Since Jun 1, 1999
... "States that in any bureaucratic organization there will be two kinds of people: those who work to further the actual goals of the organization, and those who work for the organization itself. Examples in education would be teachers who work and sacrifice to teach children, vs. union representative who work to protect any teacher including the most incompetent."
The Iron Law states that in all cases, the second type of person will always gain control of the organization, and will always write the rules under which the organization functions.
Kleptocracy: A order of thieves or a ruling body.
Government Statistics are our friends!
"In the end they will lay their freedom at our feet and say to us, 'Make us your slaves, but feed us.'" (Dosteovsky's Grand Inquisitor.)
MidCape. Ex-SF medic( CoA, 1stBN, 7thSFG, '78-82, also HHQ,3/4 ADA, 82ndABD). Lifelong nailpounder, frame to finish, addictive reader, sucker for wood boats, most any non-yappy dog and some cats that are traitors to their species. Fantasy; A doorless, windowless, barefoot beach bar in a warm place, full of books, old fishing rods, an old skiff and a decent kitchen.
(That's the ex behind us, she went back to my uncle, after having his kid)
We can't start fixing things until we can get a handle on the toxic assets behind the financial crisis.
By Hernando de Soto
April 12, 2009
As a Peruvian educated by British and American teachers, I learned never to embark on a major task without first "doing the math." No more of that Latino "happy go lucky, trust your gut and say three Hail Marys" approach to life.
Without measurement, my teachers advised, I wouldn't be able to identify and disentangle the very reality before my eyes. By doing the math, I would see order and coherence, the way things were organized; invisible relationships would come into view, and right behind order would come meaning, followed by confidence. Thanks to my Anglo-Saxon education, I learned the lesson: You cannot manage what you have not previously measured.
So imagine how I have felt watching my role models go to war over weapons of mass destruction that they never actually assessed, or now, watching them wage a losing war against derivatives -- which both Warren Buffet and George Soros have called "financial weapons of mass destruction" -- without locating or counting them either.
And, man, do those financial instruments need measuring: pooled, packaged and traded around the world, they are now the principal reason for today's massive credit contraction. The fear among financial institutions that potential borrowers and users of credit and capital could be burdened with so many nonperforming derivatives that they would be unable to repay their loans and protect their investments has plunged the global economy into a recession.
The Securities and Exchange Commission estimates that derivative paper is worth $596 trillion (10 times the value of total world production), while studies at the Bank for International Settlements in Basel, Switzerland, conclude that it could be twice as much -- $1.2 quadrillion. And exactly how many of those derivatives are actually nonperforming and would have to be surgically removed to stop their toxicity from spreading and destroying trust among creditors and investors? Nobody knows that for sure either. U.S. Treasury Secretary Timothy F. Geithner has set aside $1 trillion to assist in buying those toxic assets, but the SEC has guesstimated that there might be upward of $3 trillion worth.
With so much at stake, clearly an accurate accounting is in order. Once this paper is brought "into the sunshine," as former SEC Chairman Christopher Cox said at the beginning of the crisis, "money and credit will begin to flow again." Government has to assure that it is located, quantified and usefully categorized so that the market can again gauge risks and restore trust by isolating the toxic from the healthy paper.
So what are we waiting for? Many worry about government meddling in the affairs of financial institutions. Some contend that Wall Street has Washington in its pocket; others suspect that the bankers are afraid that the numbers will be so high as to spark a run on their banks. And then there are those who still believe that the market will be able to sort it all out -- if we would just stand back and let the vulture capitalists dispose of the toxic stuff in their discreet and profitable ways.
Let me offer just four of the many good reasons I could give for why "doing the math" -- right now -- is still the best strategy for halting the global economic meltdown threatening us.
First, the vultures I've talked to tell me that buying a significant amount of paper in the dark will take years. With information about derivatives not standardized and thousands of idiosyncratic bonds sold, resold and scattered helter-skelter all over the market, it will be difficult for any individual vulture to calculate their worth until someone locates and categorizes them. In fact, some derivative paper is so sloppily structured that banks have been unable to figure out the contents of their own portfolios, and U.S. courts continue to reject many foreclosures that are based on this kind of paper. So before we could really hand over the solution to the vultures, someone still would have to do the math.
And even while the vultures are, minimally, at work, the contamination will continue as this huge shadow economy of derivative paper infects everything it touches. Consider that a mere 7% default on subprime paper -- equivalent to maybe $1 trillion or $2 trillion -- quickly contaminated other paper, creating a $50-trillion hole in the U.S. economy from losses in stocks, home values and revenues in less than one year. By not counting and identifying derivatives one by one and drawing a legal boundary around each by means of the rules of property law (things such as registration, traceability and standardized identification), we are unable to protect every asset and every particular interest on that asset from contamination. The longer we wait to do the math, the worse it will get. And the more likely the anarchy of this shadow economy will spread.
In the world where I come from, it is the typical state of affairs. In fact, apart from the elite Westernized minority, most people's assets are covered by paper that is endemically toxic: not recorded, not standardized, difficult to identify, hard to locate, its real value so opaque that ordinary people cannot build trust in each other or be trusted in global markets. In short, for shadow economies outside the U.S. and Europe, "credit crunch" and "meltdown" are chronic conditions. You don't want to go there: It will wipe out your middle class, nurturing radical politics, class confrontation, violence, crime and massive drug production and narco-trafficking. (North Americans only know drug consumption; just wait until you see the supply side of the deal.)
Finally, you can't continue the bailouts, monetary infusions and tax breaks because you will eventually run out of money -- and still have little credit available. That is because the overwhelming amount of available credit is not made up of money but assets documented in property records such as fungible real estate titles, mortgages, bonds and derivatives, which have some of the financial attributes of money -- what economists used to call "moneyness." In fact, although there is only $13 trillion in cash notes and coins worldwide, there are hundreds of trillions of dollars in "property paper," when moneyness is taken into account.
If you want to get credit flowing again, you must restore trust in paper as soon as possible. And that means measuring the assets, recording them, finding and purging those that are toxic and preventing future debasement of the paper -- in essence, submitting it to property law just like all the other assets that we own and value.
Before we can get out of this recession, we need to concede that we just don't have the right information. At present, the world of derivatives is devoid of useful facts and a structure from which we can extract the meaning, knowledge and confidence required to end the credit crunch.
And before anyone can get those facts, we have to do the math.
Economist Hernando de Soto is the author of the "The Other Path" and "The Mystery of Capital." He has helped carry out property-reform programs for heads of state in about 20 countries.
I have been asked to talk about what I consider the most important challenge facing mankind, and I have a fundamental answer. The greatest challenge facing mankind is the challenge of distinguishing reality from fantasy, truth from propaganda. Perceiving the truth has always been a challenge to mankind, but in the information age (or as I think of it, the disinformation age) it takes on a special urgency and importance.
We must daily decide whether the threats we face are real, whether the solutions we are offered will do any good, whether the problems we're told exist are in fact real problems, or non-problems. Every one of us has a sense of the world, and we all know that this sense is in part given to us by what other people and society tell us; in part generated by our emotional state, which we project outward; and in part by our genuine perceptions of reality. In short, our struggle to determine what is true is the struggle to decide which of our perceptions are genuine, and which are false because they are handed down, or sold to us, or generated by our own hopes and fears.
As an example of this challenge, I want to talk today about environmentalism. And in order not to be misunderstood, I want it perfectly clear that I believe it is incumbent on us to conduct our lives in a way that takes into account all the consequences of our actions, including the consequences to other people, and the consequences to the environment. I believe it is important to act in ways that are sympathetic to the environment, and I believe this will always be a need, carrying into the future. I believe the world has genuine problems and I believe it can and should be improved. But I also think that deciding what constitutes responsible action is immensely difficult, and the consequences of our actions are often difficult to know in advance. I think our past record of environmental action is discouraging, to put it mildly, because even our best intended efforts often go awry. But I think we do not recognize our past failures, and face them squarely. And I think I know why.
I studied anthropology in college, and one of the things I learned was that certain human social structures always reappear. They can't be eliminated from society. One of those structures is religion. Today it is said we live in a secular society in which many people---the best people, the most enlightened people---do not believe in any religion. But I think that you cannot eliminate religion from the psyche of mankind. If you suppress it in one form, it merely re-emerges in another form. You can not believe in God, but you still have to believe in something that gives meaning to your life, and shapes your sense of the world. Such a belief is religious.
Today, one of the most powerful religions in the Western World is environmentalism. Environmentalism seems to be the religion of choice for urban atheists. Why do I say it's a religion? Well, just look at the beliefs. If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.
There's an initial Eden, a paradise, a state of grace and unity with nature, there's a fall from grace into a state of pollution as a result of eating from the tree of knowledge, and as a result of our actions there is a judgment day coming for us all. We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability. Sustainability is salvation in the church of the environment. Just as organic food is its communion, that pesticide-free wafer that the right people with the right beliefs, imbibe.
Eden, the fall of man, the loss of grace, the coming doomsday---these are deeply held mythic structures. They are profoundly conservative beliefs. They may even be hard-wired in the brain, for all I know. I certainly don't want to talk anybody out of them, as I don't want to talk anybody out of a belief that Jesus Christ is the son of God who rose from the dead. But the reason I don't want to talk anybody out of these beliefs is that I know that I can't talk anybody out of them. These are not facts that can be argued. These are issues of faith.
And so it is, sadly, with environmentalism. Increasingly it seems facts aren't necessary, because the tenets of environmentalism are all about belief. It's about whether you are going to be a sinner, or saved. Whether you are going to be one of the people on the side of salvation, or on the side of doom. Whether you are going to be one of us, or one of them.
Am I exaggerating to make a point? I am afraid not. Because we know a lot more about the world than we did forty or fifty years ago. And what we know now is not so supportive of certain core environmental myths, yet the myths do not die. Let's examine some of those beliefs.
There is no Eden. There never was. What was that Eden of the wonderful mythic past? Is it the time when infant mortality was 80%, when four children in five died of disease before the age of five? When one woman in six died in childbirth? When the average lifespan was 40, as it was in America a century ago. When plagues swept across the planet, killing millions in a stroke. Was it when millions starved to death? Is that when it was Eden?
And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did. On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process. And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.
How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself. The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.
There was even an academic movement, during the latter 20th century, that claimed that cannibalism was a white man's invention to demonize the indigenous peoples. (Only academics could fight such a battle.) It was some thirty years before professors finally agreed that yes, cannibalism does inbdeed occur among human beings. Meanwhile, all during this time New Guinea highlanders in the 20th century continued to eat the brains of their enemies until they were finally made to understand that they risked kuru, a fatal neurological disease, when they did so.
More recently still the gentle Tasaday of the Philippines turned out to be a publicity stunt, a nonexistent tribe. And African pygmies have one of the highest murder rates on the planet.
In short, the romantic view of the natural world as a blissful Eden is only held by people who have no actual experience of nature. People who live in nature are not romantic about it at all. They may hold spiritual beliefs about the world around them, they may have a sense of the unity of nature or the aliveness of all things, but they still kill the animals and uproot the plants in order to eat, to live. If they don't, they will die.
And if you, even now, put yourself in nature even for a matter of days, you will quickly be disabused of all your romantic fantasies. Take a trek through the jungles of Borneo, and in short order you will have festering sores on your skin, you'll have bugs all over your body, biting in your hair, crawling up your nose and into your ears, you'll have infections and sickness and if you're not with somebody who knows what they're doing, you'll quickly starve to death. But chances are that even in the jungles of Borneo you won't experience nature so directly, because you will have covered your entire body with DEET and you will be doing everything you can to keep those bugs off you.
The truth is, almost nobody wants to experience real nature. What people want is to spend a week or two in a cabin in the woods, with screens on the windows. They want a simplified life for a while, without all their stuff. Or a nice river rafting trip for a few days, with somebody else doing the cooking. Nobody wants to go back to nature in any real way, and nobody does. It's all talk-and as the years go on, and the world population grows increasingly urban, it's uninformed talk. Farmers know what they're talking about. City people don't. It's all fantasy.
One way to measure the prevalence of fantasy is to note the number of people who die because they haven't the least knowledge of how nature really is. They stand beside wild animals, like buffalo, for a picture and get trampled to death; they climb a mountain in dicey weather without proper gear, and freeze to death. They drown in the surf on holiday because they can't conceive the real power of what we blithely call "the force of nature." They have seen the ocean. But they haven't been in it.
The television generation expects nature to act the way they want it to be. They think all life experiences can be tivo-ed. The notion that the natural world obeys its own rules and doesn't give a damn about your expectations comes as a massive shock. Well-to-do, educated people in an urban environment experience the ability to fashion their daily lives as they wish. They buy clothes that suit their taste, and decorate their apartments as they wish. Within limits, they can contrive a daily urban world that pleases them.
But the natural world is not so malleable. On the contrary, it will demand that you adapt to it-and if you don't, you die. It is a harsh, powerful, and unforgiving world, that most urban westerners have never experienced.
Many years ago I was trekking in the Karakorum mountains of northern Pakistan, when my group came to a river that we had to cross. It was a glacial river, freezing cold, and it was running very fast, but it wasn't deep---maybe three feet at most. My guide set out ropes for people to hold as they crossed the river, and everybody proceeded, one at a time, with extreme care. I asked the guide what was the big deal about crossing a three-foot river. He said, well, supposing you fell and suffered a compound fracture. We were now four days trek from the last big town, where there was a radio. Even if the guide went back double time to get help, it'd still be at least three days before he could return with a helicopter. If a helicopter were available at all. And in three days, I'd probably be dead from my injuries. So that was why everybody was crossing carefully. Because out in nature a little slip could be deadly.
But let's return to religion. If Eden is a fantasy that never existed, and mankind wasn't ever noble and kind and loving, if we didn't fall from grace, then what about the rest of the religious tenets? What about salvation, sustainability, and judgment day? What about the coming environmental doom from fossil fuels and global warming, if we all don't get down on our knees and conserve every day?
Well, it's interesting. You may have noticed that something has been left off the doomsday list, lately. Although the preachers of environmentalism have been yelling about population for fifty years, over the last decade world population seems to be taking an unexpected turn. Fertility rates are falling almost everywhere. As a result, over the course of my lifetime the thoughtful predictions for total world population have gone from a high of 20 billion, to 15 billion, to 11 billion (which was the UN estimate around 1990) to now 9 billion, and soon, perhaps less. There are some who think that world population will peak in 2050 and then start to decline. There are some who predict we will have fewer people in 2100 than we do today. Is this a reason to rejoice, to say halleluiah? Certainly not. Without a pause, we now hear about the coming crisis of world economy from a shrinking population. We hear about the impending crisis of an aging population. Nobody anywhere will say that the core fears expressed for most of my life have turned out not to be true. As we have moved into the future, these doomsday visions vanished, like a mirage in the desert. They were never there---though they still appear, in the future. As mirages do.
Okay, so, the preachers made a mistake. They got one prediction wrong; they're human. So what. Unfortunately, it's not just one prediction. It's a whole slew of them. We are running out of oil. We are running out of all natural resources. Paul Ehrlich: 60 million Americans will die of starvation in the 1980s. Forty thousand species become extinct every year. Half of all species on the planet will be extinct by 2000. And on and on and on.
With so many past failures, you might think that environmental predictions would become more cautious. But not if it's a religion. Remember, the nut on the sidewalk carrying the placard that predicts the end of the world doesn't quit when the world doesn't end on the day he expects. He just changes his placard, sets a new doomsday date, and goes back to walking the streets. One of the defining features of religion is that your beliefs are not troubled by facts, because they have nothing to do with facts.
So I can tell you some facts. I know you haven't read any of what I am about to tell you in the newspaper, because newspapers literally don't report them. I can tell you that DDT is not a carcinogen and did not cause birds to die and should never have been banned. I can tell you that the people who banned it knew that it wasn't carcinogenic and banned it anyway. I can tell you that the DDT ban has caused the deaths of tens of millions of poor people, mostly children, whose deaths are directly attributable to a callous, technologically advanced western society that promoted the new cause of environmentalism by pushing a fantasy about a pesticide, and thus irrevocably harmed the third world. Banning DDT is one of the most disgraceful episodes in the twentieth century history of America. We knew better, and we did it anyway, and we let people around the world die and didn't give a damn.
I can tell you that second hand smoke is not a health hazard to anyone and never was, and the EPA has always known it. I can tell you that the evidence for global warming is far weaker than its proponents would ever admit. I can tell you the percentage the US land area that is taken by urbanization, including cities and roads, is 5%. I can tell you that the Sahara desert is shrinking, and the total ice of Antarctica is increasing. I can tell you that a blue-ribbon panel in Science magazine concluded that there is no known technology that will enable us to halt the rise of carbon dioxide in the 21st century. Not wind, not solar, not even nuclear. The panel concluded a totally new technology-like nuclear fusion-was necessary, otherwise nothing could be done and in the meantime all efforts would be a waste of time. They said that when the UN IPCC reports stated alternative technologies existed that could control greenhouse gases, the UN was wrong.
I can, with a lot of time, give you the factual basis for these views, and I can cite the appropriate journal articles not in whacko magazines, but in the most prestigeous science journals, such as Science and Nature. But such references probably won't impact more than a handful of you, because the beliefs of a religion are not dependant on facts, but rather are matters of faith. Unshakeable belief.
Most of us have had some experience interacting with religious fundamentalists, and we understand that one of the problems with fundamentalists is that they have no perspective on themselves. They never recognize that their way of thinking is just one of many other possible ways of thinking, which may be equally useful or good. On the contrary, they believe their way is the right way, everyone else is wrong; they are in the business of salvation, and they want to help you to see things the right way. They want to help you be saved. They are totally rigid and totally uninterested in opposing points of view. In our modern complex world, fundamentalism is dangerous because of its rigidity and its imperviousness to other ideas.
I want to argue that it is now time for us to make a major shift in our thinking about the environment, similar to the shift that occurred around the first Earth Day in 1970, when this awareness was first heightened. But this time around, we need to get environmentalism out of the sphere of religion. We need to stop the mythic fantasies, and we need to stop the doomsday predictions. We need to start doing hard science instead.
There are two reasons why I think we all need to get rid of the religion of environmentalism.
First, we need an environmental movement, and such a movement is not very effective if it is conducted as a religion. We know from history that religions tend to kill people, and environmentalism has already killed somewhere between 10-30 million people since the 1970s. It's not a good record. Environmentalism needs to be absolutely based in objective and verifiable science, it needs to be rational, and it needs to be flexible. And it needs to be apolitical. To mix environmental concerns with the frantic fantasies that people have about one political party or another is to miss the cold truth---that there is very little difference between the parties, except a difference in pandering rhetoric. The effort to promote effective legislation for the environment is not helped by thinking that the Democrats will save us and the Republicans won't. Political history is more complicated than that. Never forget which president started the EPA: Richard Nixon. And never forget which president sold federal oil leases, allowing oil drilling in Santa Barbara: Lyndon Johnson. So get politics out of your thinking about the environment.
The second reason to abandon environmental religion is more pressing. Religions think they know it all, but the unhappy truth of the environment is that we are dealing with incredibly complex, evolving systems, and we usually are not certain how best to proceed. Those who are certain are demonstrating their personality type, or their belief system, not the state of their knowledge. Our record in the past, for example managing national parks, is humiliating. Our fifty-year effort at forest-fire suppression is a well-intentioned disaster from which our forests will never recover. We need to be humble, deeply humble, in the face of what we are trying to accomplish. We need to be trying various methods of accomplishing things. We need to be open-minded about assessing results of our efforts, and we need to be flexible about balancing needs. Religions are good at none of these things.
How will we manage to get environmentalism out of the clutches of religion, and back to a scientific discipline? There's a simple answer: we must institute far more stringent requirements for what constitutes knowledge in the environmental realm. I am thoroughly sick of politicized so-called facts that simply aren't true. It isn't that these "facts" are exaggerations of an underlying truth. Nor is it that certain organizations are spinning their case to present it in the strongest way. Not at all---what more and more groups are doing is putting out is lies, pure and simple. Falsehoods that they know to be false.
This trend began with the DDT campaign, and it persists to this day. At this moment, the EPA is hopelessly politicized. In the wake of Carol Browner, it is probably better to shut it down and start over. What we need is a new organization much closer to the FDA. We need an organization that will be ruthless about acquiring verifiable results, that will fund identical research projects to more than one group, and that will make everybody in this field get honest fast.
Because in the end, science offers us the only way out of politics. And if we allow science to become politicized, then we are lost. We will enter the Internet version of the dark ages, an era of shifting fears and wild prejudices, transmitted to people who don't know any better. That's not a good future for the human race. That's our past. So it's time to abandon the religion of environmentalism, and return to the science of environmentalism, and base our public policy decisions firmly on that.
Thank you very much.