Simulating Stimulus, Undervaluing Values




How did the financial crisis start? By Americans having to pay more than ten trillion of mortgage debt. That was simply too much. Don’t forget that if you owe a million (say) to a bank with a 30 year mortgage, you end up paying about 3 times that.

So now we are 5 years after the crisis started. The Bush-Obama administration threw 3,700 billion dollars at the banks to save them from the crisis (said the TARP inspector, an independent government official, July 2010). The Obama administration in particular tried to preserve the value of the homes (as Obama says at every occasion).

Obama is a funny guy, very cool, that his job. The great terror of the banks was that all mortgage holders would default, and buy the house to the left. Say the house to the left was worth 30% of what it was worth before. The total sum of all mortgages in the USA would have been divided by 3. Big banks, instead of getting 600 billions annually, would get only 200 billions.

But Obama saved the value of the homes, that is the value of the mortgages, that is, the extent of the servitude to banks. 5 years after the crisis started, indeed, the total value of all home mortgages is still above ten trillion dollars. In other words, Obama did nothing, strictly nothing, to solve the housing crisis. It’s still here, just as big as it was before. But Obama kept the serfs in place, paying the same as they did before. His lenifying discourses have mesmerized Americans. Very cool, indeed.



As I have said many times in the past, as soon as February 2009, there was no Obama stimulus. Obama goes around saying just this, without understanding what he says: ‘I saved the states’. Saving is not stimulating.

I did the arithmetic, long ago. But then, I am not a lawyer (like Obama), or a failed journalist (like Axelrod), or a super, overnight multimillionaire banker (like Rahm Emanuel). I can add. Now finally Krugman did a graph (he has plenty of slave students to make them). Here it is:

clip_image002BEA, CBO

As Krugman says in "Hey, Small Spender!": "Feel the surge!". The far right microscopic tilt up is Obama’s stimulus. And it is entirely due to spending on unemployment benefits and the like. It goes without saying that, if you removed the military spending (which has augmented enormously under the bipartisan president), you would get a sharp hook, DOWN.



Obama is a lawyer who is viewed as black. So he showed up at Harvard, was bipartisan with the conservative Law Review, and was elected president of it, just as Ulysses elected to make the gift of a horse for Troy. I wonder if it was a black horse. Anyway, in three years, Obama was done. Three years is enough to sharpen the tongue in the skill of false beliefs giving hope to the naïve, unwary and good natured.

But, whereas it is easy to form a specialist of gab, it takes more than a decade to form an engineer, or some technology specialists. Therein the pitfall of the Wall Street directed economics: as engineers get yanked about, and finance replaces thinking, engineering skills get lost. They are hard to replace.

Some will say: so what? But GM (cost 60 billion dollars to taxpayers) will fail, because it needs as good automotive technology as there is anywhere, just to survive (in spite of American nationalism, I do not see too many Americans spending giant money on the unworkable Volt car). This is caused, in part, by world overproduction of cars, and a pretty open market… in combination with an attenuation, in the USA, or, at least upper management in the USA, of thinking excellence.



Now, make no mistake, the USA is still a technological leader. thanks to a government program known as the military-industrial complex. American killer robots are by far the best in the world, thanks to the war in the Middle East.

So the war in the Middle East is Obama’s true and only stimulus. It is also the USA’s high tech and engineering insurance program. However, in the meantime, the school and university systems are giving signs of stress, and they underlay engineering supremacy. Why? Money is disappearing, as it is all sucked up by the military-pharmaceutical-financial-congressional complex, leaving crumbs for the crucial parts.



Advanced skills can be lost. Henrich has it that not enough numbers will do it, and thus he explains the Tasmanian effect (science fiction writers and Krugman have jumped on this, concluding that millions of people are needed to colonize … Mars). I have an essay on this coming. My explanation is completely different, and argues that ideas are more important than numbers: many are the ants, few are the philosophers.

In recent decades, tendentious commentators, sociologists, ethnologists, and philosophers (many of the original ones being famous French philosophers) have painted European civilization under an erroneous light, describing it first as a place of imperialism, sucking the innocent world dry. In this those advocates of "multiculturalism" strangely followed the line invented by Herder and Rousseau. That line of thought which produced Hitler.

I am extremely multicultural myself, so multicultural that I need a valuation system to order all my multicultural ideas. This is what happens when Murid, Greek, European, American, mathematical, historical, scientific and countless other value system have to cohabit together in the same brain. Multiculturalism without multivaluationism is a chicken with a thousand heads.

By overdeveloping its military skills, the USA is dangerously losing more important skills. And thinking, foremost. Not to see, not to feel that plutocracy and democracy are incompatible is exhibit number one.



Pushing technology as military technology is not necessarily best for society. This is probably a difference between Britain and France during the last 600 years. As a continental land power, France had to maintain a vast, expensive, high tech army. Britain could do most of the time with little, or no army.

So, for example, the ramshackle fleet of Elizabeth I, with a handful of expert navigators (Drake, etc.), using brazen, desperate methods, and a lot of luck, were able to stop the Grand Armada. But, if the irresistible Spanish army had crossed over, it would have quickly ended in Edinburgh. Spending little on army and fleet, relative to France, Britain was able to develop a less militarized society.

Meanwhile, each time the Spanish army was entering the Netherlands to submit the recalcitrant Dutch, there would be war with France. It’s really the French army which, after 70 years or so, finished that imperialistic fascism Philip II had started. Fine, but this establishment in perpetuity of the Dutch republic cost a lot.

Later, it was more of the same, in reverse; the heirless Spanish king offered his throne to the Bourbon, uniting in some sense France and Spain. This started the War Of The Spanish Succession, where all of Europe united against France and Spain. There, again, Britain, just as in the Middle Ages, per its position as an island, was able to bring in cheaply a lot of expensive troubles to France.

It sounds all very picturesque, but these wars created enormous destructions, deaths, and lasting impoverishments on French territory.

All of plutocratic Europe would unite again against France in 1792, to try to destroy the ("French") Human Rights Revolution. The invention of new explosives for the battle of Valmy allowed the French rabble to stop the Prussian army.

Meanwhile the "nation of shopkeepers" that the dictator Napoleon underestimated, was developing its civilian industrial economy frantically, leaving France in the dust. It is not that the French were backward relative to the Brit. To a great extent, it was the other way around. The breakthrough on steam power was made by a Frenchman working in England.

A century later, in 1769, a French military program tried to develop tanks (under the good king Louis XV!). They worked, but the military lost interest. In the following century another French military program financed the first planes (built by Ader, who also invented the word "avion", "aviation", etc.).

In WWI and WWII, Great Britain declared war immediately, but, having basically no army, France was left to fight alone fascist Germany twice her size, for all too long (hence the defeat of 1940).

It’s not that Britain was nasty and treacherous. It’s simply that the British empire was run with a big Navy (a necessary condition) and a shoestring budget. That cheapness allowed British industry to dominate. As the French were busy with giant military spending, the chemistry of dies was developing in England, soon stolen by the Germans, founding the powerful German chemical industry.

Military technology programs do not improve the efficiency of the overall economy. This is a major problem, at least for the USA as old energy systems are quickly becoming too expensive on the face of it, in indirect costs and pollution costs. Although there is no doubt that plenty of robotic technology will come out of the war effort, it is probable that other countries developing robots directly for the civilian sector will come ahead. A famous example is that a Frenchman, Bear de Rochas, developed the first gasoline internal combustion engine, but forgot to patent it (1862). Daimler and Benz became what they did, by using that loophole.



I have argued that the USA ought to develop advanced nuclear technology. It can be made safe, very efficient, and such that proliferation problems would be resolved. But for all this to happen, American nuclear tech has to be at the forefront, which it is not right now. It even uses a primitive, and extremely wasteful, dangerous and polluting open cycle, the same as in the 1940s. France’s atomic energy runs completely on a closed cycle, generating much smaller waste (which could be burned in more advanced reactors).

Developing and leading in nuclear arts also a moral necessity, because efforts to prevent the rise of nuclear tech in other countries is bound to fail. All what the leading countries of the West can do (including Japan) is lead the process to a safe and effective nuclear world.

Fast forward now to electric trains.

The USA, alone in the world among the most developed, significant countries with high density population corridors, which is not developing high speed rail. China, by contrast, is developing it at break neck speed (it is alleged that China uses more or less stolen German tech, but the same can be said perhaps for Bombardier and Alstom).

First of all the fastest trains are really fast. The world record has been held by French electric trains since 1954 (except for a few months in 1988 when German trains became insolent). The speed record is now 574.9 km/h. This was obtained by a TGV with AGV motorization, on the TGV Est line, which is designed and homologated for 250 miles per hour.

Most of French electricity is nuclear, and most of the rest of renewable origin. Thus the French trains are actually nuclear trains. They create not even 3% of the CO2 other transport modes create.

The magnetic levitation (maglev) record, obtained only for a second or two on a short experimental track, is only 6 kilometers per hour higher. Maglevs are not suitable, because they cannot run on conventional tracks, their magnetic fields are dangerous, and their hyper light construction makes them extremely flammable and fragile (more than 2 dozen people got killed on an experimental German maglev). Moreover, they are much more costly to operate (due in part to their unforgiving concrete tracks; fast Franco-German trains use ballast, which is elastic). And they have no advantage whatsoever.

Air is very dense close to the ground, that is why planes fly high. At sea level, maximum speed by military jets is much less than the cruise speed of Concorde (the SR71 was also flying very high).

The factor limiting the French train record speed was aerodynamics. The Alstom engineers were surprised by this. Resonances and vibrations in rail and piloted pantograph can be mastered up to 660 km/h with present technology. The AGV has better aerodynamics, but has not been tested at maximum speed yet.

Many routes in the USA are French scale. Chicago-New York and Boston-Washington, or San Francisco-LA are similar to Paris-Marseilles. London-Marseilles will beat the plane once a more direct High Speed Line is built through Picardie. At 252 miles per hour, it takes only 10 hours to go from Los Angeles to New York, arguably faster and more convenient than taking the plane. Siemens’ Velaro has reached such speeds on the Madrid-Barcelona Very High Speed line in conventional operations with a conventional train. So none of this is science-fiction. And better French and German high speed train sets are coming.

Russia, the world’s largest country, has a vast program of equipment and technology transfers from Alstom (pendular trains) and Siemens (Velaro), for the next 20 years. Pendular trains can reached very high speeds (up to 200 mph) on conventional lines. They lean in turns.

Trains can be made very safe. TGVs will stop if they are ahead, or ignore signals. It’s a system similar to the metro, with no current between the train sets. Al Qaeda bombed a TGV, with lots of explosives, destroying a cab, but the rest of the train survived untouched. TGVs are made to stay upright, even if they leave the tracks (which has happened after some collisions with trucks). The energy is absorbed by the zigzags of the train out of tracks.



The secretary of transportation said that Obama has a "vision" of high speed rail, and some lines at 110 mph are being financed (in Europe high speed is higher than that, and VHS is double that). And then there is the idea of putting high speed on slow freight lines, which is impossible (even 100mph lines .would cost a lot of money if built for freight).

Instead Obama should have spent lots of money on one true Very High Speed line, to demonstrate to all Americans how superior High Speed Train was. That is what Russia did on the Moscow-Saint Petersburg line, which is equipped with Velaro trains running at 155 mph (250kmh), covering the 400 miles in 3 hours.

Hoover had the Hoover dam (and many other large construction projects). What will the Obama administration be remembered for? For its health plan, to come on line in 2014, after the republicans have completely gutted it of any relevant meaning? For saving GM which will fail within 2 or 3 years? For the financial cover-up over the inability to put back in place the Banking Act of Roosevelt of 1933? For putting back in power the same exact people who destroyed the banking act, ten years ago? Will the Obama administration be remembered for having delayed the collapse of the insufferable enormity of the ensemble of all mortgages due? Will the Obama administration be remembered for its lack of reading on Afghanistan before deciding to move mountains there? Or for viewing Afghanistan as a proper stimulus for the USA? Will the Obama administration be remembered for having augmented enormously the already unsustainable military spending? Is this lack of anything positive to be remembered by related to the fact that only 42% of Americans think Obama is American born (August 2010)?

In any case, the Obama administration will not be remembered for having put the USA back on the rails.

Patrice Ayme

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8 Responses to “Simulating Stimulus, Undervaluing Values”

  1. multumnonmulta Says:

    “Murid, Greek, European, American, mathematical, historical, scientific and countless other value system have to cohabit together in the same brain.” Almost… N.N. Taleb.


    • Patrice Ayme Says:

      Mr. Taleb is impressive, especially for a member of this species I deplore so much the existence of. It’s a bit like Mr. Soros (another would-be philosopher), gifted, like the largest sea going crocs off Western Australia, one could even say sentient, and many correct ideas, but still nothing to let civilization be guided by. And let it be observed that black swans are quite common…in Australia. Some of what Mr. Taleb speaks of is not just due to chance, by the way, but more to the reflexivity Mr. Soros is obsessed by, and know so well how to manipulate.


  2. multumnonmulta Says:

    “but still nothing to let civilization be guided by” civilization, whatever that is, moves in mysterious ways. Many a fool has tried otherwise; Soros is making money by understanding human condition and stepping forth at the best of times. Taleb, hailing from a smaller tribe, is a more marginal figure, financially speaking–though, age still gives him a chance.

    At the end of the day, the tragedy of our time will be expressed by our measuring everything up or down to the money. Which brings so many cute faces ahead of Taleb into the public attention.


    • Patrice Ayme Says:

      I wanted to say Taleb is part of the problem, not the solution. He exploited the problem well. But the housing crash was clearly coming. Goldman made money from it through a conspiracy. I did not see the Obama crash/conspiracy coming, though. I would have never believed Obama would 180 degree like that (if I had, I would have kept at least my money). Although by Nov 5 2008, it was obvious to me that he had been bought, and I wrote of it at the time. He went to work at a hedge fund, unbelievably…which may explain why the hyper rich pays at most 15% tax… still.

      Not everybody is measuring all by money, such is lots of the resistance to the USA, worldwide, a large part of so called “anti-Americanism”. But I agree, it is the present downfall of the USA.


  3. multumnonmulta Says:

    Patrice, your blog has built enough credit with me on your behalf to make me think twice about such a statement: “I wanted to say Taleb is part of the problem, not the solution.” Had it come from another source, I’d have discounted it automatically; that not being the case, please clarify.

    My only problem with Taleb is about his libertarianism. As for the aftermath of this crisis, have a look at his position about making banking boring (I think it was published in Financial Times).

    Obama started by making me believe there was hope in politics. By and large, he used to speak my mind, as it were. I understood for the first time what people might have meant when saying that Kennedy was the president of their generation, despite my being so neutral about the whole affair. So, either Obama was channeling the zeitgeist, or the White House moves according to its own logic, anchored in the preservationist axioms of the elite so you either swim with its under-current or sink. This last point still brings me to ask, how was FDR possible? Unless Obama needs a worsening of the crisis to get us there… But you know, one never bathes in the same river.

    Have a look at the recent talk between Wilbur Ross and Charlie Rose. The money people would have no problem with higher taxes, and the citizenry would take some hardship. All that’s needed is a dual sense of purpose/direction and justice.


    • Patrice Ayme Says:

      Thanks for the compliment. I think to many bright mind have tried to do like Taleb, and got their degrees or practices in the black arts swooning on civilization.

      So Taleb is a long story. I read his book, and I appreciated it, and him, but I also disagreed with many things. He is fundamentally a derivative trader trained in a particular place in France which has been churning “QUANTS”. One of them is actually an old friend of mine, a bright mathematician who made the deliberate, and cynical, choice of going for big money. Now he works in London, regretting Paris. I do not even remember the details of the whole Black Swan thing, I do not remember an impression of mental breakthrough, reading it. I find Soros deeper (although not as exciting). Anyway, if all bright minds do derivative work, we will get a derivative world. A problem with no solution.

      I have my own theory about “catastrophic calculus”, earlier on my site. I am zero happy with Obama. He is a huge personal disappointment, having invested enormously in him, I, and my spouse and family wasted considerable energy, time, money, as he gave it all back to the Goldman Sachs boys. A family member did more than a year of high level volunteer work, and got basically destitute. The occasion will not be back (most probably). Not of being destitute, of course, but of having such control from progressive forces. Except Obama has the D and the R inverted.

      So maybe indeed, the USA has to go through a disaster, as Germany did, before becoming a republic for real… Not a reassuring notion. Ideally I would study the Taleb thing, but I already did, with my catastrophic calculus, at the more important climate level… And I have zillions of things to do.


  4. multumnonmulta Says:

    Ms. Kagan, the recently confirmed Supreme Court Justice, will give the full measure of Obama’s presidency…

    Now, I think I better understand your position vis a vis Taleb, but then why consider Soros any better? Aren’t both of the same ilk, pure financial speculators?


    • Patrice Ayme Says:

      Soros’ reflexivity (which he got from Popper who got it from Heisenberg) is a real, non linear effect that was not too much studied, as far as I know, before the 20C. Of course, Soros did not invent it, but he uses it a lot (and that’s honest to say so).

      Taleb’s Black Swan stuff, I don’t get very much what’s original about it. It was already known under other names, meaning that the probability was low enough to be ignored (an oxymoron). Nothing deep such as Poincare”s work on probabilities. Just a guy who got a PhD in France about manipulating the financial markets, through derivatives, one of this vast horde, or herd, ruining the world economy.

      The tech of the financial crisis has to do with reflexivity: everybody piled up on one side of a trade, making the impossible, impossible… to avoid.
      I think my catastrophic calculus is more original, and more useful, as I already said. Probabilities get weighted by the catastrophes they could lead to.

      And agreed, Soros is not removed from pure financial speculators, but he has seen many shortfalls of the system, and tries to support some people who disagree with it.

      In the end, the greatest wealth and power comes from within.


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