I Believe I Can Fly

Despite his age and plenty of free time for thoughtful inquiry, former Fed Chairman Alan Greenspan still doesn’t get it.  Like Daedalus, the famed designer of the Labyrinth in Crete into which the Minotaur was imprisoned, Greenspan and his off-spring have failed to recall that the maze includes Ariadne’s thread which, if followed, can unravel the mystery that isn’t.  During his interview with Charlie Rose, Greenspan evidenced the same myopia that blinded him for over 18 years – cataracts that are alive and well in the eyes of Janet Yellen.  Spoiler alert:  It’s not the housing, stupid.

He was a man learned for those times, of ripe old age, and in his early youth hazarded a deed of remarkable boldness.  He had by some means, I scarcely know what, fastened wings to his hands and feet so that, mistaking fable for truth, he might fly like Daedalus, and collecting the breeze on the summit of a tower he flew for more than the distance of a furlong.  But agitated by the violence of the wind and the swirling of air, as well as by awareness of his rashness, he fell, broke his legs and was lame ever after.  He himself used to say that the cause of his failure was his forgetting to put a tail on the back part.   – Eilmer of Malmesbury recounted by Geoffrey of Monmouth

Eilmer, the flying monk of Malmesbury was not sponsored by Red Bull but, had the chalice been caffeinated back in 1020 CE, he would have been.  There’s a lot that’s cool about Eilmer (or EFM as I imagine his hip, rad Red Bull sponsored code name would be today).  Historians suggest that he may have been one of the few millennials in the 11^th century to actually see Halley ’s Comet twice – first in 989 and second in 1066.  But EFM’s 200 meter flight, like the Icarian myth from which it was inspired, actually set in motion innovation that is alive and well today.  Well, let’s pause for a moment.  Popular culture suggests that between 1930 and 1961, 71 of the 75 people working on perfecting the design for the wingsuit paid for their efforts with their lives making this one of the most lethal innovations when measured by mortality rates (much higher than Skydiving 3.3/1000 or summiting K2 104/1000) so we need to be careful with the “alive” part of “alive and well”.

Now what do Greenspan, EFM, and flying squirrel suits have to do with the economy, you ask?  Greenspan and my all-time favorite Fox News demigod Vice President Dick Cheney (who stated that, “I don’t think anybody saw it coming”) continue to recite their conviction that “no one” could have seen the fiscal house of cards collapse risk despite mountains of published evidence (including my own from 2006) that is available to contradict their assertions.  Why would these pilots of policy fail to update their self-evident imbecilic statements?

Well the answer is really quite simple and has four degrees of freedom: Lift, Drag, Thrust and Weight.  These four variables are what makes something fly or, conversely, hang in the air the way bricks don’t (thanks Douglas Adams!).  In this metaphor, I seek to explain economic ideals through the understanding of what it takes to fly.  And the reason for this is really quite simple.  In all human endeavors, lateralized thinking – the ability to apply observed principles from one discipline to another – is helpful in assessing where we might need to go to solve for what seem to be intractable obstacles in the consensus view.

If one aspires to take-off or remain in flight, a fluid dynamic conspiracy must be engaged.  If one seeks to keep an economy going, a fluid dynamic conspiracy must be engaged.  For the purposes of our conversation, let’s unpack the analogy a bit.

For flight, lift is the aerodynamic force that is created when contour creates differential pressures perpendicular to the flow of the wind above and below the wing.  For economics, lift can be understood as the momentum of flow of transactions through the wind of trade.

For flight, drag is the mechanical form that interacts with fluid resistance.  For economics, drag is the expansiveness and complex contour of all types of transactions in trade and exchange. 

For flight, thrust is the acceleration of mass to propel an object into the flow of the fluid.  For economics, thrust is the animation and stimulus of activity in the market.

For flight, weight is the force of gravity opposing lift and creating the higher pressure on the lower surface of the wing to stimulate lift.  In the economy, weight is the carrying cost of the system that includes the entire utilitarian expectations of all things dependent on money.

Our current economic theorists, regrettably, are attempting to fly with only two variables – thrust and drag.  For over 5 years, the Federal Reserve has mistakenly increased the thrust using a variety of ill-conceived stimuli that have added viscosity to the flow.  At the same time, they continue to insist that housing is the wing that will lift the economy back into flight.  They’ve done nothing to alter the momentum of flow – which would require massive expansion of domestic production and consumption rebalancing as the flow is relevant at the surface of the wing – not in bi-lateral or multi-lateral trade agreements far from home.  And they’ve added weight by increasing the number of areas where the economy must serve humanity – more public employment, more indirect government expenditure dependency – relative to all previous periods.  At this time in our economic evolution, we need greater contour and adaptability on the upper surfaces of our wings – more agile businesses and business models; more adaptation at the margins (attack and flaps) – and we need weight reduction (less monetary dependency) if we expect to soar. 

Housing does not a flightworthy wing make.  The financing for housing still requires government intervention (Freddie and Fannie) to sustain what has become an orgy of over-consumption.  Far from shelter, our mini-palace definition of home has seen our houses grow in size 69% from 1973 to 2010.  Like our waistlines (60% of Americans are now overweight and obese), our gluttony has made our capacity to soar diminish.  Now as we blubbered our way into bigger homes, did we actually achieve a more stable economy?  Absolutely not.  Did any of our ‘growth’ actually come organically?  Absolutely not.  We grew our economy by adding weight and increasing drag.  We ignored lift and attempted to make up for our design failures by adding throttle.  The bad news is that this formula works for landing – not for taking off.

We need to regain the svelte attitude of flight.  Highly adaptable models that can respond to flight conditions at the wing.  Highly distributed transactions – more and smaller.  Lower viscosity of the fluids through which we move.  And less dependency on monetary intermediation of all of our transactions.   If we want to fly, we can.  And like EFM, we don’t need to wait for our drunken pilots to climb into the cockpit to crash all over again.  We The People can actually start living on the wing and before long, we can realize that we don’t need Daedalus anymore.  Climb up on the tower (or the face of a giant, Red Bull sponsored cliff), feel the wind on your wings..., breathe, then go ahead, jump with a tail on the back part!

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Go Jump in a River

I suppose that I was in one of those ‘been-in-the-air-too-long hazes’ flying over Ur or Sumer en route to the Kingdom of Bahrain when I finished reading the Wall Street Journal, the Financial Times, and the Gulf News.  The monotony of the media’s coverage of troubled banks, EU protestations over U.S. spying, and, pompous morality policing (and scandals) overwhelmingly drowned out all other voices.  Loss of trust, inhumane treatment between citizens of the globe, and deceit are epidemic and, unlike the avian influenza, there’s no quarantine underway.

For the reason I cited above, I decided to break out my favorite cuneiform reference – the Code of Hammurabi – to see whether a journey over the same globe 4,000 years ago would have been much different.  For those of you who don’t have it handy, a quick refresher.  In the slightly over 280 laws, the “wise king Hammurabi” (that’s what he called himself) set forth laws that were to remain unaltered for all time.  The general themes of the law cover topics like Justice (5%), Human Trafficking (3%), Property Rights (8%), Agroeconomics (8%), Money (21%), Marriage and Prostitution (24%), and Civil Penalties (28%).  But one of the more curious elements of the Code of Hammurabi is introduced right at the beginning: Law 2 to be exact.

“If anyone bring an accusation against a man, and the accused go to the river and leap into the river, if he sink in the river his accuser shall take possession of his house. But if the river prove that the accused is not guilty, and he escape unhurt, then he who had brought the accusation shall be put to death, while he who leaped into the river shall take possession of the house that had belonged to his accuser.”

It turns out that the Jump-In-A-River test was actually pretty common in Ur and Sumer and is, by no means, the comedic basis for the Monty Python Holy Grail witchcraft mob logic.  Which begs the question of whether or not the first club fitness program for ne’er do wells would have been advisably swimming lessons.  To prove one’s innocence, cast yourself into the river and, if you don’t drown, whatever allegation has been made against you is proven to be false with grave harm befalling the accuser.

Now what on earth does this have to do with the headlines that graced my interminable night of flying 1/3 of the way around the world?  Well really, it’s quite simple.  In the past 4,000 years we’ve not seemed to learn much about human behavior, integrity, or accountability.  And it may be because, like Hammurabi, we’ve been focused on a rather profane and diminished view of humanity.  Personal injury, gender-biased faux morality defined for the benefit of domineering males, and money – the preponderance of Hammurabi’s obsessions – are still prevailing themes today.  And, as was the case 4,000 years ago, life (or the indenture and extermination thereof) and monetary penalties (fines for indiscretion and abuse) are the only two tools we can concoct to mete out a wretched form of justice.  In a world in which we label those who disclose egregious violations of international law “traitors” (despite the justifiable global condemnation for the acts they are unveiling) while in the same moment extract less than 25% of JP Morgan’s 2012 net income in a settlement for massive fraud, can we really continue to suggest that the 4,000 year old system of justice is working?  I think not.

Edward Lee Thorndike is credited with the modern conception of “behavior modification”.  In his dissertation, Animal Intelligence: An Experimental Study of the Associative Processes in Animals (which happened to credential him just in time to become a psychological testing expert to qualify soldiers about to be sent to their deaths in World War I based on their measured proclivity to accept orders), Thorndike reinforced the illusion of stimulus-dependent enculturation and responsivity.  Thorndike and Hammurabi both assumed a linear view of humanity that sought to distinguish ‘man’ from savage or beast.  Thus aspiring to something just above savagery as the laudable trajectory for humanity, is it any wonder that we still find ourselves deceiving, philandering, injuring, and pillaging?

Why does a mercenary NSA spy for its paymasters?  If you seriously buy the “war on terrorism” malarkey, you’ve been watching too much Fox News.  There’s never been a war on terror; rather a war on liberty.  There has been an assault on humanity for the preservation of an unsustainable dichotomy of power dominating the masses.  The U.S. is not sorry that it spies any more than it’s sorry that it maintains power and wealth imbalance across the globe.  It has abused its technology, reputation and power and has acted without consideration of consequence.  Wrapping lies and subterfuge in the American flag does not ameliorate the abrogation of the humanist ideals of liberty and morality once celebrated as the grand experiment of the United States.    It has, in fact, proved one of Thorndike’s assertions – action precedes interaction and association.  Thorndike was credible enough to supplant his own argument about ‘connectionism’ in recognizing that behavior first happens and then is judged with pleasure or aversion. 

“I wish to also say that whoever thinks that, going along with the current which parallels the association, there is an accompanying minor current, which parallels the pleasure and which stamps the first current when present with it, flies directly in the face of the facts.  There is no pleasure along with association.  The pleasure does not come until after the association is done and gone.”

The U.S. is sorry that it got caught.  It’s ‘investigating’ how it found itself, um, … with its hand in the cookie jar (or in Angela’s cell phone as the case may be).  Which begs the fundamental question.  If 100 years ago Thorndike was able to successfully conclude that behaviorism failed a prima facie neurological and logical argument, why are his observations ignored when it comes to our current memes?  Why are we still focused on attributing blame, seeking justice, and penalizing those who violate social order and laws?  We know that this has been ineffective for 4,000 years yet we still persist in the illusion that it preserves order.  We spy to gain an unfair advantage to the detriment of all others.  We perpetually prop up and vilify the global banking system with oversight and then accommodation with such frenetic convulsions so as to insure that no one can have faith and confidence in money or its purveyors.  We abuse one another in ecstatic intimacy and benign neglect.  We are who we’ve been.

How about a different path?  How about living a life in voyeuristic transparency?  By this I mean living in such a way as to celebrate the essential best of humanity so that you see and can be seen not for the façade you deem suitable but for the essence of yourself.  What if you welcomed surveillance to demonstrate the potential of a life unencumbered?  What if you conducted your affairs in such a manner as to proudly take attribution for your successes and failures?  What if you actually lived within your means and strove to insure that others could equivalently do so?  Rather than falling into the ancient social reflex of causality, could you actually see yourself living accountably?  And by this I don’t mean seeking attribution for egoic benefit.  Rather I mean taking full responsibility for the fact that you are, in fact, the perpetrator of your life – not a helpless victim of carnality or causality.  In such a world, NSAs, banks, social conventions, and the like become impotent in the face of a human with nothing to hide. 

So here’s a swimming lesson.  Survey the river to find out where the stones are.  This is important for two reasons.  First, if you choose to dive in, you may want to avoid hitting your head on the way in.  But equally important, once in the water, you may need to display your innocence and, if your arms fail you, you may need to know where to stand.  Strip off your tired clothes and come on in.  The water’s cool and refreshing.

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Selling Souls for $13 Billion

Word on the street is that the price of justice has just been auctioned at $13 billion.  Reportedly this past Friday afternoon, JPMorgan Chase Chairman, President, and CEO (can anyone say too many titles?) Jamie Dimon connected with the indulgences-minting Attorney General Eric Holder to see what the going rate for crime is these days.  There’s no question that JPMorgan defrauded investors.  There’s no question that they were not acting in isolation.  There’s no question that the actions they initiated were in violation of numerous laws designed to protect investors and the general public from misdeeds that triggered the Great Depression.  And there’s no question that the U.S. government has sold integrity before and has every intention of selling it again.  The part of the about-to-be-settled complaint that I find priceless is claim 686 on page 260 where the government alleges that, “GSEs justifiably relied on false representations and misleading omissions of J.P. Morgan Acquisition,” (et al) and Claim 687 on the following page, “would not have purchased the GSE certificates,” had they been exposed to the true facts.

Now grab your box of tissues because, according to the civil and criminal complaint, the “immediate victims” were Fannie Mae and Freddie Mac – two dignified, upstanding government sponsored entities whose mission is to provide “affordable housing to millions of Americans.”  The SHAME!  These poor, helpless co-conspirators (oops, how did that get in there?) were too dull minded to know that they were being duped and they – not the ignorant public – were the victims.  The Federal Housing Finance Agency’s (FHFA) September 2, 2011 complaint identifies over $30 billion in securitizations that were subject to the alleged frauds enumerated in the over 260 pages of Quinn Emanuel billable hours.  Over 50 persons and corporations listed as defendants created over 100 “investments” that turned out to be gross misrepresentations of Americans’ ability to live within their means.  Uh oh!  Who is the victim now?  Oh, and the Securities and Exchange Commission (not named as a co-defendant) reviewed the Prospectus for each of the securities and no one there is culpable?  Seriously?

Just when you thought the criminality of the system couldn’t get more outlandish, Warren Buffett dismissed crimes against investors with the pandering statement that, “If a cop follows you for 500 miles, you’re going to get a ticket.”  Well Oracle of Omaha, thank you for punctuating the indictment on the market and any sense of propriety.  “You can’t be active in a big business without making some mistakes, and sometimes they may be big ones,” he clarified. 

Mistakes?  Getting a ticket?  Warren, get a grip, man!  These are not misdemeanors and accidental oversights.  These are crimes perpetrated against millions of people for billions of dollars of damage.  And when the public is told to just look the other way courtesy of $100 million here and $13 billion there, the contempt for justice and the rule of law actually goes up.

In his testimony in January 2010, Jamie Dimon blamed most of his firm’s troubles on “some unscrupulous mortgage salesmen and mortgage brokers.”  He also stated that, “you know, that home prices don’t go up forever and that it’s not sufficient to have stated income in home [loans].”

Now before you go off and conclude that I find Jamie and the JPMorgan gang unique in their behavior, think again.  The one place where I agree with Warren Buffett is in his observation that everybody is doing it.  And there’s no question that when the government was trying to staunch the bleeding in the ’08 meltdown, Jamie was asked to pull a whale of a task in swallowing the toxic Jonahs – WaMu and Bear Sterns – and refer to both as ‘strategic business combination transactions’.  So, while we’re throwing criminals under the bus, let’s think about who was in the White House, the Treasury and the Fed and add them to our perp walk.  He played ball with the cover-up of government endorsed fraud and, in a warped moral contortion, could actually blame the government for a chunk of his problems.  Oh, that’s right, he has!

If the U.S. wants to gain a modicum of credibility for the rule of law, Attorney General Eric Holder and New York Attorney General Eric Schneiderman should walk away from the $13 billion and actually take the real list of defendants to court.  But that would actually demonstrate that the victims weren’t; that the public harm was actually the public’s economic indiscretion orgy coming back to bite all of us; and, that the system hasn’t gotten one bit better since 2008.  There will be no justice in this case because there cannot be any.  In his A Theory of Justice, John Rawls postulates that people determine their perception of justice behind a “veil of ignorance.”  Worse still is a public where justice is ignored in cold, sterile contempt for the rule of law.  Our recent debt drama in Washington, our neglect for our own accountability, and the collective cataracts that blind us to what is being done in our name for our own ‘benefit’ are all symptoms of our incapacity to apprehend morality.  We have, in fact, sold our souls.

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Render to Caesar

Silver is the instrument and measure of commerce in all the civilized and trading parts of the world.  It is the instrument of commerce by its intrinsic value.  The intrinsic value of silver considered as money, is that estimate which common consent has placed on it, whereby it is made equivalent to all other things, and consequently is the universal barter or exchange, which men give and receive for other things they would purchase or part with for valuable consideration: and thus, as the Wise Man tells us, Money answers all things.

In his 1691 treatise entitled “Concerning Raising the Value of Money”, John Locke laid the foundation for the single most pervasive and destructive myth of his time and of ours.  Ironic that this text was the opening of an attempt to advocate for the Parliament to actually increase faith and confidence in sovereign monetary systems – a novel and tenuous proposition at the time.  In the same manifesto, he paved the way for Adam Smith and others who would come to see the productivity of humanity through the distortion of rented anonymous labor for which humans prostitute their lives until their disability or, more often death.  Paradoxically, while the White House and Congressional Republicans were exchanging epithets about each other’s dereliction of responsibility ignoring the self-evident reality that the capital exoskeletal remains of the U.S. economy are rapidly desiccating, I was listening to a cacophony of those who would seek to change the world clamoring for monetary funding for their endeavors.  Projects that would power civilization by harnessing energy from the Earth and cosmos, would nourish, shelter, and hydrate the world – technologies that could be harnessed for ‘free’ – all were held in embryonic suspension waiting for monetary sufficiency to set them “free”.

John Locke was wrong.  His progeny are wrong.  And the charade in Washington D.C. is also wrong.  On the 100^th anniversary of the Federal Reserve, we know that the core assumptions derived from Locke are grossly flawed.  We know that the Fed has not succeeded in its publicly stated mission of controlling and facilitating a healthy labor market and controlling inflation.  But further, we know that the current theatrics do nothing but confirm that no one in D.C. (nor in their European counterparts) is yet willing to confront the central failure inspired by Locke’s maxim.  Our shared problem is not the cost of energy, the size of our national debt, or the tirelessly maligned capital intermediaries.  Our problem is our addiction to Locke’s maxim.

Just a quick reminder.  When the Federal Reserve was born, the long-dated asset (the 30 year Treasury) was meant to serve as a stabilizing economic keel for the economic ship called the United States.  In its first maturity cycle, we entered the Second World War masking illiquidity with massive wartime consumption.  In its second maturity cycle, we had the combined suspension of the Bretton Woods gold standard and Congress and the White House paved the way for foreign governments – including the Communist People’s Republic of China – to purchase our debt and call it an “asset”.  In the third turning, we had a string of atrocities in September of 2001 which distracted the nation from the grave statements made by the Bush Administration regarding “trillions” of dollars of fiscal holes in the coffers of the country.  And, when the government was unable to respond, it turned to the assets held by citizens – their homes – and induced the abuse of mortgages as ATMs which in turn blew up in 2008.  The “monetary system” that we extoll as our succor has, in fact, never completed a full cycle without war or manipulated intervention and has never stood on the full faith and confidence of American productivity.  Rather it has relied on propaganda and inducement of foreign interests to be buoyed as the most tolerable illusion.

Einstein is quoted to have stated that, “No problem can be solved from the same level of consciousness that created it.”  In the company of those who seek to transform our energy dynamos from centralized fossil fuel combusting grids to whirring magnets and toroidal vortices, Einstein’s quote is the staccato to the underlying pulsating beat of Tesla adoration.  And to be sure, both of these brilliant minds were both genius and fodder for the industrialist hegemony into which they were born.  Both were set upon by those who sought to control the mercantile future of their work and both were manifestly dependent on purse strings to their own undoing.  I find it fascinating that in all the adoration of Nikola Tesla, J.P. Morgan is the villain.  With all his brilliance, did Tesla genuinely remain ignorant of the source of the funds that were his remuneration?  Did he really think that capitalists in the late 19^th century were overcome with such a philanthropic sense of humanity as to not desire a metered power system?  Was his genius, and that of so many suppressed and derided inventors to follow, so monotonic as to ignore the ancient truism: “Render to Caesar what is Caesar and to God what is God’s?”  Not at all.  The desire for the coin of the realm was too loud a siren to ignore and, when recompense was due, lately acquired morality had departed.

So here’s my adaptation of Einstein’s postulate.  I offer it as my Archimedean Theorem VII:

No systemic breakthrough can be provisioned solely reliant on the same currency that maintains the incumbent status quo.

Think about it.  We want politicians accountable to the electorate but we fall for those who have spent the most donor money in their campaigns.  In the name of peace, we acquiesce to persistent terror.  We want connections with people so we intermediate flesh with Facebook and Skype.  We want knowledge so we drown ourselves in the edited, curated content Google chooses to render visible.  And in a room full of would-be inventors for a “new” humanity, references to “non-disclosure” and “patent” out-numbered the clarion calls to collaboration.  Why?  Because that which separates us and ‘protects’ us is beholden to money.  Must we accumulate the life-blood of the system we deride because in our hands we’ll do better?!  Hogwash.

Now let’s be abundantly clear.  Money – a transitive and temporary unit of stored value – serves a vital role in intermediating time and pulsatile seasons of production and consumption.  Money provides exceptionally efficient neutrality in denominating social consensus in transactions.  But money as judge, jury, and executioner of ideas, technologies, social benefit or power attribution is an offense to a mercantile system.  It is a utility devoid of wisdom, ignorance, or any other attribute.  And its utility, when celebrated as the artifact of supreme importance, is lost in its obsession.  Now is the time for We The People to call John Locke’s bluff and start answering the exchanges between humanity with values that are as diverse as humanity’s capacity to apprehend.  Only then will conscious enterprise stand a chance.

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Hashtag #Don’tFallForIt

In their audited financials, Twitter vividly reveals one of the lessons clearly NOT learned by the market in the faux ‘tech’ bubble of the late 90s.  From 2010 to June 30, 2013, the 140 character “conversation” platform has lost over $181 million on revenue of $705 million.  This money-losing corporate enigma is seeking to raise $1 billion on a projected valuation of nearly $15 billion.  And, if history is any indication, they’ll get a swarm of investor interest for their IPO just in time to have a Facebook-style swoon.  In a time when Facebook, Instagram and others are suffering backlash for pushing advertisements onto social media platforms and in an era where Google and Bing are increasingly ineffective and unreliable given search engine optimization algorithm result manipulations, the Twitter S-1 filing relies on many of these rejected ‘business strategies’. 

Twitter states that it has “6 issued U.S. patents and approximately 80 patent applications on file in the United States and abroad.”  Being a geek, I wanted to check out the Twitter portfolio and, as of October 5, 2013, the United States Patent & Trademark Office records two patents issued to the Assignee Twitter Inc. (8,448,084 and 8,401,009).  To find the rest of their patents, you have to weed through acquisition records that are not publicly indexed – something that the average investor will not do (nor their advisors).  And, the two that they have publicly associated with their name have already drawn the attention of other patent holders (including infringement allegations by TechRadium, Inc) along with a recent lawsuit by Cooper Notification Inc.  Adding sales, promotion, video, or news feed as push features – all contemplated in the S-1, will vastly increase the size of the bulls-eye on Twitter’s little blue tail.

Now Page Mill Road legal sensation Wilson Sonsini Goodrich & Rosati, P.C. has certainly done their customary diligence on the proprietary rights of Twitter, its current, and proposed future business.  But what they may have overlooked is the potential plaintiffs who could be waiting in the wings with rights that a profitable Twitter could experience coming back to pluck their feathers – patent holding firms like Microsoft, IBM, Intel, Research in Motion, Nokia, Cisco and others.  During Twitter’s money-losing launch and ascent, 1,812 patents have been issued to third parties including over 580 that include direct reference to the platform.  Goldman, Sachs & Co, the lead underwriter for the IPO (along with BofA Merrill Lynch, Allen & Company, J.P. Morgan, Deutsche Bank, Morgan Stanley, and CODE Advisors) have no underwriting standard that includes an independent review of S-1 filing’s statements about the proprietary rights surrounding the businesses they promote to investors.  And in a world where fighting over intellectual property is a certainty, this opacity directly harms investors.  However, as the Securities and Exchange Commission turns a blind eye to this issue, they’ve got no reason to care.

Why is it that Twitter, like the hundreds of ill-advised IPOs that have preceded theirs, continue to extoll the merits of unprofitable business models, ignore the proprietary landscape into which their plans are directed, and seduce investors with the siren song of meteoric casino returns?  One simple reason: fees.  If you take a look at the S-1, you quickly see that the “sell-side” promotion of this venture – like many others they collectively promote – generates gargantuan fees for the promoters and advisors.  It lands a couple people on the stage at Davos or TED to talk about “innovation” and the “digital economy”.  The problem is that we don’t need more of these types.  And the only thing that’s digital is the certain loss that investors will experience when the avoidable risks surface.

Twitter’s IPO is another sell-side win with a buy-side yawning loss crater waiting to swallow the blind capital of Vegas-style managers.  #badidea.

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Cost of Nazi Rhetoric

Glasgow Caledonian University 1: Princeton & Harvard 0

Disclaimer:  I went to a “Liberal Arts” college for my undergraduate degree.  And, no, “Liberal” does not connote leftist, godless, pagan, hedonist potheads (though I’m not judging those either).  Instead, it suggests that an educated person, for the sake of general civil engagement and, at times, for elocution, is sufficiently exposed to a breadth of the humanities so as to not be incapable of logical formation and engagement.  One of the values of exposure to the humanities is the resulting capacity to critique your own experience and participate in public debate without coming across as illiterate. 

This week’s alumni performance by the Hon. President Hassan Fereydoun Rouhani of the Islamic Republic of Iran (graduate of Glasgow Caledonian University) and U.S. Senator Ted Cruz (R-TX) of his imagined Evangelical Republic of Texas (graduate of Princeton and Harvard Law) served as an exceptional example of the dysfunction of our ‘civil society’.  The quotes below were both, in part, pandering to an illiterate electorate.  Whether you’re an anti-Semitic revolutionary in Iran or a Bible thumping, tea-swilling patriot in Texas, the likelihood that you’ll spend much more time in contemplation than the few milliseconds it takes to figure out that “that guy sounds funny” as you reach for your god-given-right-to-bear-arms pistol that you’re packing is pretty slim.

When seeking to describe the profound injustice associated with the idea that a society should have a mechanism where the citizens of a country have to pay for their ravenous consumption of industrial medicine (you’ll notice I will not use the term “health” or “care” as we’re not predisposed to either), Senator Cruz compared the Patient Protection and Affordable Care Act (PL 111-148) to a Nazi state behavior. 

"You go to the 1940s, Nazi Germany. Look, we saw in Britain, Neville Chamberlain who told the British people, accept the Nazis. Yes, they'll dominate the continent of Europe but that's not our problem. Let's appease them. Why? Because it can't be done. We can't possibly stand against them. 

 "I suspect those same pundits who say defunding Obamacare can't be done, if it had been in the 1940s, we would have been listening to them. They would have been saying we cannot defeat the Germans."

What Ted apparently failed to attend or flunked out of in Princeton and clearly neglected in Harvard Law School was any course that would have taught him that rhetoric, if designed to be taken seriously and critically, must not be prima facie (that’s Latin for those of you who know who you are) falsifiable.  Neville Chamberlain was actually holding onto a global desire for peace that following the First World War had given rise to the League of Nations.  In 1938, as the Third Reich was seeking to annex Sudetenland (a German majority region of Czechoslovakia that had been created under the Versailles Settlement), Chamberlain desperately sought to avoid an all-out war in Europe.  Advocating for the avoidance of conflict is not cowering.  In fact, Mr. Cruz, it was Chamberlain who actually sought a moral advantage over actual immorality in Germany.  Oh, and Chamberlain was not in the 1940s – his Munich Agreement was in 1938.  But you would have known that if you were a scholar of history.

Which leads me to my second Nazi Germany reference.  When asked if he subscribed to the denial of the Holocaust like his predecessor, President Hassan Fereydoun Rouhani stated that his posture was not to comment on the history (ambiguous in whether he meant the 1930-40s or whether he meant President Ahmadinejad’s reckless rants) but he went on to make a lucid and morally unambiguous response evidencing an argument for apolitical basic human values.

 "I have said before that I am not a historian and historians should specify, state and explain the aspects of historical events, but generally we fully condemn any kind of crime committed against humanity throughout the history, including the crime committed by the Nazis both against the Jews and non-Jews, the same way that if today any crime is committed against any nation or any religion or any people or any belief, we condemn that crime and genocide. Therefore, what the Nazis did is condemned, (but) the aspects that you talk about, clarification of these aspects is a duty of the historians and researchers, I am not a history scholar.”

So here we sit.  We have a U.S. Senator Holocaust trivializer (suggesting the genocide is comparable to having to pay for your x-rays and over-priced pharmaceuticals) and an Iranian President “fully condemning any kind of crime committed against humanity throughout the history.”  Lest you think that this is mere theater and politically posturing, think again.  It is reprehensible to think that the United States Senate is insufficiently constituted to allow hate speak in 2013.  It is even more reprehensible that major news outlets failed to celebrate the substance of President Rouhani’s statement choosing instead to focus on his statement that he was not a scholar of history.  He acknowledge “the crime committed by Nazis both against Jews and non-Jews.”  This is an amazing step forward for a member of the Supreme National Security Council and Expediency Council.

Our world and its economy our destabilized by reckless rhetoric.  When uninformed, we react to hyperbolic diatribes rather than engage in thoughtful discourse, we create schisms which frequently lead to great instability.  Senator Cruz brought dishonor on the American people and the institution of the Legislative branch.  President Rouhani took a giant leap forward for an Iranian President (angering his revolutionary opponents at home) to open a door for appeasement.  Who is Chamberlain?  Who is Hitler?  Who are Germans, Americans, Iranians?  Let’s let history serve as a teaching metaphor so, through it we may learn to build a More Perfect Union.

Final Note.  Near the corner of 25^th and Madison in Manhattan is the Memorial to the Victims of the Holocaust Injustice.  This amazing memorial sculpted by Harriet Feigenbaum is emblazoned with the quote:

“Indifference to Injustice is the Gate to Hell”.

For those of you who still value humanity and the celebration of our finest moments as well as our most despicable, I commend its visiting to you.  Its subtle presence is disarming but its impact reminds us all to be human.

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Supercalifragilisticexpialidocious and the Fed

When Walt Disney allegedly plagiarized a “known variant” of “Supercalafajalistickespeealadojus” from the Gloria Parker and Barney Young 1951 Super Song in 1964, it was, according to the film, a word to say when you have nothing else to say.  Reading the FOMC statement from this week’s meeting, I found myself thinking that a better theme song for the Fed would be Paul Overstreet’s and Don Schlitz’s:

It’s amazing how you can speak right to my heart.

Without saying a word you can light up the dark.

Try as I may, I could never explain what I hear when you don’t say a thing.

The smile on your face lets me know that you need me.

There’s a truth in your eyes saying you’ll never leave me.

The touch of your hand says you’ll catch me wherever I fall.

You say it best when you say nothing at all.

Now here’s the trouble.  I like the whimsical nature of Disney’s Mary Poppins and I love hearing Allison Krauss’ throaty rendition of the Overstreet Schlitz song so I mean neither disrespect by linking them to the Fed or the FOMC statement.  I just couldn’t help but sit in wonderment when I read the same words emanating from the Fed.  Upon close inspection – which I don’t recommend – you’ll notice that the Fed has been incapable of demonstrating a solitary piece of evidence that their intervention is doing ANYTHING for employment or prices.  They are erroneously misreading the housing data as they’re oblivious to the fact that it’s not American homebuyers who are buying real estate.  It’s investors – foreign and domestic – who are hedging future investment volatility at the unwinding of QE (infinity) who are the ones taking advantage of the low Fed Funds rate with their purchase of real estate.  In other words, nothing is working so we’ll do more intervention!?

The only bright spot in the report was the fact that Kansas City’s Esther L. George, an MBA from University of Missouri-Kansas City and a career employee of the Federal Reserve Bank of Kansas City, had the good sense to point out that someone needed to be a voice of rational dissent on the Committee.  While dissent from the consensus made good sense, how she arrived at her conclusions suggest that she’s more concerned about the Fed’s future credibility than convinced of the efficacy of “stimulus”.  Her concern, validated by the Friday repudiation in the equities market following the Fed’s non-statement of non-conviction based on non-facts, was that by continuing its accommodative path, the Fed may be misconstrued as weak and may harm its future relevance.  Yes and Yes.

While I do my best to avoid referencing the nemesis of critical inquiry and thought – Wikipedia – I found their entry on Disney’s nonsense word to be tragically cute.  The etymology of the non-word was loosely, “Atoning for educability through delicate beauty.”  Now while this definition actually resembles poorly translated signage at antiquities sites in China (one of my favorite pastimes), it seems like a suitable bridge from the FOMC to my inspirational songs.  What makes the Fed so charming is their near constant ability to convince everyone of the gravity of their importance while watching asset values dance around their fickle commentary on data that’s more reliquary than relevant. 

In a 1964 world – the world of Walt – the then Federal Reserve was far more credentialed and circumspect.  In their assessment of the preceding 3 ½ years of economic growth, the 1964 Fed highlighted the need to understand the nature of the “circular chain of cause and effect.”  They stated the need to “distinguish between underlying forces of supply and demand that result in changes in bank deposits and credit, and the actual changes themselves, after these underlying forces have worked through the economy.”  The 1964 Fed actually acknowledged that they participate in, not form the basis of, the public economy.  It’s as though the heliocentric wisdom of antiquities has been replaced with New-York-centricity which would make Ptolemaic philosophers scratch their bewildered heads.  The 1964 Fed was famous for measuring their contribution to commercial credit flows – not to agency and non-agency mortgage buttresses.  (For a nostalgic view, make sure you read the New York Fed’s Monthly Review, December 1964.)

Well, just when you thought we had another quarter of inaction supported by incomplete assessment of meaningless data stimulating the inflation of yet another bubble that worries pretty much everyone who actually is in the business of finance (a credential that is not often welcome at the Fed), we’ve got one woman who’s about to shake things up.  And no, I’m not talking about Janet Yellen.  I’m talking about the well alloyed Angela Merkel who just won her third term.  Her victory speech tonight actually sounded Supercalifragilisticexpialidocious.  “We have just done something fantastic.  This is a Super Result.”  Hey, say all this in German and it starts sounding rather precocious!  When Angie shows up in the German parliament fresh off her victory, she’ll have to figure out how the coalition has shifted and, lest you think that she’s going to be cavalier about how the Greens and the Left view the euro, European unemployment and accommodative fiscal policy, think again.  The weeks ahead will be choppy ones.  Thinking that inaction defers the global economy’s desperate need for accountability is for the birds… which reminds me of my favorite song from Mary Poppins…

“Come feed the little birds, show them you care

And you’ll be glad if you do.

Their young ones are hungry,

Their nests are so bare;

All it takes is tuppence from you.

Feed the birds, tuppence a bag….”

Listen to wisdom from 1964 and see if together, We the People can do one better than the birds!