Pretending, And The Financial Crisis
January 30, 2011, 11:00 pm
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It’s become clear that I should share my thoughts on what caused The Financial Crisis (tm/2008). I make fun of so many other peoples’ stupid ideas of what caused it, that I may as well put forth my own. Besides, well…the people clamor for my opinions, and I listen.

So, without further ado, here’s my brilliant diagnosis of what caused The Financial Crisis: our pyramid scheme finally collapsed. Oops! Didn’t know they could do that!

Speaking of The Financial Crisis as some sort of event that befell us, which had exogenous ’causes’ (causes that, it’s implied, could have been averted), strikes me as a mistake. When you strap feathers on a fat man’s back and shoot him out of a cannon up into the sky, you don’t later scratch your head at the resulting flattened corpse and ask ‘Golly, what made him come down? Next time we gotta figure out how to make him not come down.’ Sorry. He was gonna come down, the question is, and should be: how the heck did he even get up there in the first place?

Because you put him in a cannon and lit the fuse, numbskull. Did you really think the fat man could fly? No, of course not. You were just pretending.

Due to many factors, our economy, our financial system, has turned itself into the most sophisticated pyramid scheme in human history. So, therefore, the bubble burst. To paraphrase Keanu Reeves to Joaquin Leaf Phoenix in Parenthood, “That’s what little pyramid-scheme dudes do.” Given that we had a pyramid scheme, the collapse wasn’t avoidable, it didn’t have some mysterious ’cause’, it wasn’t avertable with just the right clever genius Smart People regulations, generally speaking it just wasn’t not going to happen. Not-happening wasn’t something that was in the cards. On the contrary, it was going to happen and the only question was when. Why not summer ’07? You got a better ‘when’? When then?

To cite the most notorious pyramid scheme, everyone has heard of Madoff and everyone has heard of CDOs but few seem to have made the link. So, let me. What Madoff is accused of having done involves taking money (from ‘investors’), giving the investors a Thing, and printing up paper statements showing that the Thing they bought increased in value, which attracted new investors. He did this for a while, and for a while it was fine because new investors kept showing up (so, in particular, he could cash out the old ones who wanted out), but then he couldn’t, as the fiction was unsustainable, and the pyramid scheme collapsed. That’s what pyramid-schemes do.

The tragedy of CDOs actually involves a precisely-analogous story arc. When analyzed responsibly, there’s nothing magical or mysterious about a CDO that makes it different from any other debt instrument. It’s far more levered, and it’s the debt of a synthetic company instead of a real one, but if you take the leverage, the hedging costs, and the uncertainty into account correctly, you can price a CDO appropriately like any other bond, and everything will be fine. CDOs valued appropriately would never have contributed to The Financial Crisis, because no one (including rating agencies) would have pretended their value was much higher in the first place.

The problem though is that CDOs are complex things whose value is calculated with formulas and simulations, and while there are formulas that in responsible hands are basically fine, ultimately it seems they can also be manipulated/tuned to make them come out however you want, and due to the complexity, this is hard to stop or catch. And so, this is what (some) people did. Thus, just as the Madoff crime intimately involved the pretense of value, so did the creation and issuance of CDOs. The mechanisms were different (all Madoff needed, it seems, was some word processing software and a printer, whereas CDO sellers needed a team of quants, a library of algorithms, and a cozy relationship with a rating agency) but the end result was the same: make up some numbers showing the Thing has more value than it really has, sell it, keep marking it there (or higher), sell some more, repeat.

The commonality here is making up value out of thin air – or, to put it more neutrally, inflating value.

This takes me to my real diagnosis. The crisis was the popping of a pyramid scheme. Any discussion of the crisis is therefore incomplete without addressing and diagnosing the pyramid scheme. The real question, in essence, is: what caused the pyramid scheme?

To cut an already-boringly-long story short, we may as well just go straight to the source: housing. Our government poured money into housing and artificially propped up the housing market with easy-money it didn’t have and market-distorting regulations and incentives. Basically, loans were given to people who weren’t good for them. The loans were guaranteed by ‘government-sponsored entities’ that weren’t actually solvent on their own. And that’s how houses were given to people who couldn’t afford them. Lo and behold, at the root of this we see the same factor present as in Madoff’s scheme, and as in banks’ CDOs: the pretense of value. Let’s all pretend that this two-bedroom house on the outskirts of a Phoenix suburb is worth $900k. Let’s all pretend that this modest-salaried person can and will pay back the loan. On these pretenses, a flimsy pyramid was indeed built. And then it collapsed. Duh. That’s what pyramid schemes do.

The motives for the housing make-believe varied a bit (in the Clinton years the handwringing over ‘redlining’ was probably ideological, a sop to ‘diversity’ and race equality; in the Bush years it was, I suspect, more of an approval-rating/electoral strategy) but the result was the same: borrowing money from future levels of the pyramid sceme generations in order to artificially-boost everyone’s home values and make them feel in-the-money. To create the illusion of wealth, of value. And for a while, it worked, and then the bubble burst, so it didn’t.

But this is the arc of every single pyramid scheme. All perfectly normal and natural. None of it unexplainable or mysterious. What is there to talk about that won’t just be depressing? Any further questions or can we all just end class early and head down to the Rathskeller for a pint, and talk about something else, like cars, and girls? In fact, can we just pretend I never even brought it up…please?

Egypt: The Porn Revolution

I have no in-depth knowledge of the goings-on in Egypt and as far as commentary goes my reaction is essentially no different than I wrote in response to the events in Iran a couple of years ago, in a post that with hindsight actually appears to have been spot-on. (Once again, when I wonder to myself ‘have I already written something about this?’, the answer is ‘yes’, and I go find the post, and it’s good. Why isn’t this like one of the main blogs?)

In this case I’m following events even less closely than usual. Oh sure, I’ve seen snippets on the TVs at work in between Jim Cramer rants and the various ‘Sonorous’ ™ Obama speeches that pepper our newcast. But at best, I’m a half-informed half-wit on this subject. What little I have picked up, between Mohammed El Baradei (there’s a name I recognize – from where?), and the shutting down of the internet, and Obama ‘monitoring’ the situation, and our State Dept. calling for the policemen not to be violent with the rioters – all of this jumble has fermented in my brain and led to the following stunning thought:

This is the “Porn Revolution” (tm/2011 Sonic Charmer all rights reserved).

Somehow, some way, all these Egyptian Muslim-Brotherhood rioters, can be traced back to internet porn. I don’t have an argument for let alone actual objective facts to back this up yet; it’s just something my mind seems to be intuiting, a raw, reactive thought. And (as perhaps you can see from some of my recent, er, provocative posts), my new thing here at RWCG is just to get the thoughts out as they come, with little attempt at self-editing.

What would an argument for calling it the “Porn Revolution” consist of? Well, to take a stab in the dark, I suppose it might start with the observation of these young idle men all over the streets, young men with (evidently) nothing to do, and yet (I imagine) with as much knowledge of the decadent, wonderful West as the rest of us, through the globalized media (as symbolized in particular by – that’s right – the internet porn that (I assume) they surf), men who are unmarried and unmarryable due to the inequality of their society, who there suffer and seethe at the dishonor and indignity of being under the Mubarak yoke, etc etc etc. And so, they riot, inchoately.

Yes, the argument might go something like that. I really wouldn’t know as my knowledge of Egypt comes 10% from a big book on The Pyramids that I perused but never actually got around to doing an Oral Report on during 3rd-grade ‘Gifted And Talented’ sessions, 20% from the Brendan Fraser The Mummy movie franchise, and the other 70% or so from perusing that cool kids’ activity book Egyptology: Search for the Tomb of Osiris while waiting for this or that kid to finish playing with the Thomas trains in the children’s section of Barnes & Noble.

However, lack of a supporting argument or evidence is not going to stop me from clever branding and self-promotion. So that’s why I’ve decided the imperative is just to get it out there and then let the chips fall where they may: this mess in Egypt, this is The Porn Revolution.

And now, there’s no denying that if that moniker actually catches on, you can honestly say, you heard it here first.

Let’s Create Real, Not Made-Up, Jobs For Women
January 28, 2011, 7:48 am
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Been seeing a lot of chatter recently about the intersection of feminism, the sexual marketplace and progressivism. The basic pattern being observed is a cycle (whether virtuous or vicious depends on your POV) that resonates between female independence from men, female pursuit of alpha males, and female support for big government.

To describe the cycle (starting arbitrarily somewhere in the middle of it – it has no beginning or end):

The more women pursue and indulge alpha-male-exclusive fantasies, the less they have (stable, monogamous) relationships with men in their lives. The less monogamy and stability, the more big government women support. The more that government involves itself in and arrogates to itself the right to control, suckle, and nanny every aspect of human existence, the less pressure women will feel to have stable, monogamous relationships with men, and the more inclined they are to join alpha-male harems. The more they join alpha-male harems, the more they’ll need big government to be their husbands…

Compounding all this is a little-commented but not-unimportant side effect: as government gets bigger and power/money more concentrated, the few alpha males who come out on top of the game become that much more alpha. There’s far more ‘spoils’ accruing to a President, or Senator, or CEO of a firm tied to/dependent on government – which, increasingly, means virtually all firms – in a big-government world than in a small-government world; there’s far more in 2010 than there was in 1910. That makes those alphas that much more alpha, which makes alpha-pursuing women want them more, which only helps further the sort of society that creates these mega-alphas.

The end goal sought is, as stated brilliantly in the comment unearthed by Vox Day in the post linked above,

…a polyandryous society that still maintains a “Sex and the City” civilization. They somehow expect to limit sexual access to the five percent of men they find attractive while the rest toil away to make life easier and more comfortable for them.

It’s not clear how to halt or even slow down the progress of this development before it leads to real disaster.

So, as has happened before, the only thing I can really think of is ridicule. To that end, I need to observe that the key development enabling this cycle is that women, having been liberated and having (as they do) equal rights, now have jobs – in fact they seem to be doing better in the workforce than men. And don’t get me wrong; women being able to work, by itself, is obviously a good thing. But it is what allows women to be independent, and marry later, and date (or just sleep with) a lot of alpha guys with no real concern for eventual settling down. In other words their jobs are the fuel for the feminism/alpha-chasing/big-government cycle.

Here’s where the ridicule comes in: a disproportionate number of those ‘jobs’ (when compared with the jobs men do) wouldn’t exist without the government. Essentially, they are made-up, cushy, silly jobs that were basically invented, often by women, to give women something to do. Because otherwise, there’d be nothing for all these women, who want all these jobs for their independence, to actually do. Nobody would pay them to do (non-sexual) things, out of their own volition; they needed to harness the power of the government – men with guns – to take money away from others and create (directly or indirectly) ‘jobs’ for women to do. By definition, such ‘jobs’ aren’t – can’t be – contributing anything to society. They didn’t arise out of genuine need, they arose out of nagging and campaigning, or nannying and worrywartism, or something other than genuine economic need.

patty and selma

The ‘jobs’ held by Marge Simpson’s sisters on The Simpsons (chain-smoking unpleasant trolls of the DMV) are the canonical example. The reason The Simpsons has been so funny for so long is because much of its humor rings so true; it is closely-observed, and Marge’s sisters are no exception. I have seen, and you have too, real-live DMV employees exactly like that: Large, unpleasant, heavy-set middle-aged women grudgingly shuffling over to the copy machine at a snail’s pace to grab the printout of the form you had to stand in line for 75 minutes to pick up. The details vary but a lot of womens’ “jobs” are pretty much just like that. They work in an office somewhere. They work with a lot of paper. There are some government rules or regulations and they have to comply with them. They have to have, or set up, weekly meetings about this and that. They have to fill out forms about this and that. People are required to go see them, or make an appointment with them, or ask them to schedule an appointment with someone else, or call them, all of it because of some rule, or regulation, created by the government. They don’t produce or create or sell something. In one way or another they are basically glorified day-care workers tasked with keeping an eye on this or that aspect of society – this or that ‘classroom’ – so that real stuff can get done elsewhere.

I’m painting with a broad-brush here, obviously. I have to, for maximal ridicule. Obviously I’m not describing all jobs held by women, or even (necessarily) a majority of them. There are female scientists and saleswomen and engineers and writers and doctors (to name some non-made-up jobs that come to mind). Of course there are. And there are jobs held disproportionately by men (soldier, for example) that wouldn’t exist without the government.

But let me just try this:

(a) would the job Diversity Coordinator exist without the government?
(b) if I told you someone was a Diversity Coordinator, and you had to guess their sex, what would your guess be?

How about: the HR person who explains your health care plan to you when you start a new job, or an HR anything really. Same questions, (a) and (b). Or, someone works in compliance at a corporation. (a) and (b). Someone who works at a nonprofit that campaigns for government ‘clean-energy’ funds, or a nonprofit anything, really. (a) and (b).

Now, to sober up a bit here, I admit it’s not like there are no men in these sorts of jobs. There are. But what is true is that (a) these jobs wouldn’t really exist, or would exist in lesser numbers at least, without government priming or politicizing of one sort or another, and (b) they are disproportionately female (I think).

MIWBIIN*, why would that be? Why are made-up jobs disproportionately held by women? Why can’t oh-so-independent women cut it in the real world – make real economic contributions – without the embarrassing and belittling crutch of government either artificially spawning endlessly larger bureaucracies for them to run, or needlessly writing endlessly intrusive regulations for them to nanny?

Once I praised The Office as my favorite conservative show, particularly for its portrayal of salesmen. (Have you noticed how often I link to myself by the way? I have! That’s because my blog is so awesome that it has lots of good posts on everything.) More recently I pointed out that it’s gone downhill. One small but notable development I hadn’t mentioned was that Pam, who had long aspired to be an artist, and then more recently wanted to be in sales, has now become the ‘Office Manager’, which was a job she made-up. A non-job. A job that didn’t really exist, and which has no observable tangible duties that I can see. (In one episode she decided to make a ‘My New Year’s Resolutions’ bulletin board; okay so that’s 0.25 hours, what is she doing for the remaining 39.75 hours of the week? You got me.) Why, you might ask, do they even keep her on? Well basically (to combine the TV logic & the intrinsic logic on the show), because even though she wasn’t a good saleswoman and generates no revenue for the firm, she’s pretty, and people like her, and people would get mad if she weren’t on the show, and would feel sorry if she got laid off or fired or something. So, let’s give her something to do and keep giving her a paycheck. And then pat her on the back, because look, she’s ‘independent’!

This is what I’m talking about, in microcosm.

Let me try to end this post on a positive, optimistic note by stating my observations as a challenge: if women have equal rights (and, surely they do), and have equal potential (as I believe they do, if in different dimensions), there should be plenty of work for them to contribute to the private sector – without the direct or indirect prompting of government, nannyism, phoniness, style over substance, etc. So maybe that’s the key to ending or at least interrupting the feminism/big-government cycle: create real, genuine jobs for women to do, jobs that help to create actual profits, jobs that make actual positive economic contributions to society – instead of the jobs that so many of them, all too many, actually do have. And the great news is, feminists should be totally on my side here – because they, like me, believe women are equally capable of making economic contributions as men (right?) – thus they should be totally on board with what I’m saying.

So who’s with me – no more ‘nonprofit’ or bureaucratic paper-pushing work for women – so demeaning! They’re better than that! (Right?) I say, it’s time to put women to work in generating actual things, goods, and profits – just like men. There’s gotta be something meaningful and profitable they can do.

Any ideas?

[*MIWBIIN=Maybe I'm wrong but if I'm not]

Useless Messages
January 28, 2011, 5:03 am
Filed under: Uncategorized

I like (and by ‘like’, I mean ‘dislike’) how when you install a program or do something else time-consuming on your computer a message usually pops up that says ‘Please wait’. Do I have a choice? What else am I gonna do? I guess I could pull out a hammer and smash the computer thing. That’s kinda-sorta the opposite of ‘waiting’ in this context. But really, the message just makes no sense.

Blogging The State Of The Union Address**
January 26, 2011, 12:07 pm
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Well, President Obama really hit one out of the park last night. The soaring rhetoric, the renewed call for unity of purpose, the inspiring anecdotes. I especially appreciated the commitment he expressed to strongly supporting good things (of which he gave examples, that are too numerous to list in this space) with government funds.

All in all, this was precisely what he needed to give himself a bounce in the polls, Clinton-style, and set the stage for a triumphant re-election in 2012. Obama’s back!

**note: I didn’t actually watch or read any part of the State Of The Union Address. And actually, I wrote the above 3 weeks ago. Nevertheless, I’m certain the preceding comments apply, regardless and independently of what he actually said or didn’t say or what transpired last night. This can be easily confirmed by, for example, reading any mainstream-media pundit commentary on it, none of which will differ markedly from the above nor have any more basis in substance for the conclusions drawn.

Scams For Me But Not For Thee
January 23, 2011, 10:51 pm
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Matthew Yglesias has a good post on AOL and the economics of scams whose content I am happy to endorse.

…as the economic pie grows bigger and bigger, the number of hours in the day doesn’t grow. So in many cases the opportunity cost of taking the time to really check things out is rising. That means more and more often it’ll be the case for consumers to be rationally ignorant about what exactly they’re doing, and it’ll more and more make sense for firms to exploit that.

Indeed, and (like most things) I’ve even written about this sort of thing before:

I don’t have the time to do that analysis. So I’m probably getting ripped off on my cell phone service. I don’t have the time to do much about it. See, I have a life. People who don’t have a life, or who don’t value their free time as highly as I do, probably do indeed dig into their phone contracts, shop around, look for deals and coupons and tricks to save money. Some people (unlike me) don’t mind doing stuff like that with their free time (or at least, they have far more free time than I do). These are the coupon-clippers, the fine-print readers, the people who call the 1-800 number. They do these things, they save money, and they’re presumably ok with the status quo, which in part involves me subsidizing the fact that they save money, because I end up paying what amounts to an “I-have-a-life” tax.

So Matthew and I nominally agree that it’s increasingly a problem when complexity of this sort leads to a free-time tax. Yglesias even goes farther than I did, because he says business conducted in this way is literally a scam.

Yet what I find fascinating is that, however much they understand this and see it as a problem, it’s also the Matthew Yglesiaseses of the world who are all in favor of the government doing exactly the same thing to people – for example, when it comes to taxes, or health care. After all, can any mortal human make an informed, intelligent calculation as to his tax exposure, or whether what he’s being charged for health care makes sense? Whether he’s getting a ‘good deal’? Of course not. And that’s the way the left likes it. In fact, by supporting single-payer with implied government rationing, they want us to not even have any choice in the matter, have the decision handed to us by other people, and have no means or ability of doing any calculation or evaluation at all. Surely by Yglesias’s criteria this is scam multipled tenfold.

So does Matthew Yglesias only oppose ‘scams’ when not perpetrated by the government?

Our Straw Wrappers Have Been Illegitimately Replaced
January 22, 2011, 9:38 pm
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I’ve noticed something sinister about our society recently that seems to have gone largely and insidiously unnoticed:

Drinking straws are ridiculously hard to unwrap nowadays.

Everyone knows that you’re supposed to be able to take the paper off a drinking straw by grasping it gently by its sides, banging it briskly on the table in one clean vertical motion until the top of it pops out of the paper, grabbing that top, and then sliding the paper off easily in one piece.

For some reason, this no longer works.

Whether it’s McDonald’s or other fast food or generic cafeteria straws, the paper just no longer cooperates: it won’t slide off easily, and the more likely outcome of banging the straw vertically is that a fracture forms in its side, meaning that as you drink, liquid leaks out. Thereby rendering the entire drinking experience unsatisfying if not unrecognizable. So, to avoid this and get the straw out, you have to unpeel the paper off carefully, in several pieces, in several steps. Like an idiot. Like a sucker.

What has happened to our nation’s straws? Am I the only one to have noticed this? That’s the creepiest thing of all. I searched diligently on the Internet for over 80 seconds, but it appears nobody has noticed that our straw wrappers have been silently replaced by these pale impostors of their former glory.

Naturally, I blame communists. Or more specifically, greenies. Namely, I’m guessing that the straw wrappers are now made out of ‘recycled’ paper or some such nonsense, and everyone decided that would be ok to do, and no one would notice. Well what about ME dammit. Nobody asked ME whether I’D be ok with it.


Just another example of how, rather than progress, what we are actually getting is regress. Every day, all the time, little by little. When our grandchildren are drowning in tears with frustration and thirst as they fumble with hopelessly unwieldy straw wrappers over their so-close yet unattainable 64 oz drink of Brawndo, will they be able to forgive us? More to the point, can we rightly expect them to?


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