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by Rob Horning

18 Dec 2008

Reading this post in whcih Adam Levitin recounts credit-card lenders’ abuse of behavioral finance—key excerpt:

The card lender often isn’t looking to get the principal repaid. Instead, the interest rate and fees returns are high enough that they cover the cost of the principal. The principal remains outstanding, and the ideal consumer makes minimum payments forever, making enough new charges to keep the balance from ever amortizing. In effect, the consumer becomes an annuity.

—right after this post about the potential incentive to voluntarily participate in a Ponzi scheme if you are expecting a bailout—key excerpt from a paper by Utpal Bhattacharya:

We argue in this paper that if agents correctly believe in the possibility of a partial bailout when a gigantic Ponzi scheme collapses, and they recognize that a bailout is tantamount to a redistribution of wealth from non-participants to participants, it may be rational for agents to participate, even if they know that it is the last round.

—led me to this question: If credit-card companies can expect a bailout if a critical mass of borrowers default, do they become aware of point at which it becomes more prudent to lend to everyone and encourage them to charge up a storm rather than perform due diligence on the risks various individual borrowers represent? They can collect their fees from customers until the whole thing collapses, hopefully with a loud enough crash that the state will restore much of the principal. A related question: Did mortgage lenders reach that point a few years ago? Is this how investors’ cupidity led them to interpret the implicit government backing of Fannie and Freddie?

by Bill Gibron

18 Dec 2008

The importance of people can never be underplayed in any form of social upheaval. Good or bad, well-intentioned or anarchic in purpose, the inherent power in the citizenry is what makes change possible - be it organized or organic. America was founded on revolution. Russia rejected the Czar and eventually became a Soviet superpower thanks to armed uprising. China grew to distinction under its “cultural” uprising, while all over Africa and South America, factions and sects are today taking the concept of self-determination into their own often bloody hands.  Violence is indeed a byproduct of most upheaval, the struggle to gain/sustain power taking on ugly, unapologetic means. Perhaps that’s why the thought of revolution, while tempting, is tempered by the potential harms to all side.

Yet this didn’t stop the all important individual from trying. Just look at the fall of the Berlin Wall. The break up of the Soviet Union. The independence of the many former Communist satellites. To Western eyes, these were events that were never going to happen in their lifetime…or even their children’s lifetime. Yet with the introduction of glasnost and perestroika by then Russian leader Mikhail Gorbachev, the openness and tolerance presented as part of the new policy led many dissidents to test the limits of their ruling regimes. What makes the case of Estonia’s fight for independence so unusual is that it wasn’t based in acts of overt defiance. Instead, they relied on history, tradition, and a rich musical heritage to start their own Singing Revolution - and once it began, there was nothing any army could do to stop it.

As portrayed in James Tusty’s memorable documentary of the same name (currently available in a deluxe, three disc DVD and accompanying coffee table book by Priit Veslilind), Estonia suffered greatly throughout the course of its harried history. Directly in the middle of the fray between Nazi Germany and Stalin’s armies during World War II, they were occupied by both factions before finally succumbing to Communist control in the ‘50s. From that point on, a nation previously devoted to peace and personal freedom found itself under the heavy dogmatic thumb of Moscow’s ruling junta, and the lack of sovereignty sparked a sense of national pride that lingered, underground, until the 100th anniversary of the annual Singing Festival became the focal point for a call to change. From there, all that was required to unseat Soviet rule was a commitment from brave members of the citizenry, and the use of nonviolent protest in light of a mighty military crackdown.

Though it proposes to discuss how music made all the difference in Estonia’s fight for independence, The Singing Revolution is actually more focused on the behind the scenes wheeling and dealing that helped determine the end of Russian influence in the Baltic region. While the annual celebration and its symbolic performance grounds did become an aggregate space for spontaneous protests and planned rallies, the backdoor machinations that resulted in secret deals, unusual alliances, and dangerous stands were far more responsible for the eventual change than the actual reliance on traditional folksongs. What the singing did symbolize, however, was the previously unknown national consciousness. People who wouldn’t normally think of themselves as activists could use the cover of communal participation as a means of protest.

Tusty goes into great detail here, speaking with individuals who were actually there on the front lines. As much as story about Russia’s fall as Estonia’s rise, he is careful to include contextual information, how Gorbachev’s calculated move to make the Soviet Union more modern opened a can of free speech worms he couldn’t contain. Indeed, while there are several other factors that helped form Estonia’s break, the ability to freely and openly address the nation’s rich cultural past was the catalyst that many newly formed factions used to advance their call to arms. Even more astounding, Tusty gets everyday Estonians to describe the terror they lived under, the undeniable knowledge that the KGB sat at every corner, recording their every move and word.

Indeed, what a film like The Singing Revolution reminds us is that, unlike life in America, the threat of overthrow by an imperialistic or theocratic system is typically a political campaign away for these minor nations. Even when Gorbachev’s reforms seemed to suggest a lack of reasonable response from Russia, Estonia knew there was still a chance that tanks and troops would sweep across the border and take back control forcibly - and that’s just what happened…almost. One of the most compelling parts of the narrative is the last ditch effort by Communist hardliners to take back the Union. A coup led to Gorbachev being placed under house arrest, and with the Central Committee in the hands of those who’d return power no matter the consequences, things looked grim. It was thanks to two industrious police officers, given the task of protecting Estonia’s radio and television tower, and Boris Yeltsin back in Moscow, that truly saved the day.

As with any political thriller, this is incredible compelling stuff, and Tusty doesn’t amplify or marginalize the material. Instead, he lets narrator Linda Hunt provide the plainspoken facts. Then he will accentuate the ‘you are there’ moments and newsreel/television footage with the voices of those who were actually involved. The humble cop who secured the nation’s sole source of information is relatively down to earth regarding his part in history. Similarly, those who staged the concerts and the rallies are on hand to describe the feeling of seeing hundreds of thousands of their countrymen and women coming together for the noblest of citizenry causes.

In fact, if there is one minor flaw in Tusty’s approach, it’s that we don’t get enough of the title element. Songs are indeed sung, but they are only offered in snippets. It would be wonderful to see just one of these important melodies completed all the way through. In addition, there is very little input from the Russian side of things. Though their handling of the matter is not what’s important here, a little more scope would seal the documentary’s importance. Still, it’s hard to deny the human drama that plays out over the course of these mesmerizing 90 minutes. Just listening to the participants casually run off their stints in Siberian labor camps and as political prisoners (some for many years) is inspiring enough.

Such a sentiment is supported when viewed in this deluxe DVD presentation. We are treated to over four hours of additional material, interviews and historical documents detailing the history of the region, the ever-changing maps, and the newsreels that highlighted the major political events from the ‘30s to the ‘50s.  If the devil is in the details, a digital package like this clearly provides the minutia meant to establish the USSR’s ruthlessness since they exerted their force in the Balkans decades before. Vesilind’s book is even more in-depth. There are chapters focusing on the “Birth of a Modern Nation”, the “Push to Independence”, and the all important “Summer of Song”. While it follows the film quite closely, the prose style used captures a kind of urgency and intrigue that the documentary fails to capture. Here, Vesilind can set the tone and atmosphere in our mind’s eye. It makes the entire Singing Revolution experience far more personal, and powerful.

It’s the kind of confrontation that makes one question their own commitment to country. The United States has been incredibly lucky in that no foreign nation has ever literally tried to invade and take over. We’ve stood by across decades as other countries claim rights to and overthrow empowered governments for completely incomprehensible or selfish reasons. It’s clear that there’s authority in the voice of dissent, and when matched to a tune that proclaims native roots and right to self-determination, the force is strengthened further. Without its annual proclamation of music, Estonia might still be a Russian stronghold today. But thanks to The Singing Revolution, it’s a proud, prosperous democracy. It proves that power always remains where it begins - in the people. 

by L.B. Jeffries

17 Dec 2008

Whenever someone tells me that video games are superficial or generic it always feels a bit like having someone who only watches MTV tell you that all music is shallow and commercialized. Yes, if you only pay attention to AAA games made by companies who want to appease the largest set of consumers possible, you will probably notice that there is rarely much experimentation or issue pushing. They never totally make you happy nor do they totally piss you off, they just get the job done.

A lot of funny things start to happen to video games once you ditch the desire to make money, make people happy, or care about review scores. You start seeing games that are using the player to protest a trend in games. You start to see games that spoof their history. And sometimes you see a painting of Mega Man made out of a woman’s menstrual fluids. All signs indicate the rabbit hole keeps going after this.

Which is why Jason Nelson’s latest game I Made This. You Play This. We Are Enemies. is a welcome addition to the scene. Mixing a bit of social commentary with basic gameplay and massive amounts of abstraction, the game runs very similar to his last project game, game, game, and again game. As noted in the interview with Nelson that Popmatters did about a year ago, the principle purpose of the game design is to get the player to engage with the art. Not rack up a score, not make you feel pleasure at beating the level, and certainly not at figuring out the solution to Nelson’s nebulous art. There are a couple of basic elements that anyone playing will quickly notice. Your avatar moves in a pattern that is very similar to how your eyes travel when viewing each of the different websites being spoofed. The Yahoo News site moves up and down on platforms like one reads the columns, the Fark website moves in horizontal lines as you traverse down the page. Although being sent back to the level only mildly figured into game, game, etc., here it plays a massive role in communicating how a website sucks you in by constantly dragging you to the start. The mental trap of being stuck in ‘F5’ mode expresses itself throughout the game. Layered throughout all of these levels are Nelson’s signature eccentric videos, scribbles, and cryptic poetry.

I’m as late to the party as ever with this game, if only because watching it make the rounds is almost more interesting than yammering about my own analysis. The principle thing most websites looking at it seemed to struggle with was whether it was gibberish or something really clever that they didn’t quite understand. Which might be one of the most interesting new developments in video games outside the mainstream. While it’s certainly true that player input is what makes these things video games, there is still quite a bit of room to explore in regards to how exactly one should be treating the player. Perhaps the thing that wears people out so much about AAA titles is that they are always treating the player like royalty and rolling everything out in a nice, neat package. One doesn’t have to drag themselves through a film like Vanilla Sky to know that part of how people define their pleasure from an experience is by contrasting it to the things that they didn’t enjoy. In Nelson’s case, chucking the player into the chaotic confusion these websites manifest through an abstract video game interpretation is not really about being clever or using gibberish as an obstacle. It’s just a part of the grander experience of not always understanding what’s going on around you.

by Rob Horning

17 Dec 2008

In the wake of the Fed’s moves yesterday, the word of the day in the econoblogosphere today is ZIRP: zero interest rate policy. (This is also known as “quantitative easing”—what happens when Fed rates can’t be cut any further, but the Federal Reserve still wants to influence them in the wild.) In other words, the Fed has made its last rate cut. The technical terminology and wonkery involved here may make this seem like something ordinary people can safely ignore, but to judge by the reaction among Fed watchers, it’s as though one of the four horseman of financial apocalypse has rode onto the scene.

By pushing the rates to zero, Fed Chairman Ben Bernanke is, in effect, making good on his suggestion in 2002 that central banks can drop money from helicopters in the event of deflation. Martin Wolf, in this FT editorial, puts a dark spin on this turn of events.

As Robert Mugabe has shown, anybody can run a printing press successfully. Once the interest rate hits zero, the Fed can perform much further easing. Indeed, it can create money without limit. Imagine what would happen if an alchemist could transform lead into gold, at no cost. Gold would not be worth much. Central banks can create infinite quantities of money, at no cost. So they can reduce its value to nothing without difficulty. Curing deflation is child’s play in a “fiat money” – a man-made money – system.

The upshot: If we keep printing money, it eventually becomes worthless. Wolf doesn’t predict Weimar-style hyperinflation for the U.S., but does expect acute inflation years down the road.

Whether or not ZIRP will work to get more money into the system and narrow credit spreads between Treasurys and commercial rates seems to be a matter of some debate thus far—Yves Smith rounds up some opinions here, noting the disquieting air of desperation in the Fed’s moves. Calculated Risk notes that money-market funds may be induced to give negative returns—rather akin to the calamity that helped spark the mayhem in the wake of Lehman Brothers’ collapse.

Basically, the Fed is done now with anything resembling the conventional monetary policy of the past few decades and is in terra incognita. We can only hope the atmosphere is hospitable.

by Mike Schiller

17 Dec 2008

All dolled up for the holidays, too.

All dolled up for the holidays, too.

All right, I suppose it’s possible that the title up there is insulting your intelligence, and you’re already fully aware of the great game writing and tightly-knit forum scene going on over at The Escapist.  Truly, it’s become one of the most essential gaming sites out there, and if you’re still just going there to look for the video with the yellow background and the guy with the sweet hat, get your weekly dose of profanity-laced insight, and leave, you’re missing out.

Combining a set of weekly features that all revolve around a common theme with daily editorials and reviews, The Escapist is one of a growing number of sites that are treating games as something more than simple diversions.  Founded by Alexander Macris (himself a Harvard Law grad), The Escapist has a way of finding angles at which to look at games that we didn’t even know existed.

As it so happens, L.B. Jeffries has the cover story over there this week, which obviously makes this the perfect time to check it out.

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