warren j. dew

psychohist @ 2009-12-03T10:14:00

2009-12-03T15:14:14Z

Most of the longest lived people in the world are short, generally no more than 5 feet tall. Most of the tallest people in the world die early - the tallest tend to die before age 50. If you could choose only one, would you rather be tall or long lived?

(Please excuse the formatting, it's my first LJ poll)

View Poll: Would you rather be tall or long lived?

Outsmarting herself

2009-11-13T15:28:26Z

I was late putting on my socks this morning; I hadn't folded my part of the last load of laundry yet, so I had to wait until I went downstairs to the second floor to get socks off the dryer. I then sat down on the bottom stair near where Margaret was playing and took off my slippers to put the socks on.

About this time, Jomkwan, our au pair, came up from the first floor. Normally, Margaret is more than happy to join Jomkwan for her all day play date. This time, though, she uncharacteristically resisted. When Jomkwan tried to take her, Margaret said "no!" very clearly, and refused to be picked up by either Jomkwan or myself.

Though I didn't make the connection immediately, normally when I sit on the stair and take my slippers off, the next step is to put my shoes on and go out somewhere. Margaret often gets to go along. This time, though, after my socks were on, I put my slippers back on instead of donning shoes. Margaret's plan had backfired - not only was there no walk with daddy coming up, but she had just lost her chance to go with Jomkwan for the day too! There followed a bit of forlorn crying and tugging at daddy's slippers to try to get them off, but Margaret's expression showed that she really knew she had outsmarted herself this time.

Fortunately, after stashing the day's supply of formula in the first floor refrigerator, Jomkwan came back up and gave Margaret another chance. This time, Margaret went more than willingly.

psychohist @ 2009-11-06T11:21:00

2009-11-06T16:48:02Z

In the news today are the shootings at Fort Hood by Army Major Nidal Malik Hasan. Hasan had recently been assigned for deployment to Afghanistan, and had evidently tried to get out of the army to avoid that because of his sympathies with fellow muslims in Afghanistan. Given those facts, it's quite possible this was a deliberate act of terrorism, and not just the result of psychological stress.

Perhaps relevant is the fact that Nasir al-Wahayshi, head of the arabian peninsula branch of Al Qaeda, last week called for jihadists to perform simple attacks against what they consider to be enemies, using readily available weapons.[1] Al Qaeda issues similar calls a couple times a year, and while this one appears to have been directed primarily to potential terrorists in arabia, it was issued online and Hasan might have known about it.

On the one hand, the fact that Al Qaeda has to resort to calls to random sympathizers illustrates how their direct organization has been limited in recent years. On the other hand, attacks like this point out one of the downsides to the U.S. effort in Afghanistan; while our effort in Iraq was aligned with the interests of the local population, that in Afghanistan has primary goals directed towards exclusively U.S. interests.

This particular incident also suggests we might benefit from a mechanism to allow officers to buy their way out of obligations incurred from schooling - probably the only reason why a Major couldn't just resign. Certainly it reinforces the wisdom of an all volunteer force; conscription would undoubtedly result in far more incidents like this one.

[1] See Stratfor counterterrorism report from 4 November 2009, www.stratfor.com

Wasted health care

2009-10-21T04:50:34Z

I kind of owe an article on how I would cut government health care expenditures in half by improving the efficiency of care. Unfortunately if I write everything I want to write, that article is going to be a long time in coming. So here's a "short" article on why I think a large fraction of all medical expenditures in the U.S. - like about half - are probably waste and could be cut out completely without affecting the quality of care, even with no other improvements in efficiency.

The first thing to understand is that the large majority of medical expenditures are not on things that happen to the young - where "young" means roughly "under 50". In fact, 75% of U.S. medical expenditures are on chronic diseases[1], which primarily affect old people - like my mother, who at 77 is on 7 different kinds of medication for things like diabetes, high blood pressure, and the side effects of others of the medications. And she's relatively healthy for her age! So if you're 30 or 40 years old, the vast majority of health care expenditures are on things that you've likely never even had to think about.

The second thing to understand is that the medical establishment has little knowledge of what causes these diseases. Rather, they treat symptoms. As one doctor puts it:

What would be the typical treatment of cardiovascular disease? First they check the cholesterol. High cholesterol over 200, they put you on cholesterol lowering drugs and what does it do? It shuts off your CoQ10. What does CoQ10 do? It is involved in the energy production and protection of little energy furnaces in every cell, so energy production goes way down.... One of the best treatments for a weak heart is CoQ10 for congestive heart failure. But medicine has no trouble shutting CoQ10 production off so that they can treat a number (cholesterol figure)....

In almost all cases if you treat a symptom, you are going to make the disease worse because the symptom is there as your body’s attempt to heal itself. The medical profession calls the symptoms diseases.... They treat what they think is the disease which is just a symptom.

If you are going to treat any disease, you need to get to the root of the disease.... But the problem is that we don’t know what the root is, or we haven’t. They know what it is in many other areas of science, but the problem is that medicine really isn’t a science, it is a business.[2]

As Gary Taubes[3] puts it, doctors want to do something for their patients now, not do years of research to figure out what the right thing to do is. Regarding metabolic syndrome, which accounts for most of that chronic disease expenditure, he points out:

The urge to simplify a complex scientific situation so that physicians can apply it and their patients and the public embrace it has taken precedence over the scientific obligation of presenting the evidence with relentless honesty. The result is an enormous enterprise dedicated in theory to determining the relationship between diet, obesity, and disease, while dedicated in practice to convincing everyone involved, and the lay public, most of all, that the answers are already known and always have been - an enterprise, in other words, that purports to be a science and yet functions like a religion.[4]

So basically most of that 75% of U.S. medical expenditure on chronic diseases doesn't work and likely makes things worse. If we could just resist the impulse to "do something, anything" when a problem came up, we could save that money with no impact on actual quality of health care.

And yes, we could also make things better while still saving the money. But that's a subject for another post. This one is just on saving the money.

[1] See http://genomebiology.com/2006/7/2/104 figure 1.
[2] http://nourishedmagazine.com.au/blog/articles/insulin-resistance-the-real-culprit
[3] See my previous post at http://psychohist.livejournal.com/40106.html for more information on Gary Taubes.
[4] Gary Taubes, Good Calories, Bad Calories, pp 451-452.

Compensation reflecting performance

2009-10-19T04:13:10Z

The latest economic news incudes administration complaints about the prospect of high bonuses at invesment banks. So why are these bonuses expected to be so high?

Well, as it turns out, the investment industry has done extremely well this year - as might be expected given the recovery of stock indices like the DJIA and S&P 500, which are up more than 50% since their lows near the beginning of the year. Good performance is reflected in high bonuses - exactly the kind of performance based pay the administration was advocating a few months ago.

It's more than just that, though. The investment industry is to a large extent what's driving the recovery; without their putting their money back into the market, the Dow would still be languishing at 6,000, instead of having recovered to 10,000. Without the recovery in the market, people who watch their retirement accounts would not have started spending again. We wouldn't have what little recovery we've seen, and the unemployment rate might be climbing towards 20% rather than stabilizing at 10%.

Now, it's certainly true that some investment banks were the beneficiaries of some government bailouts - especially indirectly, through the guarantee of AIG swaps that those banks had purchased. But you know what? If the government gives out money, whether in bailouts or other handouts, you have to expect that people's performance will including playing the government for as much of that money as possible. The answer here is to stop bailing people out, so their performance will be based on productivity, rather than on playing the game.

The administration can hardly complain when people are taking their advice, and compensating based on performance. And if they're unhappy with what that performance is based on, they should be learning instead of lecturing: in this case, learning that bailouts and handouts are counterproductive when trying to get people to be productive and to get the economy back on track.

Article on administration statements:
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/18/AR2009101802542.html?hpid=topnews

Ardipithecus ramidus

2009-10-03T04:17:39Z

Ardipithecus ramidus is a 4.4 million year old hominid, one of whose examples has yielded the most complete skeleton to date from that time period. As the date of the fossil is close to the date for the branching between the human and chimpanzee lines, it's likely that A. ramidus is quite close, morphologically, to the common ancestor of those two lines. A. ramidus has a brain the size of a chimpanzee's, is bipedal, and has some arboreal adaptations that are entirely different from the chimpanzee's. All that makes this quite possibly the most important anthropological find of the 20th century.

20th century? Yes. The fossil was first found in the early 1990s. It just took them a few years for those who found it to publish their results.

Science has devoted an entire issue, including 11 articles, to the find. The articles are currently available for free - with registration - at:

http://www.sciencemag.org/ardipithecus/

We do deserts, we don't do mountains

2009-09-29T18:54:04Z

With the focus of U.S. military efforts in the middle east shifting from a tentative success in Iraq to an uncertain outcome in Afghanistan, it may be worthwhile to compare the two situations.

In Iraq, the U.S. had a long term plan of establishing a government that would represent all Iraqis. In Afghanistan, the goal appears to be retribution against a single person, with the U.S. commitment to the welfare of the populace far from clear.

Iraq's primary export was expected to be oil, which we're happy to buy. Afghanistan's biggest export is opium, comprising a third of the country's economy, an export that the U.S. government wishes to shut down.

"We do deserts, we don't do mountains." Deserts and flat terrain like Iraq are ideal for large, organized armies. Mountains favor insurgents.

Afghanistan may be shaping up to be more like Vietnam than like Iraq. Our key mistake in Vietnam was the commitment of ever increasing numbers of ground troops. Repeating that mistake may not be the best idea.

Slow recovery

2009-09-29T02:20:03Z

Here's a breakdown of how fast the $787,000,000,000 of Federal stimulus money approved early this year is being spent:

151 billion has been spent so far and $185 billion will be spent by year's end. Another $399 billion will be spent next year ... and $134 billion will be spent by the end of 2011 ...

I guess Congress was planning for a slow recovery.

Efficient vocabulary use

2009-09-23T19:20:55Z

Margaret can say maybe half a dozen words now, but the only one that elicits a response from her minions - er, parents - with any reliability is "up". Evidently it takes about eight months for minions to learn a new word.

So what do you do when you have a one bit communication channel, but need to communicate more than one bit of information? Well, previously she used the word only when facing the minion intended to complete the task. Now, though, she faces the object she wants to be put into. If she wants to be in the high chair rather than just picked up, she faces the high chair when she says "up".

It only took the minions a couple of days to catch on to the fact that she wasn't expecting the high chair to grow arms and pick her up.

15 month checkup

2009-09-19T03:29:46Z

Margaret's measurements at 15 months were 47 cm head circumference, 30.5 inch height, 21 lb 14 oz. I knew she was getting heavier!

The head measurement is about 80th percentile for girls, height about 55th percentile, weight about 35th percentile. The formula is making her a little less slim than she was on breast milk, but it doesn't seem to be making her fat.

Margaret was better behaved on the scale, probably because we let her sit up. She kept pushing against the nurse with her feet on the length measurement - maybe she wanted to be taller. She really doesn't like the head measurement and kept pushing the tape measure off; I'm not sure why she objected so much.

The doctor mentioned that at this age the babies generally start disliking the doctor's office because they remember getting prodded and poked. Margaret objected only when the stethoscope was on her, and of course when when the vaccines were being injected.

I don't think it was a case of her having forgotten, though. On her way out, I asked her to say goodbye to the doctor, and the doctor seemed really surprised and happy when she smiled at him. When she went by the office of the nurse who had given her the vaccines, though, she squeezed up against the far wall of the corridor and walked by very quietly. It was really cute.

Protectionism at work

2009-09-18T20:37:37Z

A week ago, the Obama administration imposed a 35% duty on Chinese tires:

http://timesofindia.indiatimes.com/news/business/international-business/US-imposes-35-additional-duty-on-Chinese-tyres-/articleshow/5003191.cms

The American owner of a couple of the Chinese tire factories waited only a few days to pass along the cost to the consumer:

http://www.tirebusiness.com/subscriber/headlines2.phtml?cat=1&headline=Cooper+raising+prices+on+most+consumer+tire+lines&id=1253220210

Basically the duty ends up as a tax on discount tires that are bought primarily by the poor and marginally employed.

Who benefits? JK Tyre, with factories in India and Mexico, may benefit from low cost labor outside of China. Goodyear might benefit somewhat, but even with the duties, they'll find it difficult to compete in the discount market. Probably the biggest beneficiary is Bridgestone, the big Japanese tire manufacturer.

So basically, the working poor in America end up subsidizing the Japanese tire industry. Brilliant.

Calories in and calories out

2009-08-17T02:17:50Z

Weight gain happens when you eat more calories than you use, right? Not so fast. Here's a really excellent presentation given at the Dartmouth Hitchcock medical center on why that might not be the cause of weight gain, after all:

http://www.dhslides.org/mgr/mgr060509f/f.htm

The speaker, Gary Taubes, is highly entertaining and provides a compelling presentation. It is a 45 minute presentation, though, so you might want an hour or so free before you watch it.

Is 0.6% "high"?

2009-08-14T08:34:32Z

Both studies also show that the severity of swine flu is not high. In the US, only 14% of confirmed cases had to be hospitalized, while 302 (0.6%) had died (till July 24).

http://timesofindia.indiatimes.com/news/india/Swine-flu-deaths-01-of-positive-cases-in-Europe-06-in-US/articleshow/4892168.cms

Does the "severity" change if the mortality rate remains the same, but ten times as many people get infected? What if it's a hundred times as many that get infected, still with the same mortality rate?

Ironically, given this statistic, it's reassuring that the CDC thinks a million cases had actually occurred by July 24, despite their counting only 43,771 cases.

Unintended consequences

2009-07-24T01:55:28Z

If a health care bill passes, one of the unintended consequences of Federal health insurance regulation may be that Congress will decide to directly determine whether health insurance covers certain procedures.

What procedures might Congress explicitly exclude? Well, there's one obvious one that's often a political football, and for which direct federal funds are already prohibited: abortion.

http://edition.cnn.com/2009/POLITICS/07/22/health.care.abortion/index.html
http://www.washingtonpost.com/wp-dyn/content/story/2009/07/22/ST2009072202023.html

Stimulating the recession

2009-07-22T04:22:22Z

I recently started seeing, up close, the first solid evidence of this year's economic stimulus plan. It was really solid evidence, too: replacement granite curbs at a couple of intersections along our street.

You hadn't realized that granite curbs wore out to the point they needed replacement? Well, neither had I. However, work doesn't have to be produce something useful to stimulate the economy: as long as workers get hired and paid, they have more money to spend than they otherwise would have, and the additional spending will help restore demand for actual useful products. Eventually, so the theory goes, the extra demand will result in rehiring of the workers laid off earlier in the recession, ending the recession.

You may have noticed a slight flaw in this theory: if the laid off workers have already been rehired for the unproductive work, they won't be available for rehiring for actual productive work. Instead, the supply of useful products will continue to be limited, and with more money chasing after the same amount of goods, we'll see inflation instead.

As usual with the economy, government intervention is likely to have the opposite of the intended effect: in this case, it is prolonging actual recession conditions of limited useful production and employment. Fortunately for the government, statistics will be able to cover that up by valuing the new granite curbs as if the old ones had actually worn completely away.

Life span

2009-07-11T03:37:32Z

Some readers may remember coverage of a concept called "caloric restriction" in science journals in the late 1980s. Caloric restriction - restricting the amount of food eaten - had been shown to increase life span almost proportionally in numerous species, from paramecia to mice. Studies were in progress or being started in a variety of other animals.

Yesterday, one of those studies - using rhesus monkeys as a subject, who are considerably more closely related to humans than mice - published their first set of statistically significant results. What they found was that caloric restriction, as compared to free feeding controls, resulted in:

- statistically significant reductions in "age related diseases" such as cancer, heart disease, and diabetes, including complete elimination of diabetes

- statistically significant reduction in mortality from age related diseases 20 years into the study, which had started with adult rhesus monkeys between 7 and 14 years old

- a reduction in total mortality - including causes not related to age, such as death from anesthesia and endometriosis - that is suggestive but not statistically significant at this point in the study.

This is of particular interest to me because I inadvertently practiced caloric restriction until age 35 or so. I'm also trying to get back into it now, as I didn't start having kids until 48 and I'd kind of like to see them have children.

If anyone gets Science magazine and doesn't mind lending the current issue to me so I can see the whole article, I'd appreciate it. In the meantime, there's a summary here:

http://www.sciencedaily.com/releases/2009/07/090709110836.htm

Iran, democracy, and realpolitik

2009-06-23T19:52:27Z

Much of the U.S. press seems to be painting the protests in Iran as a genuine, popular uprising against an autocratic, religiously fundamentalist regime.

It's true that the Iranian government is autocratic and religiously fundamentalist. However, it's also true that that government has the support of a large majority of its people, who mostly live in the rural countryside and small towns, and who are, by and large, religiously fundamentalist. While there may have been some voting fraud in some districts, it should come as no surprise that the vast majority of the population supported their current President.

The protesters are largely urban: college students and young urban professionals. While such populations might be typical in the U.S., they are not typical of Iran as a whole; they constitute a small minority of the population there. They're sufficiently atypical of Iran that they're not even well represented by "their" candidate, Mousavi, who is more typical of the Iranian governmental establishment.

The truth is, the protests in Iran are largely the protests of a minority that is being oppressed by a government supported by a large majority of the people there. They are in no way a popular uprising, and absent an externally planned and funded coup, have no chance of significantly affecting the government.

Simian improvement

2009-05-29T04:45:23Z

Recently - well, in 2007, which is recently given how far behind I am on my reading - some scientists examined the spines of a 21 million year old fossil monkey, Morotopithicus bishopi, and concluded that it was adapted to an upright posture. This conclusion was based on a lack of the bracing against the sagging that would happen if the creature had walked on all fours, with spine horizontal; in an upright posture, the stresses are different and that bracing is not required. Since humans branched from chimpanzees only about 5 million years ago, the earlier upright fossil suggests that our common ancestor with chimps also walked upright - and in that sense was more human than chimp.

More details can be found in the article at:
http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0001019

One might consider it evidence against this theory that humans' three closest living relatives - chimpanzees, gorillas, and orangutans - all tend to walk on back legs and front knuckles, rather than fully upright. They also all have bracing against spinal sag. However, it turns out that the bracing is different in each of these: vertebral facet locks - basically locking bumps in the vertebrae - in orangutans, laminar blocks - a different set of vertebral bumps - in gorillas, and ligaments in chimpanzees. Having three distinctly different mechanisms for accomplishing the same goal suggests strongly that knuckle walking evolved independently in each of these lineages, again supporting the theory that they all branched from a line with an upright posture.

One is tempted to conclude that, instead of humans evolving as an improvement on chimpanzees, chimps devolved from humans. But is it really devolution? Another experiment now indicates that chimpanzees may be smarter than humans based on a task that involves memory, spatial perception, and numerical ordering with arabic numbers:

http://news.nationalgeographic.com/news/2007/12/071204-chimps-video-ap.html

Maybe the branch was better than the basic form after all; it's just that chimps are the improvement, and humans are the older and less effective model.

What happened to the constitution?

2009-05-28T06:57:22Z

Sonia Sotomayor, based on reading a few of her opinions and summaries of dozens more, appears to apply the law as strictly and logically as possible. This is of course exactly what the Republicans always claim to want: supreme court justices who will strictly apply the law. It is no surprise that the Republicans have already decided not to attempt a filibuster.

Unfortunately, like all other recent nominees, she seems willing to be a lot more cavalier about the constitution. While she's ardently championed the first amendment in some cases, she's quite willing to dismiss the second amendment as not being "fundamental", even in the face of a recent clear supreme court ruling to the contrary. I guess she's never lived in a country that became a dictatorship.

I wish that one of these years, we'd get a nominee that was willing to strictly interpret the constitution, as well as the law.

psychohist @ 2009-05-22T01:30:00

2009-05-22T05:27:48Z

Vice President Cheney has provided a coherent explanation of the Bush administration's policy on interrogation of suspected terrorists. "Coherent" does not necessarily imply "correct", of course. If you'd like to read the transcript rather than second hand reports, it's available at:

http://www.msnbc.msn.com/id/30867685//

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/21/AR2009052104387.html

I have to think that making this kind of speech in 2002 instead of 2009 would have helped to avoid a little of the bad PR that was a major failing of the Bush administration. I'm interested in reactions from anyone else who makes it through all 5-8 pages.

Baby talk

2009-05-19T14:27:35Z

Margaret knows about three words - "ma" (or "mamamamama") for mom, "da" (or "dadadadada", sometimes substituting the Chinese "b" for the western "d") for dad, and "nai" (or "nanananananana") for milk/formula. (Note that "na" is repeated the most times, as it's the most important word.)

She doesn't use the words to communicate, though. Rather, she generally uses the words to express her feelings. "Mamamamama" doesn't mean "take me to mommy, immediately"; it means "I miss mommy and wish she were here". After all, how much can one communicate with only nouns and no verbs?

Rather, to communicate, she uses actions. This morning, during the hour I was with her, was a particularly good example.

First, daddy got confused during the handoff and thought mommy was going to bring some formula up before going to work, so he left the door to the play room open. After a while, when Margaret heard some sounds from downstairs, she started crawling tentatively towards the door. She knows she's not allowed to crawl past it, though - the top of the stair is there - so when she got to the threshold, she looked straight at me and raised her arms into position to be lifted by an adult: "pick me up!" See how much easier it is to express verbs and imperatives in gestures rather than in words?

After a visit downstairs confirmed that the noises were, in fact, mommy, but that she just needed to check her email before work, we went back upstairs. After a bit, there was a baby poop smell. When daddy didn't do anything immediately - we generally wait five minutes since there's often a follow up - Margaret crawled over to the end of the couch where the bag of diapers are usually kept. The bag was missing though - unbeknownst to her, the bag had been emptied earlier when her evil twin decided that the diapers needed to be strewn all about the floor, and a parent had picked them all up and put them out of reach - so after a moment's consideration, she grabbed the bag of wipes and tugged at it repeatedly, in a "daddy, don't you know what these are for?" way. The message was clear.

The last one was the most inventive. The newly clean baby dropped down off the couch and picked up the bottle of baby powder, raising it and crying repeatedly. Maybe it's supposed to be stored on the couch? Daddy picked it up and put it on the couch. But no, Margaret asked for a lift onto the couch, then grabbed the baby powder bottle again. Then she started alternately shaking it and sucking at the top. "Daddy, what comes in a bottle that gets shaken up and then sucked on?" Yes, formula gets shaken up to mix it - something Margaret likes to help with - and of course is drunk from the bottle. Sometimes you have to paint a very clear picture for that slow daddy to understand!

Stress test foolishness

2009-05-08T02:29:53Z

You may have heard of the banking industry "stress tests" - "what if" scenarios to see how the government thinks banks would fare under a variety of economic scenarios. The most stressful case is an assumption that the current recession gets even worse, deepening and continuing past the end of the year.

The result is government pressure for banks to increase their equity ratio significantly beyond what is required by regulations. This would allow them to survive in the face of losses for a longer period of time.

There is a certain amount of criticism of the government's models. For example, they say Wells Fargo and Bank of America need more capital, even though those two banks are making money despite the recession and thus wouldn't ever go bankrupt no matter how long the recession lasted. Meanwhile, they rate Capital One as safe even though it is losing money and could eventually go bankrupt if things don't get better.

There's also the issue that converting, say, the government's preferred stock to common stock, in many cases at fire sale prices, would improve banks' stress test ratings even though it would improve their ability to survive a deepened downturn little, if at all.

However, the most important issue is this: requiring the banks to be able to survive a much deeper recession might well help bring such a deeper recession on. To see this, let's look at the two basic ways to improve a bank's stress test rating:

1. The bank can raise capital by issuing more stock, putting downward pressure on the stock market. With the stock market recovering, people have started to spend money again, but a reversal of that recovery could make the restaurants empty again.

2. Reduce debt by reducing loans and discouraging deposits. Fewer loans of course will limit economic recovery - the restaurants may be full, but they may not be able to manage their cash to make payroll - and suddenly having lots of banking fees appear on checking and savings accounts won't help either.

Either way, it seems the government's analysis of a "worst case" recession could become something of a self fulfilling prophecy. We're currently set to come out of the recession this summer, but the government's preparing for it to continue through next winter may cause just that to happen.

Articles, one listing the results, the others discussing them:
http://www.bizjournals.com/birmingham/stories/2009/05/04/daily44.html
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/07/AR2009050704257.html
http://online.wsj.com/article/SB124172137962697121.html

Anatomy of a restructuring

2009-05-04T04:44:22Z

With Chrysler finally in bankruptcy, the spotlight in the auto industry shifts to GM. And with the government using the Chrysler creditors as a scapegoat, the spotlight is now squarely on the GM creditors.

Evidently the GM creditors realize this. The GM creditors' committee recently provided a counteroffer to the government's restructuring plan. I thought it would be interesting to see how the two plans stack up, so here they are in a nutshell. The numbers are from news articles, not from filings, so they are approximate:

Government plan:
1% of equity is retained by the current shareholders
39% of equity to the UAW union in lieu of $10 Billion owed the health care plan
10% of equity to bondholders in exchange for $24 Billion debt forgiveness
50% of equity to the government in exchange for about $10 Billion debt forgiveness

Creditors' plan:
1% of equity is retained by the current shareholders
41% of equity to the UAW union in lieu of $10 Billion owed the health care plan
51% of equity to bondholders in exchange for $27 Billion debt forgiveness
government doesn't have to forgive any debt

If the government is really just looking for a fair deal for everyone and don't want to be in the business of owning companies, as Obama claims, then they really have no excuse for rejecting the creditors' plan: it's just as fair to the union, and the government doesn't need to forgive any debt. The difference between $37 Billion and $44 Billion in total debt forgiveness is not going to make or break the deal, given that GM's total debt is around $180 Billion.

On the other hand, if the government really sees this as more of a political football than an investment, the administration may feel it is worth losing a few billion taxpayer dollars to avoid potential accusations of "caving in to bondholders". In this case, we can expect the government to ignore the bondholders.

It will be interesting to see how the government responds to the bondholders' plan.

Article on the GM bondholder counterproposal:
http://online.wsj.com/article/SB124105121817871157.html

Articles on the government pressuring secured Chrysler creditors to accept a worse deal than unsecured creditors:
http://www.nytimes.com/2009/05/01/business/01hedge.html
http://voices.washingtonpost.com/economy-watch/2009/04/holdouts_on_chrysler_deal_say.html?hpid=topnews
http://seekingalpha.com/article/134773-fascinating-showdown-ahead-for-u-s-chrysler-and-fiat

Go Navy!

2009-04-13T03:17:17Z

Nice to see the situation with Captain Phillips of the Maersk Alabama has been resolved. I thought there were a couple of interesting tidbits about the story.

First, it still takes a while for naval forces to get into position. The Bainbridge, a destroyer, got to the area pretty quickly, but really couldn't do much - not even when Phillips jumped into the water from the lifeboat where he was being held and got shot at for it. The issue is that Destroyers do not generally carry much in the way of troops. That had to wait for the arrival of the Boxer, an amphibious ship, and a contingent of SEALs that was likely either on the Boxer or could be flown to it from Iraq or wherever.

Second, the rules of engagement sounded pretty restrictive. Basically the SEALs weren't allowed to fire unless the hostage's life was in "imminent danger". As a result the SEALs couldn't shoot until Phillips jumped into the water again and the pirates pointed an AK-47 towards his back, and even that was stretching the rules. The fact that the SEAL sniper then managed to take out the three pirates on the lifeboat without Phillips actually getting shot is pretty impressive. It probably helped that the lifeboat was at this point under tow by the Bainbridge, which wasn't the case before the SEALs arrived....

What to do next? I'd favor returning the one remaining live pirate to shore to spread the message not to mess with American ships, except that hasn't worked so great for the French. In the longer run - but not a lot longer - we should probably take out the pirate bases, as Jefferson did with the Barbary pirates. I bet that wouldn't draw any Security Council vetos.

Links to stories on Maersk Alabama and on the French hostage rescue.
http://online.wsj.com/article/SB123953580718311447.html
http://online.wsj.com/article/SB123943067280810885.html

Paying the piper

2009-04-10T21:27:40Z

The effects of government profligacy are beginning to show. The government managed to run up a bigger deficit in the first six months of this fiscal year - $956,800 million - than in all twelve months of the previous fiscal year - $454,800 million - which itself was a record. The runaway deficit is partly because tax receipts are down, by about 15%, but mostly because the spending rate has nearly doubled from last year. If things keep going this way, we'll manage to top the previous record deficit by a factor of four.

There's a limit to how long we can get away with this. While the recession continues, it may hide the inflationary effects of the extra spending; however, when we do pull out of the recession, we may quickly go to stagflation and not to a long term healthy economy.

One source for more specific numbers:
http://online.wsj.com/article/BT-CO-20090410-704541.html