Monthly Archives: August 2012

In praise of (some specific aspects of) libertarianism

(written Dec 8, 2010 — uploaded Aug 28, 2012)

I ridiculed the silliness of some aspects of libertarian thought in an earlier post, and planned to offer some balance by noting that their inherent suspicion-of-authority has played a big role in raising awareness of the financial crimes and improprieties of recent years.  Alpha-dog libertarians are a bit like moneyed anarchists — since “the system” has worked well for them, they don’t actually want to destroy the state.  Just neuter it.  ;)  Anyways, their pecuniary acumen seems to give them a sharklike sense for financial corruption.

But then WikiLeaks began releasing their cables, which gives a more prominent example for commendation.  The only elected official in US I’ve seen offering public-support-in-principle for WikiLeaks, has been libertarian stalwart and Republican congressman Ron Paul, who tweeted:

“Re: Wikileaks – In a free society, we are supposed to know the truth. In a society where truth becomes treason, we are in big trouble.”


Paul ran for the leadership of the Republican Party in 2008, unleashing zingers like the following at the debates.

  • “the best commitment we can give to the Iraqi people is to give them their country back”
  • “what would we say if China was [building permanent military bases] in the Gulf of Mexico?”
  • “there’s a strong tradition of being anti-war in the Republican Party”


Astonishingly enough, these soundbites earned him rousing cheers from the audience… of Bill Maher’s left-leaning “Real Time” talk show.  At the debate, all he got was silence of the “chirping crickets” variety.  And sadly, he was barred from participating in later debates by the party’s insiders, the only upside of which was web footage of FOX commentator Sean Hannity running away from an angry mob of Ron Paul supporters, outside one of the debates he’d been excluded from.

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In other news, the WikiLeaks-hunting US State Department (the Jalvert to WikiLeaks’ Jean Valjean) yesterday announced that it was pleased to host Unesco’s World Press Freedom Day in 2011.  No doubt attendees will be interested to see how the US is “…concerned about the determination of some governments to censor and silence individuals, and to restrict the free flow of information”and how they plan to keep their “enduring commitment to support and expand press freedom and the free flow of information in this digital age”.

Here’s a screen-capture of the Guardian’s live feed of Julian Assange’s arrest back in 2010.


Not a joke, but funnier than “LOLcats”.  And as a result, horrifyingly sad…

How Libertarians brought America Big Religion and Bigger Lawsuits…

(originally written Nov 2010; uploaded Aug 21, 2012 as part of my Great Upload of Musings…  for balance, I’ll soon post the follow-up which praises some portions of libertarian philosophy which are very dear to my progressive heart.  Politics makes for strange bedfellows, and I’m not above shacking up with occasional allies.  :)  )


It looks like the Democrats are going to get clobbered in the [2010 midterm] US elections. Economic malaise tends to do this to governing parties, which is one reason currency devaluation is the policy-du-jour: if country A can make its currency cheaper, it becomes more competitive and can export goods (and unemployment!) to countries B, C and D, whose currencies remain more expensive. It’s this kind of race to the bottom which has given gold aficionados their current decade in the sun. Of course, though Hemingway never lived to write about it, the sun also sets… :)

The Tea Party’s emergence has been an interesting but predictable phenomenon. The stagnation in American incomes for the past generation has finally hit a boiling point (what took so long?). Increased prosperity has largely been confined to the top 1% — and even then mainly the top 0.1% — of income earners in the population; those nice folks whose job titles begin with “Chief” and end with “Officer”. :)

In many cases, union-busting concessions levied in the name of improving competitiveness went straight into C-suite compensation: “trickle-up economics”, as it were. I don’t have the American numbers handy, but here are some Canadian ones. Perhaps one day, left-leaning parties will realize that they’ll get more support if they confine talk of tax increases to the very, very topmost folks. Noblesse oblige, and all that.


The anti-government stance of the — ugh — “Teabaggers” contrasts spectacularly with the strikers in France. The French were striking over a government plan to increase in the retirement age (from 60 to 62), to address pension costs. In other words, they were striking for more government (services, spending and so forth). Meanwhile, in the US, the Tea Party is agitating for less government.

One wonders if this different outlook comes from the two countries’ respective revolutions. In France, the French aristocracy was overthrown by the downtrodden masses, whereas in America, the British nobility was overthrown by a homegrown one. This is a simplification, but is reflected in the voting rights that resulted: every man in France had the right to vote as of 1792. (Revolutions, counter-revolutions, empires and monarchies made this a bit dicey for a few decades… ;) ) In the US, until about 1840, you couldn’t vote unless you were a property-owning white guy. So it was really a democracy of the rich. Not unlike today, really… ;) The rest of the XY club got to vote one Civil War later, vote-suppression campaigns notwithstanding. To give the US some credit, women’s suffrage arrived there in 1920, beating France by a quarter-century.


The Tea Party’s anti-government stance traces back to heavy funders the billionaire plutocrat Koch brothers, who have that libertarian streak common to the ultra-wealthy, and the clueless rubes who believe they’ll join those ranks if only [X] gets out of their way. The brothers Koch, building on decades of conservative dogma, have cunningly equated [X] to government; and specifically, a government that gave tax cuts to the bottom 98% of the population as one of its first orders of business.

As a quick recap, libertarians want minimal state interference in their daily lives. Most oppose motorcycle helmet laws as unnecessarily restrictive, but the hardliners — the few, the lucky few, that band of brothers — are still fighting… seat belts. And income tax. And public schools! Mind you, all groups have their flaky enthusiasts. ;)

Libertarianism has cast a large shadow over the American experience, and can be argued (weakly or strongly, you decide :) ) to be responsible for two standout features of American society: its litigiousness and its religiousness. This is ironic, because lawsuits are about the only thing that can cut the ultra-wealthy down to size… and because by and large, the only things libertarians abhor more than government services, are religious services. (Pun intended.) If you think governments are fussy about personal liberties… ;)


Putting my “Freakonomics” hat on, the litigious aspect of American society comes out of rational self-interest. If someone gets hurt — at work, in traffic, or elsewhere — and there’s a 1% chance a million-dollar complication will result later in life, very different results occur if you’re part of a universal healthcare system or not. In the former case, you won’t pay anything out-of-pocket: you’ll be subsidized by your fellow citizens. Unless there’s a matter of punishing gross negligence, you don’t have an incentive to sue. Besides, litigation is time-consuming, expensive, and stressful.

But in the latter case, medical complications could very well bankrupt you. (Medical costs are perennially the leading cause of bankruptcy in the US.) As such, litigation becomes a matter of self-preservation. Instead of one out of a hundred victims receiving a million dollars of medical intervention at some point in the future, all hundred will be in the courts to get the money that could save them from bankruptcy, up-front. That’s a hundred million dollars cash; an enormous drag on the system. All thanks to the paradigm shift from a country of millions, to millions of fiefdoms of one. :)


In recent centuries, the welfare state (in rich countries) has expanded into roles religious communities have traditionally paid — caring for the ill and infirm, minding children, and so forth. The reason churches and temples provided these services instead of business people, is that it’s tough to profit from these activities. (The current setup in most places, where houses of worship can provide such services alongside the public sector, is probably a good thing all in all, because a little competition keeps everyone honest.)

In the US, though, the paucity of public social spending means religious communities have retained a tremendous influence; they’re the only groups who will consistently provide the social services non-multimillionaires will depend on at one point or another in their hopefully-long lives! As such, being part of a faith community is a matter of rational self-interest for the average American; in addition to the spiritual nourishment they hopefully provide, they usually offer support / safety net services when there’s no publicly-funded game in town…

The biology of phishing

Some nefarious group recently made a phishing attempt against me, trying to lure me into providing bank account information in response to an Official Looking email.

Presumably, the combination of spam filters and alert consumers means phishing has a very, very low success rate.  Fortunately for criminals, email has virtually no incremental cost: you can send a million phishing messages almost as easily as you can send a thousand, or ten.  In contrast, con men can only be in one place at a time, and probably need to invest a lot of time per victim, so they need a much much higher success rate.

That brought to mind r/K selection theory, from biology:

– in r-type reproduction, creatures create zillions of offspring.  In stable ecosystems, almost all the offspring will die before reproducing, giving a (near-infinite offspring x near-zero success rate) arrangement.  Examples include insects, fish, and dandelions.  By analogy, phishing would fit this category.

– in K-type reproduction, creatures create few offspring, but the survival rate is much higher.  Basically, it’s a (near-zero offspring x near-100% success rate) type arrangement.  Examples include bears, elephants and whales.  By analogy, con men would fit here.

And this got me wondering how businesses look, when viewed through the r/K lens.  (It also got me sending emails to the local university asking if any researchers have been looking at this topic; we’ll see if anything pops up.  :)  )

By and large, virtual goods seemed to follow r-type behaviour, and physical goods, K-type.

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Commemorating Joe Romm’s “Language Intelligence”

Joe Romm‘s book Language Intelligence is now out in the US (but maddeningly, remains unavailable in Canada).  Early reviews proclaim it as both a rhetorical masterpiece, and a masterpiece on rhetoric.

To commemorate the book in my small way, I dug up a piece I wrote for a competition on Dr. Romm’s blog, Climate Progress.  In 2009, he asked readers what they’d have Obama say, if they could write the energy and environment portion of his inaugural speech.

I made a couple light edits; some phrases sounded a lot better three years ago than they do now.  Regrettably, Obama’s “yes we can” is among them.  It rings hollow in 2012, given that his governing philosophy has largely been “no we can’t” — no we can’t switch to single-payer, universal health coverage; no we can’t prosecute financial corruption; no we can’t pass a climate bill; and so forth.


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Batman and other cultural stories (1 of 2)

The horrible, horrible shooting at the recent Batman movie made me decide to delay sending this out, since times of tragedy aren’t appropriate for semi-flippant ruminations. In light of our southern cousins’ gun culture (and US Supreme Court justice Antonin Scalia’s suggestion that Americans’ right to bear arms might extend all the way up to shoulder-mounted weapons like anti-aircraft missiles) one wonders whether the satirists at The Colbert Report will announce a PR blitz built around the phrase “nuclear weapons don’t kill people, people kill people”…

But back to our subject line.

With the acclaimed completion of Christopher Nolan’s Batman movie trilogy, we’ve gone through three live-action incarnations of the franchise in the past forty or so years. As a contemporary mythology deeply imprinted in the modern North American psyche, Batman is an excellent springboard for us post-religious secularists to understand the cultural stories of our spiritual siblings.


So let’s start by cycling through the incarnations of the caped crusader, whose basic character biography can be summarized as:

1) boy from rich family watches his parents get shot dead,

2) by a low-level gangster

3) and grows up wanting to avenge their deaths

4) so he dresses up like a bat and fights crime, using weapons and gadgets his money gives him access to,

5)  sometimes accompanied by a teenaged sidekick named Robin.


More after the jump!


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Doubting “doubting” Thomas

(written March 17; uploaded Aug 9)

Dang, I missed being able to send this out on 3:16 — wouldn’t that’ve been topical! Oh well, St. Patrick’s Day it is, then…

I should also note that I’ll be using the conventions of modern scholarship.*


I’ll be picking up a physical copy of the latest National Geographic, as its cover story “The Journey of the Apostles” has a great bit on “doubting” Thomas, whom tradition has it (and scholarship largely accepts, based on the balance of evidence) travelled to Jewish colonies in India, to proselytize there.

Sadly, when Portugese imperialists got to India around 1600 and discovered a heretical Christian sect with their own holy texts, they kinda had all the bad books burned. Which means that we may never know the literature the relatively-isolated Thomas Christians passed down from generation to generation. (Happily for them, Thomas Christians are still around in India, which hit on the idea of freedom of religion about two thousand years before America’s Founding Fathers made a big deal of it.) A hint of what might have been, comes from the “Jesus Sutras“, a set of Chinese-language Christian scriptures discovered recently in China, dating to roughly 1000 years ago.

Wildly heretical by most Christian standards, they poetically convey the transformative experience the faith has brought so many, over the years. If nothing else, they show the challenges of transposing subtle theological ideas across languages and cultures — something to keep in mind, when we consider that Christianity in Western Europe was a Gentile religion shaped by Latin-language liturgy based on manuscripts translated from Greek, about a Jewish founding community which spoke Aramaic! Suddenly the idea of the Buddha, a skinny Indian, being represented as a portly Chinese fellow, doesn’t seem so farfetched now, hmm? ;)

Now, I have sympathy for Thomas — so much so that Thomas was one of the few “normal” names I pitched for our son, early on — in part because I think he got a bad break with the whole “doubting” Thomas thing.

In the Synoptic Gospels (Mark, Matthew, Luke) the Big Three apostles are Peter, James and John. (And Mary, but that’s a different note, maybe for International Women’s Day or something.) While Jesus gives extra attention to the Big Three/Four, and Judas gets his big moment near the end, Thomas and the rest largely put in cameo appearances.

The Gospel of John is very different, coming from a different Christian community in a different area, with different priorities. And one of those priorities was sticking it to Thomas at every turn (hence the doubting-Thomas episode, among others). The Biblically curious only had one side of the story to go on, until a copy of The Gospel of Thomas was unearthed in Egypt about sixty years ago. Thought to’ve been written in a community near John’s community. And taking a few jabs at John’s beliefs about the Christ. Turn the other cheek, indeed…!  (This is the primary source for the preceding paragraph.)

So we now have the religious literature of two feuding, neighbouring faith communities, one of which came to overwhelmingly overshadow the other. To use a TV cartoon analogy, John is to Springfield as Thomas is to Shelbyville.

For many scholars, the Thomas Gospel is fascinating because parts of it may predate the Gospels. Among other things, it points to James the Just as the arbitrer of disagreements; he died in the early 60’s AD, while non-fundamentalist scholars tend to date the canonical Gospels to the period of roughly 70 to 100 AD. A healthy-but-not-overwhelming majority of scholars argue that Thomas came later, because other portions hint at the worldview of later-developing Gnostic Christianity. In a sense, it’s a case of whether scholars feel the glass is more half-full (parts of it seem early!) or half-empty (other parts seem late!).

As someone without a horse in the race, but with a chronic fondness for the underdog, I’m partial to the idea that there was an early Christian community espousing at least some of the ideas in the Gospel of Thomas, who didn’t get along with the community where the Gospel of John was written. Which would explain why both sides’ literature contains subtle digs against the other. It wouldn’t be the only case of this happening.

The unflattering depiction of Peter in the Gospel of Mark leads some scholars to think the author of Mark wasn’t a fan. Nor was John, who describes the “Beloved Disciple” in more flattering terms. (Tradition has it that the “Beloved Discipline” is John himself; convenient, eh? :) ) And nor was Thomas. But the fact that all three are uncharitable towards Peter, more or less proves he was an important figure in the early Christian communities. After all, if he was unimportant, why bother? In the same way, the Gospel of John’s criticism of the apostle Thomas suggests that there already existed a community identifying itself with that apostle, which had the “wrong” ideas about Jesus. Since Thomas doesn’t feature much in the other canonical Gospels, that community may have been pretty marginal. Perhaps because it didn’t yet exist…?  ;)


It should be emphasized that none of these human foibles diminish in any way the life-changing experience of faith these early Christians were trying to convey in the words and deeds and miracles they recorded. While we live in a scientific era with a strict binary division between fiction and non-fiction, this was not the case when so much of the world’s profoundest religious literature was written. So it’s unfortunate that we moderns tend to get tied down in questions of factual accuracy, when the point of such scriptures is to point to timeless truths, not event-specific ones. A good modern analogy might be the US Declaration of Independence, which says that “all men are created equal”. This is technically untrue — we’re all different in our DNA, socioeconomic background, and so forth — and also overlooks half of humanity, but we accept it based on the deeper truth it points to. So it was for our forebears, and their guiding documents, in an earlier age.


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* funnily enough, one of the conventions is to refer to the authors of the various Gospels as Mark, Matthew, Luke and John, despite the fact that these almost certainly weren’t the authors’ names. And though Matthew gets pole position in the New Testament, Mark was written first (then used as a quasi-template by both Matthew and Luke) hence the order I’m using here…

Central planning – not just for the communists anymore

(written Aug 22, 2011; uploaded Aug 8, 2012 … but still valid, I think!     :)  )

(also, Jesse was kind enough to post a lightly-adapted version on his blog, last year)

It’s been a rough few weeks for the capitalist system, which bestrides the globe like a teetering colossus. Not only has there been stock market turmoil worldwide, and the temporary threat of a (temporary) US default on its debts … but an esteemed, very well-to-do economist suggested that Karl Marx was right! In the Wall Street Journal, no less!

That would be Nouriel Roubini, whose claims to fame came from timely warnings about the US housing bubble (2005-ish) and subsequent US stock market collapse (2008-ish). Now, it’s important to note that he only said that Marx was right in that capitalism could collapse on itself. Not that it actually would. A slight distinction lost on many a lefty website in the past couple weeks. ;)


Most people are familiar with the spectacular failures of central planning in Communist regimes. According to the resurgently-fashionable Austrian school of economics this is because an economy is too complex to be managed by one expert, or even one committee of experts, regardless whether the clubhouse door reads “Politburo” or “Dragon’s Den”. Rather, society’s fastest path to prosperity consists of allowing every person to decide what’s in their best interest. It’s basically the “million monkeys at a million keyboards” approach. :)

A biological analogy comes from flocks of birds, schools of fish, and ant colonies, among others. These swarms function extremely well, despite being composed of simple critters following simple rules, and despite the anarchic lack of a leader directing things. Our own “simple critter rules” in modern society are probably along the lines of “try to get a higher paying job, and pay lower prices for stuff, within the laws of the land, and without making too many enemies”.

A business analogy comes from Toyota. Their quality went from hopeless to fearsome by training every employee to be competent enough to figure out how to do their own job better, and then allowing them to do so. If their management tried to dictate how each task was to be done, they’d’ve topped out at early-80’s American carmaker quality levels. ;)

In a similar way, they decided not to try to predict the right production levels for each model, colour, and trim level. Rather, they would pre-build enough cars to fill dealership inventory… and each time a customer purchased a vehicle, they’d build one more of that exact model, in that colour, at that trim level. (In economic nerdspeak, they responded to that “market signal”.) So if 5% of Corolla drivers wanted a green car with deluxe extras, in the long run 5% of Corolla production would consist of deluxe green vehicles.


Since the flaws of central planning / benefits of distributed decision-making occur in the public sector, the private sector, and even in biology, we can generalize that the USSR’s economic problem was ultimately that a small group of people would decide how to (mis)allocate most of the country’s resources. (The little people, after all, could still choose whether to wait in line for an hour for bread, or wait in line for an hour for shoes…)



Let’s move on to capitalism, now. In the past thirty-odd years, there’s been an immense concentration of wealth — particularly in Anglo-American countries (the US, UK, us, the Aussies). The US is at the leading edge of this trend, with the top 1% owning 42% of the wealth, or about six times as much as the bottom 4/5 of the population. And this means that in recent decades capitalism has moved towards the central planning ideal of a few people in charge of all the resources. This narrowing of perspective has in turn led to policies progressively more disastrous for the moved and the shaken… which was exactly the Soviet denouement.

I wish I’d come to this insight on my own, but I have to credit the thoughtful blog of a well-to-do American serial entrepreneur and, uh, military theorist. (I try to keep my reading varied. ;) )

Capitalism’s path back from central-planning roulette will require a more equitable (or at least, less inequitable) distribution of wealth, by which to rebuild the middle class. This in turn generally starts with higher taxes on the extremely wealthy. So one-time world’s-richest-man Warren Buffett’s recent New York Times editorial is timely; he asked why he paid 17% in taxes on his $40,000,000 of income last year, while his staff (earning probably one-thousandth as much) paid an average of 36%. Which is what Roubini was complaining about, in saying that too much wealth was being redistributed from labour to capital.


There would be a terrible irony if Marx was right and unchecked capitalism destroyed itself by evolving the self-crippling features of a communist economy, and one does hope that we can reform our current market systems before things get worse. I wouldn’t mind a future that leans Swedish: for all their semi-socialist tendencies, the Nordic smorgasborgers still manage to regularly create free-market titans.* That’s a combination which could conceivably appeal to both the Conservatives and the (now-post-Layton) NDP. Don’t fear, though, I’ve become benumbed to vain aspirations… ;)

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* among them Ericsson, H&M, IKEA, Metro (the free commuter papers), Saab and Volvo, Tetra-Pak, and even BRIO, makers of those beloved wooden train sets of my youth.  Sure, some of them may now be on their last legs, but no doubt there are other emerging Swedish entrepreneurs to fill the gaps…

Bankers uber alles

A few weeks into a planned three-month stint as a full-time parent, I’m amazed at how much less time I have; the only breaks I get in the day, are when our son naps! In contrast, I could reliably eke in minutes here and there throughout the workday; if I had a meeting in four minutes, or was waiting for a kettle to boil to refill my tea, I could whip out a paragraph or two, no problem.  You could think of it as the typing equivalent of the scam in Office Space where the heroes skim a half-cent off everyone’s hourly wages, into a slush fund.  The movie referenced Richard Pryor pulling the same scam in Superman 3, a movie with which our elder (or less-hip) readers may be more familiar.  ;)


There was a recent IMF study not too long ago which concluded that a too-big financial sector was an impediment to growth.  The explanation is that when the financial sector gets too bit, it causes the misallocation of capital.  Which I’m guessing, based on recent experience, is code for “derivatives” and other highfalutin forms of gambling.

One sign that more financial innovation is worse-not-better, come from high-frequency trading algorithms — an example of which is the software “glitch” that caused Knights Capital to lose $440 million in 45 minutes last week.  And that wasn’t market capitalization, that was basically cash-on-the-books!  :)

High-frequency trading algorithms have flourished in the past few years, as under-regulation made way for un-regulation.  These enabled financial behemoths to make huge trading profits virtually every day, off of their customers, by “front-running”.  Which, as I understand it, is a fancy way of saying they inserted themselves as middle-men into every trade.  HFT is defended as the latest in financial innovation, which is a like saying bridge tolls are the latest in automobile technology.  ;)

HFT algorithms submit bids-to-buy and offers-to-sell hundreds of times per second (see here for pretty graphs) in various patterns to determine exactly what price sellers and buyers are seeking, and are willing to accept.  The bids and offers would be near-immediately cancelled, because the investment banks had no interest in actually following through with them — for all intents and purposes, these were fake bids and offers.  (Which would make HFT trading a form of quote-stuffing.)  The brokerage firms would then run-in-front of the buyers (hence “front-running”) to buy the stock first, then immediately turn around and sell it to the other buyers for just a bit more.  The other buyers, in many cases, being the brokerage house’s clients.  How does that saying go?  “Do unto others before they can do unto you”?  :)

Putting it in real-world terms, if a mutual fund wanted to buy a million shares of BigCorp at $10, but were willing to pay $10.05 per share, in an earlier era they might have gotten an average price of $10.02.  Thanks to HFT front-running, their average price might be in the whereabouts of, say, $10.025.   As the guys in Office Space proved, getting a fraction of a cent off of zillions of transactions, can be really lucrative!


The usefulness of a big financial sector may actually get some discussion in this year’s US elections, since Mitt Romney made his fortune as a financier.  His company, Bain Capital, would purchase companies, loot everything of value, then shut the doors.  Kind of a profit-through-bankruptcy model.  Romney was caught a few months back saying “corporations are people”, inspiring Stephen Colbert’s SuperPAC to air an ad comparing Romney to a serial killer (Mitt killed a lot of companies; companies are people; therefore Mitt is a serial killer).

Of course, Colbert is exaggerating for effect.  :)  Romney wasn’t so much a serial killer, as a guy who bought people and turned a profit by selling off their organs; if they died, that was unfortunate, but… hey, wait, that meant there would be more organs to sell!  It’s a kind of “the sum of the parts is greater than the whole” philosophy.


It’s well-known that Romney is a Mormon; and congratulations to those guys for getting one of their own on the Presidential ticket.  Despite this, I think Hinduism is the most illuminating lens through which to understand the Presidentially-aspiring Romneys.  (Mitt’s father George tried to get the Republican leadership nomination in the 1960’s.)  While George Romney led a car company, American Motors, that created jobs and prosperity for employees and suppliers alike, Mitt Romney was a corporate raider whose company, Bain Capital (fitting, that) would buy other companies, extract the wealth, and let them go under, causing misery.

Applying a Hindu overcoat to the Mormon Romneys, we might say that George Romney was the Brahma (“the creator”) to Mitt Romney’s Shiva (“the destroyer”).  ;)


As an appended aside, the fact that Bain was allowed to continue doing what it did, may reflect the fact that for the past generation the US has followed a policy of deliberate deindustrialization in favour of a service economy.  Pity then, that too much finance isn’t good for you, eh?  One definitely gets the impression that industry in Germany, other European countries, and Japan remains healtheir than in the Anglo-capitalist countries have (US, UK, Canada, Australia).)


Still, the foibles of Knights Capital, Bain Capital, and even HFT front-running, are beer-league infractions compared to the scandal surrounding LIBOR — the London InterBank Offered Rate — which investment bankers have been manipulating to their benefit since 1991 or earlier.  That’s so long ago, the Soviet Union was still around!!

Just as the central bank’s prime rate is the reference rate for mortgages in many countries, LIBOR has been a reference rate for probably trillions of dollars of loans and investment products (“interest rate swaps”) over the years.  So LIBOR manipulation is a Very Big Deal — conceivably, in a just world, every affected party could sue for damages.  And according to Matt Taibbi, the floodgates may have started

Fortunately for those involved, we don’t live in a just world, and the principals involved seem as likely to go to jail, as the Washington Generals are, to beat the Harlem Globetrotters…  :P


The acknowledgement of LIBOR manipulation gives credence to gold enthusiasts’ long-held insistence that gold prices are also manipulated.  Of course, given that prices have gone up five-fold in 12 years, it can be hard to feel empathetic.  ;)  There’s also the reality that the world is ruled by is’s, not should’s.  Enbridge might think the Northern Gateway pipeline should get built; whether it is built, is another thing entirely.  Titans and insiders should play fair, but alas, in life, that’s not the way to bet.  :)


The chart which probably best shows why gold bugs have been up in arms for years, is the following.  It shows daily price movements, on a percentage basis, over the course of four years (from 2006 to 2010).  Visually, you can see that in each two-minute span, prices generally move a maximum of about ± 0.004%.  Except for one wee anomaly at -0.018%.  Which occurs exactly when markets close in London.  Where brokerage houses have been coincidentally manipulating LIBOR for the past twenty years.  Smoke, meet fire; fire, smoke.  ;)


I don’t think such price charts follow a “normal distribution” as defined by statistics, but if for our purposes we pretend they do, and we assume that one standard deviation is ±0.003%, that would mean 99.7% of the data would fall within ±0.009%, which looks roughly right.  This would also mean that the -0.018% datapoint represents six standard deviations, which screams “special cause” as opposed to “nothing to see here, but normal variation”.

I can’t pretend to know these apparent chicaneries’ intricacies, but it would appear that gold has a habit of dropping violently on options expiry dates, when extraordinary quantities of the stuff seem to enter the market.  Adding to the sense of Something Very Awry, the CFTC may apparently drop a four-year investigation into price-fixing in silver futures, without publishing their findings.

Still, for all of that, it would seem the precious metals will continue to be a reasonably good investment class, at least until stocks’ P/E ratios reach “end of bear market / start of bull market” territory.  After all, if years of possible manipulation can’t stop a five-fold rise, how likely is it to prevent further increases going forward?