Friday, December 19, 2008


Just in case you're still not convinced regarding torture, here is a quote (via Andrew Sullivan's blog) from an American soldier, Matthew Alexander, who interrogated al Qaeda suspects in Iraq.

"The number-one reason foreign fighters gave for coming to Iraq to fight is the torture
and abuse that occurred at Abu Ghraib and Guantánamo. The majority of suicide bombings are
carried out by foreign fighters who volunteered and came to Iraq with this motivation.
Consequently it is clear that at least hundreds but more likely thousands of American
lives (not to count Iraqi civilian deaths) are linked directly to the policy decision to
introduce the torture and abuse of prisoners as accepted tactics.

Americans have died from terrorist attacks since 9/11; those Americans just happen to be
American soldiers. This is not simply my view – it is widely held among senior officers in
the U.S. military today. Alberto Mora, who served as General Counsel of the Navy under
Donald Rumsfeld, testified to the Senate Armed Services Committee in June 2008 that “U.S.
flag-rank officers maintain that the first and second identifiable causes of U.S. combat
deaths in Iraq–as judged by their effectiveness in recruiting insurgent fighters into
combat–are, respectively the symbols of Abu Ghraib and Guantánamo.” We owe it to our
troops to protect them from terrorist attacks by not conducting torture and we owe it to
our forefathers to uphold the American principles that they passed down to us"

Thursday, December 18, 2008

Good News

Abby had her orthopedic appointment yesterday.  She's got a classic clavicle break, and in a little kid like her there is nothing to be worried about.  She'll only need her arm sling for another week (Merry Christmas), and should be able to have full motion of the shoulder around then as well.

Over the next week, she'll develop a bump/bruise on her shoulder as the blood clot forms around the break to close it up.  As she grows, the bone will smooth itself out and become straight again (right now it looks like a really shallow inverted V).  But in another 3 weeks she should be clear to do swimming, ballet, etc.. without a problem. 

As a side note, we realized that Madeline is the only one to make it through (almost all) of 2008 without a serious injury (Kirstin - twisted tube, Me - ribs, Abby - shoulder).  There are two possible conclusions:
1) She's due
2) She's responsible

Vegas has #2 as a 5-1 favorite.

Enough, I know

Just in case you were still thinking there was something honorable in our tactics of torture, consider this Washington Post article from 2003.

"Col. David Hogg, commander of the 2nd Brigade of the 4th Infantry Division, said tougher methods are being used to gather the intelligence. On Wednesday night, he said, his troops picked up the wife and daughter of an Iraqi lieutenant general. They left a note: 'If you want your family released, turn yourself in.' Such tactics are justified, he said, because, 'It's an intelligence operation with detainees, and these people have info.' They would have been released in due course, he added later. The tactic worked. On Friday, Hogg said, the lieutenant general appeared at the front gate of the U.S. base and surrendered."

So at least by 2003, we were kidnapping innocent wives and children and holding them hostage.

Stay classy, America.

Stupid Examples

When one tries to defend torture as a legitimate tactic, it typically takes the form of the "ticking time bomb" example (see every season of '24').  That is, there is a major (often nuclear) device hidden in a city, and you have in custody someone who knows it whereabouts.  They refuse to talk.  In this case, with potentially millions of lives at stake, aren't we justified in torturing this individual to get the information on where the bomb is located?

The problem with this example is that is pre-supposes three very critical things, none of which are applicable to any real life situation.
1) The individual in custody knows the location   We have police procedures and ultimately we have trials specifically to review the available evidence and make determinations of guilt and innocence. We get this wrong sometimes. It is impossible for us to be 100% sure we have the proper individual in custody, no matter how much evidence we pile up.  Particularly when we do not require (as the Bush administration insisted) on any semblance of due process for the person in custody.  In the real world, we might end up torturing the wrong person.
2) Torture is an effective means of eliciting the truth.  All the evidence shows that tortured individuals will make up any story you'd like in order to make the pain stop. All the literature on torture suggests that it actually *reduces* the veracity of the victims statements.  So even assuming we are torturing the right person, the possibility of actually getting the location of the bomb is far less than 100%.  Think about this, if on September 10th, 2001, we had Khalid Sheik-Mohammed in custody, what would you expect by torturing him? This man helped plan a suicide attack. Do you think he wouldn't lie? Do you think he wouldn't give false information?  Do you honestly think that beating him in the face will convince him to tell the truth?  Wouldn't the torture just convince him of the injustice of the U.S. and give him incentive to lie even more?  Torture is useless in extracting gainful information.
3) The potential damage is big enough to warrant torture.  That is, we suppose that "millions" of people would die, so torturing one person is worthwhile.  What if it was 100,000?  10,000? 1,000? 100?  At what point do we allow torture?  To save one other person?  Two other people?  Are we authorized to torture some more painfully the more people are at risk?  Can I slap someone around to save 5 people, but I can electrocute their testicles to save 1000?  The assumption is that we can make firm determinations of what torture is, when it is authorized, and when to apply it.  We cannot.

There is no situation in which torture is legally warranted.  None. Zero.  If you want to pick one thing that defines "civilization", it is not language, or forks, or art.  Cavemen had language, tools, and cave paintings.  What sets us apart is having set aside physical intimidation and abuse as methods of presuasion.  Torture violates the very nature of civilization.  It is barbaric, in the most perjorative sense of the word.

BUT, you say, wouldn't you torture someone to save Abigail and Madeline?  Let's leave aside the issues in 1) and 2) above, and assume that I have exactly the right person tied to a chair, and I'm garuanteed that if I snip off his fingertips with a metal shears I will get the information to save my little girls.  Would I cut off his fingers?  Would I torture this man to save my girls?

Absolutely.  But that does not make what I did legal, moral, ethical, or right.  After torturing this man and saving my family, I should go to jail.  And I'd go happily.

The *right* question to ask regarding torture is this: do you feel that the chance of obtaining useful information to save an unspecified number of people is worth spending time in jail?   Are you willing to pay the price of torturing people?

Let me amend my post from a couple of days ago to this.  I think that Bush, Cheney, Rumsfeld, Gonzales, John Yoo, and all the other officials that knew about and authorized torture should be put on trial.  They should be required to - publically and openly - explain what they did and why they did it.  They should be forced to acknowledge and take ownership of their actions.  At that point, a jury of their peers might decide that what they did was justified and warranted, in the sense that it saved lives.

But they must be forced to admit they are torturers.  And if they really believe in what they did, they should be *proud* to admit that they tortured people.

You'll notice, though, that at no point did anyone in the administration have the guts to get up and speak directly to the country.  All the torture authorization happened in memos and meetings that they could pretend didn't happen.  They're cowards, flailing out at people that look different in an attempt to protect themselves. They are nothing more than cavemen, using their physical advantage to beat, rape, and kill weaker individuals.

If they want to be proud of that, let them stand up and confront the pictures and accounts of what they did.  But they won't. They'll hide behind executive privledge and let a few poor Marines go to jail.

I repeat, cowards. All of them.


Abby and Madeline have Hannah Montana toothbrushes.  They play music. 

I shall now insert a fork into my eye socket.

Wednesday, December 17, 2008

Zero Interest Rates

So far this recession has been a boon to those of us who teach intermediate macroeconomics.  We're covering all the theoretical possibilities we were only able to speculate about in the past.

For instance, yesterday the Fed lowered their target interest rate to essentially zero.  The idea of this is to lower the cost of borrowing so that banks can borrow cheaply and then lend that money out to firms and people to buy stuff. But the Fed has been lowering the interest rate for months and the economy continues to worsen. And now the Fed has no place left to go - you can't lower the interest rate to less than zero.

So why isn't the lower Fed interest rate working?  And if it isn't working, what is the Fed's next step?  To answer this, let's review something really important, the Fisher equation (thanks Irv!).

Nominal interest rates (the rate you pay on your mortgage is a nominal interest rate) is made up of two parts:
i = r + p
where i is the nominal rate, r is the real interest rate, and p is a measure of inflation.  To understand this definition, think about lending me some money.  If you are going to loan me $1000, you need to be compensated for two things.  First, you need a 'real' return - this refers to the fact that for a year (or however long it takes me to pay you back) you will *not* have $1000.  The real interest rate is the 'charge' for this inconvenience to you.  Let's say that is equivalent to 3%.  That is, the cost of not having your $1000 for a year is $30. 

In addition to paying you the real return, I need to compensate you for the fact that a year from now prices will likely be higher.  So when I pay back the $1000, you can buy less stuff than you could have today.  Thus I have to pay you something in addition to the real return.  That something is the inflation rate.  If inflation were 2%, then the nominal rate would be 3% + 2% = 5%.

The Fed targets the nominal interest rate.  By saying that they have an interest rate target of 0%, they are saying that:
r + p = 0

Now, why might this not stimulate the economy?  Well, if we have that inflation is negative (deflation), then p<0 and it has to be that r>0.  If we expect prices to fall by 3% over the coming year, then the real rate of interest is equal to +3%.  The *real* interest rate is what matters for investment in the economy. So even though nominal rates of interest are zero, because of deflation this might mean that real interest rates are quite large.

Given the recent CPI information, it seems that prices are falling or stagnant, and more importantly, it seems that people are expecting prices to fall in the future.  Therefore the real interest rate is positive and large, and firms don't want to borrow.

So now what does the Fed do, if they can't lower the nominal rate below zero?  Well, they can try and adjust the expected inflation rate. How do they do that?  Fire up the presses.  We are at the point where the Fed will likely need to start printing money, and use this money to buy up financial assets.  The flood of new dollars into the banking system will drive up inflation.  More importantly, the Fed will have to convince everyone that they intend to keep inflation up (say at around 3%) for the foreseeable future.

If inflation is +3%, and the nominal rate of interest is 0%, then the real rate of interest is -3%.  Now we're cooking (we hope).  Negative real interest rates mean that you actually make real money by borrowing. Firms will be better off borrowing to buy new machines and expand production *now*, rather than in the future.

Ultimately, yesterdays setting of the nominal interest rate to zero signals that we are done with interest rate policy for the next year or so.  The Fed will have to move on to adjusting inflation directly to achieve any stimulus at all. 

This is not the end of the world, but it is like the guys at the Alamo running out of ammuntion and chucking rocks and dead cats at the Mexicans.  The Fed is down to dead cat throwing.  Well placed dead cats can still kill a man (I would presume that you need to get the claws to stay out, maybe if rigor sets in you can make this work), so it is not like they are powerless.  But much of the emphasis will likely now shift to the fiscal stimulus plan.

Tuesday, December 16, 2008

Get Mad

Okay, we're going to bring down the mood a little.  There have been few news reports on the Senate Armed Services Committee report just issued regarding torture.  Before the details, let me make it clear that this report was jointly issued by Carl Levin and John McCain, and that there were zero dissents on the committee made up of 13 Democrats and 12 Republicans.  This is not some Democratic hatchet job.

Remember Abu Gharib? The pictures of the soldiers posing with naked and hooded prisoners who were in torture positions?  That occurred in late 2003 and early 2004, with top brass "officially" reviewing the evidence on May 12th of 2004 before proceeding to court martial several soldiers for their actions.

As noted at that time, the actions that the soldiers took violated the Geneva Conventions, of which the U.S. was an original signatory.  In addition, the War Crimes Act of 1996 made violations of the Geneva Convention a felony under U.S. law.

So read the following outtakes from the Levin/McCain report and ask yourself why Bush, Cheney, Gonzales, and Rumsfeld should not be prosecuted.

- "On February 7, 2002 President Bush signed a memorandum stating that the Third Geneva Convention did not apply to the conflict with al Qaeda and concluding that Taliban detainees were not entitle to prisoner of war status or the legal protections afforded by the Third Geneva Convention."

- "In December 2001...the Dept of Defense General Counsel's Office had already solicited information on detainee 'exploitation' from the JPRA, an agency whose expertise was in training American personnel to withstand interrogation techniques considered illegal under the Geneva Convention."

- "On August 1, 2002,....the Dept. of Justice's Office of Legal Counsel issued two legal opinions. The opinions were issued after consultation with senior Admin. attorneys, including then White-House counsel Alberto Gonzales... The memo's conclusions were that 'torture law doesn't apply if you act under the color of presidential authority.'

- "On August 1, 2002....the second memo..responded to a request from the CIA, addressing the legality of specific interrogation tactics. ...a publicly relaeased CIA document indicates that waterboarding was among those analyzed and approved."

- "On December 2, 2002, Secratary Rumsfeld signed Mr. Haynes recommendation [approving 15 different torture techniques], adding a handwritten note that referred to limits proposed in the memo on the use of stress positions: 'I stand for 8-10 hours a day. Why is standing limited to 4 hours?'

- "On September 14, 2003 the Commander of CJTF-7, Lt. General Ricardo Sanchez issued the first interrogation SOP that authorized interrogators in Iraq to use stress positions, environmental manipulation, sleep management, and military working dogs..."

The reports conclusions can be summarized as:
1. Before Abu Ghraib, The President made a written determination that the U.S. would not abide by the Geneva Conventions
2. Before Abu Ghraib, Members of the Cabinet and other senior officials were in meetings where specific torture techniques were discussed.
3. Rumsfelds authorization of torture led directly to abuse of detainees at Guantanamo Bay as well as contibuting to the use of the abusive techniques at Abu Ghraib.

Here's the quote to mull over - "The abuse of detainees at Abu Ghraib in late 2003 was not simply the result of a few soldiers acting on their own."

Congratulations, you live in a country where the most senior officials in the government authorized your country to violate the standards of civilization.  They stripped down human beings, urinated on them, let dogs urinate on them, hung them from their arms, forced them to go without sleep for days, made them stand for hours on end, put bags on their heads and beat them, and deliberately kicked detainees to break their arms.

Bush, Rumsfeld, Cheney, Alberto Gonzales, John Yoo, etc.. made a deliberate decision to torture human beings. For what? Ask any experienced law enforcement official, and they will tell you that no useful information is ever gathered from tortured individuals. They will say anything (i.e. they will make up stories) to make the pain stop.  The information, if any is actually obtained, is useless. 

These are small-minded, disgusting individuals who shredded their own morality in order to satisfy their desire to seem "tough" and to extract some kind of revenge of 9/11. 

I for one don't want revenge.  If there is anything I want, it would be to actually exert some effort to capture the man responsible for 9/11.  That has nothing to do with Iraq, and it is absolutely unnecessary to sacrifice fundamental human rights to achieve this.  After we finally get bin Laden, I want him to go on trial and spend the rest of his life in jail, next door to some crack-dealer from Compton.

If you think this torture was justified to "defend the homeland" or "to keep real Americans safe" or "to defend freedom" or "to get them before they get us" or "because they would torture us", then you have missed the entire point of Western Civilization and the United States of America.  I would suggest that you find a nice home in North Korea, or perhaps Saudi Arabia.

Bush and his cronies and puppet-masters degraded the honor of the U.S.A. with every one of these unspeakable acts. Good riddance to his entire administration.

Now, will we do the right thing and actually put them in jail?

Long-distance BBQ

I had a great Saturday.  After talking about it for a long time, we finally organized and did the "Taste of Texas" dinner.  One of the dad's from playgroup (Stefan), is a pilot and owns a four-seat Mooney (see here to get an idea of what it looks like).  Stefan and I took off at about 10am and flew from Sugarland to Boerne, TX, just NW of San Antonio (about 1 hour in the air).  There we borrowed the airport car and drove to the SisterAcres winery and picked up a few bottles of (rather good) locally produced wine.

From Boerne, we took a quick hop to Llano (20 minutes), a tiny burg in the hill country.  We swung by Cooper's Pit BBQ, where they, well, BBQ stuff in big brick pits.  We got brisket, pork tenderloin, ribs, and chicken.  Dipped in sauce and then slapped on a plastic tray.  They wrapped it up for us in some trays and we were off.

Next stop was Brenham (another 20 minutes) where we grabbed a pecan pie from the on-site airport diner.  After that it was back into Sugarland and back to Stefan's where the playgroup had assembled.  Then we ate, had some wine, and tried to keep children from mangling each other or the poor dog.

The flight was great. You get to see everything on the ground, and can see how the climate completely changes from swampy/humid in Houston to scrubby/dry out in the hill country.  It was windy, so one of the landings was a little bumpy, but otherwise it was pretty slick.  There is a lot more to flying one of those little planes than you'd think.  Especially around Houston, you have to stay alert at all times for instructions or requests from the air controllers (and yes, its the same controllers working the commercial flights).  The information input is overwhelming, and by the end of the day I had some ability to translate the communications Stefan was getting from the controllers.  But only a little. 

By the way, the BBQ is unbelievably good.  I'd drive the fours hours to pick it up.

Friday, December 12, 2008

Brittle Bones

Apparently the Vollrath family is prone to breakage. Last night Abby "fell" off of the Smart Cycle (stationary bike thing that attaches to the TV as a video game).  She broke her clavicle.  It's not severe, and she'll heal up just fine in a few weeks.  She's got a sling to wear, but that's about all we can do.  Lot's of pain, lots of crying, but she's held up like a trooper so far.

I said "fell" because sources have informed us that foul play may be involved.  We're still waiting for CSI:Bellaire to clear the scene, but we have one primary suspect, a 3' 1" blond female caucasian.

Auto Bailout Down the Tubes

Thank God.  Sorry to Michigan, but this was always a stinker of a plan.  Let's throw $14 billion into three companies that rightfully belong in bankruptcy so that they can.......go bankrupt three months later than we expected. 

Just to be clear, there was nothing about the bailout that could have altered the fundamental problems of US automakers. These seem to be three-fold:
1) High costs per worker.  This is not because current auto-workers are paid ludicrous amounts of money. Those actually working for the Big Three earn about $56 an hour in wages and benefits, while workers at Japanese plants in the U.S. earn about $49. Not a huge difference. The problem comes because in addition to the $56 per hour, the Big Three pay about $17 per worker hour in benefits to retirees. It doesn't matter how much they restructure their existing labor force, that $17 per hour has to be paid.  The bailout doesn't address this.
2) The Big Three make relatively crappy cars.  Quick, you want to drive an Olds? Why does Olds still exist? Hummer? Buick? Seriously, the vast majority of cars made by Detroit suck. This is unfixable by the bailout - and no, making greener cars doesn't help this.
3) Foreign auto-makers have better production systems.  They are more efficient at design, procurement, and production.  Nothing about the bailout changes the relative advantages of the foreign firms.

I, for one, am glad it failed. Let them go to Chapter 7 or 11 and then the market (not some government appointed car czar) will decide whether the pieces of GM, Ford, and Chrysler are worth picking up. In the meantime, go ahead and pledge money to garuantee benefits if you want.

As a total aside - shouldn't the car czar really be called the "auto-crat"?

Lego for Everything

See here for an interesting comparison of recently "troubled" governor of Illinois Rod Blagojevich and a Lego mini-person.  Eery coincidence, or something more sinister?  Are the Danes trying to inflitrate Midwestern governments?  I report, you decide.

Poor Chinese People

No, I don't mean "poor" as in "not a lot of money", but "poor" as in "sad and put upon".  The Chinese government has issued numerous statements over the years about how some other country has "hurt the feelings of the Chinese people", which apparently is a classic mis-translation into English of what the Chinese really mean (something more along the lines of "you're a d-bag").

This site has counted up the number of times people have officially hurt the feelings of the Chinese.  Not surprisingly, Japan came in #1 (with 43 instances - or roughly twice every three years since Communist China was founded).  The USA is #2 with only 23 times. 

We can do better!  I challenge everyone to offend the sensibilities of the entire Chinese nation as much as possible. We're the USA. We should be #1!!!   We don't send professional athletes to the Olympics to finish #2 do we?  Come on America, let's get a move on!

We're all gonna die! (part II)

So the economy is looking worse and worse. Jobless claims are up to their highest levels since the early 1980's, or depending on how you measure it, the 1950's.  Regardless, the recession is on and looking bad.

How do we recover from this?  Well, the federal government is mulling over a large ($800 billion?) fiscal stimulus bill that would have the government start spending on things like infrastructure, health care, etc. to get the economy moving.  The intellectual back-up for this comes from the Keynsian multiplier.  That is, every dollar of government spending becomes income to someone else (a business from whom they bought concrete to build a new road), who then in turn spends this (on your salary), and you spend this on things like TV's and take-out Chinese food.  The original $800 billion stimulus actually generates an extra (1+x)*$800 billion in economic activity. "x" is the Keynsian multiplier, and your average macro textbook will tell you that x could be as big as 1 or 1.5  (So we could get $2 trillion in new economic activity by spending $800 billion). 

This all hinges on the size of x - (by the way, theoretically we think that "x" is bigger for government spending than for tax cuts, so that is why Obama is focusing on spending).  But this site, run by two really good economists reviews some research that suggests that "x" may actually be zero.  That is, $800 billion in government spending could only generate $800 billion in new GDP.   That's still good - but not the bang for the buck that you'd like. 

So when you are listening to the news about the fiscal stimulus, it is useful to realize that much of the discussion can essentially be boiled down to asking how big "x" is.

Wednesday, December 3, 2008


Always, always, always check you child's work before they go back to school:

In this case, Mommy works at Home Depot, and little Sparky drew Mommy selling snow shovels to a host of maniacal stick people.  
What? You thought it meant something else?  Dirty, dirty mind.

Monday, December 1, 2008

In Defense of Kirstin

This is for Kir, who gets worked up over this kind of stupidity.

From Slate:
      If you're like me, you grew up worrying about people starving in other
      countries. Your mom would tell you things like, "Eat your food. There are
      kids going hungry tonight." But hunger, as a global threat, is now
      dwarfed by overweight. According to Popkin, the population of obese and
      overweight people worldwide—1.6 billion—is now twice as large as the
      population of malnourished people.

An interesting fact, perhaps.  But if true, then there are about 800 million under-nourished people in the world, while the population of malnourished people is 1.6 billion + 0.8 billion = 2.4 billion.  The prefix "mal" means "bad" or "incorrect" or "wrong".  Like malfunction, or malignant, or malcontent, or maleficent. It does not mean "under".   Anyone with poor nutrition is malnourished, and their actual weight is immaterial.

Stupid interweb.


Sig sent this site along.  I'm not sure I wanted to know this much about poop, but there you have it. 

Multimedia Review

Finished a few books worth mentioning:
1) The Reformation, by Diarmaid MacCulloch.  Hefty tome on religious history from about 1500 to nearly 1700. A very interesting review of what the Church looked like before the Reformation, and then a suprisingly readable walk through Luther, Zwingli, Calvin, and others as they break with Rome.  Two reactions to the book.  First, it is quite clear from this history that most of the Reformation consisted of political entities using a religious controversy to extract themselves from Popish intereference.  Second, the various Protestant sects were willing and able to fight about nearly every single meaningless detail of the liturgy.  It strikes me that it was a bunch of stubborn German(mainly) academics who refused to acknowledge the other guy might be right.  It reminds you of Churchill's comment along the lines of: "The arguments are so intense precisely because the stakes are so small."

2) The Big Con, by Jon Chait.  This starts out as a quick history of supply-side economics, showing that Jude Wanniski and Arthur Laffer were essentially hacks.  Their crackpot ideas (just lower taxes and everything will take care of itself) was latched onto by Republicans - NOT because Republicans believed in their soul that low taxes are right - BUT because Republicans realized they could win elections by telling people they would cut their taxes without cutting spending.   From there the book wanders off into Chait's own screed about the failures of modern media to call the Republicans on this.  Regardless, it is a quick interesting read, and highlights for you how intellectually vacant the whole Laffer curve and supply-side economics argument has always been.

3) The Horse, The Wheel, and Language.  This should really have been a more interesting book. The author is an archaelogist who is summarizing the arguments from academia regarding the "homeland" of the Indo-European language.  This primitive Indo-European langauge is the "mother" language of Sanskrit, Hindi, Persian, Latin, English, German, French, Spanish, and pretty much most of the rest of Europe.  His argument is that the steppe-living people of the area just north of the Black Sea and Caspian Sea were the originators of this language, and that their adoption of horses to both ride and pull wagons was the impetus that pushed their culture and language out into new areas.  The book, though, is thick with archaeological detail that stuns with its boredom. Nothing like reviewing the various pots found in an ancient garbage dump on the Volga river to really bring the story to a screeching halt.  It's too bad, because a better, shorter, pithier version of this book would probably be really interesting.

Also have seen several movies recently:
1) Iron Man - finally got to watch the DVD.  For a Marvel comics action movie this is pretty good.  And it is all Robert Downey, Jr.  He is fantastic, and makes the movie worth watching.  Otherwise its just as clunky as Daredevil.
2) Quantum of Solace - saw this in the theater.  For a Bond movie, it is really good.  Daniel Craig is excellent, and I enjoy the rough and tough Bond more than the Roger Moore befuddled gent routine.  Only moderately superfluous action sequences (the plane chase has no purpose), but the opening car chase is great.  Well worth your money and a bucket of popcorn.

Thanksgiving Debriefing

The big innovation this year on Turkey Day was deep-frying a turkey.  We borrowed a gigantic crawfish pot and propane burner from some neighbors, stoked up about 9 gallons of peanut and canola oil to 370 degrees, and started frying anything we could get our hands on. 

We learned a lot of things doing this frying:
1) You cannot overestimate the amount of oil you need. (Thank you to Randalls for being open until 4pm)
2) High-temperature resistant silicone gloves are essential
3) Deep-fried turkey is really good - BUT, for the effort involved, I'm not sure it's worth it.  We also had smoked turkey and a regular roasted turkey, and the fried turkey was not that much better.
4) Have a really deep pot (like we did) to fry a turkey, because oil shoots out of the turkey's butt when you put it in
5) Deep fried mashed potato balls are incredibly good.  They have earned a spot on our regular T-giving menu.  So puffy.  So tasty.  Mmmmmmmmmm.....
6) On the other hand, deep-frying a Reese peanut butter cup is not worth the trouble.
7) Hanging outside with your fryer is a nice way to spend Thanksgiving.  We chucked everything in there - onion rings, jalapenos, mushrooms, candy bars, the turkey, mashed potatoes.  If Abby and Maddie had not been careful, I probably would have battered and fried them too

Wednesday, November 26, 2008

"Perhaps you'd like to take off your shorts."

No? Then apparently you haven't read some of the worst sex writing of 2008.  Check it out here

Personal favorites:

'The blue veins are divine,' he whispered.

"...I mistook it for some sort of monument in the centre of a town. I almost started directing traffic around it." 

"like a cat lapping up a dish of cream so as not to miss a single drop."

The Long Run View

So the whole economy is supposedly collapsing, right?  Is there any reason to suspect that in the end this could be a good thing?  Yes, if the current issues represent a fundamental shift towards a higher rate of savings.

Following the whole sub-prime financial meltdown, banks and financial institutions got scared and stopped lending. The real economy slowed down as firms couldn't get lines of credit to make payroll or loans to open new offices, and you couldn't get cheap credit anymore to buy a new car or house.  This slow-down has spooked everyone (like you) into doing what? Saving more. Now, rather than taking that vacation, people are paying down credit card debt.  Rather than buying a new car, they are putting that money aside in case they lose a job.  So the rate of savings is going up.

In our basic textbook model of long-run growth, there is an optimal level of savings.  That is, there is a savings rate that maximizes the long-run level of consumption (fun stuff like food and Wii's and princess movies).  This savings rate is usually referred to as the "Golden Rule" level of savings (as in, you should save at the optimal rate so that your children will have high consumption).   The Golden Rule savings rate, in the simplest form, says that the savings rate should be equal to the ratio of (Capital Income/GDP). 

In the U.S., the ratio of Capital Income to GDP is historically around 30%.  That is, of all the output we produce, 30% of it is paid out to the owners of the machines, land, and factories that produce the stuff we like to consume.  If you own an S&P index fund, you own capital, and therefore your dividends (for example) are part of this 30%.   The other 70% of GDP, roughly, is paid to labor.  That is, it is paid to you in the form of wages.

So the Golden rule says that the optimal savings rate is about 30%.  What is the effective savings rate in the U.S. over the last 10 years?  Somewhere around 14-17%.  (You've probably heard that the savings rate is negative or less than 5%.  That's the personal savings rate.  What we care about is the overall savings rate, which includes all forms of corporate investment).   So we are well below the Golden Rule savings rate in the U.S..

Now IF the current economic situation means that people have fundamentally altered their savings behavior and the overall savings rate goes up to closer to 30%, then in the long run we will be better off.  How much better?  Well, in a really rough calculation, having the savings rate go from 15 to 30% would generate nearly twice as much consumption in the long-run as we have now.  And that is ignoring any additional growth in productivity between now and then.  Even if the savings rate only goes up to 20%, this represents a gain in long-run consumption of nearly 60%. 

So in the long run, an increase in the savings rate is the right thing to happen.  We'll all enjoy (and our kids and grandkids will really enjoy) higher consumption thanks to us saving more.  Ideally, we would gradually increase the savings rate over time, avoiding the current drop in economic activity.  However, we've all basically decided to jack up our savings all at once, and that puts the brakes on current economic activity. 

But, in the end, IF we sustain this savings rate, we'll all be better off.  It's just a tough period of adjustment to get there.  So ask yourself this:  would you trade two years of low economic growth and high unemployment (around 9%) for a doubling of your consumption over the rest of your life (and more importantly, your kids lives)?

Tuesday, November 25, 2008


As a quick aside, here are a few things to chew on regarding the Obama economic team:

1) Larry Summers: New head of the National Economic Council.  Honestly, who cares what position he has. He has emerged as probably the leading advisor to Obama on economic policy.  To illustrate this guys intellectual heft, let me paraphrase the comment made by one of my old graduate school advisors who knows Larry pretty well - "The single best thing I could do to further the study of economics would be to serve as Larry Summers' personal valet, so that Larry could spend more time thinking about economics."

2) Christina Romer: New head of the Council of Economic Advisors. I've met her very briefly, and my only reaction from that instance was that she seems like one of the least egotistical really great economists in the world. That said, she has every reason to be really egotistical.  Her work on monetary policy and history is considered top-flight, and she probably understands the ins and outs of U.S. government fiscal policy over the 20th century better than anyone (but she might be tied with her husband, David Romer). 

From my perspective, the best thing about both of them is that neither has every betrayed a sense of letting ideology stand in the way of sound economic reasoning.  In other words, they aren't just partisan hacks who have been smoking the supply-side trickle-down ganja so that Dick Cheney will hire them.  These are serious economists *first*, and Democratic partisans *second*.

Stimulus Package

Mark Thoma is a really good economist, and he has done some crunching on the mooted stimulus package. His full post is here, but the upshot is this:

Obama's team has announced a plan to create (replace?) 2.5 million jobs by the end of 2010. At $700 billion in stimulus, this works out to $280,000 per job created.  Seems a little high, doesn't it?  There are several reasons this looks big:
1) The government will actually spend less than $700 billion
2) Obama's team is low-balling the job creation estimate
3) Obama's team thinks that government spending has a small effect on GDP (and hence on employment)

If you take pretty standard macro-economic results seriously, then the $700 billion should generate about 2x$700bn = $1.4 trillion in new GDP.  (We think the multiplier on government spending is about 2. Why is it bigger than one? Because when the govt spends money, that money ends up with companies who use it to pay employees, who use it to buy things like plasma TV's and Cheetos, which then gives money to the workers who make Cheetos, etc. etc.).   So the $1.4 trillion in new GDP is an increase of about 10% over last years total GDP (just under 14 trillion).  Historically, every 2% increase in GDP yields about 1% lower unemployment.  So that means unemployment should go down by 10% x 1/2 = 5%.  A 5% increase in employment would be about 5% x 155million = 7.75 million jobs. 

So this would indicate that the plan would be spending $700 bn / 7.75mil = $90,322 per job.  That's only about a third of the $280,000 per job number you get from the Obama numbers.  So it seems likely that the Obama team is underselling their potential impact.  This is probably smart, because it's a lot worse to fall short of your jobs goal than to come in ahead of it. 

Is $90,322 a lot to pay to generate a job?  Think of it this way, the government is basically going to borrow that money to generate the jobs.  So that $700 bn in extra borrowing gives us each (about 300 million people) $2,333 extra in government debt.  Is *that* a lot for each of us to pay for 7.75 million new jobs?  I don't know. I guess it depends on whether you are unemployed or not.

Family Memo

This is pretty funny stuff.  A sample:

"In the Travel and Entertainment category, you will find that fewer requests to eat in restaurants will be approved, and requests for desserts in restaurants, particularly, will not be approved (unless they are included in the cost of a kid’s meal). In the case of Cabot’s or The Cheesecake Factory, where ice cream or cheesecake, respectively, is kind of the point, sharing is strongly encouraged. An additional benefit of this will be improved health. Netflix has been put on hold for 90 days, and we will reconsider that offering then; unopened red envelopes left on top of the TV indicate a lack of demand at present. Newspaper and magazine subscriptions are subject to elimination as well. Executives, including myself, are being asked to purchase regular coffee in place of more expensive coffee drinks while traveling, and to utilize meals from our on-site food service provider whenever possible."


Whoops. Forgot to put in the link to the blog-personality test site. It is HERE.  Analyze away.

Monday, November 24, 2008

The Blog Speaks

So this site will analyze a blog (in about a nano-second) and give you a personality read on the author.  I am apparently a "ISTP" type, described as:

"The independent and problem-solving type. They are especially attuned to the demands of the moment are masters of responding to challenges that arise spontaneously. They generally prefer to think things out for themselves and often avoid inter-personal conflicts.

The Mechanics enjoy working together with other independent and highly skilled people and often like seek fun and action both in their work and personal life. They enjoy adventure and risk such as in driving race cars or working as policemen and firefighters."

That sound you hear is Kirstin laughing out loud at some of this.  You know me, big into race-car driving, fire-fighting, and independent police work.  I do prefer to think things out for myself, so that's about right.  But dealing with spontaneous challenges?  I'm not sure spontaneous should really ever be used in connection with me or my approach to life. 

The Onion Rocks

Here is an article entitled, "I'm Not One of Those 'Love thy Neighbor' Christians".  Classic and probably disgustingly accurate.

Do you know your Civics?

Not sure? Take this quiz and find out how you do.  For kicks, they gave this quiz to a group of elected Representatives and other government employees.  Average score?  About 40%. 

Now, can you beat my 32 out of 33?

Thursday, November 20, 2008

Let them die peacefully

The American auto companies, that is.  It sounds as if the Senate is being remarkably sensible in dealing with this ludicrous attempt to throw good money after bad.

See here for a nice article by Matthew Slaughter, a really good economist from Dartmouth, who points out that bailing out GM and Ford will have (gasp!) long-run ramifications.  Very quickly, if you keep bailing them out (and you'll have to, because that $25 billion is going right down the toilet in the space of a year to 18 months), then you basically are telling Honda and Toyota that they should look elsewhere to build their auto plants that compenstate their employees at about $60 per hour (benefits included).  Because there is no way we want to have more productive plants in the U.S. paying good wages.  That would suck.

Your Christmas Shopping List

Don't miss the hot items selling over at the American Family Association web-site.  As you can imagine from their name, these are regular average people who worry about things like mortgages, kids, schools, and how to get from soccer practice to ballet recitals with time to spare.

Oh wait, that would things real families care about.  The willfully bigoted Jesus cultists over at the AFA are really a raving bunch of lunatics that think gay people actually give a shit about them or their kids. 

To wit: the "They're Coming to Your Town" DVD.  Don't forget to watch the trailer.

If being filled with un-Christian hate is not your thing, why not consider showing the neighborhood that you are a closet KKK member?  Just plug in the handy-dandy light up cross from these guys.

A website for everyone

Don't miss the "Hot Chicks with Douchebags" website.  I'd say something else about it, but it exists as such a Platonic ideal form of a web-site that nothing comes to mind.


I have finally entered the blissful state.  In return for reviewing a book proposal, Oxford University Press has sent me $200 in free books:

The Oxford Companion to Food
What God Hath Wrought (a history of the U.S. btwn 1812-1848)
The Quantum Ten (history of the Solvay conference that hashed out quantum mechanics)
The Writings of Max Weber
The Undercover Economist

I have the best job ever.

Tuesday, November 18, 2008

Bailout the Carmakers?

From here, an interesting calculation.

"Yermack estimates that the aggregate capital investment in GM and Ford since 1980 has led to a net reduction in capital of $465 billion...This is what I find particularly disturbing: with that $465 billion, 'GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan, and Volkswagen.' "

Like I said before, how about we just pay off the workers, if we're so concerned with their welfare (and by the way, the wage rate in US automakers is about $70 per hour when benefits are included, compared to $28 for the average American)?   Even better, let's take the proposed $25 billion in bailout money and use it to buy a basket of stocks, which are terribly cheap right now, and offer a much better return over time than decrepit old car-makers that are supporting the lifestyles of a number of under-productive Lions fans.

Seriouly II

More stunning insights from the world of wack-job Christian fundamentalists:

"Since the election I've been asked a number of times to comment on the likelihood that Mr. Obama could be the anti-Christ.   Let me begin by saying that having been elected President he's Mr. Obama now, not just Obama.  As for him being the anti-Christ I've discouraged that thought because I don't believe it's time for the anti-Christ to be revealed yet. But apart from that there's no Biblical reason I can find that would absolutely disqualify him.  And based on the things we know about the anti-Christ there's a fit in several important places.  The anti-Christ will have to burst on the scene quickly and powerfully to accomplish so much in the little time he has, so maybe he'll need a head start.  If that's the case, maybe Mr. Obama is on his way to becoming the anti-Christ. Let's find out.Jack Kelly  

It takes all kinds to make the world go round. But honestly, Jack Kelly is simply a waste of valuable carbon atoms, isn't he?  If we could break him down into constituent molecules, that would be something like 100 pounds of water that could be used to keep some starving African kid alive. How is this not more valuable than this garbage? 


"I think there is a gay and secular fascism in this country that wants to impose its will on the rest of us, is prepared to use violence, to use harassment. I think it is prepared to use the government if it can get control of it. I think that it is a very dangerous threat to anybody who believes in traditional religion," - Newt Gingrinch.

Thanks to Newt, I'm finally going to get that GDM (Gay Defense Mechanism) installed at our house.  I want to make sure the Gay Menace doesn't sneak in my hair?

I grew up with Ronald Reagan as the President. I believe in small government, fiscal responsibility, individualism, and the strictest forms of rights to privacy. There is no one, and nothing, left in the Republican party that represents any of these things. There are a group of disreputable, dishonest, bigoted, willfully ignorant, and evil (yes, evil) grumpy old white men (and moose-hunting moronic women that the old white men like to ogle) that now parade around under the Republican Party name.

If you want to "defend marriage" as we know it, great.  You know what cheapens and degrades marriages?  Alcohol. Drugs. Abuse. Adultery. Dis-honoring your vows. Taking your spouse for granted. Treating your spouse like a servant.

For the record, here is Newt Gingrich's personal history of "defending marriage"
- In 1962, at the age of 19, he married Jackie Battley, his former high school geometry teacher, who was 26 at the time
- Gingrich divorces Battley in 1980
- In 1981, six months after his divorce, Gingrich married Marianne Ginther
- Gingrich divorces Ginther in 2000
- Shortly after, Gingrich marries Callista Bisek, with whom he was having an affair during his marriage to Ginther

It may be worth pointing out to this colossal prick that "traditional religion" has generally forbid divorce, and punished adultery by death.  So how about this.  The day that Newt Gingrich, out of despair over his violations of the sanctity of marriage, commits suicide by hanging himself with barbed wire by the scrotum, I'll consider him a valid spokesman for the values of marriage.

Friday, November 14, 2008

We're all gonna die!

Not really, but it probably seems that way if you read newspapers (not that any still does that, but you get the point).  Bad news about the economy continues to roll in (lower consumer spending, higher unemployment, etc.) and no one is sure when it will end or what to do about it.

First, let's establish an important point. This is *not* going to be the next Great Depression. It might be a recession as bad as the 1980-82 one, which is bad. But take a deep breath and tell yourself that we are not headed into a new Depression. If you remember back a few posts, one of the defining elements of the Depression was DE-flation. We do not have deflation, and this makes all kinds of differences.  In addition, the people in charge (Bernanke) may not understand why this is all happening, or exactly how to get things turned around, but they DO know how to keep us from getting deflation. They have printing presses, and can start shucking out dollars, which will prevent deflation.  So we WON'T end up in another Depression.

Now, we will have a pretty painful recession (or more accurately, are in the midst of a one). At this point, the reasons for why this happened seem to be less important that the policy choices we have to make to get out of this mess. We can worry about blame later.

Paul Krugman made a nice distinction about the current situation.  He said we are not in a Depression (nor will we be), but our policy options look like those in the Depression.  Simply put, here are the government options for what to do:
1) Lower the interest rate
2) Lower taxes
3) Raise government spending
4) Do nothing

Bernanke has already done 1), and the Fed Funds rate is so low now that there is little scope for further cuts to improve the situation. Lower interest rates should make borrowing cheaper, so that people will buy more homes and factories. In other words, it should make purchases today cheaper than purchases tomorrow, so we should buy more today and increase aggregate demand, increasing output and reducing unemployment. BUT, the lower interest rates have not generated this effect (probably because people are so spooked that no one wants to buy much of anything) and further cuts in interest rates are unlikely to work either.

So what about 2)? Lower taxes (e.g. send out stimulus checks to everyone) should push up aggregate demand. If the government sends you $2000, the idea is that you'll spend that on new stuff, and this will increase demand, raising output, and reducing unemployment. However, you might use that $2000 to pay off some existing credit card debt or pay down some other debt. Or you'll just save it in case you do lose your job. This is the big issue with stimulus checks, what percent of them will people actually spend?  If they save all the money, the stimulus is a waste.  Why? Because the government borrowed the money from a bank to send you $2000, and then you basically put that $2000 right back into the bank. There is no difference in the assets of the bank, and you did no additional spending. So if you just save the $2000, no good comes of it.

That leaves us 3), raise government spending. This has the advantage of being, well, spending. The government could do a variety of things, all of which have floated around the news lately.  They could start a national infrastructure program (to replace those bridges like the one in Minneapolis that collapsed), or they could transfer funds to state and local governments to fund their own projects (build a new school, upgrade a sewer, etc..), or they could subsidize "green" energy research by pumping money into research, or they could incent companies to get green by subsidizing the purchase of clean technologies.  Heck, we could just invade Iran. That would incur a lot of government spending.  The point is that the government *spends*.  They buy stuff from companies, who then hire more workers, who get paid, who then spend more money, etc..  But unlike the tax breaks, we are at sure that there is some initial spending.

Of course, the government could do 4), nothing. This seems unlikely to it isn't really worth dwelling on.

The point is that only increased government spending is likely to be effective. So IF we should increase government spending, we should at least do it smartly.  That is, let's get something worthwhile out of it.  We could build a 12 lane highway between Missoula, Montana and Witchita, Kansas.  That would be increased spending, and would help.  But long run, it's just a waste of resources.  You'd like to government to spend on things that have the potential to a) increase current economic activity and b) have a long-run benefit.  Things like infrastructure replacement (e.g. replacing useful roads that are in disrepair) or increasing education or something that has benefits. We'll all disagree on which projects qualify, but we should at least agree on the principle.

Does the proposed auto bailout qualify? It would increase current economic activity.  Actually, it would technically stop current economic activity from getting lower, but that is effectively the same thing.  So the question is whether bailing out GM and Ford has any long run benefits.  I can see several.  Like, um, you know, people like cars?  And, er, they're both really cool?

My point is that there seems to be little long-run benefit to an auto bailout.  These companies are reaping what they and their unions sowed over the last 50 years.  They are inefficient, bloated, and incapable of keeping up with their competitors. They should go into bankruptcy and try to sort out their problems. 

If you wanted to spend government money on bailouts for their employees, then I'd be more amenable to the plan. Still a rip-off, since most of their employees are members of the UAW, and have allowed their union to put them in this situation, but whatever.  GM has 300,000 employees.  Offer each of them $100,000 - that's a total of $30 billion.  Do the same for Ford and Chrysler and you probably have to spend $60 billion, far less than the $250 billion thrown around to keep inefficient companies afloat.

Just saying.

Thursday, November 13, 2008

It's all rock and roll to me

Unfortunately, that Rolling Stone list is the kind of thing you can't get out of your head. So while laying awake last night, several more things came up:

Egregious omissions from the list:
- Chris Robinson of the Black Crowes (you know, Kurt Russell's step-daughter's ex-husband, that guy). If Mick Jagger had never been extruded from the alien birthing tank that produced his self-replicating immortal being, then Chris Robinson would have been the next best thing. He's skinny, he's white, and he can absolutely belt out the blues. His voice is pure rock-n-roll, and he (and the Crowes in general) are underrated.  By the way, "Hard to Handle" was originally an Otis Redding song, and Chris Robinson may actually have made a better version.  But that's a whole different topic.
- Bob Seger.  He's one of these guys that you totally forget about, but you know the words to almost all his songs. "Old-time Rock and Roll" is still getting it done, and he's got that "I was up until 3am drinking bourbon and smoking Marlboro's (the reds, not that pansy-ass filtered crap)" rasp to his voice that screams rock and roll.

Broader comparisons (the list was only rock and roll, but to put all these people in perspective let's review the following)
- Billie Holliday, Ella Fitzgerald, and Sarah Vaughn are all up here (imagine my hand up about my forehead), and all the rest of y-all (yes, you Van Morrison and you Sam Cooke, and especially you John Lennon) are down here (now imagine my hand down around my knees). They didn't sing rock and roll, but at some point it doesn't matter. You name one person on the planet who can do what they could do.
- Nat King Cole. Imagine Bille Holliday, now deepen her voice a little. The only man who could sing like those three. I only wish he had been born a few years later so that he could have put together a Motown kind of catalog, rather than being "stuck" with his standards. (As an aside, let us not confuse Nat King Cole with his low-rent, money-grubbing, no-talent daughter Natalie Cole. There is a special place in hell reserved for her gold-digging thievery of her father's work and the warbling screech that she insisted on poisoning it with. Don't worry, the members of Radiohead can crawl up one another's ass to make room for her.)

I'd say that's it, but we all know this is going to bug me for the next few days, so stay tuned.

Wednesday, November 12, 2008

Greatest Rock Singers of All Time

This list cannot go unchallenged. Rolling Stone ranked the best rock and roll singers in history. My guess is that the list is so retarded so as to generate comments (like this one).  So I'll take the bait and run down the top part of the list.

1. Aretha Franklin (my rank: top 10, not #1) - this is a safe, defensible pick. But it's like betting on the Yankees in the 30's: you'll win, but where is the drama?
2. Ray Charles (my rank: #3 or 4) - I love me some Ray Charles. The hard part here is trying to imagine what it was like to listen to Ray Charles when he was the first one to sing like he did.  Game-changing, and you don't get Sam Cooke, Otis Redding, Stevie Wonder, or most of Motown without him showing that soul sells.
3. Elvis Presley (my rank: 5-10) - I'm not a big Elvis guy, but he does have that ''uh-huh" thing down pat.  You can make a good argument that every straight rock-n-roll singer is simply a knock-off of Elvis.
4. Sam Cooke (my rank: #3) - If you have never heard Sam Cooke sing, then I order you over to iTunes right now. Download anything. Download him singing the alphabet while eating a peanut butter and jelly sandwich underwater.  Then listen to one of the most amazing sounds you will ever hear in your life.
5. John Lennon (does not make my top 20) - ask yourself this: if Lennon wasn't shot in 1980, would we think so much of him today? No. His voice is distinctive, not great. He's a really wonderful artist, but to even to even suggest that he is close to Sam Cooke or Ray Charles or Elvis is honestly just more of the Beatle-mania hagiography that is getting very old.
6. Marvin Gaye (my rank: 5-10) - kind of the second coming of the Sam Cooke/Otis Redding soulman, but as a knock-off, he needs to be a little lower than this.
7. Bob Dylan (honestly, this is just stupid, he cannot make this list) - Let's get something straight. Bob Dylan is a brilliant lyricist, an accomplished composer, and a truly miserable singer. Because what he sang was so intriguing, you can forgive him. But please.
8. Otis Redding (my rank: #2) - #8? A travesty. A sham. An mockery.  A trav-a-sham-ockery. In a parallel universe where John Lennon is not dead, John Lennon is still trying, fruitlessly, to sound like Otis Redding. There is a reason that all the British groups of the 60's tried to copy American soul music of the 60's. They ALL wanted to sound like Otis. Lennon, McCartney, Jagger, Plant. All of them.
9. Stevie Wonder (my rank #4-#6) - Not sappy Ebony and Ivory Stevie. Groovy, inspired, belt-it-out Stevie from the 60's and 70's. We do not discuss Stevie Wonder after 1980 - the real Stevie was abducted by aliens and replaced with Mel Torme with a tan.
10. James Brown (uh, top 20?)  - This is tough. He's innovative, he's cool, he's in the hot tub. But if you had to take along one singer with you to a deserted island, is it him? Is he even in the discussion? I say no.
11. Paul McCartney (not in the top 20) - see John Lennon. Except for the dead part. And McCartney will always be penalized for inflicting Wings on us.
12. Little Richard (not in the top 20) - a human Muppet. Ahead of his time, yes. But did everyone start singing like Little Richard? No. They all started singing like Ray Charles.
13. Roy Orbison (not in the top 20) - apparently there is a "dead" bonus of about 15 spots on this list.
14. Al Green (between 10-20) - this is always tough, because you can't help but compare Marvin Gaye and Al Green. And I think Marvin takes the cake in that contest. But just to be clear, Al could outsing Lennon, McCartney, Orbison, and Little Richard if you shoved Dylan down his throat.
15. Robert Plant (somewhere in the 20's) - Plant gets dinged for being indistinguishable from one song to the next. Also, Plant is the one that every hair band from the 80's styled themselves after, so he gets a demerit.
16. Mick Jagger (5-10) - Underrated. Who knew a skinny British kid could bring the blues? Pleased to meet you, Mr. Jagger. And yes, I know your name.
17. Tina Turner (between 10-20) - see the Al Green comments, and substitute Aretha for Marvin Gaye.
18. Freddie Mercury (maybe 20-25) - about right, if slightly higher than he should be.  Again, probably benefitted from the apparent "dead" bias in Rolling Stone (remember, most of the people who work there are now close to dead themselves and want to think we'll remember them. Sorry Jan Wenner, everyone still thinks you're a wanker after 'Almost Famous').
19. Bob Marley (30's) - Rolling Stone staffer: "Hey, shouldn't we put in a reggae guy somewhere?".  Editor: "Uh, I guess so. Is there a dead one?"  Staffer: "Yeah, I think Marley is dead." Editor: "Excellent, put him down at 19."
20. Smokey Robinson (10-20) - probably got this one right. He's smooth, he's unique. He's too squeaky to really qualify as a rock-and-roll singer, but whatever.

Okay, here are the people who were NOT listed in the top 20 of the list that should have been, with my suggested rankings:
1. Van Morrison. - this is a colossal underrating that should not stand. If we do not shut down Gitmo soon, then whoever put Van the Man at 24 should be sent down to be water-boarded for a few hours. You give this guy a phone book, a bottle of scotch, and a microphone, and I'll listen to him yodel it.  Raspy, soulful, raw but in control. This guy takes dumps that can sing better than Lennon.
12-15. Bruce Springsteen - they put him too low at 36. If you want to just rock and roll, then who else do you want but the Boss? And seriously, can anyone else have pulled off, "you ain't a beauty, but hey you're all right" and made it sound good?
12-20. Gladys Knight - RS has her at 54. 54? They should be forced to listen to "Heard it Through the Grapevine" (the original) over and over until they wise up. Also does a damn fine gospel version of the "ABC"s on one of our Sesame Street discs.  (Don't snicker. If you're gonna knock the Muppets you can just log off right now, wait 20 minutes, and then open your door so I can punch you in the face.)
15-20. Annie Lennox. - Absurd that she is at 94. Here are several people she is listed below: Willie Nelson, Don Henley, Merle Haggard, and Steve Perry (yes, the guy from Journey).  You could make a good argument that Annie Lennox is in Billie Holiday territory when it comes to vocal purity. Merle Hagged, my ass.
10-30. Brian Wilson - big range, but I'm not sure exactly where to stick him. But it's higher than 52.

Okay, now here are several people on the list that should be taken out and shot through the vocal chords so that they shall not inflict their warbling upon us any longer.
45. Kurt Cobain - perhaps it won't be necessary to shoot him. But anyway, any yokel can scream into a microphone.
60. Bjork - really. Really.
66. Thom Yorke - I think my views on Radiohead are established. To even type his name in the same list as Otis Redding is an affront to the Gods of Music, and Rolling Stone will be made to suffer.
76. Steve Perry - look, his voice is probably alright, but you have to have some integrity to be on this list, don't you?
87. Don Henley - see Thom Yorke, but change Radiohead to the Eagles.
98. Stevie Nicks - look, if you get "Stand Back" stuck in your head, you will nearly stick a screwdriver in your eye socket to get it to stop. That should disqualify you from any list of "good singers".

I will now resume pretending to work.

More smarty farty stuff to blow your mind

The number of excruciatingly smart people in this country is amazing.  This profiles a finding by some biologists on how cells actually regulate their own evolution.  Basically, cells can turn themselves "off" if they have a non-useful mutation by altering their own energy usage. They use a mechanism not unlike a thermostat. They monitor their situation (e.g. temperature) and turn on or off their mitochondria (e.g. the furnace) by altering how fast ATP can move through the mitochondrial walls.

In case I'm not getting across the potential "wow" factor here, let me try again.  Organisms have control over their own evolution.  If you have a random mutation that does not improve your adaptive fitness (i.e. your ability to eat and breed) your cells may actually turn off those cells.  It offers an explanation of how we can get such complex organisms (i.e. humans, otters, Donald Trump's hair) without any guiding direction to the random mutations.

By the way, this updates the scoreboard to:
Charles Darwin - 4,576,890
Intelligent Design - zero

Classic Letterman

Back in the day (especially for those of us without cable thanks to living in the middle of Siberia central Wisconsin), David Letterman was the funniest guy on TV.  The video here is recent, but is a classic Letterman bit.  Let me preface it by saying two things:  Jamba Juice.  Spider-man. 

Malcolm Gladwell is a cooler nerd than you

The guy who wrote Blink and the Tipping Point gets profiled here.  I especially enjoy the fact that he does most of his research in the library, reading actual books.  It always strikes me as odd that I am the only faculty member in the Econ department here that actually goes to the library on a regular basis. 

I mean, is there anything better than really old book smell?  No, no there is not.

Tuesday, November 11, 2008

Veterans Day

Since it is Veterans Day (and points to you for knowing that this is the day - 11/11 - that the Versailles peace treaty was signed - at 11:11am - that ended World War I), here are some interesting facts about the Purple Heart.  The PH is awarded to servicemen and servicewomen who have been wounded while performing their duties.

The PH was actually dreamt up by George Washington, who decided to give out little fabric hearts to three soldiers during the Revolutionary War.  It lapsed until after World War I, when people (including George MacArthur) revived the medal, designing the version you see today.

In World War II, 964,409 Purple Hearts were awarded.  In Korea: 136,936.  In Vietnam: 200,676.  In the Persian Gulf: 590.  In Afghanistan: 2,743 (as of August of this year).  In Iraq: 33,923 (as of August as well).

Interestingly, the Purple Hearts that are handed out to soldiers today are from the stock of Purple Hearts that the Pentagon still has on hand from the end of World War II.  Anticipating massive casualties from invading Japan, the Pentagon ordered 500,000 medals.  If you add up all the casualties since WWII, you'll see that this does not add up to 500,000.  So all the Purple Hearts awarded to soldiers today were cast in 1944-45.  There are enough PH's in stock that units in Iraq actually carry them around to award them on the field of battle.

By the way, it is a federal offense to sell your Purple Heart, as it is a federal offense to fake one.

Cool election maps

This site, from a Wolverine no less, has some great cartograms of the electoral map.  The interesting ones are the map with state sizes weighted by population (so you don't get that odd feeling that the red-blue divide is pretty even because McCain won more square miles than Obama did).  That and the county results are fascinating.  The country is basically little pockets of blue cities surrounded by big swathes of red small towns and rural areas. (You know, the "real America" part of America, as opposed to all of you urban communists and your lattes).

Do the Wolverines now know foreign policy?

So our boys in maize and blue went to Alaska for the weekend (and presumably were able to see Putin at the game, along with Sarah Palin, Sig Hansen from 'Deadliest Catch', Ted Stevens and his federal escort, a polar bear, two huskies, and sixteen oil-slicked sea lions).

How do you drop a game to Alaska?  These are the games where you have to run up your record, so I'm disappointed.  Losing 4-1 on Friday before the 3-2 win on Saturday. Not a terribly impressive weekend.  You'll notice, if you look at the box scores, that we lost Friday with no help from the soph's.  On Saturday they had a combined 5 points.  If these guys play (and our boy Louie did score on Saturday), then this team will keep winning.

Again, Sauer only started one of the games, and Hogan the other. Can you guess who played in which game?

I'm really fascinated to see how this shakes out by the spring. When is the last time Red had a goalie rotation? 1991? I seem to remember that Shields didn't play every game his freshman year.  But since then, he's always had one guy. Stay tuned.

Then again, at the rate things are going, it is all a moot point.  Boston University cannot lose.  Not only can they not lose, they are scoring in huge bunches. Scary stuff from Jack Parker.

Halloween Cute

The princesses are ready for a Halloween party:

Bicycle cute

Seriously, can you beat this?

Dumb Cats

Just because its fun. The best part is later on when he gets stuck in the carton.

Wednesday, November 5, 2008

As usual, the Onion is on top of the news

Saw this link today...

The Onion Calls It
An instant classic:
Carrying a majority of the popular vote, Obama did especially well among
women and young voters, who polls showed were particularly sensitive to
the current climate of everything being fucked. Another factor
contributing to Obama's victory, political experts said, may have been
the growing number of Americans who, faced with the complete collapse of
their country, were at last able to abandon their preconceptions and cast
their vote for a progressive African-American.
Citizens with eyes, ears, and the ability to wake up and realize what
truly matters in the end are also believed to have played a crucial role
in Tuesday's election.

Monday, November 3, 2008

Okay God, I get the picture

Apparently the great robot overload of the sky-people has decided that I
should not play soccer. I know this because yesterday while playing I had
some guy fall on top of me and bruise/crack one of my ribs (my left side,
just under where my heart would be). It knocked the wind out of me when it
happened, and then when I could breathe again, it hurt. Bad. It has to be
one of the most annoying injuries you can get, because *everything*
requires your torso to move.

On the bright side, I haven't spit up any blood or blown up like a
balloon, so it looks like I didn't puncture anything.

So let's review my last three soccer seasons
2006-2007: Hyperextend my knee, watch it blow up like a grapefruit, start
wearing old man bionic knee brace
2007-2008: Get hit akwardly, break ankle
2008-2009: Get fell on akwardly, bruise/crack rib

I give up. I'm afraid to go back and play at this point. I'm pretty sure
the next time I touch the field I'll actually lose one of my arms.

Friday, October 31, 2008

Check this Out

These pictures are amazing:

It's a bunch of hippopotami (-musses?).  Take a look at this guys website for more.  Really cool stuff. 

Thursday, October 30, 2008

Radiohead still sucks

For the benefit of all those readers who have taken the time to try and
post such thoughtful comments:

Radiohead is, was, and will remain a putrid vomit pile of dissonant
moaning and heroin-induced ambient noise. We can only hope that very soon
a janitor comes along and buries them beneath a crumbling pile of sawdust
and kitty litter, noting their passing through the music scene only with a
sign reading "Biohazard".

Wednesday, October 29, 2008

Inching towards Civilization

Ok, the title of the post is perhaps a little misleading. But we are now a
few weeks into Madeline being potty trained (during daylight hours, at
least). She could hold it, but had been struggling with the whole "Oh
wait, I think I'm about to pee all over myself. Perhaps I should do
something about that..." aspect of the process.

Now she's got her brain re-wired (no doubt thanks to the M&M's she gets
for each "major incident" on the potty) and we're down to only using
Pull-ups for her at night and during naps.

The other day, in fact, I forgot to put her in the Pull-up during her nap.
She got herself up, got one, put it on, and went back to her nap.

I guess sometimes her insistence on acting twice (four times?) her age
isn't so bad.

Tuesday, October 28, 2008

Hockey, Hockey, Hockey!

So it's been a long, hot summer/fall (it's Houston), but hockey is finally
back in swing. I'm at my office right now listening to a Caps game (so sue
me, they were the only internet feed I could find). Just checked out to see the latest rankings for the college teams. Michigan is
holding at number 8 this week after a tough visit to Boston, where they
got smoked. It's alright, things like this happen early in the season.

Our favorite freshman from last year, Louie Caporusso, has 5 goals in the
first six games. Palushaj, Hagelin, and Rust, also sophomores, are 1,2,3
in scoring. But honestly, we all know that this year hinges on the ability
of Billy Sauer to keep it together when it matters. Hogan (another
sophomore) already has 3 wins, so maybe Red is hedging his bets.

By the way, did anyone notice if the Michigan football team was still
playing? Someone told me they lost to Toledo, but I'm pretty sure they
must have meant the field hockey team.


Thursday, October 23, 2008


Kirstin and I got back last weekend from our junket to Copenhagen, where I was giving a talk. Grandma watched the girls and we explored Scandanavia when I wasn't "working". Here are the impressions of Denmark and Sweden:

- An almost movie-set quality to Copenhagen. Exactly what you think of as "European", 5-6 story old stone buildings lining twisty streets and surrounding open squares filled with outdoor cafes. The only drag is that almost all the storefronts look like places I could visit in the U.S. at a nice mall.

- In the main square they had set up a number of large tables, piled with white Lego pieces. People just wandered by and built towers, houses, etc. at all hours. It must be in their blood.

- The canal tour was exceptional, a great way to see the city (and the little Mermaid statue without being hassled by other tourists), and Kirstin and I were able to give our poor American feet a break.

- We established that there is a physical limit to the number of pieces of art I am capable of looking at.

- The food is good, and the best part is that most places go with a "Tapas" like approach. Lots of little portions of different items. That makes for more fun eating, and you aren't stuck with something you don't like. Especially when food has names like Smoorgenbroodenhvok.

- Any country that fries pork with the skin on is alright with me.

- Surprisingly, the coffee in Denmark blows.

- People are very friendly, and they all speak perfect English. Which reminds you what a rube you are for not sticking with the language that you learned in high school (which was 6 years too late, anyway).

- When we lived in Chicago, I remember how every nice day in the spring thousands of pasty-white people would evacuate their apartments and head outside. In Copenhagen, there is a similar phenomenon. Regardless of the actual temperature, if the sun is out so are the Danes. Most cafes have stand-up heaters and blankets available for each table. But if you can see the sun, then the cafes are packed.

- Staying for 6 days is precisely the *wrong* amount of time to be in Europe. Just when we got used to the time zone, we left.

- If you thought Bush's approval rating was low in the U.S., you should see Europe.

- You could improve the opinion of the U.S. in Europe solely by shutting down MTV.

- Despite sounding terrible, the curried pickled herring was actually kind of good. The Danes love a good pickling.

- Bikes, bikes, bikes. Everywhere bikes.

- Disappointingly, the Lego factory/hometown is in Billund, about 3 hours from Copenhagen by train

- By the way, I forgot how much I love travelling by train. It really is so much better than any other alternative.

I'm sure there are a million other things I've forgotten already about the trip, but overall it was an A+. We'd happily go back through Copenhagen, and I'd suggest it as a non-obvious place to visit if you're in Europe.

Why I like Houston

Here's the weather forecast for the next few days:

Friday: 79/51 (10% chance of rain)
Sat: 81/56 (10%)
Sun: 83/57 (10%)
Mon: 75/46 (20%)
Tue: 72/46 (0%)
Wed: 74/53 (10%)

Not too shabby for late October.

Thursday, October 9, 2008

Stop with the Depression talk

Enough. Yes, financial markets are in turmoil, and your 401(k) is losing value daily. Yes, we are likely already in a recession and growth will likely be very slow next year. Yes, the unemployment rate is going to go up.

But stop listening to people who tell you this is the next Great Depression. During the Great Depression, real GNP fell by 30% in just four years. Year by year, here is GNP growth during the start of the actual Great Depression

1930: -9.9%
1931: -7.6%
1932: -14.7%
1933: -2.1%

We are close to the end of 2008, and estimates of total growth for the year are somewhere around.....+1.6%. That is, our economy will still have grown over 2008. Most of that was early in the year, yes, but it is still almost certain that our economy will be larger on 12/31/2008 than it was on 12/31/2007.

The IMF has issued an estimate of growth in the U.S. next year of +0.6-0.8%. Very slow, very low, but growth. Let's even assume that the IMF is wrong, and the U.S. economy shrinks in the year 2009 by 1%. That is still not even remotely close to what happened in the Great Depression.

What about the Great Depression was so awful from the perspective of the common person? I'd suggest the following three items
1) Unemployment rates of up to 25% (in 1933) mean that people either couldn't find jobs, or had no leverage to get raises or improve their situation at work
2) Bank failures wiped out all of peoples savings
3) Deflation (falling prices) made the real cost of mortgages and loans much higher. (e.g. your wages are falling because prices are falling, but your mortgage payment is fixed)

So does the current situation pose any of these problems?
1) Unemployment: yes, the unemployment rate will go up, and that sucks for the lots of people who will be out of jobs, and sucks for everyone else who then has to forego raises. This will be harmful, but even if unemployment doubles from its current rate (6.1%) we will still only be halfway to the dire situation of the Depression.

2) Bank failures: yes, banks are failing, but your savings are not being wiped out. You have FDIC insurance, so your money will be returned to you if your bank goes under. Remember that in the 1930's, people didn't have 401(k)'s and IRAs and brokerage accounts - ALL of their savings was likely in their bank. When their bank went under, they lost EVERYTHING. This will not happen to you. (And yes, your 401(k) is going down, but remember that you still own the shares, so when share prices recover you'll benefit. You are also still paying into your 401(k), meaning that you are buying up shares on the cheap these days, meaning that your gains will be very large. So stop whining.)

3) Deflation: not happening. If anything, we're still worried about too much inflation. If all prices are going up (and this includes wages, remember) then over time your mortgage payment becomes a smaller and smaller part of your monthly paycheck. You are not going to have to default on your mortgage just because your paycheck is shrinking. (And by the way, I know you think that you get raises on a regular basis because you're a hard worker and a people person, but some of your raise is simply the general drift upwards in prices over time. Sorry. I'm sure you're quite good at what you do.)

So when you hear people shout "It's the next Great Depression!", please just tell them to shut up. It is not. Could it be the worst recession since 1980-82? Maybe. That is not a generation-shattering event.

1934: +9.2%
1935: +9.7%
1936: +14.2%
1937: +5.2%
1938: -5.4%
1939: +8.9%
1940: +8.6%

Tuesday, October 7, 2008

Tiny (or huge) bubbles

The financial markets continue to be panicky, waiting for another shoe to drop. I saw something by Nick Rowe of Carleton University on how we got into this whole crisis in the first place, the emergence of the housing "bubble". How did we get into a situation where a) house prices were going up dramatically and b) then not only stopped going up, but collapsed? (Said collapse triggering defaults and destroying much of the value of many mortgage-backed securities, which in turn generated much of the current mess.)

Nothing particularly dramatic happened in August 2007, the point at which this all started to go south. So how come home prices collapsed and defaults started to go up?

Let's start with how you would value a hosue, if you were going to sell it one year later. You'd set the price today according to the following:

P(Today) = Annual Rent + P(Year Later)/(1+r)

The price today is equal to what you'd earn by renting out the house (or, equivalently, the amount of rent you don't have to pay for a year) PLUS the price of the house in one year from now, discounted. What is this discounting term, 1/(1+r)? This comes from the fact that you are waiting one year to sell. If you could sell the house for $1000 in one year, then you'd be willing to take less than $1000 today, just because you don't have to wait to get the money. The higher is r, the stronger this discounting.

Now, let's assume that you aren't planning to sell the house any time soon. In fact, you will hold the house until an infinite number of years from now (I know, dumb, but not much different mathematically from holding it for 30 years). You expect that both rents and the price of the house will go up at G percent per year. So now the value of the house is

P(Today) = Value of Rents to Infinity + P(Infinity) / (1+r)(to infinity power)

Given the growth rate of G, this works out to

P(Today) = Today's Rent / (r-G) + P[(1+G)/(1+r)](to infinity power)

So what do we have? The price of houses today depends on the rental value divided by this term (r-G). This is just valuing the stream of rental payments (or implicit payments to yourself) that the house generates. The second term depends on the ratio of (1+G) to (1+r), raised to the infinity power.

Now, as long as G < r, or the growth rate of house prices is less than the interest rate you can earn investing "safely", then the price of your house today depends ONLY on the rents you earn. Why? Because if G < r then (1+G)/(1+r) < 1 and any fraction to the infinity power is essentially equal to zero. In contrast, let's consider the origin of a bubble in housing. What happens here? The assumed growth rate of house prices, G, goes up for some reason (perhaps lots of people with subprime mortgages bid up the price of houses). At the same time, the "safe" return rate, r, is pretty low thanks to a) a Fed that is averting a recession in 2001/2002 and b) a glut of global savings. This means that G is almost equal to r. The ratio of Rent/(r-G) blows up, and therefore so does the price of a house. (Note that if r-G is very small, then Rents divided by something very small is a very large number). Any small changes in Rents results in really dramatic changes in price levels for houses. What if our assumed G goes up above r? Then the valuation of a house is P(Today) = Infinity Now, obviously house prices didn't go to infinity, but it seems pretty clear that house prices were way larger than made sense. In other words, there are only two outcomes that can happen when we get G > r. 1) House prices actually DO go to infinity or 2) we were wrong about G and eventually we will come to our senses and reset our assumed G to less than r and get finite values for houses.

So let's go back to the case where G < r, but really really close to r. House values still go WAY up, but not to infinity. Now in August 2007 some of the subprime mortgagees who had bid up house prices (and hence made us believe that G was really big) default, and everyone realizes that the rents they could earn on their house just went down (even by just a little). A small drop in rents, given that G is almost as big as r, means a huge drop in the price of houses.

A big drop in house prices convinces everyone that G is in fact lower than we had assumed. The drop in G then lowers the price of houses even more, and we have ourselves a crash.

Ultimately, the origins of this bubble are a shrinking of the difference between G and r. The crash happens when this difference widens out again. Why does this gap shrink? We assume that a surge in house prices today thanks to higher demand is indicative of higher G forever (as opposed to a temporary blip). Also, the risk free rate, r, is coming down at the same time.

Why does the gap open up again? First, when defaults show that rents (or the implied value of your house) are lower, and second, when this causes us to realize that G isn't as high as we thought.

Tuesday, September 30, 2008

Loan interviews

More quality analysis from the Daily Show.

Finally someone makes sense

This article is about how animal fat is not that bad for you. No Kirstin, I don't want to hear why she's wrong. I prefer to justify my bacon eating through faith alone.

"Animal fats have lots of good fatty acids that fight disease, help absorb vitamins and lower cholesterol. Your body burns the short-chained fatty acids found in animal fats and stores the long-chained ones found in polyunsaturated fat. It is a myth that eating animal fat makes you fat."

All hail the short-chained fatty acids. Go pigs!

Scale - part II

Of course, the market is back up today in a big way. So cost of failing to pass the bailout is now only about 1.12% of total wealth in the U.S., or about $650 billion.

So if today the stock market is getting valuations right, we just substituted a roughly $700 billion dollar loss in the stock market for a (maybe) $200 billion loss on the bailout. Is that a fair trade-off? It depends on how heavily invested you were, and how much longer you'd expect to be paying the taxes that will have to be raised to pay for the bailout. For a lot of people, I'm guessing that they are a) not heavily invested and b) old enough to not be paying taxes very long - so they're feeling alright with this.


You'll see this number - $1.3 trillion - as the amount of wealth lost in the U.S. yesterday because the stock market dropped in the wake of the failure of the bailout bill. For some perspective, the total wealth of the U.S. in 2007 was around $58 trillion. So a loss of about 2.24% of wealth in the U.S.

For comparison, the bailout bill, even if the "bad assets" that it buys up turn out to be truly toxic and equal to exactly zero, would represent a loss of $700 billion, or only about 1.2% of all U.S. wealth. In reality, the bailout won't cost $700 billion because the assets are not worthless, they are just worth less than we thought. So the true cost of the bailout is (depending upon who you ask) between $0 and $200 billion. So the loss to U.S. wealth from the bailout would be between 0% and 0.3%.

So the failure of the bailout cost people an extra 1.94% of total wealth. Oops.

Monday, September 29, 2008

Take a deep breath

...and read this article. The upshot is that despite the 'financial meltdown' on Wall Street, there is not a huge body of evidence that the wider world of banks are failing or have reined in lending.

"The most recent Federal Reserve data show that the volume of outstanding bank loans declined 0.5 percent from the last week of August to the second week of September, though it was up more than 6 percent from the corresponding time last year."

Almost exactly one year ago, the subprime meltdown started. Since then, banks have been in so much trouble that total outstanding bank loans have.....gone up by 6%. This is not a sign of the apocalypse. Could bank lending have been higher? Probably, but it is not contracting dramatically (as it did during the Depression).

There is a part of me that wonders whether the drama surrounding the Wall Street investment banks is something that has fewer ties into the rest of the economy than they would have you believe.

Here would be a simple explanation of what I mean. Let's say that Kirstin and I have made a series of loans to each other (I loaned her $50 for a mani/pedi, and she loaned me $50 for beer and steaks, and so on). We've each built up huge piles of debt (I owe Kirstin the $50) and huge piles of assets (Kirstin owes me $50). On paper, we could generate billions (like, say, $700 billion) in offsetting assets and liabilities to each other. Now let's say that I "fail", or might "fail". All of the sudden I can't make my loan payments to Kirstin (why? partially because she can't pay me all of the sudden). We have billions in value on our books - we're too big to fail! But if we go down, who and what do we take with us? Nothing.

Part of me wonders whether the current crisis is not just a crisis of Wall Street, at least in large part, and we are overselling the ramifications. I think one approach to understand this would be for the government to require that all the investment banks reveal their balance sheets to the public. Let investors and other banks see precisely what they have on the books. Then we can understand how important their failure actually will be.

Maybe they'll already done this, and shown the Fed and the Treasury their books. In that case, Bernanke and Paulson know a lot more than anyone else and are judging the crisis correctly.