The movie that cost 2 Trillion dollars

We went to watch “Inside Job”, a fabulous movie about the crisis, mixing interviews of the highest profile international experts and leaders, with an outstanding narration by Matt Damon !

It pretty much explains what is already laid out in several books, but hearing the confused explanations of top players, their shameless lies, just give the crisis an additional dimension of amorality. It leads one to question what kind of system brings such shallow characters to positions of power or influence – not only in business, but also in politics and academics. The interviews of Eliot Spitzer, former New-york Attorney General, are very revealing, and it’s a shame no prosecutor of that caliber is going after those who should be held accountable for having created the system and profited from what ended-up in ruin for others.

An absolute must-see, you can get all details on IMDB at http://www.imdb.com/title/tt1645089/

Demography, Economy and Society

A theme is emerging in lots of recent readings – the impact of demographics on society and economy. We’ve probably ridden a wave of demographic explosion in the West over the past 50 years with the Baby Boom. And it’s interesting to look at the excesses of the bubble years, and the current bust, as the result of the savings of retiring Baby Boomers looking for high yields.

An example I recently read explained the interest rates as the demand-supply balance between the older and younger generations. The older people have savings, and in order to secure their retirement want to lend it to secure regular yield, as high as possible, ie high interest rates. The younger generation has no savings, but wants to borrow money to buy a home, start a business, and are looking for low interest rates. The proportion of both population hence drives the interest rate level – it is high if there is a large proportion of young people, low if there’s an excess of old people.

Aouda and I were born when the Baby Boomers entered the workforce, and when I read this all of a sudden the high interest rates my parents paid on their mortages started to make a lot of sense – as did the current low interest rates !

Of course, our world itself is highly bipolar in this regard – one of the biggest difference between the West and the high-growth countries is the demographic structure. Just look at an interactive map of the world as they now exist, and just browse various countries for the average age of their citizens, you will be amazed at the differences – US and Europe at 40 years (and sorry Mr Rumsfeld, there’s really no “Old Europe” and “New Europe” – it’s all pretty old all the way to Russia), versus India at 25 and Africa at 20 years of average age ! (Never forget Africa and its 1 Billion of people, even if they don’t make the news as they’ve not taken off economically yet). Very interestingly, China is already at an average age of 35 years, quite close to the US average age actually – not clear what the implications are, except it might mean China might be the Japan of yesteryears, which after explosive growth attracting everybody’s attention will rapidly stabilize and have to cope with its own issues.

This is such a fascinating topic, especially when you think beyond economics and look at the societal implications. A large young population giving us Woodstock, the Hippies and May ’68, what will these same folks drive in our culture and politics as they retire and become unsurprisingly conservative ?

Aouda is reading a book called “The 4th Turning” about supposed patterns in generations behaviors – interesting to see how that can shed some light into this issue !

The end of the Party

I have recently finished a good book : “Whoops!” by John Lanchester. It is another of a long series of readings i have done over the past two years since the crisis hit. Like most of them it explains the root causes of the financial and economic crisis, and the lack of cure so far. It does so probably less accurately but in a more lively and entertaining manner.

One of the most interesting contentions of the author is that with the end of the cold war and the obvious failure of communism, capitalism found itself unchallenged as a paradigm. The most extreme supporters of free unbridled markets found themselves in a position of ideological monopoly, and were able to dismantle the apparatus of controls that had been put together by governments after the crisis of ’29 and the social safety nets built during the cold war at a time when communist countries were claiming to bring security and happiness to their citizens.

It is an interesting theory, but I am not entirely convinced by the logic of the arguments. It certainly fails to recognise the historical events that were the opening up of India and China and their return to the forefront of the international economic scene after two centuries of absence. It also does not mention the impact of an ageing western population, and especially of the baby-boom generation, creating a glut of retirement money chasing yields that a smaller number of younger people could not satisfy -unless that is one could find a way to hand out large numbers of real estate loans to folks who could never pay them back …

Still a very interesting read !

P.S. One particular paragraph in the book made me think hard … And not very successfully so far ! I searched the Internet a bit and found the following link which will show you how confusing some statistics can be.
Click here for link

Happy thinking !

Understanding some limits of modern science

Reading a great book “13 things that don’t make sense” by Michael Brooks. It throws great perspective into news you hear about dark matters and other current scientific pursuits. Bottom line we know much less than we pretend to, and there is experimental data that we have trouble fitting into our models. This reminds of scientists saying in the 19th century that everything had been discovered (and parallels in human sciences of “the end of History”). It is great and refreshing to see that we are but in the infancy of understanding the laws governing our world, and there is always going to be room for new Einsteins !


– Posted using BlogPress from my iPad

Is the world evolving too fast for our species ?

Aouda and I had a great saturday-morning-in-bed philosophical discussion yesterday.

Has the world become too complicated for us humans ? We are for a large part primates who owe their evolutionary success to their propensity to cooperate as part of a close-knit group. That’s why language is as important in defining us as opposable thumbs. It’s also probably why we are so good at wars and genocides.

Civilisation until recently had kept us in the environment we like best. It provided for strong leadership, well established values guiding each of us in our everyday lives.

The western world pursued the logic of group domination to its extreme, enjoying a fantastic couple centuries of rise to preeminence. But it probably got traumatized by the butcheries of WWI and WWII. They demonstrated that masses of indoctrinated individuals, bound together by strong group beliefs, can bring horror and destruction to such a scale that it threatens the basis of civilization itself.

So … regardless of the origin of its change of mind, over the past 50 years the west – and especially Europe – has dramatically rewired its social model to put the individual at the forefront. Religion has faded almost totally, families barely hold any power over their members, military service is gone, and divorces are becoming the rule.

This is great news in a number of ways. More creativity, less violence and frustrations, all these probably resulting in greater wealth. It will also probably be difficult to put these populations in an uniform and tell them to go kill others for god or country.

But – at a time when there is less material needs and poverty than ever – people seem to be more unhappy than ever. They value their freedom enormously, but seem to struggle to deal with the ensuing complexities. They want to do what they want, according to their own individual desires of the moment, but they long for the lost sense of community with their fellow humans.

Is Internet a successful subsitute ? Maybe – and its success is probably linked to our deeply-ingrained need for constant interactions with others. But it probably still lacks the “warmth” of real human interactions, and

So what happens next ? Well mostly more questions 🙂

Will we see a war of civilization with the new Eastern powers – India with its community based social structure (but with its elite and middle class moving fast to the western model) – China with its strong government managed model ?

What of the US ? Has it kept kept the sense of community / duty / religion that Europe has lost.

Will humans evolve to satisfy themselves with a more individualistic way of life ? This seems unlikely due to natural evolution because few people really die of loneliness – but can education foster the right balance between individual aspirations and the need to cooperate as part of larger groups ?

Oh well – enough for a saturday morning in bed.

Yours respectfully,

Phileas.