Video: Bill Emmott's 'Good Italy, Bad Italy - Girlfriend in a Coma' (Full Video)

Young People CAN and ARE Making a Difference in Europe

Getting more young people (and women) into positions of political power is a good thing.

Alexis Tsipras, leader of Syriza

Whether you agree or disagree with the politics of 37-year old Alexis Tsipras, the leader of a leftist-Greek coalition which surprised in the weekend election, he has demonstrated that not every member of the next generation is politically impotent.

While this blog probably would not be characterized as far left-wing, we do celebrate seeing someone under-40 years of age achieving political success.

Bravo, Alexis!

Video: Lawrence Lessig's Republic, Lost - How Money Corrupts Congress—and a Plan to Stop It

Note to video departments everywhere that the below video is a fantastic way to show a presenter and his/her slides.

h/t Barry

Video: Jeffrey Sachs Full LSE Talk on The Price of Civilization

Image of the Day

(click to enlarge)

In case you missed the video.

More on the story and fallout here.

Educational Site: If you are concerned about political reform, you might be interested in taking courses as a political science major.

Michael Lewis on Bankrupt California

It's Michael Lewis week here at the PolyCapitalist.

His latest in a series of financial disaster pieces he's been penning for Vanity Fair is about his home state of California. The whole article is a must-read (here's a link to the full article) but below are a some of the highlights:

But when you look below the surface, he adds, the system is actually very good at giving Californians what they want. “What all the polls show,” says Paul, “is that people want services and not to pay for them. And that’s exactly what they have now got.” As much as they claimed to despise their government, the citizens of California shared its defining trait: a need for debt. The average Californian, in 2011, had debts of $78,000 against an income of $43,000. The behavior was unsustainable, but, in its way, for the people, it works brilliantly.

On the fiscal nightmare that is the City of San Jose...

The ex-Governator

The relationship between the people and their money in California is such that you can pluck almost any city at random and enter a crisis. San Jose has the highest per capita income of any city in the United States, after New York. It has the highest credit rating of any city in California with a population over 250,000. It is one of the few cities in America with a triple-A rating from Moody’s and Standard & Poor’s, but only because its bondholders have the power to compel the city to levy a tax on property owners to pay off the bonds. The city itself is not all that far from being bankrupt. 

By 2014, Reed had calculated, a city of a million people, the 10th-largest city in the United States, would be serviced by 1,600 public workers. “There is no way to run a city with that level of staffing,” he said. “You start to ask: What is a city? Why do we bother to live together? But that’s just the start.” The problem was going to grow worse until, as he put it, “you get to one.” A single employee to service the entire city, presumably with a focus on paying pensions. “I don’t know how far out you have to go until you get to one,” said Reed, “but it isn’t all that far.” At that point, if not before, the city would be nothing more than a vehicle to pay the retirement costs of its former workers. The only clear solution was if former city workers up and died, soon. But former city workers were, blessedly, living longer than ever. 

This wasn’t a hypothetical scary situation, said Reed. “It’s a mathematical inevitability.” In spirit it reminded me of Bernard Madoff’s investment business. Anyone who looked at Madoff’s returns and understood them could see he was running a Ponzi scheme; only one person who had understood them both­ered to blow the whistle, and no one listened to him. (See No One Would Listen: A True Financial Thriller, by Harry Markopolos.) 

“How on earth did this happen?” I ask him. 

“I think we’ve suffered from a series of mass delusions,” he says. 

I didn’t completely understand what he meant, and said so. 

“We’re all going to be rich,” he says. “We’re all going to live forever. All the forces in the state are lined up to preserve the status quo. To preserve the delusion. And here—this place—is where the reality hits.” 

...and the bankrupt hell that is the City of Vallejo:

On the way back to the elevators I chat with two of Mayor Reed’s aides. He’d mentioned to me that, as bad as they might think they have it in San Jose, a lot of other American cities have it worse. “I count my blessings when I talk to the mayors of other cities,” he’d said. 

“Which city do you pity most?” I ask just before the elevator doors close.

They laugh and in unison say, “Vallejo!” 

I notice on his shelf a copy of Fortune magazine, with Meredith Whitney on the cover. And as he talked about the bankrupting of Vallejo, I realized that I had heard this story before, or a private-sector version of it. The people who had power in the society, and were charged with saving it from itself, had instead bled the society to death. The problem with police officers and firefighters isn’t a public-sector problem; it isn’t a problem with government; it’s a problem with the entire society. It’s what happened on Wall Street in the run-up to the subprime crisis. It’s a problem of people taking what they can, just because they can, without regard to the larger social consequences. It’s not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They’d been conditioned to grab as much as they could, without thinking about the long-term consequences. Afterward, the people on Wall Street would privately bemoan the low morals of the American people who walked away from their subprime loans, and the American people would express outrage at the Wall Street people who paid themselves a fortune to design the bad loans. 

The evolutionary explanation underpinning society's collective behavior:

The road out of Vallejo passes directly through the office of Dr. Peter Whybrow, a British neuroscientist at U.C.L.A. with a theory about American life. He thinks the dysfunction in America’s society is a by-product of America’s success. In academic papers and a popular book, American Mania, Whybrow argues, in effect, that human beings are neurologically ill-designed to be modern Americans. The human brain evolved over hundreds of thousands of years in an environment defined by scarcity. It was not designed, at least originally, for an environment of extreme abundance. “Human beings are wandering around with brains that are fabulously limited,” he says cheerfully. “We’ve got the core of the average lizard.” Wrapped around this reptilian core, he explains, is a mammalian layer (associated with maternal concern and social interaction), and around that is wrapped a third layer, which enables feats of memory and the capacity for abstract thought. “The only problem,” he says, “is our passions are still driven by the lizard core. We are set up to acquire as much as we can of things we perceive as scarce, particularly sex, safety, and food.” Even a person on a diet who sensibly avoids coming face-to-face with a piece of chocolate cake will find it hard to control himself if the chocolate cake somehow finds him. Every pastry chef in America understands this, and now neuroscience does, too. “When faced with abundance, the brain’s ancient reward pathways are difficult to suppress,” says Whybrow. “In that moment the value of eating the chocolate cake exceeds the value of the diet. We cannot think down the road when we are faced with the chocolate cake.”

Lewis concludes on an optimistic note:

When people pile up debts they will find difficult and perhaps even impossible to repay, they are saying several things at once. They are obviously saying that they want more than they can immediately afford. They are saying, less obviously, that their pres­ent wants are so important that, to satisfy them, it is worth some future difficulty. But in making that bargain they are implying that, when the future difficulty arrives, they’ll figure it out. They don’t always do that. But you can never rule out the possibility that they will. As idiotic as optimism can sometimes seem, it has a weird habit of paying off.

For more Michael Lewis, both past and present, simply click on the tag with his name at the bottom of this post.

Greek Referendum on Leaving the Euro

Update: a rumor no longer. Latest polling shows 60% of Greeks oppose last week's bailout deal, while 70% want to keep the euro. The vote will supposedly take place sometime early next year. I stand by my earlier prediction that this vote will never take place for the reasons described below. The prospect of a Greek vote on not just the bailout but Eurozone membership, hanging over the financial system like a Sword of Damocles, cannot possibly be tolerated for the next three months.

The latest rumor:

As pressure from Greece’s foreign creditors and austerity-weary citizens mounts on the government, Prime Minister George Papandreou is considering calling for a referendum on whether Greece should continue to tackle its debt crisis within the eurozone or by exiting the single currency. 

According to sources, Papandreou hopes that the outcome of such a vote would constitute a fresh mandate for his Socialist government to continue with an austerity drive backed by Greece’s international lenders -- the European Commission, the European Central Bank and the International Monetary Fund.

A bill submitted in Parliament, paving the way for a referendum to be carried out, is to be discussed in coming days.

Here's the source.

Will Greeks be allowed to vote on whether or not they want to remain in the Eurozone? Extremely unlikely, IMO.

The Eurozone is like the Eagles' Hotel California: countries which have been invited can check in any time they like, but they can never leave. A formal legal process for leaving the Eurozone was intentionally left out of Maastricht.

The situation on the ground in Greece is already incendiary enough as it is. Putting the euro to a Greek vote, while democratic, would trigger far too much chaos. And if the majority voted in favor of leaving the euro and returning to the drachma there would be an immediate, full run on Greek banks (if it hadn't already been completed in anticipation of the voting result).

If Greece decides to leave the Euro, which looks increasingly likely, it won't be done through a popular vote.

Why oh why on Earth is anyone still keeping their euros in a Greek bank? Or to put it another way, why aren't the Greeks behaving more like the Irish?

Quote of the Day: Paging Mr. Oliver Cromwell

Oliver Cromwell

Putting aside his controversies for a moment, the below words Oliver Cromwell used during his address to the Long Parliament in 1653 feel appropriate for today:

"It is high time for me to put an end to your sitting in this place, which you have dishonoured by your contempt of all virtue, and defiled by your practice of every vice. Ye are a factious crew, and enemies to all good government; ye are a pack of mercenary wretches, and would like Esau sell your country for a mess of pottage, and like Judas betray your God for a few pieces of money. Is there a single virtue now remaining among you? Is there one vice you do not possess? Ye have no more religion than my horse; gold is your God. Which of you have not bartered your conscience for bribes? Is there a man among you that has the least care for the good of the Commonwealth? 

Ye sordid prostitutes, have you not defiled this sacred place and turned the Lords temple into a den of thieves by your immoral principles and wicked practices. Ye are grown intolerably odious to the whole nation. You who were deputed by the people to get grievances redressed, are yourselves become the greatest grievance. Your country therefore calls upon me to cleanse this Augean stable, by putting a final period to your iniquitous proceedings in this House; and which by God`s help, and the strength he has given me, I am now come to do. 

I command ye therefore, upon the peril of your lives, to depart immediately out of this place; go, get you out! Make haste! Ye venal slaves, be gone! So! Take away that shining bauble there, and lock up the doors. In the name of God, go!"

Are there any politicians out there today who can deliver similar words with conviction and credibility?

The SEC: Just When You Think You've Run Out of Outrage...

SEC Commissioner Mary Schapiro

Things were starting to look up for the beleaguered-since-Madoff  U.S. Securities and Exchange Commission (SEC) with its spate of successful prosecutions of high-profile insider trading criminals. But for the U.S. stock market cop it continues to be a case of one step forward, four steps back.

Rolling Stone's Matt Taibbi delivers the latest bombshell:

For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation’s worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – “18,000 … including Madoff,” as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history. 

It goes without saying that no ordinary law-enforcement agency would willingly destroy its own evidence. In fact, when it comes to garden-variety crooks, more and more police agencies are catching criminals with the aid of large and well-maintained databases.

Much has been made in recent months of the government's glaring failure to police Wall Street; to date, federal and state prosecutors have yet to put a single senior Wall Street executive behind bars for any of the many well-documented crimes related to the financial crisis. Indeed, Flynn's accusations dovetail with a recent series of damaging critiques of the SEC made by reporters, watchdog groups and members of Congress, all of which seem to indicate that top federal regulators spend more time lunching, schmoozing and job-interviewing with Wall Street crooks than they do catching them. As one former SEC staffer describes it, the agency is now filled with so many Wall Street hotshots from oft-investigated banks that it has been "infected with the Goldman mindset from within."

Anyone seen the latest Intrade odds on SEC head Mary Schapiro keeping her job?

Full Taibbi article here. 

Video: Our Political and Economic Problems Are Fundamentally a Crisis in Virtue

Marcus Aurelius

George Friedman of STRATFOR gets to the heart of the current political and economic malaise in a brief and succinct video interview here.

He's spot on about the point that all the new regulation in the form of Dodd-Frank, Basel III, etc. do zero good without enforcement.

And why aren't both existing and new regulations being enforced? In Dr. Friedman's view, it comes down to a lack of virtue among our current elite.

The good news is that this is not an insolvable problem for two reasons: First, virtue, in my opinion, is unlike height, raw intelligence, or good looks, in the sense that it is not something that one is by-and-large born with. Virtue is both learned and cultivated over time.

But how much attention do we currently place on the development of virtue? The classics in the western world on this topic include the works by Marcus Aurelius, Benjamin Franklin, Adam Smith, Thomas Aquinas, Aristotle, among others. To perhaps unfairly single out two disciplines, what room is made for those works in our current economics and business curriculum? From my personal observations, zip.

The idea of a renaissance education has been steadily pushed aside through the years in favor of the poly-technical practicalness of the 1-minute manager MBA and quant-PhDs. Today's economic and political conundrum is arguably a by-product of this de-prioritization of the study and development of virtue.

The second reason I am optimistic we can solve this problem is that when our leaders first fail society in such an epic fashion, and then next fail a second time by not fixing the root-cause of the problem, then those of us in representative democracies often make change.

Here's to hoping we get the change right this time.

Playing it Safe, Losing it All

Two facts worth highlighting from Drew Westen's controversial NY Times piece titled 'What Happened to Obama':

1. Obama published nothing (except his autobiography) during his twelve years as a faculty member at the University of Chicago
2. Before joining the Senate he voted 'present' (instead of 'yea' or 'nay') 130 times

What is one to make of this?

I won't speculate on Obama's not publishing anything in an academic journal, but one thing presidential candidates are often attacked on is their voting record. During a heated political campaign a candidate's previous legislative votes are scrutinized and picked over for any possible controversy (see John Kerry). As an astute observer of political history and campaigns, Barrack Obama would be well aware of this.

Was his voting 'present' strategy all about playing it safe and as Westen puts it "dodging difficult issues"? Or is there another explanation all together?

From Westen:

Perhaps those of us who were so enthralled with the magnificent story he told in “Dreams From My Father” appended a chapter at the end that wasn’t there — the chapter in which he resolves his identity and comes to know who he is and what he believes in.

One of the hallmark qualities of Barrack Hussein Obama's rise to the presidency has been his exceptional risk aversion. That strategy worked well in the campaign but is not serving President Obama or the country well at a time when bold, visionary political leadership is needed.

Like many, I've been scratching my head trying to put my finger on what it is about Obama that just doesn't seem right. And then I remembered a comment made by fashion designer Karl Lagerfeld when he was asked to describe himself: "I don't want to be real in other people's minds. I want to be an apparition."

I completely agree with Westen that right now the U.S. desperately needs the gregarious optimism and energy of a Franklin Delano Roosevelt or Teddy Roosevelt type personality in the White House, and not the Lagerfeld-esque 'complete improvisation' we seem to have at present.

I will never wholly forgive and forget the missed opportunity in 2009 to conduct a perhaps once-in-a-century overhaul of the global financial system, along with Obama's decision to reappoint many of the same people who led us into the crisis - Larry Summers, Tim Geithner, and Greenspan protege Ben Bernanke.

With the way things are going at Bank of America and the Eurozone we may soon get a second bite at the financial system overhaul apple. Fighting to keep Timothy Geithner on as Secretary of the Treasury doesn't exactly instil in one a sense of optimism, but there is still time for President Obama to do what is necessary to restore American optimism.

Why Bankrupt America Needs a Third Political Party

From Boston University Professor Laurence Kotlikoff:

The Republicans and Democrats have done a terrible job of managing our country and economy, transforming the American dream into a nightmare. They’ve squandered our youth and wealth in endless wars we couldn’t win, and spent six decades running an intergenerational Ponzi scheme, racking up huge official and unofficial debts for our children to pay. 

By some measures, the U.S. is now in worse fiscal shape than Greece. True, our official debt is a much smaller percentage of economic output. But our unofficial debt is much larger. The unofficial debt includes primarily the obligation to pay 78 million baby boomers roughly $40,000 a head each year of their very long retirements in Social Security, Medicare and Medicaid benefits. To get our overall fiscal gap under control, the U.S. must cut spending or raise tax revenue by $20 trillion over the next decade, far more than either the president wants or the House Republicans seek.

Full must read op-ed at Bloomberg.

How to Fix Our Optimism Deficit

Europeans, Japanese, and even rose-colored glasses wearing Americans are suffering from what has been described as an 'optimism deficit'. This rather unthreatening sounding phrase should not be mistaken for an insignificant economic problem.

Optimism fuels all sort of important economic activities, such as entrepreneurship, saving for the future, and social cohesion. It may in fact be the most fundamental immediate challenge facing the developed world today. But with pre-election political gridlock setting in, our leaders are big on rhetoric and short on concrete actionable ideas which can restore confidence.

There is one idea, however, that I believe could make a significant impact on restoring optimism, but before getting to that a brief personal backstory.

Blowing Bubbles

I lived in San Francisco and worked in tech during Dot Com bubble and bust a decade ago, and it taught me a lot of lessons. But perhaps the most important one didn't come until several years afterwards.

Having been away from California for a few years since the burst, I moved back (this time to Southern California) in 2003. To my disbelief I began noticing similarities between the still nascent housing bubble and the one which I had just recently had a front-row vantage. The tech bubble seemed still too fresh in my mind for the kind of speculation on housing that was taking place. While the assets were different (tech stocks vs. real estate), the underlying psychology was eerily familiar.

I did not have the foresight of Michael Burry, Steve Eisman, and the founders of garage startup hedge fund Cornwall Capital to cash-in on this observation. Instead I simply ignored peer pressure and pesky real estate salespeople who warned me that if I didn't purchase a home now I would be "priced out of the market forever". Another memorable ribbing from that era was the "you're throwing your money down the drain" by renting year-after-year. When the 2008 financial crisis hit it made the Tech Bubble look like a small financial radar blip.

Forget-Me-Nots

Witnessing two significant financial crashes in such close proximity to each other left an indelible lesson, which was to never underestimate how quickly a large number of people can forget a traumatic financial event.

This month marks the four-year anniversary from what was arguably the canary in the coal mine moment, the July 2007 collapse of two Bear Stearns hedge funds, both of which were heavily invested in mortgage securities. Bear Stearns itself blew-up approximately nine months later, and it would take until September 2008 for the crisis to reach its nadir with the simultaneous implosion of Lehman Brothers, AIG, Merrill Lynch, and a bevy of other financial firms.

The case of Citigroup bears special mention. Its collapse and bailout marked the third time in last quarter-century that the firm needed to be rescued by the government (the other two instances being the 1982 Latin America debt crisis and the late 1980s bust in commercial real estate which sparked the S&L crisis). Yes, that's right, about once every 8 years on average Citibank blows-up and needs a taxpayer funded bailout. If an inglorious banking prize equivalent to baseball's golden sombrero doesn't already exist then one should be created and promptly awarded to Citi!

While Rogoff and Reinhart caution against the following type of thinking, I do suspect that this time is different from 2003-2004. I don't believe as many people have forgotten the financial crisis as did the dot com bust, and not just because the 2008 crisis was much more spectacular in its magnitude. There are two big differences between then and now:

1. Protracted high unemployment, which in the U.S. is at 9.2%, and in places like Spain is over 20%.

2. The sovereign debt crisis that is hitting not just European countries such as Greece, but is also hammering away at confidence in the U.S. with daily headlines about nearing the debt ceiling.

A sense of widespread and growing economic unease can be seen in recent polling data:

A New York Times/CBS News poll finds that 39 percent of respondents believe “the current economic downturn is part of a long-term permanent decline and the economy will never fully recover.” (in October, only 28 percent of people believed the U.S. economy was in permanent decline -- marking an 11-point increase between now and then) 

The survey is only one of a recent spate indicating widespread distress over the state of the economy. On June 8, a CNN poll found that 48 percent of Americans believe another Great Depression is either very likely or somewhat likely.

The 2008 financial crisis was a severe blow to economic confidence and optimism, by far the biggest since the Great Depression. The most important and personal asset for the vast majority is housing, which lost one-third of its value from the peak and recently began a double dip. This combined with high unemployment and the suffocation of too much debt is at the heart of the current economic unease.

What Did Taxpayers Receive in Exchange for Bailing-out Banks?

The fundamental instability of the financial system was laid bare for all to see during the 2008 crisis. The public also got a glimpse of just how dangerous Too Big to Fail financial institutions are as governments around the world rushed to bailout megabanks and firms like AIG with taxpayer money. What did taxpayers get in exchange? As much as Paul Volcker, Adair Turner, Sheila Bair, and other well meaning and respected technocrats would like us to believe that Dodd-Frank, Basel III, etc. repaired the foundational cracks, the ongoing sovereign debt crisis casts serious doubts on these claims.

Today, people aren't wondering whether the next proverbial shoe will drop. People are instead bracing for when the next economic tsunami will make landfall. Will it be this week with Greece, end of this month with the U.S. debt ceiling, or sometime around the next major elections, when historically (and peculiarly) financial crisis seem to appear? The exact timing is uncertain, but there is broad understanding that another major financial crisis will strike, and perhaps soon.

This sense of pending chaos has left many people in a state of economic paralysis and dealt a collective blow to confidence and optimism. As Austin Powers would put it, we've lost our economic mojo.

A Key to Fixing Our Optimism Deficit

A big key to restoring economic optimism is the establishment of a sturdy foundation for the financial system.

Our current financial system is opaque and not well understood by the general public or many experts, such as macro economists, almost all of which failed to see the crisis coming. Apocalyptic terms are often employed when discussing it, and a fear that it may come crashing down at any moment feeds existential worry and creates a drag on productive economic activity. For example, concern of another crash inhibits lending and investment, reduces entrepreneurial risk taking, and may be responsible for the stockpiling of cash we're seeing at many large corporations, like Apple which is sitting on approximately $60 billion.

How best to provide the financial system with a rock solid foundation? Is simply restoring Glass-Steagall enough? I don't think so.

The most far-reaching, comprehensive and achievable plan is the one outlined by Professor Laurence Kotlikoff, which he calls Limited-Purpose Banking. I believe that title may in fact do a disservice to his well thought through ideas, which go far beyond banking and include insurance and other areas of the financial system (e.g., regulatory consolidation of the 120 government agencies currently charged with supervising various elements of the financial system).

Professor Kotlikoff has written a book on his ideas, which you can find in the Good Books and Films section of the right-side column of this blog, titled Jimmy Stewart is Dead: Ending the World's Ongoing Financial Plague with Limited Purpose Banking (the Stewart reference is to the thespian's role as the likeable community banker, George Bailey, in It's a Wonderful Life). You can listen to an excellent talk he gave at the London School of Economics here. His proposal has generated bi-partisan political, regulatory and intellectual support around the world. Mervyn King of the Bank of England has been one of its foremost champions.

Without going into all the technical details, Limited-Purpose Banking basically removes leverage from the financial system and makes the entire system more like mutual funds, which did not collapse or suffer from fraud during the recent financial crisis.

Here are some of the promises of Limited-Purpose Banking:

• We’ll never have another financial collapse.
• We’ll never see a run on banks ever again. 
• We’ll never see insurance companies insuring the uninsurable. 
• We’ll get rid of all the con jobs underlying the current financial system. 
• There will be no more insider rating deals, liar loans, director sweetheart deals, bonuses which amount to corporate theft, bribing of Congress. 

In short, we’ll have a financial system that’s honest and that we can trust. The financial plague will be cured, once and for all.

Interview with Larry Kotlikoff Author of "Jimmy Stewart Is Dead" from Daniela Guernica on Vimeo.

To bring back economic optimism we must build a new, more stable foundation for economic activity. This foundation can be created with a new financial system like the one proposed by Professor Kotlikoff, who is quite optimistic about the likelihood that his ideas will ultimately be implemented. It may take one more financial crisis and bailout of the banks to get the public and politicians on board with this type of reform, but I agree with Professor Kotlikoff that something along the lines of the reforms he's outlined will happen eventually.

Photo: Greek PM Papandreou IMF 'Employee of the Year' Banner

As seen outside the Greek parliament, some protesters roasting Greek Prime Minister George Papandreou, the Minnesota-born 'socialist convert to spartan economics'.

Bloomberg has a great history of the Eurozone debt fiasco.

Pakistan 101: Bhutto Movie Review and Trailer

Pakistan is complex, messy, and an absolutely crucial place for the world to better understand.

Pakistan is described as a military that happens to have have a country attached to it. The Economist recently argued that the Pakistani-Indian border is the world's most dangerous (although I'd argue back that the North Korean-South Korean border is perhaps equally if not more dangerous). The country has nuclear weapons and has trafficked nuclear technology to North Korea, Iran and Libya. It is also perhaps ground zero in the War on Terror.

In the U.S., many questions have arisen since Osama bin Laden was killed in Pakistan about just how reliable a friend is Pakistan? Since 2002 the U.S. has sent nearly $20 billion in military and other aid to the country, with another $3 billion slated for 2011. How is that aid being used? Is this policy helpful or harmful to not only the U.S.'s interests, but Pakistan's?

The film Bhutto, which premiered at the Sundance Film Festival last year, is well made, engaging, informative, and highly recommended. While it perhaps can justifiably be accused of painting a positively-biased picture of Benazir Bhutto, it does not shy away from interviewing her critics and pointing out at least some of the accusations of corruption made against Bhutto and her husband, Asif Ali Zardari, the current President of Pakistan.

This film is a recommended piece of edutainment for anyone interested in learning more about Pakistan and who likes learning through movies. It provides a helpful introduction to the history of Pakistan and the significant role the Bhutto clan have played.

Even more highly recommended is the book Ghost Wars by Steve Coll (who is interviewed in the film), which you can find on the right side of this blog in the Good Books and Films section.

Was putting a man-on-the-moon peculiarly un-American?

First-image of ISS docking by a soon-to-retire U.S. space shuttle

The Economist has an interesting read on the 50-year anniversary of President Kennedy's speech which set a goal of putting a man-on-the-moon within a decade.

Here's the key excerpt:

He (Kennedy) set out to make America’s achievements in space an emblem of national greatness, and the project succeeded. Yet it did not escape the notice of critics even at the time that this entailed an irony. The Apollo programme, which was summoned into being in order to demonstrate the superiority of the free-market system, succeeded by mobilising vast public resources within a centralised bureaucracy under government direction. In other words, it mimicked aspects of the very command economy it was designed to repudiate. 

That may be why subsequent efforts to transfer the same fixity of purpose to broader spheres of peacetime endeavour have fallen short. If we can send a man to the moon, people ask, why can’t we [fill in the blank]? Lyndon Johnson tried to build a “great society”, but America is better at aeronautical engineering than social engineering. Mr Obama, pointing to competition from China, invokes a new “Sputnik moment” to justify bigger public investment in technology and infrastructure. It should not be a surprise that his appeals have gone unheeded. Putting a man on the moon was a brilliant achievement. But in some ways it was peculiarly un-American—almost, you might say, an aberration born out of the unique circumstances of the cold war. It is a reason to look back with pride, but not a pointer to the future.

Barring a crisis or existential threat, are the prospects for the U.S. undertaking an ambitious, focussed transition to a sustainable energy based system, or an affordable healthcare system, extremely remote?

In short, was the U.S.'s Race to the Moon success, as The Economist puts it, a 'glorious one-off'?

War on Drugs, Say Hello to Silk Road: the Amazon.com of Illegal Drugs

On a day when a number of former and current leaders from around the world are calling to end the failed War on Drugs, Gawker has a story about a website where you can readily purchase illegal drugs and have them shipped right to your doorstep.

The site is called Silk Road, but finding it is not as simple as typing the name into Google and clicking:

The URL seems made to be forgotten...It's only accessible through the anonymizing network TOR, which requires a bit of technical skill to configure.

 How can you trust what you buy there?

Once you're there, it's hard to believe that Silk Road isn't simply a scam. Such brazenness is usually displayed only by those fake "online pharmacies" that dupe the dumb and flaccid. There's no sly, Craigslist-style code names here.

Silk Road cuts down on scams with a reputation-based trading system familiar to anyone who's used Amazon or eBay. The user Bloomingcolor appears to be an especially trusted vendor, specializing in psychedelics. One happy customer wrote on his profile: "Excellent quality. Packing, and communication. Arrived exactly as described." They gave the transaction five points out of five.

And here's what's available for purchase: 

Here is just a small selection of the 340 items available for purchase on Silk Road by anyone, right now: a gram of Afghani hash; 1/8th ounce of "sour 13" weed; 14 grams of ecstasy; .1 grams tar heroin. A listing for "Avatar" LSD includes a picture of blotter paper with big blue faces from the James Cameron movie on it. The sellers are located all over the world, a large portion from the U.S. and Canada.

Transactions are conducted with a semi-anonymous online currency known as Bitcoins:

Bitcoins have been called a "crypto-currency," the online equivalent of a brown paper bag of cash. Bitcoins are a peer-to-peer currency, not issued by banks or governments, but created and regulated by a network of other bitcoin holders' computers. (The name "Bitcoin" is derived from the pioneering file-sharing technology Bittorrent.) They are purportedly untraceable and have been championed by cyberpunks, libertarians and anarchists who dream of a distributed digital economy outside the law, one where money flows across borders as free as bits.

Although...

Jeff Garzik, a member of the Bitcoin core development team, says...that bitcoin is not as anonymous as the denizens of Silk Road would like to believe. He explains that because all Bitcoin transactions are recorded in a public log, though the identities of all the parties are anonymous, law enforcement could use sophisticated network analysis techniques to parse the transaction flow and track down individual Bitcoin users. 

Whether or not Silk Road succeeds in remaining in business, it does point out yet another difficulty of enforcing illegal drug laws.

In many states, like California, prison costs have overtaken funding for higher education due to the internment of people associated with the War on Drugs. We need to reverse this trend.

There must be a better policy than the one we currently have. It's time to fundamentally rethink the War on Drugs.

Video: U.S. Debt Limit Cartoon

Outrage of the Week: FCC Commissioner Meredith Attwell Baker Cashes-In

Shameful

Federal Communications commissioner Meredith Attwell Baker, who just four months ago voted in favor of the hugely controversial merger between Comcast and NBC, announced this week that she planned to join the lobbying office of Comcast.

From the Washington Post:

Baker stood out among the FCC’s five commissioners for criticizing the merger review process for taking too long. She said the agency attached too many conditions to the deal. Among them, she opposed holding Comcast accountable to Internet access rules and the sharing of content with new online distributors such as Netflix and YouTube. She said those Internet television platforms were too new and that the market for online video was competitive and still forming. 

The deal was approved in January by the FCC and Justice Department, forming a media behemoth that controls a bevy of television and movie assets along with the largest number of U.S. home Internet and cable subscriptions.

Also of note, Meredith Attwell Baker is a Republican who was appointed to the F.C.C. by President Obama two years ago. On the endemic problem of regulatory capture, here's The Future of Capitalism:

In a better world, this would be a hot political issue for a politician to seize on. But because it's such a bipartisan problem — both Republicans and Democrats cash out through the revolving door — it doesn't get much attention. It's a part of why government gets bigger, though, because for the politicians and regulators the incentives are there to make more complex rules and laws that they can then earn money helping companies to either comply with or get around.

Meredith Attwell Baker is just the latest example of the pervasive 'go into government to cash-in' culture which has poisoned public service in the U.S. Baker's shameful move is nothing new, but she does earn extra outrage kudos for brazenly waiting a scant four months before making such a blatant ethical affront.

Some may wonder whether it's right to cast shame on Attwell Baker? I'm not a legal expert, but I suspect she's not violating any laws or rules. Instead one could argue that she is simply behaving in accordance with the system's incentive structure.

The big problem with taking this view is that regulatory capture is a very difficult problem to address, but one that creates huge costs. Most of the people who are best served to work in the regulatory arena naturally come, and can most easily find later employment in, the industries they regulate. Until a systemic solution is devised accountability has to be maintained at the individual level, and that means shaming the shameful.

As the regulatory revolving door leading in-and-out of industry keeps going around, and around, and around, and as fiscal deficits keep piling higher, can there be any doubt that we're simply biding our time until the next big crisis?

Graphic: Why Healthcare in America is so Expensive

For a quick chart-view on just how much more Americans pay for healthcare click here.


Via: Medical Billing And Coding