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Banbury Cross

a pillow for lost thoughts...

Archives for: September 2010

Beer World

This planet is like a kaleidoscope. As it tirelessly spins around its axis, it throws its movable parts around in a spirited tumble, both literally and figuratively. Objects that would never have crossed paths embrace themselves fleetingly in a wild melee of the cosmic dryer and yet - in that split second - they manage to be instantaneously projected onto the world screen by their chance eye witnesses. The constant stream of random coincidences that life on this magmatic rock brings about generates wave after wave of potential poetry. Day in and day out. All the Beauty has to do then is surf their crests like a daring queen of a California beach.

This summer, my nephew-in-law invited me to a secluded fish restaurant run by one of his friends in a little village not far from my hometown in the Czech Republic. As we were sitting on a simple wooden bench just outside of the pub, next to a giant inflatable can of Gambrinus, our noses were being lured into dancing with drawn out and enticing aromas emanating from the grill while our eyes kept guard of the scene, lazily monitoring the subliminal proliferation of beer glasses on the oblong table. Suddenly I noticed that rays of the setting sun shone through a thick beer glass onto my camera and I wondered what would happen if I opened the lens and hit the shutter release. The rare alignment of Sun, beer and Japanese optics was bound to deliver something of value. I cupped my hands to see the first snapshot and it did not look bad at all. Intrigued, I rotated the glass slightly so that its relief would meet the sunrays at a different angle and shot again and again. When I inspected the sequence of images on the little screen, I was presented with a unique testimony to how rich in curious charms this little planet was. It was like peeking through a narrow vista into a peculiar and mystifying world, completely unlike our own.

Sometimes when I watch sci-fi movies, I am puzzled by their anthropocentric bias. I don't understand why their creators assume that the rest the Universe looks more or less like our Solar Hood - three dimensional and invariably populated by familiar humanoid critters, perhaps a bit on the gray side, but nevertheless in clear possession of two eyes, two hands, two legs, two kidneys and a couple of scoops of the well protected cerebral pulp for generating mathematical equations and silly political movements. But what if the far out Universe is actually quite different? What if there is a world out there, where there are no solid shapes to begin with, where all objects have liquid, maybe even nebulous, character. No edges, no surfaces, no hard feelings. A Universe where life forms are not based on carbon, but rather on ... say hops and barley. And there it was. Right on my camera screen.

Welcome to the Beer World.

pivko

Me First

Individual pursuit of happiness has been the driving force of progress as well as the unstoppable engine of capitalism for several centuries now. But sometimes our appetite for immediate personal satisfaction has to take a back seat to a wider set of considerations. Sometimes our own narrow set of goals has to be synchronized with the rest of the society.

The USA and most of the developed world have a serious problem.

Imagine five people gathered around a table to divide profits from their business endeavors. Each participant was promised a share of $30 dollars, but somehow due to unforeseen circumstances there are only $100 lying on the table, instead of the anticipated $150. The partners are sitting nervously on their wooden chairs, biting their nails and pondering how to deal with the situation. There are essentially two ways.

First, the most brazen guy can step up to the plate and say something like this: "Well, guys, as we all know I was made an explicit promise for $30 so if you don't mind I am taking my cut off the table - no one has any problems with it right? - and y'all just take care of the rest. I am sure you can split it fairly. Buh-bye!" So that's one way. Another possibility is to calmly assess the situation, try to ascertain every person's fair share and split the pile of money anew according to mutually agreed upon rules.

Now back to reality. Over the past decades many aspects of our national wealth creation mechanism have gotten seriously out of whack. Our debt has risen to unsustainable levels, highly qualified and well paying jobs were outsourced and are no longer available, many pension funds were based on unrealistic assumptions and are significantly undercapitalized, banks have not followed proper rules of accounting, thus greatly inflating their reserve assets, unproductive parts of the economy grew out of proportion, public unions were made exaggerated promises by local politicians, who in turn recycled their votes for easy reelection. As a result we are all collectively expecting a bit more than what we actually have. There are too many competing liens against our pot of gold. How we deal with them will say a lot about us when history comes around for the final judgment.

One would expect that a sincere nationwide discourse about managing our resources would be instigated under such circumstances. Social utility of whole economic sectors may need to be reevaluated, cash flows of the global trade inspected. Fortunately there are visionaries who have their own original ideas how to solve this conundrum. In their view the Wild West approach will do just fine.

Enter Charles Munger, the billionaire vice chairman of the Berkshire Hathaway Inc and Warren Buffet's second in command. During his recent speech at the University of Michigan, he told students that we should "thank God" for all the bailouts of the financial sector, while adding at the same breath that we cannot keep doing this indefinitely and that people in economic distress should just "suck it in and cope."

Lovely, isn't it? Now that all the paunchy captains of the industry have been saved and are comfortably seated on their cushioned benches, no more life boats are to leave the deck of Titanic. Women and children can just suck it in and cope.

Here is how Mr. Munger elaborated on this theme: "if you talk about bailouts for everybody else, there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies". Hmmmm. I wonder what culture could Mr. Munger possibly have in mind? Did he mean the "Me First" culture of Wall Street that was practiced by the Too Big To Fail institutions? Yeah, the ones that have only gotten Too Bigger To Fail over the past 18 months. Or did he mean the culture of double speak and circuitous logic, as preached by the choir of Wall Street's overzealous apologists (Christopher Dodd, Tim Geithner, Hank Paulson, Larry Summers etc)? If this is the culture Mr. Munger wants saved for eternity, I'd say let's call the nearest taxidermist and put that culture on his wall.

Don't get me wrong. We need a financial system, so some triage was necessary. But we need a sound one. The system whose purpose is linking free capital with entrepreneurial ideas. Not the one linking preposterous leverage with poorly understood macroeconomic conditions, the one where economy ends up being a hostage to a bunch of berserk gamblers. When their beloved casino burned down, those clever foxes slipped their gambling losses in between the insurance claims and we never even noticed.

Yes, we needed to save our banks, but before that happened, we should have inflicted a royal pain on our financial aristocracy - bondholders, shareholders and all those who profited from the monumental Ponzi scheme. We should have levied criminal charges and clawed back some of the astronomical bonuses doled out to the incompetent (if not outright fraudulent) tycoons. Not only would it teach a valuable lesson on how capitalism works, but it would also ease the subsequent burden on the US taxpayers.

But that is all water under the bridge now. Some milk has been spilled, but much has fortunately remained on the table. We are still standing tall, our economy is largely functional, our research and development best in the world and our labor force well trained, educated and eager to work hard. But several things have to change relatively fast. First, we need clear and frank assessment of our overall fiscal health and admission that the current policies are not viable. A serious discussion should ensue about our priorities and the levels of pain we are all willing to endure in order to set things straight. Housing market, our military adventures, Medicaid and Medicare have to be supported by our export power, not by murky machinations of the Federal Reserve or Fannie and Freddie. All this has to be resolved in a transparent manner so that everyone sees that the burden distribution is not lopsided. It won't be an entirely pleasant discussion, but it will be cathartic at the end.

Otherwise we risk that whatever is left of our common pie will be hijacked by the least scrupulous character at the table: the bankster.

The Source

"Man shall not live by bread alone", quotes Luke 4:4. Similar words have been uttered by other spiritual authorities of considerable reputations and equally considerable beard volumes. Whether we like it or not, religion is bewilderingly universal. Its ubiquity shows that yearning for a realm beyond reality has been encoded directly in the human DNA.

Denizens of this planet have always wondered about the origins of ethical behavior and morality and - in more general terms - about their place in the Universe. Could there exist an external presence whose authority would support the intrinsically fragile concept of moral behavior? By looking for answers and eventually embedding themselves in a more robust framework, they found a way to cope with their own mortality. Whether you look at Australian aborigines, at Mayan, Inca or Aztec civilizations, at the Modern Western cultures or dynasties of the East, the search for divine influence had underwritten the social contract for just about any society.

As none of the major religions can lay a clear claim on owning the truth, they all ended up jealously guarding their particular views. As a consequence, their main branches have petrified into highly dogmatic franchises with formidable power and significant revenue streams. Fortifying their walls against infidels and apostates as well as securing their seeming supremacy became a matter of existential passion. But if you abstract from their protocols and liturgy, if you look beyond Moses, Jesus, Mohammad, Buddha or any other central figure, what lies beneath the rigid facade is a bit murky. Where is the original source of our deep and indisputable spirituality? What exactly is God and can we, lesser creatures, ever find out about His true nature?

I grew up in an atheist country, in a system, where mere possession of a bible could be a pretext for serious questioning by the State Police. With that kind of background, I don't really have a bias for one doctrine or another. But over the course of my life I noticed that frequency of unexplained and often strange coincidences beats the values one could infer from probability and statistics. As if the magic of intelligent life wanted to transcend the simplistic soup of scientifically stirred proteins. Slowly, I came to the conclusion that there is more to this world than the laws of physics. But despite my religious objectivity, I don't have a better idea of what God is or isn't than the next guy, although I see at least four scenarios of how our rational world could have been permeated by a supernatural presence.

1. Omnipotent Creator
This is the most obvious one. The image portrayed by most major religions. God is the creator of the World. He is omnipotent, omniscient and aware of itself. In some belief systems, there may be a multitude of such Gods, some with special functions, but the basic tenets are the same.

2. Higher Being
In this scenario, God is but a higher form of life, endowed with dazzling but limited array of powers, most of them inaccessible to humans. He is potent, but not omnipotent. He has just evolved a bit further than we did. In other words, God did not create this Universe, he inhabits it together with many other forms of life. The relationship between man and God is similar to the one between animal and man. We can interact with him, much like a dog can interact with us, but it is not an interaction of equals. We have no more chance of understanding Him than a dog has of understanding our own motivations. This view includes the possibility, popularized in the 1970s by Erich von Daniken, that the Earth was visited by such higher powers in the past and these extraterrestrial visitors/explorers became spiritual gurus (Gods) of young incipient civilizations.

3. Fifth Force
It is possible that what we perceive as divine influence actually comes from a hitherto unknown fifth force - the first four coming from physics: gravitational, electromagnetic, weak and strong. These forces have limited domains of applicability though - for instance the electric force, as we know from school, acts only on charged particles. Thus I would assume that this hypothetical nonphysical force only acts on very select matter - in this case on live and intelligent objects. It influences our lives and provides guarding rails for our sense of morality. We are "coerced" to engage in proper behavior by the field of this force in much the same way that ordinary matter is "coerced" to follow the gradient of the gravitational potential.

4. Collective Mind
Finally, the entity we commonly call God may just be the humanity itself. The divine substance could very well occupy the aggregate soul or the collective consciousness of all human beings, as is suggested by some Eastern philosophies. Think of it this way: what exactly is "you"? Somehow the concept of "you" resides in your brain, in the maze of billions of neurons. None of the individual neurons is YOU though. Your neurons aren't even aware of themselves. But collectively, the actions of all these low level cells give rise to a high level consciousness which you interpret as YOU. None of us humans really understands what "God" is, just like your individual neurons have no idea what "you" is. But together - as a whole - we may be more than just sum of constituent parts. Each of us, perhaps, represents a small part of God.

As we sail through life, we are trying to make sense of the cacophony of hints, cues and signs that are bombarding our path every day. But putting the jigsaw puzzle together is a tall order, given the short time we have been allotted and the number of distraction we have to deal with. Sometimes it seems that a larger picture looms in the distance, but more often than not we are left wondering...

zapad

Tax Cuts and Bruises

When judging presidents and wine, a little perspective can work miracles. With the benefit of hindsight, the variety that aspires to be a "decider" often ends up being merely "de Cider".

We inherited a treasure trove of head-splitting hangovers from the President Dubya. Two wars mired in sand, economy damaged by the wrecking ball of "ownership society", diminished respect and scattered allegiances of the developed world, greatly empowered oil cartels, and above all the controversial tax cuts. A cursory glance at any recent income distribution stats clearly reveals the direction of the prevailing windfall. Most of it landed at the high end of the earning spectrum.

As the midterm pre-election season kicks into high gear, the attempts to derail the gravy train for the affluent campaign donors promises to heat up a simmering hot sauce. While some in Washington are genuinely trying to find that delicate balance between not choking the ailing businesses and not snubbing out the remaining vestiges of fiscal sanity, others are pushing for the wall to wall extension so that recovery can fully recover from its deepening malaise. But are the top earners still the economic engine they once used to be? Do they really allocate capital in the best interest of the whole system?

From what I can see, the well-to-do have already all they need, so whatever extra chips are tossed their way will probably end up in bonds, gold, foreign currencies and whatever risky derivatives they will dare to tinker with. That won't create many jobs except maybe a few in the banking sector. Instead of waiting for that money to slowly trickle down into the real world, why not cut out the middleman and give it directly to the less opulent classes, who will spend the money almost immediately on actual goods and services, providing the necessary jolt to the manufacturing sector that had been balancing on the verge of cardiac arrest for the past two years. After all, a true organic expansion should be driven by an excess demand from below, rather by an excess supply from above. Henry Ford knew that.

And how does this fabled trickle-down mechanism work anyway? Has it been documented that $1,000 in the pocket of a Manhattan landlord produces more employment opportunities than $1,000 in the pocket of a Louisiana fisherman? What makes us believe that a hedge fund manager raking in billions a year will feel an irresistible urge to set up a hairdressing boutique in the basement of his McMansion in order to give work to a few soccer Moms? OK, that was a bit tongue in the cheek, but you get the point. The "trickle down" philosophy sounds noble on the surface, but in practice it is as iffy and untested as fighting the energy crisis with massive deployment of unicorn wagons.

Human folly knows no bounds. Whose idea was it that investment wizards who take insane risks (and get insane returns because should something go wrong, the American taxpayer has their back) need to be further encouraged in reckless behavior? What genius figured out that we can create more jobs by providing financial incentives to top managers who derive their profits primarily from outsourcing once vibrant industries to cheap Asian labor and then selling their products in lucrative western markets?

This whole "trickle down" idea sounds a lot like a schoolyard bully saying "give me your new toys, I'll play with them and only when I am done can you have them back". The bloated disciples of Mammon just want to knead your dough first. How selfless of them! And it gets even more perverse when you realize that our national piggy bank is virtually empty. In case you just came back from Pluto, the Treasury has been running record deficits for the past two years, sending the federal debt into stratosphere. But our plutocracy won't hear any of that. They want us to borrow left and right just so they can put an "I saved the economy" stern sticker on their third jumbo yacht.

There is one more thing which the tricklenomists won't probably tell you. Those who buy a product with their ill-conceived tax returns receive its full value. The goods are theirs, free and clear. On the other hand, the trickle recipients, the ones who make the product, only get to keep the margin - they still have to cover the production and labor costs. At the end, they are left with a meager profit and hard callouses on their hands. In effect, this political charade will result in a tax cut for the well connected elite and a tax bruise for the working Joe. As usual.

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