Marking the passing of a great American novelist, The New York Times Weekend Review carried an outstanding essay "John Updike’s Mighty Pen" by Charles McGrath http://www.nytimes.com/2009/02/01/weekinreview/01mcgrath.html?emc=eta1
Especially interesting was the Video A Conversation with John Updike, taped in October 2008, with Sam Tanenhaus, the editor of the Book Review, “about the craft of fiction and the art of writing.” Disquieting to think he died only a few months later, but listening to the interview I was struck how much he ruminated about aging and writing. He said that he was currently working on an historical novel set in the 1st century, but not knowing much about the period he was trying to educate himself, lamenting, though, that “maybe I’m too old to be educated.” He also said he was thrilled that the New Yorker had recently accepted two of his short stories as he was “trying to keep [his] name in the New Yorker after a long draught.” “It makes me feel like a real person to get a short story in the New Yorker.”
He went on to observe (and much of this is paraphrased here) that there comes a moment in a writer’s life when you are full of material untouched in your mind and seemingly urgent and it merges with enough skill to get it down, but this skill tends to peak in an American writer’s late 20s or early 30s. In those years I could bring a naiveté and therefore a sense of wonderment to my writing. “I’m not ashamed of my later work, but feel there is an unforced energy in the earlier work.” We never idolize anything beyond youth in this country. Consequently, we’re all failed youths, as we don’t believe in the wisdom of the ages especially now that so many people live forever in old age homes. Some of our greatest writers were Hemingway and Fitzgerald; “their idea of happiness is to be young.” And those words concluded the interview.
I closely identify. In Florida that sense of aging, a feeling of irrelevancy, is particularly pervasive. As Updike says in Rabbit at Rest, “There’s a lot of death in Florida, if you look. The palms grow by the lower branches dying and dropping off. The hot sun hurries the life cycles along….Even friendship has a thin, provisional quality, since people might at any minute buy another condominium and move to it, or else up and die.”
I thought my feelings might be confined to those of a retired businessperson living in the “sunshine state.” But my friend Bruce, a teacher and a writer living in Massachusetts, to whom I sent the New York Times link, seems to have had a similar reaction. This business of aging, still trying to stay productive, moving forward with learning as being the very essence of living, is something I would like to think we share with Updike. Here are Bruce’s comments on the Updike interview:
I listened to the interview and was, of course, attentive to his remarks about aging and youth. Naturally, I immediately applied what he said to myself to see if I thought it was true. My conclusion about me is that I am profoundly and forever naive. Thus, I'm surprised that because I am old I am invisible. I am surprised that my students don't realize that I am wise and learned. Oh, they do to a degree, but their best perceptions of me are ones that leave out my age. I'm surprised that young teachers with a few exceptions do not seek me out. I am surprised I am not valued because I have so much experience. Perhaps, I am, but it's not apparent to me. I like what Updike said about the unforced energy of youth. I think that's true, but an older man needs to seek to find what imparts an unforced energy to his own endeavors. I keep returning to Bronte's remark about being appreciated and expecting to get credit for what you do. Don't she says, or you will spend your life waiting. Then again in our own conception of ourselves we are never appreciated enough. Thus, we are back to Ecclesiastes and vanity. In any case, I liked the interview, especially the remarks about America and youth
See http://lacunaemusing.blogspot.com/2008/02/old-friends.html for more about Bruce.
Tuesday, February 3, 2009
Tuesday, January 27, 2009
Updike at Rest
John Updike passed away today. I deeply grieve. I’ve read most of his works, particularly his novels, except his most recent one, The Widows of Eastwick. Ironically, I just finished his penultimate novel, Terrorist, which I mentioned in my last entry.
Updike has been my companion since I began to read his work, starting with Rabbit, Run soon after it was published in 1960. The image of the young high school basketball star, Harry 'Rabbit' Angstrom, going up for a jump shot, “his hands like wild birds” as I recall Updike’s description, is indelibly etched in my mind. I have followed Rabbit through cycles of life that seem to mirror mine. Those novels Rabbit, Run, Rabbit Redux, Rabbit Is Rich, and Rabbit At Rest were each published at the beginning of a new decade (as well as his briefer Rabbit Remembered published at the beginning of this decade). Each captures the Zeitgeist of those moments in time. Updike had an ear for language, the mores of the American suburbs, and wrote with an erudition befitting his Harvard education.
Although his sexually charged Couples published in 1968 might have put him in the mainstream of widely read contemporary American writers, I love some of his lesser-known works such as Roger’s Version and Toward the End of Time.
But I was constantly drawn to Harry ‘Rabbit’ Angstrom who was about ten years older than I. When I read Rabbit At Rest I wondered whether there would be a similar fate, “escaping” to Florida, only to become lazy, flabby, and depressed. As it turns out, I did follow Harry to the sunshine state, and about ten years after him, but I would like to think that is the only similarity. After all, I always had Updike to keep me company, to help keep me engaged.
Updike increasingly ruminated about death in his later works, as one is prone to do as one ages: an acceptance that it happens to all of us – “no one gets out alive” – as we flippantly say. It’s the singular part we must play in this birth/death comic tragedy that we wonder about. I found myself looking for clues of Updike’s own feelings in his recent literature.
From Terrorist comes one of Updike’s more poignant passages, describing the thoughts of Jack Levy (the novel’s aging high school guidance counselor) in the dark of the early morning: …Jack has personal misery, misery that he “owns,” as people say now – the heaviness of the day to come, the day that will dawn through all this dark. As he lies there awake, fear and loathing squirm inside him like the components of a bad restaurant meal – twice as much food as you want, the way they serve it now. Dread slams shut the door back into sleep, an awareness, deepening each day, that all that is left on Earth for his body to do is to ready itself for death. He has done his courting and mating; he has fathered a child, he has worked to feed that child, little sensitive Mark with his shy cloudy eyes and slippery lower lip, and to furnish him with all the tawdry junk the culture of the time insisted he possess, to blend in with his peers. Now Jack Levy’s sole remaining task is to die and thus contribute a little space, a little breathing room, to this overburdened planet. The task hangs in the air just above his insomniac face like a cobweb with a motionless spider in the center.”
What great writing. Just to key these words makes me shudder with the knowledge that there will be no future Updike novels. We have lost a truly great American writer and, for me, a heartfelt companion.
.
Updike has been my companion since I began to read his work, starting with Rabbit, Run soon after it was published in 1960. The image of the young high school basketball star, Harry 'Rabbit' Angstrom, going up for a jump shot, “his hands like wild birds” as I recall Updike’s description, is indelibly etched in my mind. I have followed Rabbit through cycles of life that seem to mirror mine. Those novels Rabbit, Run, Rabbit Redux, Rabbit Is Rich, and Rabbit At Rest were each published at the beginning of a new decade (as well as his briefer Rabbit Remembered published at the beginning of this decade). Each captures the Zeitgeist of those moments in time. Updike had an ear for language, the mores of the American suburbs, and wrote with an erudition befitting his Harvard education.
Although his sexually charged Couples published in 1968 might have put him in the mainstream of widely read contemporary American writers, I love some of his lesser-known works such as Roger’s Version and Toward the End of Time.
But I was constantly drawn to Harry ‘Rabbit’ Angstrom who was about ten years older than I. When I read Rabbit At Rest I wondered whether there would be a similar fate, “escaping” to Florida, only to become lazy, flabby, and depressed. As it turns out, I did follow Harry to the sunshine state, and about ten years after him, but I would like to think that is the only similarity. After all, I always had Updike to keep me company, to help keep me engaged.
Updike increasingly ruminated about death in his later works, as one is prone to do as one ages: an acceptance that it happens to all of us – “no one gets out alive” – as we flippantly say. It’s the singular part we must play in this birth/death comic tragedy that we wonder about. I found myself looking for clues of Updike’s own feelings in his recent literature.
From Terrorist comes one of Updike’s more poignant passages, describing the thoughts of Jack Levy (the novel’s aging high school guidance counselor) in the dark of the early morning: …Jack has personal misery, misery that he “owns,” as people say now – the heaviness of the day to come, the day that will dawn through all this dark. As he lies there awake, fear and loathing squirm inside him like the components of a bad restaurant meal – twice as much food as you want, the way they serve it now. Dread slams shut the door back into sleep, an awareness, deepening each day, that all that is left on Earth for his body to do is to ready itself for death. He has done his courting and mating; he has fathered a child, he has worked to feed that child, little sensitive Mark with his shy cloudy eyes and slippery lower lip, and to furnish him with all the tawdry junk the culture of the time insisted he possess, to blend in with his peers. Now Jack Levy’s sole remaining task is to die and thus contribute a little space, a little breathing room, to this overburdened planet. The task hangs in the air just above his insomniac face like a cobweb with a motionless spider in the center.”
What great writing. Just to key these words makes me shudder with the knowledge that there will be no future Updike novels. We have lost a truly great American writer and, for me, a heartfelt companion.
.
Monday, January 19, 2009
Early in the Morning
It is early in the morning on the eve of President-elect Obama’s inauguration – in fact very early, another restless night. When it is so early and still outside, sound travels and I can hear the CSX freight train in the distance, its deep-throated rumbling and horn warning the few cars out on the road at the numerous crossings nearby.
Perhaps subconsciously my sleeplessness on this, the celebration of Martin Luther King’s birthday, relates to the incongruous dreamlike images of the bookends of my political consciousness, from the Little Rock desegregation crisis of 1957, the freedom marches that culminated with the march on Washington in 1963 and Martin Luther King’s historic "I Have a Dream" speech, to the inauguration tomorrow of our first Afro-American President. All this breathtaking demonstration of profound social change in just my lifetime.
Much has now been said comparing Obama to Lincoln. In my “open letter” to Obama that I published here last May http://lacunaemusing.blogspot.com/2008/05/open-letter-to-senator-obama.html I said “Your opponents have criticized your limited political experience, making it one of their main issues in attacking your candidacy. Lincoln too was relatively inexperienced, something he made to work to his advantage. Forge cooperation across the aisle in congress, creating your own ‘team of rivals’ as Doris Kearns Goodwin described his cabinet in her marvelous civil war history.”
The Lincoln comparison is now omnipresent in the press, not to mention his cabinet selections indeed being a team of rivals. But I am restless because of what faces this, the very administration I had hoped for: a crisis of values as much as it is an economic one. The two are inextricably intertwined.
I am reading an unusual novel by one of my favorite authors, John Updike, Terrorist. One of the main characters, Jack Levy laments: “My grandfather thought capitalism was doomed, destined to get more and more oppressive until the proletariat stormed the barricades and set up the worker’ paradise. But that didn’t happen; the capitalists were too clever or the proletariat too dumb. To be on the safe side, they changed the label ‘capitalism’ to read ‘free enterprise,’ but it was still too much dog-eat-dog. Too many losers, and the winners winning too big. But if you don’t let the dogs fight it out, they’ll sleep all day in the kennel. The basic problem the way I see it is, society tries to be decent, and decency cuts no ice in the state of nature. No ice whatsoever. We should all go back to being hunter-gathers, with a hundred-percent employment rate, and a healthy amount of starvation.”
The winners in this economy were not only the capitalists, the real creators of jobs due to hard work and innovation, but the even bigger winners: the financial masters of the universe who learned to leverage financial instruments with the blessings of a government that nurtured the thievery of the public good through deregulation, ineptitude, and political amorality. This gave rise to a whole generation of pseudo capitalists, people who “cashed in” on the system, bankers and brokers and “financial engineers” who dreamt up lethal structures based on leverage and then selling those instruments to an unsuspecting public, a public that entrusted the government to be vigilant so the likes of a Bernie Madoff could not prosper for untold years. Until we revere the real innovators of capitalism, the entrepreneurs who actually create things, ideas, jobs, our financial system will continue to seize up. That is the challenge for the Obama administration – a new economic morality.
Walt Whitman penned these words on the eve of another civil war in 1860:
I hear America singing, the varied carols I hear,
Those of mechanics, each one singing his as it would be blithe and strong,
The carpenter singing his as he measures his plank or beam,
The mason singing his as he makes ready for work, or leaves off work,
The boatman singing what belongs to him in his boat, the deckhand singing on the steamboat deck,
The shoemaker singing as he sits on his bench, the hatter singing as he stands,
The woodcutter's song, the ploughboy's on his way in the morning, or at noon intermission or at sundown,
The delicious singing of the mother, or of the young wife at work, or of the girl sewing or washing,
Each singing what belongs to him or her and to none else,
The day what belongs to the day--at night the party of young fellows, robust, friendly,
Singing with open mouths their strong melodious songs.
It is still early in the morning as I finish this but the sun is rising and I’m going out for my morning walk. Another freight train is rumbling in the distance. I hear America singing.
.
Perhaps subconsciously my sleeplessness on this, the celebration of Martin Luther King’s birthday, relates to the incongruous dreamlike images of the bookends of my political consciousness, from the Little Rock desegregation crisis of 1957, the freedom marches that culminated with the march on Washington in 1963 and Martin Luther King’s historic "I Have a Dream" speech, to the inauguration tomorrow of our first Afro-American President. All this breathtaking demonstration of profound social change in just my lifetime.
Much has now been said comparing Obama to Lincoln. In my “open letter” to Obama that I published here last May http://lacunaemusing.blogspot.com/2008/05/open-letter-to-senator-obama.html I said “Your opponents have criticized your limited political experience, making it one of their main issues in attacking your candidacy. Lincoln too was relatively inexperienced, something he made to work to his advantage. Forge cooperation across the aisle in congress, creating your own ‘team of rivals’ as Doris Kearns Goodwin described his cabinet in her marvelous civil war history.”
The Lincoln comparison is now omnipresent in the press, not to mention his cabinet selections indeed being a team of rivals. But I am restless because of what faces this, the very administration I had hoped for: a crisis of values as much as it is an economic one. The two are inextricably intertwined.
I am reading an unusual novel by one of my favorite authors, John Updike, Terrorist. One of the main characters, Jack Levy laments: “My grandfather thought capitalism was doomed, destined to get more and more oppressive until the proletariat stormed the barricades and set up the worker’ paradise. But that didn’t happen; the capitalists were too clever or the proletariat too dumb. To be on the safe side, they changed the label ‘capitalism’ to read ‘free enterprise,’ but it was still too much dog-eat-dog. Too many losers, and the winners winning too big. But if you don’t let the dogs fight it out, they’ll sleep all day in the kennel. The basic problem the way I see it is, society tries to be decent, and decency cuts no ice in the state of nature. No ice whatsoever. We should all go back to being hunter-gathers, with a hundred-percent employment rate, and a healthy amount of starvation.”
The winners in this economy were not only the capitalists, the real creators of jobs due to hard work and innovation, but the even bigger winners: the financial masters of the universe who learned to leverage financial instruments with the blessings of a government that nurtured the thievery of the public good through deregulation, ineptitude, and political amorality. This gave rise to a whole generation of pseudo capitalists, people who “cashed in” on the system, bankers and brokers and “financial engineers” who dreamt up lethal structures based on leverage and then selling those instruments to an unsuspecting public, a public that entrusted the government to be vigilant so the likes of a Bernie Madoff could not prosper for untold years. Until we revere the real innovators of capitalism, the entrepreneurs who actually create things, ideas, jobs, our financial system will continue to seize up. That is the challenge for the Obama administration – a new economic morality.
Walt Whitman penned these words on the eve of another civil war in 1860:
I hear America singing, the varied carols I hear,
Those of mechanics, each one singing his as it would be blithe and strong,
The carpenter singing his as he measures his plank or beam,
The mason singing his as he makes ready for work, or leaves off work,
The boatman singing what belongs to him in his boat, the deckhand singing on the steamboat deck,
The shoemaker singing as he sits on his bench, the hatter singing as he stands,
The woodcutter's song, the ploughboy's on his way in the morning, or at noon intermission or at sundown,
The delicious singing of the mother, or of the young wife at work, or of the girl sewing or washing,
Each singing what belongs to him or her and to none else,
The day what belongs to the day--at night the party of young fellows, robust, friendly,
Singing with open mouths their strong melodious songs.
It is still early in the morning as I finish this but the sun is rising and I’m going out for my morning walk. Another freight train is rumbling in the distance. I hear America singing.
.
Wednesday, January 14, 2009
The Bernie Reality Show
What a brave new financial world, one that can produce the confluence of a Bernie Madoff, his feeder funds, the regulatory (that is the lack of regulations) environment where such a Ponzi scheme could thrive over decades, and the eager investors who convinced themselves that their steady “returns” in good and bad markets were an entitlement of their connections and station in life (as Jane Austen might have put it), not to be questioned by them. Now there is the endless media frenzy over Madoff, even including a camera trained on Madoff’s apartment building in NYC. This is the perfect diversion from the more serious financial landscape of trillion dollar bailouts with consequences no one can foretell.
The same society that gave rise to Madoffian cupidity and deception is also addicted to reality shows such as American Idol, Survivor, etc. so here is the idea: give the man his own TV program, such as the one depicted in The Truman Show! That way, Bernie’s every movement voyeuristically can be monitored with all advertising revenue going to the “BMVBF” (Bernie Madoff Victim Bailout Fund). What’s the sense of sending him to prison only to make license plates? After the BMVBF is fully funded, sponsorship can then be diverted to TARP, TAF, TSLF, ABCP, HOPE and all the other bailout acronyms, present and future. Thanks Bernie!
The same society that gave rise to Madoffian cupidity and deception is also addicted to reality shows such as American Idol, Survivor, etc. so here is the idea: give the man his own TV program, such as the one depicted in The Truman Show! That way, Bernie’s every movement voyeuristically can be monitored with all advertising revenue going to the “BMVBF” (Bernie Madoff Victim Bailout Fund). What’s the sense of sending him to prison only to make license plates? After the BMVBF is fully funded, sponsorship can then be diverted to TARP, TAF, TSLF, ABCP, HOPE and all the other bailout acronyms, present and future. Thanks Bernie!
Monday, January 12, 2009
Bailout Math and Implications
In an effort to try to understand the more than $8 trillion guarantee our government has made to bailout our financial mess, I tried to assemble a spreadsheet and before long I was drowning in acronyms and conflicting information that was beginning to remind me of an elaborate shell game a Bernie Madoff might have constructed. How can we manage to make transparency so confusing?
To the rescue, though, is a magnificent, clear summary published by Bianco Research which came to my attention through the From Behind the Headlines blog by Michael Kahn http://quicktakespro.blogspot.com/. While the details can be seen from what was published in SFO Magazine http://sfomag.com/images/charts/012009/GettingTech_fig1_0109.jpg here is a summary of Bianco's work (figures are in billions):
Measuring the Size of the Bailouts
THE FEDERAL RESERVE (Net Portfolio Commercial Paper Funding,
Term Auction Facility, Other Assets, Money Market Investor Funding Facility, MBS/FHLB Agency in Reverse Auctions, Term Securities Lending Facility, AIG Loan, Primary Credit Discount, Asset Backed Commercial Paper Liquidity, Primary Dealers and Others, Bear Stearns Assets, Securities Lending Overnight, Secondary Credit)
FEDERAL RESERVE TOTAL $5,065.0 Maximum / $1,839.5 Current
THE FDIC (FDIC Liquidity Guarantees, Loan Guarantee to GE)
FDIC TOTAL $1,539.0 Maximum / $139.0 Current
TREASURY DEPARTMENT (Fannie/Freddie Bailout, Spring 08 Stimulus Package, Treasury Exchange Stabilization Fund, Tax Break for Banks, Citibank Asset Backstop, Tem Asset-Backed Securities Loan Facility)
TREASURY DEPT TOTAL $1,803.0 Maximum / $597.0 Current
FHA (Hope for Homeowners) $300 Maximum / $300 Current
DEPT ENERGY (Auto Loans) $25 Maximum / $25 Current
GRAND TOTAL $8,707.0 Maximum / $2,875.5 Current
Here is a translation of how this looks in “real dollars:”
$8,707,000,000,000/$2,875,500,000,000
These staggering figures are before the Obama infrastructure / jobs programs get into full swing, so we can be talking about more than $9 trillion. To put this in perspective, according to the Congressional Budget Office GDP in 2009 will be $14.2 trillion, while outlays will be $3.5 trillion and total revenues $2.3, a deficit of some $1.2 trillion.
This assumes we can have confidence in government projections. Looking at the real world in a rear view mirror, this is how the budget deficits have been ramping up the National Debt since the Bush administration took office:
9/30/2000 $5,674,178,209,887
9/30/2001 $5,807,463,412,200
9/30/2002 $6,228,235,965,597
9/30/2003 $6,783,231,062,744
9/30/2004 $7,379,052,696,330
9/30/2005 $7,932,709,661,724
9/30/2006 $8,506,973,899,215
9/30/2007 $9,007,653,372,262
9/30/2008 $10,024,724,896,912
1/8/2009 $10,608,325,323,173
I include the latest figure (more than a $½ trillion increase in only 100 days) from the following handy calculator http://www.treasurydirect.gov/NP/BPDLogin?application=np as it shows a parabolic trend. The extent to which the bailouts work is going to enormously impact the budget projections, both on the revenue and outlay sides of the ledger. Tweaking the former down because of the severity of the recession and the latter upwards because of more bailouts puts us on an irreversible course. It was not long ago that the main discussion concerning the long-term budget centered on the ticking time bombs of Social Security, Medicare, and Medicaid. These threats have not disappeared, but they become even more formable as our precious resources have to be spent on surviving today to wage that war tomorrow.
The foregoing figures come from the Congressional Budget Office. Their published outlook http://www.cbo.gov/ftpdocs/99xx/doc9958/01-08-Outlook_Testimony.pdf is remarkably pointed:
The Budget Outlook for 2009
The federal fiscal situation in 2009 will be dramatically worse than it was in 2008. Under the assumption that current laws and policies remain in place (that is, not accounting for any new legislation), CBO estimates that the deficit this year will total $1.2 trillion, more than two and a half times the size of last year’s. As a percentage of GDP, the deficit this year will total 8.3 percent (as compared with 3.2 percent in 2008)––the largest since 1945.
The deterioration in the fiscal picture results from both increased outlays and decreased revenues. Relative to what they were last year, outlays will rise dramatically— by 19 percent according to CBO’s estimates. Much of that increase is a result of policy responses to the turmoil in the housing and financial markets—particularly spending for the TARP and the conservatorship of Fannie Mae and Freddie Mac. In addition, economic developments have reduced tax receipts (particularly from individual and corporate income taxes) and boosted spending on programs such as those providing unemployment compensation and nutrition assistance as well as those with cost-of-living adjustments.
Without changes in current laws and policies, CBO estimates, outlays will rise from $3.0 trillion in 2008 to $3.5 trillion in 2009 (see Table 5). Mandatory spending is projected to grow by almost $570 billion, or by 36 percent; nearly three-quarters of that growth results from the activities of the TARP and CBO’s treatment of Fannie Mae and Freddie Mac as federal entities. Discretionary spending is projected to grow by $52 billion, or by 4.6 percent. In contrast, net interest is anticipated to decline by 22 percent as a result of lower interest rates and lower inflation. In total, outlays will be equal to 24.9 percent of GDP, a level exceeded only during the later years of World War II.
Spending for certain other mandatory programs is expected to rise sharply this year. The faltering economy has increased outlays for unemployment compensation and the Supplemental Nutrition Assistance Program. Unemployment compensation is projected to nearly double— from $43 billion last year to $79 billion this year— as a result of increased unemployment and legislation to date extending such benefits. Outlays for the nutrition assistance program are expected to grow by 27 percent— from $39 billion to $50 billion—primarily because of increases in caseloads and benefits (resulting from higher food prices).
The three largest mandatory programs—Social Security, Medicare, and Medicaid—are all anticipated to record growth of at least 8 percent this year. Some of that growth stems from the relatively high rate of inflation recorded early in 2008, which boosted cost-of-living adjustments for retirees and the cost of health care. In addition, rising unemployment will add to Medicaid spending by increasing the number of beneficiaries.
Discretionary spending under current laws and policies is projected to grow by 4.6 percent in 2009. In CBO’s baseline, defense outlays rise by 5.0 percent and nondefense outlays by 4.1 percent. However, most programs are currently operating under a continuing resolution, which holds funding for 2009 at the level provided for 2008. Final appropriations and additional funding for operations in Iraq and Afghanistan may increase outlays for 2009 and beyond, and any stimulus package may raisediscretionary spending further.
To the rescue, though, is a magnificent, clear summary published by Bianco Research which came to my attention through the From Behind the Headlines blog by Michael Kahn http://quicktakespro.blogspot.com/. While the details can be seen from what was published in SFO Magazine http://sfomag.com/images/charts/012009/GettingTech_fig1_0109.jpg here is a summary of Bianco's work (figures are in billions):
Measuring the Size of the Bailouts
THE FEDERAL RESERVE (Net Portfolio Commercial Paper Funding,
Term Auction Facility, Other Assets, Money Market Investor Funding Facility, MBS/FHLB Agency in Reverse Auctions, Term Securities Lending Facility, AIG Loan, Primary Credit Discount, Asset Backed Commercial Paper Liquidity, Primary Dealers and Others, Bear Stearns Assets, Securities Lending Overnight, Secondary Credit)
FEDERAL RESERVE TOTAL $5,065.0 Maximum / $1,839.5 Current
THE FDIC (FDIC Liquidity Guarantees, Loan Guarantee to GE)
FDIC TOTAL $1,539.0 Maximum / $139.0 Current
TREASURY DEPARTMENT (Fannie/Freddie Bailout, Spring 08 Stimulus Package, Treasury Exchange Stabilization Fund, Tax Break for Banks, Citibank Asset Backstop, Tem Asset-Backed Securities Loan Facility)
TREASURY DEPT TOTAL $1,803.0 Maximum / $597.0 Current
FHA (Hope for Homeowners) $300 Maximum / $300 Current
DEPT ENERGY (Auto Loans) $25 Maximum / $25 Current
GRAND TOTAL $8,707.0 Maximum / $2,875.5 Current
Here is a translation of how this looks in “real dollars:”
$8,707,000,000,000/$2,875,500,000,000
These staggering figures are before the Obama infrastructure / jobs programs get into full swing, so we can be talking about more than $9 trillion. To put this in perspective, according to the Congressional Budget Office GDP in 2009 will be $14.2 trillion, while outlays will be $3.5 trillion and total revenues $2.3, a deficit of some $1.2 trillion.
This assumes we can have confidence in government projections. Looking at the real world in a rear view mirror, this is how the budget deficits have been ramping up the National Debt since the Bush administration took office:
9/30/2000 $5,674,178,209,887
9/30/2001 $5,807,463,412,200
9/30/2002 $6,228,235,965,597
9/30/2003 $6,783,231,062,744
9/30/2004 $7,379,052,696,330
9/30/2005 $7,932,709,661,724
9/30/2006 $8,506,973,899,215
9/30/2007 $9,007,653,372,262
9/30/2008 $10,024,724,896,912
1/8/2009 $10,608,325,323,173
I include the latest figure (more than a $½ trillion increase in only 100 days) from the following handy calculator http://www.treasurydirect.gov/NP/BPDLogin?application=np as it shows a parabolic trend. The extent to which the bailouts work is going to enormously impact the budget projections, both on the revenue and outlay sides of the ledger. Tweaking the former down because of the severity of the recession and the latter upwards because of more bailouts puts us on an irreversible course. It was not long ago that the main discussion concerning the long-term budget centered on the ticking time bombs of Social Security, Medicare, and Medicaid. These threats have not disappeared, but they become even more formable as our precious resources have to be spent on surviving today to wage that war tomorrow.
The foregoing figures come from the Congressional Budget Office. Their published outlook http://www.cbo.gov/ftpdocs/99xx/doc9958/01-08-Outlook_Testimony.pdf is remarkably pointed:
The Budget Outlook for 2009
The federal fiscal situation in 2009 will be dramatically worse than it was in 2008. Under the assumption that current laws and policies remain in place (that is, not accounting for any new legislation), CBO estimates that the deficit this year will total $1.2 trillion, more than two and a half times the size of last year’s. As a percentage of GDP, the deficit this year will total 8.3 percent (as compared with 3.2 percent in 2008)––the largest since 1945.
The deterioration in the fiscal picture results from both increased outlays and decreased revenues. Relative to what they were last year, outlays will rise dramatically— by 19 percent according to CBO’s estimates. Much of that increase is a result of policy responses to the turmoil in the housing and financial markets—particularly spending for the TARP and the conservatorship of Fannie Mae and Freddie Mac. In addition, economic developments have reduced tax receipts (particularly from individual and corporate income taxes) and boosted spending on programs such as those providing unemployment compensation and nutrition assistance as well as those with cost-of-living adjustments.
Without changes in current laws and policies, CBO estimates, outlays will rise from $3.0 trillion in 2008 to $3.5 trillion in 2009 (see Table 5). Mandatory spending is projected to grow by almost $570 billion, or by 36 percent; nearly three-quarters of that growth results from the activities of the TARP and CBO’s treatment of Fannie Mae and Freddie Mac as federal entities. Discretionary spending is projected to grow by $52 billion, or by 4.6 percent. In contrast, net interest is anticipated to decline by 22 percent as a result of lower interest rates and lower inflation. In total, outlays will be equal to 24.9 percent of GDP, a level exceeded only during the later years of World War II.
Spending for certain other mandatory programs is expected to rise sharply this year. The faltering economy has increased outlays for unemployment compensation and the Supplemental Nutrition Assistance Program. Unemployment compensation is projected to nearly double— from $43 billion last year to $79 billion this year— as a result of increased unemployment and legislation to date extending such benefits. Outlays for the nutrition assistance program are expected to grow by 27 percent— from $39 billion to $50 billion—primarily because of increases in caseloads and benefits (resulting from higher food prices).
The three largest mandatory programs—Social Security, Medicare, and Medicaid—are all anticipated to record growth of at least 8 percent this year. Some of that growth stems from the relatively high rate of inflation recorded early in 2008, which boosted cost-of-living adjustments for retirees and the cost of health care. In addition, rising unemployment will add to Medicaid spending by increasing the number of beneficiaries.
Discretionary spending under current laws and policies is projected to grow by 4.6 percent in 2009. In CBO’s baseline, defense outlays rise by 5.0 percent and nondefense outlays by 4.1 percent. However, most programs are currently operating under a continuing resolution, which holds funding for 2009 at the level provided for 2008. Final appropriations and additional funding for operations in Iraq and Afghanistan may increase outlays for 2009 and beyond, and any stimulus package may raisediscretionary spending further.
Saturday, January 10, 2009
Crow
Crow Island, Latitude 41.0612081 and Longitude -73.3906734, the epicenter of our boating life. This continues the boating thread that began with the following two entries:http://lacunaemusing.blogspot.com/2008/07/living-on-boat.html
http://lacunaemusing.blogspot.com/2008/08/lake-years.html
At high tide it’s just a small pile of rocks but at low tide it’s part of the Crow bar, connecting two of the Norwalk, CT islands, Copps Island and Chimon Island. This link shows those two larger islands, with Copps in the foreground. Crow bar can be seen connecting to Chimon. http://www.norwalkct.org/PictureTour/IslandsNorth.htm
Aside from the Thimble Islands further east, the Norwalk Islands is one of the largest groups of islands in the Long Island Sound. There are a number of coves and anchorages, which make
boating something special there. http://en.wikipedia.org/wiki/Norwalk_Islands We called the water to the east of Crow Island “home” for countless weekends. When anchored there one would think you are in a far away place, with few signs of civilization except for the conspicuous presence of the Manresa Island Power Plant on the mainland in Rowayton (see the stack at the lower right of this photo).Before the GPS became ubiquitous, Crow’s waters were relatively private as Beers Rocks and other assorted rocks loom just beneath the surface making it somewhat treacherous to find one’s way into the area. Many a boat has damaged its running gears in such attempts, and the word spread quickly, keeping other boaters out.
But, with local knowledge, passage is relatively safe, especially when dead
low tide is avoided. So, for years friends and we enjoyed the waters as a private enclave. And, as members of the Outboard Cruising Club, an old local club, we even own the deed to that pile of rocks, called Crow. As the tide recedes, a little sandy beach emerges, a great spot our kids went to in our dinghies and where I dutifully walked our little Schnauzers when we had them, first Muffin and then Treat. One could find me there at dawn (my favorite time of the day) as my family and friends slept.During the summers, Crow was our community, not the towns in which we lived, and our kids became best friends there.
The usual routine was to go out to the island on Friday night. Ann would load up the boat, pick up Jonathan at school, and I would meet them Norwalk Cove Marina after work and off we would go in the setting sun to our anchorage
There, we would meet Ray and Sue, John and Cathy, Richard and Marlene, Tony and Betty, Bob and Bev, and Shel and Naomi (the only stalwart sail boaters in the group). Weather cooperating, we would raft together in groups, and dingy back and forth between boats.We began our voyage to Crow with just a thought: we wanted an activity our family would enjoy doing together, something to get me away from my all-consuming work. We considered a small vacation cottage on Connecticut’s Candlewood Lake, much smaller than Lake George where we had vacationed before, but closer to our home. We began to get serious about that alternative, but the idea of cleaning more gutters and more home repairs were off-putting.
Our home in Weston was only a few miles from the beautiful Long Island Sound, where I had boated as a child, and that is why we began to consider boating. We initially imagined ourselves as sail boaters, quietly gliding upon the waters of the Sound to the coves and towns near its shores but we first needed to learn more about boating in general and the Sound in particular. So in January 1983 we enrolled in a Coast Guard auxiliary course to learn the basics of boating.Coincidentally, in the summer of 1981 there was a boating tragedy in our nearby waters off of Port Jefferson, the sinking of the ‘Karen E’ – this became the focus of the course as the captain of the ship, a 36’ Trojan, did everything totally wrong causing untold tragedy for his family and friends. He left Port Jefferson as dark was closing in, for a port in Connecticut and failed to recognize the lights of a tugboat with a barge in tow, piloting his boat between the two. The Karen E ran into the steel tow cable and sunk somewhere between Brookhaven, L.I., and Old Saybrook, Connecticut. His wife and daughter were killed in the accident, along with three friends. Miraculously, the Karen E’s captain made it to shore after swimming half the night.
Studying this case made us acutely aware of the gaps in our knowledge, not only about boating,
but sailing in particular, which is yet another skill one must master. We therefore decided that once we earned our Coast Guard Power Squadron certificates, that we would buy a powerboat and perhaps work our way up to a sailboat. So, in the spring of 1983, graduation “diplomas” in hand, we looked for a boat.Our search ended at Norwest Marine, a small boat yard on the
Norwalk River, with a few dozen slips and rack storage. There we bought our first boat, a used 20’ cuddy cabin with a single inboard-outboard engine, which we dubbed the ‘Annie H’ and even ventured to “far off” Eaton’s Neck (only a few miles across the Sound) and to some of the anchorages around the 52 acre Norwalk Island, Sheffield, the only island with a lighthouse, although now deactivated: http://www.lighthousefriends.com/light.asp?ID=786After only a few weeks though, coming back from a day on the Sound, the boat began taking on water. Ann was bailing out with a bucket as I tried to get the boat back to our slip. We discovered the block was cracked. We had bought a bumboat.
The owner of the marina agreed to take the boat in on trade for a new boat. We would have been better off doing that in the first place, so we traded for a new 22’ “Holiday Express.” It had a
little sleeping area under the rear seats in addition to the cuddy cabin and a tiny stand up head, all in 22’ so the three of us could spend an overnight or even more time on the boat. We anxiously awaited delivery of our new Annie H” which was promised for the 4th of July weekend.Late in the day on June 28, 1983 Ann was driving back from Greenwich on I95. Several hours later, the Mianus River Bridge on I95 in the Cos Cob section of Greenwich, Connecticut – the very span she had just traversed -- collapsed, killing three people and injuring three. Because of that collapse, the delivery of our boat was delayed as it was on a trailer, scheduled to cross the bridge the following day. It had to
be rerouted, as did all truck traffic, north to Route 84 and then south to reconnect with I95. As I recall, our new Annie H did not arrive until after the July 4th holiday.For the remainder of that summer though we were out on the Annie H every weekend and even ventured to a port that became one of our favorites over the years, Essex, CT, some six miles up the Connecticut River. There we discovered the joys of the famous Griswold Inn one of the oldest continuously operated inns in the
country, having opened its doors for business in 1776. The original architecture and the marine art in the main dinning room http://www.griswoldinn.com/Pages/Dining.htm conveys the sense of embarking in a time machine, transported to the time the Declaration of Independence was signed.Coming back from Essex we ran along the old QE2, which was
taking a “cruise to nowhere” in the Long Island Sound. Ironically, we had crossed the Atlantic in October 1977on the QE2 when Jonathan was still a baby – here dressed in his sailor’s outfit -- and here we were running alongside this leviathan in our little 22 footer. By today’s cruise ship standards, the QE2 would now be considered a small ship.Most of that summer we spent around Sheffield Island and at Mt. Misery Cove just to the East of the entrance to Port Jefferson harbor, a sandpit with 60 foot high
bluffs which we would climb to view the harbor and the Long Island Sound. We even managed to persuade Ann’s Mom to go out with us when she was visiting from California.But one afternoon we had taken my Dad and our friend, Arlene, out for the day on the south side of Sheffield. We anchored and the current was running strong. Ann and Jonathan were swimming near the boat and the current swept them away to the west (luckily, Jonathan was in a life jacket). Showing my inexperience and my overconfidence in my swimming ability, I tried to swim to them with an extra life jacket, somehow thinking I could bring them back to the anchored boat. I almost drowned and had to be fished out of the water by a passing vessel. The captain NEVER leaves the ship!
Ann had given me an anniversary gift that year, a modest little book by Janet Groene, How to Live Aboard a Boat, which she inscribed as follows: Honey – Here’s to a “dream come true” one day! Happy Anniversary, Love, Ann. Little did we know at that time where our obsession would lead. The following year there would be a new boat and there would be others after that but more on those and our times at Crow and other cruises in another entry.Meanwhile, as it so neatly merges my publishing and historical interests with information on our home cruising grounds, I am appending a section from the United States Coast Pilot by the U.S. Coast and Geodetic Survey, published by the Government Printing Office in 1918. This was scanned as part of the Google Books Library Project from a copy at the University of California library.
This passage, written almost 100 years ago, is very detailed (a disclaimer for anyone not interested in boating or the area). Although some features are antiquated, it captures the essence of the Norwalk Islands and its environs:
NORWALK ISLANDS are a group of islands, rocks, and shoals which extend from 1 to nearly 2 miles off the north shore of Long Island Sound and have a length of 6 miles from Georges Rock to Greens Ledge lighthouse. Cockenoe Island Harbor and Sheffield Island Harbor, good at low water for vessels of about 9 and 12 feet draft, respectively, are available anchorages, and are the approaches to Norwalk River. These anchorages are marked by Pecks Ledge and Greens Ledge lighthouses and are easily made. The bottom is very irregular around the islands and rocks in the Norwalk Islands; and, although the area is well surveyed, vessels should, as a measure of safety, avoid all broken ground and proceed with caution when crossing shoal areas.
Cockenoe Island, at the eastern end of Norwalk Islands, is marked on its south side by two knolls, the rest of the island being low and level. A bar, dry in places at low water but with general depths of 1 to 2 feet, connects the island with the north shore at Seymours Point. Cockenoe Island Shoal is an extensive and dangerous area which extends 1.5 miles eastward and east-southeastward and .5 mile southward from Cockenoe Island. The least depths found are shown on the chart, but the entire area is exceedingly broken with boulders and should be avoided by strangers, even in small craft.
Georges Rock, awash at lowest tides, is at the eastern end of the shoal, and is marked off its northeast side by a black buoy. A gas and bell buoy marks the southeast end of the shoal. Vessels rounding the eastern end of Cockenoe Island Shoal should give the buoys a good berth.
Channel Rock, with 2 feet over it, lies 400 yards southwestward of Cockenoe Island, and is marked by a red buoy placed 300 yards south- westward of the rock.
Cockenoe Island Harbor lies westward of Cockenoe Island, and is marked by Pecks Ledge lighthouse. It has anchorage for vessels of less than 9 feet draft, and is also an entrance from eastward to Norwalk River. The best anchorage for vessels is in the deeper part of the harbor, depths 12 to 25 feet, lying northward and northwestward of the lighthouse. Vessels should proceed with caution at low water when crossing the shoal with 12 to 15 feet lying southward and westward of Channel Rock buoy.
Directions, Cockenoe Island Harbor. — From eastward pass southward of Cockenoe Island Shoal gas and bell buoy, steer 254° true (W % S mag.) until Pecks Ledge lighthouse bears northward of 285° true (NW by W % W mag.), then steer for the lighthouse until up with Channel Rock buoy, and then pass eastward and northward of the lighthouse at a distance of 200 to 300 yards. From westward give the edge of the shoals a good berth until Pecks Ledge lighthouse bears westward of 350° true (N mag.), and then steer this course with the lighthouse on the port, bow, passing preferably eastward of the 12-foot spot lying 250 yards southeastward of the lighthouse.
The following islands and rocks are on the northwest side of Cockenoe Island Harbor : Sprite Island is high and has some trees. Calfpasture Island has several houses and a few trees. The island eastward of Calfpasture Island is low and covered with boulders. Sheep Rocks are covered at half tide. East White Rock is a high, white rock. Grassy Hammock Rocks are bare at half tide; the rock at the south end of the group is awash at high water, and is marked by Grassy Hammock light.
Pecks Ledge lighthouse, on the west side at the entrance of Cockenoe Island Harbor, is a white conical tower, middle part brown, on a pier.
Goose Island and Grassy Island are low. The rest of the Norwalk Islands are hilly and are partly settled. Chimons Island is marked by a windmill and water tank. Copps Island has a prominent survey signal. Sheffield Island, the westernmost of the Norwalk Islands, is marked by a disused lighthouse tower (granite building). There is a boat landing on the north side of Sheffield Island.
Great Reef, lying 14 mile southward of the western end of Sheffield Island, is covered at half tide and marked by a spindle. Hiding Eocks, Old Baldy, and Old Pelt, lying northwestward of Great Reef, are bare at low water.
Greens Ledge is a rocky ridge extending from Sheffield Island to Greens Ledge lighthouse. There is little depth and rocks bare at low water in places for a distance of nearly % mile from the island, and thence to the lighthouse there is a depth of about 7 feet on the ledge. Depths of 10 to 15 feet extend about 400 yards westward and southwestward from the lighthouse, and this part of the ledge is marked at its southwest end by a red buoy. A rocky ledge, on which the least depth found is 22 feet, extends 1 mile west-southwestward from the lighthouse.
Greens Ledge lighthouse is a conical tower, lower half brown, upper half white, on a pier. Budd Reef, a small ledge with a least depth of 25 feet, lies % mile south-southeastward of Greens Ledge lighthouse. The bottom is very broken on the south side of Greens Ledge, and deep-draft vessels should pass southward of Budd Reef and the ledge with a least found depth of 22 feet lying % mile south-southwestward of Copps Island.
Sheffield Island Harbor, also known as Norwalk Harbor, is formed by the western Norwalk Islands. It is frequently used in the fall and winter, and by tows. The depths at the anchorage northwestward of Sheffield Island range from 12 to 16 feet. The directions from westward for Norwalk River lead through the harbor. The shoal flats on the north side of the harbor have rocks and boulders in places. A black buoy and a horizontally striped buoy mark the edge of the shoals with depths less than 10 feet on the north side of the harbor southwestward of Tavern Island.
Tavern Island has a number of houses. Little Tavern Island is marked by a prominent, high water tank. A row of piles extends from Tavern Island to Little Tavern Island. A rock covered at half tide lies 250 yards northeastward of Little Tavern Island. A bare rock, marked by telegraph poles, lies westward of Little Tavern Island. A shoal with little depth over it extends 250 yards south-westward of Tavern Island. A rock bare at low water lies about half-way between the southwest end of Tavern Island and the wharf at Wilson Point.
The following are objects near the channel leading from Sheffield Island Harbor to Norwalk River. White Rock shows above high water. White Rock Reef light, northward of White Rock, is located in a depth of about 9 feet on the southeast edge of the channel. Long Beach light is on the east side of the channel, near the end of the reef extending northwestward from Long Beach. Round Beach light is on the northwest side of the channel at the entrance of Norwalk River, and lies 400 yards westward of Hound Beach. The latter is a grassy shoal awash at high water, and is marked on its western side by a private spindle with cask.
NORWALK RIVER is on the north side of Long Island Sound northward of Norwalk
Islands, and is important commercially. The river has been improved by dredging a channel 150 feet wide and 10 feet deep to South Norwalk, and 100 feet wide and 8 feet deep to Norwalk. The principal entrance to the river is from westward, through Sheffield Island Harbor, and is good for a depth of 10 feet at low water. The entrance from eastward, through Cockenoe Island Harbor, is good for a depth of about 7 feet at low water. The deepest draft of vessels going up to South Norwalk and Norwalk is about 14 feet at high water.
Dorlons Point, marked by a clubhouse and wharf, is on the east side of Norwalk River 1/2 mile above the entrance. On the west side of the river abreast Dorlons Point is a shallow creek, crossed by a lift bridge with an opening 30 feet wide, above which are several marine railways to which a draft of 3 feet can be taken at high water.
South Norwalk is an important commercial and manufacturing city on the west bank of Norwalk River about 1% miles above its mouth. The depths at the wharves below the bridges range from about 5 to 12 feet.
East Norwalk, opposite South Norwalk, is reached through a channel dredged 75 feet wide and 6 feet deep, which is used mainly by small pleasure craft. In 1917 the channel had shoaled to a depth of 2.2 feet, and at low water is marked by the flats. Fitchs Point light marks the entrance of the channel at the junction with the main channel leading to South Norwalk. A stake and flag marks the southeast point of the entrance and another stake the turn abreast the lower wharves. The upper section of the channel is marked on both sides by stakes, to which small craft moor. The yacht club is at the head of navigation.
Norwalk is a city on both banks of Norwalk River at the head of navigation 1.1 miles above South Norwalk. There is a depth of about 10 feet at the wharves. The channel from South Norwalk to Norwalk is winding, with extensive flats on both sides, and requires local knowledge, even at low water, to follow it. Bridges. — Two bridges cross the river at South Norwalk. The lower one is a double-leaf lift, with an opening 70 feet wide. The second, or railroad bridge, is a center pier draw, with an opening 60 feet wide on either side…..Freight steamers make regular trips to New York from Norwalk and South Norwalk. The latter is on the main line of the N. Y., N. H. & H. R. R. Supplies. — Coal and water can be had at the wharves of South Norwalk and Norwalk. Provisions, gasoline, and other supplies can be obtained. Ice forms in the river and usually obstructs navigation for about six weeks in winter. Tides. — The mean rise and fall of tides is 6.9 feet. Some local knowledge is required to follow the best water in Norwalk River and approaches. Proceed with caution and preferably on a rising tide.
Monday, January 5, 2009
Black Swan Reveries
As a change of pace – away from my normal interest in literature and biography -- I read Nassim Taleb’s The Black Swan; The Impact of the Highly Improbable. He basically argues that experience and therefore planning counts for little. We are all governed by extraordinary effects of unanticipated extraordinary events and not by planning the minutia from the observed experience of the past. Essentially, our planning tools, the normal statistical methods we use are only effective in “Mediocristan" a world in which extremes are limited, such as the normal height of human beings, and therefore a random selection of that particular universe is anticipatable and measurable. He contrasts Mediocristan with "Extremistan" the world in which chaotic extremes reign and therefore a random sampling will not be representative. Hence, it is fruitless to plan for such extremes. So much for free will.
We are left with a world we can plan for “inside the box” but the true impact to that world occurs outside the box.
It’s sort of an in your face, edgy presentation by Taleb, very cynical in some respects. I empathize with the latter because of years of corporate planning. With the development of, first, VisiCalc, then Lotus 123, and now Excel, this kind of planning has been taken to such an extreme that the process itself probably keeps half of corporate America employed. It always amused me; I used to call it the battle of the spreadsheets – central corporate vs. the operating companies.
Part of that “planning” involves associating or connecting past events and “making sense” out of them. He calls that “naïve empiricism,” a “natural tendency to look for instances that confirm our story or our vision of the world….Alas, with tools, and fools, anything can be easy to find. You take past instances that corroborate your theories and treat them as evidence.” Even more profound is his observation: “We humans are the victims of an asymmetry in the perception of random events. We attribute our successes to our skills, and our failures to external events outside our control, namely to randomness. We feel responsible for the good stuff, but not for the bad. This causes us to think that we are better than others at whatever we do for a living.” Decades of corporate life leave me saying Amen to that.
But, isn’t the existence of the worlds of Mediocristan vs. Extremistan self-evident? Obviously, we can only think within the box when dealing with processes such as sales forecasting, budgeting, etc., basing them on the past statistics from Mediocristan. And a “black swan event” is going to have a profound impact on the world of Mediocristan. We mere humans do not have much control over an asteroid hitting our planet. Taleb’s problem with the foregoing is that we think we do.
Besides being a mathematician and philosopher, Taleb is a hedge fund manager. I was therefore interested in how he translates his philosophy to investment. Essentially, he takes the position that 85% of one’s portfolio should be allocated to “risk free investments,” specifically US Treasury Bills and the remaining 15% into very high risk investments that could have an exponential payoff in a Black Swan event from the world of Extremistan. So after a very convincing and sometimes disturbing philosophical argument the author seems to fall victim to the very blindness he decries. Are T-Bills “risk free,” especially as the US seems to be on a course to guarantee every debt and every major corporate shortfall, not to mention the twin time bombs of Social Security and Medicare/Medicaid as the baby boomers retire and unemployment rises? Now there is a Black Swan.
We are left with a world we can plan for “inside the box” but the true impact to that world occurs outside the box.
It’s sort of an in your face, edgy presentation by Taleb, very cynical in some respects. I empathize with the latter because of years of corporate planning. With the development of, first, VisiCalc, then Lotus 123, and now Excel, this kind of planning has been taken to such an extreme that the process itself probably keeps half of corporate America employed. It always amused me; I used to call it the battle of the spreadsheets – central corporate vs. the operating companies.
Part of that “planning” involves associating or connecting past events and “making sense” out of them. He calls that “naïve empiricism,” a “natural tendency to look for instances that confirm our story or our vision of the world….Alas, with tools, and fools, anything can be easy to find. You take past instances that corroborate your theories and treat them as evidence.” Even more profound is his observation: “We humans are the victims of an asymmetry in the perception of random events. We attribute our successes to our skills, and our failures to external events outside our control, namely to randomness. We feel responsible for the good stuff, but not for the bad. This causes us to think that we are better than others at whatever we do for a living.” Decades of corporate life leave me saying Amen to that.
But, isn’t the existence of the worlds of Mediocristan vs. Extremistan self-evident? Obviously, we can only think within the box when dealing with processes such as sales forecasting, budgeting, etc., basing them on the past statistics from Mediocristan. And a “black swan event” is going to have a profound impact on the world of Mediocristan. We mere humans do not have much control over an asteroid hitting our planet. Taleb’s problem with the foregoing is that we think we do.
Besides being a mathematician and philosopher, Taleb is a hedge fund manager. I was therefore interested in how he translates his philosophy to investment. Essentially, he takes the position that 85% of one’s portfolio should be allocated to “risk free investments,” specifically US Treasury Bills and the remaining 15% into very high risk investments that could have an exponential payoff in a Black Swan event from the world of Extremistan. So after a very convincing and sometimes disturbing philosophical argument the author seems to fall victim to the very blindness he decries. Are T-Bills “risk free,” especially as the US seems to be on a course to guarantee every debt and every major corporate shortfall, not to mention the twin time bombs of Social Security and Medicare/Medicaid as the baby boomers retire and unemployment rises? Now there is a Black Swan.
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