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I just listened to the This American Life episode Another Frightening Show About the Economy, a followup to their earlier show The Giant Pool of Money. The earlier show explained the mortgage crisis in terms anyone can understand. The new show explains how the problems of the mortgage industry have spread to the rest of the economy.

In particular, it explains:

• What a Credit Default Swap is, and how it turned from something harmless into something disastrous;
• What the commercial paper market is;
• Why AIG nearly collapsed and needed to be bailed out, and how the bailout was carried out;
• How the rest of the financial system nearly collapsed;
• Why the original $700 billion bailout plan was terrible, and how the new one (the one made into law) is slightly better in that it at least allows the right thing to be done;
• That the total failure to regulate a risky credit default swap market, bigger than the entire global stock market, was a totally bipartisan fuckup.

If any podcast is essential listening, this one is.

A couple of months ago, 15 UK troops were taken hostage in Iraq. They were eventually freed. Then I started seeing news stories about how everyone was furious because the troops were selling their personal stories to the highest bidder.

Maybe I’ve been in the US too long, but I didn’t understand what people were upset about. I still don’t.

Those troops went through a hideous ordeal. Why shouldn’t they be allowed to get money in return for telling people what it was like? If everyone can agree to give JK Rowling ten million quid for writing a bunch of guff about kids learning to be wizards, what’s the moral argument for not allowing troops to sell true stories for a sackful of cash? (I note that they even had explicit permission from the MOD to do so!)

Or maybe it was all faux outrage manufactured by the newspapers who lost out in the bidding war?

Scientific American, February:

Money is an incentive to work hard, but it also promotes selfish behavior. Those conclusions may not be surprising, but psychologists at the University of Minnesota recently found that merely thinking of money makes people less likely to give help to others.

The researchers got people to think about money by showing them words related to money, having them handle play money, or revealing a poster with pictures of money on it. They then got the subjects to perform tasks which had nothing to do with money, but assessed social behavior. The result: people who think about money are less helpful and also less likely to seek help from others.

Science, November 17. [Link]

Everyone should have a chunk of cash in an instant access savings account; see Dilbert’s guide to financial success.

If you’re in the US and have $250 spare to put in a savings account, I’ve got a voucher you can use to open an account with ING Direct, and they’ll give you $25 free. (Plus $10 for me.)

I’ve been saving with them for a while, because their rates are so much better than my bank’s savings account rates (4.4% APR with no fees). They’re a proper FDIC insured outfit backed by a real bank, a European multinational. I briefly had all the proceeds from selling my UK apartment in the account, and they didn’t abscond with it, so I’m pretty sure your $250 will be safe.

Also on the subject of free money, a while back Bank of America bought MBNA. I have MBNA credit cards; naturally I pay off the balance each month. Based on my transaction history, Bank of America have sent me mail saying they’ll pay me $100 to open a checking account with them. Maybe I’m crazy, but I haven’t rushed to do so. A quick glance at the relevant Wikipedia page and you’ll see that Bank of America has engaged in various sleazy business practices.

My current bank is Wells Fargo; they have a much cleaner record, and I also get the joy of knowing I’m supporting a company that really irritated Focus in the Family. Plus, they were the only US bank I could find that had all the necessary information about how to transfer money internationally available on their web site.

Update 2006-11-15

A customer was worried that a check for an eBay transaction might be fraudulent, so he asked Bank of America to examine it carefully. They said it was on a valid account, so he asked them to cash it. Then Bank of America changed their minds and decided the check was fraudulent, called the cops, had him put in jail, and effectively wasted $14,000 of his money on legal hassles.

OK, now I’m really sure I don’t want to do business with Bank of America.

In part 1, I enumerated the approaches to spam eradication I was aware of, and explained my conclusion that the only approach which will work is an economic approach. In part 2 I discussed various options for tackling spam economically, ending with the one I think would actually be acceptable and useful: attention bonds.

Now I’ll run through (and shoot down) a few of the objections commonly brought up when the possibility of involving actual cash in e-mail sending is raised.

Continue reading »

In Part 1 I took a “from first principles” look at the spam problem, and concluded that the only way to actually solve the problem was to make people pay to send e-mail.

Now, it’s time to look at what I mean by that—because there are almost as many ways to implement “pay to send” as there are ways to implement filtering.

This is going to be a bit more technical than part 1. I’m going to assume you know basically how SMTP e-mail works. If not, there are tutorials available.

Continue reading »

A great many words have been written on the subject of e-mail spam. Effort has been poured into all kinds of technological measures against it. In my view, many of these efforts have been a waste of time, because they have failed to address the fundamental problem of spam.

To explain my thinking, I’ll start with some basic statements:

1. Your attention is a valuable resource. If you doubt this, you need only look at the amount of money spent on advertising in an attempt to acquire your attention.

2. Therefore, your inbox is a valuable resource. Many people, perhaps most people, now check e-mail multiple times a day. In fact, according to some surveys college students spend more time on the Internet than watching TV. They check their e-mail inbox more than they look at ad breaks.

3. SMTP e-mail allows anyone to send mail. There’s no centralized registration required in SMTP; there’s no control over the growth of the SMTP e-mail network. While some servers restrict which SMTP clients may connect to them, there’s essentially no control over who sends mail, as it’s always possible to open a new web e-mail account, buy a new ISP dial-up account, or whatever.

4. SMTP e-mail is free for the sender. Sure, many people pay for their Internet access; but once you have an Internet connection, sending e-mail basically doesn’t cost you anything—it has marginal cost.

Now, let me re-cast those four statements:

We have unrestricted access for anyone in the world to use arbitrary amounts of a valuable resource.

Can you think of any case where there has been a system like that, and it has worked? I can’t. The canonical example is the tragedy of the commons, but there are plenty of others, including the Cambridge ‘Green Bike’ scheme and the overfishing of cod.

In order to avoid a “tragedy of the commons” situation, we need to alter the situation so that one of the statements above is no longer true. Let’s go through them again and consider our options.

Continue reading »

Ever wonder where the Bush family got all that money?

In 1923, the Nazi party was given 100,000 gold marks ($25,000) by German industrialist Fritz Thyssen. This generous donation helped the fledgling party through its early financial troubles. After his father August’s death in 1926, Thyssen created the United Steel Works, a German industrial conglomerate.

In 1924, the Bank voor Handel en Scheepvaart met with Harriman & Co, represented by the Harriman brothers and George Walker. They formed the Union Banking Corporation.

Later in 1924, George Walker hired his new son-in-law, Prescott Bush, to be VP of Harriman & Co. Bush was responsible for overseeing the Thyssen/Flick United Steel Works.

In 1928, Hitler was broke again. Things had gone badly since his failed coup attempt in 1923. Thyssen arranged for the Bank voor Handel en Scheepvaart to buy the Barlow Palace and refit it as the new Nazi HQ. Thyssen claimed the cost was 250,000 marks; the Nazis claimed over 800,000.

In 1931, Harriman & Co. changed its name to Brown Brothers Harriman. Averell Harriman and Prescott Bush established a holding company called The Harriman 15 Corporation.

In 1932, Thyssen joined the Nazi party, and held a fundraiser for Hitler at his castle.

By 1934, Hitler had seized power, and USW was chosen to overhaul the German military machinery. Thyssen and Flick made hundreds of millions in profits, which flowed to UBC and the Bank voor Handel en Scheepvaart.

In 1934, the Polish government started threatening action against Consolidated Silesian Steel Corporation and Upper Silesian Coal and Steel, for financial irregularities. The owners of the companies—including the Harriman 15 Corporation—were faced with a demand for back taxes. Fortunately, Hitler’s invasion of Poland in 1939 ended the investigation.

Consolidated Silesian Steel happened to be located near Oswiecim in Poland, so when the Nazis began building concentration camps for slave labor, they decided to build one near Oswiecim. They called it Auschwitz. It provided cheap labor for many companies, including Consolidated Silesian Steel.

As Hitler began to march his armies across Europe, Thyssen and Flick began to have misgivings. They sold Consolidated Steel to UBC. It became Silesian American Corporation, under the complete control of Harriman, and managed by Prescott Bush. In fact, a Dutch intelligence agent reported that a portion of the slave labor force was managed by Bush.

Six days after Pearl Harbor in 1941, the Trading With The Enemy Act made it illegal for US business interests to deal with US enemies of war. Prescott Bush continued running Silesian American Corporation until the summer of 1942, when the New York Tribune exposed his business deals with Thyssen. The US government took over UBC and the Silesian American Corporation, but Bush was not prosecuted. In 1943, he resigned from UBC, but kept his stock.

In 1951, Thyssen died, and UBC’s assets were released to Brown Brothers Harriman. Prescott Bush cashed in his stock for $1.5 million, and used it to set up a firm called Overby Development Company as a gift to his son—George Herbert Walker Bush.

In 1980, George Herbert Walker Bush placed his father’s family inheritance into a trust fund, managed by William Farish III. Farish was the inheritor of millions of dollars made by Standard Oil, from its investments in IG Farben to build the IG Auschwitz gasoline plant.

—Summarized from a feature article in Clamor Magazine.