September 2011

The Ascent of Money

The Ascent of Money, by Niall Ferguson ★★★★★
The review reluctantly receives 5 stars in that I disagree with many of the suppositions and conclusions of the author. Yet, Ferguson makes a fascinating story of the money world that is quite worth reading. His writing style tends to lead to many thought-provoking hours if one takes the time to consider the implications of money history. And, as the subtitle states, it is a financial history of the world. Ferguson presents six chapters with an epilogue questioning whether the financial world as we know it will persist. But, that question is not to be approached in this review, as I don’t have a clue. The six chapters neatly divide money history into 1. The history of stocks, 2. The history of bonds, 3. The history of central banks, 4. The history of the insurance industry, 5. The history of the mortgage market, focusing on the US, and 6. Globalization and its implications in the world of finance, including the role of the IMF and World Bank. Ferguson makes a good but not solid case against a gold standard in economics, though he never really challenges the gold standard as such. The strength of this book is that Ferguson is able to show how all monetary systems are not fool-proof and are highly subject to the foibles of man. Perhaps the world economic boon suggests that the economic system with corrections is the best that could be, though a serious crash, perhaps sufficient to enter the world into another dark age, might rule that out. My distress with Ferguson’s book is that he left much unanswered. How did civilizations such as Rome in times past build massive systems without stocks, bonds, derivatives, and hedge funds? How was America able to be most successful in the pre-Jekyll Island days? Is it right that there is a massive surge in “money managers” that make ungodly sums of money for doing nothing but gambling? Shouldn’t money managers and corporate executives be held personally responsible for failures since they receive massive personal gain from success? I’ll leave those questions and many more to a subsequent book by Ferguson. In the meantime, go out and get a copy of this book to read-you’ll be glad you did.

Review of three economic documentary films with commentary

I am currently reading a book by Niall Ferguson on the history of money which will soon be reviewed, but have diverted to three films, all highly recommended by a broad spectrum of people on, and thus I felt reasonable to watch. In particular, I wished to learn more, after the fact, about the nature of the economic collapses of the last decade. In the end, I feel that I could have simply sat down and read a text from Ron Paul or Pat Buchanan and had a better feel as to the nature of the problems with the system of economics in this nation. I will review each film in order in which I watched them.

Collapse, starring Michael Ruppert ★
This film was absolutely awful.  The majority of the shots were various angles on Michael sitting on a single chair in the middle of an otherwise empty warehouse. We had to endure his continual preoccupation with cigarettes. Michael’s only message was that the entire system is going to break because the world is going to run out of oil. This will be followed by mass chaos and mass starvation, war, and disruption of all the social aspects of life.  He seems to fix most of his blame on George Bush. Michael’s brand of alarmism is disingenuous, in that he has essentially given up on the system. The final views are him in his home which has past-due taxes and bills that he cannot pay. Poor Michael! While there is truth in his thesis of the purported coming system collapse, he lacks not only credibility but also the ability to develop his claims in a convincing fashion. This film is a total waste of even the time it takes to watch it.

Enron, The Smartest Guys in the Room, editor Allison Ellwood ★★★
This film is a documentary of the rise and fall of Enron. It is a sad story in many ways, in that it reflects what is happening throughout the financial structures of corporate America. Unfortunately, the editor identifies what I believe to be false or superficial causes for the collapse of Enron, including the government giving in to demands for increased deregulation. The prevailing undercurrent in this film was a statement against deregulation. In fact, the documentary failed dismally to identify where deregulation was a great evil, outside of holding people responsible for their actions and maintaining transparency in issues that involve public concern. There is a sense of anger left at the end of the film, as to why so many of the top executives could make out with hundreds of millions of dollars, middle managers and traders with millions of dollars, and yet leave many pension plans (such as with PGE) destitute. The film fails to identify a greater evil lurking in the very heart of corporate America that may lead to such corporate collapses many more times over in our short lifetime.  This film is worth watching if one has not stayed on top of the issues that led to the fall of Enron.

Inside Job, directed by Charles Ferguson, narrated by Matt Damon ★★
This film is a documentary about the 2008 financial collapse. It attempts to offer an in-depth analysis of what went wrong with the financial system, placing most of the blame on none other than George W. Bush (surprise?).  No mention is made of the fact that it was a very socialistic democratic congress that essentially controlled governmental financial dealings. Oddly, the film uses two faux-pundits to help sort out was went wrong with the housing bubble and the collapse of AIG and Lehman Brothers. The first was Barney Frank, who waxed eloquent about how proper regulations were not put in place on Fannie Mae and Freddie Mac. Oddly, it was Frank and the democratic party that refused to listen to warnings. Barney is more to blame than anybody is the collapse of Fannie and Freddie. The second faux-pundit was George Soros, the consummate hypocrite who has made more billions off of shady dealings on Wall Street than anybody alive. The only benefit that I received from the film is that I was left with the impression that it is the fox that guards the financial hen-house.  The film shows adequately that even the academic institutions are now besotted with corruption with very lucrative advisory roles given to many economics professors.  It has enough fairness to admit that even St. Obama has failed the faithful by continuing Wall Street personnel such as Larry Sommers, Timothy Geithner, and many others who have failed the public trust through corrupt actions.
Conservatives tend to defend Wall Street as the model of free-market economics. The argument is against limits on top executives since free markets determine what a person earns. Such an argument is certainly true for the prior builders of industries that have made America, such as with Andrew Carnegie, The Rockefellers, etc., and is also true of modern industry builders such as Dell, Gates, and Jobs. They deserve what they have earned. I have much more trouble with the astronomical profits earned by the financial gamblers of Wall Street who run the banks. They produce nothing, their risks are not great since the Feds will bail them out, and they will be able to make catastrophic decisions and still take home at least 100 times what I will earn in a lifetime.  Ferguson argues that these banking systems create the “wealth” that powers modern society to drive itself forward. Yet, I disagree to some extent. America grew quite fine before the Federal Reserve was created on Jekyll Island in 1913. There was never an issue of phantom monies coming and going, of corruption and dishonesty controlling and regulating itself. Why are normal politicians not allowed to see into the workings of the Federal Reserve? Because we just can’t understand? If banking is truly that complex, then we have a serious problem. Strangely, many evil people such as Sommers and Geithner were given positions by George Bush, only to be held on to and adored by St. Obama.

As brother Dennis rightly states, there is minimal difference between the Republican and Democratic Party in many things, and economics seems to be one of them. Few besides Ron Paul have the wisdom to identify that the Federal Reserve is built in a fashion to protect corruption, promote parasitic high-rollers in the banking world, but in whom we are supposed to trust our money. Is it no wonder that the world economic status has become unglued?

Glacier National Park Cycle Road Tour

The adventures of Ken and Russ 01SEPT11 to 05SEPT11

Logan Pass
01 SEPT11 Finished call that went overnight, with few calls. I was able to sign out to Sneller Moreller and then take off.  I met Russ at his house and we took off at 8:15am. When we got to Whitefish, we had dinner and then stayed in a total dive of a motel. Drive was 570 miles, taking 9 hours.
Heading toward West Glacier
On the road to Essex
Izaac Walton Inn

  Train headed to Marias Pass

02 SEPT11 Parked car at Columbia Falls Airport, and took off. Stayed at the Isaac Walton Inn in Essex, MT. 3297 Cal, 719 meters of ascent. 4:24 time 85.5 km. This hotel is a historic building that housed railway workers in yesteryear who maintained the tracks in winter. It is now an elegant hotel, where one could watch the trains go by, just west of Marias Pass.
03SEPT11 Essex to  St. Mary via Looking Glass Hill Time 6:35, Distance 96.7 km, Ascent 1534 meters, cal 3883.
Marias Pass
View from Looking Glass Hill
Marias Pass went quite smooth, about 400 meters of climbing, and we arrived in East Glacier Park at about 11:30, so had lunch there. The route immediately started climbing up Looking Glass Hill. The views were stupendous, but the road had no shoulder, was busy, and persistent 6-7% grade, another 400 meters of climbing. The rest of the trip to St. Mary was three subsequent climbs, finally exhausting me, but Russ was handling all okay. The final 8 km descent was glorious. We stayed in a small budget hotel in town.
04SEPT11 St Mary to West Glacier via Going to the Sun Road across Glacier National Park. 873 meters ascent, 3143 Calories, 4:44 time, 73.5 km. Seven miles of this trip (not counted) was via a mandatory shuttle bus along Lake McDonald. This was moderately strenuous after a very strenuous day. Russ handled it well, but he was performing the first Touring time trial up Logan Pass.
Headed West on Going to the Sun Road
Peak seen from Going to the Sun Road
Near the top of Logan Pass

 Logan Pass

Peak seen from Logan Pass

Logan Pass
Descent from Logan Pass
Western Going to the Sun Road
West end of Going to the Sun Road
05SEPT11 West Glacier back to Airport, and then drive home.  37 km, 1:43 time, 1222 Calories, 169 meters ascent.
We returned by way of route 2, which left a mile of tight canyon road, very suited for photography, except that there was no shoulder on the road so it was impossible to comfortably stop. After returning to the car, we were able to drive home in reasonable time.