Three hours from disaster - the US economic and political system

Check out this video - Rep. Paul Kanjorski explains how the US (and world) economy came within 3 hours of complete collapse due to an electronic run on the banks.

He explains just how close we all came to economic and political disaster:

I was there when the secretary and the chairman of the Federal Reserve came those days and talked to members of Congress about what was going on... Here's the facts. We don't even talk about these things.

On Thursday, at about 11 o'clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to a tune of $550 billion being drawn out in a matter of an hour or two.

The Treasury opened up its window to help. They pumped $105 billion into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks.

They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn't be further panic and there. And that's what actually happened.

If they had not done that their estimation was that by two o'clock that afternoon, $5.5 trillion would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.

Now we talked at that time about what would have happened if that happened. It would have been the end of our economic system and our political system as we know it.

Please check out the video!

The World is Flat 3.0

Here is an interesting talk from Tom Friedman (speaking at MIT).

He says:

A bigger problem still is that three billion new players are streaming into this newly flat world, seeking their own version of the American dream, with cars, toasters, and microwaves. “If we don’t find a cleaner, more non-emitting way to power their dreams, we’re going to burn up, choke up, heat up and smoke up this planet so much faster than even Al Gore predicts.”

Friedman scoffs at those who claim “a green revolution is going on,” calling it instead a green party, entailing no real sacrifice or pain. He says the only hope will be a “disruptive breakthrough” that brings a completely different mix of standards and taxes.” Friedman’s new mantra is, “Change your leaders, not your light bulbs.” Without new leaders to rewrite our laws and trigger the innovations, “we are cooked.”

More here

Gambling advice - two systems

Martingale System:

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Originally, martingale referred to a class of betting strategies popular in 18th-century France. The simplest of these strategies was designed for a game in which the gambler wins his stake if a coin comes up heads and loses it if the coin comes up tails. The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus win a profit equal to the original stake. Since a gambler with infinite wealth will with probability 1 eventually flip heads, the Martingale betting strategy was seen as a sure thing by those who practised it. Of course, none of these practitioners in fact possessed infinite wealth, and the exponential growth of the bets would eventually bankrupt those who choose to use the Martingale. Moreover, it has become impossible to implement in modern casinos, due to the betting limit at the tables. Because the betting limits reduce the casino's short term variance, the Martingale system itself does not pose a threat to the casino, and many will encourage its use, knowing that they have the house advantage no matter when or how much is wagered. (WIKI)

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Anti-martingale system:

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In a classic martingale betting style, gamblers will increase their bets after each loss in hopes that an eventual win will recover all previous losses. The anti-martingale approach instead increases bets after wins, while reducing them after a loss. The perception is that in this manner the gambler will benefit from a winning streak or a "hot hand", while reducing losses while "cold" or otherwise having a losing streak. This general idea of increasing bets when conditions are believed to be favorable can improve the odds in games with a memory by using a strategy like card counting. But in a true random memoryless game there is no such thing as a winning streak or losing streak (these notions are gambler's fallacy) so this strategy can't improve the expected winnings in such situations. (WIKI)

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HINT: Both systems don't work unless you have unlimited amounts of money to throw away!!

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HINT 2: The concept of martingale in probability theory was introduced by Paul Pierre Lévy, and much of the original development of the theory was done by Joseph Leo Doob. Part of the motivation for that work was to show the impossibility of successful betting strategies!!!! (WIKI)

Nine meals from Anarchy

"Nine Meals from Anarchy: Oil Dependence, climate change and the transition to resilience" was the Schumacher Lecture 2008 (given in Leeds, UK) by Andrew Simms from the New Economics Foundation (NEF: Economics as if people and the planet mattered).

It is a great summary of the problems societies face (both now and in the past) and offers Solutions as if people and the planet mattered.

It is easy to read and has great quotes like this one:

"The invisible hand of the market has been at odds with the invisible heart of the core economy".

Simms suggests the core economy is made up of family, neighbourhood, community and civil society. The core economy is the operating system upon which the money economy depends upon (much like we depend upon the atmosphere). However the money system is corroding the core economy (working longer hours, capitalism promotes individual values over community values, etc).
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The values of the 'money economy' do seem to outweigh the values of the 'core economy' in modern society. Many people seem more concerned with 'interest' and their 'shares' than showing interest in others or sharing.

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In the same way, we often fail to value (and instead take advantage of) the Earth's 'core economy' (its fauna and flora, its forests, its rivers lakes and oceans, its local, regional and global ecosystems) and instead focus on the business/economic 'reality' (i.e. the money economy).

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We put anthropocentric values over ecocentric needs and as a result the Earth's core economy (broadly the environment) suffers - much as many people's work/life balance suffers when money becomes more important than people and community - except the results will be much worse than anything a financial crisis can muster. We need to learn to care about other species and share the Earth much more fairly between all.

Anyway, I hope you find 15 mins to read it.

Enjoy!

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What do people think??
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Comments most welcome !!
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Please check out:
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Combating Climate Change and Boosting Growth Are Natural Allies
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Splitting: 'jobs' versus 'the environment'
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Polar Bear Begs

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Random Man Planet Earth

The 'Black Swan' and the 'Fourth Quadrant'

Sometimes you read something that really gets you thinking . . .

Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the "logic of science"; it is the instrument of risk-taking; it is the applied tools of epistemology; you can't be a modern intellectual and not think probabilistically—but... let's not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let's face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).

The above is from an essay called THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS by Nassim Nicholas Taleb [9.15.08]. It contains two very interesting ideas.

The idea of the 'black swan' (highly improbable and unpredictable events that have massive impact) and the 'fourth quarter' (complex decisions in 'extremistan' [the Black Swan's domain] where statistics are useless and statistical based claims should be seen as hopeless guesses (at best).

Taleb suggests there are two classes of probability domains: Mediocristan and Extremistan.

In Mediocristan, exceptions occur but don't carry large consequences. Add the heaviest person on the planet to a sample of 1000. The total weight would barely change. In Extremistan, exceptions can be everything (they will eventually, in time, represent everything). Add Bill Gates to your sample: the wealth will jump by a factor of >100,000. So, in Mediocristan, large deviations occur but they are not consequential—unlike Extremistan.

Anyway, I thought you might like the link too.

What do you think???