.

Government required banks to make loans to people who could not pay through 1977's Community Reinvestment Act. They made this crazy lending painless for the institution by requiring the government giants, Fannie Mae and Freddie Mac to buy lots of those bad loans and package them into securities (the bank gets rid of their risk, the government assumes the risk, then sells government guaranteed risk). Finally, Alan Greenspan cut interest rates too low for too long encouraging a real estate feeding frenzy--many warned at the time.

Bruce, this answer passes the smell test--heck, it is compelling. Self-interested politicians ramped up risk in order to put their poorer constituients in homes. Barney Frank even confessed that he was "rolling the dice" in ramping up this risk.

Without the rot underneath the leverage and derivative pricing, there is no story.

We are currently looking at a government mess, not a free market mess. The pioneers of financial engineering, Miller, Modigliani, Scholes and Merton (to which I will add Fischer Black) discovered fire. Beginning with Fannie Mae's creation in the Great Depression, the U. S. government took a flamethrower to the free market.

Your Car Has A Couple of Nuts Loose Behind The Steering Wheel

Yesterday Harry Reid, Senate Majority Leader, announced that U. S. auto makers must submit plans for restructuring their companies if they want to get my tax dollars to bail them out. But that is not the funny part.

The automakers must submit their plans to the foremost business minds in congress--the financial geniuses that fought valiantly against critics of the government housing giants, Fannie Mae and Freddie Mac (the FMs). No one did more to encourage home loans to people who could not repay than Chris Dodd and Barney Frank. Now these Bobbsey Twins of financial idiocy will end up instructing the auto makers on how to be profitable!

Barney Frank famously said, about his opposition to more oversight of the FMs, "I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing." Barney kept rolling, along with Chris Dodd, who received a sweetheart mortgage from the subprime king, Angelo Mozillo of Countrywide Financial, until they got snake eyes. Oh well, it was not their money, anyway.

Barney Frank is the guy who had an affair with a top Fannie Mae executive at the same time that he was the ranking democrat in charge of "regulating" Fannie Mae.

Now we are turning the auto companies over to these idiots.

A friend once griped to me that Ayn Rand's Atlas Shrugged set up government regulators as idiot straw men that she knocked down. To my friend, I say truth is now stranger than fiction.

I'm laughing.

I'm crying.

Thursday, November 20, 2008

The Solution

Proposition Eight, overturning the California Supreme Court's decision mandating that marriage licenses be granted to same-sex couples, has caused plenty of hoopla (love that word). I recently saw a photo of protesters carrying a large sign that said, "Can I vote on your marriage, now?"

I loved it!

Marriage began as a religious sacrament--mutual promises exchanged before God. Eventually the government got involved. Since early governments were religious in nature, this probably had little or no effect for quite a while.

But now marriage is two things. Marriage is a contract--mutual promises that may be enforced by civil law, consumated by signing a state's marriage license (legal marriage). Marriage is also a religious sacrament (religious marriage), consumated by someone of religious authority saying, "I now pronounce you . . ."

I am in favor of the change on the protesters' sign, "Can I vote on your marriage, now?" Yes! Vote.

Vote to invalidate every legal marriage. Government would then only control civil unions--the ability to legally contract--a contract that any humans could make. Multiple spouses? Sure! Have at it. Sorry you can't marry your horse. Horses cannot make contracts.

Government would, in no way, discriminate between various parties to civil unions. However, the insurance company should have the freedom to discriminate, and not insure my sixty husbands and seventy wives at no extra charge--people who own insurance companies should have freedom, too.

What about my religious marriage? Today's governments should not regulate the religious sacrament. After the state's recognition of marriage is gone, the spiritual aspect of my marriage, which I consider my real marriage, will be untouched.

Wednesday, November 19, 2008


I ended a previous post by saying that sometimes it takes me a while to catch on.

Universities sometimes ask faculty to waste time. Of course, faculty members cannot complain too loudly because there is some administrator somewhere that thinks the most productive thing that the faculty member can do is take two months to change three words in the mission statement--to the three words that the administrator wanted in the first place.

At my previous university, I was asked to go to a board meeting three hours away. Drive three hours, eat a mediocre lunch, listen to pointless reports, listen to the staff of the organization tell the board what I had done for the year, stand up and repeat what the staff said along with seven suckers like me, then drive three hours home.

Pointless. All that time wasted. My only function was to tell the board what the staff already told them--no function at all.

I was sick when one of the meetings was held. Of course, with all that crap, it probably did not take much to incapacitate me. I called the staff and sent them my report. They did their usual thing. When I did not show up at, the university president was not amused. He said I should have asked a colleague (who knew zero, zippo, nada about the work I was reporting on) to go in my place.

I did not understand what the big deal was. It took me a few years to figure it out.

Professors think that the most important use of their time is in teaching. Another vital use of their time is in research. Missing a class day to blather to some idiots at a boring meeting is a waste of time, unless one is a mindless bureaucrat who only wants to climb the ladder. Oh . . . like a university president.

I figured it out. For a university president the most valuable thing in the world is to stand behind a microphone before a group of bankers, legislators, and the like. So when I was giving my report, my U president was thinking, "They are listening to a real professor from my university. This shows that I am just as good as the presidents of the real U's in the state."

As regards U service, I now try to look at things from the mindless bureaucrat point of view. It makes me nauseous and gives me a rash in the bends of my elbows. But I understand a bit more.

Tuesday, November 18, 2008

No Wine, No Beer, No Bull

A couple of decades ago Julia and I were waiting in a hospital's lab's waiting room in South Carolina. For some reason people stood against the wall and sat in the aisles, there were so many.

A woman in a seat around the corner said, "No potatoes, no grits. No steak on the table. No cornbread and milk. No wine, no beer, no bull. No potatoes, no grits. No steak on the table. No cornbread and milk, no wine, no beer, no bull. No potatoes, no grits. No steak on the table. No cornbread and milk, no wine, no beer, no bull . . . "

An old woman with a feeble voice, now and then commented, "Please, be quiet. Would you please be quiet?" But the loop tape kept running. " . . no steak on the table. No cornbread and milk. No wine, no beer, no bull."

"Please be quiet. Would you please be quiet."

By the way, "Bull," in this context is Schlitz Malt Liquor.

Now and then Julia or I will say, "Did you put the bread on the table?" and the other will begin the loop, "No steak on the table. No cornbread and milk. No wine, no beer, no bull."

I love private language.

Monday, November 17, 2008

Synchronicity And Chihuahuas

One of my two best friends at work contemplated buying a chihuahua. He was about ready to start looking for one. Then he was in my other best friend's office and a student walked in carrying two young chihuahuas, one of which was for sale. My friend held the little ball of nerves and decided that he did not want to buy one.

When my friend sat in my office and told me about the incident I expected a gorilla to walk through the door carrying a bag of gorilla chow.

No such luck.

Sunday, November 16, 2008


In my backwoods school my class had between twenty-eight and thirty-three students through the years--we were the largest class the school ever had. In sixth and eighth grades my teacher was a guy named Perry Hudnall. He was the perfect teacher for me.

Perry was demanding. I responded by excelling.

One test in science had a True/False question, "There are nine planets in the universe." I answered "False," and missed it. I appealed to Perry afterward, saying, "There are nine planets around our sun, but there are plenty of other stars and we know that some of them must have planets.

He said, "So far no one has found planets orbiting other stars. When they find some, come back and I will give you that point."

Years later I heard about the first discovery of a planet outside the solar system. I decided to go see Perry the next time I went home. When I got home I heard about the accident.

Perry was an avid duck hunter. He was out on the lake with friends when a thunderstorm whipped up the lake and capsized their boat. His friends swam for shore but Perry, using recommended safety techniques, stayed with the boat. Perry was the only one of his group to die of exposure that day.

I would like to have kidded him about the discovery of that planet.

I should have thanked him for the good job he did.

Friday, November 14, 2008

Normal or Paranormal?

My wife, Julia, sometimes reads paranormal novels. Last night she was particularly piqued at one that she was reading. She was thinking of putting it down because it was so derivative of another that she had read. The protagonist was "Mary Sue," who can do anything. In addition, too many subplots cluttered the book. Finally, Julia thought that the author had a big problem with telling and showing.

Here is a description and a pacing problem in a sliver of a scene. Raphael's brother tells him that a woman Raphael likes has been killed.

Blood drained from Raphael's face. "Renee?"

His brother raced down the stairs. When Raphael returned he looked grim. "Too late. There's people in front of the shop. She's been found."

Since the the first line has Raphael speaking, and the next line says, "His brother," the reader likely reads that Raphael's brother raced down the stairs. But no, Raphael has raced down the stairs. Another problem is that in one line Raphael races down the stairs, and in the next line he trudges back, without even a paragraph break or hint that time has passed.

The biggest "showing vs. telling" problem happened at an important place--the climax of the story. The story had been, in its own way, leading toward a huge battle. The battle started with blood and fur flying. Then we read this paragraph at the climactic moment of the climactic scene.

A loud snarling split the air. Her gaze whipped to the open doorway. Three large gray wolves entered the courtyard. Relief filled her. Damien's brothers joined the fight. It was soon over, and Adam and his clones were dead.

At the physical climax of the book, "It was soon over." Wow.

Let me say that I am not a fan of fight scenes that go on forever. But the climax of the book is no place for narration. That's got to be scene, baby, scene!

Wednesday, November 12, 2008

Malthus Vs. Smith

This is my answer to someone posting on our university newsgroup. I have changed the poster's name.

Samuel said ". . . we may, through human inventiveness, find new ways of producing products from new sources. That, however, only would seem to delay our acknowledgement of the fundamental problem. We live on a finite earth with finite resources."

Thomas Malthus predicted that Britain's population would outstrip its food supply and settle into a steady state on the brink of starvation in the early 1800's. Land, surely, must be the most fixed of all resources. How could Malthus miss?

In 1968 Paul Ehrlich predicted that by 1980 U. S. life expectancy would be forty-two years due to population outstripping earth's resources. Back in 1900 U. S. life expectancy was forty-seven; in 1970 it was seventy; in 1980 it was seventy-four; in 2000 it was seventy-seven. Ehrlich missed by about a century.

The fact that Malthus and his fellow travelers have been wrong thus far does not necessarily imply that they will always be wrong. But I think the Malthusians will, indeed, always be wrong. Samuel supplied the answer with, ". . . we may, through human inventiveness, find new ways of producing products from new sources."

This was the logic that the brilliant economist, Julian Simon, used in his argument and winning bet with Paul Ehrlich that involved Ehrlich's scarcity predictions.

As oil becomes scarcer its price rises. As its price rises, someone can make a lot of money by finding substitutes for oil. A capitalistic economy rewards people who can make others' lives better in this way. (I just read in Twain's "Life on the Mississippi" about how extraction of oil from cotton seeds changed the nature of cotton commerce during Twain's lifetime.)

In my view, currently our most pressing scarcity is that of fresh water. We are draining our aquifers. But as water prices rise, the rewards for finding ways to make fresh water, perhaps from salt water, increase. Also as water prices rise, industries that currently use water will find cheaper substitutes.

In the very long run, we have to deal with the law of entropy. As we continue to consume, we transform stuff from more organized states to less organized states. However, as we go forward we are able to make more and more use of these more disorganized outputs of production, because it is profitable to do so. Perhaps we can continue this for a long time (until the last judgment, for millenialists; until universe's energy is all unorganized, for others.)

Malthus attempted to improve on Adam Smith's theory of economic growth. Smith's theory is still validated in large ways and small ways all over the world. Mathusians are still telling us, "Just wait." I cannot say the Mathusians will never be right. But their track record is not so good--so far the only we only see Malthus borne out due to a lack of economic freedom to improve (in many African countries, in Mao's China, etc).


1. If we put the *world's* population into four-person families living on subdivision-sized lots, they could all fit into the state of Texas.

2. In every society, affluence reduces fertility rates. As we become better off we have less offspring, putting less pressure on resources. Paradoxically, if we clamp down on freedom today to preserve tomorrow's resources, we might increase fertility rates, straining future resources.

Tuesday, November 11, 2008

Less Steak and Less Shake

Julia had a get together for women last week. The boys and I went out to eat so that we would miss the "fun." We went south ten miles just to kill more time. We kicked around ideas about where to eat and finally settled on Steak & Shake, twenty miles further down the highway--killing even more time!

Steak & Shake had advertised four meals for under $4.00. Under $4.00 means, of course, $3.99. Each meal had a burger of some kind. They make great burgers.

But the burgers they served were unusually small. When we were in the southern part of the state after Roberto died we ate at a Steak & Shake. The burgers were larger than the typical fast food chain. In just two months prices had been slashed, along with the size of the burgers. The other unusual thing was that the waiters and waitresses seemed much more attentive than other times we had eaten there.

I questioned the manager on the way out and he denied everything. I do not blame him.

Here is my solution to the mystery.

During the past year food prices have soared. In addition, consumer spending is down. In addition, unemployment has inched up. Finally, the minimum wage rose over the summer. Which business strategies react to all these effects?

To counter high food prices, shrink portions. However, since consumers are spending less, lower the restaurant's prices to compete better with the typical fast food chains--hence, cut the portions even more. Finally, with a higher minimum wage and lower employment, employees will be reluctant to leave the job. So demand more work (customer service) from those employees. The higher demands on the workers are reinforced by the fact that workers are earning more, due to the increase in the minimum wage.

If we had a Steak & Shake in our town would I buy food there, given all this? You bet. The portions are small, but the food tastes great. I can eat an apple at home for dessert.

Monday, November 10, 2008


We drove into the mountains on Saturday, headed for a little town with lots of apple orchards. Tourists visit my little town to take such drives, the copious maples are brilliant in the fall.

Our sixteen year old and eleven year old sons went along and kept Julia and I entertained.

We found the orchard that we wanted and bought a half peck of pink ladies. They are tart and sweet and crisp. Further on, we found the town to be much larger than we had expected. One of my students from that town had described the town as if it were smaller than the hole-in-the-road that I grew up in. The Japanese restaurant was great.

Today, after rain and wind on Sunday, the leaves are on the ground.

Sunday, November 9, 2008


My dad gave my mom (then his ex-wife) one of his little hairless dogs and supplied a male to breed the dog to. The dog had two pups and, a couple of months later, slipped out and was run over by a car. The two pups did fine.

Rascal, the male pup, was mom's constant companion. She was diagnosed with advanced multiple myloma (cancer) when Rascal was young. She spent most of the rest of her nine months of life in her recliner with Rascal there with her. She hand fed him. After she died, her husband wanted to get rid of Rascal. Rascal's sister was mom's husband's favorite.

We ended up with Rascal and loved him from the start. When we moved into our home last June we decided to "fence" Rascal using the electric wire and shock collar. (Don't get bent out of shape--the "shock" is akin to a static shock from touching someone after walking across the carpet--surprising, but harmless.) We spent a few months walking him when he needed to go out, then got the collar and wire last week.

We ran the wire and put up flags to warn Rascal where he would get a shock. Rascal approached the flags tentatively and sniffed at them, then he yelped and jumped back. He wandered a few steps and tried again, with similar results. Then he hastily walked to the front door to be let in.

That day and most of the next, Rascal was scared to go outside. Then the day after, he ventured out. He has not been shocked again. He is a fast learner.

Friday, November 7, 2008


I missed the last meeting of my large writing group. I heard they just talked politics and not writing. Today they mostly talked politics. I read some of Suffrage and we read two poems--one of which was political. Then most of them talked politics.

I like to talk politics with people who analyze the issues, but my writing group has an emotional approach to politics. They believe that politicians can "help us" and think in terms of good and evil.

Here is an armchair analysis, as opposed to emotion. I have heard that the president can "create jobs." Politicians could create jobs by hiring people to stand under trees to catch falling leaves. That will also destroy jobs, since the "leafcatcher" salaries will be appropriated from people who are now, with their spending, paying other people's salaries.

Private markets, left alone, can create jobs only when those workers create value for consumers. If the private market has not already created leafcatcher jobs then those jobs must not support enough value in the market to pay the workers' salaries and benefits.

The politician will create more jobs than he destroys only if government is smarter at spending your dollars than you are--if the most massive bureaucracy in existence is more smart, knowledgable, and efficient at pleasing us than we are. Alas, I am begging the question, since the answer is obvious.

This kind of analysis leads me to believe that politicians do not have much power to make our lives better. We have that power, and politicians can help us by giving us more power to act in our own interest and in the interest of others, but they cannot, by their own actions, make us better off.

Alas, few politicians want to run on the platform, "I am going to leave you alone." (I can just hear the response those with the emotional approach, "Leave us alone? Please don't! We don't want to be alone.")

The writerly types and others in the publishing industry seem oriented toward emotional, rather than analytical approaches to policy. Perhaps I will always be the quiet one in the room, since I do not want to try to convert the convinced. Policy is more of a religious matter with those folks and I do not want to try to talk them out of their religion.

Thursday, November 6, 2008


In Life on the Mississippi, Mark Twain wrote about his love for the river's beauty. But then he became a pilot.

The river transformed into currents that revealed the bottom contours, snags to navigate by, depth measurements at crossings, portents of future weather on the wind and in the clouds, and everything else that went into his two years of training to be a pilot. He could no longer see or hear the river's poetry.

We cannot write anything that is original. I realize this, but I slipped. I thought I had written something original. But now I see that Mark Twain nailed the point that I explored in my poem, Scholar. He even discussed how a doctor would see a beautiful woman as the sum of her hideous parts.

Damn you, Mark Twain!

Wednesday, November 5, 2008


As I handed out the test today a student said, "You should give us bonus points to celebrate the election." Other students voiced their agreement.

I replied, "To celebrate the election, I am going to take points from people with high grades and add those points to people with low grades."

I got a five-star laugh.

I kept going. "I just want to spread the points around."

Another five-star laugh.

It got my test experience started off right. I am not sure if it helped them much.

Tuesday, November 4, 2008


Mom was an excellent cook. Except that her pancakes were always tough. Looking back, I think she must have beat the batter too much.

One morning she tried again--made us pancakes for breakfast. We could not eat them. She got mad and threw them out the kitchen window.

The following day I found our yellow cat dead in the back yard. His mouth was full of mom's pancakes. Mom never lived it down.

Neither, of course, did the cat.

Monday, November 3, 2008

Wheels Included

My family, in order, camped in a tent, pop-up camper, pickup camper, and then a motor home. We bought the motor home used. I guess it was a Boise Cascade, since that was the only name I ever saw on it. It was medium sized for a motor home. It would have been monstrous for a loaf of bread. It had good beds, an icebox, a stove, and even a bathroom.

We camped in the Ozarks, on the beaches of Louisiana and Texas, through some of Mississippi (I don't know why), Illinois, and Tennessee. We went to lots of festivals.

There was no casastrophe that made us get rid of the thing. I think my brother and I just got tired of so much travelling.

We had the best breakfast ever--sausages, eggs, and toast on a grille--on a cold morning in Tyler State Park. My brother threw a flounder and hit me in the face. Our dog chased chipmunks in Missouri. We skinny-dipped in a freezing spring-fed creek just off the road in the middle of nowhere. Mom concocted a slumgullion that she called "Chinese-cajun surprise" at Johnson's Bayou, that included freshly caught crab, bean sprouts, cheese, and bread crumbs (mom was an excellent cook). When nobody on the pier at Padre Island had caught more than one or two fish, my little brother took the fish off their hands and we had a smorgasboard of croaker, whiting, sea bass, drum, snapper, and I don't remember what else. We fed a hoard of gulls on the Aransas Pass ferry. When thugs in Vicksburg jumped up on our trailer at night, dad pulled the .44 magnum and they high-tailed it. And we talked about our hairless dogs from one end of our trips to the other.

After my first son was born, dad advised me, "Make whatever sacrifices you have to and and buy a motor home when he's young."

I didn't. I regret it.

Sunday, November 2, 2008


After the pop-up camper we got a pick-up camper. For everyone who has never seen a pick-up camper, it fits in the back of a pick-up. It had a stove and icebox (that used a 25 pound block of ice). It had a bed over the cab of the truck and a dining table that broke down into a bed.

On some vacations we went to art shows, huge flea markets, and festivals. Mom had always painted in oils and she began to display her art. She started selling and dad built a trailer for her.

She eventually found her real market--oil paintings based on steamboats, plantation houses, and old photographs of ancestors siting around a lumber camp with huge crosscut saws, or leaning on hitching posts, or standing on the front porch of the old homestead.

My brother and I painted rocks, glued googley eyes on them and sold them. We arranged flowers on driftwood and in bottles. We sold spin-art. Dad made the spin-art machine with a fan motor that turned a turnable. The mechanism was mounted in a box. We would put a piece of paper on the turntable and turn the fan motor on--the paper would whirl and for fifty cents, a kid could drip paint from bottles onto the spinning paper, making circular or spiral designs.

We enjoyed making money and attending the events. We also went on normal vacations where we did not sell anything. Unlike with our tent and our pop-up camper, we did not have a mishap that caused us to abandon the pick-up camper. The folks just finally saved up enough to buy a motor home.

Friday, October 31, 2008

Gorilla Chow

A gorilla killed and ate a young woman--a blonde beauty in her twenties, as I could see from the television news.

My eleven year old and I investigated the incident. We followed the trail to the factory where they make gorilla chow. When gorilla chow is produced, actual gorillas are in the room. Their hoots and howls are imprinted into the gorilla chow so that when a gorilla eats, it hears the sounds of gorillas, which comforts the beast.

However, the suspect gorilla ate gorilla chow that was made on a day when the factory manager's young wife was present, berating the manager. The security tape from the factory confirmed this. So when the suspect ate the chow, he heard a woman berating him. This enraged him so much that he broke his cage. The rest is history. In my dream.

Thursday, October 30, 2008


When I was in the second grade, we bought an aqua double cab Dodge from a guy whose oilfield gang used to ride in it. We pulled a pop-up camper behind the truck.

We especially enjoyed vacationing on the southwest Louisiana coast in places like Cameron, Holly Beach, and Johnson's Bayou. One day at Holly Beach, we all swam further out into the Gulf of Mexico than ever. We played, bobbing up and down as the big waves rolled in. A storm blew up.

By the time we made it to shore it was raining. We quickly dressed and stepped out to pop the tent down. Waves rolled in around our feet, between six inches and a foot of ebb and flow. We popped the camper down and hooked it to the truck, hoping that the wheels would pull us through the wet sand.

The truck surged forward in the driving rain. We made it to the houses on stilts at the town of Holly Beach. Mom said, "Is everything all right with the camper?"

Dad looked back and said, "It's gone."

Mom said, "Scotty, you're kidding."

He said, "No. It's gone." He got out and trotted back down the beach with mom accompanying. My brother and I waited in the truck, cold and scared. Eventually we saw Dad and Mom dragging the camper through the rain.

We never camped in it again.

Wednesday, October 29, 2008


By the time I was in first grade we had a tent. We spent days swimming and fishing in a little creek and nights we sat around a dying fire and dad called owls. Dad had the owls talking to each other and to him. Dad is from Mudville--as far back in the sticks as one can get.

We dug a Dakota holes and cook steaks on a wire grill. We fried crispy little bream and sun perch on a butane cooker.

We slept on cots in the tent. One night a tremendous thunderstorm poured in and turned the floor of the tent into a creek. We packed up in the downpour and went home. We sold the tent and bought a "pop-up camper." We never missed the tent.

Tuesday, October 28, 2008

One Of My First Memories

We camped in an ancient "metro," van in the sixties. It had a generator and my dad had just bought a heavy duty extension cord. He paid a lot for it--we did not have much money.

Beside the creek, my parents lay back in their hammock folding chairs, talking and watching the leaves waver while I played on the other side of the metro. Now and then I would yell "Timber!" and they would help out, yelling "Timber!" along with me. We all had a great time.

Until they realized that I had found their machete and chopped dad's extension cord into little pieces.

Monday, October 20, 2008


I wrote about a colleague who was so strangely mistaken about the world that he was too far to reach. That committee met again and the strangeness continues.

The committee decides if the research that is being done at the University is safe. That is, if the researcher exposes someone to physical or psychological risk, do the potential results of the research justify the risks? Are the participants informed of the risks? Stuff like that. The University would not want test subjects to die while taking physical stress tests, after all, unless the results of the research could potentially cut the risk of heart attacks significantly.

This time we had one proposal. I will change some details to preserve anonymity. The student researcher intended to discover which qualities of female hairstyles most strongly attract men. The funniest thing about the study was that the (female) researcher's email address was

The researcher would show pictures of women who have various hairstyles to male students and ask the students to rate the women by a few criteria, like "I would want to meet this woman," "I would want to date this woman," "This woman is cute," etc.

The men surveyed would be anonymous, so there is little exposure to psychological or physical harm. For me, this was a no-brainer. This research will not hurt anybody. I do not think it is valuable research, but, as an economist, I do not always understand what is important in other fields, and the feeling is mutual, I am sure. But that is fine because it is not my job to determine if the research is "good," unless it is risky.

The strangeness started at once. One committee member forcefully said she voted "no" because the study is sexist. The study would treat women as sex objects.

There are psychology courses at the University in sexual development. There are courses in evolutionary biology, which explain attraction in terms of biological advantage. Plenty of research at Universities treat women and men as sex objects. My colleague was, essentially, objecting to Freud and Darwin.

In any case, even if somebody objects to Freud and Darwin, that does not mean that research should be barred in sexual psychology and biology. Our duty was to assess risks and procedure, not to evaluate the overall worth of the research.

Perhaps this faculty member would object to economists' studies of efficiency in the Third Reich. Economists have shown theoretically and empirically that bureaucracies are inefficient--except for the Third Reich. Examination of the Third Reich has yielded a whole new theory regarding bureaucracy. These results might be applied to bureaucracies which have benevolent aims, as opposed to the maevolent aims of the Third Reich.

Will Smith was excoriated for saying that the Third Reich was efficient--are people so illiterate that they cannot understand the difference between saying, "The Third Reich was efficient," and in saying, "The Third Reich had admirable aims?"

I expect more literacy from people with advanced degrees. Alas.

Sunday, October 19, 2008

Acceptance--But Not Fiction

I wrote my dissertation on strategic interaction with terrorists (1990). For years my major focus was terrorism, with "terrorism and the media" being my specialty. At one time I was told by a young star in political science that I was the only scholar doing real research on data related to terrorism and the media. I was flattered.

Today I was informed that the last paper I wrote on terrorism and the media will be published. The paper has a sad tale behind it, probably only appreciated by nerds who publish in scholarly journals.

The paper is modest in its aims. People (including scholars) say that terrorists' chief goal is media attention.* So it stands to reason that if the media pay more attention to terrorist incidents that terrorists will be more likely to perpetrate incidents. Hence, if the average coverage of a terrorist incident today increases, we should see more terrorist incidents in the future.

This is not a complex argument that needs a mathematical model. This is the conventional wisdom.

When I finished the paper the data was a few years old. Compiling some of the data had been painstaking. But since nobody was doing work with that data, I was in the clear.

The first journal rejected in a week--not their thing. Desk rejections are rare in academia, but I really appreciate them, since I can send the paper out after just a week or two.

The staff at the second journal was trying to figure out what they wanted to do. Who would be the new editor? Would they change their focus? I started calling after 9 months--not uncommon--and they strung me along for two years before giving me a desk rejection. That was unprofessional. I hope Economics and Politics has cleaned up their act since then.

I sent to a good political science journal. The reviewers wanted cognative models, resolution of definitional ambiguities, blah, blah, blah. These are the kind of nerds that if you say, "I show that better looking waitresses get bigger tips from men," they will ask for evolutionary biology models that show that men like attractive women. Morons. I was testing the conventional wisdom. Everybody knows the conventional wisdom--I could point to it in lots of places in the literature and in the popular press.

The reason that it was important to test that conventional wisdom is that it unravelled the work of other scholars who were publishing complex research on terrorism.

After all this, the data was so stale it reeked. It still showed that the conventional wisdom held using data that nobody else had bothered to compile. So I submitted to a modest journal that I thought I had a chance with. I killed the suspense already. It was finally accepted.


*Other than their overarching goal of political change

Saturday, October 18, 2008

Tale of Two Joes

Just now in the U. S. Presidential election, everyone was wondering if the McCain campaign would dissolve into endless repetitions of Obama's answer to a question from a guy known as "Joe the Plumber."

Joe asked Obama face-to-face if Obama would raise his taxes should Joe be fortunate enough to buy the plumbing business that he now works for. Obama forgot his "those who are blessed by America should be willing to pay their fair share" rhetoric and, instead, said that it is a good thing to spread the wealth around.

It was a telling moment. But if the moment had lasted another week, I would have had to stop watching the news and do something productive.

It was mildly interesting to see the news media deconstruct "average Joe" by reporting that he is plumbing without a license and has not paid all his taxes.

O. K., so Joe is a libertarian's hero. History perfectly cast him for his role.

But even that was getting stale when the other Joe--Joe Biden--fragged Obama. Biden told a group of their supporters that U. S. enemies would provoke a crisis to test his untried running mate.

It is hard to keep a running tally of Biden's questions about the Obama campaign's validity.

During the primary, Biden said that Obama had no experience and that the office of the presidency did not lend itself to on the job training.

Biden once said McCain had the experience to be president.

Biden even said that Hillary would have probably been a better vice presidential pick than Biden.

Now he confirms what every serious person knows--that Obama is a lightweight who will attract enemy fire. Obama may fight, like Kennedy did (he was deemed a lightweight by the Soviet Union). Or Obama may only offer testy rhetoric, like Carter did after the Soviet invasion of Afganistan. But Obama will be tested in ways that crotchety old McCain would not have been. (My take on McCain, as a person, is that he is the old guy who yells, "You kids get off my lawn!")

I reiterate that I am neither a Democrat nor a Republican. I have serious problems with McCain's active pragmatism that runs roughshod over individual freedom. But Biden said what I have been saying for months.

I can keep watching the news.

Friday, October 17, 2008

Why I Love Phil Gramm

I love Phil Gramm with one of those platonic, brotherly, nerdly, econo-loves. Phil is a real economist who graduate from a real university, then did real research and taught at a real university.

Then he became a politician. But, as politicians go, he was pretty good.

But I would not be singing Phil's praises if it were not for his remarks in the summer of 2008. I wrote about them here. To that, I can add that we now know that Gramm was absolutely right. The second quarter 2008 numbers showed growth. Here is why I renewed my love for Gramm today.

In class today I taught about the Great Depression and discussed how government turned a medium sized economic problem into a humongous economic problem. Jim Powell's book, FDR's Folly, catalogues the ways in which the Roosevelt Administration declared war on the economy. We could also add the Federal Reserve to the list of miscreants.

I likened politicial behavior during the Great Depression to political behavior today. We have a crisis caused by politicians forcing banks to make bad loans and having huge government-backed enterprises bundle those bad loans into securities. Then, as now, government intervention in the economy caused problems for which politicians now propose that more government intervention is the only solution.

This government insanity is widespread. You can hear it from George W., Nancy Pelosi, Harry Reid, Barack Obama, and John McCain.

One of my students said, "This seems so simple. These people have economists who advise them. Do these economists just not know, or do they not tell their politicians the truth, or do the politicians just not take advice?"

Phil Gramm set me up to knock that one out of the park. Phil, on McCain's staff told the truth! My previous post on Phil revealed that in a heartbeat Obama had dissed Phil and in an hour McCain had disavowed Phil.

Yes, politicians sometimes keep economists around who tell them the truth. But those politicians cannot tell the truth. They want to get elected. They have to pander. They have to gin up contributions. Truth is a liability they cannot afford.

So, yes, there are probably a few politicians that knew that the 2008 stimulus package was an idiotic shell game. (They sent out checks for a few billion, to pump up the economy. Hey, where did they get that money from--from . . . the economy?) But some of those politicians probably voted for the stimulus package because they wanted to appear concerned. Hm, screw things up so I can appear concerned--sounds like a great deal.

Phil Gramm helped me show my students why we have idiotic policies, though there are a few people in the room whom everyone knows are not idiots.

Thursday, October 16, 2008


Writers get rejected a lot. I previously wrote about one successful short fiction writer's massive rejection. When agents reject a book idea they almost always say, "I am not the right agent for your work." That is a "it's not you, it's me," answer, but the writer knows that it really means, "it's you--it's all you."

One magazine rejected my first story with a few comments, chief among them being, "I never got a feeling for your main character's hopes and dreams." True, Killing Words does not start with "Riva hated her life in the temple and wished she were anywhere else, but especially with her family."

I did start with Riva examining her bruises, showing fear/panic at the day's deadly activities, and having four reactions in three pages that showed her missing various things about her family--weaving those reactions into the narrative. I thought, "Well, her hopes and dreams are there, but the editor did not get it. I will see lots of that in my career."

I checked the next story I sent to this editor, Bryton Wyld, to make sure that I had clearly shown that Bryton wanted an idealized love--his hopes and dreams, ya know.*

". . . white and gold statues of Telor and Scyntella appeared as if they had come to life, standing over the doorways of their twin houses of worship. Porp smacked Bryton on the back of the head, knocking his floppy black hat over his eyes. Porp said, “You stopped in the street.”

Behind the cart, someone screamed, “Move!” And a messenger kid shoved Bryton and groused, “This is a street, not a pig farm!”

“Really original!” Bryton called after him. The sight of the gleaming husband and wife had absorbed Bryton. Embarrassing."

Most of the story is about Bryton pursuing that ideal love--oh, and trying not to get killed where possible. Again, the editor replied with, "I never got a feeling for your main character's hopes and dreams." I concluded that I was still too subtle for the editor.

But another suspicion had been working on me. It is an "it's not my fault" suspicion, so I put it on the back burner. I had noticed that the editor never announced an upcoming story without listing rather lengthy credentials for the author. Maybe what was really going on was that the editor did not see an impressive list of previous professional sales in my cover letters, so that my stories never really stood a chance.

I looked over Knickknack, then rewrote the beginning. This time I had my main character, Jane, trembling with excitement at the prospect of leaving her family's gypsy camp to visit a real city, focusing all her efforts on making sure she does not mess up her chances to go. Whatever else Knickknack's flaws were (for instance, lack of subtlety), Jane would scream her heart's desires at this editor.

Of course, the editor replied with, "I never got a feeling for your main character's hopes and dreams." So now I get it. That is this editor's form rejection. It may mean, "You are not going to make your first professional sale here." Or it may mean something else. But it does not mean what it says.

Sometimes it takes me a while to catch on.

Wednesday, October 15, 2008

English Lesson

The eleven year old asked me, "What is a gherkin?" I told him it is a pickle. He was playing a flash game on the web called No One Likes Gherkin.

Then today he told me that he has a new girlfriend on this kids' game he plays. He said, "She's from Israel. She is learning to speak English. So I told her what a 'gherkin' is."

Somewhere in Israel is a confused young girl.

Tuesday, October 14, 2008

Economics Body Temperature

I squawked at Paul Krugman's Nobel prize in anti-economics yesterday. I found a hilarious* article that says that Krugman won the first posthumously awarded Nobel. Donald Luskin generously suggests that Paul Krugman, the economist, died a decade ago, leaving an incompetent babbler to usurp Krugman's good name.

Where I had suggested that ridiculous political figures such as Ross Perot, Ralph Nader, and Cynthia McKinney will be next in line for a Nobel, Donald Luskin equates Paul Krugman's current status as an economist to Oprah Winfrey.

Luskin is too kind by half. His comparison suggests that Krugman's "economic body" is currently at room temperature, whereas my comparisons equate Krugman's "economic body temperature" to minus 273 degrees Celsius.**

Luskin's observations of Krugman, the Enron consultant who blames Enron's collapse on their consultants, took me to nerdvana.


*Hilarious to economists--so that means it's a yawner to all the non-nerds out there.
**Yes, that is a shout out to all my science nerd buddies out there.

Monday, October 13, 2008


I read that Paul Krugman won the Nobel Prize in economics. I squawked.

Krugman deserves the Nobel Prize for anti-economics. I do not seek out his opinions, but when I end up hearing his take on an issue, I can almost guarantee that if there is a clear-cut aspect of efficiency in the issue, Krugman will come down on the other side.

I heard Krugman speak when I was in school at South Carolina. I thought it was odd that this young economist spoke to the international business students and some economics students came along for the ride. In retrospect, that was not so odd. He does not have much in common with economists.

Krugman did one thing worth mentioning--it is, of course, anti-economics in its flavor, but he got it right. Economists can often say, "The answer is free trade--what was the question?" There is a good reason to presume that the answer is free trade. Free trade is efficient.

However, Krugman showed that one could find a set of circumstances under which managed trade is more efficient than free trade. Krugman's set of circumstances in which free trade is suboptimal is not necessarily common, so I still think that free trade is still the answer almost all the time. And, of course, if Krugman's circumstances are met, managed trade is best only if one assumes that government can efficiently manage something (that is known as a heroic assumption, except when it is only meant as a joke).

Given my two objections, I am not interested in putting a footnote by the "free trade answer." But, yes, Krugman took a towering result in economics and showed that another tower could possibly exist under some circumstances, which might be taller. Governments have been trying to build that taller tower for centuries, to the detriment of their citizens.

I guess they gave all the Nobels for economics, so now they have started on anti-economics. Perhaps Ross Perot, Ralph Nader, and Cynthia McKinney should get in line for next year's prize.

Sunday, October 12, 2008

More Founder Critiques

Last night my online writing group met. They gave feedback on Founder, my experiment in mood fiction. All the news was good. They found it basically sound, but had questions that pointed toward improving the story.

In particular, from my Gang of Three and from the online group, I got feedback that the husband, Mason, seems too controlling of the wife, Jenna--that she seemed more like his child. I was mostly OK with that. He is a "fixer." However, without too much effort, I think I can amplify the theme--that trying to live in the past can be harmful to your health. After all, if I more plainly bare Jenna's actions as running contrary to Mason's preferences, then she is clearly more culpable for the unfortunate outcome.

Related to Jenna's clear choice, is her motivation--that her family is dead, so she feels as if she has lost her mooring. This makes a more accessible motivation than racial guilt.

I also got a few tidbits that amplified the Gang of Three. I had an extraneous red herring that I did not spend much time on--the villain's name is also that of a dead poster artist. In this story, which should be like a car's emergency brakes coming off and rolling downhill, it's better not to have the distraction. Also, I called a light bulb a "helix bulb"--those curlicue bulbs that are so energy efficient. Two people have not known what those were from my description. However, any more precise description would involve technical language that is out of place in the story.

Friday, October 10, 2008

Cleaning Up After Life

Julia spent a week at her mom's house, helping to sort things out for mom's move to Oregon following Roberto's death. Julia's brother lives in Oregon and mom feels that is the best move for them.

The house belonged to Roberto and Paula, who have both died. The son, Julia's nephew, is sixteen. So Julia's mom is living in a house to which she has no legal connection. Someone said, "I guess she's a squatter." They do not think there is equity in the house, so she will let the finance company have it when they get around to it.

Paula collected Beanie Babies. Julia's nephew did not want them. Julia agreed to see what she could get for them on EBay.

Lots of stuff went into a box of mementos for the nephew, like Roberto's medals and his favorite watch.

We ended up with a laptop that may or may not work. Before I went to get Julia at the end of the week, I took the middle seat out of the van so we could fit everything in. We ended up bringing home the smaller storage bench, rather than the larger storage chest, so we had more than enough room.

Julia's mom gave us this little cooking gadget. It had never come out of the box--in fact, there were two of them in the box. She said, "Roberto was so looking forward to using that, but it was delivered after he died."

Julia remarked that so much stuff accumulated. At one time it was important to the people who collected it.

Wednesday, October 8, 2008


My gang of three group met. B. J. is somewhat stuck at her current place in the novel, so she skipped some scenes. The result was great. She had some great action, capped off by a description that conveyed such attitude that I had to laugh. "Bror dropped the body into the hole, kicking the dirt over it, contemptuously, like a dog marking its territory."

Barbara's scene had people playing a tense card game in which the players' wagers attack each other so that if the betting does not end soon, the stakes may vanish. "Tense" is the key--she does great description of the battle of wills.

They critiqued Founder. As I mentioned before, reading it makes my head buzz and spin, so I was not sure how others would read it.

Barbara liked it a lot. Since it was much shorter than what I usually write, it was easier to like because it was less work. I think she got involved with the characters. She liked the minimalist style and foggy perceptions of the first person narrator.

B. J. had problems with both main characters, but she did not think that the whole thing was a hopeless mess--which I considered a distinct possibility. I am mulling her suggestions. I think I agree with her, and can redirect things with a couple of words here and a clause there.

Monday, October 6, 2008

No, You Can't Watch It Here

Yesterday I said I was shocked that Saturday Night Live told the truth about the bailout. Apparently the truth was too shocking for somebody. NBC pulled the sketch from the web site. The sketch has been posted and removed multiple times from YouTube. The transcript and screen shots are here--but it is not nearly as funny.*

The Blogosphere rumor is that the Sandlers--a real couple that the sketch depicts--demanded that it be taken down. They, like George Soros, give lots of money to their favorite political causes. Perhaps the Sandlers threatened to sue. From what I have read, they built a huge business on subprime loans of the most laughable** sort, then sold that business to Wachovia, helping to bring the banking giant down. Here is a blogger who makes that claim.

Let me make it clear that I have no independent knowledge of this. I have previously been sued for libel and that was enough for me.***

Telling too much truth can be funny, but hazardous.


*Michelle Malkin is a conservative blogger. I am only a conservative in a narrow, classical sense. I am also liberal in a narrow, classical sense. My opinions do not fit within the usual orientation--and heck no, I'm not an "independent."
**If they were not so sad.
***The plantiff's case was dismissed with prejudice by the state court of appeals.

Sunday, October 5, 2008


Saturday Night Live did a sketch on the Wall Street bailout. You can watch it here. It shocked me. If you do not want to have it spoiled, watch it before you read on.


The SNL writers told the truth. The entertainment industry typically buys the liberal line. In this case, the liberal line is, "Wall Street melted down because of greedy lenders who made predatory loans to people who could not afford to borrow." But this does not pass the smell test, since institutions do not like to make loans to those who cannot pay. Apparently at least one SNL writer smelled a rat and found the real story, which I have previously told here.

Excellent work. I did not think they had it in them.

Saturday, October 4, 2008

The Darker Side of Boredom

In my little town the cable television provider seems to think we have C-SPAN, that channel that televises such boring things as congressional debates. One channel comes up as C-SPAN on the television's display, but C-SPAN is not there.

I love C-SPAN. Without C-SPAN, news channels are the most boring stuff that I can inflict on my family.

We are now visiting my mother-in-law, who actually has C-SPAN. I have watched two hours of people who wrote books on Abraham Lincoln. I am not watching slick History channel documentaries. I am watching scholars drone on endlessly on obscure aspects of Lincoln's life, correcting all the myths that History propogates.

I have achieved nerdvana.

Friday, October 3, 2008

Steampunk, Lincoln, John Brown, and Mormons

My latest story idea involves having a genius among the Utah territory Mormons discover and use uranium as nuclear fuel for steam engines. Invention in the territory zooms forward, but the society has remained relatively insulated, with only scattered wild tales emerging.

One of the Mormon inventors heads east on a religious mission in a nuclear/steam powered tank and encounters Bleeding Kansas, in the person of John Brown.

Also in the mix is Abe Lincoln who suffered a crushing depression, chucked his former life, and headed west to make a new life. In Kansas he became the leader of an abolitionist mob.

Both sides of the battle over slavery try to get access to the Mormon's inventions, but Abe has his own agenda, related to his views of the economy.

There will be plenty of bombs and blood and butchery by both sides--and some humor-- to chug and clank and rattle the story along.

Wednesday, October 1, 2008

Too Far To Reach

Something that a colleague said this week reminded me what a different reality that some of us live in.

It was my first time to meet with a particular committee. I told them I was an economist, so they asked me what caused the current mess. After they assured me that they really did want to hear two minutes of economics stuff I told them the story about the government forcing financial insitutions to make loans to people who could not afford to pay, then getting Fannie and Freddie to securitize those loans.

One member of the committee said, "The rest of the story is that most of those poor people are poor because they could not afford to pay their medical bills."

I have lived in cities with high poverty rates. My friends who lived on "the wrong side of the tracks" were not confused about what caused the persistent problem in their neighborhoods. The government gives checks and other benefits to people who do not work.

After the meeting I looked up poverty rates, bankruptcy rates, and how often medical bills are cited as the cause of bankruptcy (1/2 the time!). But those bankruptcy numbers do not make up a significant portion of the poverty numbers, as I had suspected. Consider inner city poverty--housing projects. Lots of medical bankruptcies? Laughable.

But, at the time my colleague said it, I knew that he was too far to reach. So I smiled and nodded.

Tuesday, September 30, 2008


I think I finished Founder. I have never attempted anything quite like it. It may be good. It may be horrid. I am not sure. Usually I have a better idea about things.

What makes Founder hard for me to comprehend is the style. I won't tip you off as to what makes my head buzz and spin when I read it--maybe it is painfully obvious or maybe I have gone barking mad. But when I would try to write another scene, I would have to refer to the previous scene and the writing style would make my eyes cross and I would have to stop.

I am ready to get back to something more conventional for me. My long-term project is Bryton Wyld. No fancy stuff, just plot, character, setting, motion, motion, motion. So that is probably what's next. I have 10,000 Bryton words. Another 5-10 and before I know it I'll have another novel. This time I'll have one with a hook! (Except that who knows if anyone will bite at it).

I have talked about Ben Franklin before, but I have found that he is probably overused in speculative fiction. I would love to do more steampunk, but I'll need to work up an idea first.

So, back to the drawing (writing) board.

Monday, September 29, 2008

The New Paradigm

I am not in love with my phone--that thing in the home that sounds an alarm when someone wishes to speak from theirs to mine. My distain for the phone is rooted in my ideas regarding self-interest. Will people tend to call me when it is in my interest or theirs?

Obviously, people will tend to call me when it is in their interest. Sometimes their interest overlaps with mine, but not enough to make me glad to hear phone ring. Occasionally I am pleasantly surprised.

Why would I want to carry this thing with me everywhere? Yes, I am so old that I do not routinely carry a cell phone.

But the young folk, who have not figured out this self-interest thing carry the phones. Well, that is not entirely true. Young folk carry the phones, but they almost never answer phone calls. They look at the display, see who is calling, but do not answer. However they answer text messages. Why?

My theory is that text messages allow the receiver to better control the communication channel. The self-interest thing applies. That is, a young whipper-snapper can glance at the message and say, "Oh, Sparky wants to meet for lunch. I hate Sparky. Forget it." Then she does not return the message. Or she might say, "Athena says her boyfriend yelled at her? Wow, I gotta' know more!" And then she can return the message.

Talking is much more efficient than typing from the standpoint of being able to communicate large amounts of information. But maybe the young folks do not want large amounts of information.

As I read everywhere I turn, the new technologies may be training the young to have zero attention spans. Two "friends" walk down the sidewalk, each texting someone else, not very aware of each other. Or maybe they are actually talking on the phone--each to someone else (how did they get anyone to answer?).

Which brings me to what triggered me to write this. The hallway outside my office was empty. A student passed by me. He said, "Where is Dr. T.'s office?"

It turns out that I could not just say, "Third on the right." There is a corner, a side door, and another side door to navigate. I stopped to give him directions. I said, "It's on this floor, but it's not easy to find." But he did not stop. He kept strolling, not looking back. I paused, waiting for him to stop and pay attention. He kept walking.

I said, "Good luck finding her."

I wonder if he remembered that he had asked me the question. Maybe he was busy texting?

Sunday, September 28, 2008


Number 3, the eleven year old, said, "I want some fruit loops."

Number 2, the sixteen year old, said to Julia, "He already had seventeen chicken nuggets."

I said, "Yeah, I saw him with a plate full of nuggets, there may have been seventeen there."

Julia said, "You have eaten plenty."

Number 3 said, "Number 2 ate one of them!"

Saturday, September 27, 2008


Baby, I need you. I need you like I need another shoe. -- Tom Tom Club

I walk back and forth to work. It takes about thirty minutes. On the way there, I am walking down the mountain, so it is easier than coming back. Lately my feet have been hurting as if severely bruised on the soles.

I think this is a problem with my shoes. They both have lots of holes. I could probably poke three fingers through one side and out the other (though I have not tried). Really it is a problem with the soles of the shoes and the holes merely indicate that I have mostly worn them out, soles, holes, and all.

Today I bought new shoes. The store had one of those buy one pair get one pair at half price things going on--they always have it going on--so I bought two pair. They were soft and came in a wide size. It is quite a change for me to wear shoes that are not too tight.

Now you can sleep soundly tonight.

Friday, September 26, 2008

What Are They Doing?!

I just realized that I have talked a lot about the current problems in the financial system but have not talked about the proposed solution.

Remember the problem is that firms have all those mortgage backed securities that no one knows the value of. Paulson, the U. S. Secretary of the Treasury, recommends that taxpayer money be used to buy up those devalued mortgage backed securities. That way the questionable securities will be taken out of the market, removing the uncertainty that has shaken the market.

No, taxpayers would not have to hand over $700 billion today. The U. S. debt would increase by that amount.

What will the government do with those securities? As long as the government holds the securities, it will earn money from them, offsetting their cost somewhat. Eventually the government would sell them, possibly for more than they bought them, so that in the long run taxpayers might not end up any worse off. However, taxpayers could end up worse off if the securities sell for less than the government buys them for.

On balance, I am not opposed to the Paulson plan. I view the securities as a poison that the U. S. government brewed up with the Community Reinvestment Act in the laboratories of Fannie and Freddie and poured into the financial system. I am OK with the government removing that poison, especially since the cost may be substantially lower than the $700 Billion.

But, then, I am in favor of sellling Fannie and Freddie to the private sector and scrapping the Community Reinvestment Act. We should aim for long-run health.

Thursday, September 25, 2008


Ann Crispin (famous sci/fi author) said in a workshop that when she cannot figure out what to write, she scrubs her bathroom floors. Sometimes it takes two bathrooms, and sometimes she gets all the way to the kitchen.

I get ideas while walking. Things start to fit together when I have the pulse raised, but do not have anything to concentrate on. The shower is another place where I am stuck for a while without anything else to think about. Sometimes ideas strike me there.

Now and then I have to work out big plot things, like who knows what and when do they know it, and why would they do the thing to get them from A to B. Sometimes I just envision the next part of the story.

Today, for instance, while walking I was thinking about the next part of a scene. The husband is driving home. He sees this spooky guy who has taken an unhealthy interest in the husband's wife. The spooky guy is walking on a lawn in his neighborhood, the opposite way of the husband's house, as if he is coming from that way--and there is no reason for the guy to be in this neighborhood, except to visit the wife, who is home alone. The spooky guy, oblivious, walks behind a house. The husband pulls up in the driveway and runs around the house, but does not see the guy. He looks for places the guy could have gone. Did he duck into the sun room of the house?

As I was out walking I decided that the husband should whip out his cell phone and call home. But there is no answer. The guy is somewhere close by. But there is no answer at home, so he's got to speed home at once.

Maybe that sounds like a little thing. I think it adds to the atmosphere and builds suspense. I will make some headway on the story tonight, then walk to work tomorrow.

I will be done with the story by the end of the month if my shoes hold out.

Wednesday, September 24, 2008

Shouldn't I Know More?

I recently listed some protagonists and antagonists from my writing. You may have noticed that the protagonists have the longer character descriptions. However, I think that writers' antagonists should be as richly developed as their protagonists.

How do I reconcile the last two sentences in the previous paragraph. I withheld more about the antoganists, so as not to kill the suspense. In fact, I withheld some information about the protagonists to preserve some suspense.

Though we usually think of the protagonist as "the good guy," sometimes the protagonist is not so good. The protagonist is the character who is the most changed by the events of the story.

Taken as a whole, who is the protagonist of the first Star Wars trilogy? The person who undergoes the most change over the three films is the guy who is usually credited as the chief bad guy--Darth Vader. Star Wars is Vader's quest, and Luke serves as his guide for the quest.

Tuesday, September 23, 2008


Timur Mohammed Akbar Mirza Mughal: The grandson of the last Mughal Emperor of India

Sergeant Zerstorend Engel: A zealous, xenophobic Austrian policeman

Stephan Geist: A collector of artifacts in Ramas

Lord Rall: A son of Rovish, the God of Luck

Verletz: A priest of Telor, the God of All Things Known

Jemmin Weller: The greatest thief in the most corrupt city in Ramas

Sir Ragal Tak: The most stupid and violent of Baron Navee's Baron's Men in the most corrupt city in Ramas

Veluin: The High Priest of Silas

Sarge: The tyrannical majoritarian leader of a troop of Union cavalry attempting to round up the perpetrators of the Colfax Massacre, the largest outbreak of violence following the Civil War

Furnace Angel: A hare lipped redneck that crashes the filming of a program designed to expose child predators

Saddam Hussain: You know him, you love him

Lucien Boucher: A Haitian who promises to introduce people to their departed relatives

Monday, September 22, 2008


Vincent Renaud: A French-born monk in an Austrian monestary (circa 1857), afflicted by a severe panic disorder

Jane Geist: A gypsy girl who is her clan's greatest hunter, taught the thieves' trade by her uncle, and taught to mingle with society by her educated father

Bryton Wyld: Does not know his father is Rovish, the God of Luck, lives with his mother, an avaricious merchant, in the most corrupt city in Ramas, the main continent in the Arch of Time universe

Riva Tanner: Died in a fall at age 10, retrieved from the Spirit World by her father, a Priest of Jair, upsetting the balance of the universe, entered in Jair's order to endure the grueling training of a battle priestess

Julian Granger: The arrogant son of the benevolent ruler of the most insignificant barony in Ramas

Jake Fox: A backwoods boy living in Reconstruction Era Louisiana, orphaned when his father died at the Battle of Mannsfield and his mother died of pneumonia, raised by his brother

Dan Held: Cameraman on a reality "police" show, grandson of the leader of the Cajun revivalist movement, a failed attempt for those with Cajun descent to get back to nature

Jenna Dean: A kindergarten teacher with a love of genealogy

Staff Sergeant U. P. Smith: The driver for a retired Lt. Colonel, now working for a defense contractor in Iraq

Sunday, September 21, 2008

Who Is Lying?

My son is playing some game that has lots of logic puzzles. Here was my favorite.

The cops know that one or more of five suspects were in on committing a crime. They know some are lying, but some may be telling the truth. If the cops can figure out who is lying from the following statements, they will release any who are telling the truth and concentrate on the liars. If any are lying in the following statement they are also lying about their innocence.

Suspect 1 says that one person is lying about being involved in the crime.

Suspect 2 says that two people are lying.

Suspect 3 says that three people are lying.

Suspect 4 says that four people are lying.

Suspect 5 says that five people are lying.

How many (and which) suspects are lying and how many are telling the truth?

I loved that this puzzle had such a precise answer.

Saturday, September 20, 2008


A bicycle’s tires thrummed on the footbridge as Eve and I sat dangling our feet off the edge, leaning our chests against the cold lower rail. A bulb mounted high on an iron pole behind us created our island of light. Ahead in the darkness we heard ducks bickering at the water’s edge.

I told Eve, “Danny said that they give the ducks cancer, then see if they can cure them.”

“Why do you still talk to Danny after what he said about me?” If I had asked her that question I would have tried not to sound hurt, but women are just fine with telling you that you hurt them.

I thought about it. The lights of the cars on the main bridge reflected off the black water, but the reflections were far away and the car sounds were beyond our hearing. Before us, the bayou looked like space beyond the stars. “I didn’t think what Danny said was a big deal. He said you are out to marry me and take me away from the game—or the gang. You are, aren’t you?”

“You know they hate me,” she said flatly, softly.

I shrugged a shoulder.

Eve took a fig from our paper sack. She and I had picked them on the bank of the bayou before the sun went down. She pulled off the stem and tossed it into the water; something sinuous surfaced momentarily beside it. She turned the purple globe inside out, revealing its succulent center. She ate.

Something bumped under our feet, accompanied by a soft sploosh, as if a huge fish had rolled on the surface of the water. I whispered, “What was that?”

A few hollow bumps later, the canoe appeared below us as two girls paddled from under the bridge, probably heading back to the bank beyond the main bridge where the canoes were usually stowed for the night. The girls were like twins, long blonde hair dimly visible over ninja black. In a few seconds the girls had paddled beyond the island of light that illuminated Eve and me.

She sighed. “What would Danny know about the ducks?”

“He’s a pharmacy major. The professors over in health science play evil genius with the ducks.”

She looked down at the ripples where the canoe had been. “Danny samples every drug they make, you know. Half the time, he’s either speeding or he’s dopey.”

I grinned. “Yeah. I didn’t know you knew they sampled. He says that when somebody prescribes drugs they need to have experienced the effects—so they know what’s normal.”

“He says what he needs to say. And you believe it.”

I looked up into the heavens and said directly, “That’s insulting.”

She murmured, “Sorry.”

I glanced toward the sound of heavy rhythmic steps. I waited for a couple of huge, black frat guys, Omegas, to pass by. They wore white shirts with dark blue letters. I idly wondered if you had to be huge to join. Eve had leaned her forehead down onto the lower rail. I could feel the heat radiating from her body. I thought she was crying and almost consoled her.

She took out another fig, de-stemmed it and turned it inside out.

I said, “You don’t need to give anybody up for me. It’s not like you have a lot of friends.” As soon as I had said it, I regretted it—whining and insulting at the same time.

She turned her head to face me. She held the juicy fig out to me. The faint light overhead was enough to show the thin scar on her cheek. The ducks had gone to sleep.

As I leaned forward and bit into the sweet, wet fruit, the only sound was her voice. “Just one friend. That’s all I want.”

I sucked the juice from her fingers. I could feel her warmth against me and could smell her vanilla perfume. And then I knew that was all I wanted too.

Friday, September 19, 2008


In 1977 the U. S. government tried to make things fairer. They outlawed "redlining" in the Community Reinvestment Act. That is, in the poor parts of town, few people can get loans and risks are greater, so lenders "drew a red line" around bad neighborhoods. The CRA made it more difficult for lenders to refuse to make loans to borrowers who were not credit worthy, creating sub-prime mortgages.

In 1995 the CRA was amended to allow sub-prime mortgages to be bundled into big packages and sold to Fannie Mae and Freddie Mac (big, government created firms that buy bundles of mortgages and sell securities that allow investors to get a big piece of the mortgage action). This greatly increased the number of sub-prime loans.

Enter, low interest rates (easy money) by Greenspan and Bernanke in this new millenium and we have the explosion of real estate investment I described here.

I have come to understand another piece of the puzzle. After the S&L crisis of the late 1980's, we realized that some financial institutions hold loans or debt that they know are bad, but because accounting standards valued them at their original value (the book value*), the institutions could get into big trouble by pretending that the accounting numbers were correct. The archetypical example from the time is this. A S&L in Texas has made a loan to an oil producer who is struggling and cannot be counted on to pay. The loan is valued at its original value until the borrower defaults. So the S&L can hide its weakness for a while.

The new accounting rules are called "mark to market." These rules value a promise to pay (a debt or a security) at that promise's current market value. Mortgage backed securities are hard to value at the moment. Many of them will pay well because plenty of the mortgages that back them are fine. But the increased uncertainty means that not many buyers and sellers can agree on a sales price. Markets with few transactions are called "thin."

Suppose 10,000 of a certain security are held by Lehman Brothers and have been used as collateral for a loan that Lehman has taken out. Then a bank sells a few of that kind of security very cheaply. "Mark to market" rules say that Lehman now owns something that is not very valuable--and the creditor that made the loan tells Lehman, "You don't have sufficient collateral anymore." So Lehman goes looking for another loan--backed by what?

In the end, Lehman has to default and declare defeat. The rough thing is that Lehman's securities may truly have enough value to back its obligations, but in a thin market, "mark to market" rules force instant devaluations that may be huge. The market value of those securities may be much higher in a week or a month.

This post makes plain how the Community Reinvestment Act (and the 1995 addendum) and "mark to market" rules helped precipitate the current crisis. Being an advocate of freedom, I am opposed to forcing companies to make risky loans if they do not want to. Further, being skeptical of government efficiency, Fannie Mae and Freddie Mac have always scared me. And, yes, the Fed cannot seem to stay focused on its true mission--to maintain a strong and stable currency.

I am an athiest on "mark to market" rules. They seem more realistic than using "book value," as was previously done, but also seem to have big problems in thin markets.

My overall theme remains the same, though. Fannie/Freddie, the Fed, and the CRA are government impediments to freedom and have thoroughly trashed the financial markets.

Oh! One more thing. Politicians have found an innocent scapegoat--"deregulation." In particular they blame the Gramm-Leach-Bliley Act (G-L-B) of 1999 (passed the senate 90-8), which allowed banks, insurance companies, financial service companies, etc., to co-mingle ownership. In 1933 the Glass-Steagall act had made it illegal for banks to mingle with other financial companies, so G-L-B repealed Glass-Steagall.

Glass-Steagall was wrong-headed at the time. Diversification helps companies maintain themselves in crisis. In fact, the "rescues" and buyouts of financial companies this year would not have been possible without allowing banks and other financial companies to co-mingle. G-L-B is mitigating damage, not causing damage.

To me, the scapegoaters reveal their dishonesty by blaming G-L-B, but without being able to say in what way G-L-B actually hurt anything.


*Book value is just a little more complicated than this--not much.