Archive for credit crisis

All along the watchtower: Citicorp’s unconscionable accounting

Posted in Uncategorized with tags , , , on April 20, 2009 by spinoza1111

Eric Dash, in “Creative accounting helps Citigroup return to profit” (IHT 20 April 2009), describes how Citigroup booked a one-time gain “approximately equivalent” to the lower market price of its bonds (its debts). This very creative accounting is supposed to reflect the fact that Citigroup can buy back this debt at the new low price, a price that reflects the market’s dim view of Citigroup’s willingness and ability to pay its debts.

Suppose your only friend is friendly Bob Adams at Chase Visa, a nice guy who calls you now every night to get you to pay at least some of what you owe on your maxed-out credit card in a settlement. Can you “assetize”, can you book, can you buy or sell friendly Bob Adams’ friendship and Chase Visa’s willingness to get a haircut?

This would take moxie. This would take chutzpah. This creative accounting is hard to understand because most people know that there are limits to “factoring”, to making pseudo-things to buy, sell and value, since a healthy market as opposed to a shark tank assumes a basic level of honesty not on display at Citicorp.

Capitalism cannot run on moxie or chutzpah; it seizes up when it becomes possible or probable that institutions and men will with Citigroup’s frivolous creativity make their willingness to waltz away from debt an asset by “assetizing” their incompetence, dishonesty and unfair dealing as reflected in lower bond prices.

George Soros has pointed out that a market consisting of people who can ponder its own operations self-reflexively will never be the machine that runs of itself or the invisible hand. Instead, as Citigroup, instead of cleaning up the filthy mess it has made, a mess reminiscent of the vomit spewed by Mister Creosote in the eerily prescient Monty Python sketch, finds “creative ways” to enrich its toplevel managers. This is the self-reflexive Worm of Ouroborus of the end of time: this is Shakespeare’s Duke of Albany’s “humanity”, perforce preying on itself, at the end of time, “like monsters of the deep”.

ouroboros

A depression is no time for creative accounting. The goal of this unconscionable creativity is to return Citicorp to completely private ownership. The decisionmakers at Citigroup, like the honchoes at Goldman Sachs, seek to escape bailout oversight so they can return paying fat salaries and bonuses.

And let us not speak falsely now for the hour is much too late. While the brass at Citi and Goldman say that they want to return to paying their “best people” fat salaries and bonuses, they mean themselves, alone.

They have laid off many of their best technical people, the traders and quants who actually know what’s going on inside computers and the hearts of men, and who could have used their skills to clean up the foul mess by these latter-day Creosotes. But this knowledge is coded as overly detailed, somewhat pedantic and unworthy of the CEO estate as opposed to the Eleusinian mysteries of Hamptons real estate, sky boxes, and golf, about which the CEO estate will know very much indeed.

By “the best people”, they mean themselves, alone, and they are men who do not, it is now evident, know much about what goes on in their own computers or the hearts of men; indeed they take pride in their ignorance, calling it plausible deniability. They seek, with surplus moxie and excess chutzpah, to return to their own swine’s trough, and enrich themselves like in the fat years, while their quondam best people queue at job fairs.

There must be some way out of here, said the joker to the thief,
There’s too much confusion, I can’t get no relief.
Businessmen, they drink my wine, plowmen dig my earth,
None of them along the line know what any of it is worth.

No reason to get excited, the thief, he kindly spoke,
There are many here among us who feel that life is but a joke.
But you and I, weve been through that, and this is not our fate,
So let us not talk falsely now, the hour is getting late.

All along the watchtower, princes kept the view
While all the women came and went, barefoot servants, too.

Outside in the distance a wildcat did growl,
Two riders were approaching, the wind began to howl.

mr-creosote-citi-logo

Computer software as a philosophical pathology

Posted in Uncategorized with tags , , , , , , , , , , , on March 29, 2009 by spinoza1111

three-stooges-read-plato
I like words to live in familial groups because in differences there is meaning (this is an antiPlatonist view).

Much of what passes for “education” is uncritical, Positivist, training in the definitions of favored words, in which disfavored concepts are unmentionable, like the madwoman in the attic. Thus, insofar as students even learn about “philosophy”, they learn about “Plato” and “Socrates”.

Platonic idealism, combined with a Socratic plainness shading into ugliness, then becomes all of “philosophy” for the putatively learned. The result? Neo-colonialism and, as I’ll show here, disaster.

The “philosophy of mathematics” interrogates mathematics: what objects-in-the-world are mathematics about (ontology), how can we be so certain of mathematical truth (epistemology), what is mathematical beauty (aesthetics), etc. It is not understood at all if a serious discussion, such as the discussion at this link, can start and end with Plato: yet that is precisely how philosophy is treated in the media, a music of one note with no development or dialectic.

Now, Stefan Korner’s book may be out of date: incomplete. However, it has the saving grace in that it is an interplay between Platonism (or its modern version, logicism), intuitionism, and formalism, because one never understands the part unless one begins to understand the conceptual family of which it is a member.

Thus, I understand mathematical Platonism in opposition to formalism and intuitionism, and only in this group. To discuss, as does the blogger referenced, the philosophy of mathematics as if the only philosopher was Plato or his butt buddy Socrates is utter pretension. It makes philosophy into the spinning of fables, because absent intuitionist and formalist responses (especially the mostly ignored response of intuitionism), and absent any social critique,“Platonism” reduces to the utterly absurd (because uncontested: because uncritical) fable of the Forms.

Seen in contrast only to Aristotle’s Metaphysics, the “world of forms” retains its limited truth content, because when we aspire in the world of matter to make form, we do have a mental template which has the properties of the capital I Ideal. In software, we try to assemble a chaos of bits (matter) into Form using a mental construct.

But by itself, the world of forms is a children’s fable.

How do these philosophies of mathematics apply to software?

The blogger rather idly fantasizes that software Platonism would be the belief that over and above specific programs, there is the Idea of the program, which raises all sorts of interesting problems that were also raised to Plato when he constructed the idea of form independent of matter.

Plato was asked whether there could be Ideas of “bad things”. Is there a Platonic fart? Certainly, there are aestheticians of breaking wind who rate explosions for sound and smell.

Likewise, over and above the millions of shipments of Microsoft Windows, is there an Ideal Microsoft Windows? Is this the perfect, bug-free Windows intended by its core development team? Do the ideas of the orange badgers count (the “orange badgers” are the thousands of temporary employees doing the same work as Microsoft employees for less money and fewer benefits)?

Or is Microsoft Windows so exemplary of what not to do that its Idea would be the buggiest and most odious version of Windows, say rel. 1.0 running on an underpowered Intel 386?

microsoft-bob

Or would the Idea be an averaging of all the above?

Pure Platonism, especially when through arrogance or ignorance or through a study of “philosophy” restricted to Bonehead 101 and The Fountainhead, is just malarkey, and it needs to confront more modern philosophies to serve as their genetic ground.

The blogger seems unaware that “modern” Platonism would be the “logicism” of Gottlob Frege and Bertrand Russell. Although Bertie did imply in his earlier general philosophy that Ideas exist, he and Frege were more concerned with a consequence of Platonism in the philosophy of mathematics.

This was that it seemed to them and others around 1900 that mathematics could be reduced to logic by means of a rich conception of the mathematical/logical “set” as a bridge notion. If all sets exist unproblematically, then we can derive mathematics by way of construing numbers as the “set of all sets of the same cardinality [set count]” and expressing basic arithmetic as set operations.

Because of some well-known paradoxes, this project failed: it was as if the Platonic empyrean were found to contain one or more Rebel Angels, “whose high disdain, and Sense of Injur’d Merit” would upset the apple cart.

I express one of the most famous paradoxes in my China teaching like this: during the Cultural Revolution, the village Party cell decrees: “Comrades! Revolutionaries express their commitment to the dictatorship of the proletariat and the liquidation of the landlord class by remaining clean shaven! All men must shave every morning in preparation for toil!”

chinese-cultural-revolution

“All men who do not use the services of Comrade Wong, village barber shock worker, must shave themselves! All men who do not shave themselves must be shaven by Comrade Wong!”

Needless to say, Comrade Wong is found dead by suicide, since he cannot figure out whether to shave.

Obviously, logicism and Platonism resemble, to a certain extent and with far more dignity, the nonsensical pseudo-philosophical ravings of the mad woman Ayn Rand: they are limit cases, generators of paradoxes and in themselves philosophical problems.

David Hilbert’s nihilistic formalism declared baldly that mathematics refers to nothing outside itself and is an uninstantiated game with symbols playable only by tenured professors and their favorite adjuncts because it pleases them: equivalent to chess, crossword puzzles, or what was known to Cantabrigians of the 1930s as The Higher Sodomy. Of course, this completely fails to explain why mathematics can be used outside of mathematics and why, at any time, bridges, constructed using mathematics, don’t fall down.

Hilbertian formalism as applied to software would mean that software has no meaning outside of software.

This is where the philosophy of mathematics-in-software gets interesting, because there is a philosophical pathology, the investigation of how philosophies and their misunderstood mutations escape the Platonic knocking-shop and Academy and become the “philosophies” of people working in other learned professions and in trade. Mechanicals and slaves in Plato’s time were innocent of big ideas, for the very good reason that most big ideas hadn’t been thought yet: today they inherit, albeit down, in some cases, at the community college, some big ideas, considerably shop worn, perhaps mutated, by the distance traveled in raum undt zeit.

It may seem wrong to view business and administrative software are an uninstantiated game with symbols, because we write software to “solve problems”, the fact is that in business, many companies get into creating software blindly, the software creates more problems than are solved and their data processing staffs contribute nothing to the bottom line owing to their incompetence, merely playing David Hilbert’s “games with symbols”, having found a new way beyond a tenured professorship to basically jerk themselves off.

In 2003, Harvard Business School professor Nicholas G. Carr announced “IT (information technology: software) Doesn’t Matter” [emphasis mine]. He has found that in the beginning of a new technology only does it provide competitive advantage. Certainly, many new-company entrepreneurs discover innovative ways to at least seem to get quick results using IT. Federal Express was able to do so.

But, Carr went on to show that after first entrants gain competitive advantage, the rest of the market is locked into providing the same service, incurring a new layer of costs with no clear benefits. What Carr failed to point out was that no entrants, early or late, have to provide correct software. By the time bugs matter, and by the time they are fixed, the software is a pure cost.

This appears to me to be applied Hilbertian formalism. The actual developers even of the first software worked blindly because of the end users’ inability to verbalize their needs. Since this ability is roughly the same as actual programming there was a massive duplication of effort as, in the early days, vast, unreadable and unread “requirements documents”, full of aporias and errors, were typed by secretaries and handed to programmers.

However, if anyone at the time reflected on what was going on, “philosophically”, overemphasis on a static “philosophy” that starts and stops with Plato/Socrates caused the developers and their corporate sponsors to treat buggy first versions (a competitive advantage all the same) as a Platonic “Form”, with end users, low level employees, and customers paying the price of errors. Nonetheless the buggy software was a genuine competitive advantage.

As a Platonic Form, strangely, the buggy Rel. 1.0 was “good enough for government work”. Monstrum Horrendum Derrida has pointed out Platonic aporias: perhaps the most basic is that the Platonist, approaching the limit, getting close enough, sees the infinitesimal as unworthy, a form of writing: the trace in Derrida, and thus is able to confuse the buggy release with the Form.

But over time, data processing became a cost center. Today, most programmers unconsciously are formalists who follow syntactical, Hilbertian rules. In many cases, in order to avoid errors, they are directed to use “applications generators” which force their programmers to follow Hilbertian rules with little control over the result, and reinforce an Hilbertian split between what they do and meaning. But, there’s no way of philosophically narrating this change, because “philosophy” is treated as a practice with no evolution and no pathology.

In the case of “rocket science” financial software, these tools are little understood; owing to the formalist bias against relating math to reality, the general public has no understanding of financial software as used in securitization and structured finance. As a result of Hilbertian games, and the frivolity of David Hilbert’s philosophy of mathematics, we see absence of name and address of original borrower on securitized loans and circular chains in other artifacts, where, for example, a reinsurance policy insures itself at two or more levels removed. The result? The end of the world?

thomas-cole

For example, software developers at D. E. Shaw develop models explicitly identified, on the D. E. Shaw Web page, as “proprietary”. Unfortunately, in software, “proprietary” has a specific, rather Hilbertian, and somewhat sinister meaning.

The software’s “source code” (the instructions in a formal language readable by programmers trained in that language) cannot be viewed without D. E. Shaw’s permission, as opposed to “open” systems such as Linux for which the source code is available.

One real-world meaning of “proprietary” software is that its freedom from “bugs” is unknown to all but people biased towards thinking of the software free of bugs. Secrecy kills knowledge, and in being proprietary, D. E. Shaw’s software is logically akin to Bernie Madoff’s far cruder and less elaborate Ponzi scheme.

Platonism and formalism are in themselves bad jokes because neither, in themselves, betray any serious engagement with each other. Intuitionism is in a different weight class.

The best and noblest philosophy of programming resembles the Intuitionism of Brouwer, and as Donald Knuth wrote in a 1978 essay, its avatar, the late Edsger Dijkstra, was also Dutch, appropriately.

Mathematical Platonism, as applied to software, arrogantly assumes that the software which controls and destroys people’s lives pre-exists even before you write it and thus is an implicit ideological justification for the substitution of promises for software, and the Benthamite implication that surveillance, as software, exists: software formalism is even more irresponsible: but Dijkstra is the noble Intuitionist who not only with rigor but also with moral seriousness refuses to admit that “there is a program” for a given problem until that program has been step by step generated: from its own correctness proof!

Only software Intuitionism, a refusal of Platonic arrogance, and Formalist nihilism, betrays no reading of Kant. The final correctness of the absolute (zuivere) program might in fact be an unknowable thing in itself, a limit or upper bound. Dijkstra’s practice was what his countrymen Mondrian and van Doesburg called zuivere beelding: purity above all.

mondrian1

I’m serious. Arrogant Platonists at the top of companies like D. E. Shaw, protected against the consequence of their errors by ownership of source, have helped to destroy the economy because they sold “solutions” which used “chaos” but did not, could not, anticipate “black swan” unexpected conditions in part because of mere memory limitations: the Intuitionist knows that 2^64-1 is nothing more than a finite number, whereas the applied Platonist confuses 2^64-1 with infinity, even as he confused 2^31-1 with infinity in 1990.

Nihilistic and substance abusing Formalists were delighted to play what they knew to be uninstantiated games with symbols for the Platonists at the top, for money. Intuitionists were hounded out of the field as whistle-blowers and party poopers.

We live with the result. Yesterday, Luis Ignacio da Silva, president of Brazil, said that the world financial crisis, powered as it is by software, is the mischief of blue-eyed white people. Platonism and irresponsible Formalism were their ideological tools in software.

I shall now illustrate my points.

The Game of Life was developed by the Cambridge and Princeton mathematician John Horton Conway (who I was privileged to meet when I was at Princeton) in 1968, and I implemented The Game of Life on an old mainframe with 8000 bytes in 1971. In this mathematical game, imagine (imagine) a world consisting of cells. Each cell can be alive or dead. Each cell has a square neighborhood consisting of the eight neighboring cells.

If a dead cell has three neighbors it becomes live. If a live cell has four or more neighbors it dies as if from overcrowding. If a live cell has fewer than two neighbors it dies poetically and picturesquely as if from loneliness.

life-example

These simple rules have been found to create strange and wonderful patterns.

life-message

Symmetry is preserved, so a simple row of ten cells produces a sequence of stunning patterns and the message HIH. Asymmetrical patterns generate, as in the “glider” motion and, when they meet other objects, sexual reproduction and the creation of factories to clone themselves.

Now, it seemed obvious to me in 1971 to program Life on a computer. But note that most simple versions of Life have what hero computer scientist Edsger Dijkstra, who had zero tolerance for errors, would consider a showstopper bug.

The glider shape, in an empty screen, replicates in such a way as to seem to creep across the screen, merely because its starter shape creates a shape which creates a glider, offset diagonally from its “sharp end”.

life-glider

It should move off the screen. One should see it disappear. But in most implementations, such as this online Java implementation of Life, the band of cells at each border is most conveniently considered as an unchanging row of dead cells. But this, as shown, gives a wrong answer.

java-life-bug

The theoretical predictions as to the lifetime of various patterns of starter worlds can’t be confirmed with these models.

Now, it is tactically possible to use clever programming to account for the borderline problem. Indeed, Dijsktra used an ontological approach predefining words carefully and (while Dijkstra had no use for “object-oriented programming”) he would posit concepts and objects to clarify algorithms. He might say that the program’s display should be rigorously considered, by the programmer, as a peephole or window onto a lifeworld (lebenswelt) represented separately and independently by an array.

Typically, suggestions like this as made by Dijkstra before his death in 2003 were met with the same sort of response Kant encountered in response to Kant’s political writings. Kant’s paraphrase of his critics in Kant’s pamphlet “On the Old Saw” was “that is all very well, Herr Learned Professor, but we are practical men and your suggestion is elaborate: surely there must be a simpler solution to the problem from common sense”.

Kant’s riposte was that he was doing common sense…better than the typical “practical” statesmen of his or any other time, most of whom were best described, as was Talleyrand, as shit in silk stockings.

To Dijkstra, and to programmers like him, the patronizing response was “that is very nice but you just made me think, you dreg, and I didn’t think it, you dog, and I own the company, you waterfly, therefore let’s not do it: let’s NOT by any means separate the display from the array”.

think

However, Dijkstra would then go on, I think, to say that this merely postpones the problem to the limits of the array. In general, whenever Life generation occurs at any one of the (four) upper and lower bounds of the array, values need to be generated “beyond” this bound because those values may “feed back” to visible cells. In my glider illustration, the glider “wants” to generate a new cell below its three bottom cells as their neighbor when it reaches the bottom of the screen (or any other side), and this new cell influences the visual cell in the next step. Instead, because it is forgotten, the visible cells turn into a block of four cells which produces no new cells.

Clever programming can continually expand the array as needed, of course. In fact, the total area occupied by a mixture of live and dead cells is a completely definable rectangle, defined by the lowest and rightmost cell, the lowest and leftmost and so on. As an optimization strategy, this area can be subdivided into a list of separate neighborhoods. But, any possible program will run out of space.

The implications of this differ depending on your philosophy of mathematics.

The Platonist will conclude that the computer program is at best the shadows cast on the wall in Plato’s fable of the Cave which he tells in The Republic to illustrate the forms. Also, given Plato’s suspicion of writing, the Platonist will distrust the program in general.

The Formalist has no reason to do anything but smirk, and sell the model as reality to the next fool (yes, I have a great deal of contempt for formalism as such).

The intuitionist would keep on expanding the program but in despair of the possibility of ever writing a correct program.

Leonard Smith, in his Oxford University Press “Very Short Introduction” to Chaos, writes that computers cannot simulate chaos at all because they are finite state machines in all cases no matter how large.

We think of storage as “unlimited”. But, programming on an 8000 byte IBM 1401 in 1971, I thought that if my university could get the Chicago Police Department’s 37K 1440, there would be far more than enough storage. The computing industry in fact has repeatedly fallen prey to the illusion that numbers are intrinsically large.

1401

The latest joke is the redefinition of a long int[eger] in the wildly overrated language C as 64 bits by various compilers (no, there’s no such thing as a “standard” C: the language cannot be standardized). 31 bits was “infinity” in 1990, but East Asia has, apparently always been at war with Oceania. Not once was the mathematically more sensible decision made, to not support arithmetic in any one fixed precision, but, using RISC or microcode, to support variable precision.

The intuitionist would say that we can always add memory, but this operation, which was first mentioned by Turing in arguing for the universality of his abstract machine, cannot be merely mentioned from the standpoint of mathematical truth.

It seems to me that from a neutral POV, the operation “obtain additional memory” would have to be part of a correct implementation of any computer model of a mathematical process which assumes infinite resources, unlike, strangely, “obtain additional time”. But, absent a World, Galactic, or Universal computer, that would consume all available matter, this is an impossibility.

But: the social implications are clear. Insofar as software is a simulation, it cannot ever be trusted.

It is said that the unexpected threat of a Russian default in 1998 triggered the failure of proprietary mathematical software developed at Long Term Capital Management in 1998 as a “black swan”, where the “black swan” is the highly improbable case that breaks the model. The Platonic “visionaries” of LTCM had seen, correctly, that while traditional business software is fixed point, far more sophisticated hedging models could be built by using floating point (real) numbers.

Unfortunately, these “visionaries” didn’t know much about history and had never read about the Bolshevik defaults on capitalist debts of the Tsar and didn’t foresee that the market would overreact to a Russian threat of default.

But: software bugs are white swans. Most software includes limitations and bugs.

It’s all very well to do philosophy as a form of shopping. Most people, including most graduate students of philosophy, are simply not widely educated enough to even begin to see philosophy in action, not in a seminar room, but as a pathological, historical dynamic. So, I’m probably pissing in the wind here.

Today’s Paul Krugman column (24 March 2009)

Posted in Uncategorized with tags , , , , , , , on March 24, 2009 by spinoza1111
Peter Gerasimon is a very talented artist: Peter, if I have erred in posting this copy of your work, please let me know.

Peter Gerasimon: The Debt Collector, 2008

Peter Gerasimon is a very talented artist: Peter, if I have erred in posting this copy of your work, please let me know. Reader, click the image to go to Peter’s image’s site and see more of his work.

Letter to the editors of the International Herald Tribune re today’s Paul Krugman column

Edward G. Nilges
Lamma Island
Hong Kong

24 March 2009

To whom it may concern:

Re Paul Krugman’s excellent column, “Financial policy despair” (IHT 24 March), policy makers like Geithner and Summers, who in their personal lives don’t have to live with the consequences of their foolish decisions, may not be aware of the law, in inviting unknown private investors to buy discounted toxic assets.

I know bankers, and ordinary people, who are unaware that in American law, the loss of collateral (the home) does not relieve the debtor from her debt. But the private investors will learn this in the manner of the shark, and to recover their investment and to profit, they will hound, bullyrag, and harass the “jingle mail” people who in 2007 moved out of depreciating homes for which they’d paid inflated prices.

Direct help to the actual victims, as in Katrina, is less important in an administered world than ideology, despite Obama’s mandate for change. If the toxic assets fall into the hands of the usual thugs that infest the lower and higher reaches of American business, we may look forward to gunplay and bounty hunting reminiscent of the Wild West. This is because Obama has hired thugs who are part of the problem and not the solution.

Sincerely

Edward G. Nilges

Stanley Fish on faith and debts

Posted in Uncategorized with tags , , , on March 2, 2009 by spinoza1111

Stanley Fish is back after, I would imagine, a fishing vacation, and writes this week on “faith and deficits”.

Here are my comments at the site, awaiting moderation at this time.

As in the case of your series on Rancourt, Mr. Fish, you engage in no little sleight-of-hand. You take two views which contradict each other and allow the reader to make the false conclusion, from their contradiction, that they represent ALL possible views.

Thus, in the Rancourt piece, the university’s claim that the professor must confirm to norms insofar as the university chooses to select and enforce norms is contrasted with Rancourt’s claim that the university must conform to him. Of course, missing is the view that the university could in some cases be expecting professors to teach nonsense, as in the case of (1) English departments whose chairs believe that Shakespeare didn’t write the First Folio, (2) so-called “Christian” institutions that require professors to teach “intelligent design”, (3) Turkish universities that require professors to deny the Armenian genocide, etc. (the examples are legion).

Here, you’ve presented opposing but by no means mutually exhaustive views. Both assume, in making a metaphor, that lending money at compound interest is licit, and that the creditor may be “totally other” with respect to the debtor.

However, in mediaeval times, it would have been blasphemy to represent God as a creditor lending money at interest because usury was considered morally wrong. Likewise, in Islam, lending money at interest, where the creditor has an arm’s length relationship at best with the debtor (and, interestingly, where the creditor can non-Islamically sell or “collateralise” debt) is considered morally wrong, and it would probably be blasphemy to make God a creditor.

Both metaphors put creditors in the catbird seat. “Critical pedagogy”, your bete noir, would point out that we’re not all Protestants, and it is a *Kulturkampf* for you to write as if we were. Some of us contracted debt in order to afford life-saving operations for parents, and would be, if religious, hard put to imagine the creditor in such a transaction as anything other than Satan, exploiting America’s lack of decency in health care for private gain.

However, I get the feeling here (from your silence in response to questions about C. S. Lewis and the way you fail to address the vast differentials in academic pay) that I’m talkin’ to the hand.

PJ O’Rourke’s nonsensical babble in Financial Times

Posted in Uncategorized with tags , , , , , , on February 12, 2009 by spinoza1111

One hopes to see the last of the sardonic Baby Boomer apologists for free market capitalism, for P. J. O’Rourke’s explanations and predictions in the Financial Times for 11 Feb 2009 don’t make sense.

O’Rourke, at the defunct National Lampoon of the 1970s, made racist and sexist humor funny, and a safety valve in a society in which it became rapidly less easy to “speak truth to power” than the 1950s, especially as power devolved on cynical, and therefore unprincipled, members of the Baby Boom generation of vipers.

Now, as a horrible old fat man, he’s trying desparately to explain the credit crisis while saving his precious freedom-for-some.

He’s found that Adam Smith didn’t approve of “overtrading”, and that “overtrading” caused the credit crisis. But at the end of his nonsense he writes that “freedom” creates “opulence”.

Unfortunately, “freedom” includes the “freedom” to do all sorts of things, including torment small animals and to “overtrade”.

Adam Smith may have imagined that “money” in all of “money’s” forms, currency, stock shares, and IOU notes to whores (for currency is also a promise) can be an accurate reflection of something outside itself: “wealth” such that X amount of wealth in a society is naively believed equal or isomorphic to Y amount of money…either as a matter of fact, or, more probably, as an axiom of faith undergirding the science dismal (as the French would call it).

However, even in Smith’s time, “money” and “wealth” didn’t correspond any time two men, perhaps in two distant locations, traded with two more men the favors of one and the same whore at the same time of the night, unless “wealth” is, among other things, the happy enthusiasm with which a man anticipates an illicit Assignation of Venus…to fall into 18th century prose rhythms appropriate to the theme.

In other words, Marx made up his mind about what constitutes value as wealth: it is what real working people know it to be, as opposed to aging fat men writing for the Financial Times. Marx defined value as labour, whereas neoclassical economics only occasionally had this clarity. Following David Hume, their value became an unexamined sensation of felicity: a thrill.

Modern “neoclassicists”, including pompous Yuppie scum who claim to have read the Wealth of Nations, confuse wealth with what is known today as “wealth effects”, and the “wealth effect” is nothing more than Joe Blow in Colorado Springs (or Zhou Blow in Shenzen), circa 2003, saying “honey we’re rich” in their overmortgaged and over-valued home.

Any number of promissory notes can be written, in P. J. O’Rourke’s glorious “free market” to make suckers salivate with anticipation of a coming Golconda. These have absolutely no relation to the wealth of the world, constituted by the work, not of the chattering class, nor of the bullshit artists, but of the people who pick up their trash and cook their dinners and roll their hand-made cigars.

During the putative fat years, these working people saw their incomes decline. I was there. Computer programmers who troubled to learn their trade were mocked as “nerds” because Job One was looking like the red-suspendered winner who wins in a walk. The charge of “verbosity” was the all-purpose excuse of managers who didn’t want to work. People obtained law degrees and never practised law; instead they became political appointees such as school superintendents who cannot teach, library directors who don’t read books, and Presidents who didn’t know the difference between Sunni and Shi’ite, Iraq and Iran, and Medicare and Medicaid.

P. J. O’Rourke’s irony became Standard Operational Bullshit. You worked hard? Let’s joke about that in your performance review, and focus instead on your mannerisms. We’re not sexists or racists, but women programmers sure are funny, and black programmers are funnier, and an all-white-male office is loads more laughs.

The same phenomenon happened in the United States and world-wide in the 1920s as actual commodity producers, some of the hardest-working working stiffs on the planet, saw the prices for their oil, wheat, rice, rubber, and bat guano collapse after the First World War. The Smart Set was not liberal, any more than O’Rourke: HL Mencken destroyed the reputation of William Jennings Bryan, a true spokesman for working and rural people, in a Willie-Horton caricature of Bryan’s stand on evolution. The result of the underlying injustice, the result of the freedom to pee on people and say “it’s raining”, was degringolade.

But by comparision, the global economics of trickle down over the past thirty years have been a golden shower much larger in intensity. The poor were deprived of much more relative to the wealth of nations, and nations including Palestine and Iraq were brutalized much more. Work, in America, was axiomatically defined as “making money” or, at a minimum, “being a stylish intern or Open Source coder with a definite prospect of making money”. Value became thrill and whim and wealth effects.

We may be looking at much more than a mere Great Depression as a result. We may be facing Ragnarok, or the Thousand Years of Darkness. And, clowns like O’Rourke are to blame, because they reversed the Enlightenment.

O’Rourke cries for “freedom from government”: but Adam Smith took government as a given, because governments create enough safety for markets. People who haven’t read Adam Smith, or passed out nodding over Adam Smith, or who read what they want to read, fantasized as ideologues that if “freedom from excessive government” (freedom, that is, from the relatively heavy hand of 18th century mercantilism) is good, the increase in benefits is a smooth function of the freedom-from.

Therefore, Grover Norquist decided that taxes should be reduced not only to spark growth but also to downsize government until it could be “drowned in the bathtub” (a phrasing that exposes, perhaps, the family brutality underlying the Reagan programme), and PJ O’Rourke did his dirty work for him as part of a well-funded new chattering class much more influential than “liberals” of any epoch.

But when this was tried as regards speculation, “overtrading” is the natural result, and PJ O’Rourke is babbling when he attempts to blame it somehow on the French (in his inaccurate analysis of the South Sea Bubble).

It’s too late, Mr. O’Rourke, to run your smart mouth about “overtrading” and “freedom”, because you have lied to yourself and others about what constitutes a commodity, and you have been bewitched in Wittgenstein’s sense about language even though Wittgenstein was on-tap at Ohio State; you were, in fact, too busy being a hippie at the time, because your bottom line has always been your gullet. The Scots did not give John Law the freedom to defraud, but owing in some measure to you and your stupid mouth, people who tried to blow the whistle on Bernie Madoff and securitized debt obligations were mocked and shown the door.

PJ O’Rourke is naive. He’s never tried to get a cab at Lo Wu, in Shenzen, for Bai Sheng Zhi Zhou. A functioning market exists in the belly of the Communist superstate because Leninism was always consistent with markets; it was Lenin who invented the New Economic Policy of the mid-1920s in the Soviet Union, which allowed both Russian plutocrats and ordinary people to get rich without changing the overall direction of the economy.

Government provides a frame as it were for markets and market economies. This frame can be minimal, a steel bar, or it can be quite ornate, unrelated to the intensity or the prosperity of the framed art work.

In my direct experience, it’s a myth that Deng Ziao Peng abandoned socialism. The well-stocked grocery stores of Shenzen feature “economic police” to prevent cheating, and when my employer, in Shenzen, played games with my final paycheck, a Chinese friend said that it’s standard operating procedure to occupy the offices of the defaulting firm until the police show up: in Chicago, the police won’t listen to the employee’s complaints but in Shenzen the police have to, under the law, take the side of the employee in these disputes. [Note: I didn't have to go to that length: instead, I wrote a brief and effective letter identifying the law.]

Socialism in fact protected China from the worst effects of the 1998 East Asia meltdown because at the time, China’s Leninist capital controls prevented Western yuppies from overinvesting. This same dynamic operates today; countries like India are faring better in the crash than countries that followed the “free market” playbook, and opened themselves to Western investment.

PJ O’Rourke has been mocking government for years. The result is that he has no solution today for the credit crisis except the “freedom” which got us into this mess.