They are also wrong, and indeed wicked. Heinz ketchup is something like a precious work of art: it's that rarest of things, an instance of perfection. It may be that many have forgotten one of the most interesting articles ever written about the human palate; if you have, read it again. It starts with the question of why there are so many 'gourmet' mustards and spaghetti sauces ('gourmet' is in scare quotes in deference to Ogden Nash); but there is only one ketchup.
It turns out the reason is that ketchup, and particularly Heinz ketchup, happens to be perfect.
There are five known fundamental tastes in the human palate: salty, sweet, sour, bitter, and umami. Umami is the proteiny, full-bodied taste of chicken soup, or cured meat, or fish stock, or aged cheese, or mother's milk, or soy sauce, or mushrooms, or seaweed, or cooked tomato. "Umami adds body," Gary Beauchamp, who heads the Monell Chemical Senses Center, in Philadelphia, says. "If you add it to a soup, it makes the soup seem like it's thicker--it gives it sensory heft. It turns a soup from salt water into a food." When Heinz moved to ripe tomatoes and increased the percentage of tomato solids, he made ketchup, first and foremost, a potent source of umami. Then he dramatically increased the concentration of vinegar, so that his ketchup had twice the acidity of most other ketchups; now ketchup was sour, another of the fundamental tastes. The post-benzoate ketchups also doubled the concentration of sugar--so now ketchup was also sweet--and all along ketchup had been salty and bitter. These are not trivial issues. Give a baby soup, and then soup with MSG (an amino-acid salt that is pure umami), and the baby will go back for the MSG soup every time, the same way a baby will always prefer water with sugar to water alone. Salt and sugar and umami are primal signals about the food we are eating--about how dense it is in calories, for example, or, in the case of umami, about the presence of proteins and amino acids. What Heinz had done was come up with a condiment that pushed all five of these primal buttons. The taste of Heinz's ketchup began at the tip of the tongue, where our receptors for sweet and salty first appear, moved along the sides, where sour notes seem the strongest, then hit the back of the tongue, for umami and bitter, in one long crescendo.There are some things a civilization ought to preserve, and art is one of them; art that approaches perfection especially. The man who thinks to improve our lives by removing the sublime, even if it comes in a ketchup bottle, that man is an actual enemy of humanity.
This phrasing ["You Lie!"] is not a "breach of protocol," as the NYT would have it, but part of another protocol. Kenneth R. Greenberg, scholar of dueling (and baseball, oddly enough; he had some interesting things to say on the intersection of those two things in the post-war American South), noted:Now, another scholar named Greenberg -- I don't know if they are related -- wrote a piece on the Jews of Savannah, Georgia. I believe this is the piece, although you can't see the relevant part if you don't have access to an academic library. If memory serves, it recounts the story of how Jews in Savannah were accepted into the community early compared to the rest of the country, as proved by the fact that they were challenged to duels and fought them; for, as Kenneth Greenberg describes at length, gentlemen dueled only with equals. If they were challenged in the terms of honor, and allowed to fight as honorable men, then they were equals in fact.Only certain kinds of insulting language and behavior led to duels. The central insult that could turn a disagreement into a duel involved a direct or indirect attack on someone's word -- the accusation that a man was a liar. To "give someone the lie," as it was called, had always been of great consequence among men of honor. As one early-seventeenth-century English writer noted, "It is reputed so great a shame to be accounted a lyer, that any other injury is canceled by giving the lie, and he that receiveth it standeth so charged in his honor and reputation, that he cannot disburden himself of that imputation, but by the striking of him that hath given it, or by chalenging him to the combat."
Three breaths before Rep. Wilson shouted out that President Obama was a liar, President Obama had said that "prominent politicians" who spoke to concerns about potential end-of-life issues were spreading "a lie." Every Congressman present understood themselves to be a prominent politician; those who had expressed concerns about that issue, then, stood accused to their faces of lying. Rep. Wilson, of South Carolina, responded in anger and in kind.
It may be hard to understand if you aren't from the South, or a similar culture: but "giving the lie" in this case is the furthest thing from a mark of racial disrespect. It is a mark of accepted equality.
If a Southerner accepts you as an equal, and you call him a liar to his face, you will have to fight him. That is courtesy, not discourtesy: he wouldn't bother to fight you if he didn't respect you. He would snort at you, or strike you, but he would not respond to you in the language of honor.
Of course, these days we do not duel, and the only way such an encounter can terminate is with an apology. One was offered, and accepted -- the wager of battle, such as it is today, has been fulfilled according to the ancient forms. It may look strange to places that have not known such wagers in their lifetimes, but this sort of exchange was once the lifeblood of American politics. The South, as always, sustains.
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This is a cross-post, but I expect it'll interest a few of you.
William McIntosh, the "White Warrior" of the Creek nation, had risen to the leadership of the Creeks in spite of being of mixed Creek and Scottish blood. That Scottish ancestry offered no shame to a warrior people: he was of the blood of John Mohr McIntosh (the Gaelic byname meaning, "the Great"). John Mohr was recruited by Georgia's own founder, the heroic Sir James Edward Oglethorpe, friend of the Yamicraw nation, to guard the early colony against Spanish raiders from the south. Chief William was of the blood also of General Lachlan McIntosh, who served with General Washington at Valley Forge and helped to negotiate treaties for the establishments of forts in the west during the Revolutionary war; he thereby opened the West to later expansion. General McIntosh also killed Declaration of Independence signatory Button Gwinnett in a duel. Finally, he was a direct descendant of William McIntosh, who was sent by the Revolutionary government to the Creeks to aid them in fighting the British.
Perhaps out of loyalty to this revolution, or out of loyalty to his fathers who fought for it, Chief William McIntosh made a deal that put the lands of the Creek Nation under the jurisdiction of the state of Georgia. Shortly thereafter, he was assassinated in his home by tomahawk; but the transfer of authority held in spite of his murder.
What had heretofore been forested country began to be cleared by homesteaders, who wanted a place to grow food for their families and crops to sell at market. As they cleared a particular patch of land in west central Georgia, they began to notice that the land began to erode far more than other lands in Georgia. The erosion was serious enough to be noteworthy in the 1830s. One can imagine the early farmers wondering how bad it would get. The topsoil, and their livelihood, was washing away: where would it stop?
Providence Canyon, North Rim
Providence Canyon, West Rim
Providence Canyon, Spire
It's a strange world we live in. Divided loyalties lead to murder or betrayal. Other men stake their hopes on a crop, and see the ground literally wash away from them. Hopes are dashed, lives are blasted, the work of a lifetime is lost: and an unimaginable beauty appears from the land. Long she waited there, cloaked in seemingly usual hills and valleys, waiting only the right touch to make her beautiful. How many more wait, and for what man's touch?
The ranger center proudly posts several registry sheets showing the names of famous guests. In 1967, the guest register for Providence Canyon was boldly signed: "John Wayne."
I would say the lessons are that:
Disaster may give way to beauty.
Many things are hidden.
Here are men who did their best, and followed their vision. They did not get what they sought: Chief McIntosh was killed by his own, farmers lost their fortunes, Lachlan McIntosh slew a great man of his own cause.
Here is their mark: this is how the world received them.
Find its equal. The world loves such men. At their touch, she shows herself as only does a woman who loves.
You may not have ever heard of Alfred E. Smith -- I had not, before tonight -- but I think we can all agree that what follows are the best speeches of this Presidential campaign.
UPDATE: See the updates below. What appeared to my inexpert eyes to be an order (on account of saying ORDER and having the Judge's name on it) is not, in fact, an order according to Valerie. I've left the original text of the post unaltered, in recognition of my error (which I regret most deeply).
A much remarked, minor story in this election was the question of Senator Obama's birth certificate. We've all ignored it, except to try to shoot it down, because it sounded like a wacko conspiracy theory; and anyway, the campaign produced a birth certificate.
In ignoring this story, we may have made an error. Some of you will recall that the issue arose briefly a little while ago when a Clinton camp supporter filed a suit demanding that Sen. Obama produce various documents to prove that he is able to run for the Presidency.
US Federal District Court Judge R. Barclay Surrick has denied Sen. Obama's motion to dismiss the suit, and has ordered him to produce a certified copy of the original long version of his birth certificate. Presumably, Sen. Obama will comply.
However, the judge's order also states that, according to the law in effect in 1967, Sen. Obama lost his citizenship when he was adopted in Indonesia. He has therefore also ordered Sen. Obama to produce a certified copy of his Certification of Citizenship and a certified copy of his Oath of Allegiance.
These must be produced within three days of the order, which was dated 29 September, 2008 -- I think that means, "tomorrow."
UPDATE: As I look at the document more closely, I realize that I may be using the wrong terminology -- I am not a lawyer, so I'm not sure if the whole document is the 'order' or if just the first page is the 'order.' I'll gladly accept corrections for any errors arising from my inexpertise in legal matters.
UPDATE: Valerie, in the comments, says that this is not an order, but a draft of an order showing what the plantiff would like such an order to look like. I'm going to assume she knows better than I do.
So, doubtless you have all seen this video. It's ten minutes long, and provides a straight-line explanation for the current financial crisis.
We have had a good discussion on the matter below. Since this video is taking off and has gotten a lot of attention, though, I'd like to hear some focused criticism on its claims. Where is it wrong? How is it right?
I'll start: this is plainly a partisan video, that intends to cast blame on one side where there is blame to go around. That isn't helpful when Speaker Pelosi does it, and it isn't helpful here. In terms of understanding the crisis, though -- as opposed to laying blame for it -- where is it right, and where is it wrong?
UPDATE: Per the comments, YouTube has pulled the video. It can now be viewed here.
The purpose of this post is to debate and try to understand exactly how our financial systems failed. This post is the right place for clean debate on the systems: how they were supposed to work, how they really did work, and what to do about it.
In the extended entry, I'll repost a series of comments from an earlier post -- we went a bit off-topic -- and we can run with it from there.
And now I've "done that." So let's carry on.
#19 from Andrew J. Lazarus at 2:43 am on Sep 25, 2008
Here are some alternative suggestions for why the tide is running Obama's way, instead of naively suggesting it's the media.
Regulatory oversight of Wall Street seems to have been inadequate. To the extent this is regulatory incompetence, McCain's party is on the hook, and to the extent it is philosophical, up until last week McCain loved deregulation.
I'd be glad to have Sarah Palin as my next-door neighbor, but there are probably hundreds of readers of this site better prepared to step in as President of the United States. McCain's MO: bold, reckless, dangerous.
McCain has alienated the press, who once loved him, by ending his once-famous access and by keeping Palin hidden away from any sort of questioning. His plan, as it were, to compensate for the press's reaction to this is, guess what, to claim that it is the press that is unfair. (Palin to be questioned only by those suitably 'deferential'.)
McCain spent the first week of the bailout looking shocked, ill-informed (fundamentals are strong), self-contradictory, and confused, without any help from the press. He managed to lose George Will, who described him as a rookie playing a league too high while Obama looked collected and presidential.
Except insofar as he's the nominee, McCain isn't a key player in the bailout negotiations, which were going along just fine without him. But the polls were starting to go south, so it was time for another wild gamble. (You do know he likes cas1no gambling, right?) Since this one looks like a non-starter, I can't imagine what desperation move he has in mind for late October.
I am, by the way, having a hard time understanding why the Administration's $700B original bailout plan was not in some way socialistic. I guess the idea is that demanding an equity stake in the rescued businesses (Sweden did this, I read) is socialism, but just giving the money away for nothing is good old hard-edged capitalism. I'd have called it crony capitalism or even corporate fascism, but GK works from a different dictionary. Many of his posts seem to have suffered in translation from the Martian.
#21 from Grim at 2:58 am on Sep 25, 2008
To the extent this is regulatory incompetence, McCain's party is on the hook...
That seems to be the public perception, but it's an odd one. As Cassandra points out the Bush administration has "implored Congress to regulate GSE no fewer than 18 times during 2008 alone (that's roughly twice a month)."
Which party controls Congress?
Nevertheless, the public does seem to blame Bush. The buck, as they say, stops there -- right or wrong, it just does.
#23 from Andrew J. Lazarus at 3:22 am on Sep 25, 2008
Grim, I am not going to comment on the 18 reforms until I can look up what they were specifically; they may have been changes (i.e., not reforms) that would make the situation even worse. Certainly the bankruptcy 'reform' had a negative impact on the mortgage crisis; making BK more difficult increased the economic sense of walking away from a difficult mortgage.
I did, however, read far enough into your links to see that they assign mot of the blame for this mess on, variously, the GSEs and on such well-intentioned laws as the Community Reinvestment Act. This talking point has merit only for those who are looking for hacktackular anti-liberal talkingpoints, and those glibertarians for whom everything the government tries to do must have terrible consequences worse than any benefits.
The CRA is implicated in something less (perhaps much less) than a quarter of distressed mortgages. No one twisted the arms of banks to make bad loans under the CRA or elsewhere, and I don't see why if Fannie and Freddie were making loans that banks expected to be losers, they nevertheless felt obliged to copy them. (The CRA passed in the 1970s, so there's also a temporal problem in this analysis.) In the real world, the banks loved the fees from constant refinancing and loan origination with increasingly weird alternative mortgages (which, you will recall, Alan Greenspan, not a liberal, endorsed in his attempt to keep the consumer sector afloat in the wake of the 2001-2 retrenchment in manufacturing and the inability of the Feds to respond because of deficits caused by foolish tax cuts).
Even this, however, doesn't strike at the single most important cause, which is the creation of bizarre Structured Investment Vehicles whose purpose, to borrow the verb from a Kos blogger, was to transubstantiate subprime crap into AAA collateral. These confections, which are now totally illiquid and impossible to appraise, should have simply been outlawed. Their purpose was to hide risk and enable obscenely large deals based on excessive leverage. The managements who overleveraged with alphabet soup junk as collateral and the stockholders who enjoyed the party while it lasted well-deserve to be zeroed out, which is why I like the various equity recapitalization suggestions that are floating about. The fact the clowns at places like Investors Business Daily (a rival that finds the WSJ too fact-based) support the $700B golden shower is almost enough by itself to say it's a bad deal.
The economy almost always does better under Democratic presidents than Republicans. Perhaps Dems are interested in broad measures of prosperity while the GOP concentrates on increased income disparity.
#24 from Marcus Vitruvius at 3:27 am on Sep 25, 2008
Regulatory oversight of Wall Street seems to have been inadequate. To the extent this is regulatory incompetence, McCain's party is on the hook, and to the extent it is philosophical, up until last week McCain loved deregulation.
That this is the meme that will inevitably take hold galls me. The deregulation that everyone is blaming for this current round of woes is the Gramm-Leach-Bailey act, repealing the Glass-Steagall act in 1999. Yes, 1999. Which means Clinton signed it. Which doesn't really matter, because the passage margins were 90% in the Senate, and 83% in the House. Not just veto-proof, but bullet-proof. Let's remember that the reconciliation process that turned discrepant bills from either chamber into the unified bill that became law, gathered Democrat support by strenthening the CRA provisions, which effectively mandated lending practices for disadvantaged areas, i.e., "Forcing banks to lend to poor untrustworthy people," as Republicans would put it.
And let's remember that while Dodd was asking, this week, where McCain was for the last few years if this was so all-fired important, McCain was actually trying to get more regulation on top of Fannie Mae and Freddie Mac, specifically the Federal Housing Enterprise Regulatory Reform Act of 2005. And the Bush administration tried to get regulatory authority in 2003, but that was derailed. Why? Never ask a politician to pass regulation that would slow down lending to disadvantaged neighborhoods-- even in theory, if not in practice-- and especially not while the subjects of that regulation are lobbying hard and spreading favors against it.
So this may have been a failure of regulation, yes. And it very well might be that the public decides to blame the Republicans for this one. But it was a goddam complicated failure of regulation, and both sides had their eager hands in this right up to the elbows, and damn few people saw it coming-- not like this. Serious, sober commentators on both sides admit that.
Just once-- just once in my life-- I'd like to see the eternal cycle of political grab-ass take a goddam day off.
#26 from Marcus Vitruvius at 3:40 am on Sep 25, 2008
That seems to be the public perception, but it's an odd one.
It's an understandable one. High finance is as good as witchcraft to most folks, and I'm not much better myself. (I know a few things, but I haven't studied it.) Regardless the actual facts, the average guy on the street knows ("knows") that Republicans are out for Big Business and High Finance through Deregulation, and that Democrats are out for the Little Guy through Backing Unions and Regulation.
It's a simplification to such a degree that it's practically a caricature, but simplifications still have an element of truth to them. Combine that with ignorance of the subject (and it's a damn complicated subject) and a generally short attention space (much less for failed regulatory attempts) and the reason for the public perception should be obvious.
Except this time, it happens to be false.
Or at the very least, not straightforward.
#27 from Grim at 3:42 am on Sep 25, 2008
I'm going to be a stand-up guy here, and admit that I don't understand the economic and finance issues well enough to debate them. I listen to Cassandra on the subject because I respect her judgment and education, and I know that this is an area in which she is well-versed.
I am, however, forced to bow to others in this area. As Scott Adams said in The Dilbert Principle, the world is becoming complex enough that we are all functionally morons in at least some areas; this is one of the ones where I am out of my depth. I understand how to take a third-world economy and start to make it functional for the people of a poorer nation, as that is something I've worked with professionally in Iraq and elsewhere: these are matters of agriculture and small businesses, which I understand fairly well. These complex financial instruments that dwell in the most advanced markets are a different matter, and one beyond my ken.
As to whether Cassandra or you are right on the merits here, then, I cannot say with any authority. I will say that I trust her to speak the truth as she sees it, after long association: and therefore I don't believe her to be 'hacktacular.' I'm quite sure she doesn't have a libertarian bone in her body. But I am willing to learn, and if you want to engage her on the subject, I suspect that both you and I would learn something from the exchange.
#28 from andrwedb at 3:43 am on Sep 25, 2008
Andrew L -
>No one twisted the arms of banks to make bad loans under the CRA or elsewhere,
Actually they did. A bank couldn't open a new branch without showing evidence of CRA compliance. It was a common tactic of Rev. Jackson to use this, for example.
I personally think there is more then enough blame to go around on both sides of the aisle on this stuff. The GSEs for example were throwing money (all entirely legal contributions or grants to NGOs) around at anyone with a pulse in DC, -- this isn't an R or D issue. Add ordinary greed by borrowers, lenders, and brokers and we get where we are today.
I understand this is serious stuff, but I do find it a bit galling to think of taxpayer bail-outs to firms that pay millions in bonuses however.
#29 from Andrew J. Lazarus at 3:51 am on Sep 25, 2008
Well, I'll agree that the Democrats get a share of the blame. I don't understand the purpose of quasi-private entities like Fannie Mae (or even the Postal Service) which Clinton-type New Democrats loved. What I don't see is why their bad practices should have dragged down every investment bank in the country—stupidity is a long-term competitive disadvantage. Your neighborhood bank that sells mortgages just in your town is probably quite healthy right now, and one point of the bailout has to be protecting its smarter management. And I'm not sure whether the completely private sector was jealous of Fannie's performance or the perceived opportunity for executive compensation.
As for visiting Cassandra, I'll have to check how much time I have. Running a worldwide Islamocommunist conspiracy worse than Goebbels is pretty time-consuming.
My favorite liberal economist blog is Brad DeLong. Disclaimer: we’re acquainted. He has a great post today on what he intended to say at a debate with a Republican economist, although one of the two conservatives refused to appear.
#30 from Grim at 4:02 am on Sep 25, 2008
Yes, I understand. My various conspiracies occupy a great deal of my time as well.
That said, it would be nice to see some of the better minds brought together on the subject. Since you know Brad DeLong, perhaps he might want to engage Cassandra (or someone else she might name; it's possible that she, likewise, has conspiracies on her hands that occupy her)? I am trying to learn more about the subject, as its importance has become clear, but it's hard to find a place where the different views are being hashed out coherently. Trusting people whose intelligence and reasonable thinking is well established is a good first step, but once they are identified, it would be helpful if they could be convinced to talk to each other.
#32 from Grim at 4:17 am on Sep 25, 2008
If I can expand on the point I was making in #30, consider this analysis which comes recommended by another blogger I respect on finance issues (Dad29). It's got some nasty partisan rhetoric, but so does Brad DeLong's blog (Nixon? LBJ?); but what I would like to do is get at the underlying issue, in order to understand it. This is how they describe it:Let's jump back 18 months. I spent several letters going over how subprime mortgages were sold and then securitized. Let's quickly review. Huge Investment Bank (HIB) would encourage mortgage banks all over the country to make home loans, often providing the capital, and then HIB would purchase these loans and package them into large securities called Residential Mortgage Backed Securities or RMBS. They would take loans from different mortgage banks and different regions. They generally grouped the loans together as to their initial quality as in prime mortgages, ALT-A and the now infamous subprime mortgages. They also grouped together second lien loans, which were the loans generally made to get 100% financing or cash-out financing as home owners borrowed against the equity in their homes.Now -- my question is, do we agree that this is the basic failure? Or was it the issue that Ben Stein pointed to?
Typically, a RMBS would be sliced into anywhere from 5 to 15 different pieces called tranches. They would go to the ratings agencies, who would give them a series of ratings on the various tranches, and who actually had a hand in saying what the size of each tranche could be. The top or senior level tranche had the rights to get paid back first in the event there was a problem with some of the underlying loans. That tranche was typically rated AAA. Then the next tranche would be rated AA and so on down to junk level. The lowest level was called the equity level, and this lowest level would take the first losses. For that risk, they also got any residual funds if everyone paid. The lower levels paid very high yields for the risk they took.
Then, since it was hard to sell some of the lower levels of these securities, HIB would take a lot of the lower level tranches and put them into another security called a Collateralized Debt Obligation or CDO. And yes, they sliced them up into tranches and went to the rating agencies and got them rated. The highest tranche was typically again AAA. Through the alchemy of finance, HIB took subprime mortgages and turned 96% (give or take a few points depending on the CDO) of them into AAA bonds. At the time, I compared it with taking nuclear waste and turning it into gold. Clever trick when you can do it, and everyone, from mortgage broker to investment bankers was paid handsomely to dance at the party.The crisis occurred (to greatly oversimplify) because the financial system allowed entities to place bets on whether or not those mortgages would ever be paid. You didn't have to own a mortgage to make the bets. These bets, called Credit Default Swaps, are complex. But in a nutshell, they allow someone to profit immensely - staggeringly - if large numbers of subprime mortgages are not paid off and go into default.Or is it a combination of the two? The CDS were bad thinking, proposition bets with money that didn't really exist; but also, the odds of the proposition bets were badly evaluated because the bets were converted from subprime to AAA bonds?
The profit can be wildly out of proportion to the real amount of defaults, because speculators can push down the price of instruments tied to the subprime mortgages far beyond what the real rates of loss have been. As I said, the profits here can be beyond imagining. (In fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...)
These Credit Default Swaps have been written (as insurance is written) as private contracts. There is nil government regulation of them. Who writes these policies? Banks. Investment banks. Insurance companies. They now owe the buyers of these Credit Default Swaps on junk mortgage debt trillions of dollars. It is this liability that is the bottomless pit of liability for the financial institutions of America.
Because these giant financial companies never dreamed that the subprime mortgage securities could fall as far as they did, they did not enter a potential liability for these CDS policies anywhere near their true liability - which again, is virtually bottomless. They do not have a countervailing asset to pay off the liability.
This is the kind of issue I'd like to have resolved with patient dialogue. I would, in fact, greatly appreciate some insight.
#33 from Marcus Vitruvius at 4:39 am on Sep 25, 2008
Your second case seems to be basically short-selling under another name.
Is that right?
#34 from Grim at 4:49 am on Sep 25, 2008
I think so, but again, I'm spinning up on all this. I am a gambler, so when I say "a proposition bet," I'm thinking of the term as it applies to table games at cas1nos. Frankly, this is starting to look like a situation where banks thought they were making proposition bets with good odds (AAA ratings!), but in fact were fooled by the tranches into betting on subprime mortgages without adequate security.
So the proposition is: "You won't get repaid." And the bet is, "If you don't get repaid, you pay me X; otherwise, I pay you Y." X>Y.
Now, you think you've got a AAA bond, so the odds of the proposition seem to favor you heavily. You take the bet.
In fact, you have a bet based on subprime mortgages, and the odds actually favor you losing the proposition. You end up losing a large sum of money -- not once, but on the vast majority (all?) of the 96% of subprime mortgages that got converted into AAA bonds.
Now, what I want to know is, have I understood the situation correctly? If I have, there are some pretty clear policy prescriptions; but if not, I want to know where I've gone wrong.
#35 from Andrew J. Lazarus at 4:58 am on Sep 25, 2008
There was a good explanation of this stuff in the WSJ several months ago, but the URL is on my office computer. I'll supply the link when I find it.
The situation is even a little kookier than Grim's source mentions in three respects.
First, the ratings agencies are not so neutral as they might seem. If they don't give a good rating, the banks may take their business elsewhere. So there was a lot of bargaining between the rating agencies and the banks on just how much crap to put in there. The idea that most of these instruments were high-risk didn't seem to penetrate. (My guess is that in evaluating risk, they underestimated badly the likelihood of mortgages going bad all over the country in the same time frame, as opposed to localized housing price deflation.) But the rating agencies aren't on the hook: their magic AAA, AAa, etc. are all a gimmick with other people's money.
Second, the instruments got even weirder than that story mentioned. For example, you could have a CDO-cubed, whose underlying securities were not mortgages that could be prices, more-or-less, but CDO-squares, which were tranches of agglomerated CDOs, etc. A new rule: any financial instrument that can be modeled with a Russian Doll is illegal.
Third: Leverage. This AAA crap counted as assets enabling the banks to lend out much more. (We've had fractional reserve banking for 160 years, more or less.) This means that banks had to call in their loans when their own assets went bad… but those loans were used to be other crap, now you see the liquidity crisis where everybody tries to unwind their assets at once.We should have another thread on this, I would guess. I'll try to keep further comments on the McCain gamble. Our presidential elections are not horseshoes, and it looks like McCain will try anything rather than lose quietly.
#36 from Grim at 5:03 am on Sep 25, 2008
All right. I can do that.
A friend of mine sent me this link to the DOD IG report on corruption in Iraqi Cell Phone contracts. I was vaguely intrigued, since one of the big early success stories in Iraq has been the flowering of the cellular phone industry (as well as the satellite television industry, and a few others). I had an IRAQNA phone myself while I was over there. Crystal clear reception to the USA; kind of horrid reception if you're calling a buddy a few blocks away.
So I know it's big money, and it's not shocking to hear there is some corruption. I was rather surprised by the tagline:
This 146 page US Defense Inspector General's report, written at the For Official Use Only level, pertains to a fraud investigation centering on Iraqi-British billionare Nadhmi Auchi, who is connected to Presidential Candidate Barak Obama via former Obama fundraiser Antoin "Tony" Rezko.
Well, yes, he is: Richard Fernandez of the Belmont Club did a good part of the work on that. I hadn't realized, however, that Auchi was so important to Saddam's weapon smuggling program as well.
It's a long report, but you may wish to read it for yourself in spite of that.
Judith Warner is a bestselling author and a blogger at the NYT who produces (I have learned today) a blog called "Domestic Disturbances." Her writing was panned by Prof. Kenneth Anderson, who called it condescending. I have only read the one piece of it she wrote, so I won't say he's wrong as a general thing: but I thought this was a piece that showed a great deal of the right spirit. Let me explain.
She writes about attending a McCain-Palin rally in Virginia. She confesses that she intended to go as a joke, and to mock the attendees -- but she ends up being taken by the kindness of the strangers, their hopes for Gov. Palin, and the evident joy of their lives. It scares the hell out of her.
No, it wasn’t funny, my morning with the hockey and the soccer moms, the homeschooling moms and the book club moms, the joyful moms who brought their children to see history in the making and spun them on the lawn, dancing, when music played. It was sobering. It was serious. It was an education....Now that's a start. Let's explore it a bit.
For those of us who can’t tap into those yearnings, it seems the Palin faithful are blind – to the contradictions between her stated positions and the truth of the policies she espouses, to the contradictions between her ideology and their interests. But Jonathan Haidt, an associate professor of moral psychology at the University of Virginia, argues in an essay this month, “What Makes People Vote Republican?”, that it’s liberals, in fact, who are dangerously blind.Haidt has conducted research in which liberals and conservatives were asked to project themselves into the minds of their opponents and answer questions about their moral reasoning. Conservatives, he said, prove quite adept at thinking like liberals, but liberals are consistently incapable of understanding the conservative point of view.
The place to start is the Haidt essay. He begins by noting the famous study that treats conservatism as a sort-of mental condition: "conservatism is a partially heritable personality trait that predisposes some people to be cognitively inflexible, fond of hierarchy, and inordinately afraid of uncertainty, change, and death."He then adds:
Diagnosis is a pleasure... But with pleasure comes seduction, and with righteous pleasure comes seduction wearing a halo. Our diagnosis explains away Republican successes while convincing us and our fellow liberals that we hold the moral high ground. Our diagnosis tells us that we have nothing to learn from other ideologies, and it blinds us to what I think is one of the main reasons that so many Americans voted Republican over the last 30 years: they honestly prefer the Republican vision of a moral order to the one offered by Democrats. To see what Democrats have been missing, it helps to take off the halo, step back for a moment, and think about what morality really is.I would go farther than that, and suggest that the model is self-evidently false. What percentage of entrepreneurs are conservatives in some sense of the word? What percentage of small business entrepreneurs -- that is, those who risk not just something, but everything? Voting habits indicate it's a clean majority -- yet these people are supposed to be 'especially fearful of uncertainty'? What percentage of military officers -- or soldiers of any rank in the the combat arms of the military -- are conservatives? Voting habits, again, indicate a strong majority: and these are the people supposedly afraid of death?
What has happened here is that the halo blinds from the beginning. It blinds people into accepting results plainly at variance with reality, because it answers their preconceptions. It also allows them to discard the fact that these economic questions do have a conservative answer: even Dr. Haidt's explanation, which I will praise on more important grounds in a moment, simply takes as read that conservatives who are poorer are voting moral rather than economic interests. In fact, they have a different concept of where their interests lie.
There is something deeply worthy in the Haidt piece -- what is far more important than the wrongness of the concept that conservatism is a mental state to be diagnosed, rather than a philosophy to be explored and considered. It lies here:
My first few weeks in Bhubaneswar were therefore filled with feelings of shock and confusion. I dined with men whose wives silently served us and then retreated to the kitchen. My hosts gave me a servant of my own and told me to stop thanking him when he served me. I watched people bathe in and cook with visibly polluted water that was held to be sacred. In short, I was immersed in a sex-segregated, hierarchically stratified, devoutly religious society, and I was committed to understanding it on its own terms, not on mine. It only took a few weeks for my shock to disappear, not because I was a natural anthropologist but because the normal human capacity for empathy kicked in. I liked these people who were hosting me, helping me, and teaching me. And once I liked them (remember that first principle of moral psychology) it was easy to take their perspective and to consider with an open mind the virtues they thought they were enacting."The normal human capacity for empathy" is just what we have so long been missing in this discussion. The implicit advocation that you should try to like the people you are observing, that it would open new avenues for understanding them, is long overdue. Dr. Haidt is to be praised for this insight, but also for being the kind of man who could have it.
Judith Warner has read his piece, and is trying to do what he advocates. She is not -- still not! -- able to understand these women. She is still afraid of them, and that fear of them comes through in her piece in many ways. From her recognition that her children's love for brie might mark her as an outsider here, to the sense that this is all an alien environment she cannot comprehend, it is clear she is afraid of these people, and of a joy she can neither name nor understand.
Yet she is trying to understand it. She is trying to make friends.
Both she and Dr. Haidt ultimately are far from understanding -- reading Dr. Haidt's clinical descriptions is enough to make a man chuckle. Yet I respect their kindness and their humane desire to understand, to have empathy, to like and befriend.
They will probably not quite grasp what I mean when I say that conseratives are not subjects-for-observation but neighbors; and that in choosing "Love thy Neighbor" as their method, they have found the right road. I expect Dr. Haidt will read that as my desire to enact my life in accord with a defined sacred order, to reduce uncertainty and bring meaning to my life.
That is not at all what I mean: what I mean is that, in this world, that is the road most likely to lead to genuine understanding between people. Like Chesterton, I learned that from the world, and then found it reflected in the books.
That, though, is a longer trail. For now, it's enough to take a moment to recognize a good thing, to welcome it and praise those who are trying to make it work.
Based on a number of interviews with military officers in Iraq, I have compiled a strategic update on the situation post-Surge. You can read the summary, the whole analysis, or the transcripts of the interviews if you prefer to make up your own mind.
Tensions are getting higher with the election's approach, so I want to emphasize that this post is in no way intended to be disrespectful of either side. A liberal friend brought up an interesting point, and I wanted to bring it to your attention here because of Winds' location right at the center of the blogosphere. My only interest is to expose the question to a larger community, to see if the observations hold true in a broader sense than in the smaller community that reads Grim's Hall.
We were recently welcoming a new reader, and asking her to tell us a bit about herself. In return, I thought perhaps we should all tell her a bit about ourselves. (Which is a useful exercise, actually -- it might make a good concept for the Winds community as well.)
At the end of a long string of comments, Jeffrey -- a committed liberal and Obama supporter, whose friendship I greatly value because of his careful thinking and insightful critiques -- noted that, unlike the rest of us, he hadn't mentioned anything about his family history. He wondered why so many people felt that was important.
The question reminded me of Prof. Althouse's post about one of McCain's earliest commercials, the one that started with old footage of Theodore Roosevelt, then FDR, then young McCain, then McCain today. She wrote:
"I thought: This is the feeling of being conservative — it is a deep emotional sense that the past matters and flows into the present and makes sense out of the future."
For many of us, it's a very strong sense: we see our ancestors behind us, past the parents and grandparents we may have known, we can imagine the ones who came before them from their stories, and from histories the ones behind them. It's a sense of belonging to that sweep of things that rose out of the past, of being part of a long current that -- like a river -- imparts force and direction.
It was an insightful comment she made, and something that I think tends to matter deeply to conservatives. Indeed, it may be the very quality that makes you a conservative.
I got the same sense the day after Sen. Clinton's speech, reading liberal blogs who talked about it. What was (without question or near comparison) the strongest part of her speech for me was her mother/daughter/Harriet Tubman metaphor. That's a force of that kind, where she sees herself as a part of a line that is itself part of a movement, imparting force and direction, and she gloried in it.
Yet I didn't see that quoted by anyone on the left. They quote the attacks on McCain, or the stories about the lady with the bald head from her cancer treatments, or the wounded Marine; but the part that really impressed me didn't seem to register at all with them.
Now, I don't read as many left-wing blogs as some of you do, so it's entirely possible that it was a major focus on a large number that I missed. Nevertheless, Jeffrey agreed that it was an interesting question, and so I want to put it to you.
Do you think that the sentiment is something that conservatives feel strongly, but that a mind that tends towards progressive politics doesn't feel as deeply? Or (if you are a progressive who disagrees) are there different forces that you feel a part of -- movements like the one that Sen. Clinton spoke so well about, stretching across generations, movements that swell around you, imparting force and direction to your life?