In a blistering
report, Kevin G.
Hall claims that Moody’s decline in ratings quality was no
accident. The article claims that bond issuers placed pressure on the
ratings agencies to give favorable ratings and pushed all the ratings
agencies to produce fanciful estimates of risk and rate junk
investments as AAA.
The perverse system of bond issuers paying for ratings is such an
obvious conflict of interest that it seems outlandish that so much
attention is being paid to executive compensation while the incentive
structure at ratings agencies is ignored. This right here is the heart
of the financial crisis. People selling equities can be counted upon
to be dishonest. It is in their best interest. The ratings agencies
must have a financial incentive to make accurate ratings. The way
things are done now, they only have an incentive to make favorable
ones.
- Published:
- October 20, 2009 – 12:20
- Author:
- By Carl Flippin
- Categories:
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- Comments:
While the talks
with Iran about its nuclear program seem to be going well, it may be
wise to consider the potential ramifications of a failure. They may be
dire indeed.
The United States has promised that it will deliver ‘crippling’
sanctions
against the Iranian regime if talks fail. Many believe that Israel is
likely to attack directly if they feel that the actions of the US and
allies do not go far enough. In such a case, we may face the real
nuclear option in Iran.
As it stands now, Iran is unable to deliver a nuclear weapon. They are
farther along than would make everyone comfortable but they do not yet
pose a credible nuclear threat. The true nuclear option which Iran has
hinted at is the mining of the Strait of
Hormuz. About 90
percent of gulf oil exports travel through the strait and a disruption
in shipping there would be devestating to world trade at a time when
the economy is in a very fragile state.
Caitlin Talmadge has
stated
that such an action could shut down shipping out of the Persian Gulf
for a month or more. The disruption to oil supplies in such a case
would be substantial. An anlysis by
Stratfor from July 2008 indicates that the
mere hint of mines in the strait would send shipping insurance rates
skyrocketing.
The United States has placed substantial military assets in the region
and one presumes that they are looking particularly closely at any
activity in the region. If Iran were to act, the US would almost
certainly attack. The question is how fast the US could get control of
the region and how quickly the oil markets could recover.
Hopefully, talks will go well and we won’t have to consider such a
situation.
- Published:
- October 19, 2009 – 14:07
- Author:
- By Carl Flippin
- Categories:
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- Comments:
The Atlantic is
reporting that
the flu vaccine is not all it’s cracked up to be. This is not
anti-vaccination craziness and there is no wild eyed talk of autism
here. In fact, there are some solid studies that indicate that the
supposed effectiveness of flu vaccine can be explained by the
healthier state of those who receive the vaccine. The difference in
mortality between those who receive the vaccine and those who do not
is far too large to be explained by the vaccine alone. It may be that
the difference in mortality is merely the result of inherent
differences between people who tend to get the vaccine and people who
do not.
The only real way to tell for certain whether the vaccine is effective
is to do a double-blind experiment but most scientists are unwilling
to risk the lives of patients in the process. It may seem that
continuing to vaccinate, at the least, does no harm but it seems that
the billions spent on production and distribution of vaccine may be a
serious misapplication of funds if the vaccine is useless.
- Published:
- October 14, 2009 – 16:24
- Author:
- By Carl Flippin
- Categories:
-
- Comments:
People seem to have some unusual
ways of killing
each other.
- Published:
- October 11, 2009 – 11:16
- Author:
- By Carl Flippin
- Categories:
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- Comments:
Kubrick was more right than he knew. Wired has a disturbing
article
about the Russian doomsday machine intended to retaliate against a
first strike from the US. Officially called Perimeter, it was
unofficially called “Mertvaya Ruka”, the Dead Hand. Once activated,
the system could launch a retaliatory strike against the US nearly
automatically. It could be set off by a single worker sitting in an
isolated bunker. It is still active. Even more here.
- Published:
- September 24, 2009 – 13:25
- Author:
- By Carl Flippin
- Categories:
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- Comments:
In his capacity as the Reich Minister of Public Enlightenment and
Propaganda,
Joseph Goebbels
produced some of the most horrifyingly anti-Semitic films ever
made. To the modern viewer, they seem almost like parodies of
racism. The films portray Jews as scheming parasites feeding on the
hard work of the Aryan people through trickery and fraud. It seems
like it would take a childlike mentality to fail to see through such
obvious libel.
The fact is, the absurd racism portrayed in these films was a major
cause of the horrors of the Holocaust. The Eternal
Jew has
been described as a blueprint for
genocide. It
is much easier to accept mass murder if you believe that the people
being murdered are diabolical agents bent on world domination. It is
important to remember such terrible films so we can avoid the same
mistakes:
- Published:
- September 4, 2009 – 17:59
- Author:
- By Carl Flippin
- Categories:
-
- Comments:
The New Yorker offers a saddening
look
inside the rubber room. Rubber rooms are special relocation centers
for teachers in New York City who have been deemed a danger to
students in one way or another. Due to stringent union regulations, it
takes months or years to fire the teachers. In the meantime, they are
paid their full salary while the process grinds away. For an in person
look at the occupants of the rubber room, see
this
episode of This American Life.
- Published:
- September 4, 2009 – 14:05
- Author:
- By Carl Flippin
- Categories:
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- Comments:
The New Yorker has a tragic
story
of a factually innocent man executed in Texas in February
2004. Charged with the murder of his three children by arson, he
maintained his innocence until his execution. Fire scientist Craig
Beyler said that the methods used in the initial investigation were
“characteristic of mystics or psychics.”
- Published:
- September 3, 2009 – 12:14
- Author:
- By Carl Flippin
- Categories:
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- Comments:
Life magazine has a fascinating gallery of WWII propaganda posters. Some from both the Axis and the
Allies. Very compelling viewing.
- Published:
- September 3, 2009 – 10:07
- Author:
- By Carl Flippin
- Categories:
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- Comments:
In a fascinating new article, Vanity Fair looks into the world of Office 39 in North Korea. This group works to find ways to close the yawning trade deficit created by sanctions imposed by the western world. North Korea’s trade deficit has grown to roughly 10 billion USD a year but sanctions seem to have little effect due to the work of Office 39.
That work involves a number of criminal enterprises including heroin and methamphetamine production and smuggling of counterfeit cigarettes. Even more notably, they seem to have perfected the art of forging US currency. The forged US notes are so accurate that, when sent to the Secret Service, agents could not tell they were fake. The value of forged US notes currently in circulation as a result remains a source of endless speculation but some say it could be as high as 2 billion USD. Laundered through places like Las Vegas casinos and a North Korean owned bank in Macao, these bills have already lead to a run on the dollar once in Taiwan.
Most amazingly, the Bush administration had an excellent program in place to track down these currency exchanges and trace things back to the North Korean leadership but they backed off on prosecutions at the last minute in an attempt to secure negotiations with North Korea over nuclear disarmament. With Office 39 still in operation, though, it seems that the threat of sanctions can hold little sway over North Korea. If we withhold US aid, they can generate their own aid on North Korean printing presses. It seems that we can’t legitimately threaten sanctions until Office 39 is stopped.
Thankfully, the Obama administration seems willing to take up the case again. The administration has sponsored a UN resolution that seeks to freeze North Korean assets and the investigation into counterfeit currency is ongoing. We would be fools to let this drop again.
- Published:
- August 16, 2009 – 04:13
- Author:
- By Carl Flippin
- Categories:
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- Comments: