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Nothing sums up what has happened better than this. Given the bailouts, its fair to say that in 2008 the majority of the worlds best known banks were bankrupted.

Via FT Alphaville.

Ambrose Evans-Pritchard is the business editor of the Telegraph, a conservative UK broadsheet. In other words a senior figure in a serious newspaper with a sober character. What he writes today is downright alarming.

“I am seriously worried that British government is losing control…The $4.4 trillion of foreign liabilities accumulated by UK banks are twice the size of the British economy. UK foreign reserves are virtually nothing at $60.6bn…We cannot even do what Iceland did to save its skin…The debts are too big. If London takes such disastrous action it will set off global panic and lead to an asset death spiral, drawing the entire world into deep depression.”

“England has not defaulted since the Middle Ages. There is a real risk it may do so now.”

Link

Felix Salmon spells out the case for unavoidable nationalization of banks:

“Let’s work from an ex hypothesi assumption that a certain bank — let’s call it Citigroup — is insolvent.”

Ha.

“For a bank, Chapter 11 is pretty much impossible, since you’re not going to find anybody to provide debtor-in-possession financing to keep it going. Except the government. And if the government is in possession, then, hey, you’ve just nationalized the bank.

As for liquidation, that’s not an option, because Citigroup is too big to fail. Dumping Citi’s trillions of dollars of assets onto the market in a fire sale would depress asset prices worldwide so much that we’d enter a global depression, not just one in the US.”

It would be logical for the US to blackmail other countries for help, with the threat of letting another big one go down, impacting everyone. That blackmail is built into the system already, however, in the form of Treasuries.

As for nationalization, one way of reducing the size of forest fires is to limit the growth of trees. Limiting the growth of banks comes from regulation and all roads lead to it.

In all scenarios, and however it is dressed up, the US is looking at a period of partially socialized, loss making, non-free market banking. Meanwhile US tax payers still won’t get the benefits of the good types of social infrastructure, such as universal healthcare, which incidentally costs less than what we already pay. Its a pity.

Link

Is the announcement of fart gas on Mars, just before a new administration and NASA budget comes into play the biggest news story ever?

The web has a tendency to promote news with good headlines rather than the truth. There is no better headline than ‘life on mars’ which has spread from the UK tabloid, the Sun, to Drudge, which makes a living from picking interesting headline links.

After the disappointment of the unconvincing find of fossil bacteria in a Martian meteorite scientists are more careful these days, but this time the omens are good. Its precisely because of this caution and the general fact that science is often not as dramatic as fiction that the serious news outlets aren’t able to run front page, ‘Life on Mars’ headlines.

Carl Zimmer live blogged the NASA press conference:

Mars is active and producing plumes of methane (which amazingly were discovered from Earth based telescopes not Martian probes).

The methane comes from volcanoes or bugs.

The evidence (lack of other volcanic gases, for example) points to bugs.

For further bug evidence we would need to look at isotopes in the methane.

To look for bugs we would have to either drill wide and deep (not going to happen soon) or if we are very lucky, scratch through a layer of permafrost.

Link

This years Edge question is: What game-changing scientific ideas and developments do you expect to live to see?

Biocurious has a good overview of the answers, here.

My personal favorite is Stuart Kauffman’s answer, that large parts of the universe are free of physical law. A brilliantly argued piece of true scientific heresy (although here from a biological rather than a fundamental physics perspective). This is an idea which I have a hunch may be right, placing natural selection as the creation mechanism above gods and scientific law, rather than the the artifacts which are produced by them.

This article on the BBC today claims that “Two search requests on the internet website Google produce as much carbon dioxide as boiling a kettle”, according to Harvard physicist Alex Wissner-Gross.

Yet in the same article, Google say that “in the time it takes to do a Google search, your own personal computer will use more energy than we will use to answer your query”. Google have a blog post which goes into more detail about the environmental cost of search.

Given that laptop power is somewhere between 20 and 50 Watts and a desktop somewhere between 50 and a 150 Watts and takes fractions of a second to search, whereas the average kettle requires 1800 Watts and takes over a minute to boil, there is something wrong here (by a factor of tens of thousands). In fact, the act of wandering over to a kettle and switching it on uses more energy than a Google search. I assume this is bad journalism rather than bad science.

Elsewhere in the article is the statement “A recent study estimated the global IT sector generated as much greenhouse gas as the world’s airlines put together.”

This is a largely meaningless assertion since without the global IT sector people would have to use planes more. In addition, ‘global IT sector’ includes all of the computers required to design, build and operate aircraft, all of the computers used to search for and book trips all of the computers used for in flight entertainment systems and all of the computers used by air traffic control.

In terms of moving people around to exchange information, if you wanted to make plane travel several million times more efficient, an Internet enabled computer is a viable alternative.

Since the availability of efficient access to information makes us access it wastefully (i.e. more people search for Paris Hilton than travel to Paris to stay in the Hilton) the idea of computer waste has some validity. However, to curb carbon emissions, fighting spam (denial of service attacks alone, account for more Internet traffic than all the world’s email) and improving software efficiency (searching Outlook is several thousand times slower than Gmail) would be a priority above making computer hardware more efficient, which has happened on its own through Moore’s Law.

Assuming that we should look at computer hardware and Internet infrastructure efficiency as a priority, there are two aspects to computer power use, calculation and bit transfer. If we measure the average bandwidth of a human being’s speech in bits and compare that to the energy used for bit transfer via the internet the latter is several million times more efficient. To illustrate the point, imagine the inefficiency of shipping a computer across the word to deliver an email. This is what shipping people to meetings via plane is like.

The calculation cost is also more efficient by a factor of several million, in many cases. The cost of calculating by slide rule and human requires feeding humans. If there were some equivalent unit of measure for computers, analogous to horse power, (human power) that measured serial calculations in terms of what a slide rule enables the brake human power of my laptop would be the equivalent of a football stadium full of snack eating, kettle boiling, tea drinking, human calculators.

For massively parallel calculations, human power is still more efficient, but it is realistic to assume that we will be able to develop machines that will outperform us. When we do, we should look at what energy saving that will allow as well as what it will consume.

When diamonds were discovered in South Africa at the beginning of the 19th century, the supply of diamonds was increased by a factor of thousands, threatening a crash in prices.

The solution was found by the De Beers cartel who created the idea of the mass market engagement ring:

“in 1880 almost no one in the U.S. owned a diamond engagement ring, by the 1920s it was expected that a middle-class bride would receive one. By the 1950s even laboring-class brides were expected to be able to display a diamond — thanks to the newfound formula of De Beers, according to which an engagement ring should cost a bridegroom two months of his salary, before taxes.”

Robert Proctor, Stanford Professor of the History of Science: The Agateer

Yves Smith comments on a paper called “Bullshit Promises” by Curtis Bridgeman and Karen Sandrik which was picked up by Elizabeth Warren.

Both the paper and Smith’s commentary are a must read.

In summary, the hand wringing about the failure of certain facets of capitalism which have American cultural associations (such as gung ho rather than conservative bankers), has begun and a mainstream awareness of the hitherto niche idea of a culture of manufactured consent (i.e. bullshit) is perhaps emerging.

Smith points to the fact that white lies are endemic in corporate culture in the US. Anyone who has had to navigate the corrupt and cynical inefficiency of anything from healthcare insurance companies to retail banks (not just investment banks) will be aware of something fundamentally wrong with the way that these organizations worked in the decade or so leading up to the crash. Unfortunately entrepreneurship and innovation will suffer because of the reaction against the systemic incompetency in these sclerotic organizations and will no-doubt result in regulation which will be ill thought out and wrongly targeted.

Link

2008 was an early end to a decade with no name. The post millennium? The new century? The decadent decade, perhaps? It was an entire era of price without value, a zeitgeist that artists would surely try to capture, symbolically. But how to do it and still sell your work? Perhaps Damien Hirst knew how?

Damien Hirst is very rich and he is not stupid. His most daring work of art was an elaborate joke that could have become a symbol of this decade that closed down early – a platinum and diamond-crusted real human skull, the world’s most vulgar trophy. Like a gorilla hand ashtray or an elephant foot umbrella stand, this $100 million decorative, anatomical, bling trinket needed to be sold to someone very rich and very stupid for it to be complete, a tasteless prize that was bought and therefore self-awarded rather than given.

Who would be the recipient of this severed head which was completely covered in money, but in less money ($25M) than its asking price ($100M)? Would it be a Russian oligarch, a Manhattan property tycoon, a member of the Saud family, a London hedge fund manager, a vapid LA Youtube celebrity or any other of the monstrous avatars of the decadent decade. Sadly, even the diamond skull was a flop, and was rumored to have been bought by Hirst himself, to save face. Like the hedge fund managers, Hirst became rich but didn’t leave the legacy he wanted, and the contemporary art market, which peaked with his $170M takings at the “Beautiful Inside My Head Forever” sale, was merely a bubble created by the recently rich who wanted new stuff rather than antiques and wished for the million dollar art equivalent of fast food, to buy taste, immediately.

But this bubble was particularly symbolic. The contemporary art market was leveraged beyond real estate and stocks and artists were part of the culture they could have been dissecting and rebelling against, they were collaborators rather than renegades. The sudden demise of famous living artists tells a better story than the art itself ever could.

Ben Lewis tells the story of the contemporary art bubble in Prospect:

“While British house prices took six years to double at the start of this century, contemporary art managed it in just one, 2006-07. (Over the same period, old masters went up by just 7.6 per cent and British 17th to 19th century watercolours actually lost value.) Contemporary art in the emerging economies did even better. The value of its sales in China increased by 983 per cent in one year (2005-06). In Russia they rose 2,365 per cent in five years (2000-05), while its stock market increased by “only” about 300 per cent…The Chinese painter Zhang Xiaogang saw his work appreciate 6,000 times, from $1,000 to $6m (1999-2008); work by the American artist Richard Prince went up 60 to 80 times (2003-2008). The German painter Anselm Reyle was unknown in 2003; you could have picked up one of his stripe paintings for €14,000. Now he has a studio with 60 assistants turning them out for about €200,000 each.”