Links 3/19/09

Global crisis ‘to strike by 2030‘ BBC

Fintag Comment Fintag (hat tip reader Richard). Excel is the cause of the crisis. No, seriously.

Shell dumps wind, solar and hydro power in favour of biofuels Guardian

Suze Orman Says Build Up Emergency Cash As Much As Possible Consumerist. Zeitgeist watch.

Dissecting the A.I.G. Bonus Contract Steven Davidoff, New York Times

Steeling for 80% export drop Shanghai Daily (hat tip reader Michael). The Baltic Dry Index has also fallen 20% in the last five days.

Slaughtering sacred cows: it’s the turn of the unsecured creditors now Willem Buiter. The one point where I think he is wrong is in his assumption that the US has anything approaching a regime for winding up a Goldman or Morgan Stanley, but that’s not central to his argument.

Credit Booms and Prices Slide Caijng Economics (hat tip reader Michael). More questions about credit growth in China.

I know the chances are slim, but is there anyone who works for AIG that can tell us what the hell is going on internally? Reditt. I have no idea whether the response is legit, but given how rambling it is, my hunch is yes.

Antidote du jour (from the Times Online):

Kasper, right, a three-month-old white lion cub, plays with zookeeper Nadja Radovic’s hair in the lions’ enclosure at Belgrade Zoo, Serbia. The cub, an extremely rare subspecies of the African lion, was born on December 9 in Belgrade Zoo. White lions are unique to the Timbavati area of South Africa and are not albinos but a genetic rarity

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  1. Anonymous

    re: global crisis.

    Hasn’t someone, somewhere, been predicting the end of the world from like the time of Jesus Christ? (read Revelations!!!) Remember the claims back in the 70’s that the world was heading into another Ice Age???

    Now it’s Global Warming. I suspect our children will look back at us and chuckle.

  2. retread

    4:16, your comments make clear you didn’t read the article. we are supposed to take you seriously?

    I suggest you read Jared Diamond’s Collapse. believe it or not, cultures have suddenly imploded. you might bother learning why.

    and if you understood Taleb, your logic is faulty too. a bunch of confirming sightings don’t prove the opposite is impossible.

  3. Anonymous


    “a bunch of confirming sightings” doesn’t confirm the possibility (or more accurately, the certitude) of the opposite (ie. something “bad” happening).

    By your post, I understand that you’re not capable of understanding my argument and that you are one of the many who subscribe blindly to Al Gore’s arguments.

    I suggest you read the following to find enlightenment, and then ask yourself whether we’ll still be concerned with global warming in 30 years when it turns out to not be the “problem” the scientific community (who receive millions in grant money to “study” this “problem”) make it out to be.

  4. Richard Smith

    Er, anonymous of 4:48, the doughty retread has it right, and if the first sentence of your comment is anything to go by, you need a spot of remedial on modal logic.

    You are right, climate experts were wrong 30 years ago. But the relevant question is whether the claims made by the new generation of climate “experts” are correct, isn’t it?

    Past errors imply the question is a difficult one, not that the new answer is wrong.

  5. Anonymous


    In the comments to the AIG/Liddy post last evening, you and a reader had an exchange about outrage over exec compensation being substantive, b/c the compensation of millions was a fraction of the billions trashed to extract it.

    It's the exact same short-sighted rationale at play when politicians award legislation that benefits parties with millions or billions (regardless of the long-term social & economic consequences), for a meager $100k campaign contribution. Or a drug dealer hobbles his community for a quick buck.

    Personally, I think it all comes down to TV and other technology that has made us more isolated, focused inward. Regardless, we've been on this trajectory for a long long time. I think that's why these bonuses sting so much — it's not because they exemplify greed (and a lack of shame), but because its proof that even total obliteration hasn't shaken them from this failed negative-trajectory behavior pattern. To top it off, our intelligence is insulted and our confidence further eroded when we're told that these proven-losers are the golden few capable of cleaning up the mess

    I don't want to see the AIG folks paraded on TV (I actually left several comments speculating as to how go about uncovering their identities.) From the rambling testimonial of a potential AIG-related VP, I don't if the company 'morale' (and HR dept) can withstand such fury.

    What can be done to keep AIG from leveling everything, but still allow for investigation of fraud to detox the place?

    Is there some way that AIG's recovery can be made more transparent (for the sake of easing tension inside), without leaving it naked to those who'd make a quick profit by expediting its demise. Is there anything besides poor business practice blocking this (like greed, concealing fraud/protecting fraudulent individuals?)

    There's been lots of talk of what a Citi of BoA nationalization would look like, but not as much AIG (which seems to be very different, but perhaps a real opportunity depending upon how much of a keystone it really is in this mess.

  6. Anonymous

    I have a real problem with hearing words along these lines.. “destruction of ____ dollars of wealth.”

    Like it was launched into the sun.

    This was all imaginary money, cooked up through mark-to-market, insurance gambles… it wasn’t lost, it was supposed. And taking it from somewhere else (taxpayers, printing) isn’t going to make it real. Even when the poor surrender their wealth, they don’t just sit and wait at “0.” They run a deficit, and sell their own peace of mind out, for a quick buck to relieve the pain (hopefully via food.) That loss of peace comes at a huge cost that takes decades or generations to reconcile. Even physically speaking, there must be negative neurological/physiological effects from swallowing such experiences — just ask someone with PTSD. How much of the world has to persist in this state?

    What are we really talking about here? Pillaging the non-wealthy (and the massive weight it brings to bear), to keep a confidence game going? Its just like with the bonus-reaping Wall St exec, the contribution-taking politician, and the drug dealing neighbor…. eventually the weight of the action is going to be reverse the short gains… it can’t keep going on. Now we’ve got the Internet, we’ve got a recorded history… We can’t just fall into hell and let it scramble our brains to the point that all lessons are lost, and the game can loop over. I don’t know, don’t get it..

  7. John Rosevear

    Re the AIG insider’s post… I’m sure that AIG’s “good” businesses are in real trouble right now — consider what Mr and Mrs Middle America have heard about AIG in the last six months and then ask, “Would you buy a financial product from that company?” I bet their new sales are near zero, and their renewal rate not much higher.

  8. Anonymous

    retread: “believe it or not, cultures have suddenly imploded. you might bother learning why.”

    What of it? Cultures have also lasted many thousands of years too.

    All of the “WE ARE ALL DOOOOOOMMMMEEED” arguments, based on the Diamond, Tait, and other books are only correct insofar as we can not find another source of energy in the intervening (and subsequent) years.

    They are proffered by people raised on carbon-based energy and can’t see the future due to their fear and panic. They are also utterly ignorant of the fact at the end of the day energy is everything. Water? An energy problem. Food? Energy — literally.

    The good news — which doesn’t sell newspapers — is that there is enough energy on this planet to power 10, 20, or more, modern civilizations until the Sun greenhouse-kills it in about 500 million years.

    But hey, let’s not let a few facts get in the way of Scary Stories, eh? Gotta sell those books, gather clicks on websites, and generally rent-seek at the public teat, don’tchaknow.

  9. Anonymous

    My favorite article is the one about Excel. Any organization claiming to have sophisticated “mathematical” models should stay the f away from excel and pay for real math software. Excel is an office product. Nothing more.

    Using excel to hold a balance sheet is like using your office bin to dump toxic waste (no pun intended).

  10. spare some change?

    In the world of business, tools like Excel are treated as Analytical Engines whose output is oracular in its trustworthiness.

    I worked for a PM who used Microsoft Project to (mis)manage his schedules and subordinates. Nothing ever got delivered on time, but the charts, oh so pretty.

  11. William Mitchell

    Jared Diamond-style collapse on a global scale is of course possible, but likely farther away than it looks.

    The reason is a sort of ecological version of portfolio effect and rebalancing.

    All of Diamond’s collapse examples occurred in tiny, isolated, closed, and often marginal ecosystems, able to support little human life in the best of times. All eggs in one little basket.

    On a global scale, collapse could of course occur, but would have to destabilize the entire planet simultaneously, and overcome normalizing influences: mass migration of humans, fish or other animals, and so forth.

    Again, such a collapse is certainly possible, maybe likely, maybe inevitable — but farther away than it looks.

  12. Anonymous

    for those criticizing excel and models, what specifically do you expect ‘them’ to use? why not blame pen and paper while we’re at it?

  13. Anonymous

    I’m convinced that many anti-climate change rhetoric one reads by outlier individuals in popular blogs is merely astroturfing. My favorite in the non-anonymous comment division is Art DeVany, who otherwise writes well (even if he is a bit Randian) about fitness and economic subjects.

    Anyway, like the “debate” about evolution, there doesn’t appear to be any reasonable argument that can be made against the theory scientifically, so alternate approaches must be taken. Keep burning carbon people.

    Terry Gross had an fascinating interview with James Balog who is documenting the fate of big ice around the world. You may want to take a look here:

    Nova will air a documentary about him on 3/24:

    Finally, thank all of you, but especially Yves for consistently providing glimpses of clarity in an otherwise exceptionally murky mirror.


  14. MyLessThanPrimeBeef

    That tiger on the left, is he or she smiling for or ready to eat the photographer?

    As for the albino one on the right, it is likely that he/she is mimicking a killer whale, toying with its seal prey, before the final coup de grace.

  15. spare some change?

    Anon @ 11:31

    Because if they had to generate their idiocy with pen and paper, they’d quickly realize their foolishness. Or get writer’s cramp and give up. Either way, big win.

  16. Anonymous

    spare some change?

    maybe it’s the idiocy not the tools as pen and paper sure didn’t stop the great depression.

  17. Anonymous

    anon of 11:46,

    your characterization of those arguing anti-climate change as “astroturfing” betrays your bias.

    The point is that every advocate for both sides of this argument is unconditionally biased one way or the other, when what is needed is clear-headed debate and an open mind. Clearly, this is a trait most people don’t have on this subject, and it’s this fact that is leading to a mob mentality on climate change. Don’t forget, the pendulum swings both ways.

  18. Anonymous

    I believe the Reddit article on AIG is legit, such as it is regarding ‘insights’.

    The author is almost certainly a Bermudian employee, and employed in AIG’s captive or rent-a-captive operations in Bermuda. The poor grammar and common misspellings are regrettably typical of the on island talent. Having worked in the reinsurance industry in Bermuda I can attest to the poor level of communication skills.

    ‘Coney’ is also the name of a common reef fish caught in Bermuda, part of the grouper family.

    Having done contract work for AIG in Bermuda I can also attest to how tightly they control internet access and monitor everything that you do. The office is incredibly regimented with NO deviation allowed. Even to the point of defining how you must head the subject field in emails!

    As to his ‘insights’ frankly, few major decisions are made in Bermuda and none of those will be made at the VP level.

    AIG does however, have surplus office space available for lease!!

    As to business, I hear from brokers that they are only lightly discounting their property quotes (very short tail business) but the liability side is discounted 40 – 50%. Of course you’re taking the chance they may not be around in 15 years when those liability claims come due for settlement.

  19. Name

    Re: Global Crisis

    Anyone remembers the Club of Rome? We were all supposed to be dead by now!

  20. Anonymous

    I love the way ignorant people dismiss real issues and don’t bother to read either.

    The BBC article is NOT primarily about climate change, it is about overpopulation leading to scarcity of water (first and foremost) and water.

    If any of you bothered being on top of this, diminishing supplies of potable water is a real issue. Even Coca Cola, hardly a bunch of tree huggers, is worried about it and putting resources behind it.

    And you completely missed retread’s point too about absence of prior examples does not prove it can’t happen this time. And the experts making these calls are not the same as in the Club of Rome days.

    As for the “collapse happened in isolated populations” I remind you we also thought financial market risk was well diversified and problems in one sector couldn’t affect another. Drought and famine will lead to migrations. Think that won’t be destabilizing? The Pentagon, again not a bunch of tree huggers, has flagged this as a major risk and is also doing scenario analysis on it.

  21. Richard Smith


    a) the Club of Rome made no such claim. You are repeating a tired old lie. Check it out.

    b) Pending your homework on a) you are referred to the final sentence of my comment at the top of this thread.

  22. MyLessThanPrimeBeef

    One way to warm up the planet is for memmbers of the most over-reproduced species to get hot under the collar with other members of the same species.

    When the heart beats faster, when the breathing becomes heavier, more carbon molecules are released into the atmosphere. So when you get into a heated argument about the planet, the very act of standing up for the planet kills it a little bit.

    Sexual intercourse has the same effect on global warming. When you are huffing and puffing, the planet gets just a little bit warmer, suffers a little more.

    I think earlier in this thread, people also talk about going back to nature. The problem is not whether people should go back to nature and love nature. The problem is whether nature can withstand our ‘love.’ It’s one thing for a small film crew to drive a 100MPG ‘green car’ to Alaska to make a documentary, but imagine if 300 million Americans decide they also love nature and want to live there permanently. What will happen? I will tell you what will happen. Nature will die. We have come to a point in time where we can’t go back to nature no more – why? Someone mentioned overpopulation earlier in this thread. That’s why. Thanks to progress, science and technology, we can’t go back. We can’t go back to nature. And like men always hurt those women they try to love, people hurt nature when they try to love her.


    Today’s progress
    Tomorrow’s mess.

  23. Richard Smith


    Sounds like you are underselling your beef.

    What do you make of the mysterious third cat in the antidote?

  24. Anonymous

    there is enough energy on this planet to power 10, 20, or more, modern civilizations until the Sun greenhouse-kills it in about 500 million years.

    Very true. Very true. With super-advanced nanotech, we can rearrange any molecule we want into any other molecule we want, for almost no energy. In this way, we can make oil, water and any other substance you want (gold perhaps? ice cream?), and we can all lead a life of liesure while nanobots do all the work using natural renewable energy.

    This is why you financial geniuses have to start pumping some serious dough into the sciences– because civilization is at least 100 years away at the moment from being able to really utilize this energy the way oil energy is utilized.

  25. MyLessThanPrimeBeef

    Richard, I may sound like a self-hating human and at times, I wish I were a cat. I just had to get that off my chest – there is completely no scalability about going back to nature. For one guy/gal, it’s cute but when we all do it, we kill it. As for that third mysterious cat, she’s a carnivore for sure – you can tell from the sizes of her teeth…they are too big for a vegetarian.

  26. Richard Smith


    Look the snarly lion. It has a pair of front paws growing out of its side, and the bottom half of a lion’s muzzle.

    Perhaps it’s just me being half blind, but it struck me as a nice camouflage demo, huh?

  27. Anonymous

    @anon 1:18

    Absolutely. We’re all biased. “With our thoughts, we make the world.” Knowing this, do your research and make your own decision. I did, and so did they:

    As for how big oil is working public opinion, you can check out the DCI Group’s antics or just google “climate change astroturf” for some not-so-entertaining reading.

    Or not. Whatever.

  28. MyLessThanPrimeBeef

    Richard, I see it now – like Goldman, the eminence grise behind Paulson and Geithner, you have to look hard to find it. But it’s there alright.

  29. evelyn


    My Maine Coon cat signaled his taking possesion of me by “capturing” my hair. He was extremely eager to do this, so much so that he’d pounce on any stray strands of my waistlength hair. He purrs when he makes me his in that way.

    Just sayin — the hunter instinct is in all our cats. Look up the Feather Plucking instinct! Zoo animals fed “meat” will luxuriate in plucking feathers fr0om a “carcase” when they get the chance, to such an extent that it looks obsessive.

  30. Name

    To the ignorant jerks above: According to Club of Rome, we were supposed to be back in Stone Age 15 years ago. Do your home work!!!

  31. Anonymous


    May you and your seeds hide stick between my teeth, for their arrogance.

    Grosse Pointe.

  32. Anonymous

    This is why you financial geniuses have to start pumping some serious dough into the sciences– because civilization is at least 100 years away at the moment from being able to really utilize this energy the way oil energy is utilized.

    First, it’s clear you have no idea what you are talking about when you babble on about being able to convert anything into anything else for “almost no energy”.

    Second, “natural renewable energy” will never be part of the long term energy equation. Another sign of your general cluelessness.

    This pattern suggests that your third claim, quoted above, is likely as far off the mark as the typical doomer nonsense, c.f., “We’ll all be thirsty in 2030.”

    I will agree, however, with the idea that taking the quants away from their stock tickers and other random number generators and putting them back to work as physicists and chemists would be a pretty good thing to do. It is disgusting that AIG executives are paid what they are when (to pick at random) reptile biologists — who, alone, will create more value than all Wall Street CEO’s who have ever existed and will ever exist — are starved for money to buy simple RFID chips to simply mark their subjects.

  33. Richard Smith

    Awww, Name, don’t be like that. Just go and read “The Limits to Growth”.

    You won’t find either of your purported claims (“all dead by now”, or “back in Stone Age 15 years ago”) in that book.

  34. Wade G

    “for those criticizing excel and models, what specifically do you expect ‘them’ to use? why not blame pen and paper while we’re at it?”

    If it is a system the company depends on and makes them competitive, it needs to be treated with more diligence than Excel can offer. Professionally crafted code that is peer reviewed, backed up regularly, audit-able, stored in a source control system, manual and automated tests and co-developed with the business close by to help drive the direction is what is required.

    I used to work at this company Systems that blow the pants off competitors, easily model complex financial instruments in hours with a custom developed financial grammar. Competitors took months to solve the same problems with teams of quants using c++. The thing is, and this article speaks to it, the banks never wanted that kind of system. As good as a company like Quic is, they had a hard time penetrating markets that should have been banging their doors down.

    They prefer the obscure decentralized world of Excel where the real nature of what they were doing is much harder to see. Read up on SocGen where an excel hacker, Kierval, gamed the insecure systems based largely on Excel to the tune of a 7.2 billion hit.

  35. Anonymous

    @Wade G,

    Too right, and on top of that, try adding how many companys (LARGE ones at that) buy off the self programs and hire coders to tweek to fit. When they should have had progames custom built, my lone Wolf friends laugh all the way to the bank.

    Grosse Point.

  36. Anonymous

    Richard Smith: You won’t find either of your purported claims (“all dead by now”, or “back in Stone Age 15 years ago”) in that book.

    No, you won’t find those exact words in the book. However, it did make a number of predictions based on exponentially increasing resource consumption — and the authors of the book make it clear they felt this was the most likely model. And their version of this model do indeed say we ought to have run out of oil (and other stuff) by 1992 — a scenario that would indeed be fodder for “stone age” and “mass death” situations. Even their most optimistic predictions would have the Earth running dry of resources in about 50-80 years from now. A prediction that if true we should be observing seriously dire effects right now — not in 2030, but today, and on a magnitude that would render current matters quite unimportant.

  37. Richard Smith

    Polite Anonymous of 2:09,

    The book grabbed headlines, for good or ill, mostly ill, to judge by the canards still floating about 35 years later. Yes, exponential growth is key to it – actually few of the book’s critics challenge it on this point, which is a shame, since that would be the way to explode its model.

    No, the 1992 calamity is not a prediction of the book, it’s just what their model outputs if you assume that oil exploration etc stop dead in 1970 and feed that into the model. GIGO – obvious then and now.

    This CSIRO doc includes a handy enumeration of the false claims made about the book’s thesis (pages 13-14):

    The doc then compares the 2000 actuals with the baseline scenarios from ’72, and concludes (p37) that one of the scenarios (“standard run”) actually stacks up quite well, while other scenarios definitely don’t. It’s also consistent with global collapse mid C21 – so, no, we wouldn’t necessarily be seeing any dire effects right now. BTW it’s a great pity the graphs didn’t make it into the PDF.

    Jury still out, of course, but “Limits to Growth”, warts and all, isn’t necessarily a complete crock. Which is an interesting surprise, non?

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