1gor

  it was the lack of regulation that caused it

So it was politically motivated regulation that caused this recession/depression.

also "One thing that's unsettling is that many of the assigned WMo codes for Canadian stations do not return any hits with a web search. Usually the country's met office, or at least the Weather Underground, show up – but for these stations, nothing at all. Makes me wonder if these are long-discontinued, or were even invented somewhere other than Canada!"

So much for 'scientific model supported by hard data'.

  If you think that Saiers is in the greenhouse skeptics
  camp, then, if we can find documentary evidence of this,
  we could go through official AGU channels to get him ousted. 
  (From Tom Wigley).

http://en.wikipedia.org/wiki/Tom_Wigley

  If you think that Saiers is in the greenhouse skeptics
  camp, then, if we can find documentary evidence of this,
  we could go through official AGU channels to get him ousted.

  You can chart the damage done by Goldman Sachs and 
  their   gang of thieves by looking at commodity pricing 
  pre- and post-ICE. Before ICE, commodities followed a more 
  or less normal growth path that matched global GDP...

Combine that with some famous central bank character wanting to drop money from helicopters to avoid the US sliding into Japan-like deflation...

Combine that with China and the Pacific region starting to emerge as economic powerhouse about that time...

And you can send any European pension fund shivering from anticipation of collapsing dollar (and value of their treasury holdings) and scrambling to protect themselves by buying commodity index swaps. The demand was there and Goldman Sachs (and other smart/hard working banks) obliged and engineered as many commodity-linked instruments as possible, supported by as much liquidity as they can create.

Commodities boom of past several years is simply an implicit devaluation of the dollar. Commodities supply is more or less fixed. Chinese industrial growth has been between 10 and 25% since 2000 (affecting world demand for commodities/energy). US dollar interest rates have been somewere around 2% on average since then, and credit growth was massive (dollars are still plentiful in these times of 'stimulus').

How would the author explain gold breaking $1100 this week (up from under $300 in 2000)?

You can blame this currency collapse on the 'gang of thieves' or on the US monetary authorities, or simply on the historical trends. I won't care that much, but the article author is obviously an ignorant populist.

In 1986 Andy Lo and Craig MacKinlay performed a rigorous statistical test of Efficient Market Hypothesis and decisively rejected it, simultaneously supporting previous findings by Benoit Mandelbrot. Unlike Mandelbrot’s their work has been broadly discussed and accepted by the scientific community.

Also, I would not agree with your characterisation of China and its regime. Its current government has been doing wonders lifting hundreds of millions of people out of poverty, and cases of corruption unfortunately happen everywhere -- from Chicago to Shanghai. They do have a bit different social organization, but its current modification seems to work for them for the past thirty years.

   Meanwhile, the Chinese are unlikely 
   to allow their currency to appreciate in value

1. Traditional deposit/lending.

Essentially, banks fund themselves short-term through deposits and then lend long and medium term to businesses. This duration mismatch is always risky (think of 'run on a bank'), but one can argue that banks perform essential function in the economy by analyzing credits and channeling savings to small/medium business.

2. Transaction business

It is common for a major bank to have a lock-in onto most of day-to-day transactions that people conduct. Salaries get paid by wire, then get withdrawn through many of cash machines, letters of credit are written for international trade transactions etc. For large corporate business, an international bank can arrange financing for a new oil field, then distribute this funds through its international branch network. This business is not particularly high-risk and it is not 'immoral' however you look at it. It is simply passing money around.

3. Securities and derivatives trading

A broker firm who sits between the issuer of securities (or derivatives like swaps etc.) and the buyer of securities/derivatives is not supposed to expose itself to much risk. That's why they are called a 'broker'. Godlman Sachs is a broker, and so was Lehman Brothers. They don't do deposit/lending business of any significance. Of course, in real life they do proprietary trading as well and can get hurt (like Lehman did, who carried a lot of unsold junk in its books). These institutions can also can hurt others, stuffing their clients' books with crap assets (like sub-prime mortgages etc.). But then... buyer beware, isn't it?

Actually, even through the public lumps all three above business models into 'banks' category, I would stick to orthodox definition and separate them into 'commercial banks' (doing (1/2) above) and 'investment banks' (doing (3)).

So why so many 'banks' gone bust recently and why there is so much pain around?

It is because 'commercial banks' from category (1/2) above took the easy path and stuffed their balance sheets with securities/derivatives with embedded nonlinear risk. They were supposed to do straightforward lending to businesses, yet they went into buying 'AA' rated securitized junk. The same applies to insurance companies who also have to carry assets on their balance sheets to off-set their promises to policy-holders.

And now populist press are blaming traders/brokers for greed and irresponsible behaviour of commercial banks managers.

As to the questions 'why do they make money', we need first to define which 'banks' are we talking about. Investment banks? Commercial banks? There could be another post altogether.

A collapse of several banks/insurance companies would trigger a run on the remaining banks, complete break-down of business lending, mass bankruptcies among non-financial companies, mass layoffs, civil unrest, sky-rocketing costs of servicing state debts, drop in foreign capital inflows, currency devaluation and likely default on government bonds leading to more misery. The crisis would be world-wide, affecting international trade and investment and well-being of billions. The costs of doing nothing would be enormous.

Markets is a complex nonlinear system that can go into a state of positive feedback -- trouble would breed more trouble. So US central bank tried to stop this vicious circle from developing by preventing Wall street from collapsing.

These measures may still fail, primarily because earlier the Fed did not do anything to prevent said positive feedback when markets and investment risk appetites were going up (also known as 'the bubble').

Populist soundbites on HN always surprise me.

    The Russians still won't discuss it, and Americans 
    at the highest levels—including former top officials 
    at the State Department and White House—say they've
    never heard of it.

    "Yes, but the whole point of the doomsday machine 
    is lost if you keep it a secret! Why didn't you tell 
    the world?"

   be careful with ActiveRecord

The truth is that a VC sits on a portfolio of undervalued options. A success among pool of startups is always a non-linear event. It is a meteoric rise, a market-share grab which often actually creates a completely new market. A very few successful startups will make a large pool of dog investments still a very profitable business. One option will fire, the rest will expire worthless.

That's why a VC has to drive all of his startups towards increasing risk and trying to grow big, fast. Go for a large team. Invest, borrow, rise capital. One of you will win, the rist... what do I care?

Now, from the point of view of entrepreneurs, they often get a very poor deal. An engineer has only one option in his portfolio -- that is his venture. Its success is largely dependent on random factors like stumbling on a network effect, or tapping a new undiscovered need of millions. What would be a true price of such an option?

Whatever the price, young guys have poor bargaining power at the negotiating table facing seasoned VCs. Older guys do better. For a young guy a startup is not only a way to riches -- it is also a way to self-actualise, to define one's identify. An old guy does not need this crap. He has accomplishment behind his belt. He can drive a hard bargain and to get better deal from a VC. He is driven to get a good business deal, and will not go dancing across the room just because his name features in some crappy termsheet.

An old hand is also more likely to take less risk and to shoot for a long term, VC appetite be damned. They will be practicing more 37signals-like approach. Profitable? Have positive cashflow? Great! And fuck your IPO plans, at least until I feel the time is right.

So, it is no wonder that older founders have better success rates. They exploit the VC industry when they want to, not the other way around.

The companies that went directly to customers first on merits of their product and then attracted attention of rolodex-waving vcs include google, 37signals and probably pg's viaweb (sorry for non-original examples).

Remember, internet IS a network already. Even mentor knowledge is available through Google. Leverage this network and you're in business. You do need some hard technical knowledge (and books) to achieve this, though.

On the other hand, stuffing startups with executive 'mentors' who bring 'experience' but also grab tons of call options is a venerable vc industry tradition.

As somebody who went once through a vc-funded startup that was later killed by the same vcs, I remain ever sceptical about their motives and see this article as a piece of vc propaganda.

Essentially, the article calls you to try to be Steve Jobs, not Steve Wozniak. If you are an MBA type rather than a hacker, then go ahead, skip the books, get to know right people, take care of you network and create 500+ connections in your linkedin.

Oh, by the way, don't be fooled: becoming Steve Jobs would still require hard work on yourself (on your taste, philosophy and general personality, if not on your technical knowledge).

For some reason I think spending life making things is more fun than spending it bullshitting, networking and kissing ass of your 'mentors'. And there is less competition in the former field, as they say.

Time delay embedding is a common method to estimate hidden structure in the system. You can make short-term predictions about future state of the system if you look at its previous states and find ones that are similar to current one. You can analyse transitional probabilities between these states. You can also study scale-invariant properties of the system such as fractal dimension or log-time scaling. There is a separate discipline called 'chaos control' that looks at certain unstable moments when the system can be manipulated by a small external signal (very relevant for dealing with heart attacks, should be interesting for central banks as well).

So, most categorically, current mainstream economic models are by far not the best we can do with at the time. They are grossly inaccurate representation of reality. There is of course emerging field of 'complexity economics' but it is not even close to being accepted in the mainstream.

The biggest issue is that modern mainstream economics is modelling the world as Gaussian. There is no room for 'fat tails' in econometrics, for example, every time you see 'regression' mentioned somewhere -- this should raise alarm. The world is not-linear.

Same applies to other concepts mentioned above. This one issue of crude inefficient approximation (stochastic world rather than the world as a complex nonlinear system) is enough to undermine most of modern economics. This is because a lot of this so called 'science' consists of many very elaborate and intellectually beautiful rigorous constructs, which are unfortunately built on an obsolete base.

Linear models had their place, maybe, 20 year ago, because there was nothing better. But now we have a very solid body of knowledge on which to build further scientific advances, most of it achieved through experiments (with computers), and not though some cute 'mental experiments'.

So, let's not be too sensitive, there is science that is supported by experiments, and there is a kind of abstract sophism which is modern economics. The sooner the public sees that this emperor has no clothes, the better.

It is based on a set of hopelessly outdated assumptions about the world, and its current toolset is easier to throw away than to modernize. Especially since the economic academic establishment is focused more on self-defence and self-support than on the pursuit of knowledge.

Here is the list of things that are central to modern mainstream economics but are proven wrong.

- the concept of equilibrium

- efficient market hypothesis

- modern portfolio theory

None of core economic concepts is supported by experimental evidence, so it is as much a science, as the "scientific Marxism" was.

In all emerging market economies that managed to stabilize their currencies and make them appreciate (Latin America in the 90s) this has led to domestic consumer booms and reduction of current accounts surpluses (or running up deficits). China has not gone this route yet, but this is a massive reserve of growth. I am sure their leaders understand this. Of course, to focus on domestic market instead of exports, it represents a major policy change. But fundamentals increasingly point at this scenario, so we may reasonably assume that this is what will eventually happen.

I also do not buy the 'forced loans' concept. Throughout last years of rapid growth Chinese authorities have been in fact imposing artificial caps on domestic credit growth, since they don't have developed domestic debt market, and therefore lack effective tools to sterilize their dollar interventions. Immediately after financial crisis, the Chinese have removed many of those lending restrictions, as part of their 'stimulus'. Now, because of the developing stock market bubble in domestic Chinese stocks, the authorities are bringing the lending restrictions back.

I think the idea of 'forced loans' came from the same area as fables of state-planned road running through schools and kindergartens (but not through villas of state officials). It is so heavily mixed up with ideological propaganda and clichés, that it does not really deserve a serious discussion.

China has been keeping its currency pegged to the dollar and lived off US consumption. Now US will not be consuming much for a long time, so China has nowhere to sell their goods to. Unemployment and riots are at hand, it seems.

Of course, that's wrong. China can and will continue growing, but this time the engine of growth will be their own consumer market. Which is huge. There are already more internet users in China than people in the US.

When renminbi will start appreciating vs. other currencies, the population will start feeling richer and will consumer more, import more and borrow more. Today they already have shortages of consumer goods on the mainland, such as cars, even though dozen of producers are struggling to keep up with demand.

China, in other words, is where Japan was in the 60s and early 70s (maker of transistor radios and cheap scooters, export-oriented mostly). And it will go on to become what Japan was in the 80s, only with 1 billion population.

The rational strategy is not to try to discover some 'success recipe' (there is none), but to do a lot of tinkering, be prepared for many false starts, and make sure that the unavoidable failures will not kill you as an entrepreneur.

'Cooperate' (C) = to publicly approach an attractive girl

'Defect' (D) = to ignore the girl, read the paper instead

So, imagine yourself walking into a cafe and seeing Carol at a table. She has been there for a while, and you have no way of knowing if some other guy has already approached her (or if Carol has a boyfriend). Let's assume for the sake of simplicity that the first man who dares to approach Carol always gets her telephone number (her nice way to reward him for being brave). That automatically means that the second guy will be rejected and feel bad.

The outcomes are (in order of preference):

CD = You dare to speak to Carol, you are the winner, the other guys didn't dare to approach her.

DD = Every man in the room reads the paper, Carol sits alone.

DC = You choose to ignore the girl, then some lucky bastard walks across the room and gets her number. Bad, but you have not lost your face.

CC = The worst outcome. You have approached Carol, but she is already involved with someone else. You walk back to your table, feeling miserable.

You notice that second and third outcome are somewhat identical, there is no gain, but also no real damage. A rational person may well prefer to do nothing and land in the 'neutral' area where 50% of total outcomes lay, rather than to approach Carol and to have 25% chance of success vs. 25% chance of a complete disaster.

---

I think it is not the women's attractiveness that acts as a repellent, but uncertainty of her status (has or has not a partner already). The way for Carol so improve her situation is to develop some sort of signalling that says she doesn't mind to be approached (flirting used to do the trick in old times).

   in terms of text editors on Mac, nothing else is really that close

In a few years everybody was forced to eat their lunch at their desk.

That's why I don't see this Japanese example as excessively cruel.

I have not tried it, anyone has any experience with it?

Unsuitable name for me, but they say you can run in on your own domain, and skin it to match your site.

Not, actually.

A surprisingly large part of my enterprise prospects/clients have javascript switched off completely, and a a large part of them still use IE6!

It is tempting to ignore a dinosaur client who is still on IE6, but when the dinosaur happens to be a top manager at a large bank -- that makes you think.

As a result I am minimizing/eliminating JavaScript and sticking to simple html forms. Hell, I even have replaced all PNGs with GIFs after a IE6 user complained he couldn't see the charts.

It is a pity, of course, but business users' environment is a bit different from consumers' one.

To avoid? I'm quite sure he (or his PR firm) has engineered the whole hype thing.