Garbage In, Money Out

Wall Street firms, which have made substantial investments based on complex computer models, are rethinking the limits of these models as they have watched a number of their peers sink into bankruptcy. Most experienced CEOs of non-financial firms would not invest $2 based solely on computer models prepared by one of their divisions seeking funding. The seasoned executive has seen too many hockey-stick market forecasts that oversimplify complex market dynamics to be anything but skeptical of such models.

Unfortunately, the U.S. Congress has already spent nearly a trillion dollars using computer models of similarly dubious accuracy. And if the Democrats have their way with cap-and-trade, we may find ourselves spending trillions more based on the same fallacies relative to climate.

It is a genuinely frightening prospect that the spiritual sons of Saul Alinsky and the "intellectual" descendents of the Frankfurt School are now possessed of a tool which rewrites history and projects the future according to their whim. If we remember that a cardinal precept of both the Alinsky School and the Frankfurt School holds that there is no conventional reality because everything is deconstructed by the critical theory. Everything is subject to revision. The results of this theory in both schools is a galloping cynicism which has now been lent verisimilitude to whatever prejudice and preconception might be conjured up by the left and pictured on a computer screen.

I think we are in for a lot of this kind of mind control. It is an assault on our eschatology. It is an assault on the scientific method. It is the most dangerous tool in the hands of the demagogues like those who we now know, betrayed by their own e-mails, seek to bend the minds of Americans to elect Barack Obama or prove global warming. In the hands of a ruthless operative like a Rahm Emanuel it becomes something terribly powerful and sinister. This is a tool that Goebbels would have cheerfully murdered for. That this is in the hands of these kinds of people is terrifying. As one potential example, consider the census done under this kind of computer modeling, massaging bogus data collected by brownshirts of the administration.

Pretty loose connection between these models. The financial failure was caused by models that grossly underestimated risk and a carry trade credit boom which provided leverage to the modeled "risk free" returns. The financial models are myopic and ignore the overleverage in the rest of the world.

The climate models are used for the opposite effect, to overestimate risk. They contain various parameters to create climate catastrophe since they lack the resolution to model actual climate-controlling weather (meso-scale convection). Another difference from financial models is the global focus of climate models with subsequent poor resolution and performance.

The financial failure was caused by models that grossly underestimated risk

And the deliberate, fraudulent, gaming of those models?

No FICO? No Problem!

Argent Mortgage fabricated thousands of them because -

"At Argent Mortgage we haven't CHANGEd the mortgage industry - we've REVOLUTIONized it."

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

http://www.pbs.org/wgbh/pages/frontline/warning/view/

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