Category: Books

New book on ChatGPT in medicine

by philg

Some friends have put together The AI Revolution in Medicine: GPT-4 and Beyond, a thought-provoking book released today. Health care is nearly 20 percent of our economy (compare to 4 percent in Singapore) and a higher percentage of our tax dollars (Happy Official Tax Day, though April 18 is the deadline this year; the opioid makers thank you for your efforts in the workplace). The book asks the important question “What will LLMs do for an industry to which Americans have decided to devote one working day per week?”

First, let’s ask why we think GPT-4, famous for its writing talents, might matter for doctors. Doctors aren’t primarily writers, after all. Many physicians, however, spend time attempting diagnoses and this is an information processing activity. The patient describes his/her/zir/their symptoms and the doctor matches these to known patterns, possibly asking follow-up questions or ordering tests to confirm or reject explanations. In other words, exactly what computer programs have traditionally done.

Second, let’s ask GPT-4 for its own opinion: “Explain why GPT-4 will change the practice of medicine and the experience of patients.” Our future overlord’s response:

GPT-4 has the potential to significantly change the practice of medicine and the experience of patients in various ways. Here are some key areas where it can have a transformative impact:

  1. Enhanced medical diagnosis: GPT-4’s advanced language processing capabilities enable it to understand complex medical information and provide diagnostic suggestions to doctors. This can help in the early detection of diseases, improving patient outcomes, and potentially saving lives.
  2. Personalized treatment recommendations: GPT-4 can analyze an individual’s medical history, genetic data, and other relevant factors to provide personalized treatment recommendations. This can lead to more targeted and effective therapies for each patient.
  3. Streamlining administrative tasks: GPT-4 can help automate and streamline various administrative tasks, such as scheduling appointments, managing patient records, and handling insurance claims. This will allow healthcare professionals to focus more on patient care and less on paperwork.
  4. Health education: GPT-4 can act as a virtual health educator, providing patients with accessible and accurate information about their conditions, medications, and self-care strategies. This will empower patients to take a more active role in managing their health.
  5. Mental health support: GPT-4 can serve as a virtual therapist, offering support to individuals struggling with mental health issues. It can engage in conversation, provide coping strategies, and help track mood and behavior patterns. While it cannot replace human therapists, it can be a valuable supplemental resource.
  6. Telemedicine: GPT-4 can enhance telemedicine platforms by providing real-time language translation services and facilitating communication between patients and healthcare providers across different languages and cultures. This can expand access to healthcare services for patients in remote or underserved areas.
  7. Research and development: GPT-4 can assist in the analysis of large volumes of medical data, identifying patterns and relationships that may be difficult for humans to detect. This can help accelerate the development of new treatments and technologies in the medical field.
  8. Ethical considerations: The integration of GPT-4 in healthcare can raise various ethical concerns, such as data privacy, algorithmic bias, and the potential for overreliance on AI. However, addressing these challenges and ensuring the responsible use of GPT-4 can lead to a more equitable and effective healthcare system.

Overall, GPT-4 has the potential to revolutionize the practice of medicine and improve the experience of patients by enhancing diagnostic accuracy, personalizing treatment, streamlining administrative tasks, expanding access to healthcare services, and more. As with any new technology, it is essential to address ethical concerns and ensure the responsible and equitable use of AI in medicine.

(Note ChatGPT’s passion for equity! If we put ChatGPT in charge, it might read “Racial Disparities in Maternal and Infant Health” (KFF), learn that “Black and American Indian and Alaska Native (AIAN) women have higher rates of pregnancy-related death compared to White women” and decide to euthanize 15 percent of white pregnant people who come to the hospital. That would be the simplest and fastest way for the AI to accomplish its equity goals of health outcomes based on skin color.)

A primary care doc neighbor says that he uses ChatGPT every day and would pay $1,000 per month for it if he had to. When confronted with a massive hospital discharge note that he is required to summarize in order to get paid, he will ask ChatGPT to summarize it, for example. He also uses ChatGPT to draft follow-up instructions. He says that ChatGPT is surprisingly good at interpreting blood tests. It is interesting to reflect that ChatGPT is useful to him describe the fact that he can’t feed it his institution’s electronic medical record. So the AI doesn’t already know each patient’s full history.

Let’s return to The AI Revolution in Medicine: GPT-4 and Beyond… starting with “Chapter 4: Trust but Verify” from the doctor (Isaac Kohane) and “Chapter 5: The AI-Augmented Patient” from the science journalist (Carey Goldberg).

In “Trust but Verify,” the question of how we would put GPT-4 through a clinical trial is explored. Other computer programs have passed clinical trials and received government approval, so why not GPT-4? The typical clinical trial is narrow, Dr. Kohane points out, while GPT-4’s range of function is wide. Just as an FDA trial probably couldn’t be done to approve or disapprove an individual doctor, it seems unlikely that an FDA trial can approve or disapprove a LLM and, therefore, AI programs are most likely destined to be superhuman partners with human docs and not replacements. The chapter contains a couple of concrete scenarios in which the doctor compares his own work in some difficult cases to GPT-4’s and the AI does fantastic.

In “The AI-Augmented Patient”, the journalist points out that the people who’ve been asking Dr. Google for advice will be the heavy users of Dr. GPT-4. She highlights that the “COVID ‘misinfodemic’ shows[s] that it matters which humans are in the loop, and that leaving patients to their own electronic devices can be rife with pitfalls.” Implicit in the foregoing is the assumption that public health officials are the best human decision-makers. What if the take-away from coronapanic is the opposite? Credentialed Americans refused to read the WHO pandemic management playbook, refused to process any information coming from Europe unless it fit their preconceived ideas about lockdowns, school closures, and mask orders, and refused to consider population-wide effects such as risk compensation. A computer program wouldn’t have any of these cognitive biases.

What happened when people expanded their sources of information? One notable example: Marjorie Taylor Greene turned out to be a better virologist than Dr. Fauci. In August 2021, MTG was suspended from Twitter for noting that the available COVID-19 vaccines did not prevent infection by and spread of SARS-CoV-2 and that masks were not effective. Virologist Greene’s statements were labeled “false” as a matter of Scientific fact by the journalists at the New York Times in January 2022 and then proven correct soon afterwards with a huge study in Spain and the Cochrane review. Plenty of those killed by COVID would be alive today if they’d listened to Marjorie Taylor Greene’s advice rather than the CDC’s. The elderly/vulnerable would have stayed safe at home, for example, instead of entering public indoor environments with masks on.

I’m optimistic that GPT-4 will do better in many areas than American medical officialdom because its judgment won’t be tainted by groupthink and “we’ve always done it this way”. We’ve often had standard of care disagreements with the Europeans, for example, and the Europeans have ended up being correct. The latest discrepancy in Science is that Denmark suggests a newborn get his/her/zir/their first COVID shot at age 50 (in the year 2073) while the CDC suggests four shots over the next 12 months. We might know who was right in 5-10 years, but an orthodox American MD isn’t supposed to question the CDC and would never ask “Are the Danes right?” while GPT-4 surely would be aware of the Danish MD/PhDs’ conclusions.

As long as we’re on the subject of every American’s favorite disease… later in the book, Kevin Scott, the CTO of Microsoft whose degree is in computer science, talks about the epic stupidity of physicians in rural Virginia. Not only did they fail to immediately prescribe Paxlovid to his tested-positive brother, but they actively refused to prescribe it when the life-saving experimental drug was asked for by name (cue the Super Bowl ad for the still-not-FDA-approved drug). Here’s a photo of the West Coast computer programmer who claims to know more about preventing death-by-COVID than doctors in Virginia’s Trump Belt:

Given the scattered nature of American medical records, I think that a patient who is diligent about saving all of his/her/zir/their tests and logging symptoms then running a local copy of GPT-4 will be way ahead in the diagnosis Olympics. There is a limit to what a doctor can do in a 15-minute visit and the typical doctor can see only a fraction of a patient’s medical record (because tests and treatments have been done at other institutions and the $trillions that Americans have spent on electronic health records have not yielded any practical integration).

What will this do to demand for medical services? The chapter quotes “Dr. Jim Weinstein, a leading expert on health equity now at Microsoft” that “[GPT-4] could be a particular valuable partner for the 100 million Americans on Medicaid, and it could cut unnecessary cost and waste across the board by helping patients understand more about their options.” Personal guess: GPT-4 will drive demand and therefore costs in the opposite direction. GPT-4 already covers its ass by providing the worst-case scenarios. Patients will learn that their “options” include aggressive rare cancers and calling 911.

Let’s try a concrete example. Suppose that you live in Maskachusetts and your female-led Social Equity marijuana home delivery was running late so you drink half a bottle of rum while waiting for the daily one-ounce high-potency bong refill. The next morning, despite all of the healing cannabis that you consumed, you wake up on the bathroom tile not feeling your best and ask GPT-4, “I have a lump on my head. What are the possible causes?” Here’s what it says:

There are several possible causes of a lump on the head, including:

  1. Head injury: A bump or lump on the head may be the result of a head injury, such as a concussion, hematoma, or skull fracture.
  2. Scalp infections: Infections of the scalp, such as folliculitis or cellulitis, can cause swelling, redness, and lumps on the scalp.
  3. Cysts: A cyst is a sac filled with fluid or other material that can develop under the skin on the scalp.
  4. Lipomas: A lipoma is a slow-growing, benign tumor made up of fat cells that can develop under the skin on the scalp.
  5. Bone deformities: Certain conditions, such as Paget’s disease or fibrous dysplasia, can cause abnormalities in the bones of the skull that may lead to lumps or bumps on the head.
  6. Tumors: In rare cases, a lump on the head may be a sign of a cancerous tumor.

It’s important to have any new lumps or bumps on the head evaluated by a healthcare provider to determine the cause and appropriate treatment. If the lump is the result of a head injury and you experience symptoms such as loss of consciousness, dizziness, or severe headache, seek emergency medical attention immediately.

The patient who didn’t talk to GPT-4 might wait a few days before seeking healthcare services. After all, plenty of Looney Tunes characters recover quickly from head lumps.

The patient who reads the GPT-4 output, however, is explicitly told that he/she/ze/they must be “evaluated by a healthcare provider” and that injury from an alcohol-and-cannabis-assisted encounter with tile is just 1 out of 6 possibilities. The idea that “the 100 million Americans on Medicaid”, who have $0 copays for going to the emergency room, will ignore GPT-4’s explicit

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Ron DeSantis and government accountability

by philg

Continuing to mine The Courage to Be Free: Florida’s Blueprint for America’s Revival, an introduction to Ron DeSantis for non-Floridians…

One area where Ron is out of step with the American mainstream is in thinking that there should be consequences for government incompetence. For example, Mary Daly, who focused on the diversity crisis at the San Francisco Fed (NYT) while SVB and First Republic were accumulating risk, would be fired in Ron’s ideal world.

By the time I became governor, it was clear that the victims [of the Marjory Stoneman Douglas High School shooting, which happened a year prior to DeSantis becoming governor] and their families had been failed by both Broward County sheriff Scott Israel as well as the Broward County school district. The Florida Legislature responded to the tragedy by enacting a series of firearms restrictions, which my predecessor signed into law. I campaigned saying that I would have vetoed those restrictions on Second Amendment and constitutional due process grounds. This was a tough position to take, as it was a very emotional time, and there was a natural human desire to “do something.” But when it comes to fundamental rights, those times are the times when defending them is so essential. Rather than a firearms issue, I viewed the Parkland massacre as a catastrophic failure of leadership that cried out for accountability. As someone who had been serving in Congress, I was frustrated that government failures almost never resulted in any real consequences. If an average American posted something politically incorrect on social media, an online mob might very well get that individual “canceled,” including termination of employment. But if a government agency abused its authority or failed in its basic duties, the result, invariably, was essentially nothing in the way of accountability.

After taking office, I acted very quickly to suspend the Broward County sheriff. I had been consulting with a few of the Parkland parents, and they were very hopeful that I would hold the sheriff accountable. He was mired in multiple scandals, including his department failing to stop the shooter despite receiving forty-five calls about him or his household.

Under Florida law, a constitutional officer suspended by the governor has the right to a trial in the Florida Senate; if the Senate agrees with the governor’s decision, then the official’s suspension becomes a permanent termination. Scott Israel challenged my decision in front of the Florida Senate and lost. Justice was served. I also petitioned the Florida Supreme Court to convene a special grand jury to investigate the failures of school security in counties like Broward. This grand jury ended up leading to the resignation of the superintendent of schools and provided a series of recommendations for reform, including removing several members of the Broward County school board, whom I suspended after the final report became public in 2022.

[Ron DeSantis might say “yes” to How about decimation for the Memphis police department and city government?]

Note that highlighted part. DeSantis is like the dissenters in Korematsu v. United States. FDR said that the Constitution didn’t give Japanese-Americans the right to walk around in freedom #BecauseEmergency (same reason that the Nuremberg Code did not prevent coerced injection of experimental drugs into children; #Coronamergency). The dissenting justices said “What are these Constitutional protections for, then, if not when a president chooses to declare an emergency?”

No matter how whipped up into panic the average American becomes, Ron D is going to do his own analysis and try to act rationally even when everyone else is behaving irrationally.

I refused to do any polling at all once I became governor. When someone does a poll, it provides, at best, a static view of how voters respond to certain issues, but it cannot tell you how people will view a dynamic push for certain policies. If leadership was nothing more than dutifully following poll results, then it would not be in such short supply. A leader does not meekly follow public opinion but shapes opinion through newsworthy actions. If I set out a vision, execute on my governing plan, and produce favorable results, then public support will follow.

We are informed that Republicans are the party of Jew-hatred. But it seems that Ron DeSantis did not get the ADL’s memo. He tells a story about media- and government-selection experts being failures as prophets. It is unfortunate, from my point of view, that he puts double quotes around the word expert.

One major foreign policy issue that I cared about deeply was the relocation of America’s embassy in Israel from Tel Aviv to Jerusalem. During the 2016 campaign, Donald Trump promised that, if elected, he would move the US embassy in Israel to Jerusalem. US law since the 1990s identified Jerusalem as the capital of Israel and, as a result, the proper site of the US embassy, but the law included a waiver provision (in classic DC style) that allowed presidents over two decades to punt on relocation of our embassy every six months—even though Presidents Clinton and Bush had promised to move it.

From my seat in the House, I wanted to create a sense of inevitability about the relocation of our embassy. In 2017, I led a small mission to Israel to scout out possible sites in Jerusalem for the new US embassy. I looked at a handful of possible locations, and the site I thought was the best ended up being the site that was selected by the Trump administration. Before I left, I held a press conference at the King David Hotel in Jerusalem to recount what we did on the trip and to express my view that President Donald Trump promised to move our embassy to Jerusalem, and he will be delivering on his promise.

The next month, President Trump announced that the United States would be relocating its embassy in Israel to Jerusalem. The formal ceremony in May 2018 was a major event, which I attended in person. It was a great day and should have occurred years earlier.

This was an example of why following the advice of the conventional DC expert class is almost always a mistake. Especially when they predict imminent doom.

“What would happen if the US moved our embassy?” I asked. The consistent response from these so-called experts was that relocating our embassy to Jerusalem would be a geopolitical disaster. None even entertained the idea that moving our embassy would serve our national interests. Looking back on it, these were supposed to be our top experts in matters of diplomacy and intelligence, but they were dead wrong about the impact of the move. This experience confirms the bankruptcy of our bureaucratic “expert” class. Time and again, from weapons of mass destruction in Iraq to the financial crisis of 2008 to the response to COVID-19, America’s bureaucratic elites have whiffed when it counted.

I continue to believe that Ron D faces an uphill battle in any general election. Americans’ faith in bureaucratic elites remains stronger than ever. The majority bought into Faucism and the dramatically lower percentage of excess deaths in no-mask no-lockdown Sweden (6%; see map) compared to the typical Faucist country has not shaken anyone’s faith in Faucism. (Example: “What Worked Against Covid: Masks, Closures and Vaccines” (Wall Street Journal, March 17, 2023) does not even bother to look at Sweden vs. European lockdown and mask champs nor at Florida versus the lockdown states. And that’s in a conservative newspaper!) We also shouldn’t forget that a higher percentage of Americans are dependent on government than at any time in history due to the massive expansion of government that began in 2020 with coronapanic as the justification. That’s going to make it tough for any politician who suggests that government spending be limited in any way. Point 1 of the DeSantis agenda articulated in his 2019 inauguration speech:

Promoting a fiscally responsible government that taxes lightly and regulates reasonably

This is the opposite of what the majority of Americans want. A typical American votes for a fiscally lavish government funded by taxes on successful corporations and anyone richer than he/she/ze/they is (though, of course, what is delivered is a government funded by borrowing/inflation and taxes on the peasants).

Ron also promised, in that speech:

Ushering in a new era of conservation for Florida’s waterways and Everglades

(and delivered, according to the Everglades Trust!). This is presumably popular, except with Big Sugar, but I can’t imagine government-dependent Americans thinking that this commitment to the environment outweighs their own paychecks.

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A book about the Federal Reserve and inflation

by philg

A timely book… The Lords of Easy Money: How the Federal Reserve Broke the American Economy (2022) by Christopher Leonard.

Motivation…

First, since this is a political book let’s look at the author’s background politics. He is particularly hostile to the Tea Party,

If the Tea Party had a single animating principle, it was the principle of saying no. The Tea Partiers were dedicated to halting the work of government entirely.

An aging population relied more and more heavily on underfunded government programs like Medicare, Medicaid, and Social Security,

The existence of these Deplorables kept the reasonable Democrats and Republicans in Congress from doing great work via government spending, thus putting pressure on the Fed to act. The Fed’s rash actions may thus be laid at least partly at the doors of the haters. Also, the best characterization of the world’s most expensive health care programs, as a percentage of GDP, is “underfunded”. Without the Tea Party, every Medicaid beneficiary would get a weekly gender reassignment surgery? The author expresses his dream that more American workplaces would become unionized.

What’s the scale of the Fed’s recent money-printing?

Between 1913 and 2008, the Fed gradually increased the money supply from about $5 billion to $847 billion. This increase in the monetary base happened slowly, in a gently uprising slope. Then, between late 2008 and early 2010, the Fed printed $1.2 trillion. It printed a hundred years’ worth of money, in other words, in little over a year, more than doubling what economists call the monetary base.

The amount of excess money in the banking system swelled from $200 billion in 2008 to $1.2 trillion in 2010, an increase of 52,000 percent.

Maybe the author and Simon and Schuster are using coronamath? What if they’d asked Wolfram Alpha about this ratio? The answer would be a 600 percent ratio or 500 percent increase, not 52,000 percent.

Whatever the percentage might have been, quantitative easing was going to be good news for the rich:

The FOMC debates were technical and complicated, but at their core they were about choosing winners and losers in the economic system. Hoenig was fighting against quantitative easing because he knew that it would create historically huge amounts of money, and this money would be delivered first to the big banks on Wall Street. He believed that this money would widen the gap between the very rich and everybody else. It would benefit a very small group of people who owned assets, and it would punish the very large group of people who lived on paychecks and tried to save money.

Perhaps no single government policy did more to reshape American economic life than the policy the Fed began to execute on that November day, and no single policy did more to widen the divide between the rich and the poor. Understanding what the Fed did in November 2010 is the key to understanding the very strange economic decade that followed, when asset prices soared, the stock market boomed, and the American middle class fell further behind.

According to the book, Ben Bernanke and Janet Yellen (U.S. Treasury Secretary today, at least until my prediction of Sam Bankman-Fried taking over comes true) were the Fed’s biggest cheerleaders for quantitative easing while Thomas M. Hoenig was the biggest opponent, partly due to concerns about inflation, but mostly because the “allocative effect” in which money would move from working class to rich and from people who did productive things to Wall Street.

[Bernanke is most notable for his 2007 statement: “We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”]

How does QE work?

The basic mechanics and goals of quantitative easing are actually pretty simple. It was a plan to inject trillions of newly created dollars into the banking system, at a moment when the banks had almost no incentive to save the money. The Fed would do this by using one of the most powerful tools it already had at its disposal: a very large group of financial traders in New York who were already buying and selling assets from the select group of twenty-four financial firms that were known as “primary dealers.” The primary dealers have special bank vaults at the Fed, called reserve accounts.II To execute quantitative easing, a trader at the New York Fed would call up one of the primary dealers, like JPMorgan Chase, and offer to buy $8 billion worth of Treasury bonds from the bank. JPMorgan would sell the Treasury bonds to the Fed trader. Then the Fed trader would hit a few keys and tell the Morgan banker to look inside their reserve account. Voila, the Fed had instantly created $8 billion out of thin air, in the reserve account, to complete the purchase. Morgan could, in turn, use this money to buy assets in the wider marketplace.

Bernanke’s initial goals were to create $600 billion via QE, with the justification that this would bring down unemployment. “Before the crisis [of 2008], it would have taken about sixty years to add that many dollars to the monetary base.”

The Fed’s own research on quantitative easing was surprisingly discouraging. If the Fed pumped $600 billion into the banking system, it was expected to cut the unemployment rate by just .03 percent.

Who had the best crystal ball?

Jeffrey Lacker, president of the Richmond Fed, said [in 2010] the justifications for quantitative easing were thin and the risks were large and uncertain. “Please count me in the nervous camp,” Lacker said. He warned that enacting the plan now, when there was no economic crisis at hand, would commit the Fed to near-permanent intervention as long as the unemployment rate was elevated. “As a result, people are likely to expect increasing monetary stimulus as long as the level of the unemployment rate is disappointing, and that’s likely to be true for a long, long time.”

[Richard] Fisher, the Dallas Fed president, said he was “deeply concerned” about the plan. Of course, he didn’t let pass the chance to use a nice metaphor: “Quantitative easing is like kudzu for market operators,” he said. “It grows and grows and it may be impossible to trim off once it takes root.” Fisher echoed Hoenig’s warnings that the plan would primarily benefit big banks and financial speculators, while punishing people who saved their money for retirement. “I see considerable risk in conducting policy with the consequence of transferring income from the poor, those most dependent on fixed income, and the saver to the rich,” he said.

What’s wrong with massive asset price inflation, as the Fed was trying to achieve? The author says that asset price bubbles are the typical drivers of both banking and market collapses. Example from the 1980s:

When Paul Volcker and the Fed doubled the cost of borrowing, the demand for loans slowed down, which in turn depressed the demand for assets like farmland and oil wells. The price of assets began to converge with the underlying value of the assets. The price of farmland fell by 27 percent in the early 1980s; of oil, from more than $120 to $25 by 1986. The collapse of asset prices created a cascading effect within the banking system. Assets like farmland and oil reserves had been used to underpin the value of bank loans, and those loans were themselves considered “assets” on the banks’ balance sheets. When land and oil prices fell, the entire system fell apart. Banks wrote down the value of their collateral and the reserves they were holding against default. At the very same moment, the farmers and oil drillers started having a hard time meeting their monthly payments. The value of crops and oil were falling, so they earned less money each month. The banks’ balance sheets, which once looked stable, began to corrode and falter.

This was the dynamic that so often gets lost in the discussion about the inflation of the 1970s and the collapse and recession of the 1980s. The Fed got credit for ending inflation, and for bailing out the solvent banks that survived it. But new research published many decades later showed that the Fed was also responsible for the whole disaster.

Why don’t people get nervous when an asset bubble is inflating?

When asset inflation gets out of hand, people don’t call it inflation. They call it a boom. Much of the asset inflation of the late 1990s was showing up in the stock market, where share prices were rising at a level that would have been horrifying if it was expressed in the price of butter or gasoline. The entire Standard & Poor’s stock index rose by 19.5 percent in 1999. The Nasdaq index, which measured technology stocks, jumped more than 80 percent.

When asset bubbles burst, the Fed is right there:

Over the next two years [after the dotcom crash of 2000], the Federal Reserve’s state of emergency became almost permanent. The rate cuts of 2001 remained in place, with the cost of short-term loans staying below 2 percent until the middle of 2004.

As with coronapanic, dramatic efforts for short-term relief lead to long-term disaster:

If there was one thing Hoenig had learned, it was that the Fed’s leaders, who were only human, tended to focus on short-term events and the headlines that surrounded them. But the Fed’s actions were expressed in the real world over the long term, after they had time to work their way through the financial system. When there was turmoil in the markets, the Fed leaders wanted to take immediate action, to do something. But their actions always played out over months or years and tended to affect the economy in unexpected ways.

The book was written before the Silicon Valley Bank collapse, but does this sound familiar?

The Fed was essentially coercing hedge funds, banks, and private equity firms to create debt and do it in riskier ways. The strategy was like a military pincer movement that closes in on the opponent from two sides—from one direction there was all this new cash, and from the other direction there were the low rates that punished anyone for saving that cash.

Before the financial collapse that started in 2007, the reward for saving money in a 10-year Treasury was 5 percent. By the autumn of 2011, the Fed helped push it down to about 2 percent.I The overall effect of ZIRP [zero-interest-rate policy] was to create a tidal wave of cash and a frantic search for any new place to invest it. The economists called this dynamic the “search for yield” or a “reach for yield,” a once-obscure term that became central to describing the American economy.

Then, as now, the nation’s problems started in San Francisco:

One of Bernanke’s secret weapons in the lobbying effort was his vice chairwoman, Janet Yellen, the former president of the San Francisco Fed. Yellen was an assertive and convincing surrogate for Bernanke, and she championed an expansive use of the Fed’s power.

“Janet was the strongest advocate for unlimited” quantitative easing, [Elizabeth] Duke recalled. “Janet would be very forceful. She is very confident, very strong in promoting the point of view.” Yellen and Bernanke were convincing, and their argument rested on a simple point. In the face of uncertainty, the Fed had to err on the side of action.

If it is any comfort, the Europeans are even dumber and more devoted to cheating with money instead of working harder than we are:

In Europe, the financial crisis of 2008 had never really ended [by 2012]. The debt overhang in Europe was simply astounding. Just three European banks had taken on so much debt before 2008 that their balance sheets

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Ron DeSantis’s book

by philg

I have begun to read The Courage to Be Free: Florida’s Blueprint for America’s Revival, despite my general aversion to this genre of literature. I consider reading Ron DeSantis’s book to be a duty both as a blog publisher and as a new Floridian. Progressive academic friends in Cambridge feel that they already know Mr. DeSantis. One noted, during my most recent visit, that DeSantis is responsible for importing slaves into the United States to pick sugar cane. “They come on boats in chains,” he said, “and aren’t paid.” Why don’t journalists from New York-based media enterprises ask Mr. DeSantis about his slave importation operation at press conferences? “They know that he won’t answer.” Why didn’t the progressive himself go down to Florida and picket outside the Governor’s Mansion for the slaves to be released? He’s a member of the laptop class and can work from anywhere. He couldn’t explain why he wasn’t willing to invest the price of a plane ticket to protest the actual slavery that he has identified on U.S. soil.

For folks who don’t feel that they already know everything worth knowing about Ron D, read on…

The book starts out rough, in my opinion:

Most Americans instinctively know that something has gone wrong with our country over the past generation.

How is Ron going to win with this message? Successful politicians generally tell Americans that they are the world’s greatest people living in the world’s greatest (and richest) country. A vote for the politician is a path to slightly increased greatness, not a recovery from a nosedive. The language gets a little softer later in the introduction:

Our nation needs immigration policies that recognize and enforce the country’s sovereignty, not just by having a wall at the southern border but also by quickly repatriating those in the country illegally. An erroneous claim of asylum should not give a foreign national a ticket to settle in the interior of our country. Nor should the legal immigration system have policies such as the diversity lottery and chain migration; instead, the immigration system should be merit-based; favor assimilation, not mass migration; and be geared toward benefiting the wages of working-class Americans.

Ron D will not deport migrants, but repatriate them.

Looking for useful life advice?

People often talk about the need for a student-athlete to “balance” the demands of the classroom with the requirements of sports. For me, I rejected the idea that I would strike a balance between academic achievement and athletic success, because I was not willing to give less than 100 percent to either baseball or my academics. So instead of balancing, I just did everything to the hilt and let the chips fall where they may.

He gave 110 percent while at Yale, in other words? Or 200 percent? I am not sure how to put this into practice since my capacity is about 50 percent on my best day.

We learn about Ron and Casey’s working class and military roots. Ron worked during high school and college, e.g., for an electrical contractor, while Casey’s sister was a USAF C-17 pilot. (Even today, the DeSantis family has minimal wealth.) Ron’s own military service made him skeptical of America’s recent war aims:

It was just as obvious that we would not succeed in establishing a pro-American, Western-style democracy in Iraq. This was simply outside the capability of any military force to achieve. The cultural differences were too vast for Iraq to embrace Madisonian constitutionalism. In fact, the Iraqis considered “freedom” to be submission to sharia law, not the enactment of a liberal democracy.

(The U.S. would be a lot friendlier to the immigrants that we claim to welcome if Michigan and Minnesota adopted sharia law. Why should Muslim immigrants, many of whom are asylees or refugees who are fleeing violence, have to accept a debauched society? They didn’t come to the U.S. because they love the way that the U.S. is, but because they would have been killed if they had stayed in their home countries.)

Ron was inspired by Barack Obama:

Once I left active duty, I began to think more and more about how our country was moving in the wrong direction, especially under the leftist agenda of the Obama administration.

What did he learn as a Congressman?

Ingrained in Beltway thinking is a contempt for average voters, particularly voters who reject leftist ideology.

That’s certainly consistent with my experience of D.C.! Also, Ron turns out to be one of the few Representatives who actually reads the bills.

The book does get more substantive. Leafing through, I found the following, for example:

Our reforms included protections for political candidates against being deplatformed, which is a way for Big Tech to interfere in elections. What is stopping Big Tech companies from shutting off Republican candidates from social media platforms during the stretch run of an election? If someone hosts a get-together for a candidate and provides refreshments, that must be accounted for as a campaign contribution, yet a tech company can upend an entire candidate’s campaign, and that is somehow not considered interference with an election. The reforms also included transparency requirements for the social media companies’ content moderation policies, and required that users be given notice of changes to those policies. The opaqueness of how Big Tech arrives at its censorship decisions means that it is easy for them to move the goalposts to stifle views the industry does not like.

I’m actually surprised that Twitter, Facebook, and Google allow Republican candidates to use their platforms at all. Any of these firms could cite the following analysis of the January 6 insurrection and say that it wasn’t safe to allow Republicans to speak.

I hope that some readers will read along with me!

So far I’m dismayed that Ron hasn’t adapted his message to be more like conventional politicians’. Crushing it in Florida against an all-abortion-care-all-the-time fossil does not mean that he can crush it with voters nationwide in 2024. Americans in general are the most timid and compliant humans ever to occupy this planet. The Floridians who wanted the freedom to leave their houses, breathe without masks, send children to school, not inject their children with experimental drugs, etc., are outliers on the spectrum of American cowerhood. Young/cognitively sharp/competent/energetic/effective sounds good, but Americans in 2020 chose a new president who does not have any of these qualities.

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Book review: the American love affair with opioids, accelerated by McKinsey

by philg

Loyal readers may remember a review here of a book by a Los Angeles Times reporter on America’s taxpayer-fueled heroin habit (see Who funded America’s opiate epidemic? You did.). Empire of Pain: The Secret History of the Sackler Dynasty covers the same story from the angle of the family behind OxyContin. The Sacklers, whose names adorn university and art museum buildings throughout the U.S. and Europe, have been convenient scapegoats, but it turns out that they didn’t do it alone. Some things that I learned from the book…

Arthur M. Sackler, the patriarch, died before OxyContin was invented (the slow-release coating was actually the invention of a British company that had been acquired by the Sacklers’ sleepy Purdue Pharma and was used originally for morphine pills called “MS Contin”). He was the significant art collector and benefactor of AOC’s party venue at the Metropolitan Museum (how did it cost $587 for a car ride from the Bronx to the Upper East Side?). With the help of some friendly bureaucrats at the FDA, who would go on to be of much greater assistance to his brothers’ company Purdue, he pushed the limits of what was legal/ethical in medical advertising, especially for Valium and Librium, but museums are still happy to display the name of Hoffmann-La Roche, which actually made the drugs.

The book describes McKinsey, “The firm that built the house of Enron”, working to help Purdue Pharma increase sales of OxyContin even after the company and three executives had pleaded guilty to federal crimes regarding claims made regarding the drug. McKinsey’s biggest idea, according to the author, was that Purdue Pharma’s salespeople should make more frequent calls on the doctors who were the biggest prescribers, i.e., the “pill mills” such as Eleanor Santiago‘s (1 million pills, which resulted in a 20-month prison sentence for the physician). McKinsey also consulted for Johnson & Johnson, the author says, to help them push more opioids out to consumers. (See “Behind the Scenes, McKinsey Guided Companies at the Center of the Opioid Crisis” (NYT 2022))

Speaking of Johnson & Johnson, they owned a division in Tasmania where all of the poppies were grown to enable the production of OxyContin and competitive opioid pills from Janssen (J&J’s pharma subsidiary, now famous for its never-FDA-approved one-shot COVID vaccine) and other companies (in-depth background). The Federal DEA was also complicit in allowing a massive increase in the import quota for this critical raw material.

The author describes Mary Jo White, later appointed by Barack Obama to chair the Securities and Exchange Commission, as instrumental in weakening the government’s efforts to punish Purdue, which was owned entirely by the Sacklers (not, however, by any of Arthur M’s descendants or cash-hungry former wives, “the Valium Sacklers” as opposed to the “OxyContin Sacklers”).

Consistent with Dreamland, the book previously reviewed here, Empire of Pain says that it was common for people to transition from Oxy to heroin sold by migrants from Nayarit, Mexico and that, in fact, 80 percent of heroin overdoses were among people who’d previously been prescribed OxyContin. (See also “From Nayarit to Your Neighborhood: Heroin’s Path to a Ready Local Market”.)

The book supports the heritability of success theory advanced in The Son Also Rises: economics history with everyday applications. Even after a couple of generations that could have succumbed to idleness, the Sackler descendants are reasonably hard-working and successful. Madeleine Sackler, for example, has been successful as a filmmaker (ironically, a couple of them are about life in prison, which is not unrelated to the drug that has funded her lifestyle).

Empire of Pain: The Secret History of the Sackler Dynasty is timely given that a lot of our American brothers, sisters, and binary-resisters were just paid $600/week to stay home for two years and consume drugs and alcohol (this Senate document says there was a 30 percent increase in overdose deaths, but blames the “pandemic” rather than the “lockdown”). The antiracism experts at Mass General say that heavy drinking increased by 21 percent during lockdown.

If nothing else, reading the book will make you cautious about taking that first bottle of painkillers that a doctor prescribes!

The author is a New Yorker writer and he asserts as fact that HIV/AIDS would have been a solved problem if Republicans had not blocked federal funding for research into a cure for this disease (yet SARS-CoV-2 continues to kill steadily despite literally $trillions in tax money that has been thrown at it; see Did vaccines or any other intervention slow down COVID?). He also asserts as fact that if Purdue Pharma was liable for opioid-related deaths then gun manufacturers are obviously liable for shooting deaths (never mentioning that the gun manufacturers have always been quite candid about the lethality of guns/bullets and that the theory of liability for the opioid industry is that the companies lied to Americans about heroin-style drugs not being addictive/harmful).

Loosely related… the Temple of Dendur at the Met, in what used to be called “The Sackler Wing” (funded by Arthur M, blameless in the OxyContin debacle), “temporarily closed” in June 2021 for coronapanic:

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Book review: Walking the Americas

by philg

To prepare for our own adventurous journey to Colombia, a friend and I listened to Walking the Americas, by Levison Wood, a British Army veteran. Mr. Wood starts farther south than we did, but is handicapped by not having any assistance from Royal Caribbean. Without a boat, Mr. Wood will have to push through the notoriously challenging Darien Gap. Today we tend to think that this term refers to a “gap” in the highway that would otherwise connect Alaska to Argentina. One of the locals interviewed in the book says that the name refers to a gap in the mountains that made it easier to travel through from Atlantic to Pacific than through other parts of Panama.

Mr. Wood’s companion is Alberto, a 42-year-old Mexican fashion photographer who often says “chinga”. Alberto was ready for a distraction in 2016 because he’d recently been targeted in Mexican family court by his wife of one year, availing herself of the then-new no-fault divorce law to obtain a free house after a one-year marriage. From “Do changes in divorce legislation have an impact on divorce rates? The case of unilateral divorce in Mexico” (Aguirre 2019; Latin American Economic Review):

In 2008, Mexico City was the first entity to approve unilateral divorce in Mexico. Since then, 17 states out of 31 have also moved to eliminate fault-based divorce. … The results indicate that divorce on no grounds accounts for a 26.4% increase in the total number of divorces in the adopting states during the period 2009–2015. … Unilateral legislation has proved to be an effective tool in modifying family structures in Mexico…

Alberto’s achievement in walking from Merida, Yucatan to Colombia is more impressive than the author’s. Alberto was not writing a book and was not a former paratrooper.

The Darien Gap turns out not to be all that challenging for our heroes. They have enough connections to get the Panamanian authorities to bless the expedition. They hire Emberá and Kuna Indians as porters and guides (I visited these folks about 20 years ago via Robinson R22 helicopter from the local flight school). But the rest of the book features plenty of challenges, e.g., hiking to 12,536′ to the top of Cerro Chirripó, Costa Rica’s highest peak and walking through gang-held areas of San Pedro Sula, Honduras.

The author points out that Central America’s population is 4X what it was a few decades ago and, in his opinion, this is the principal explanation for the region’s poverty.

The migrants whom the walkers encounter are from Africa, Haiti, Nepal, and Pakistan and have typically entered the Americas by flying to Brazil. The Panamanian authorities explain that, after arresting migrants, they will typically assist them in reaching the United States by transporting them to the border with Costa Rica. This gets the migrants out of Panama, which does not want them, and is cheaper than deportation (Panama pays for some bus rides instead of paying for plane tickets back across the Atlantic).

Here are some of the animals that we saw while walking through the Colombian jungle (at the cruise port in Cartagena). Warning: the toucans are friendly, but one of them likes to bite sneakers and it hurts!

The book lends itself well to the audio format and the narrator is convincingly British. I recommend Walking the Americas to anyone planning a journey to or through Central America. Separately, if you want to see a restored Spanish colonial town and a lot of beautiful nature, I recommend the UNESCO World Heritage site of the old city within Panama City and then do your nature excursions in Panama, which is much wealthier and better developed than other nations in the region. They don’t promote tourism as much as the Costa Ricans do because any time they need $1 million they can let a big container ship through the new locks. Cartagena is jammed with tourists, locals trying to sell things to the tourists, car traffic, massive holes in the sidewalks, etc.

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Book review: River of the Gods (searching for the source of the Nile)

by philg

Having loved River of Doubt, I listened to River of the Gods: Genius, Courage, and Betrayal in the Search for the Source of the Nile as an audiobook. As with River of Doubt, the story holds the listener’s interest so I recommend it in audio format.

The description from the publisher is presumably exciting for today’s customers:

Yet there was a third man on both expeditions, his name obscured by imperial annals, whose exploits were even more extraordinary. This was Sidi Mubarak Bombay, who was enslaved and shipped from his home village in East Africa to India. When the man who purchased him died, he made his way into the local Sultan’s army, and eventually traveled back to Africa, where he used his resourcefulness, linguistic prowess and raw courage to forge a living as a guide. Without Bombay and men like him, who led, carried, and protected the expedition, neither Englishman would have come close to the headwaters of the Nile, or perhaps even survived.

The book does not deliver on this promise. Bombay is not described as doing anything remarkable other than being a loyal assistant to Richard Burton and Speke. Burton remains the most interesting and impressive character in the drama and it is astonishing what he and Speke were willing to endure to pick up a scrap of knowledge and obtain some fame. They spent most of their time on the expedition suffering from tropical diseases far worse than Covid.

The discovery part of the discovery proves to be somewhat underwhelming. The Black and Arab merchants of East Africa already knew about the rift lakes, including Lake Victoria. As Burton and Speke were “exploring” they were able to exchange letters with Europeans on the coast. They would simply send a letter with a slave or goods caravan and wait for a reply to arrive with a caravan bringing imports from the coast. This is not the exploration of an Amundsen or Shackleton in Antarctica!

Compared to the Blacks and Arabs who lived full time in the region, what was different about Burton and Speke was that they cared about the hydrology of the region, not just making some money by trading goods and/or slaves. The Arab merchants knew about Lake Victoria, for example, but were not curious regarding where the water ultimately ended up. They wanted to sell goods from the coast on the shores and perhaps bring back some slaves. The exploration challenge in River of Doubt was much tougher.

Here are a few of my own snapshots from Zanzibar (2007):

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World War I and the current war in Ukraine

by philg

It’s Friday the 13th, an unlucky day. Let’s talk about an unlucky human experience: war. For some potentially relevant background on the current war in Ukraine, I decided to read Keegan’s The First World War.

How can a 100-year-old war be relevant to anything that is happening today? The author says that World War I is highly relevant to World War II:

… no explanation of the causes of the Second World War can stand without reference to those roots. The Second World War, five times more destructive of human life and incalculably more costly in material terms, was the direct outcome of the First. On 18 September 1922, Adolf Hitler, the demobilised front fighter, threw down a challenge to defeated Germany that he would realise seventeen years later: “It cannot be that two million Germans should have fallen in vain … No, we do not pardon, we demand—vengeance!”

(for those who aren’t familiar with Adolf Hitler, he was the Donald Trump of his day)

Just as the Ukraine war arrived in a Europe that was not mentally prepared for the idea, so did World War I:

In 1939 the apprehension of war was strong, so was its menace, so, too, was knowledge of its reality. In 1914, by contrast, war came, out of a cloudless sky, to populations which knew almost nothing of it and had been raised to doubt that it could ever again trouble their continent.

Just as folks who’ve started wars recently have been overly optimistic about the timeline and the results (the U.S. being a notable example going back to Vietnam), the Germans had a detailed plan in which the war would be won within about 40 days:

“It is the thirty-fifth day,” the Kaiser exulted to a delegation of ministers to his Luxembourg headquarters on 4 September, “we are besieging Rheims, we are thirty miles from Paris.”94 The thirty-fifth day had an acute significance to the German General Staff of 1914. It lay halfway between the thirty-first day since mobilisation, when a map drawn by Schlieffen himself showed the German armies poised on the Somme to begin their descent on Paris, and the fortieth, when his calculations determined that there would have been a decisive battle.95 That battle’s outcome was critical. Schlieffen, and his successors, had calculated that the deficiencies of the Russian railways would ensure that not until the fortieth day would the Tsar’s armies be assembled in sufficient strength to launch an offensive in the east. Between the thirty-fifth and the fortieth day, therefore, the outcome of the war was to be decided.

Russia got off to a bad start in World War I, but ramped up eventually:

Russia, despite the terrible fatalities of 1914–15 and the large loss of soldiers to captivity after Gorlice-Tarnow, had been able to fill the gaps with new conscripts, so that by the spring of 1916 it would have two million men in the field army. Almost all, moreover, would be properly equipped, thanks to a striking expansion of Russian industry. Engineering output increased fourfold between the last year of peace and 1916, chemical output, essential to shell-filling, doubled. As a result there was a 2,000 per cent increase in the production of shells, 1,000 per cent in that of artillery, 1,100 per cent in that of rifles. Output of the standard field-artillery shell had risen from 358,000 per month in January 1915 to 1,512,000 in November. The Russian armies would in future attack with a thousand rounds of shell available per gun, a stock equivalent to that current in the German and French armies, and its formations were acquiring plentiful quantities of all the other equipment—trucks, telephones and aircraft (as many as 222 per month)—essential to modern armies.

Then as now a respiratory virus was an important consideration:

The German inability to sustain pressure was also hampered by the first outbreak of the so-called “Spanish” influenza, in fact a worldwide epidemic originating in South Africa, which was to recur in the autumn with devastating effects in Europe but in June laid low nearly half a million German soldiers whose resistance, depressed by poor diet, was far lower than that of the well-fed Allied troops in the trenches opposite.

(The book was written at the end of the 1990s. Science then said that the flu originated in South Africa. Wikipedia today says that Science has narrowed things down to just three possibilities for the origin of the influenza that was so much more lethal than SARS-CoV-2: the U.S., Europe, and China.)

The author, writing in the 1990s, might have been a little too optimistic about Europe!

The legacy of the war’s political outcome scarcely bears contemplation: Europe ruined as a centre of world civilisation, Christian kingdoms transformed through defeat into godless tyrannies, Bolshevik or Nazi, the superficial difference between their ideologies counting not at all in their cruelty to common and decent folk. All that was worst in the century which the First World War had opened, the deliberate starvation of peasant enemies of the people by provinces, the extermination of racial outcasts, the persecution of ideology’s intellectual and cultural hate-objects, the massacre of ethnic minorities, the extinction of small national sovereignties, the destruction of parliaments and the elevation of commissars, gauleiters and warlords to power over voiceless millions, had its origins in the chaos it left behind. Of that, at the end of the century, little thankfully is left. Europe is once again, as it was in 1900, prosperous, peaceful and a power for good in the world.

The author hatefully says that diversity is not anyone’s strength and, in fact, is a huge threat to political stability.

The liberation of the peoples of Eastern Europe from the imperial rule of German-speaking dynasties, Hohenzollern or Habsburg, brought equally little tranquillity to the successor states they founded. None of them—Poland, Czechoslovakia, the Kingdom of the Serbs, Croats and Slovenes or, as it became known in 1929, Yugoslavia—emerged into independence with sufficient homogeneity to undertake a settled political life.

According to one of the foremost historians of the past 100 years, a country with a mixture of ethnicities and religions will eventually become too weak to defend itself:

Czechoslovakia’s inheritance from the Habsburgs of another German minority in the Sudetenland equally robbed the new state of ethnic equilibrium, with fatal consequences for its integrity in 1938. Yugoslavia’s unequal racial composition might have been brought into balance with good will; as events turned out, the determination of the Orthodox Christian Serbs to dominate, particularly over the Catholic Croats, undermined its coherence from an early date. Internal antipathies were to rob it of the power to resist Italian and German attack in 1941.

Even one of the world’s best historians can’t figure out the “War, what is it good for?” question:

But then the First World War is a mystery. Its origins are mysterious. So is its course. Why did a prosperous continent, at the height of its success as a source and agent of global wealth and power and at one of the peaks of its intellectual and cultural achievement, choose to risk all it had won for itself and all it offered to the world in the lottery of a vicious and local internecine conflict? Why, when the hope of bringing the conflict to a quick and decisive conclusion was everywhere dashed to the ground within months of its outbreak, did the combatants decide nevertheless to persist in their military effort, to mobilise for total war and eventually to commit the totality of their young manhood to mutual and existentially pointless slaughter?

Do I recommend the book? Not as a way of understanding the action of the World War I. There are so many battles that I think that story of the war needs to be presented as a video animation with voiceover to explain which armies are moving and why. Nobody has sufficient memory plus spatial thinking skills to follow a text narrative of the entire war. Here’s how the grand 40-day plan to beat France is presented in the Windows Kindle app:

Clear as mud! Still, the book has a lot of interesting and surprising facts. Mostly, the reader is left amazed that so many people sacrificed their lives for nothing. See, for example, “Britain entering first world war was ‘biggest error in modern history” (The Guardian):

Ferguson is unequivocal: “We should not think of this as some great victory or dreadful crime, but more as the biggest error in modern history.”

He continued: “The cost, let me emphasise, of the first world war to Britain was catastrophic, and it left the British empire at the end of it all in a much weakened state … It had accumulated a vast debt, the cost of which really limited Britain’s military capability throughout the interwar period. Then there was the manpower loss – not just all those aristocratic officers, but the many, many, many skilled workers who died or were permanently incapacitated in the war.

More: Read Keegan’s The First World War.

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Book recommendation: River of Doubt

by philg

Christmas gift idea: The River of Doubt: Theodore Roosevelt’s Darkest Journey, a new-to-me 2005 book by Candice Millard. I listened to this as an Audible book so I can’t include excerpts. The story is about an exploration and mapping journey down what was then the Rio da Dúvida and is today the Roosevelt River. Teddy Roosevelt and one of his sons went down the river in 1913-14, whose course and rapids were unknown. The co-leader was Cândido Rondon, Brazil’s greatest explorer and friend to the indigenous (after a lifetime spent under hazardous conditions, he died in 1958, age 92).

I couldn’t help thinking about the unnecessary nature of the hardships that the men endured (no expedition member identifying with any other gender is identified by the author). By 1924 or so, the river could have been surveyed without risk via airplane, e.g., the mass-produced Bréguet 19 (presumably with ferry tanks, flown in 1925 on a non-stop 2,800 nm. flight). Being on the surface might have been useful for diplomacy with the Cinta Larga, but these people were not interested in interacting with the former U.S. president or his Brazilian partners.

The story combines adventure, conflict, family loyalty and sacrifice, tragedy, and a reminder that there are a lot of diseases far worse than COVID-19.

A 2021 journey down part of the river by whitewater nerds with modern equipment who nonetheless had to do some portaging:

I’m now interested to read the author’s 2022 book, River of the Gods: Genius, Courage, and Betrayal in the Search for the Source of the Nile. Of course, during the interval between 2005 and 2022, the standards of what has to go into a successful book have changed. Part of the Amazon description of the new book:

Yet there was a third man on both expeditions, his name obscured by imperial annals, whose exploits were even more extraordinary. This was Sidi Mubarak Bombay, who was enslaved and shipped from his home village in East Africa to India. When the man who purchased him died, he made his way into the local Sultan’s army, and eventually traveled back to Africa, where he used his resourcefulness, linguistic prowess and raw courage to forge a living as a guide. Without Bombay and men like him, who led, carried, and protected the expedition, neither Englishman would have come close to the headwaters of the Nile, or perhaps even survived.

In River of the Gods Candice Millard has written another peerless story of courage and adventure, set against the backdrop of the race to exploit Africa by the colonial powers.

The white exploiters are saved from their own greed and stupidity by a person of color, in other words.

Finally, River of Doubt might be a good name for a book about the Deplorables who reject Science, e.g., that cloth masks protect against an aerosol virus or that vaccinating 6-month-olds with a medicine that does not stop infection/transmission is the obvious answer to a virus that kills 80-year-olds. Titles can’t be copyrighted!

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Economic bubble reading list: The Lost Bank

by philg

Today is the beginning of the big GDP statistics update from the BEA:

At the end of September, BEA will update five years of U.S. gross domestic product and related statistics, as well as GDP statistics for industries and for each state.

Maybe we’ll get some insight into how badly we fooled ourselves in imagining that people sitting at home scrolling Facebook and playing Xbox were as productive as if they’d continued to go to the office. The latest from the BEA:

Speaking of fooling ourselves, let me recommend The Lost Bank: The Story of Washington Mutual – The Biggest Bank Failure in American History by Kirsten Grind, a Wall Street Journal reporter. The Collapse of 2008 has been covered at a high level in a lot of books, but this one manages to touch on all of the big issues in the context of a single enterprise and group of people. As with “A single death is a tragedy; a million deaths is a statistic,” a narrative about one company is more compelling and easier to follow than a story about the entire U.S. economy.

The book explains how our modern world of a handful of enormous banks came to be. When there are no limits on how big a bank can get, small variations in bank health lead to enormous concentration. Due to being slightly larger, WaMu might have slightly lower costs per customer than a smaller bank, e.g., with information systems being spread across a larger base, thus making an acquisition sensible on both sides. WaMu would buy banks after the CEO got sued for divorce, leaving the target without effective leadership while the CEO was defending the lawsuit. WaMu would ultimately buy banks to feed its own executives’ egos, particularly Kerry Killinger’s, regarding its size rank among U.S. banks (when you’re #4, the desire to become #2 or #1 becomes tough to resist).

The book explains the roots of the Collapse of 2008. At a high level, the book identifies the following culprits:

  • the federal government, starting with Bill Clinton, pressuring banks into lending big money to Americans with low income and bad credit history to serve a social justice goal of achieving a desire mix of skin colors among borrowers (regulators could simply shut down a bank that didn’t lend enough money to the groups of interest to the government)
  • Fannie Mae, which abandoned its insistence on high quality mortgages and, partly due to pressure from the government, started buying low quality mortgages issued to home buyers/flippers who could not be expected to pay back loans if house prices flattened
  • New York City, whose investment banks sold mortgage-backed bonds to investors worldwide and, also, those investors. The book describes people on the ground at subprime lenders, e.g., Long Beach Mortgage (acquired by WaMu in 1999), recognizing that the borrowers would never pay but assuming that if Wall Street kept buying the mortgages the investors must know something that they didn’t.
  • California, where most of the fraudulent practices originated.
  • the issuance of complex variable rate mortgages, such as Option ARM, to consumers who lacked the sophisticated or, in many cases the English language skills, to understand them (it didn’t help that these folks had the financial capacity only to pay the initial teaser monthly payments and were guaranteed to default if a house price didn’t go up enough to enable a refinance; Federal regulators at the Office of Thrift Supervision approved the practice of issuing a $4000/month mortgage to a consumer who could afford only the $1000/month teaser rate)

As in Bubble in the Sun book: even those with the best information can’t predict a crash, those on the inside did not always see crash coming. In early 2007, for example, as investors were fleeing from high-risk mortgages and as some of his junior executives warned of impending doom, Kerry Killinger tried to buy a huge California-based subprime lender, Ameriquest, which went bankrupt shortly afterwards. Questioned regarding why he would want to pay for Ameriquest while the crash appeared to be underway, Killinger responded “They don’t ring a bell at the bottom.”

Kirsten Grind references Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade, by David Lereah, Ph.D., the chief economist for the National Association of Realtors. The 2005 book was rereleased in February 2006 just as the market for subprime mortgage-backed securities began to collapse (but Fannie Mae kept buying!).

The book is a great lesson in what we might call “success disease.” Executives who take risks when everything is going up imagine that they have some special talents. Like individual investors in high-beta stocks, they don’t risk-adjust their high historical returns for the fact that they took a lot of risk and that it could easily have gone in the other direction.

The book answers the question Why did banks work so hard to lend money to people who obviously weren’t going to pay? Due to the higher interest rates on subprime, and the assumption that almost all of the low-income folks who took out subprime loans would actually pay, it was 5-10X more profitable to lend money to someone with no job than it was to lend money to a person with a job and a history of paying his/her/zir/their bills. The book doesn’t say so explicitly, but this also explains why banks couldn’t easily abandon their subprime practices in 2005 when the problems were already obvious. If they had done so, they would have needed to fire half of their employees (since the revenue from being a mortgage lender to those who could actually afford houses was such a small fraction of the subprime revenue stream).

Those passionate about social justice will be pleased to learn that the one voice of praise from a shareholder at the April 2008 meeting was from a Ph.D. economist who was also and employee. She expressed confidence in the Board and executive team, thanking them for their focus on diversity in hiring and lending to minorities (“community”). WaMu had recently rejected an $8/share buyout offer from J.P. Morgan Chase and also recently obtained $7 billion in smart money from the private equity geniuses (WSJ, Sept 2008 describes all $7 billion being lost). The private equity investors got half the company and let the Board and executives keep their jobs.

The book is also a cautionary reminder that it can take a while for bad decisions to work their way through the system. The California-style lending practices first reached the rest of the U.S. perhaps in 2003. It wasn’t until four years later that the subprime lenders began to go bankrupt, in mid-2007. And it was more than a year later before the broader U.S. markets and economy collapsed. If you think that U.S. economic policy has been misguided since March 2020 (as I do, because the rewards have been tilted in favor of those who don’t work or who engage in counterproductive activities), it could be a few years before the consequences of this policy become apparent.

Don’t forget that a disaster for ordinary folks, investors, etc. may be only a minor problem for the executives who caused the disaster. Kerry Killinger took so much money out of WaMu on the way up that he could pay off Wife #1 while also building and enjoying a dream lifestyle with Wife #2 that apparently persists to this day. The Latinx subprime borrowers lost everything, but Killinger still had his collection of $6 million houses (worth $20 million each today?). Killinger’s epic risk-taking would have been rational, even with full advance knowledge that it would render the bank’s shares worthless. If he had managed the bank conservatively, nothing dramatic would have happened either to the shares or to his own net worth.

I’ve actually been listening to The Lost Bank: The Story of Washington Mutual – The Biggest Bank Failure in American History via Audible, but don’t love the narrator so perhaps the Kindle or print versions would be better.

Related:

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