Links 4/8/09

Chimpanzees exchange meat for sex BBC (hat tip reader Steve L)

Why every office needs a Dwight Schrute Globe and Mail

Investment losses hit public sector pensions Financial Times

Market bear Roubini sticks to dour forecasts Reuters

Fed’s Fisher says U.S. economy grim Reuters

Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says Bloomberg

Oil Companies Loath to Follow Obama’s Green Lead New York Times

Scrap the Summers-Geithner plan Laurence J. Kotlikoff Boston Globe (hat tip Mark Thoma). Sets forth how gaming will occur.

Debt Bomb Is Ticking Loudly on Campuses The Chronicle of Higher Education (hat tip reader Michael)

Foreign Currency Liquidity Swap Lines Alea. Hhhm.

Bernanke’s Deflation Preventing Scorecard Michael Shedlock. Fed defenders would retort that it takes time to create inflation, so I would say the jury is still out. However, note Steve Keen contends that the central bank would have to bloat its balance sheet to vastly greater levels than appears to be contemplated (a mere $10 trillion wouldn’t do it) to counteract the deleveraging in progress.

Keynes’ savings paradox, Fisher’s debt deflation and the banking crisis Paul de Grauwe, Eurointelligence

Ten principles for a Black Swan-proof world Nassim Nicholas Taleb Financial Times. Today’s must read. A great list, which I am highly confident will never be implemented.

Antidote du jour:

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  1. Anonymous

    I read Taleb’s ten principles for a Black Swan-proof world and ask why not?

    They all make sense to me and I expect others can and should be added and then we need to implement it along with a new money system/supply that is distributed initially to all equitably (no exchange for existing dollars)…..if you are going to dream…


  2. ndk

    The event noted by Aleablog is absolutely fascinating. There’s a lot of useful hypothesizing there, and I’ll throw one more possibility into the mix. What if this is a move made in response to a run of foreign depositors from the U.S. megabanks, and Citi in particular?

    Even I’m starting to get nauseous holding dollars, and I’ve been a vocal proponent for nearly a year now. Hhhm.

    Also nice to see Kotlikoff come out publicly. I’m a big fan of the work he did at the St. Louis Fed. Just a shame he didn’t work corn into this example, too.

    Both Harvard and Vanderbilt Universities, for example, held swap agreements on their debt that required them to post collateral if the market value on their swaps declined below a certain threshold.

    Glad to see it’s not just impoverished rural school districts in Pennsylvania getting screwed by interest swaps. Maybe our financial system is egalitarian after all.

    Oh, wait.

  3. Anonymous

    Am I just dreaming, or is this, the trilogy of red, blue, green Mars played out here, on Terra, by Kim Stanley Robinson.

    Skippy…please poke me with a pole and wake me up….not advised to make physical contact upon waking…old school thing.

  4. wintermute

    I like Taleb’s 10 points. I also agree with your (warranted) cynicism about whether they will ever be implemented.

    The bottom line is that somehow we, the people, need to be saved from the excesses of our corporate and elected leaders.

    How? Laws don’t seem to be enough. Bankruptcy laws are being ignored by government right now. Statute, not just policy is being ignored. Even the fiscal rigours of the gold-standard has been ignored for decades.

    The root of the problem is a flaw in democracy: Everyone gets one vote – but most people are not economists. So the majority will vote for the government which offers the most freebies. Free jobs, free education, free housing, free pensions, even free money. Darwinian natural selection will inexorably give the people the government which promises (and tries to deliver) the most freebies. We are at the end of this road where democratic, ponzi, freebee-ism hits physical limits.

    Only when the public as a whole experience the severe pains of failed freebee-ism (a depression) will they vote for governments which will apply *some* of the Taleb 10 points.

  5. Anonymous

    the chimp article has some good points. It has given me some leads. Where did i put that meat loaf recipe.

  6. Anonymous

    The hand writing on the wall truly indicates that the real problem is that the US government is completely incompetent.

    The financial plan being conducted under the direction of Geithner, Bernanke, Summers, and by default, O’Bama is the republican plan. This plan was conceived and instituted by the Bush administration under the direction of the ex-ceo of Goldman Sachs. Their initial effort was to redirect social security withholdings. Failing that, they invented TARP.

    Unlike Bush, O’bama has at least a knee jerk tendency to respect the constitution but alas appearsto be incompetent. The ultra-rightwing, Fascist agenda is being continued under O’bama who has retained the republican team.

    Name one financial, social, government, or military plan by the Bush administration that has proven to be sagacious. Why the hell would O’bama, Congress, and a cadre of bad economists think the TARP is anywhere near a solution. I am shaking with repressed realization.

  7. Glen

    Agree 101% with Taleb’s 10 points and I share your confidence Yves, along with the other bloggers here, that this will never see the light of day. I do slightly disagree however with wintermute that “we the people need saving from the excesses of our corporate and elected leaders.” In Australia, and most likely in other countries, we probably needed saving from ourselves just as much. In many a conversation, people would invariably slip into stream just how much their house was now worth or comparing their 20% vs. 22% super or asset returns. This all had to come from somewhere and at some point had to come to an end.

  8. Mondo


    thank you for another great link list.

    While looking for a reference to Steve Keen’s view on central bank balance sheet growth effectivity on deleveraging, I found the following (from

    His view on the likelihood of depression and the nonconventional (and therefore highly unlikely to be implemented) suggestions he has to turn the situation around are very interesting indeed.

    Steve Keen looks more credible to me than Bernanke… however I don’t like to contemplate what that means for all of us.


  9. jh

    My understanding is that a Black
    Swan event is unpredictive. Taleb
    makes good suggestions, but it seems
    graft on old stock. Black swans do
    not breed in known waterways.

  10. Anonymous

    I thought the de Grauwe article on the four depression processes in motion right now was very helpful. Though I disagree with some of his conclusions (why is it necessary for taxpayers to take the hit for bank restructuring rather than debtholders?), je is analytic and fairly precise.

    One question though: is that graph he shows of Eurozone indebtedness correct? Because if it is, the US is underleveraged relative to the Eurozone. I shudder to think it is accurate.


  11. Anonymous

    Wintermute – Expressing confidence that Taleb’s list will not be implemented is not necessarily “cynicism”, it is rather a correct reading of the reality.

    The root problem is not a flaw in democracy. The root problem is the deception that corrupts and prevents that democracy. Everyone does not get one vote, and disingenuously promising “freebies” to one group (so as to ultimately set it against another group), is a method of exploitation.


    Why do the chimps exchange meat for sex? Why not sex for meat? Hmmmm … and that from a woman science reporter.

    anon 7:11, I don’t like meat loaf. Let me know when you are doing some broiled chicken …

    Deception is the strongest political force on the planet.

    i on the ball patriot

  12. Anonymous


    The root of the problem is a flaw in democracy: Everyone gets one vote – but most people are not economists. So the majority will vote for the government which offers the most freebies.”

    Did you read Taleb’s list? Do you honestly believe the problem is a lack of influence by economists? Seriously, what planet are you on?

  13. asphaltjesus

    Please, stop the political-corruption-doublespeak.

    Honestly, how politically involved are most of the comments casually tossing out the end-of-the-democracy posts?

    The only reason the Republic isn’t working for the electorate is because the electorate, long, long ago stopped participating.

    There is no shortage of political action groups dedicated to a transparent economic/banking systems that need help getting their message out.

    The silence is deafening.

  14. vlade

    It’s not a flaw in democracy, it’s a flaw in humans. We humans crave certainity, and will pay anything for a promise of it (and, in our feeble minds ignore the uncerainity of the promise, even one made in good will)

    Thus, certainity pedlers will have a place in human society for any foreseable future.
    Assuming anything different is wishful thinking.

  15. James

    Thanks for the link to the DeGrauwe article. I like his idea that we’re seeing a series of interacting deflationary spirals. The one thing that frustrates me about this analysis is that, like many other people trying to explain this phenomenon (including Bernanke), he starts with the clooapse, not with the bubble that preceded it. I think the two are inseparable. The bubble was the product of several interacting positive feedback spirals, and the bust represents the unwinding of that process. I don’t think you can really understand the aftermath without understanding the build-up, but most economists don’t seem to see it that way.

  16. Anonymous

    Politicians will remain captive to the money as long as the system of paid TV to run for political office is allowed to remain in place. Combined with abolishing the graduated income tax that had prevented obscene concentrations of personal wealth, the inevitable has happened. We no longer have even the pretense of representative government. Bernanke has replaced Paulson as Dictator, and the Congress is positively supine.

    The wealth concentration factor is quantitatively enhanced by the opportunity to issue stock –just ‘create your own money.’ Anyone with the inclination and cohorts has been enabled to do so without interference from anything like an SEC.

    The victims of this 30-year war are the decent people whose peace-of-mind and security have been destroyed by the graduating erosion of their right to work peacefully and creatively and happily care for themselves and their families.

    The erosion of income and rights of the last 30 years is so much like ‘we watched as they took the other guy (10,000s at a time down sized) and then they came and got us.’

    All of this while we continue to subscribe to whatever propaganda is created by TPTB. Why should we accept “legacy” in place of “toxic.” We don’t have to.

    This is after all where the battle lines are being drawn -in the area of propaganda: re naming and re branding; although it is more like slaughter when everyone in print caves in. I agree, although I didn’t read the article, that new ‘innovative’ securities are re naming for the purpose of dodging the rule of law over the issuance and trading of stocks and bonds.

    I remind you that $73,000,000 is the amount of personal wealth spent by Bloomberg to get himself “elected” Mayor of the great City of New York. And at the end of his two terms he has been able to game the system, the democratic system, the representative government system, with an end run around the voters of this great city by recently tearing down the term limits achieved by the voters so that he can now ‘run’ for a third term.

    Not only did Mayor Bloomberg preside over the arrest of more than 1200 peaceful demonstrators at the site of the Republican National Convention 2004 and illegally detain them for the duration of the convention in holding cells he had specially prepared for just that occasion in the greatest city in the world and one of its most liberal at the same time that orange alerts were being issued that increased Bush’s polling rate 1.7% each time, Bloomberg had months prior denied Central Park permits to anti-war organizers on the fallacious basis that the lawns must be preserved.

    Fallacious is not just an opinion. A small item on the upper right hand corner of an inside page of the New York Times reported the finding many months after the fact that Bloomberg had lied about the reason he gave for denying the permit; the reason, it was found, was indeed political. We could have guessed that of course -but having it officially reported by the New York Times was, I thought, momentous. Did anyone take notice, maybe ‘liberal’ blogs? No. Nothing. Nada! Maybe I missed it. I did look for it.

    Does this say something about the people of my country being perhaps so beaten down by being unemployed, underemployed, underpaid; or employed, even overpaid but overworked and propagandized with “the greatest country in the world” sloganeering while living in fear of losing their jobs with the specter of never recovering and losing health insurance.

    Bloomberg is a reasonable candidate for Mayor of New York City given his demonstrated acumen for management and control and the problems facing the city in the face of the finance/economic crisis.

    But on the other hand, the newly fenced off areas that have been created over the winter in Central Park designed in patterns of contiguous plots of fenced off grounds delineated with narrow paths around them gives pause –a bit militaristic. The only thing missing is the barbed wire.

    This is not a gratuitous slam on Bloomberg. His personality in the private corporate sector under the rule of law is worthy of admiration, encouragement and exceptional remuneration. It doesn’t give him the right however to elective office.

    Bloomberg is yet another former Goldman, Sachs guy. And what is the Goldman, Sachs credo? Look ’em in the eye –and LIE.


  17. Anonymous

    “8. Do not give an addict more drugs if he has withdrawal pains.”

    My guess is that Taleb doesn’t know many addicts. Addicts will continue their practice until they either die or hit rock bottom. Rehab only works if the addict wants it to be successful. Otherwise its just temporary stay. Do we (the US, the world economy) want our rehab to be successful? Or do we have to hit rock bottom? The other option (failure, death) isn’t much of an option.

  18. Yves Smith


    A minor correction. Bloomberg was a partner at Salomon, and was fired when it was sold to PhiBro (1979 or 1980). Salomon managed to do a reverse takeover, something no one anticipated (as an aside).

    But completely agreed re your point on TV. One of the things that made Australia very different from the US was that voting is compulsory (get get fined if you fail to vote) and paid TV ads are prohibited. Candidates get a certain amount of free air time (dunno how the threshold, in terms of how one is determined to be a candidate). It made for much cleaner government (not that Oz is perfect, mind you, but the special interest nonsense is a very very pale shadow of what you see here) and people I met (and I’m not talking the professional classes, but blue collar and clerical worker types) were vastly better informed and much more savvy than they average American, who seems to have had his brain suborned to TV soundbites.

  19. donna

    Eh, not so sure about fragile things breaking early. I prefer spreading money around encouraging young things to grow. Tend to think the real problem is too much money piled into too few hands, myself. “too big to fail” is because, well, it’s too big.

    And my children would have been safe with sticks of dynamite, because we have a rule in our house — no explosions. It is far more about what you teach children, rather than what you give them. They played with model rockets, dry ice rockets, and all sorts of other things just fine. Their uncle was a chemist and designed many fun experiments for them…

    I also tend to think the problem is not the existence of black swans, but the inability to see them, notice them and enjoy them properly. I watched my stocks go up and just laughed at what the world imagined them to be worth. I watch them go down now with wry amusement, since I don’t currently need the money. Perhaps the real answer is to allow finance to do what it does well, but not to depend too much on the results. The assets I need right this minute are not financed, but managed. I may only be making a pittance on them, but they are safe.

    As to the debt deflation spirals, it makes me wonder if we could organize some kind of collective actions that would be helpful within a smaller group, but not too sure how. I’m certainly making small loans within family and friends and trying to support small businesses and not put off larger purchases too much right now, paying college tuitions of course, etc., but not sure how to extend this or encourage others to do so… how do we get enough people out of fear mode and making reasonable purchases again?? I agree government has to do most of the work, but is there something we could do as individuals/within smaller groups to help??

    I mean, I spent years encouraging everyone I knew to get out of debt before this mess began when everyone around them was full of greed and spending like crazy — how do I now encourage them to spend again now that we need people to stop being afraid and everyone around them is full of fear??

  20. Evelyn Sinclair

    The picture is of a whole lot of Zebra finches (they have stripes as well as those little polkadots) and a couple of Cordon Bleu finches squooshed in between.

    Zebra finches emit little contact calls the entire time they’re awake. Soft and soothing to have a cageful around susurrating: “beeb-beeb-beeb beeb beeb…”

    A lone Zebra finch will make a loud, distressed contact all, also all the time. However, once you have two Zebra finches, you have an infinite number of potential Zebra finches, as they are astonishingly good at breeding more.

    The blue finches don’t breed as hardily.

  21. Anonymous

    Taleb’s list may very well be the right one to put an end to “Black Swans” – those events that lie on the fat tail of the distribution and occur, depending on who you listen to, every 100 years or somewhat more often.

    However, that does not mean that Taleb’s solution is incredibly flawed. I liken it to saying the number one thing you need to do to prevent auto deaths from cars driven into lakes is to construct them out of buoyant styrofoam. Yes, that may make cars float and prevent drowning deaths, but it won’t do much for the much more common cause of death in cars due to collisions.

    Though it is difficult to implement, I’m a believer of the principle of “everything in moderation.” A little leverage and a the limited use of complex derivatives, if used in moderation, can in fact expand the overall economic pie without putting the entire pie on a precipice in the process.

    Taleb’s arrogance and disdain for others is also very off-putting. Who, exactly, does he think can help improve the system if he completely rules out 1) anyone who had a role in this crisis; AND 2) anyone who is trained in economics or has an MBA? Could the software engineers at Google probably come up with something that is different and works? Perhaps. But here’s the thing – they don’t want to. That’s whey they’re engineers. Mr. Taleb needs to stop coloring every MBA on the planet with the same cloth and keep to his more substantive arguments.

  22. Yves Smith

    Anon of 4:58 PM,

    Calling Taleb arrogant is an ad hominem attack.

    He is 100% right in how off base financial economics is, to the point of being criminal. Everyone KNEW these models had major flaws, yet they kept using them because they were easy to use and profitable since they understated risk, which encouraged customers to take on more than they realized. This is no different than selling people a supposed medicine that makes them feel more energetic but produces cancer in a significant number of cases. We’d clearly that as immoral.

    The behavior of those who devised and sold these products is equally tainted. It was WIDELY known the models understated risk, even a non quant chump like me was FULLY aware of it. The behavior was inexcusable and Taleb’s ire is fully warranted. These people have a lot to apologize for and almost no one is apologetic.

    You grossly misrepresent what Taleb said. Nowhere did he call for economists to have NO role, and there is no mention of MBAs. He is highly critical of what he calls the “economics establishment”. In fact, there is an orthodoxy in both neoclassical and financial economics that have successfully rejected all criticisms (you can’t get a paper published in a leading journal if it takes on the party line).

    And he calls for people who have “their hands clean”. to take the reins That would include folks who were in policy roles who dissented with the mainstream view (Ed Gramlich, were he still alive, would be the perfect example, along with Stiglitz, Rogoff, and people who were not in policy roles but saw the mess coming, like Bob Shiller).

  23. Anonymous

    On people with MBA’s, they got what they deserved. They bought into their own BS, and now they are paying for it, student loans are a bitch.

    Trying to get the rest of the populace to recognize the awesome finacial acuity of them is going to be very difficult when they are themselves bankrupt.

    The same could be said of most higher education. They are the ultimate masters of leverage.

    I am not a Luddite, I just have a major problem with saddling our “best and brightest” with a crushing debt burden right at the beginning of their careers.

    If there was any economics training, I would ask for my money back.

  24. Anonymous


    Thank you. I’m glad to be corrected about something I’ve never questioned as true; never looked it up obviously.

    Which reminds me of how important professional journalism is with its fact checkers and experienced writers who know how to make a point without going off into ad hominum attacks, etc.

    Also glad to have the information on Australian voting.


  25. doc holiday

    Chimpanzees exchange meat for sex, while Summers-Geithner scrap Summer vacation plan.

    This is not really news, because we all knew that Timmy and the guys exchange meat for various things and then use mark-to-fantasy as a way to flex their manhood. The chimps serve as a model for the invisible hand that prods the boys on wall street to prostitute themselves with the full blessings of the fourth estate, but WTF, yields are falling across the wide spectrum and doom is in the air!


  26. MyLessThanPrimeBeef

    Chimps exchange meat for sex; humans exchange sex for meat.

    Which one is smarter?

    You tell me.

    Hint: when humans exchange sex for meat, other humans exact a piece of the action…in Nevada, at least.

  27. Anonymous


    Your comment response to anonymous’s attack of Taleb is priceless prose on your part.

    To say that there is not sufficient intelligence amongst us other 99 percent of the population to clean up the mess these greedy bastards have caused is beyond the pale.

    If you are putting that sort of energy and clarity in your book it should be a blockbuster!


  28. doc holiday

    Which one is smarter?

    I’ll tell yah what, next thing we see is chimps opening markets and then pondering Keynes. I think this is well documented in 2001: A Space Odyssey
    FYI: Over images of an African desert, a caption reads "The Dawn of Man." A tribe of herbivore apes is foraging for food. One of them is attacked and killed by a leopard. They are driven from their water hole by another tribe. Defeated, they sleep overnight in a small exposed rock crater. Waking at sunrise, they find that a mysterious black, rectangular monolith has appeared in front of their shelter. They approach the monolith shrieking and jumping. Subsequently, one of the apes, played by Daniel Richter, realizes how to use a bone as both tool and a weapon while having mental flashbacks to the monolith, indicating that the monolith has either "taught" or inspired him to this knowledge. The apes are now able to kill animals and eat meat. Next morning they wrest control of the water hole away from the other tribe, killing their leader in the process. Exultant in victory, the ape leader throws his bone into the air which switches via match cut to a shot of an orbital satellite millions of years in the future, circa 1999.

    > I'm sorry to put anyone through that, but I see TARP as the monolith and the apes as the government-backed thugs like Timmy and Paulson that have found a new >☭< tool in hyper-capitalism (a term which I'm in the process of defining on-the-fly). The old capitalist tools and models are broken and the reason for that, is the clear abuse and usurping of power, by the neo financial über Gods that are using The Treasury to enslave future generations with untold and unthinkable debt burdens — while the press, Congress and the people ignore the reality of theft!

    If yah can't friggn see 2001 in this, then your as blind as One Eye'd Timmy:

    Timmy is HAL 9000 and someone needs to pull the plug, before Timmy does anymore damage!

    Also see: As Dave slowly disconnects one module after another from Hal’s circuitry, Hal continues to protest. Eventually he ends up repeating, “My mind is going. I can feel it.” Then he repeats, “I'm afraid.” Hal then goes into a monologue about his first day of operation, regressing to his earliest days. During this he offers to sing the song ("Daisy Bell") his instructor taught on his first operational day. Dr. Bowman replies he would like Hal to sing the song. As Hal sings, his voice continuously slows down. When Hal is disconnected, a television monitor is activated showing a pre-recorded briefing that was supposed to be played only when they reached Jupiter's space and the entire crew had been revived. It is the last piece of dialogue in the film.

    > * The author is not responsible for anything written here or suggested (this also is not an attack).

  29. MyLessThanPrimeBeef

    You OK there, Doc?

    Seems to me you need one of those beautiful, comforting female robots in Asimov’s robot series.

  30. Anonymous


    As the first thing I saw the first time I was stoned I understand what you are saying, but it is a bit of a stretch.

    But then again who would have thought we would be where we are some 40 years later.


  31. Anonymous

    Hey doc,

    I will be holding my NO BAILOUT sign up in Porland OR on Saturday and and it will make me feel better. Do something to make a difference in your life….it is the only life you got, make it reflect your beliefs.


  32. Eleanor

    Evelyn — Thanks for identifying the birds. I suspected zebra finches, but was thrown by the blue guys.

    I still want cute pictures of dinosaurs, but maybe I will have to make do with cute pictures of dinosaur descendants.

  33. Masked Financier

    I just made a posting at my blog about this article.

    While in one sense I agree with Nassim, in three areas I don’t:

    – There are some parts of the modern capitalist society that required large companies or entities to actually work e.g. try building silicon wafers in your back shed. You can’t de-risk this type of situation completely.

    – The economic environment can never match the biological one. The economic environment is completely at the mercy of human psyche and emotions, which don’t operate to scientific principles like the biological world.

    – I’m not sure I want the economic (or social) world to resemble the biological world. The biological world can be a frightening world – species are exterminated by other species with humankind’s help, the law of the jungle prevails, and environmental catastrophes can and do happen.

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