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Banbury Cross

a pillow for lost thoughts...

Archives for: December 2009

Christmas Spirit

The weekend before Christmas turned the Washington DC area into a Colony of the Snow Queen. Billions of tiny white soldiers parachuted down and took our land. After a record breaking winter storm blanketed the ground with 18-24 inches of the finest down, the whole town skidded to a complete standstill. Shops closed down, colors took a day off and cross country skiing became the favorite mode of transportation.

Along with the snowfall, two feet of Christmas spirit descended from heaven. When I dared to stick my nose out and walk over to the parking lot to bail out my car from an igloo jail, I noticed that the snow storm had one interesting side effect. It turned strangers into neighbors. The fury of elements brought people closer together than any non-profit charity ever could. Many offered their snow shovels to unprepared neighbors. Others offered their brawn and muscle to the weak and elderly. Advice was freely available on the street. People who barely knew each other swapped cordially their winter nightmare stories.

The sense of togetherness was palpable. It set up a very appropriate celebration of the great tidings that befell this planet some two thousand years ago. Certainly more in style than the annual elbow storm at an electronics superstore near you on Black Friday. And much healthier than stuffing your tormented intestines to the hilt with Christmas cookies and vats of potato salad.

When the residents liberated their gasoline powered metal sleds from wintry imprisonment and retired back to their warm dens, the setting sun skated around the deserted street and undoubtedly wondered: Wouldn't it be cool to blanket this Earth with a huge snowstorm before every Christmas, so that those little semi-intelligent bipeds could experience a true atmosphere of camaraderie. At least once a year.


Person of the Year

Time Magazine has selected the Fed Chairman Ben Bernanke for Person of the Year, ostensibly for his lead role in putting out the financial inferno of 2008. TIME's timing was a bit of an eyebrow raiser, though. Bernanke is in the middle of the Senate confirmation hearings and the aura of the award will surely blunt the sharp edges of some inquisitive questions.

Portraying the Fed chief as the monetary Superman who fights the meltdown monster with the collected works of John Maynard Keynes in one hand and an industry strength moneyblower in the other is impressive on the surface. What the celebratory article failed to mention was how much the spending fireworks would cost the current and future taxpayers. There doesn't seem to be much logic in fighting excessive debt with more of the same. After all, you don't see many overweight people cured by a French Fries diet, do you? But who in their right mind would even consider expanding the enormous debt burden even further? Hmmm, let's see. The ones who produce the debt and who profit from it? Bingo - that would be your friendly Wall Street leeches.

Yes, leeches - not the fat cats as they were once misnamed by President Obama. Obese felines are relatively harmless creatures. Denizens of financial marshes, on the other hand, have some truly insidious ways of sucking money out of unsuspecting taxpayers. Here is one. The Fed interest rate is currently about 0%. That means banks can borrow truckloads of essentially free money, buy the US treasuries at 3% and have virtually risk free stream of cash. Do you think you or your local Ma and Pa store could take a sip from this financial fountain of youth? Nope. But imagine it. You would borrow $10M from the Fed and deposited at 3% you'd collect a pleasant $300,000 annual income. Cool, isn't it? If we could all do it, we'd all be bloody rich. No sweat. So why can't we? Well, because some people are kind of more equal than others.

However, this planet is not exactly renowned for free lunches and at the end of the day, somebody has to pay for all the bubbly drinks. Well, guess what. It is the taxpayers who pay for the interest that the banks collect on the free money they borrow from the Fed. All taxpayers without an exception. A single mom taking care of her sick kids, a pair of retirees that depend on their lifelong savings, a family of four struggling to make ends meet. They all chip in. I wonder what financial genius invented this subtle artifice whereupon we all support the excesses of a few. I imagine him as Dr. Evil with a top hat and a fashionable walking stick in his emaciated hand.

There is a reason why the financial share of GDP has more than doubled over the past 30 years. Bankers found many slick ways how to siphon off money from the economy. And I am not talking about front running, insider trading, exotic derivatives or the fractional reserve system which lets them leverage the deposited funds. One of the most powerful mechanisms they use for lining up their pockets is compulsive bubble blowing, of which the late housing miracle is a textbook example. It works in two easily understandable phases:

Phase I - Bubble Up: During the growth phase the asset prices appreciate nicely as more and more suckers are lured into the incipient Ponzi scheme. A functional and vigilant Central Bank would respond to such trends by restricting the money supply. That of course would take some serious cojones. Hitting the breaks while their golfing buddies are frolicking on the gravy train is not the job for the faint hearted. That's probably why Ben Bernanke vigorously twiddled his fingers while the mortgage industry made a killing on bonuses, fees, commissions and profit shares. In retrospect, he did make some claims about not seeing the bubble, but I find that hard to believe. Any non blind person who has looked at the historical housing prices chart around 2005 must have seen the gargantuan hurricane developing high above overheated financial oceans. When you have to push poor fruit pickers without any documented income into half a millon Mansions just to keep the market afloat, then it is your job to see that something is distressingly wrong. But who could have resisted the sweet music of the new paradigm, right? Housing market only goes up. It was like selling a tornado insurance under the assumption that there are no tornados. The insurance premiums were rolling into their accounts so effortlessly. What a truly great business it had been! Until a tornado hit.

Phase II. - Bubble Down: OK, so now the bubble has burst. Time for free markets to exercise their Hayek given rights! You'd expect that the people who pocketed the profits and in some instances committed severe financial fraud should be the ones to eventually absorb the resulting losses, right? Wrong! Get the hell out of here you hopeless romantic. Not so in Ben Bernanke's world. In the midst of catastrophic hysteria, he threw money around with a foolhardy abandon and without a coherent justification, effectively sending a very clear message to Wall Street: It is OK to gamble aggressively, gentlemen, for should anything happen, I've got your back. Such tender loving care is normally known as "moral hazard" and represents a negation of sacred principles of free markets: those who reap the rewards are the ones who carry the risks. Yet, a year after the world teetered on the edge of an unfathomable abyss, the bankers are about to reward themselves with record bonuses - partly due to the anxious generosity of the Central Bank and partly due to a change in accounting laws that allows them to mark their assets to some cocaine induced fantasy. It's kind of like you claiming that your net worth is $1,000,000 because you have this obscure and rare photocamera that your old man once bought at a flee market and it might be worth a million bucks on eBay in 100 years. This taught a whole generation of young Americans a sobering lesson in cynicism. Thanks a lot, Ben.

I lived in a Communist system where any time a bank or a big corporation ran into trouble, the government printed more money and shoved them down their management's incompetent pockets. That system collapsed spectacularly. Supporting inefficient entities eventually turns into a liability. The laws of physics guarantee that you cannot extract value from a finite system forever. All the bonuses that were doled out to AIG, Freddie Mac and Fannie Mae executives, although their firms were technically bankrupt, have been completely wasted. All the billions we poured down the black holes of Wall Street balance sheets will be missed somewhere. They won't be used to build new schools, laboratories, bridges, superfast trains or alternative energy sources. Has Bernanke never heard of misallocation of capital?

The crisis of 2008 was a unique chance to straighten our financial system. This was the window of opportunity to crush the risky casino style culture and return to sound and simple banking. Bernanke could have banged his fist on the table, fire the officers whose only expertise was "dancing while the music was playing", he could have wiped out the shareholders and bondholders who financed this pyramid scheme with eyes set on unrealistic returns, and let the insolvent giants fail. He could have scrapped the ulcers off the financial system and build a foundation for the new one. One that would be nurturing the economy, rather than living off it like a parasite. He could have created new government backed entities that would guarantee financial operations until the healthy parts of the system stabilized. That would be my Person of the Year. Someone who can come up with creative solutions. Instead, numerous bailouts later, the unemployment is still standing at 10% and our states and cities are in a worse shape than a year ago. Bernanke didn't really stave off the next Depression. He merely kicked the can a little bit down the road. Our over-reliance on debt has not been addressed. If anything, it was made worse.

The interests of taxpayers and financiers have historically been at odds. Financiers are deeply vested in the credit expansion as they profit immensely from the ensuing growth, sustainable or not. Regular taxpayers, guys like you or me, do not get to taste the pork of the economic boom. The average salaries of middle class workers have been fairly constant for the past several decades. Taxpayers prefer a stable system because their money is on the line if something fails. In this dilemma, Ben Bernanke stood firmly on the side of financiers. So much so that he could have easily been dubbed Anti Robin Hood - the one who takes money from the middle class and forks it over to the ultra rich. The past several years saw one of the largest wealth transfers from taxpayers to financiers and in more general terms from those who live within their means (their savings are the main pray of the zero interest rates) to those who live beyond their means (the debts are the main beneficiary of cheaper currency churned into existence by printing presses).

Sound money is the cornerstone of a stable society. If we are to systematically build our personal wealth and make solid financial decisions, a dollar earned after a hard day's work must retain its value over time. Unfortunately, the Fed's inflation friendly tinkering has been focused on overextending the money supply to cover up for grave investment mistakes made by highly leveraged institutions. Over the past few years the value of our currency kept declining and that turned people into wild speculators trying to chase the inflation beating yields in the rigged casino of equity markets. On Bernanke's watch the dollar index plummeted and the price of gold has soared. That doesn't mean that gold became so much more valuable all of a sudden, it is still but a meaningless yellow metal; but its price is telling us how much purchasing power our money lost through the Fed's reckless policies.

Bernanke's playbook seems to offer very little beyond the vicious cycle of spend, consume, pollute and plunder. Despite the fact that our planet has obviously limited resources and despite the fact that at some point just paying off interest on the accrued debt becomes a real drag on the economy. Both private and public. The fact that our children will have to pay for our profligacy by living in a fiscally stifling environment should give a pause to every parent. Today's teenagers, kids, even infants will have to cough up some dough for our borrowed lifestyle, for the ridiculously overpaid public jobs that don't produce any tangible value, for all those Licensed Commissioners of Mindless Paper Pushing living high on the hog. And all of that because Dr. Bernanke has a love affair with debt and cannot (or does not want to) see the bigger picture. In a sense, the Fed Chairman is acting like a parent who parties deep into the night, and when the hangover wears off in the morning and the bills come due, he charges the expenses to his children's credit card. How exactly that makes him Person of the Year is beyond me.

I can only imagine what Time magazine will come up with next. Bernie Madoff for Investor of the Year?

We all live in a yellow submarine

This planet has an extra planet hidden within it. But you won't find it in a school atlas. It lurks deep inside the Earth's trunk. Kind of like a spare tire, in case we mess things up too much.

Stretching over two thirds of the globe's surface, the ocean is a self-contained world uncorrupted by man. No pyramid schemes to sucker unsuspecting plankton into. No bouts of anger if your offspring didn't quite make a private schools of fish. No hoodlums loitering in deep sea alleys. No agents trying to sell you wave insurance. No greedy barracudas. No duplicitous sharks. No fish too big to swallow. It is a pristine world, preserved just as it was created by God. It even provides affordable housing without subprime mortgages of any kind - although some marine economists do harbor worries that up to 100% of coral reef real estate may currently be under water. But imagine the diet! All you can eat sea food bar 24/7. It doesn't get any healthier than that.

I have never been in a submarine, so when I was loafing around the island of Cozumel this Thanksgiving and saw an Atlantis submarine dock, I could not resist temptation to embark on a little adventure. It wasn't quite 20,000 leagues under the sea, but the ensuing magical mystery tour was worth every little penny they asked for it. And since the submarine allegedly cost $4.5 million, they did ask a lot. Had I melted all those hypothetical pennies together, I would have gotten enough copper to assemble a Navy grade high-current dynamo.

The first order of business before the departure was a cautionary lecture about the magnitude of underwater pressure which was clearly sufficient to flatten a shot put ball into a giant cookie tray. When we were finished listening to the engrossing safety drill, a commanding suntanned operator herded us onto sleek looking Santa Anna which then ferried us to the dive site. The sea was unusually boisterous, so crossing from the boat to the submarine resembled changing horses in full gallop. Several balance impaired passengers had to use all the available railing to negotiate the bucking gangplank. But once we descended a narrow ladder into the interior of a cylindrical vessel, we felt we had just passed through the eye of a Star Gate. All of a sudden, everything was cosmically quiet.

Captain flipped on bunch of switches and soon we submerged into an alluring chiaroscuro. We have entered the other planet, the world ruled by different laws than our own. The Universe where elongated shapes laugh at the face of gravity and where elegance is a mode of being rather than a fashion statement. When our eyes adjusted we could admire the mushy textures of underwater plants, the permeating undulation of the surrounding medium and the brazen colors of subtropical fish. Sometimes they swam within feet from our thick windows. We were looking each other squarely in the eye with disconcerting indifference. Separated by a few feet, yet worlds apart. We belonged to Universes of vastly different pressures. It was clear that we would never live in each other's neighborhood.

Shortly after this trip I was sitting in a subway car on Washington's orange line and looked around at my fellow passengers. It felt like we were all riding in our own personal submarines. We all carry our joys and sorrows with us, our personal tragedies and comedies neatly sequestered behind thin windows of our eyes. We look at each other at times, but we know we belong to Universes of vastly different pressures. Separated by a few feet, yet worlds apart.


My First Sombrero

Life is like a string, a long line of moments bejeweled with beads of shining firsts: the first pacifier, the first homework, the first date, the first car, the first hangover, the first mortgage, the first divorce, the first dentures, the first social security check. As we coast down the freeway of our destiny, some milestones come naturally sooner, some later and some occur randomly in a blatant disregard of the segment we are currently on. For instance man's first sombrero.

Mind you, a sombrero is more than a milestone, and it certainly is more than just an exotic head cover. Depending on your point of view, it is a philosophy, a venue for Gods to get back at you, a commitment to shadows, a portable roof, a source of mischief, but above all - it is a way of life. Kind of like vegetarianism, except much broader.

My escape hatch from the non-sombrero state materialized on the island of Cozumel where - not coincidentally - the sun beats down with the ferocity of a pneumatic hammer 364 days a year. Me and one of my friends wanted to rent bikes there for some tropical joyriding. Little did we know that the Caribbean business cycle is shorter than an average palm skirt. When we arrived at the address we swiped off the Internet just two weeks prior, the bike shop has clearly evaporated, its windows boarded and its next block competitors bursting with schadenfreude and unsolicited service offers.

We thought that this was a sign to abandon the whole bike idea and parted our ways to engage in alternative activities. Thus I found myself strutting down the Rafel E. Melgar Avenue in a scorching heat while our sun screen bottle slept soundly in my friend's backpack somewhere far far away. As I didn't want to double the size of our sunscreen reserves, I decided to resolve the looming sunburn problem in a technologically simpler way and buy a sombrero.

Considering that sombrero acquisition is usually categorized as "Clothes Shopping", the transaction was surprisingly smooth and unscary. I chose a straw model in Mexican national colors, handed the shopkeeper a piece of greenish paper with some numbers on it and stepped into the outside world with an imaginary middle finger stuck firmly at the blazing sun. At least for the first few milliseconds. The Sun got back to me instantly through its close ally - the wind - and taught me a sobering lesson. Buying a fashion accessory that virtually doubles your surface area has serious repercussions in a breezy ocean environment.

Indeed, the moment I stepped out of the shop, my newly acquired hat conceived urgent second thoughts about our relationship and made several vigorous attempts to not remain on my head. Soon I became a minor tourist attraction which was signified by the well meaning honks of passing motorists as I chased the sombrero to and fro along the pavement and sometimes beyond it. Kids on the back seats were ecstatic. If Charlie Chaplin was still alive, his career would be in serious jeopardy.

Thus it was revealed unto me that wearing a sombrero is a privilege which requires certain skills. Man has no natural reflexes for successfully negotiating the finicky air streams of atmospheric convection. All the science of sailing, beating, tacking, reaching, heeling and rigging, which took seafarers centuries to master, had to be learned in a few short hours. I quickly developed unexpected reflexes. Soon I was able to catch my restless sombrero midflight, just fractions of an inch off my skull. If someone had developed catching one's head cover into an extreme sport, I could have considered a spot in the Olympics. Taming the force of the gusting wind was a bit trickier, but eventually I managed to come to an awkward truce with it. Had I had roller-blades I might have even become a self propelled green pedestrian.

As I continued learning the ropes of sidewalk wind-surfing, my sombrero turned its bright side to me and let me appreciate its many benefits. Its sun screening properties were exceptional and I was well on my way to become a minor shade exporter. In high mountains it could also be utilized as a portable medium capacity heliport. Just imagine the additional safety my hat would bring to mountaineers exposed to Nature's whims. I am just not entirely sure if sombreros would be an acceptable attire at the base camp of Nanga Parbat. Plus, in its flipped form, the sombrero could easily serve as an additional life boat, which I was planning to test should our tropical cruise unexpectedly hit a rogue iceberg. Its utility was simply stunning.

Our departure from Caribbean added one little chapter to the Sombrero story. I realized that it did not quite fit in my cabin approved luggage. No human ingenuity could wrangle the beast into my little carry on, which means that I had to portage it through the notoriously suspicious airport security in its most natural way - mounted on my head. That elicited some frowns from the screening personnel and prompted many fellow passengers to demonstrate the extension capacity of their index finger.

The final chapter culminated at the desk of the US Customs Office. A uniformed representative glowered at my sombrero and my sombrero glowered back at him. He was clearly sizing up how many narcotics you could fit in its many nooks and crannies. Judging by the ardor of his scowling, enough to supply a medium size town for at least a month. He asked me to take off my hat and show him the inside. I obliged. He nodded and his swooping rubber stamp branded a fitting exclamation point a few seconds later.

My dear sombrero, welcome to the United States of America!

Inner Core

People are like onions. What you see is only an outer layer with many more hidden underneath the surface. And it usually takes some serious peeling to get to the innermost one.

Those layers come from many sources. Some are added by our parents, some by our friends, some by our teachers and coaches, some by our priests, some by our role models and some by the crises we suffered through. But at the heart of each of us there is that mysterious inner core. Our secret pulp. The true essence of us.

Some of us are lucky enough to have their inner core aligned with their profession. Some are generals, some nurses, some explorers, some dreamers and others race car drivers. But it could also very well be that some nurses have little generals inside them and vice versa. Little routines and rituals of our daily lives make us forget about our inner core. It gets mangled and obscured by education and upbringing. It is only in extreme situations that it speaks out with a clear voice. No wonder that one gets easily confused.

For a long time I thought that at the heart of hearts I was a clown. I do enjoy humorous and often farcical aspects of life and am always more comfortable being part of a comedy than a drama. But this Thanksgiving I visited Central America and on that occasion entered a rainforest couple of times. And whether it was in Belize or Guatemala, I felt strangely at home there. So I now suspect that I am a savage at heart - an anti-tarzan of sorts. A person who was mistakenly raised in the middle of civilization, but really belongs deep into the jungle.

You can best tell what your inner core is when you find yourself in your natural habitat. You will unmistakably feel the deep resonance, the desire to blend into the environment, the comfort that can only stem from recognizing the call of your own. And with it the urge to snap the leash and run away from whichever path you are on. And howl uncontrollably all the way.


Mayan Gods Accept Dollars

When I was in college, a friend of mine had a peculiar way of negotiating with the Gods of Conveyance. It was early 80s in Prague and streetcars were an integral part of our transportation diet. Thanks to the legendary communist ineptitude, the tramway schedules were as useful as five year weather forecasts and we were often stuck on a tram island waiting long minutes for the red and yellow monsters to appear. In such situations my friend often whipped up a pack of cigarettes and with slightly raised eyebrows murmured in a conspiratorial way: "Now watch me have a talk with Gods". And indeed, no sooner had the wisp of smoke circled around his cigarette than a tramway mysteriously materialized from behind the corner. With a wry smile, my friend would snub his barely used cigarette and we'd get in. I never made a statistical study of the underlying correlations, but it was clear that something funny was afoot.

This Thanksgiving I took a Central American cruise and our first port of call was Costa Maya on Mexico's Caribbean coast. We caught the end of the rain season, so when we took a 60 minutes bus trip to the Chacchoben ruins, it was pouring all the way to the river bank. Even when we arrived at the site, the rain showed no signs of letting up. We felt like being on a set of a Noah's Arc movie and I was cursing myself for being foolish enough not to bring any umbrella.

I noticed one local hombre though, who was selling yellow raincoats at the entrance hut. I had no pesos on me, but he gladly accepted the US dollars, all five of them. I parted with them reluctantly and accepted a small yellow package in return. And then the Mayan Gods spoke. No sooner have I wriggled myself into the overpriced maze of protective plastic that the rain came to a full and complete stop. And throughout our archaeological excursion, the gray clouds didn't dare to emit so much as a drizzly whimper. Not a single raindrop fell of my fashionable outer skin. I concluded that the coat peddler must have been a fully licensed representative of Mayan deities and that I had just found a way to appease them.

These days the US dollar seems to be under severe stress. Many economists are predicting run on our currency owing to the reckless bailouts and panicky government spending. There is no shortage of monetary doomsayers that toss around expressions like dollar collapse, financial meltdown and currency crisis. But I am not as pessimistic about the greenback as they are. How could it be doomed when Mayan deities still accept it? They wouldn't deal in a legal tender that was going to be worthless, right? So I sleep tight even though my wallet is stuffed with likenesses of Lincoln, Hamilton, Jackson and Franklin. There is no point loosing sleep over the strength of a currency that is backed by the full faith of Mayan gods.

Pyramid Musing

The other day I was sitting at the foot of an old Mayan pyramid at Lamanai and pondered the visual paradox towering in front of my eyes. On the one hand, the unapologetically exhaling jungle, a walk-in sponge flaunting its life giving moisture. On the other hand, the unresponsive ruins of a long abandoned polis sulking redundantly in dry contrast. As I scanned the weathered stones put together by a culture long expired I could not help marveling at how transient great civilizations and empires really are.

Much like individual humans, civilizations grow, blossom, peak, decline and become extinct. Except they do so on a much longer time scale. Just like people's life expectancy is larger than that of their building blocks, individual cells, the lifespan of a civilization exceeds that of its constituents, individual people. But it is not infinite. Mayans, Incas and Aztecs are no longer with us. And neither are Ottoman, Persian or Roman empires. Their fate shows that some humbleness is in order. We tend to think that our own society is immortal, but it is not. It's just that our perception operates on a scale which makes it seem so. In reality, generations after generations, whole societies wither slowly away into complete oblivion.

I imagine that 500 years from now someone will be sitting at the ruins of the Yankee stadium in New York and contemplate the fate of the Western civilization. And they will undoubtedly wonder what went wrong. How did we end up crashing through the guard rails of commonsense and subjecting our social vehicle to the voracious pull of selfish gravity? An endless parade of questions will tumble across the snaggletoothed bleachers of the once mighty ballpark. Why did we let sports degenerate from a gentlemanly engagement to a farce of astronomical salaries and self-centered personalities? Was a massive drug overdose the best option for our health care system? At what point did celebrity voyeurism replace honest news reporting? Who let unproductive bureaucracy stifle the previously vibrant economies? How did political campaigns degenerate into bouts of prohibitively expensive mudslinging with hamburgers and cheap sound bites flying in all directions? Did we really believe that pyramid schemes of piling debt onto more debt could last forever? And most importantly, how come we were witnessing all of this in real time and still thought it was of no consequence? I think that future visitors of the early 21st century ruins will have their musings cut out for them with a glistening XXL sized machete.

Civilization clearly come and go. No matter how prosperous and eternal they seem, they always do. One millennium they are here, weaving their wicker baskets and erecting their magnificent temples, and the next one - poof! Fortunately, they do not take their accumulated knowledge and expertise with them. New societies emerge in their stead and pick up where the previous ones left off. They rectify old mistakes and start making new ones. Mayans are no longer with us, but we still enjoy the fruits of their labor - their agriculture, astronomy, masonry or urban planning. And of course, to this very day, we all enjoy their most significant invention - the jewel of civil engineering without which no modern civilization could step up to the pedestal of enlightenment - the Stairmaster.


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