20 Years

The Web's now 20, the disrupter supreme.

The Fix is in

BRT has talked often about the Fed and how it games the system for Wall Street while us rube take the hit. The old term, "Privatize the profits, socialize the losses." rules when bailouts at our expense became the norm in 2008, a policy that continues to this day though the corporate controlled press never talks about it... ever, save for Matt Tiabbi, a guy who knows the drill and has been right on since, it seems, from the beginning of time. To that end, I give you Everything is Rigged, The biggest Price Fixing Scandal Ever.

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.

You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."

That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.

What's truly amazing about this piece is that the data used to drive ICAP and LIBOR is not vetted and the trivial bribes the geeks take in gaming the system is absolutely astounding.

Famously, one Barclays trader monkeyed with Libor submissions in exchange for a bottle of Bollinger champagne, but in some cases, it was even lamer than that. This is from an exchange between a trader and a Libor submitter at the Royal Bank of Scotland:

SWISS FRANC TRADER: can u put 6m swiss libor in low pls?... 

PRIMARY SUBMITTER: Whats it worth 

SWSISS FRANC TRADER: ive got some sushi rolls from yesterday?... 

PRIMARY SUBMITTER: ok low 6m, just for u 

SWISS FRANC TRADER: wooooooohooooooo. . . thatd be awesome

Screwing around with world interest rates that affect billions of people in exchange for day-old sushi – it's hard to imagine an image that better captures the moral insanity of the modern financial-services sector.

David Stockman's right about the corruption permeating every aspect of finance. BRT disagrees about gold being the solution to our financial woes but not on his premise we are in trouble thanks to the malfeasance of government, the Fed and Wall Street banks but we already knew about this because the power elite has been doing this kind of business since the beginning of time, only now, the web shows us how this chicanery is done. 

Everywhere he sees sweetheart deals between government and industry, often engineered by lobbyists. The energy sector in particular he views as a sewer of subsidy and false "green" promises. Meanwhile, corporate America enters into reckless deals in part because borrowing is much too cheap, thanks to skewed tax and monetary policies.

Any questions?

Addendum: The book's a very good read. Very entertaining without question. 

Addendum II: Click here for another MT piece, this time on foreclosures. Guaranteed to make one feel even better about the Fed, governance and WS Greed.

Creativity Takes Flight :)

It feels good that creativity still rules as seen by this wonderful video courtesy of 18BIS. Enjoy

Wringing Out Water - NASA style :)

 Very cool experiment showing why water + science rocks :)

There is a Hell

Being an atheist, god is not part of the equation but hell does reside, in Alberta, CA, as seen in the Tar Sands operation pix, courtesy of Nat Geo. The enormity of the project and the impact it's already having on the environment boggles the mind even though the pipeline itself is far from completion. BRT has written copiously about the impending disaster known as Keystone but as a "subtle" reminder, read on if you have the courage to do so.

Nowhere on Earth is more earth being moved these days than in the Athabasca Valley. To extract each barrel of oil from a surface mine, the industry must first cut down the forest, then remove an average of two tons of peat and dirt that lie above the oil sands layer, then two tons of the sand itself. It must heat several barrels of water to strip the bitumen from the sand and upgrade it, and afterward it discharges contaminated water into tailings ponds like the one near Mildred Lake. They now cover around 50 square miles. Last April some 500 migrating ducks mistook one of those ponds, at a newer Syncrude mine north of Fort McKay, for a hospitable stopover, landed on its oily surface, and died. The incident stirred international attention—Greenpeace broke into the Syncrude facility and hoisted a banner of a skull over the pipe discharging tailings, along with a sign that read "World's Dirtiest Oil: Stop the Tar Sands."

Moving asphalt through a pipe 36"in diameter requires three steps. 1. Heating the sludge to high temperature, (think hot tar when paving a road as dibit is actually tar/asphalt) 2. Thin same with artificial hydrocarbons (naphtha etc., etc.) to keep it in a liquid state and 3. Move the stuff at higher pressure than that of crude (see 1. & 2.)  Because of these "wonderful" characteristics, the impact of dibit spills is far worse then that of crude as seen by the residents of  Mayflower Ak who saw first hand what a liquified asphalt spill of 5000 barrels really means. 

In perspective, imagine a Keystone rupture, with a pipe diameter of 36", vs the 9" pipe break of Mayflower or... instead of 5000 barrels, think 45,000 and have it go into the Missouri. Something to think about considering just how corrosive this stuff truly is. Already, 12 leaks, including Mayflower,  have occurred.

Over the last year we’ve had many recent indications of the risks of tar sands diluted bitumen pipelines – an 840,000 gallon spill in Michigan, a 250,000 gallon spill outside Chicago, a 1.3 million gallon spill in Alberta, as well as our recent report examining the safety of tar sands pipelines.  On May 7, the Keystone tar sands pipeline provided yet another warning when it spilled approximately 21,000 gallons of crude in North Dakota. This is its eleventh and most significant spill. 

Even better, we don't know how to clean this stuff up.

The clean up of dilbit is entirely different from that of oil. The industry knows that but where's the effort on their part to ensure that communities along their pipeline routes have properly trained clean-up crews. How can the clean up proceed if the crew doesn't even know what they are dealing with? As we see from the Mayflower, Arkansas spill, the clean up involved allowing the dilbit to get into the wet lands of Lake Conway and then pieces of absorbent material (looking like paper towels) were dropped on top of contaminated sections. Dilbit is heavy, it sinks. This photo demonstrates that they really do not know what they are doing.

Update to expand on this statement. The "paper towels" are not only useless, they inhibit the evaporation of the chemicals in the dilbit. From the clean-up of the Kalamazoo dilbit disaster:

But as the bitumen mixed with grains of sand and other particles in the river, the weight of the sediment pulled the bitumen underwater.

This dilbit in the wetlands of Conway Lake will sink to the bottom dragging the absorbent papers with it.

Well Barak, do you have the guts to pull the plug on this Fubar? One never knows, do one?

As a parting shot, here's a before and after shot of the tar sands. Question, how would you like have this in your back yard?

Addendum: Click here for in depth data from people who really know about Keystone;

The Nature of Money

U.S. Economy Grinds To Halt
As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion

The Onion's right, it is an mutually shared illusion as fiat money is created from nothing and backed by nothing and...

Money is memory, said Narayana Kocherlakota in an important 1996 paper (he is now president of the Minneapolis Fed). It is the way we as a society record how much capacity to buy stuff each of us possess. In other words, The Onion was right. Money really is just a symbolic, mutually shared illusion.

and yet again...

So the U.S. dollar isn't just important because other people think it is. The U.S. dollar is important, because the world's strongest entity, with the full force of the U.S. army, the FBI, the CIA, the NSA, and various local authorities with guns demands that you pay them in U.S. dollars. That's not faith. That's the law. Sorry.

When combined with Triffin's Paradox, you now know what money truly is.  :)

America's REAL export

... the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfill world demand for this 'reserve' currency (foreign exchange reserves) and thus cause a trade deficit.

Yours truly stumbled upon Robert Triffin's simple yet profound concept while reading about the staggeringly large perpetual trade deficits this nation runs every year, along with econmists endlessly stating the fact it's slowly eroding any kind of remaining financial stability this nation has regarding money because of the enormous debt we continue to incur because of the trade deficit, something I knew nothing about until now. I guess running on empty, is, in the short term, in this particular case, the right way to go.

Which is easier to export: manufactured goods that require shipping ore and oil halfway around the world, smelting the ore into steel and turning the oil into plastics, laboriously fabricating real products and then shipping the finished manufactured goods to the U.S. where fierce pricing competition strips away much of the premium/profit?
Or electronically printing money and exchanging it for real products, steel, oil, etc.?...

This leads to a startling but inescapable conclusion: no exporting nation can issue the global reserve currency. That eliminates the European Union, China, Japan, Russia and every other nation running surpluses or modest deficits.

Many commentators are drawing incorrect conclusions from various attempts to bypass the dollar in settling trade accounts. For example, China is setting up direct exchanges where buyers and sellers can exchange their own currencies for renminbi, eliminating the need for intermediary dollars.

This is widely interpreted as the death knell for the dollar. But this misses the entire point of the reserve currency, which is that it must be available in quantity for everyone to use, not just those doing business with the domestic economy of the issuing nation.

Any questions?

The Perils of Smoking :)

Years ago, yours truly smoked cigars, pipes and weed, guilty pleasures all, which gave me the opportunity to learn how to blow outrageous smoke rings whenever the mood struck me. :) (Still can when called upon to do it. :)) In this vein, I give you a wonderful article titled Tobacco That’s So Brooklyn but Made in Belgium that captures the essence of why pipe smoking is NOT the same as doing cigarettes (which I never have done, thank god), a truly awful smelling commodity when lit given just how corrupt the tobacco contained in these little packets of death has become.  

It should go without saying that tobacco is deadly and addictive and ought to be consumed in moderation. Anyone who tries to dismiss the deleterious effects of the plant is blowing smoke. But if the danger of tobacco is undeniable, so is its exceptional flavor. One afternoon, Vincent and Gaëtane invited a neighbor to join us for lunch, a typical Ardennes dish of endive wrapped in ham, then smothered in béchamel and baked to a crispy finish. Vincent set out a sampling of beers, including the legendary Westvleteren, and as we gathered around the large wooden table, the conversation drifted between the savory qualities of Belgian food, beer and tobacco.

I was struck by how unfamiliar the scene would have been to my American friends who have, in a fashion typical of our generation, embraced the current culinary boom with maniacal fervor, boiling obscure reductions to drip onto bits of fruit exploded by bicycle pumps in homage to Ferran Adrià, and yet, despite this globe-trotting gustatory zeal, haven’t the slightest comprehension of the exquisite flavor that haunts tobacco. If the modern mythos of the kitchen had arrived a decade earlier, before the vilification of tobacco was complete, the pipe might occupy a place on the palate alongside argan oil and hijiki and yuzu. Somewhere in the multiverse, there is an alternate New York City where the Union Square farmers’ market brims not just with heirloom melons and leeks and squash but also with local tobaccos as vibrant as the Cherokee purple tomato. There is a literature still waiting to be written on fine tobacco; tobacco awaits its Julia Child — who, it should be said, loved to smoke, as so many other chefs have and do. It is axiomatic these days that smoking ruins the palate, but this would come as news to Thomas Keller, Anthony Bourdain and all the other celebrated chefs who enjoy a good smoke.

I stopped doing the "evil" deed over 30+ years ago but always am tempted to restart my cigar and pipe smoking days again, particularly after reading a gem like this. 

Share & Share Alike

BRT has talked often about the absurdity of companies patenting genes as seen in a post titled titled Reducto ad Absurdum asking the question of how can a company patent something that A: they did not build and B: said something, DNA, exists in every living thing on planet Earth even though 40,000 genes have been privatized, thanks to the stupidity of the patent office. To that end, some researchers are starting to question this absurdity when it comes to cancer and how one company has been patenting genes regarding this horrible disease and will not share life saving data about it. 

With 17 years of experience, millions of tests looking for thousands of mutations in the genes, and a $500 million investment, the company was able to amass a huge database that tells which DNA changes increase cancer risk and by how much, and which are inconsequential blips in DNA. And it is keeping that data to itself.

Some genetics researchers are furious and have now figured out a way to get the data anyway. Every time Myriad sends out a report on a gene test, it specifies not just the mutations it found but also what they mean. As a result, Myriad’s data on each of the mutations is scattered in millions of reports in the hands of doctors and patients. If the geneticists could just gather those reports, they say, they can recreate Myriad’s database.

So they started a grass-roots project, Sharing Clinical Reports, and are asking cancer clinics and doctors to provide them with all the Myriad data they have from patients who have been tested.

Needless to say, this egregious violation of common sense must be rectified, and soon, as people's lives are at stake, something I hope the Supreme Court will properly address, starting on Monday, on whether companies have the right to patent genes. The question to ask now is, does this pathetic excuse of a SC have the common sense to say no given just how political this august body has become. Me thinks not but maybe yours truly will be surprised but I'm not betting on it. 

Surprise, the Supremes ruled 9-0 against. There is a god. :)

Form Follows Function

Form follows function, the old saw stating that design must follow function in order to it to work also applies to nature whereby dogs and hyenas,  two carnivores who could not be any more different, have acquired the same ability to crack bones in order to access the marrow inside. As seen in the video above, PHD Comics comes through big time in explaining how convergent evolution works. Enjoy.

A Smarter Way

Great ideas, as often said, are hidden in plain sight. In The Shaushank Redemption, Morgan Freedman asks an insightful question while narrating Andy's escape from the prison.

"How often do you look at a person's shoes? I don't." To me, this is the essence of creativity and imagination. It's the ability to see the obvious and do something about it. The other component of creativity, IMHO, is the ability to ask seemingly "simple" questions fraught with profound implications. Think Einstein when he asked himself, "What's it like to ride on a beam of light?" while riding the tram to work as a patent clerk. Makes one think doesn't it? :)

To that end comes the EWICON wind generator, elegant tech solving a really difficult problem of clean energy creation by looking at it from the premise of physics and electromagnetism. Enjoy.