The financial crisis via charts and graphs

Colorado College political science professor David Hendrickson has put together a nice resource at his new "Cause for Depression" blog:

Think of it as a cartoon guide to the ongoing earthquake in the world of high finance. Through pictures, we will try to understand the dimensions of the current financial crisis--its origins and causes, its likely consequences, its potential remedies.

The "Labels" in Blogspot allow us to construct a chapter organization that the reader should approach as she would a book. By hitting on the topics under "Labels," the presentation will appear in an orderly fashion.

Blogspot is not made for blogbooks, though it is easily adaptable to that purpose. Ordering within each of the chapters depends on time of posting, so my time stamps are not necessarily indicative of the actual time the material was posted. I have altered them to allow for an orderly presentation. If it seems to matter, I will post the date of composition and updates in the entry. The initial foray of posts was made in mid-October 2008.

In seeking to understand the crisis, we need to begin with the credit mechanism. We are living through the bust of one of the greatest credit cycles of all financial history. In order get a handle on the seriousness of the bust, we must register the mania that fed the boom.

We’ll first look at some measures indicative of the financial turmoil. Then we examine general conditioning circumstances: the role of the housing boom and bust, the general growth of credit market debt, the explosion in derivatives, all of which are relevant in considering how much insolvency exists within the financial system. That question--are our financial institutions insolvent?--in turn is vital in assessing the wisdom of various bailouts and rescues, the opportunity costs associated with the government-mandated maintenance of the "FIRE" sector (Financials, Insurance, Real Estate), and how the global imbalances that have marked the last fifteen years are likely to change. I conclude with some lessons. The final entry is a collection of paper topics for interested students to consider.

Where possible, I’ve tried to indicate where readers can find updated sources of information for the material presented here. Given my harsh view of "derivatives," I'm obliged to say that this compendium is almost entirely derivative. I’m deeply indebted to my blogroll for ideas, inspiration, and many of the charts contained herein.

So, if you've read thus far, go now to "Financial Stress" in the "Labels" section.

(Via Financial Armageddon.)

The amount of public and non-public U.S. debt will inevitably come back down, one way or another. I just hope we don't end up as a third-world nation (or worse yet, multiple third world nations) in the process.

S&P's Enron moment

IM conversation between two Standard & Poore's employees, April 2007, as revealed in testimony before Congress today:

Shannon Mooney: i didn't really notice...but now that i think about it i kindof tune her out when she talks

Rahul Dilip Shah: well she just is too political...and she doesn't have anything of substance to say...but keeps thinking that she does.

Rahul Dilip Shah: (I'm done venting now) :)

Shannon Mooney: k go take a nap

Shannon Mooney: see you later

Rahul Dilip Shah: ok

Rahul Dilip Shah: btw - that deal is ridiculous

Shannon Mooney: i know right...model def does not capture half of the rish

Shannon Mooney: risk

Rahul Dilip Shah: we should not be rating it

Shannon Mooney: we rate every deal

Shannon Mooney: it could be structured by cows and we would rate it

Rahul Dilip Shah: but there's a lot of risk associated with it - I don't personally feel comfy signing off as a committee member.

(Via the Big Picture blog and The Epicurean Dealmaker. The latter has a pictorial illustration that I like, Mark Tansey's "The Innocent Eye Test"; the former has links to the transcript.)

Hallucinatory near-death experiences

Keith Augustine's "Hallucinatory Near-Death Experiences" article on the Internet Infidels website has been updated to reflect its publication as a three-part series of articles in the Journal of Near-Death Studies, where it was published along with commentary from leading researchers of near-death experiences. The online version of the article includes content that was not published in the JNDS due to space considerations.

Keith has done a great job of reviewing the evidence that near-death experiences contain elements that are demonstrably hallucinatory, and therefore not evidence for survival or for consciousness leaving the body.

Bigoted and ignorant McCain/Palin supporters in Ohio

This is no doubt not a representative cross-section of McCain and Palin supporters, but it's a disturbingly ugly set of them. It's fortunate that most of the worst comments are from the older generation--I hope that younger people are less likely to hold such views. McCain has shot down such remarks from supporters when they've been made in his presence, to his credit. (And yes, this is from Aljazeera.)



UPDATE: Here are more bigoted McCain and Palin supporters in Johnstown, Pennsylvania:


UPDATE (October 20, 2008): Sarah Palin says if she heard such bigoted comments she'd shut them down:

"What we have heard through some mainstream media is that folks have hollered out some atrocious and unacceptable things like kill him,' " Palin said, referring to a Washington Post story two weeks ago about angry supporters at a Palin rally in Florida. "If I ever were to hear that standing up there at the podium with the mike, I would call them out on that, and I would tell these people, no, that's unacceptable."

She goes on to break with McCain by supporting a U.S. Constitutional amendment to oppose gay marriage and claim that "Faith in God in general has been mocked through this campaign, and that breaks my heart and that is unfair for others who share a faith in God and choose to worship our Lord in whatever private manner that they deem fit."

UPDATE (October 21, 2008): And here's another video, from Bethlehem, Pennsylvania (same link provided by Hume's Ghost in the first comment), of McCain and Palin supporters entering Lehigh University (the school where intelligent design advocate Michael Behe is a professor):



UPDATE (October 22, 2008): And be sure to check out this woman's reasons for voting for McCain, at the Secular Web.

UPDATE: And more videos of McCain supporters heckling early voters (most of whom were from an Obama rally) in West Virginia.

TSA airport security is a waste of time and money

Jeffrey Goldberg explains why in The Atlantic. The check for whether you're on the no-fly list is at the time of ticket purchase and check-in; there is no validation of your actual ticket against your ID at the TSA checkpoint (you can easily print and use a fake boarding pass at the TSA checkpoint); there is no check of ID when you board the plane. The checks for substances and items at the TSA checkpoint are easily subverted, with the restrictions on liquids probably the most absurd and pointless.

We're throwing away billions of taxpayer dollars per year on security theater.

(Hat tip to John Lynch.)

(Previously, previously, previously, previously, previously, previously.)

A Shared Culture

Jesse Dylan has made a short video about Creative Commons licensing (which is used for the contents of this blog), and how it helps patch the flaws in current copyright law.

Hell House

The Door Christian Fellowship, a creepily cultish Pentecostal Christian sect that's an offshoot of Aimee Semple McPherson's Foursquare Gospel Church, is putting on a "hell house" in Chandler. They're calling it "Hell 101," and, as usual, they are advertising it in a deceptive manner that attempts to hide the fact that it's religious propaganda. I say "as usual" because not only have they put on such "hell houses" for years around Halloween, they're also known for advertising events such as Christian rock concerts while conveniently forgetting to mention the "Christian" part.

Such deception has long been associated with Aimee Semple McPherson (1890-1944), who was a fraudulent faith healer, alcohol Prohibitionist, and anti-evolutionist who later in life faked her own abduction in order to run off with her lover, Kenneth G. Ormiston, who had been an engineer for her radio station KFSG in Los Angeles. After disappearing for 35 days, she stumbled out of the desert in Agua Prieta, Sonora, Mexico, just south of the border from Douglas, Arizona, and told a phony story of kidnapping which quickly fell apart when witnesses came forth who had seen her at a resort in Carmel-by-the-Sea, California. She ended up dying of an accidental drug overdose from taking too many Seconol sleeping pills, but her Foursquare Gospel Church still exists today with over two million members, mostly outside of the U.S. (Interestingly, as a teenager McPherson was an agnostic who defended evolution in letters to the newspaper.)

The Potter's House, The Door, Victory Chapel, and other Foursquare Gospel spinoff churches are Pentecostal churches that engage in faith healing, speaking in tongues, being slain in the spirit, and other activities of anthropological interest. They can be very hardcore in the pushiness of their evangelism, and engage in cult-like conversion techniques such as separating people from groups they come with, pairing them off with someone of the same approximate age and sex, and bombarding them with rehearsed questions designed to push someone to a conclusion that they need to accept Jesus and join their group. (The Wikipedia page on The Potter's House describes this particular sect's origins in Prescott, Arizona in 1970, originally officially affiliated with the International Church of the Foursquare Gospel. The Wikipedia biography of its founder, Wayman O. Mitchell, is also of interest. The sect's origins trace back to Los Angeles, as does the Pentecostal movement in general.)

"Hell 101"'s website calls it "Final Destination III," and describes the hell house as "a twist on a haunted house style attraction that was described by Phoenix Arizona NBC News Affiliate Channel 12 as 'scary, horrifying, suspenseful, sick....' NBC 12 News had a live video feed from our annual event where hundreds waited up to two hours in line to have the hell-scared out of them." Their FAQ has the question "If I quit because I was scared or anything else can I get a refund?" The "anything else" would include feeling defrauded by having paid money for a haunted house, but getting instead Christian propaganda. The answer: "There are no refunds if you get scared, cry, feel angry, get sick, hate it, love it or just want to run!!! Our job is to confront your senses and that we do!"

A Christian hell house can be quite entertaining, so long as you know what to expect and are prepared to exercise your right to walk away at the end when the attempts at conversion go into overdrive (they may suggest that the doors are locked and that you may not leave). George Ratliff's documentary film "Hell House" is a great way to get a preview, and shows some of the unintentional comedy that can be produced when a bunch of ignorant people try to put together a scary haunted house designed to persuade you that you're going to hell unless you believe the way they do. That documentary also shows how ineffectual some atheists can be in their confrontation of Christians, and I highly recommend that anyone planning to visit one of these hell houses for any reason give it a watch before going.

A "hell house" usually follows a common script template which the churches purchase and customize. They go through a writing, casting, and production process similar to a high school stage production. The "hell house" script typically guides a group of visitors through a series of rooms, each of which contains a brief performance by actors portraying some scene that argues for certain practices, beliefs, or actions as likely to terminate with eternity in hell, though that latter point may initially be somewhat subtle. (By the end, it is anything but.)

I attended a hell house at a Potter's House church in Tucson in 1990, from which the flyer image was obtained. (Also see this PDF of an Arizona Daily Star newspaper story about that particular hell house, which got in trouble with the local fire department for fire code violations.) That hell house followed a female character from scene to scene which included a car crash caused by teenage drinking (featuring an actual wrecked car and empty beer cans), a band of demons playing AC/DC's "Highway to Hell" (suggesting that at least some rock music is demonic in origin and consequences), and the ever-popular hanging nun in hell (Catholicism is regarded by this sect as ruled by Satan) and young woman on a stretcher with a pool of blood between her legs shrieking that she's killed her own baby (the anti-abortion segment). At the end, there's a high-pressure call to Jesus which provides an opportunity to argue with someone who may be something like a street preacher in their skill of providing pre-programmed responses to common objections they've heard many times but is unlikely to have actually thought deeply about. If you do choose to visit one of these, I advise not getting involved in such a discussion if you're somebody who is likely to blow up, call people stupid, or otherwise lose your cool--that's just going to be seen as confirming evidence that you're under the control of the devil and anything you say can be dismissed without consideration.

UPDATE (October 31, 2008): New Times has a review of The Door's "Final Destination III" hell house.

Scott McClellan reviews Oliver Stone's "W"

In The Daily Beast:

At best, Stone’s interpretation is educated conjecture. He takes plenty of liberties with the facts, a story-telling strategy he considers justified in order to get at larger truths in a 2-hour movie. As a result, the real-life complexities of the characters and events are left unexplored.
...
Overall, as should be expected from the high-caliber cast, the acting was fabulous. Brolin rightly deserves kudos for his portrayal of Bush. He has the swagger down, and does a decent job on Bush’s voice and gestures. The president’s eating habits were overdone, but not completely off the mark (you will know what I mean when you see the movie). ... The most unflattering portrayal was that of Condi Rice, caricatured by Thandie Newton as a mere yes–woman, which is excessively denigrating but not entirely without basis.

There are a number of inaccuracies in the movie, some grounded in Stone’s satirical impulse. (Maybe I was too close to the real-life situations to laugh at those moments.)

...

Stone also exaggerates in painting Bush as a simple-minded born-again Christian. President Bush is a man of deep personal faith who may have felt a calling to enter politics, but he never came across to me as presuming to know God’s will. Nor does he consider himself an evangelical Christian or fundamentalist Baptist (though along with Rove he placed a high priority on keeping that wing of the Republican base happy).

I also felt it was grossly unfair to portray Bush as merrily oblivious and somewhat smug when visiting wounded soldiers at a military hospital. Having been at President Bush’s side during such visits, I know they were somber, emotionally-draining moments for him. They were also probably the only time I ever noticed self-doubt creep into his eyes, however fleetingly, as he confronted the terrible human costs of his misguided, instinctive decision to rush into an unnecessary war.

But W. is a drama, not an historical documentary. Stone tries to play it fairly straight. Even if he misses the mark at times, he deserves credit for the glimpses of inner truth he provides, which can only be instructive, especially as we prepare to elect a new president.

My guess is the most vocal Bush critics will view Stone’s account as too soft on Bush and his top advisers, while Bush’s chief advocates will ignore and dismiss it. But I think the average Joe just might find it entertaining and thought-provoking. I won’t go as far as to borrow a line from Bush 43 and say, “Heck of a job, Stonie.” But I will borrow one from Bush 41 and say, “It’s good, not bad.”

A measure for crackpots

Last night at a party, a few of us were discussing some recent self-published books by crackpots that we've seen or had pushed on us. We noted that these books seem to have in common a few features. They seem to often have long rambling introductions that are missing key elements like thesis statements or an indication of what the book is about. They use words in non-standard ways, yet don't bother to explain how they are being redefined. They claim that the author has some special knowledge, yet don't provide any reason to believe it is the case.

I had a dim recollection of having come across a "crackpot index" before somewhere, and a little bit of searching yielded Fred J. Gruenberger's December 1962 publication from the RAND Corporation titled "A Measure for Crackpots" (PDF), which offers the following scoring mechanism for distinguishing the scientist from the crackpot:

1. Public verifiability (12 points)
Scientists promote public verifiability; crackpots rely on revealed truth.

2. Predictability (12 points)
Scientists promote predictability and track their record of failure as well as success; crackpots promote wild predictions and count only successes, not failures.

3. Controlled experiments (13 points)
Scientists promote controlled experiments; crackpots avoid them.

4. Occam's razor (5 points)
Scientists prefer the simplest explanation that covers all the facts; crackpots enjoy wildly complex theories.

5. Fruitfulness (10 points)
Scientists prefer theories that generate new ideas and new experiments; crackpots prefer theories that produce nothing of value for further research.

6. Authority (10 points)
Scientists seek the endorsement and validation of known authorities and tend to obtain it if their work is valid; crackpots usually fail to obtain it.

7. Ability to communicate (8 points)
Scientists tend to promote clear (if sometimes dull) communications through approved channels; crackpots tend to be incomprehensible and self-published.

8. Humility (5 points)
Humility is a desirable (if sometimes lacking) trait in scientists; it is rare in the crackpot.

9. Open mindedness (5 points)
Scientists tend to qualify and carefully couch their statements as tentative based on the current evidence; crackpots tend to make absolutely certain statements that may not be challenged.

10. The Fulton non sequitur (5 points)
I'm more familiar with this as the "Galileo Gambit," or the common crackpot claim that "They laughed at Galileo; they're laughing at me; therefore I'm right just as Galileo was." Gruenberger uses steamboat inventor Robert Fulton in place of Galileo. This logically invalid argument is refuted by the Bozo rejoinder, which is that "they also laughed at Bozo the clown." This is a negative test, lack of the characteristic is 5 points, presence is 0.

11. Paranoia (5 points)
Another negative test--crackpots tend to be paranoid about their ideas being actively suppressed by conspiracy.

12. The dollar complex (5 points)
Another negative test. The crackpot claims immeasurable value for his discoveries as revolutionary, worthy of the Nobel prize, and world-changing.

13. Statistics compulsion (5 points)
The crackpot tends to use and continuously explain statistics allegedly supporting his claim, while the scientist tends to use standard methods and assume the reader is familiar with them.

Gruenberger's index is focused on science crackpots rather than philosophy crackpots, but a number of the above features do apply to the books we were talking about.

A more recent "Crackpot Index," also focused on physics, was created by John Baez, a mathematical physicist at the University of California, Riverside:

A simple method for rating potentially revolutionary contributions to physics:

A -5 point starting credit.

1. 1 point for every statement that is widely agreed on to be false.
2. 2 points for every statement that is clearly vacuous.
3. 3 points for every statement that is logically inconsistent.
4. 5 points for each such statement that is adhered to despite careful correction.
5. 5 points for using a thought experiment that contradicts the results of a widely accepted real experiment.
6. 5 points for each word in all capital letters (except for those with defective keyboards).
7. 5 points for each mention of "Einstien", "Hawkins" or "Feynmann".
8. 10 points for each claim that quantum mechanics is fundamentally misguided (without good evidence).
9. 10 points for pointing out that you have gone to school, as if this were evidence of sanity.
10. 10 points for beginning the description of your theory by saying how long you have been working on it.
11. 10 points for mailing your theory to someone you don't know personally and asking them not to tell anyone else about it, for fear that your ideas will be stolen.
12. 10 points for offering prize money to anyone who proves and/or finds any flaws in your theory.
13. 10 points for each new term you invent and use without properly defining it.
14. 10 points for each statement along the lines of "I'm not good at math, but my theory is conceptually right, so all I need is for someone to express it in terms of equations".
15. 10 points for arguing that a current well-established theory is "only a theory", as if this were somehow a point against it.
16. 10 points for arguing that while a current well-established theory predicts phenomena correctly, it doesn't explain "why" they occur, or fails to provide a "mechanism".
17. 10 points for each favorable comparison of yourself to Einstein, or claim that special or general relativity are fundamentally misguided (without good evidence).
18. 10 points for claiming that your work is on the cutting edge of a "paradigm shift".
19. 20 points for emailing me and complaining about the crackpot index, e.g. saying that it "suppresses original thinkers" or saying that I misspelled "Einstein" in item 8.
20. 20 points for suggesting that you deserve a Nobel prize.
21. 20 points for each favorable comparison of yourself to Newton or claim that classical mechanics is fundamentally misguided (without good evidence).
22. 20 points for every use of science fiction works or myths as if they were fact.
23. 20 points for defending yourself by bringing up (real or imagined) ridicule accorded to your past theories.
24. 20 points for each use of the phrase "hidebound reactionary".
25. 20 points for each use of the phrase "self-appointed defender of the orthodoxy".
26. 30 points for suggesting that a famous figure secretly disbelieved in a theory which he or she publicly supported. (E.g., that Feynman was a closet opponent of special relativity, as deduced by reading between the lines in his freshman physics textbooks.)
27. 30 points for suggesting that Einstein, in his later years, was groping his way towards the ideas you now advocate.
28. 30 points for claiming that your theories were developed by an extraterrestrial civilization (without good evidence).
29. 30 points for allusions to a delay in your work while you spent time in an asylum, or references to the psychiatrist who tried to talk you out of your theory.
30. 40 points for comparing those who argue against your ideas to Nazis, stormtroopers, or brownshirts.
31. 40 points for claiming that the "scientific establishment" is engaged in a "conspiracy" to prevent your work from gaining its well-deserved fame, or suchlike.
32. 40 points for comparing yourself to Galileo, suggesting that a modern-day Inquisition is hard at work on your case, and so on.
33. 40 points for claiming that when your theory is finally appreciated, present-day science will be seen for the sham it truly is. (30 more points for fantasizing about show trials in which scientists who mocked your theories will be forced to recant.)
34. 50 points for claiming you have a revolutionary theory but giving no concrete testable predictions.

Here's a nice crackpot response to that index.

Christianity in China

The October 4, 2008 issue of The Economist has an interesting article, "Sons of heaven," about Christianity in China, which reports that the official estimate of 21 million Chinese Christians (16 million Protestants, 5 million Catholics) is probably a vast underestimate. The Centre for the Study of Global Christianity estimates that the number is 70 million, while the Pew Forum on Religion and Public Life, former Communist Party official turned Christian Zhao Xiao, and the China Aid Association all think the number may be as high as 130 million. This is compared to membership in the Chinese Communist Party of 74 million.

The reason for the underestimate is that many Christians in China are unaffiliated with any official church. The government doesn't allow more than 25 people to meet in a gathering without official permission, so Christians in China have formed thousands of "house churches," similar to the way Pentecostalism has grown through small groups across South Korea. Just as private meetings in homes were how Christianity spread in Rome, the result has been a proliferation of more and more smaller groups in China. These house churches tend to be unaffiliated with any denomination, with "no fixed liturgy or tradition," and run by recent converts who themselves are not expert on Christianity.

The article points out that in China, Christianity is not associated with tradition and ritual, but with modernity, business and the market economy (where it's seen as a necessary check on the market to provide ethics in business), and science. Six of the 30 leaders of the student protests at Tiananmen Square became Christians, and the article states that "One Confucian Chinese says with a rueful smile that most of the pretty girls at university were Christians--and would date only other Christians."

Christianity has spread in China as a result of rural Christians migrating to the cities, and students who travel to the United States and become Christians and then return home.

I look forward to seeing a similar article in the future about the spread of atheism, skepticism, and pro-science groups in the United States through Meetup groups and student groups.