Pro Commerce

I didn't do it

I take no responsibility for the 2nd mortgage or sub-prime mortgage meltdown that we read about these days.

Why should I deny responsibility?  Because I was responsible for the Savings and Loan crisis of the mid 1980s.  How?

When I was a Vice President at the Bank of California in the late 1960s, I developed and introduced several new banking instruments. The modern credit card is one of the ones I developed.  Another was the consumer certificate of deposit...the CD. 

I learned in focus groups in Hollywood among very rich people that they had no idea how to buy a CD, and they didn't know what a CD was.  So I developed a CD that could be recorded in a passbook to make customers comfortable with the idea.  I promoted it as a high interest savings account.

At the time there was a 1.5% legal differential between bank savings and S&L accounts.  Banks were limited to paying 4% and S&Ls were at 5.5%.

On January 1st 1969 I ran ads all over California announcing a savings passbook (really a CD) with 5.14% interest.  Banks were only allowed to offer CDs at 5%, but I paid mine "continuously" as opposed to quarterly, monthly or daily.  That brought the real interest to 5.14%

By the fifth day my ad ran, every other bank in California had matched me (most other banks dropped the idea of a savings passbook, which we did too).  The normal ten day end of quarter grace period for moving saving account money resulted in the Bank of California deposits growing 12% in the first 10 days of that January.

From that point on, banks began siphoning off money from S&Ls at an increasing rate.  A decade later, the S&Ls had lost so much stable consumer money that they were buying deposits at higher rates on the commercial money market...unstable money that they were lending out in long term mortgages.

Buying your money short term and lending it out long term is the recipe for disaster, which finally happened in the mid 1980s. 

I'll take the blame for getting the stable consumer savings deposits moving out of the S&Ls and into the banks...not for the stupidity of buying short to lend long.

Post script: my brother reminds me to give credit where it is due. I owe much of my success at Bank of California to Bob Persons who was my Senior Vice President and ran interference for me.

Bookkeeping illusion

If you are outside of San Francisco you may have read about the insanity of our City Health Care Plan and the associated court decisions that are incomprehensible.  The following statement from the Court is what is incomprehensible: “Otherwise avoidable human suffering, illness and possibly death will result if a stay is denied,” Judge William Fletcher said in the 3-0 decision. A lower court had ruled that applying health coverage rules on business was preempted by national laws. The lower court appropriately stayed the enforcement of the new health coverage rules and taxes.

First, the new City Health Care Plan does not provide one single additional medical service, not one. No "avoidable human suffering, illness and possibly death" can occur.  Not one more nurse, not one more doctor, not one more ambulance, not one more hospital room, not one more clinic...nothing new has been created by the City Health Care plan.  Every medical service available to an uninsured person in December 2007 is the same that is available to the same person one week after the full City Health Care Plan is implemented.

Second, what no one has pointed out about the 9th Circus (as Rush Limbaugh calls it) Court decision to collect taxes that might later have to be repaid to the businesses is that there IS NO NEW HEALTH PROGRAM in San Francisco.  It is simply a new tax. What we have is a colossal bookkeeping illusion.   

What we do now, under the new program is get people who are uninsured to sign-up for a card that they show at the clinic or emergency ward and relieves them of being billed for the medical service. 

The same people will go to the same clinics for the same treatment.  What has changed is that if they have signed up for the New Program they will not get billed by the hospital or clinic. Got that.  No more billing is all that has happened.

Considering that there was never any payment enforcement in the past, there is no change. The same people formerly got billed for their medical service and didn't pay the bill.  The City made no effort to collect on the bills sent out and all the recipients of the bills knew it.

The only change is that the bills aren't going out.  No revenue ever came in from the indigent people previously billed.

No one who hasn't used the clinics in the past will use them now because the clinics are very unappealing, primarily designed for the homeless and indigent. These are bureaucratic City clinics with long lines and the stench of homeless.

What the 9th Circus Court did is allow the City to introduce a new tax on small business that can be implemented immediately based on the sham excuse that it has something to do with City Health Care, rather than simply a new tax.

What a fraud. What a sad fraud that will cost jobs and drive the two remaining middle class families out of the City.

Free to comment

My wonderful friend, Robert Strauss, was the Peace Corp director in Cameroon for five years and we had many chances to talk about development.

Development is a subject Robert knows from a lifetime of hard work and intensive overseas experience. We worked together on several small business development projects. He was superb.

Now that Robert is out of the Peace Corp administration he can talk frankly, which he does, in a wonderful New York Times op-ed.  You'll enjoy it. You'll also appreciate Robert's brilliant writing skills and brutal candor.

Lying lie detectors

I know that the FBI and CIA are incompetent agencies for many reasons but one single issue sinks the ship for me. They both still believe in and use polygraph tests.

The polygraph test is nonsense.  It has a false positive and false negative of 10-25%.  Meaning that liars get missed 10-25% of the time and honest people are treated as dishonest 10-25% of the time.  The test is therefore worthless.  It would only be useful if the error numbers were in the 2% or less range.

Why am I so certain about the absurdity of the polygraph?  Two stories.  One dates to the mid-1970s when a lawyer friend of mine, Ephriam Margolin represented a mentally retarded 15 year old Fresno boy who had confessed to a murder.  The boy was tested on a polygraph by the experts from the Los Angeles FBI office who certified that the boy was telling the truth when he said he committed the murder.

Ephriam put up his own money for a private detective who promptly found four witnesses that the boy was 50 miles away, without any capability of traveling the distance, at the time of the murder.  The D.A. dropped the case when Ephriam gave him the names of the witnesses.

The next instance was in the 1990s when a friend of mine was hired to be a liaison for the CIA.  My friend is what I call 'a graduate student in Eagle Scouting'.  He is so goody goody, so obsequiously proper that he could no more lie than a motorcycle or airplane can drive backwards.

My Eagle Scout friend failed seven CIA polygraph tests over a years period.  I have no idea how the issue got resolved but it spoke reams to me about the value of the polygraph.

It also announces the incompetence of the agencies that believe in the polygraph.

Linear algebra

I studied linear algebra in graduate school because it is important in much of economics, computer modeling and statistics.  I may have studied the right area of math.

Today, two months after publication in a High Energy Physics online journal, I learned the name Garrett Lisi.  Lisi may have found the unified theory of all physical properties. If he has, we will know more about this drop out surfer than we ever knew about Albert Einstein. 

What Lisi did is put all known and 40 speculative physics particles into an eight dimensional structure that has 248 points (a 3 dimensional cube has eight points, an 8 dimensional cube would have 256 points). I read about Lisi's work in the New Scientist. There is Youtube imagery to go with it, but if you don't know what rotation of a multi-space object in two space is about, the image is irrelevant but cute.

All of this makes mathematical sense to me because I have worked with many multi-dimensional objects in 2 and 3 space.  Whether the universe happens to fit the math I know remains to be discovered with empirical testing at CERN.

Bad consequences

So far it has been more than two months since we won the Iraq War by driving Al Qaeda out of the country and reducing their power to insignificance.  Yet there has been no appreciable effort to let the American public appreciate, much less celebrate, our magnificent victory.

There are bad consequences of this closed-mouth approach. One bad consequence is that Americans remain in a sour mood, telling pollsters that they don't like the direction of government policy.  Americans will be excited, proud, up-beat and positive when they understand the magnitude and importance of our victory.  Another bad consequence is the public's continued tolerance for the mainstream media's bad mouthing our triumphant economic movement. 

Put both bad consequences together and we get a steady barrage of Democratic candidates lies, distortions, perversions and dissembling about Iraq and the economy which could result in bad polices of the sort that America lived with for many years after the Democrats and the mainstream media told America that we had lost the war in Vietnam.

I need only remind my readers of earlier bad consequences of failing to announce military victory to Americans.  Nixon didn't announce the victory in Vietnam in March of 1973 when the Paris Accords were signed and was driven from office in 1974.  George Bush Sr. didn't promote the American victory over Saddam in 1991 and lost the presidency the next year, in 1992, because Americans threw-up a weirdo candidate in a third-party (Ross Perot) in the general post-war malaise which got us the hillbilly Clinton family.

Starbucks

I recently asked a high ranking Starbucks employee about the pro-American campaign to give coffee to our troops overseas (the campaign has been in place for many years but only recently appeared in San Francisco, Berkeley and Santa Monica).  I wondered about the conflict involved with such a Lefty company doing something so pro-American.  I was asked 'why do you think Starbucks is Lefty?'

I can't believe that Starbucks employees don't know that Starbucks is perceived by the public as Lefty when Starbucks itself thinks the national newspaper is the (anti-American) NY Times, when Starbucks makes local donations guided by employees and exaggerates the company's love of 'organic.'

In the past year McDonalds has started introducing espresso and the stock rose 32% while Starbucks declined by 50%.  Starbucks, in desperation, just brought back the old CEO Howard Schultz.  I don't think that will help.  McDonalds is three star pro-American, ignores organic and hires developmentally disabled (a really pro-American act).

It was Schultz who allowed Starbucks to become Lefty despite the intense hatred the Left has for Starbucks.  I have ordinary friends in the Democratic Party who won't meet me for coffee at Starbucks for fear of being seen through the window.  Lefties don't care about Starbucks selling the NYTimes or promoting organic, they are ideological purists who hate every globally successful corporation, including 'shade-grown-supplier-owned-organic-coffee' retailer Starbucks.

Being a Lefty business is a bad idea.  The Left in every way, for 150 years, has treated its allies as enemies and has eaten its own children. (Yes, that is Britney in the photo.  She loves Frappacinos.)

Are you unwanted?

*The Social Security Administration is closing an office in San Francisco and the closing was protested by people who use the office.

*The Wells Fargo office on Fillmore and California has 14 obvious video cameras pointed at customers at eye level in the teller lines...it is very intimidating.

The reason for both items are the same.  The customers who go to the Social Security office to collect their pension checks cost one hell of a lot more than customers who get automatic deposits to their checking accounts. The SS Administration doesn't care if these customers have to take a bus or drive to another other office....fine.

Customers who use teller lines inside a branch, rather than the ATM outside, cost the bank one hell of a lot more that the ATM users. So the branch doesn't care if the people in the teller line are intimidated by video cameras, the bank is happy to have them go somewhere else, anywhere else.

Avoid up-to-date financial mechanisms and you become a pariah.

IQ and women

It is often pointed out in debates about IQ heritability that brain size doesn't matter.  The issue comes up because women have smaller average sized brains than men in absolute cubic centimeters.

The trouble with that argument is that it exposes the whole problem with IQ testing.  The American IQ tests are set with a norm of 100.  Of course a Japanese or Israeli IQ test would be set with 100 as the norm and the Japanese and Israeli 100 would be 20 points higher than the American.  So white Americans really have an 80 average IQ when tested on Japanese or Israeli national IQ tests.

The only reason men and women both have an average of 100 in American IQ tests is because the different parts of the test are deliberately weighted to make women and men equal.  Explain. 

If the test weighted reading 20, writing 30, word comprehension 30, math 10, spatial relations 10, to  make a female total of 100, then women would have higher IQs than men.  If the test weighted reading 20, writing 20, word comprehension 20, math 20, spatial relations 20 for a male total of 100 then men would have higher IQs than women. Women would have an average IQ of less than 90. 

But the reality is that the test is weighted deliberately to make both men and women come out 100.

Do women have a different average IQ than men?  Regardless of your answer, you have to face the same problem discussing Blacks with lower averages and Japanese with higher averages.

Pinky

I love gossip, so I must apologize in advance for the rudeness of this gossip. 

A friend who was at Harvard the same time Benazir Bhutto was at the Radcliffe campus was on a double date with "Pinky" as she was known to her friends in 1971. The man with Pinky was my friends roommate.  Only three items to report: the roommate, her date, was a Jew in name, appearance and language; she was as snooty as most women from Radcliffe (even those who's fathers were not national presidents) and she later had a nose job.

Ms Bhutto's death is a great loss to all of us, I just can't resist gossip.

The institutional need for purpose

The original thinker on this issue is Mary Douglas who, to her continued embarrassment, titled her book How Institutions Think.  This was the seminal book in creating the field of Social Thought.

I've been advising a religious institution recently and the issue comes up. I am well known for advising churches, temples and other religious groups that the day they focus on raising money instead of getting new members is the day they are headed toward the sad fate of the Christian Scientists: extremely rich and unable to attract the millions of potential new members who think like they do.  A wealthy religious institution doesn't attract members seeking enlightenment or simple spiritual comfort. Money looks like "a sell out" to such seekers.

As I thought about the need of all institutions to have a coherent purpose it dawned on me that this very principle was the reason Americans can not live together in groups. This is why co-housing has no future. Money disappears as an issue, as it did for the hippies, when people can live in a group.  One person working for a week can support nineteen other people.  So why don't the economies of living together keep people prosperous, free of work and coherent?

Because the only reason people can stand living with each other, in a diverse environment, is because they have a common purpose.  It is rare for people to have a common purpose.  A work environment is one of the few common purpose environments in modern American life.

The hippies had a common purpose, it was to build a new and better world. That commonality was sufficient for sloppy people to get along with neat freaks and vice versa ...for noisy people to live comfortably with people who prefer a quiet environment.

All situations where people are together for any prolonged period, they have a common purpose.  Even passengers on an airplane are going to the same destination.

Wait

I speculated earlier that we have never seen the power of a genuine celebrity, like Oprah, applied to politics. Maybe the Iowa caucuses were a sign that a genuine celebrity, known for political caution like Oprah, can play a powerful role in politics.  We'll see. The evidence is strong but not conclusive.

If Oprah turns out to be the force behind the Iowa Obama win, will other celebrities learn the lesson that celebrity power comes from taking moderate, non-partisan, non -confrontational and common sense positions?

Intelligence community competence

Whenever I think about the quality of the American intelligence community I use three standards of evaluation. The standards are James Angleton, Robert Philip Hanssen and Aldrich Ames.

Angleton was the head of counterintelligence at the CIA in the 1950s and 1960's, Hanssen was head of the same department in the FBI in the 1980s and Ames was the CIA counterintelligence chief in the 1980s and 1990s.  Angleton was a Soviet dupe and the other two were authentic Soviet Cold War spies.

Angleton made sure that any real Soviet spy who defected was discredited, while phony defectors were glorified and treated like royalty. Word of that outrage certainly got back to other Soviet intelligence agents.  Angleton also ignored a real communist infiltrator in the CIA, Philip Agee, who served the agency for 12 years and later released the names of two dozen overseas agents.  No wonder our intelligence, as studied after the Cold War using Soviet intelligence files, showed us to be totally out of touch with the Soviet reality.

A spy as the head of counter espionage has the opportunity to turn over any of the U.S. undercover agents overseas to our enemy for torture and murder.  What competent or semi-competent person would take a job as an overseas undercover agent when your employer had a record like the CIA or FBI?  The answer is: we don't have functioning agents overseas and may never have any.  Our intelligence people just read newspapers and look at satellite images.

Lets add to this obvious point the fact that the other dozen U.S. intelligence agencies must be even less competent than the two lead agencies because they never found the moles in their sister organizations and, from private evidence I have seen, were quite cooperative with the lead agencies. The entire intelligence fleet was leaking.

The final reality is that no competent foreign intelligence agency is likely to cooperate with the U.S. knowing our pathetic history.  Not now, not ever.

More voters

Great article by John Podhoretz.  Voter participation has be rising in this horrible era of Bush and Republican virtues.  Maybe angry debate, Rush Limbaugh radio, public intellectuals, blogs and the Internet as a news source are better than the old ways of total Lefty domination of the media.

Maybe, just maybe, the presence of the Second Voice (the voice of pro-Commerce) is the real reason.

The Finders

I recently spent three months reading a 550 page manuscript about the Finders, a Washington D.C. middle-class commune.  It took so long to read because I put it on my Sony Reader and only read it on airplane flights.  I also deliberately read every word carefully, it was so beautifully written and so engrossing.  The author of the manuscript was a long time member of the group who has an extraordinary ability to remember conversations.  When it is published I will let you know.

I first met the Finders in the mid 1970s when they opened a small branch operation in San Francisco and came to let me know they were available to help me.  I was a well known author at the time, was the treasurer and business manager of Glide a magnet institution and was deeply involved in the counter-culture.  From then on, I have stayed in touch with the Finders, I've known several of the members very well and followed their history.  I also visited them in D.C. on many occasions.

The Finders were a middle-class commune.  By that I mean (and they mean) that most of the core group were well educated, some came from prestigious universities and many had held important jobs.  The core group was close to their teacher Marion D. Petty, a self educated, retired Army non-commissioned officer.

What fascinated me most about the Finders is that they followed one of Petty's main Daoist teachings: live every moment fresh.  That meant that every day they had a group meeting and decided what to do that day.  They were serious and often they just plain disappeared for days, weeks months or years.  They arrived and they moved on without notice.

I always learned from the Finders.  They used their Daoist teachings to learn how the world worked and they learned a great deal.  I've written one blog with a story from the Finders.

In future blogs I will recount some of the interesting stories from my encounters with the Finders.

Comparison on Fundamentalism

In early December Greg Mankiw published his list of concepts in economics that distinguish the lefties from the moderates. Greg is a beloved Harvard econ professor.  Beloved by me because he attacks Paul Krugman and other political hacks who pretend to be economists. My distinctions between Lefties and moderates is called the Catechism of Lefty Fundamentalism.

Dr. Mankiw has six items, I have seven.

His six are (abbreviated)

1. The left ... is less worried about the distortionary effect of taxes.
2. The left sees (market failure) as more pervasive, ... that calls for government intervention.
3. The left sees large corporations with substantial degrees of monopoly power that need to be checked by active antitrust policy.
4. The left sees people making systematic errors and believe that it is the government role's to protect people from their own mistakes.
5. The left sees government as the main institution that can counterbalance the effects of the all-too-powerful marketplace.
6. The market-based distribution of income ..is.. unfair and ... the government (should fix it.)

Mine are:

1. Equality of income has been a human ideal. It should continue to be.
2. Global commerce is exploitive of workers and the environment.
3. People would not be poor if they were given reasonable financial assistance.
4. Large corporations are generally malevolent and should be constrained.
5. Religion is the opiate of the masses.
6. There are classes in America.
7. The top class protects its interests at others expense.

In detail we agree on his 3 and my 4 and his 6 my 1 but overall we are in complete agreement.  Take out my 5 on religion and there is very little difference.  Mankiw is focused on economic models and I am focused on a slightly more Lefty worldview model.

Portfolio

The self-balancing diversified portfolio that I recommended a year ago is doing fine.  The Dow Jones from today a year ago rose 4.6% and the self-balancing diversified portfolio rose 5.4%.  To me that is success.

The portfolio I recommended was: "45% U.S. Stock 45% international stock and 10% bonds. The 45% U.S. equity would be Dow Jones Total Index (IYY), the 45% international would be three stocks 15% Japan (EWJ), 15% non-Japan Asia (EPP), and 15% Europe (IEV).  Lastly for bonds I would get a portfolio of U.S. treasuries that are inflation adjusted (TIPS). (The letters in parens are the stock market symbols)"

2nd Amendment

The Supreme Court is right now considering the application of the 2nd Amendment to modern urban life.  The Supreme Court is the only appropriate institution to consider this question. The Supreme's job is to interpert the Constitution and reconcile differing inferior court rulings. Few Courts before have had the guts to handle this controversial issue.

The 2nd Amendment has two clauses.  One dealing with militias the other with the right to own arms.  These two have never been adequately reconciled.

If I were the Supreme's I would draw the line at rifles kept in the home under lock and key; legal.  All other arms would have to be stored in a state authorized and supervised location. That seems to me to be the clearest direct English language interpretation of the 2nd Amendment.

Teen anger

In many blogs I have speculated on the reason so many teenagers are attracted to Lefty ideology.  Teenagers are not inherently stupid nor are they all losers.

I use Occam's Razor to evaluate my own speculation.  My latest is that teen age years are years of frustration and anger. Pretty simple thesis. Occam's idea of a good approach.

That is also a perfect description of Lefty ideology: frustration with the world, perpetual complaints about life and endless anger at the reality we live in.  That may be the appeal of Lefty ideology for teenagers.