Gerhard Stoltz's Library tagged assessment →  View Popular

In the foreword to RBS’s 2006 annual report, published in April 2007, Sir Fred wrote: ‘Sound control of risk is fundamental to the Group’s business . . . Central to this is our long-standing aversion to sub-prime lending, wherever we do business.’

On the principle that people deny something only when there’s something to deny, this remark might be the biggest single clue anywhere in the RBS accounts as to the risks the bank was running. RBS turned out to have quite a lot of exposure to sub-prime risk, and to be steadily acquiring more.

Put simply, this is an insurance scheme. The government is insuring the banks against losses on their assets. There’s nothing unusual about such schemes: they’re a standard feature of the banking world. In fact, they are one of the sources of the current crisis. In the commercial world, a deal in which one financial institution insures another against defaults, in return for a fee, is called a credit default swap, or CDS. In effect, the UK government has undertaken a CDS with our imploded banks.

The story was a distraction from the real scandal about AIG, which is what was happening to the other 99.9 per cent of the money the government was pumping into the company. Since AIG wrote CDSs, which are effectively insurance against losses, and since those losses had occurred, why then the cash was going to companies that had lost money in the credit crunch: companies such as Société Générale, which received $11.9 billion; Goldman Sachs, $12.9 billion; Merrill Lynch, $6.8 billion; Deutsche Bank, $11.8 billion; Barclays, $8.5 billion; BNP Paribas, $4.9 billion. Nothing could better illustrate the way in which this has be- come a systemic international crisis than the fact that the US Treasury is transferring these gigantic sums to foreign banks, because they feel they have no choice if they’re to keep the financial system functioning.

I guarantee that at this very moment, somewhere in the world, somebody at one of the big banks is sitting with his head in his hands, looking at the company’s balance sheet and sweating over this very problem. If the global economic crisis can be reduced to one single phenomenon, it is this: the fact that nobody knows which banks are solvent.

1. Because the government would be bad at it. This is the only reason governments are willing to give in public, and it fails the most elementary test of all: only a professional politician can say it with a straight face. Bad at running the banks, compared to the bankers who broke capitalism? Please.

"Logical depth" is a good measure for strings of code, but most structures we care about, such as living organisms or technological systems, are embodied in materials.

In 1995, two biologists, John Maynard Smith and Eors Szathmary, envisioned the major transitions in organic evolution as a set of ratcheting organizations of information flow. Their series of eight revolutionary steps in evolution began with "self-replicating molecules" transitioning to the more complex self-sustaining structure of "chromosomes." Then evolution passed through the further complexifying change "from prokaryotes to eukaryotes" cell type and after a few more phase changes, the last transition moved it from language-less societies to those with language.

Scenario #3. There is no limit to how complex things can get.

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Those are the only people who can safely undertake doctoral education in the humanities. Everyone else who does so is taking an enormous personal risk, the full consequences of which they cannot assess because they do not understand how the academic-labor system works and will not listen to people who try to tell them.

When data is kept under lock and key, as mysterious as a temple secret, only the priests can read and interpret it. But place it in the public domain and suddenly it takes on new life. People start playing with the information, reaching strange new conclusions or raising questions that no one else would think to ask. It is impossible to predict who will become obsessed with the data or why—but someone will.

Bartz downloaded the database of 4,600 loans—every essay, every neighborhood, every late payment—and started searching for patterns. He identified the 300 most common words in borrowers' essays and correlated them with payment histories. Sure enough, certain words seemed linked to late payments. Among the red flags: need, bills, and business. "Those were all words that reflected that the borrower might be in financial difficulty at the moment," Bartz says. Another one was also, which Bartz theorizes meant that the loan was being used for more than one purpose.

So I think what comes next is a web with big holes blown in it. A spiderweb in a storm. The turtles get knocked out from under it, the platform sinks through the cloud. A lot of the inherent contradictions of the web get revealed, the contradictions in the oxymorons smash into each other.

In Web 2.0, if you were monetizable, it meant you got bought out by the majors. "We stole back our revolution and we sold ourselves to Yahoo."

In the Transition Web, if you're monetizable, it means that you get attacked.

All they needed was that correlation number, and out would come a rating telling them how safe or risky the tranche was.

As a result, just about anything could be bundled and turned into a triple-A bond—corporate bonds, bank loans, mortgage-backed securities, whatever you liked.

A: Doctrinaire religious beliefs that prescribe a specific way of life and ban certain technologies may be a major threat to our ability to adapt to a changing world — but as long as they are confined to their practitioners the rest of us can probably survive them.

"In other words," said Morewedge, "people attribute meaning to dreams when it corresponds with their pre-existing beliefs and desires.

Now, the people who have been brought in to improve this district are no doubt well-intentioned and good human beings, at least for the most part. I don’t doubt that they look at the statistics at this school and think “No child should be forced to learn in such an environment,” which indeed is what I think every time I go there. But that they then make the leap to defining the problem as the statistics is something that is both perpetual and maddening in my experience of US urban public schools.

It will become clear to those practicing open-source personal genomics that genes are not destiny; they are our common wealth.