I wonder if a lot of people understand how the financial crisis came to be. I'm not sure I would understand it if I hadn't gone to visit a friend who in the Sierra foothills last year.
She had inherited a house at a resort 10 years ago and had been living there ever since. It's a big house, but the construction wasn't finished. There were fixtures to be installed upstairs, and the driveway wasn't paved, but for the most part it was done.
She didn't have a job, but she had been taking out loans on the property every couple of years, and at first I didn't understand how she could do that, until I realized that the property value had kept increasing so even though she was spending most of the money she borrowed on living expenses and improvements to the property, she always had equity she could borrow against. Every two years she'd take out another loan, max out her equity, but in a couple of years the value would go up and she'd be able to take out another loan.
Until the value stopped going up, then the party was over. She still had to make payments, but now she didn't have the means to. She defaulted, left the house, and the bank took over. If they could sell it, it would be at a considerable loss.
I think a lot of people were doing that.
And I think that's where the trouble started. Making those loans was a profitable business, and a lot of people wanted some of the action. At one point I even wondered how I could, but I never (thankfully) figured it out. As long as real estate kept going up, everyone kept making money. There was even a way to rationalize it. The United States is where everyone in the world wanted to live. So property would keep increasing in value as long as there was growth somewhere in the world. But it turns out that China and India, Russia and Brazil are pouring their new money into their own countries, reproducing the infrastructure we already have, building their own highways, hospitals and universities.
When real estate started going down, the value of all those mortgages went down, in some cases way way down. Then the house of cards built on the ever-increasing value of real estated collapsed. That's the part you've been reading about. Banks need to have a certain dollar value of assets to back loans they get from other banks. When the value of the assets go down, their loans get called, they have to sell these assets to pay back their creditors, but no one wants to buy them. That's when you hold up the big Fail sign and hope someone thinks you're too big to Fail.
But really, this is probably the shit hitting the fan, it's probably not a liquidity crisis as Paulson says. It's our laziness, our thinking that our superior military and nukes would guarantee us a permanent position at the top of the pyramid. We don't make enough of the things people want these days, and instead of investing in building better education, health and infrastructure, and solving the energy problem, we've been lying to ourselves.
We also fucked up by electing idiots to lead us, and letting the press get away with providing entertainment instead of keeping us informed on what the rest of the world was doing. This led us to elect ever more dishonest idiots to lead us, and they didn't like what little oversight the press provided leading to the ridiculous situation where the candidates won't even sit down for an interview, and you can hardly blame them, the reporters are such incompetent jerks.
I heard someone say that the real estate bubble isn't the problem it's the canary in the coalmine, the first financial crisis of a series of crises. I believe this is probably true. I thought we had time to solve these problems, what Obama was saying and certainly still is saying are the right things: education, health care, infrastructure, energy. And pull back from the short cuts. We can't afford boondoggles like the war in Iraq, but it may already be too late.
No matter what, as a country we have to stop looking for the quick fixes, and start thinking about our future and doing the things we need to do to have one.
Of course all this comes at an opportune moment. We can change direction on November 4. That's not actually very far away and another opportunity like that won't come for a long time. Something to think about.
I'm absolutely sure the economic bailout story is going to end with Bush and Cheney resigning. Or more accurately, not end, but move on to the next phase. Pretty sure they will be gone by the end of the week.
It's the only thing that will give Republicans cover, and will let the Democrats feel they are not being set up. It will get everyone's attention and remove the theory that it's more Bush-Cheney deception.
Bush and Cheney have no credibility, the only thing they can do right now to help the country, if that's really what they're doing, is to step aside.
I wrote up the idea in more detail yesterday.
It's going to shake a lot of people up, but they have to go, now.
A sure sign this idea will come up on a broader level is this story on Politico about an open rebellion among House Republicans in a meeting with Cheney earlier today.
Update: An alternate theory -- if McCain puts his head on the chopping block that could provide enough cover for Republicans and Democrats to vote for the proposal.
I bought my iPhone on June 29 last year, the first day they were available. A couple of months later, I realized I wasn't using my Blackberry and a couple of months after that, I turned it off. I don't miss it, even though I loved it when I was using it because it meant I didn't have to lug around my laptop to be in range of email and Twitter.
Now a funny thing has happened since I got my Asus, I've stopped using my iPhone as anything other than a phone. The Asus is a much better computer than the iPhone, and eventually I think I will come to use it as a phone too (with Skype). I won't give up much since I have an EVDO modem, so I'll be able to use it anywhere I can use an iPhone.
I won't miss using the iPhone as an iPod because that part of the iPhone only worked for the first couple of weeks, after that, no matter what I do, even after reformatting the phone several times, and using it on different computers, I can't get it to synch music or videos with the desktop computer. Never mind that synching with a desktop computer is ridiculous for a fully capable computer as the iPhone is, but that's the point -- iPhones are crippled computers, from the start, designed not to function like a computer. So why would anyone think you could happily get it to work like one?
That's the sad conclusion to the tale of Alex Sokirynsky, the developer of the Podcaster app. He built the software Apple hasn't gotten around to building and as far as we know never plans to build. HIs software works the way I always intended podcasting to work. Go listen to the early Trade Secrets podcasts I did with Adam Curry four years ago in Seattle. We talked about podcast player devices that had wifi receivers that downloaded and played your favorite programs without help from a bigger computer. Synching was never part of the vision of podcasting. You can see it as requirement #1 on my spec for a new podcast player device in the piece I wrote for the BBC last year.
Anyway, no need to wait for Apple. As Sokirynsky says, there will be other platforms, and it would be easy to make a perfect podcast player app for the Asus. It has such long battery life, and you can configure Windows to keep running when you shut the laptop cover, so there's no problem using it as a player. It's a bit overkill, but then Apple doesn't make a rational podcast player, and willfully shuts one down created by a developer, so it's the best we have right now.
And today's Asus actually costs $200 less than the iPhone I bought last June.
Yeah I think I'm beginning to move away from Apple, again. We'll see how it goes.
How do you prepare for a Great Depression? I was thinking of doing an extra backup. Ordering a few month supply of MREs from Amazon? What else?
Always thinking ahead, it's possible that by this time next week our economy will lie in ruins, people will be hungry in the streets, out of work, and we'll all be in for an incredible hardship possibly for the rest of our lives.
Last night at dinner I was musing about this subject. There still are plenty of people around who remember the last Depression. I think some people held onto their work and dignity and were able to put food on the table and stay in their homes. My house was built just before the Depression and it's still here.
I don't have a job now, I guess I'm basically retired, although I'm always looking for a new deal that I could make money with. I've basically been retired this way since I got out of grad school in 1979.
Anyway, I hope we avoid the Depression. I kind of like the way things were going there, hope we can get around this corner without electing a fascist government too.
PS: I recently saw The Dancer Upstairs, which I enjoyed, and in it there's a character, a woman, who is always asking what she should wear to this or that. At one point she asks what she should wear to a revolution. I thought of Meg Fowler, and wondered what she would wear to a Great Depression. What's the right kind of makeup? Shoes? I admit to not understanding women or Great Depressions, but am fascinated by both.
Dave Winer, 53, pioneered the development of weblogs, syndication (RSS), podcasting, outlining, and web content management software; former contributing editor at Wired Magazine, research fellow at Harvard Law School, entrepreneur, and investor in web media companies. A native New Yorker, he received a Master's in Computer Science from the University of Wisconsin, a Bachelor's in Mathematics from Tulane University and currently lives in Berkeley, California.
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"Helped popularize blogging, podcasting and RSS." - Time.
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