Not over yet

A new consensus is seeing the end of World Depression II sometime in 2010. As a matter of fact, the list of positive elements is not negligible:

• - The very existence and the conclusions of the G20 show the existence of a fast global public response to the events, certainly going in the right direction
• - The US stimulus plan has had an initial favorable impact, paving the way for the other plans
• - Europeans plans are not as small as they look, considering the fact that social protection mechanisms mechanically increase public spending each time unemployment levels rise
• - The banking system has now ceased to crumble down, and the main pieces are back in place
• - Protectionism is being discarded as a solution
• - Destocking is reaching its material limits
• - Most commodities are back to reasonable prices
• - Confidence is being restored
• - Key currencies are stable: the ‘Chinamerican’ system protects the dollar, while the Euro structure prevents members to freely print money for their own selfish benefit
• - A reinforced IMF can be of assistance gain in the most disastrous areas
• - Last but not least, the US administration, having ceased to be an arsonist force, is now a factor of global appeasement .

Now, on the other side of the balance sheet, still lies a list of liabilities of such importance that the 2010 target remains a product of wishful thinking:

• - The financial system is by no means limited to the banking system, and it will take a long time (years) to monitor, fix, regulate and control the non-banking part which had become the largest part. This requires a better understanding and monitoring of securitization, another revision of corporate accounting, multilateral as well as bilateral negotiations for the creation of appropriate regulation entities, and adjustment of tax laws
• - Stimulus plans, limited by a dominant ideology against public deficits, are being set at an order of magnitude below actual needs: the financial wealth recently destroyed (stock markets, real estate, commodities, leveraged securities, for a total of perhaps $ 200 trillion) had been fueling growth, and must be substituted by public injections (today in the range of $ 3 trillion). In the meantime, business will lack funding and growth will stall.
• - Toxic assets are not yet entirely eliminated (CDS, and weak real estate based securities) and not even entirely identified
• - The global real estate crisis has not by any means reached its climax, and in many places (such as Spain or Dubai) drops in prices are still expected to reach 80% from currently already discounted levels
• - The West should continue to keep for several decades the largest consumer markets, and is also the place where unemployment shall keep rising: the gradient in technology capabilities which had separated East and West for the last two hundred years, creating the global system of economic specialization which in turn did sustain the extraordinary economic growth rate observed along the same period of time, is now reduced to very little. Countries like South Korea can produce basically anything the West can produce (except in the fields of airspace, nuclear energy, and armament), and can produce what the West cannot efficiently produce (e.g. consumers electronics). When China –which is a subcontractor of the West in about every sector) inevitably reaches the same situation than Korea, then Western and Eastern salaries will have to adjust. If they don’t, unemployment in the West will reach unprecedented levels, triggering an attrition of Western consumers markets, in turn preventing the East to generate resources for their own new consumers markets. If they do, social unrest in the West will contribute to the depression. In any case, the substantial cause of the economic crisis (not the occasional cause which was the financial crisis) is still in place for a while
• - When such stubborn facts appear in public view, further stimulus plans shall come. This time, however, they will have to be funded by deficits that only inflation can cure. For a short while stock market’s rallies should multiply. One could even use the opportunity to invest in the most protected sectors (let’s talk about them some other day). Yet, better miss a rally that hit the next crash sooner or later.

This is how the world goes. Please stay tuned.

In Defense of P2P

While an emblematic trial against the activist group piratebay.org now starts in Stockholm, various parliaments – in an attempt to keep alive the obsolete business models of some ailing industries – are debating bills of law degrading further the intertwined principles of secrecy of correspondence and freedom of ideas.

As we all well know, ancient democracy, the system by which citizens directly govern themselves, is no more. Modern democracy, the system by which citizens actively protect themselves against their own representatives, is losing momentum. With a reduced constitutional protection of privacy and freedom, democracy vanishes altogether. It is the nature of governments to invade the content of private communications as much as they can, and to limit the scope of civil associations. Public officials are prone to always find new reasons for eroding the corpus of legal guaranties which is their sole hindrance. They usually base their will of control on the somewhat cynical claim that ‘good citizens’ should have nothing to hide and should never pursue any activities not in the immediate interest of the State. War, crime or even the mere consideration of health are the main chapters in the sad book of Attrition of Civil Liberties, which is now describing our political lives. The perpetual guerilla between ordinary citizens and their benevolent enemies mostly takes place on a series of seemingly benign grounds, carefully chosen as to minimize the probability of efficient counter-reactions. Peer to Peer electronic networks (P2P) are a recent example of such local battlefields where essential principles are nevertheless at stake.

P2P networks enable a correspondence between individuals in the same way postal and telephone services do. What makes them specific is that individuals subscribe  to information services providing the electronic address of other individuals willing to exchange pieces of data files. To compare it with older technologies, one could simply say that the system works as if lists of postal addresses were published, allowing readers to exchange letters, each containing parts of the texts they are mutually interested in and contain description of ideas, poems, drawings, musical scores, or any such intangible products of the mind. The main difference is that they P2P networks are much more efficient.

It is important to remember that ideas may not be appropriated, and that even the fiercest advocates of intellectual property do not go as far as pretending that they should. When Einstein discovered ‘E=MC2’, no patent, copyright, monopoly was provided to make him as rich as any successful music composer or movie director can become. What is supposed to be protected by intellectual property, as an exclusive right or monopoly, is only the material form under which the idea is expressed, in this case a scientific paper or a book containing the original expression of the celebrated formula, not the formula in itself. For a period of time, the paper  may not be copied by anyone unless previously authorized by the original publisher or the subsequent owners of the rights. Brief quotes, however, are permitted in order to avoid the obviously absurd consequence of preventing ideas from being not only copied but even mentioned.

The problem is that the distinction between an idea (or any product of the mind) and the form under which it is expressed is a misleading metaphysical concept. Suppose that the formula, instead of being short enough to be quoted in less than one line, would be so complex that it would take a whole scientific paper to express it. Then, quoting the idea would actually mean copying the entire text of the paper. As doing so is expressly prohibited by law, the very idea – not only its form -  then becomes the object of a monopoly and may  not be legally spread. This shows in a lear light how absurd the foundations of  the so-called ‘intellectual property’ can be.

This situation is not restricted to mathematics, physics or philosophy. When asked by a lady how he could possibly put his ideas into the marble with such ease, Rodin answered: ‘Madam, I think in marble…”. The same applies to all arts. There is no real difference between a product of the mind and its very expression. Therefore, preventing the copy of the expression of an idea (or any product of the mind) is equivalent to preventing the free communication of ideas, an unreasonable prohibition indeed. Legislators, being at least subconsciously aware of this implication, the more an idea or product of the mind is important for mankind, the least protection they actually grant it. Disney and rap dancers thus turn much better protected than Einstein.

Great artists are not put in any more danger by P2P than scientists or thinkers have always been. The main ones to be threatened by this development are the traditional music industry, and – to a certain extent – film industry, as their business model is based on the material monopoly they had kept in the distribution of music and films. It was not only illegal to multiply copies of songs and films, but it was mainly impractical. The progress of electronics now makes it extremely easy in the case of music, and rather easy in the case of films.

Adjusting the business models of these two industries to the technical change requires a degree of imagination their management is lacking. It would in any case hurt their short-term interests. So they found simpler to initiate a brutal crusade against P2P, mobilizing part of the vast financial resources and influence they had accumulated over the past. This is i nothing but a crusade against the tens (or possibly hundreds) of millions of consumers over the world now enjoying P2P protocols which have rapidly grown as the main usage of the Internet, way beyond browsing and email. What the crusaders are trying to obtain from gullible legislators is the protection of their old business model, an undertaking directly rooted in medieval corporatism. More modern is their lobbying practice: they take the precaution to pretend acting for the defense of artists and creators more than of their own. Who would indeed be cruel enough to deprive an aging industry from revenues artists and creators receive a (small) percentage of?

Of course, things are quite different. Musicians can always make money by giving concerts, and the more famous they become through free electronic access to their music, the larger the audience they attract. In other words, music production companies do no need to exist anymore for musicians to thrive. Younger talents can find a career after being chosen by the public rather than after being selected by the executives of music companies. Other industries would also be better off without them, such as radio and TV, not to mention night-clubs, bars and the many other businesses broadcasting music as waiting tones or in elevators.

The situation is slightly different with films, as the movie industry is better protected by the material nature of the product. Blockbusters are better viewed in large theater than at home, and can generate income in the traditional way. The more modest independent films are more difficult to find on P2P networks than on DVDs. The least well placed are the mid-size productions which are too expensive to amortize on the limited number of screens distributors are usually willing to grant them. Yet, even they can survive, cable channels having proven (immense) profits can be made by financing such films even in the absence of any other distribution. More importantly, all segments can thrive, provided the whole industry accepts to change business models from copyright-based to service fee-based distribution. Consumers, as a matter of fact, have shown (for instance with i-Tunes) that they are not unwilling to pay (large fees) for the service of providing good quality files from fast servers, as soon as or shortly after the content is available otherwise, in the same manner that they are willing to pay for theater seats. Artists and creators do not care which model is used or who pays them, as long as they are rewarded by salaries or otherwise.

The notion that replicating electronic files is a forgery is the miserable argument multimedia crusaders have found. By definition a forgery is the act of imitating documents or objects in order to deceive. When a file is exchanged on a P2P network no one is deceived, as nobody claims that the compressed electronic version of any given film is the film itself or has qualities equivalent to those of the original versions available from theaters or from high definition supports. The only exceptions are the fake files sometimes injected by the movie industry vainly hoping to make the selection of good files more cumbersome for P2P users. I see no reason why the authors of such injections, deliberately violating the contractual usage policy of P2P servers of trackers (the lists of addresses of interested users), should not be sued rather than the generally non-profit activists who maintain the servers.

From a broader standpoint, copying or replicating any document or product of the mind should never be restricted, unless the original remains unpublished, or unless the copy is a strictly defined forgery. It is not at all the same thing to distribute a copy claiming it is the original than distributing a copy advertized as such. Forgeries mislead consumers on the nature of their purchases. Overt copies don’t. The history of art and culture in general is made of a large number of overt copies and a smaller number of forgeries. Let the courts deal with the last. Let consumers determine the value of overt copies. At times, they give a higher value to copies, like the Romans did for marble statues imitating Greek bronze originals. At others, they are fetishistic enough to pay a fortune for one of Duchamp’s ‘original’ urinals and not a dime for the exact same object yet not approved by Duchamp himself. Legislators are not to interfere with such preferences.

Sadly, they do. Giving way to the outrageous claims of corporatist defenders of old business models, a galore of intrusions in the privacy of consumers is sanctified. Government agencies and private operators are allowed to set up a full scale surveillance of Internet users: who contacts whom, exchanges what files, using which trackers, ports or protocols. This information, kept in databases, will serve the purpose of fining users, shutting down servers, suspending Internet access, in other words, punishing in any possible way consumers who are simply hoping for the new business models to emerge and, who, by the way, often turn out to be the same people who also go to the theater and purchase DVDs (preselected after a P2P screening). Such information can also serve more perilous purposes, too easy to imagine and useless to describe here.

Even when reluctant to so restrict civil liberties, many governments seriously consider compensating the loss of income incurred from the obsolescence of the business models, by so-called ‘global’ licenses, which are taxes unfairly levied on Internet subscriptions, no matter the nature, number or even absence of downloaded data files.

Surprisingly, such blind and large concessions made to the lobbying of aging business actors, seem insufficient to appease the wrath and greed of some enraged multimedia crusaders. Recently, Luc Besson, a French filmmaker turned into owner of a film studio, published a most heinous article, asking all people even remotely related to P2P or streaming, from advertisers to Internet access providers, to be sent to prison as accomplices of a crime he compared to drug dealing. You would think this is the mere utterance of a deranged mind. Unfortunately, the current trial against the young activists of piratebay.org, shows that the danger is real, and that greedy madmen, when influential enough, may sometimes succeed in destroying the life work of good-will visionaries.

This is how the world goes. But let’s hope (and fight) for the best.

Rationality vs. Nationalism in the Palestinian conflict – Part I

Few topics are subject to more irrational partisanship than the Palestinian conflict. Any discussion of historical claims or legitimacy issues is a sure way to reach a quick dead-end, the particular complexity of the regional history being buried under a thick layer of ideological beliefs and errors. Here is a quick reminder.

 The very name Palestine was given by Emperor Hadrian to his province of Judea, as a punitive symbol after the bar Kochba revolt. He also simultaneously renamed Jerusalem Aelia Capitolina and banned the Judeans inhabitants from the city. Palestinia was a transposition of a word used by Herodotus for the land of the Philistines, these descendants of the People of the Sea (including the Phoenicians), a mixture of Indo-European populations having invaded the so-called ‘Asian’ territories of Egypt during the 12^th century BCE. The renaming was nothing but an expression of the Roman aggravation in front of the obstinate refusal of the Judean Bedouins to integrate the Empire: at the time of Hadrian, very little was actually left from the former Philistines in Judea, except a small presence around Gaza.

 For most of its long history the territory today known as Palestine (corresponding more or less to the southern part of the Roman province of Judea Palestinia) was subject to a series of realms and (mostly) empires: including but not limited to Cannaites/ Phoenicians, Egyptians, Hittites, Hebrews, Assyrians, Persians, Greeks, Romans, Byzantines, Arabs, Franks, Mongols, Turks and British.

 As to the Hebrews, they dominated the area as a group of beduinic tribes over the 11^th century BCE. A short-lived unified kingdom lasted for about one century until the death of Salomon (-933). It was then divided into a Kingdom of Israel in the North (10 tribes) and a more destitute kingdom of Judah in the South (2 tribes). In -733 the Kingdom of Israel was thoroughly annihilated by the Assyrians. In -586 the Kingdom of Judah was in turn destroyed by the Babylonians and its modest population deported to Iran (soon to be called Persia).

 The Persians rebuilt Judea as a buffer state against Egypt, reintroducing part of the Hebrews in the area and rebuilding their temple in Jerusalem. When Alexander conquered Persia, a significant part of the local population was sent to the new city of Alexandria. Judea remained a Greek dominion until the Romans took over.

 Following their preference for indirect rule, the Romans allowed the creation of a Judean client-state under a Jewish (new name for the Hebrews) dynasty, the Hasmoneans (-138), replaced in -37 by the mixted (Greco-Edomite-Nabatean-Jewish) Herodian dynasty. A succession of revolts, mainly in 66-73 and 132-135, ended in direct Roman rule followed by the exile of most of the remaining Jewish population.

 Beduinic armies coming from the Arabian Peninsula conquered the region in 637, defeating both the Persians and the Romans (now the Byzantines), and converting most of the population to Islam. Palestine was thereafter placed under the domination of a succession of Islamic empires almost never run by Arabs but by a mixture of Turco-mongols or even European conquerors or slaves, until the dismantlement of the Ottoman Empire after WWI.

 In 1881, before the arrivals of the firsts Zionist migrants, the population in Palestine was limited to 457.000 souls (400.000 Muslims, 40.000 Orthodox Christians and 17.000 Jews). As the Arabian conquest did not take the form of a migration, it is reasonable to believe that a significant part of the Muslim population of Palestine was then formed by descendants of the Roman Jews converted to Islam.

 The recent part of the story is the direct consequence of the rise of Nationalisms, from the mid 19^th century on. Nationalism, a French creation, is the invention of mythical common origins in order for a culturally or geographically connected group to claim a right of absolute sovereignty over a territory. Please recall that the Normans and Britons were Vikings, French monarchs Germans, Provence Roman, then Germanic, then Arabic, before integrating the German empire of Charlemagne, that Burgundy was German and Spanish, that Picardie was annexed by Louis XIV, and that Savoy and Nice joined France 20 years after Senegal. The unification of 200 German speaking principalities, in spite of their deep religious divisions, under Prussia (a State artificially created during the Crusades), was a response to French imperialism. The historical existence of a ‘German nation’, however, rested on even weaker grounds than the one of a ‘French nation’.

 A Jewish nationalism was soon to follow, first as an intellectual reaction against these evolutions, then as a practical escape from their dire consequences. A vast majority of the European followers of the Jewish religion were settled inside the Russian empire. Some were certainly actual descendants of the exiled Hebrews; many others were the descendants of Turkic populations converted to Judaism over time (such as the Khazars). Some were preserving their ethnic idiosyncrasies; others were assimilating into the dominant Christian fabric.

 The pogroms which had followed the assassination of Czar Alexander II, as well as the Dreyfus affair in France, triggered a sudden growth of Jewish nationalism. In spite of its shaky foundations, the idea was then accepted that all the Jews in the world (then speaking in excess of 130 different languages, and having very distinct ethnic characters and genetic origins, including Yemenites and north-African Berbers among several others) were nothing but the very same Hebrews that had been dispersed by the Persians and the Romans. About ¼ migrated to America and British dominions, ½ were exterminated by the Germans, and a good part of the remaining ¼ took step by step the road to Palestine.

 Last but certainly not least of all, the Arab nationalism had taken birth out of the decaying corpse of the Ottoman Empire. Populations who had little in common, except a language (more or less) and a religion started feeling a common origin and a common destiny. Their new origin was of course as mythological as in all other nationalisms, and their common destiny an illusion. Various ‘nationalisms’ were attempted by trial and errors: from Arab at large, to Palestinian, via Syrian, etc. At the end of the day, no actual ‘Arab’ nation took birth, and – except in Egypt- the nationalisms adopted the artificial divisions introduced by the British Empire and secondarily by France.

 Only one area of the former Ottoman Empire, Palestine, could not be filled by an Arabic state, as the Zionist migration first and then the creation of the state of Israel made it impossible. Both Arabs and Israeli refused to even imagine a common state. The question then became: would the Arab-speaking populations of Palestine be the only ones without a State reflecting their nationalistic aspirations? Both Jordan and Lebanon had by then acquired enough identity to prevent their territories from turning into a solution for the missing Palestinian element. Backed by the United States of America, Israel was now militarily invincible and could not be removed. Fueled by an anti-American sentiment, most Arab states (and later the Islamic Iran) funded the terrorist turn of the Arabic resistance in Palestine.

 While the nationalist ideology was reaching a climax both among the Jewish Israelis and the Muslim Palestinians, the most powerful force in contemporary politics – public opinion – was called to take sides.

 (to be continued)

Maalox for Madoff

You are inevitably aware of the nature and magnitude of the fraud: $50b lost in a Ponzi scheme, according to Madoff’s own confession, the exact amount remaining to be determined. The scam is different from any of those which were recently revealed, as it is based on an absence of due diligence rather than an absence of regulations. The most interesting aspect is that a man, for over 20 years, was able to convince most members of an entire profession he could fulfill their dreams, and maintain their unwilling complicity, by offering high and constant returns insensitive to market conditions and generating high fees.

Asset managers – a motto in this blog – are totally unable to produce – as advertised – long term returns for their clients at higher rates than economic growth corrected by inflation, while grossing for themselves between 2 to 4% of the mass under management. They know they cannot achieve this by themselves individually or as a profession globally. They are ready, however, to believe in exceptions in others, and prefer to leverage such exceptions for their own profit rather than question their reliability. Although betting on exceptions made into an average phenomenon is certainly not the soundest of ideas, it seems a good way for average people to reach impossible goals.The most reckless and/or naive  among money managers started doing this in the 80s. The 90s turned it into an industry trend.

It is true, after all, that at any given moment, a handful of asset managers have beaten the market for a long time and made an impressive fortune. The best known are Warren Buffet and George Soros, others are Louis Bacon, Paul Tudor Jones, Julian Robertson and …Bernard Madoff. Obviously, not all are crooks like the later. Most are simply lucky. Some are even lucky and shrewd. Luck is a very important element in what is essentially a random distribution of outcomes. It is a well known fact that the ‘Monkey’ investment (i.e. random stock picking with positions held over a long period of time) produces results that are strictly superior to those of average professional asset managers. One of the reasons for this is that the Monkey is not concerned with generating fees by a fast turnover of portfolios, and carries fewer costs. Shrewdness cannot hurt: Warren Buffet has shown that Grand Pa’s type defiance against anything sophisticated, together with a witty wording of principles, can be good for business. Shrewdness may also reach some rationality when arbitrating between market discrepancies over identical assets. This last method – the best one – is unfortunately limited in scope and self-cannibalizing, as the more discrepancies are used the less remain to be exploited.

In any case, as these exceptions do exist, the advertized concept became: our bank (or financial entity of some sort), is formed of professionals capable not of outstanding results (something as a matter of fact difficult to believe) but of identifying outstanding independent asset managers. Asset managers picking soon replaced ‘stock picking’. The hunt was supposed to be so difficult and tricky that funds of funds had to be created and a whole new profession of distributors of funds invented. These new distributors of funds did not need any specific training, except in hunting, golfing and/or gourmet dining. Most came either from banking mid-management or impoverished aristocratic families. All they had to do was to be lavish enough in their invitations and jolly enough in their conversations to become your friend (if you are a ‘high net-worth individual’) and your banker’s friend (if you are not). In this way they could foster trust, a necessary item when dealing with expensive opacity.

From this moment on, bankers enjoyed a wonderful streak. Salaries paid to well trained asset managers for managing your money according to your own actual needs could now be eliminated. Younger, better looking and less paid account managers were in charge of convincing you to accept the new products: house funds mimicking successful funds, funds of funds, and ‘alternative’ funds that few could understand and less could explain. Not only these products came to the bankers at no cost, but they also started receiving kickbacks (more politely called ‘retrocessions’ from brokerage fees), on top of the fees you were officially paying (entrance fees, redemption fees, management fees, performance fees, custody fees). Your banker friend being your friend he could be nice with you and lift one of these many fees generated by your own money.

All such funds were supposed to have long track records showing steady returns and outperforming markets. When the emphasis is on performance, the track record is usually limited to an ad hoc selection of the best performing among a series of sister funds. When the emphasis is on the duration of the track record, a scarce item, a promise is made to provide funds by the most successful managers. This is where Madoff played his best cards. In order to create the proper hype, he made people believe that his funds were ‘closed’ and would not accept any new investors. In other words the most open of funds (what can be more open than a Ponzi scheme?) were sold as closed. Letting you in was a favor made to friends.

In a way, you can consider it good marketing: against all expectations, the ‘Dom Perignon’ is the best sold champagne in the world (it really is). Yet, this has had far reaching consequences. One cannot be too picky with favors. Illiquidity (redemption notice on the last day of each month, 35 days to redeem, then 30 days to obtain payment) was overseen. Complete opacity of the underlying assets was accepted as an effect of a necessary confidentiality (after all funds of funds have even more opacity as they refuse not only to disclose the nature of the assets – your assets- but even sometimes the name of the asset managers). Absence of understanding of the techniques being used was partly an effect of opacity. Absence of real guaranties, by the formal waiving of most rights, seemed a natural condition for products reserved to ‘sophisticated investors’. Absence of alignment with the client‘s interests was hidden, as most banks would prefer to cash-in their fees rather than include such products in their own portfolio, or simply denied (‘the managers have their own money in the fund’). Market risks involved were covered by distortions in the terminology: sheer speculation was called ‘arbitrage’, build-up of leveraged open positions were called ‘hedging’.

Facing such hype and making money at every step, the financial industry forgot all diligence: money managers trusted their bank, banks trusted distributors, distributors trusted custodians, and custodians trusted auditors. All trusted their own fees to come, and no one checked. This confederation of dunces became so powerful that regulators and authorities had to look somewhere else.

This is how an average man who certainly started his career with reasonably good performances, based on a right combination of luck and insider’s information, could then become a crook when his investments started going array. He is probably not alone in the present state of the financial industry. But we shall know quite soon, as no scam can resist for long the current storm. Attorneys are likely to be the only winners when one of the largest class-action ever starts, including the SEC among the many defendants. Last but not least, beneficiaries of a Ponzi scheme are liable to give their returns back to indemnify the last comers and victims. Considering the exceptional duration and magnitude of the scam,  it is going to be very messy.

There is little doubt that the money management industry is going to change dramatically after such events.  After a period of attempted resistance, bankers who had cautiously stored their profits in Treasury bonds while their own (now infuriated) clients are the first victims of their policies, will have to take some commercial (or legal) losses. Insurance companies, custodians, auditors and governments will contribute. Most hedge funds boutiques will have to shut down. Funds of funds will slowly vanish . Regulations will be drastically reinforced. Opacity will be banned and kickbacks will disappear. Bankers’ and managers’ responsibilities will be increased. Asset management will cease to be the cure-all for banks who had opted-out from lending. Risks awareness will be somewhat restored. Bankers will start playing serious golf or  kill less game.  Perhaps, the day will come when the best offer on the market will be a guarantied loss of 1% per year in real terms: a serious improvement indeed.

This is how the world goes.

 

Back to the Future

In 1992, a very famous book announced the End of History. For the better or for the worse, current events may be pulling us back to the future, i.e. to change under incertitude, the old feature of human condition. One of the foremost economic crises in modern times is not only blurring the vision of a triumphant capitalist market, but is also reopening the possibility of a political eschatology somewhat different from the everlasting parliamentary State.

While governments minimize by a full order of magnitude the quantities of financial medicine they should inject into the arteries of a chocking world trade, entire populations get closer everyday from feeling personally the pains of new poverty. The higher the recent growth their respective countries had reached, the harsher the depression will be for them. The most dependent zones on foreign trade are likely to undergo a severe social turmoil. For once, Western Europe is not the weakest link. Equipped with the strongest social infrastructures and relatively good reserves, the area is also protected by its dominant inner trade, as well as a long habit of bad news and of lagging in economic growth. “Chinamerica” should be the seismic zone, together with Eastern Europe. The United States cannot solve all issues by simply playing with an overwhelming currency, as in the good old days, and the Chinese armed forces are not strong enough to fight a violent resentment against so great lost expectations.

What’s really new is that domination of the State is not as much at stake as the State itself. We are not confronted with the prospect of opposition parties taking over, but with the one of a pervasive distrust for States in general. Tax boycotts could very well appear in America, and riots in many places. Young people raised in false hopes will show their anger. Nihilistic sabotage, rejection of intellectual property may also join the symptoms. Such disorders, not being driven by a structured vision of society, are among the most difficult to fight by anything else than extreme ideologies. Even Islam may prove unable to capture a negative energy essentially indifferent to geopolitics.

You may smile at this kind of doom saying and you may be right in only one case: if we can rebuild the system nearly as fast as we destroyed it, if the economy can take a fresh start on the basis of a fraction only of the assets which were annihilated. If you do not believe this is a real possibility, then better get ready to meet History again.

Bertolt Brecht had a say for the optimist and one for the pessimist. You can now make your choice: ‘The worst is never certain’ and ‘The belly is still fertile from which the foul beast sprang’. Personally, I would pick both.

This is how the world goes.

Suave mari magno

Unusual as it is to mix finance with philosophy, yet large events may call for ancient wisdom.

For the weekend, here are from Lucretius, the most rationalist of Roman thinkers, a few lines on being happy in troubled times:

’Tis sweet, when, down the mighty main, the winds
Roll up its waste of waters, from the land
To watch another’s labouring anguish far,
Not that we joyously delight that man
Should thus be smitten, but because ’tis sweet
To mark what evils we ourselves be spared;
’Tis sweet, again, to view the mighty strife
Of armies embattled yonder o’er the plains,
Ourselves no sharers in the peril; but naught
There is more goodly than to hold the high
Serene plateaus, well fortressed by the wise,
Whence thou may’st look below on other men
And see them ev’rywhere wand’ring, all dispersed
In their lone seeking for the road of life;
Rivals in genius, or emulous in rank,
Pressing through days and nights with hugest toil
For summits of power and mastery of the world.
O wretched minds of men! O blinded hearts!
In how great perils, in what darks of life
Are spent the human years, however brief!—
O not to see that nature for herself
Barks after nothing, save that pain keep off,
Disjoined from the body, and that mind enjoy
Delightsome feeling, far from care and fear!
Therefore we see that our corporeal life
Needs little, altogether, and only such
As takes the pain away, and can besides
Strew underneath some number of delights.
More grateful ’tis at times (for nature craves
No artifice nor luxury), if forsooth
There be no golden images of boys
Along the halls, with right hands holding out
The lamps ablaze, the lights for evening feasts,
And if the house doth glitter not with gold
Nor gleam with silver, and to the lyre resound
No fretted and gilded ceilings overhead,
Yet still to lounge with friends in the soft grass
Beside a river of water, underneath
A big tree’s boughs, and merrily to refresh
Our frames, with no vast outlay— most of all
If the weather is laughing and the times of the year
Besprinkle the green of the grass around with flowers.
Nor yet the quicker will hot fevers go,
If on a pictured tapestry thou toss,
Or purple robe, than if ’tis thine to lie
Upon the poor man’s bedding. Wherefore, since
Treasure, nor rank, nor glory of a reign
Avail us naught for this our body, thus
Reckon them likewise nothing for the mind:
Save then perchance, when thou beholdest forth
Thy legions swarming round the Field of Mars,
Rousing a mimic warfare— either side
Strengthened with large auxiliaries and horse,
Alike equipped with arms, alike inspired;
Or save when also thou beholdest forth
Thy fleets to swarm, deploying down the sea:
For then, by such bright circumstance abashed,
Religion pales and flees thy mind; O then
The fears of death leave heart so free of care.
But if we note how all this pomp at last
Is but a drollery and a mocking sport,
And of a truth man’s dread, with cares at heels,
Dreads not these sounds of arms, these savage swords
But among kings and lords of all the world
Mingles undaunted, nor is overawed
By gleam of gold nor by the splendour bright
Of purple robe, canst thou then doubt that this
Is aught, but power of thinking?— when, besides
The whole of life but labours in the dark.
For just as children tremble and fear all
In the viewless dark, so even we at times
Dread in the light so many things that be
No whit more fearsome than what children feign,
Shuddering, will be upon them in the dark.
This terror then, this darkness of the mind,
Not sunrise with its flaring spokes of light,
Nor glittering arrows of morning can disperse,
But only nature’s aspect and her law.

(De natura rerum, II.1 sq, transl. William Ellery Leonard)

This is how the world should go

Multiple organ dysfunction syndrome

Considering that the lead physician in the intensive care room was, by far, the most incompetent of all, we are very lucky a proper treatment was eventually applied. Following the bold plan designed in UK, Europe has mobilized enough resources to reestablish interbank confidence, and driven a clumsy US administration into following (more or less) the same path. Theoretically things should improve for some time: guarantying interbank credit is like inserting a pacemaker to make a failing heart continue to beat. Recapitalizing major institutions is also a good remedy: it is not only a better way of injecting liquidity than adding to the total amount of debts, but also leaves some hope of getting part of the taxpayers money back once the markets are completely cured.

No doubt governments will use the opportunity to treat the very origin of the disease, i.e. uncontrolled leverage. Most financial institutions should be submitted from now on to banking rules, and especially the Cook ratio. Exposure will become more explicit and subject to surveillance. New equivalents of the good old Glass-Steagall Act, which had protected generations of depositors against the hidden risk of seeing their own money burn under the form of mindboggling securities, should be put into place. There is no need of a world government to achieve this; any local regulator of a market large enough to be indispensable to global investors, can impose it worldwide.

Everything would then be fine if the banking system was the only failing organ. Unfortunately the volume of wealth destruction which has occurred goes far beyond the $ 3 (or perhaps 5) 000 billion governments can possibly gather to reflate the economy at a proper level, and goes far beyond banks. The sepsis has reached industrial corporations, both as stockholders and as suppliers of markets. It has reached pension funds, as well as consumers directly. Even if the real risk represented by CDS (see previous posts) did not turn out as disastrous as it could be (we’ll know for sure before the end of year), a consumers’ market crunch is inevitable, which cannot be adequately compensated by sufficiently massive injections of additional cash. Even if some confidence was to be restored for a while, a deep recession would still be inevitable.

This recession will be dangerous for fragile stock markets and for depleted public treasuries. It should also bear large-scale social consequences. The average person is still stunned and silent. Scared for his (or her) family‘s future, he cannot believe what he is witnessing, and hardly realizes he will be the main payer of other peoples faults, the same people who just kicked him out of his home and his job or threaten to do so anytime soon. It will not be long before he awakens to the fact he has been playing an unfair game for the profit of an unreliable, reckless and somewhat criminal elite. Then what is likely to happen?

This is how the world goes.

How will the world look like when the shock wave hits?

It has been fashionable for some time now to distinguish between ‘finance’ and the ‘real economy’. This is not very sound as finance is nothing but the cardiovascular system of the economy (made of goods and other services). The heart is now in surgery room, surrounded by physicians with limited knowledge and – above all – limited means. All they know is not to repeat the same mistake that was made in 1929, which consisted in adding a liquidity crisis to a stock market crash, and putting the overall activity close to a standstill. Governments and central banks are now pouring all the cash they have and soon all the cash they don’t into the failing arteries, in order to keep liquidity at a par with the massive destruction of wealth which is now occurring on stock markets. They definitely try their very best to save the banking system from complete crumble, by guarantying and nationalizing one after the other major financial institutions. Even after their current reserves are gone, they should be able to continue doing this by using their status of ‘least bad’ borrowers: sovereign obligations (close to having null interests’ rates) shall allow them to pursue this exercise for a while.

There is however a quantitative limit to the number and scope of entities they can bail out. Financial institutions are one important thing, and yet not the only components of the financial system. Corporations, pension funds, high net worth individuals are also facing almost unprecedented financial losses. Even massive tax cuts cannot compensate such losses (tax cuts are more or less automatically granted as losses are not supposed to be taxed in any case). For the economy to work, corporations and high net worth individuals must invest and pay salaries, while pension funds must pay pensions to consumers. Globally, they will not be able to do it at previous levels for a long while. And this is precisely how the shock waves hit the rest of the economy.

At this point, even if both causes and treatments are different from what they were in the 1930s, the phenomenology of the crisis shall look pretty much the same: massive plunge in the price of assets, massive unemployment, and massive physical poverty. As during the 30s, there will be some winners too: these are basically the owners of cash, now able to purchase the massively discounted assets as they come, provided however their cash is in safe currencies placed in a safety deposit boxes or nationalized banks. Opportunities, as a matter of fact, should multiply for them when the stock market goes down to 25-30% of its peak values, and real estate (or contemporary art) 50 to 20%. The problem is obviously that most people and corporations not only have little cash but are carrying heavy debts. Leveraged assets (many exist in the private equity sector) should go bust, and consumers’ markets will violently contract, fueling the vicious circle of recession. This should happen even if the CDS shock wave does not hit (see previous posts). If it does, you’ll see your attorney offer to work for food, and fascism come back.

Many people do not realize this. As few of them were directly exposed to the stock market, they are happy to see the ‘traders’ and the rich in general pay the price of their own mistakes, and believe they won’t have to pick the tab also, while governments are finding a solution. How wrong. They should start discovering the ugly truth sometime in 2009, and feel the consequences for a while (5 or 20 years?) afterwards.

How will the final relief come? As usual instant experts will promote gigantic schemes involving new ‘Bretton Woods’ (to achieve what as this is not a monetary crisis?) and ‘Marshall Plans’ (how can this be done in the absence of the equivalent of the 1945 USA?). As usual also, the military will attempt to be the new trusted economists, pointing at strategic hotpots (Iran, Taiwan) and lurking at weaker countries were money is left.

Let’s hope Obama can resist and someone comes up with better ideas.

This is how the world goes (sorry about that)

Don’t bother to be pessimistic: things are much worse than you may think

Remember my last post on the Credit Default Swaps? Dubai just obtained a 15 billion $ bailout from Abu Dhabi to face a default of their own Credit Default swaps. Dubai…

Let’s look again at the issue. The outstanding amount of subprime debt is about of 1,300 billion $. The outstanding amount of CDS is about 50 times larger. The good news is that a large part of this amount is made of offset positions by players reducing their exposure or netting their own contracts. As it is currently impossible to know the net total amount of outstanding CDS, let’s make the most unrealistically optimistic assumption, and consider 90% of the positions as offsets. The bad news is we are still left with at least 5 times the total amount of subprime debt.

Another element to be taken into consideration is that subprime debt is somehow based on real assets: even if they are worth a fraction only of their nominal value, buildings and apartments are still worth something. This is not at all the case with credit default swaps which are based on nothing else than gambling, a very special case of gambling, indeed. Casino gambling is regulated, CDS are not. Casinos have money to pay their own losses; this is not the case with CDS issuers. Casino’s risks are stable; CDS’s risks are not. Quite the opposite in fact: Credit Default Swaps are bets on the credit quality of third parties, at a time when the credit quality of all institutions in the world (including governments) is crumbling down under the effect of the financial crisis. Therefore most (net) CDS are doomed.

Just as the explosion of an H-bomb is initiated by the explosion of an A-bomb, the subprime crisis is getting ready to trigger the CDS crisis.

How many crises are we dealing with? Let’s count. 1 is the end of cycle which started last year and was accelerated by the surge in the price of commodities. 1 was strong enough to entail a recession that the general public would have started feeling in any case by the end of 2008. 2 is the subprime loans crisis, which already turned out to be big enough to shake the world banking system. 3 is the CDS crisis which has not started yet but looks inevitable, considering the combination of 1 and 2. 3 is definitely capable of destroying a large part of the global financial system. 4 is the subsequent mega recession which should logically follow, with major expected unemployment levels and market crunches.

Oh my, enough for today (to be continued though if you can still face it)

This is how the world goes.

How working hard has led to ignorance and could lead to poverty

From Ancient Greece to WWII social elites belonged to the leisure class. In other words they did not work or did not work hard, using their vast free time not only for love and hunting (as a training for war), but also for reading, writing, travelling, learning all sorts of things. As others were working for them, from childhood to their death, the happy few had culture for environment and did take a decisive part in it. When they entered politics, they carried with them a strong base of information, having read law, history, philosophy and geography, seen at least a couple of continents and usually given some previous thought to what should be done.
Things have changed dramatically. The so-called working classes are working less and often not at all. Children go to school, teens also go to school or join the gangs and adults retire in their 50’s or at the latest in their 60’s, while work hours have been reduced by half (in some countries by 2/3) in less than a century. Unemployment adds to the phenomenon. At the same time the elites have become workaholics. Their unlimited pursuit of wealth does not allow for much rest. Business breakfasts are being prepared under the shower, meetings follow meetings, dead times are entirely filled by the operation of PDAs. At night, time has come for emailing more than for love. Deals are discussed even on the golf course, and hunting parties produce more business cards than dead game. Vacations, limited to 2 weeks, 4 in Europe, are used for  business encounters as much as or visiting family. Patronizing the arts is mostly a housewife activity, and collecting a speculative endeavor. Information is obtained from business news, press excerpts or Internet briefs. Almost no one reads books, but a best seller here and then.
Books stores, when they still exist, keep a small space somewhere in the back for the lunatics interested in ‘Non-fiction’, and Plato can only be found inside a bizarre mixture of ‘Religion & Spirituality, Self-help, Philosophy, Gay& Lesbian studies, Foreign Language Non-Fiction’. Books are produced only according to market segments, and are not supposed to be read by anyone not pre-approving their content. The word ‘Culture’ applies to about everything from folk dance to comic strips, and exclude literature and thought almost entirely.
As a consequence, thinking is an activity one pays other people to do, advisers, consultants and journalists mainly. These are however too busy themselves to read much or think deep. One can become head of state without having crossed more than one border, or knowing the names of most capitals and prime ministers. An entire region can be conquered without the least clue of its anthropology or sociology. Vast operations are conducted, with no one having worked on a plan B.
Even business gives no price to ideas (under the pretext that only implementation has any value), and cares only for proven recipes. Dissenting positions get the young ambitious employee fired more surely than laziness. The only wise new investment of the past 20 years, the Internet, was eventually called the ‘dot.com bubble’. Venture capitalists actually venture very little, having no new ideas on their own, investing only into what the next big guy has already invested in. Things have reached the point where lack of innovation is becoming the main economic issue for the near future.
While the lower classes are informed by propaganda and TV, ignorance grows everywhere among the elites. Universities have become temples of specialized knowledge. Academics pursue their careers completely sheltered from criticism from anyone else that a handful of experts, and are forbidden to publish outside their limited field of immediate expertise or even acquire a global vision. When called for assistance in real life, they can hardly be of any help, other than on minute topics strictly belonging to their own specialty.
The only consolation is to imagine the face of Karl Marx discovering today what the contradictions of class struggle have been leading to.
This is how the world goes

Neither angel nor beast

The governor of New-York was forced to resign after the revelation of his using the services of a high-end escort service. Europeans observers were shocked by the price the gentleman was paying (hourly fees being in the $ 3,000-5,000 range), a disturbing sign of sky-rocketing inflation in the United States. American observers viewed his lack of personal morality as a proof of unfitness to public office. Who is right?

It is a constant principle of Puritanism that private behavior is a good indicator of public capacities. What makes this principle slightly inconsistent is that Puritanism also places a wall around sexual activities, which are supposed to be actively hidden from public view. In practice, the indicator is therefore discretion rather than actual morality, and can only be used if dissimilation is considered a political virtue.

More importantly, history does not seem to conclude in favor of the puritan principle. Many among the great political criminals of all times preferred mass murder as a channel for releasing their libido, to mere personal excess. Savonarola was impeccably abstinent, Aurangzeb, the most cruel of all the Great Moguls slept on the floor and seldom took time to visit his own harem, Philip II of Spain ruled his empire from a monk cell in the Escorial, while his troops where annihilating entire populations. Stalin was famous for having water poured into his glass instead of vodka, and using a modest office in the Kremlin. Adolph Hitler was anything but a womanizer. Ascetic personal behavior is no more a guaranty of political fairness, than debauch the sign of a statesman.

One does not need to suffer from a divided self to be capable of minor personal disorders while being at the same time completly able to run a government. Blaise Pascal wisely said: “Man is neither angel nor beast; and the misfortune is that he who would act the angel acts the beast”. What we need are competent politicians innocent of public crimes, rather than dangerous fakirs or even incompetent saints.

Abiding with the law certainly remains a legitimate requirement for politicians in a civilized country. In this respect, however, a reasonable scale should be applied. No one would consider a parking violation as a good motive for losing office (unless one is mainly in charge of parking policies). Corruption, a major public vice, is of much more importance.

Prostitution is a specific concern, less for its illegal character, than for its potential encouragement of sexual slavery, an unlikely possibility when consenting adults contract at the surprisingly high rates the Governor was willing to pay. In his case, embarrassment and matrimonial tensions could have been considered enough of a punishment, particularly at a time when financial abuse and white collar crime – Eliot Spizer’s specialty when District Attorney – is one of the most serious dangers we are confronted to.

This is yet how the world goes.

Western identity & Residual Privacy

Conflicts between public order and private liberties are as old as jurisprudence. The only conclusion, however, that was able to survive after centuries of critical thinking and political experience, is that whenever privacy disappears and the limits to public control are lifted, law becomes a mere shadow of itself. There may be, as a matter of fact, no better definition of totalitarianism and tyranny than the crossing of these borders by governments and public force.

It is also a constant lesson of history that, at any given point of time, excellent reasons can be found for shrinking somehow the sphere of privacy or violating it altogether. Authorities can always point to some actual or imaginary danger, coming from some inside or outside enemy, to justify such abuse. Every time the argument remains the same: “honest people have nothing to fear: their life can be turned into a glass house at no risk to them, as only the guilty has motives to protest”. Opponents to invasions of privacy are thus accused of criminal inclinations, absence of civic sense or lack of patriotism. Submission at all costs to the supposedly superior interests of law enforcement authorities becomes the sign of a good citizen, while taking at heart the principles of law in a civilized society is seen as proof of moral weakness, as if  hoping for a good police prevented  from blaming a bad one.

Perfectly aware of the implications of so dangerous an ideology, the fathers of modern constitutions were unanimous in safeguarding privacy against recurrent attacks. All over the Western hemisphere, these men thought that individual freedom is together with dignity the only value to be placed above any other consideration, even when efficiency and security are at stake.

The Universal Declaration of Human Rights thus sets forth: “No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honor and reputation. Everyone has the right to the protection of the law against such interference or attacks.” Few principles are now turned into more mockery. The “War on terrorism” was the occasion for the United States and the United Kingdom to ridicule all such rules. Germany, the most protective country for privacy, and France, against its own constitution, are now on the move. Spyware – ironically renamed ‘policeware’ – will be officially allowed, putting the entire content of private computers at the disposal of law enforcement authorities. At all times and from any place, all communications and data belonging to the targeted persons will be available online for analysis and storage, – an invasion of privacy in many ways much worse than putting cameras in bedrooms.

The fact that these new methods of surveillance are initially placed under the control of a judge is far from insignificant, but is certainly not a sufficient protection. As long as judges are not granted the appropriate tools allowing them to verify effectively the strict application of their orders, as well as the destruction of data irrelevant to specifically authorized investigation, the door is more than open to abuse. No one of course will give judges access to spyware allowing them to check the computers belonging to law enforcement agencies.

These methods are relatively inefficient against criminals, as was shown by the inability to catch Osama bin Laden in spite of the largest deployment ever of surveillance technologies. Criminals will use pigeons if need be. They are on the contrary very efficient against the average man, generally unaware of such threats and always defenceless against them.

There was a time when the Western legal system could be arguably opposed to Eastern despotism. This time is no more. The only residual differences are between primitive methods of coercion, such as actively blocking access to selected website, and the more sophisticated invasions of privacy through spyware or similar instruments.

The main combat of the 21^st century will not be between Right or Left or West and East, it will be between the defence of civil liberties and the submission to the universal tyranny which taking shape in front of us. Time has come to take sides.

This how the world goes.

The formation of public opinion

Public opinion is not an aggregate of individual opinions which would have been formed independently. Quite the opposite, really: opinions are for the largest part products of a preexisting public opinion. Naturally, public opinion acts in a circle, as it is reproduced through the very elements it has produced, the individual opinions.

Within its workings, Individuals are not passive, but they are restrained. All they can generally do is select according to their own preferences or interests (what Mark Twain used to call their ‘corn-pone opinions’) among a limited set of possible opinions deemed as legitimate and previously authorized by public opinion. In practice I may, for instance, entertain an opinion favorable to Obama, Clinton or McCain, not an ’illegitimate’ opinion, i.e. one which would be considered as eccentric, ridiculous, foolish, extremist or mad by public opinion. Well, I can, but I may not, at least if want my opinions to be discussed, respected or spread by others on any significant scale, and unless I don’t mind being ridiculed, isolated, silenced or persecuted. Actually, if I am obstinate enough not to mind this kind of social pressure, my attitude is likely to be interpreted as an additional confirmation of the illegitimacy of my opinions.

No individual or group of individuals can control public opinion which is essentially a-centric. Believers in conspiracy theories do not understand the mechanisms at work. The most one can do is influence public opinion, propaganda being the primary tool. Advertising – as we shall see – is the other one.

Not all individuals, however, were born equal before public opinion. Some of them are simply more intelligent, they have the capacity to question received ideas. Those can be extremely influential, usually after their death, when the previous ideas have lost momentum. They are very rare.

Another group are the so-called ‘opinion makers’. These do not actually ‘make’ anything, but have the power to focus public attention on a specific opinion rather than on others. These people are the actors of the Media. Their role is to increase the legitimacy of a subset of opinions, first by mentioning it, then by relaying it. In the general case, their audience already shares their subset of opinions. Very few people read a newspaper promoting adverse opinions. All they are looking for is a reinforcement of their established opinions, by the proper selection of appropriate facts and points of view. The more an opinion is reinforced, the better it spreads. Media backing such opinions get more following, and become more legitimate and influential.

The surge of the Internet did not entail any dramatic change until now. Assuming that the entire range of possible opinions is present on the web (a reasonable assumption), each of them remains almost invisible and diluted until some mass media directs public attention onto them. This can be done by non-digital media (a newspaper or a TV program mentioning an opinion expressed on the Internet, or adopting such opinion), or by digital media (e.g. major blogs). Self-organized buzz can in some cases spread virally, although none – to this date – have been able to become influential on a macroscopic scale without the leverage or traditional media.

In order to survive, traditional media need resources. Subscribers not being enough in most occurrences, advertising does the rest or does it all. In other words, any non-digital media is dependent on advertising. As advertising has also become the main source of revenues over the Internet (see previous post), the rule applies basically to all media of any kind.

Theoretically, advertisers on a perfect market are indifferent to the content of the support. They are supposed to advertise strictly according to the size of the audience. They don’t. They advertise only in ‘legitimate’ media, i.e. media relaying ‘legitimate’ ideas. Not only they are human beings, reluctant to help in any way people spreading dissenting ideas, but they are also aware that the ‘illegitimacy’ of the content can affect the image of whatever they have to sell. Even in the rare occasions where they accept a certain amount of scandal to draw more attention, things are kept within strict boundaries. For instance, Benetton ‘shocking’ marketing campaigns remained politically correct, until they had to be stopped altogether.

This means that media and therefore people working for them cannot afford emphasizing anything else than mainstream or innocuous ideas, unless they have a niche and motivated subscribers. Any opinion deemed to be illegitimate, no matter how sound or well documented it may be, is put aside or condemned. This includes original ideas, as well as views opposed to those of most people, or contrary to the interests of the advertisers.

Large corporations do not have to plot to impose their views. They don’t even have to plan it or think about it (although they of course can if need be). They simply have to advertise. Directly taking over the media is also an option, but not a necessary one. This is easily done, their opinions being usually of the mainstream kind or, more precisely, representing the subset of mainstream opinions the most compatible with their own interests.

The American people will soon elect the next President. Their choice will be limited however to candidates acknowledged as being legitimate by the media. May be a good group, may be not. Nothing can be done about it.

By the way, this post is a self-fulfilling prophecy.

This is how the world goes.

Please make me pay!

The more we use the Internet, the least we seem to have to pay for anything. I couldn’t list the almost unlimited number of things that are offered for free. Free search, free delivery, free trial, free software, free email account, free download, just name it (even THIS blog is free). Everything is free, gratis, no strings attached. What a wonderful world.

Of course you know the secret: the so-called ‘ad-funded’ model. You don’t pay for anything, as the nice, the sweet, the generous advertisers do it for you. The ad-funded model is what allowed Google, one of the smallest companies in the world to become almost overnight one of the largest ones. Every day the add-funded model gains more ground. Forecasts are clear: the future is there. Web 2.0 or Web 99.0 simply means more and more advertising all over the web. In the event you are an entrepreneur, don’t even think of raising a dime for anything else than a project under an ad-funded model.

Yes, I know there is no free lunch and you sometimes wonder if the whole thing is really that healthy. Let’s not be paranoid. Why bother when such a galore of free stuff lies beyond the keyboard? Do I really care if my mailbox is limited in size or if the software I downloaded will only work for 2 weeks? Or if I lose my account when I change my ADSL subscription? Is it more meaningful that search results showing advertised links at the top, quickly followed by garbage at the bottom, or scientific information drawn from an unedited encyclopedia? Is it of any importance to me that my email address and all information gathered about me are being resold all over the planet, generating spam and opening the fascinating possibility of identity theft? Why should I worry about discreet cookies allowing gentle advertisers to better target me? A minor inconvenience compared to all the money I save. Because I save, don’t I? It is after all the well-known purpose of advertising to make people spend less and save money. On top of it, all the messages advertisers send me are for my own good. Thanks to them I am more intelligent and better informed. I had no clue, for instance, that my next car was a transformer and that it would make me a better father. Now, I know.

What would be really great is a fully ad-funded universe. What if I id not even have to pay for my car? Well, in fact, I don’t have to. They will give me such extended credit that buying it is definitely a no brainer. Can you imagine calling long-distance for free, and simply having a reliable soda company interrupt the boring conversation every 2 minutes for always more instructive news?

I am dreaming. Things are not that perfect yet. For some bizarre reason, some of the things I need most still carry a price-tag, including my high-speed Internet connection. Can’t I change that, for a marvelously free and sluggish connection, full of funny pop-up screens? Yes, you can.

This is how the world goes.

Czar and Emir

Russia is now the last great colonial power in the world, ruling over 160 ethnic groups speaking 100 languages, on a vast territory (the largest in the world). Three quarters of its surface is located east of the Urals, i.e. outside the metropolitan part of the empire.

Russia’s economy (smaller than Brazil’s) is predominantly based on the exploitation of natural resources inside its colonial domain: commodities, raw materials, agricultural inputs. Oil & Gas by themselves account for about 30% of the total tax revenues. At 10 to 15 dollar per barrel, the second largest producer of crude oil after Saudi Arabia was a former communist country; at $100 it turns into an Emirate.

Russia is a somewhat unusual emirate, being governed by an elected Czar chosen by the KGB aristocracy. It is not a particularly efficient one, with a GDP growing by 5 to 8% a year, while the price of commodities was multiplied about 4 times over a period of ten years.

As most emirates, Russia is also bound to be conservative in foreign policy. Soviet Union was backing every movement of independence. Russia is not. The main goals it can now achieve are formal respect for its national pride and be left alone in Chechnya.

More awkward than anything for an emirate, Russia is not a friend of Islam. Afghanistan is the name of its worst humiliation, more painful perhaps than the loss of Central Europe. Muslims are the only potential danger for the internal peace of the realm. Orthodox Russia is thus coming back with a vengeance. Hence the significance of Serbia, and the hostility to Kosovo’s independence, a multiple blow to the new Russian values.

Can the Kremlin do much about it? Not really. A move against the Baltic Republics, the only one to be technically feasible, would entail long-term isolation and would not achieve much. The almost inevitable partitioning of Kosovo, the northern province rejoining Serbia, may be enough of a nominal consolation.

In any case, the Russian public opinion is currently focused on a more extraordinary event: the turning of the Emir into a Vizier after next elections. A good subject of conversation.

This is how the world goes.

Please do not write novels

I shall never write novels.

When I was a little boy, a priest confiscated the novel I was about to read. I now understand he did it for the completely wrong reasons. His idea was that various sexual references included in the book were a threat for the purity of my soul. He did not realize that familiarity with sex and romance is part of a good education and a precious stock of knowledge. The problem with novels is elsewhere.

There is nothing neutral about a literary genre. Each one conveys a specific view of things. The vision of the world you can find in a novel will never be the same than the one you get from a tragedy or from epics. They cannot be translated into one another other. A Shakespearian novel would be a total impossibility. Each society puts some genre above all others and for good reasons: our favourite literature reflects who we are. The novel is the democratic genre par excellence. No matter the author, the message is the same: do not worry about your low level of self-esteem, other people, particularly the ones with noble aspirations, grand ambitions or romantic hopes, can be much more miserable than you could possibly fear to be. The entire art of the novelist is to tell their story, torture them like an entomologist pinning an insect on a piece of cork, humiliate them in all imaginable manners, show their weaknesses and - above all – make sure not a drop of illusion does remain in their heart when we turn the last page.

Tragedy does exactly the opposite. Shakespeare always treats his monsters with utmost respect, and shows divine forces animating their dark projects. Lady Macbeth, Gloucester, even Shylock are never mocked. The grandeur of their crimes is what brings them onto the scene. They stand there with as much dignity as Juliet.

“Lost Illusions” could be the title of any good novel. “Journey to the end of Night” is an alternative. No wonder Louis-Ferdinand Celine, immense genius and abject man, is by far the best French novelist in the 20^th century. His character was the person he despised most and knew best, i.e. himself. Debasing so much and so well one’s own double cannot be the act of a good man. But who told us after all that an artist should be a moral person?

If modern novels are a long exploration of the gutters of the mind, the spirit and of society, classical novels were already of the same vein. It all started with Cervantes depicting a brave man trying to restore the values of chivalry and exert the proud virtues of knighthood, as a grotesque example of the vanity of men. Mrs de Lafayette turned the loving Princess of Cleves into a harlot. Flaubert forbade mutual love or even intelligence to all his characters. For a while, however, American novels kept an epic tilt, while Russian authors were still breathing the sharp air of the steppes. Melville could not help being fascinated by Ahab’s folly. Dostoyevsky felt visible compassion for Raskholnikov’s. But when Jack London’s Martin Eden came, the game was finally over. Humiliation was to be from now on the only reward of extraordinary men.

I read novels. I must confess I do it with great pleasure when they help me discover aspects of the human heart I did not know existed or could not understand. I have generally little personal sympathy for the imaginary world novelists live in. All they can get is my admiration. This is not enough to want to be one of them.

No matter what my own preferences are, novels will remain one of the best expressions of our time.

This is how the world goes.

Intellectual Improperty (Part 3 – end)

In the same manner that new technology and market forces are undermining the role of copyrights in performing arts and related industries (see previous post), plastic arts (sculpture, painting, photography, etc.) are being forced to change directions and return to more traditional solutions.

Marcel Duchamp and Andy Warhol are landmarks of contemporary art which cannot be fully understood without their contributions. Although both were gifted artists under classical standards, showing great talent at creating individual and carefully crafted masterpieces, their fame came from their opposite stand that major art may come from minor displacements in our relationship to highly reproducible objects. Duchamp introduced ‘ready-mades’ and his famous ‘Fountain’ (a mere urinal) as a proof that industrial objects of minimal value can acquire an entirely new meaning when the very exhibition of art is used as an artistic tool. Warhol continued the demonstration with reproducible images of commodities, such as Campbell cans, Brillo boxes or icons of movie stars.

The irony was that while both artists were denouncing the fetishism traditionally associated with art, their own works became subjects of more veneration and more fetishism than anything before. Collectors started purchasing at prices never heard of and storing inside vaults objects which could have been obtained for a dime, and that a better understanding of the artists’ explicit intentions should have led to acquire preferably from supermarkets. The comedy was to reach a climax when Duchamp’s Fountain was hammered by a fan at the Beaubourg museum. During his trial the iconoclast explained that he agreed to pay for the repair, within the limits of what a decent plumber could ask for, as opposed to the half million requested by the museum as the actual cost of the restoration by experts trained in works from the Renaissance. He also claimed to be recognized as a co-contributor to the piece and a co-beneficiary to all related copyrights. Hilarious indeed and a good example of the paradoxes of copyright…

For a while photography was threatening sculpture and painting to become the major form of contemporary art. Serial art was reaching the same prices than unique pieces. Things have been recently calming down, and the specific quality of each singular copy is again considered as an essential factor of its economic value.

Absurdity, however, has not completely left the field of photography, as owners of rights to the objects that are being photographed are also granted rights to the picture itself. I am not talking of the legitimate right to privacy and control over one’s own image, but the strange idea that the mere image of material objects should be appropriated by someone. The city of Paris has a claim, for instance, on any picture taken of the Eiffel Tower. One could understand that smaller museums with limited funding would ask for a modest fee for using a camera within their premises. There is no justification, however, to limiting the passive reproduction of images of things already offered to public view, unless we adopt the metaphysical and rather primitive creed that the essence of things resides in their image.

In the distribution of digital copies of images of any kind, a part of the value comes from the service of distributing them, sometimes more than from the image itself. An image bank can draw revenues from gathering pictures, classifying them and making them available for downloading. The bank still has to pay for procurement, particularly when images are associated to trademarks, as trademarks imply contractual arrangements with their respective owners. A photographer’s trademark may or may not be important, only the market can decide. What is certain is that no one can contract on behalf of Leonardo when dealing with a picture of the Mona Lisa!

Protecting artists against unauthorized commercial use of their work does not mean preventing unlimited duplication for private use, nor the free secondary reproduction of images taken of any primary work.

Analogue is the situation of writers. In the case of journalism or screenplays, the work being created at someone else’s request for immediate release, a simple contractual arrangement is sufficient to generate payment. Such contract may very well include an override on future revenues. If the signature of the author has any residual value, then it can be treated as a trademark and protected as such for a while against infringements during secondary distribution. If on the contrary the market does not acknowledge any value to the trademark, i.e. if the text is completely dissociated from the author’s name when reproduced or used, such text has become a commodity, and I frankly would see no reason to grant it any privilege, compared to ideas or concepts. I feel sorry while writing this for one of my closest friends who specializes in remakes of foreign films. I simply hope he will see the advantage the recommended change could mean for the creation of films in general.

It is considered ignorance or bad taste to refer to a concept without mentioning the name of its first author, unless the reference is implicit or obvious. Nevertheless, it would not cross anybody’s mind to initiate lawsuits for payment of fees to Freud’s or Lenin’s heirs for use of their respective notions of the unconscious or the proletariat. Why then should we be fined for having bought a cheap copy of a Gucci © handbag, at least when the trademark is not used? Infringement of the trademark should be repressed (through sellers not buyers), as it can induce the consumer in error about the genuine quality of the object. In the absence of a trademark, however, the transaction bears on the idea of a Gucci © handbag, which is a totally different reality.

A world with no patent and copyright (and yet with trademarks) would be a better world, more logical and efficient. Creators would still create, and their creations would be used more. Trade would continue, based on services rendered and contractual arrangements. Lawyers and monopolies only would have something to lose. Who do you think will win, at least on the short term?

This is how the world goes ©.

Intellectual Improperty (Part 2)

Copyright is the minefield of intellectual property. Its main beneficiaries seldom are intellectuals, and yet find among the intellectuals their best allies, copyrights applying to books, newspapers, plays, films, software, websites, painting, sculpture, photography, architecture, etc.

As post-Guttenberg kings were trying their best to make sure no publication would escape their control, free minds were left with no other choice then than finding publishers in foreign republics, drawing small income from their works, if any at all. At the end of the 18^th century, an awkward alliance took place between the censorship of governments and the greed of authors. Beaumarchais, the author of the ‘Marriage of Figaro’, also an arms dealer and a tirelessly litigious character, succeeded in combining things at his best advantage: from now on the legal control of printing would be used not only for censorship but also for remunerating authors. This was the beginning of copyright.

Not a philosopher nor a mathematician, Beaumarchais did not bother to protect ideas or concepts, no matter how valuable they were. As a matter of fact copyrights do not protect any such things, or for that matter, anything immaterial. They only protect the material form of the specific types of immaterial creations people like Beaumarchais could produce. No wonder paradoxes and contradictions would flourish on such grounds.

The current problems are quite different depending on the area of we consider: e.g. performing arts, writing and plastic arts. Performing arts have found themselves in the eye of the cyclone since the introduction of digital technologies. Verdi never sold music; he contracted with owners of theatres to sell seats, and became rich. One would purchase a ticket to listen to his performances, and the Italian wall painters whistling his best airs next morning on their scale were not asked for a fee. A contemporary Verdi can do exactly the same, leaving Sony Music desperate. Record companies had a short moment of glory. Among the mass of would-be musicians, they used to pick talents on a commercial basis. In the digital world, the audience is in charge of discovering new artists, for free, mostly though websites and (still illegal) copies. No one can impose purely commercial choices anymore, and talents can emerge as they did in older times, by the force buzz. Successful artists give concerts and can make fortunes. Copyright in music is useless and should therefore disappear. It will unless an irrational protection is given to an obsolete industry.

The next victim, obviously, will be the film industry. The disaster is soon to occur. There is simply no way to prevent a digital copy of a film to spread over the Internet in a matter of hours. The good news for the industry is that most people would probably be ready to pay for the service of a guarantied quality of the files, and of large bandwidth for faster downloads. The bad news is they would only pay a modest fee, unlikely to be sufficient to amortize the cost of Hollywood productions. The only reasonable solution I can see, other than fighting lost legal battles against millions of consumers, is to change the very nature of future films, dividing them into two completely different types. The first group would be productions so spectacular that it would make little sense to watch them on a TV or computer monitor. Such films would be placed in a situation very similar to live concerts. After all, who would bother downloading a digital copy of an Imax movie? The second group would be inexpensive and smaller films, typically shot with video cams, and perhaps pre-financed by subscriptions. The film industry is likely to resist as much as possible this evolution which will however open new paths to creation. Yet, inertia guarded by lawyers is a losing strategy.

(to be continued)

Intellectual Improperty (Part 1)

The choice of words is a powerful weapon. For years Marxists were the great masters in this art, naming single-party dictatorships ‘Popular Democracies’, a cynical antiphrasis among many others. After enough harsh lessons, Conservatives have achieved equivalent mastery.

‘Intellectual property’ is one of these magical expressions which can trigger instant approval as soon as pronounced. Who can oppose ‘intellectual property’ but an idiot, an anarchist or a thief? Property is a universal right. The epithet ‘intellectual’ gives it full sanctity. Intellectual property, as it would seem, is the reward of genius and a key to human progress.

One might nevertheless wonder why it took so long for mankind to discover such obvious a concept, and why it does not apply to the most valuable products of the human mind. I am not referring only to Homer, Plato, Mozart or the inventor of the wheel, none of whom where protected by any kind of intellectual property; but also to Einstein whose ‘E=MC2’ was immediately appropriated by the world. Why is it that reproducing the last video clip of a rapper can lead you to jail, while one can freely use any major theorem even if discovered last month? What makes Mickey Mouse so important and so special that his very name and image still belongs to a single corporation after so many years, while no philosopher can retain the least control upon his own ideas?

From a legal standpoint, the confusing notion of ‘intellectual property’ (which remarkably belongs to no one) includes 3 main and somewhat unrelated components: trademarks, patents and copyrights. Trademarks are certainly a good invention. They play a role similar to measures. Measures have been controlled and guarantied by governments since markets started being in existence. As buyers can seldom verify by themselves the nature of what they intend to purchase, a public control of weights and measures remains an essential service. Verified trademarks carry important information on the quality of crafts. It is critical for instance to make sure that such or such pill contains the right molecule, something patients could never check by themselves. The manufacturer’s reputation being a strong indication in this respect, the presence of an appropriate trademark should not be overlooked. Even people involved in “piracy” over the web, insist on the value of their own informal trademark as a guaranty that their DVD ripping is state of the art.

Patents are a completely different animal. They inconsitently apply to certain sectors of the economy, not to others, with no better justification that old habits and vested interests. Manufacturing is much better protected by patents than any other area. Different countries choose to include extremely different types of inventions in the bizarre list of what may or may not be patented. Isn’t it quite irrational to allow the patenting of human genes (oh my!) on a continent and not on another? It makes little sense to protect a chemical process, not a financial invention.

This being said, the most important aspect of patents is the way they work: a patent does not allow someone to use an invention, it only excludes others from doing it. In other words, by their very structure, patents do not spread new knowledge but help slowing down its expansion. The main argument in their favour is that they are supposed to stimulate research and discovery by rewarding inventors. Inventors however are not the ones who are protected by patents but those who invest in their creations. Elizabeth Maggie was the inventor of the ‘Landlord’s game’ soon to be made famous, after minor modifications, under the name of Monopoly ©. Parker had bought her out for $500 and no royalty. Albert Fert, Nobel Prize in physics (2007) is responsible for an invention which changed the order of magnitude of data storage. He could easily have claimed a patent and become one of the richest men. His deliberate choice was not to delay the advantage for mankind of a discovery all of us are using today, rather than accumulating a wealth almost impossible to efficiently spend in charities.

Even if we consider investment in research, as opposed to inventors, as a valid object of protection, it remains to be seen whether or not patents are good at stimulating research, and whether or not the larger number of economic sectors in which patents play a minor role, have been less inventive or prosperous than the others. Finance and banking have been doing rather well (or at least did until ‘subprimes’ were invented!). They continuously bring to market highly sophisticated products, and the people who come up with these concepts for them are generally well paid. When traveler’s checks were introduced by American Express in 1891, the absence of patents did not impede success, this company having kept a leadership for over a century. Patented electronic traveler’s checks are hardly used by anyone. Pharmaceutical industries are patent-freaks, a feature which turns out to be counterproductive not for their revenues but for their discoveries: when was last time new antibiotics (a major need) appeared on the market? Not a convincing change from old times when universities and hospitals did the primary work in medical research, and when discoveries were almost immediately published and rarely patented. The cliché that patents are made necessary by the sky-rocketing costs of biomedical research rests on shaky grounds. Patenting is a partial cause of the increase, together with lobbying (and corruption in various countries). The associated secrecy is another one, making evaluation and clinical trials such an inefficient process that in the U.S. only public funding (through the National Institutes of Health, not to mention other public sources) has had to be raised to almost $30 billion a year.

I personally would be inclined to get rid of all patents altogether; not for the sake of an ideology but for a better release innovation in the economy, and a faster cross-seeding of ideas. The most inventive corporations would still retain a decisive advantage under the form of acquired market-shares, experience and know-how.

(to be continued)

 

 

Poor Shivas, Happy sports fans

Most or may be all the women I know have a deteriorated image of themselves. When I say all, I do not mean the ones who could find some reasonable motive for doubting from themselves, after for instance a big emotional shock, reversal of fortune, or professional blow. I mean all, including the “Shivas”, these modern deities using their multiple arms to be at the same time at the peak of an impressive career, and great mothers, reliable friends, athletes, bright, healthy, community aware, politically enlightened, wonderful lovers and/or perfect wives.

The situation is quite different for men. Even the laziest, ugliest, most stupid, uneducated loser can have an excellent opinion of himself. Don’t worry, boys, I am not giving names. But how to explain this privilege?

The main reason, I believe, is the intense propaganda any woman is subject to from the age of 2 until her death. Dr Goebbels never dreamt of a budget close to the ones L’Oreal or Armani mobilize each year for brainwashing the entire female gender. Take the 20 most beautiful girls on the planet. As they are still not good looking enough, do spend fortunes editing the best pictures major artists have taken of them. Now invest billions in persuading women by all possible means that is they do not end up looking like this handful of supernatural women, their life is irrevocably doomed. Unless, in way or another, they adapt their own figure and very existence to these extraordinary criteria, no one will ever want or love them. They will be ridiculed and abandoned.

The simple and mundane goal of such psychological warfare is of course limited to selling perfumes, lipsticks, leather and apparel. The impact, however, is deep and far reaching. As it is utterly impossible for any of them, including the models , to really look like such icons and happily identify with them, any woman feels miserable in front of what she inevitably feels as the outcome of her own failure. Courage being one of the undeniable female qualities, few leave the battlefield before the end of a lifelong fight. Most submit to everlasting half-starvation and money-bleeding, purchasing unlimited numbers of shoes at outrageous price. Rare are the ones who accept early defeat, making the opposite choice of obesity and self-neglect.

Another implication of the fashion propaganda is to increase the dependence of women. Confronted to the material consequences of the related expenses, even the most autonomous ones are mechanically tempted by male subsidies. Mass prostitution exists in several places (Japanese school girls or Russian students as I am told). In the Western world, things for being less blatant are not ideal. Even when no monetary exchange is directly or indirectly performed, fashion demands that success be measured in the other sex’s eye. Not a good sign for a pursuit of self-reliance.

As if such public health and social equality issues were not sufficient to ensure pervasive ill-being, the female population is also placed into a double-bind between fashion system and sex-liberation. No matter how much energy she spends in conforming to all the norms of propaganda, and how dependent she thus becomes in her relationship with men, a woman is also supposed to achieve identical professional goals. Once she has overcome discrimination in the responsibilities she can obtain, often by accepting lower income, she still has to prove she can overwork herself at the office while fulfilling all duties of traditional motherhood. Survivors of one combat often fall in the next. And the rare super-heroes, who have succeeded everywhere, now fear their fifties as their final ordeal. Heavy schedules and the prospects of menopause are not favourable to keeping one’s mate faithful. Competing younger women are a danger by themselves, particularly in a society where feminism has liberated men from their ancient responsibilities. “We have spend wonderful years together, my darling, now time has come to part, I will always love you, let’s be friends, I trust you are strong, and wish you the very best for the rest of your life” is the speech that comes next, and yet soon turns into sheer hatred after the courts have performed their malefic duties and children started to show resentment.

Fashion industries have decided to expand by making the male population their next targets. Forecasts indicate men will spend even more than women in creams and clothes by 2020. They are, however, protected by a wonderful system in a society that does everything to reassure its males. TV sports culture, by all means not the only instrument to this purpose, is a good example. Take an imbecile, with absolutely no personal talent in any sport, sit him in front a TV set, sell him a six-pack of beer, and show him the most remarkable athletes you can possibly find. The man is already satisfied. Now train your athletes for a team sport which can take the appearance of a battle. Give these guys the best available coaches. See how the imbecile starts jumping, screaming, making all kind of noise, convinced as he is that HE knows better! HE has the right tactics; HE can value the players better than anyone; HE can tell; He is the man! If you repeat this at least once a week for at least 16 years, your imbecile is armoured forever against any concern for his self-esteem. When he encounters other men visibly more talented or successful than he is, his opinion of himself remains totally unaltered. This guy is gorgeous? No problem, he must be gay! This other guy is a genius? How boring, he surely doesn’t know anything about what’s good in real life! The third one made a fortune? No worries, just another unreliable bastard! The last one is an actual champion in a sport? Yeah, he has nothing better to do! Girls find you disgusting? Who cares about these sluts?

All right. That’s for sex equality at the dawn of a new millennium. What can I say other than:

This is how the world goes?

Whatever happened to Democracy?

When considering democracy it’s always a good thing to remember the Greeks, at least to measure how different we are from them. Their notion of democracy was twofold. In the strictest sense, it meant direct government by the people, a regime strongly disapproved by all ancient philosophers (in fact, probably the only thing they would unanimously agree upon). No matter how attached we are to the word of democracy, most of us partake in the old consensus. We prefer elections to direct government which is now limited to juries and referendums of minor scope. The reason direct government is disliked are basically the same than they were before: masses are prone to hysteria, lynching and mass murder, as we were reminded in our lifetime by Red Guards and by Red Khmers. Although, according to their very definition, elections produce elites, our oligarchies (government by the few) are placed under the control of the popular vote. This is the essence of the so called “mixed regime” that the very wise Aristotle always recommended.

The second sense of democracy, and the most important, is equality before the law, a concept that Greeks called “isonomy”. The presence or absence of isonomy is much more critical than any other aspect for the evaluation of a regime. The constitutional form of government (presidential or not, republican or not, federalist or not) is a mere technicality compared to it. We are (really) equals before the law or we are not, courts (efficiently) protect the weak from the strong and the individual from the State or do not. That is the question, or at least the main one.

There was a short period of time when the Western world could claim a clear superiority in both its “isonomy” and its technology. Is it still the case today and, if it is, for how long? Recent trends hardly allow any optimistic prognosis. The judicial system, the very key to actual “isonomy”, is turning mad. The Ancients used to say “too much law kill the law”, and they were right. We have too many laws, almost impossible to understand and enforce. One should add “too many legal fees give it the final blow”. Where is justice when you may have to spend more to obtain justice than what you can expect from it? Where is it when defenders can buy their peace out? As if all this was not threatening enough, governments can now escape the most basic constraints; in such a way that the more we fear our enemies the less protected we are from our own protectors. Privacy is no longer a reasonable claim, when even your turned off cell phone can be used as a microphone against you by the authorities. Waterboarding as a regular technique of government is the last symbol of what habeas corpus has become.

In theory, public opinion could react and citizens could demand a return to more respect. But how is public opinion now formed? This question needs to be discussed in another sad post.

This is unfortunately how the world goes.