“Another artificial factor stimulating investors’ demand for U.S. debt is the lack of alternatives. Because of Europe’s problems, investors there are limited in their choices of finding safe government-backed securities. In other words, interest rates on U.S. debt remain low because we are the best-looking horse in the glue factory.”
“Eventually Europe will solve its problems, or another country’s debt may unexpectedly emerge as a more attractive investment than U.S. Treasury obligations. Understanding that our budget deficits and national debt are on an unsustainable path, bond investors will put their money elsewhere. The fundamentals of our fiscal health do not support the low interest rates bond investors are now paying. Just as the poor credit quality of securitized mortgages did not support the high values assigned to mortgage-backed securities before the crisis, the poor credit quality of our overleveraged government does not support low U.S. bond yields.
When investors do eventually turn to safer alternatives, interest rates will skyrocket, with devastating consequences for our financial system and our economy. Just about every interest rate on every financial credit product offered in the U.S. is influenced by the rate the U.S. Treasury pays on its debt. Banks and other financial institutions will have to start paying higher interest rates on their deposits and other borrowings to fund themselves, even though the loans they have on their balance sheets are paying lower rates
Excerpt From: Bair, Sheila. “Bull by the Horns.” Free Press. iBooks.
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American interest rates are low and our treasury securities are in demand not because we are great but because we are the best of many bad options. We remain vulnerable to others that may get their act together faster than us.
Of course, if one’s knowledge of history is reduced to tweet-length CliffsNotes, it’s natural to feel triumphant and unique, to believe one is living in truly exceptional times—an intellectual fallacy I call “epochalism.” It’s not a preserve of Internet optimists only; the pessimists love epochalism as well. After all, their criticisms matter only if the phenomena they are criticizing are seen as unprecedented. Thus, a self-proclaimed Internet pessimist like Andrew Keen can proclaim starkly that the growth of social media is “the most wrenching cultural transformation since the Industrial Revolution” without bothering to produce much evidence. Keen simply presumes that the unprecedented scale of today’s transformations is self-evident—a hallmark assumption of epochalism.
By presuming that we are living through revolutionary times, epochalism sanctions radical social interventions that might otherwise attract a lot of suspicion and criticism. But in truly revolutionary times, everything goes; why not model politics on Wikipedia after all? All this talk about revolutions is just a clever way of legitimizing radical agendas that few would accept in normal times. The paralyzing influence of epochalism induces passivity and limits our responses to change, for the unfolding trends are perceived to be so “monumental and inevitable that all resistance seems futile. It blinds us to the banal and highly fleeting nature of the “revolutionary” trends under consideration.
After all, it’s much easier to proclaim yet another digital revolution—and to coin a requisite buzzword—than to wait and see if the observed change, instead of being a complete overthrow of established practices and principles, is just a shift in order and magnitude. But the trickery doesn’t stop here, for the novel buzzword—coined only because we are apparently on the brink of a new era—is fed back into the system as a definite proof that the era is indeed new. Such circularity—whereby “the Internet” is seen as revolutionary because of Factor X, but Factor X is seen as revolutionary because of “the Internet”—is silly, but in an era of profound and revolutionary change, this passes for deep insight.”
Excerpt From: Morozov, Evgeny. “To Save Everything, Click Here.” PublicAffairs, 2013-01-17. iBooks.
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We treat the new revolution in technology as if it provides grounds for dismissing long established truths and principles. Yet compared to the printing press, the internal combustion engine, flight, the auto, electricity, cellular technology, and nuclear power perhaps this new technology is not so ‘epochal’ as we think. Perhaps is just a progression of technology from the pen to the printing press to the word processor and then to the text message. However we apply technology to the same task we may be able to do it faster and wider but content still counts. Technology has increased the ability to create solutions but it does not necessarily make it easier to assess the problem.
Morozov notes that we able to come up with solutions before we are clear about the problem. We overcome imperfections that give life meaning.
What Data Can’t Do by David Brooks at The New York Times, 2/18/13
Data struggles with context. Human decisions are not discrete events. They are embedded in sequences and contexts. The human brain has evolved to account for this reality. People are really good at telling stories that weave together multiple causes and multiple contexts. Data analysis is pretty bad at narrative and emergent thinking, and it cannot match the explanatory suppleness of even a mediocre novel.
Data creates bigger haystacks. This is a point Nassim Taleb, the author of “Antifragile,” has made. As we acquire more data, we have the ability to find many, many more statistically significant correlations. Most of these correlations are spurious and deceive us when we’re trying to understand a situation. Falsity grows exponentially the more data we collect. The haystack gets bigger, but the needle we are looking for is still buried deep inside.
One of the features of the era of big data is the number of “significant” findings that don’t replicate the expansion, as Nate Silver would say, of noise to signal.
People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.
In times of universal deceit, telling the truth will be a revolutionary act.
We have now sunk to a depth at which restatement of the obvious is the first duty of intelligent men.
Freedom is the right to tell people what they do not want to hear.
All the war-propaganda, all the screaming and lies and hatred, comes invariably from people who are not fighting.
The nationalist not only does not disapprove of atrocities committed by his own side, but he has a remarkable capacity for not even hearing about them.
Political language… is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.
All political thinking for years past has been vitiated in the same way. People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome.
All above quotes from:
In the United States today we are facing the usual calculus of impossibility, recited by the familiar aspirants to a master plan. It is said we must abandon economic freedom because our frontier is closed; because our biosphere is strained; because our resources are running out; because our technology is perverse; because our population rises; because our horizons are closing in. We walk, it is said, in a shadow of death, with depleted air, poisoned earth and water, and a fallout of explosive growth showering from the clouds of our future in a quiet carcinogenic rain. In this extremity, we cannot afford the luxuries of competition and waste and freedom. We have reached the end of the open road; we are beating against the gates of an occluded frontier. We must tax and regulate and plan, redistribute our wealth and ration our consumption, because we have reached the end of openness.
But quite to the contrary, these problems and crisis are in themselves the new frontier; are themselves the mandate for individual and corporate competition and creativity; are themselves the reason why we cannot afford the consolations of planning and stasis. The old frontier of the American West also appeared closed at first. It became an open reservoir of wealth only in retrospect, because the pioneers dared to risk their lives and families in the quest for riches, looking for gold (of which there was relatively little in the United States) and finding oil (ten of little use). Only in retrospect were the barrens of Texas and Oklahoma an energy cornucopia, the flat prairies a breadbasket for the world, or Thomas Edison a catalytic genius and Henry Ford the salvation of capitalism is the grips of an earlier closing circle. The future is forever incalculable; only in Freedom can its challenges be mastered.
From the new edition of Wealth and Poverty by George Gilder