Unconventional Wisdom - The Myth of Especially Bad Oil

It's actually debatable whether oil as a source of energy has been the worst thing in terms of impact on the environment in human history.

When the first settlers arrived from Europe, they kicked off a wave of massive deforestation in the quest for energy. Such massive deforestation is articulated at:
http://en.wikipedia.org/wiki/Deforestation

This period was especially devastating in terms of the extinction of many species form the Eastern woodlands. Bison, Elk, Cougar, and Parrots began to disappear from the East Coast. Yes, all those animals existing on the Eastern sea board in the 1700s.

Once wood was no longer the dominant fuel for heat and transportation, forests began to naturally return. http://digitalcommons.libraries.columbia.edu/dissertations/AAI3028593/

The question now remains whether the continued appeal of suburban sprawl wipes out the return of forest lands experienced over the past 100 years or so.


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What They (The Media) Missed - The Iron Triangle Now Includes the Media

Most of us may remember the curious triangle from our high school civics or government class. It's the one thing that has stuck in many people's minds from those classes. The triangle shows the revolving door between industry, political action committees, and the bureaucracy in the executive branch. They taught it as the Iron Triangle and its influence extended to the legislative branch as well. You can find more information to refresh your high school class notes from the wikipedia at: http://en.wikipedia.org/wiki/Iron_triangle

Now that you've taken that refresher course, it's time to update those notes to keep current with the times. The Iron Triangle has become the Iron Rectangle and now includes the media. Karl Rove is joining Fox News as a contributor. This follows in a long line of politicians moving into the media that covers and should theoretically police policy makers.

The revolving door between the political world and the media seems like a ever opening spigot. The Iron Triangle has gone beyond toiling to influence the inner workings of government by using money to influence politicians in order to impact arcane legislation and bureaucratic regulations. Yes, times have changed. Just as the drug companies moved from spending heavily on gimmicky pens for doctors and free lunch for medical staff to marketing directly to consumers through print, TV, and radio advertisements: politicians are leveraging the free advertising/marketing vehicle of the media to begin influencing the public directly. Cut out the middle man! Go straight to the public with your message by owning the media outlet from a though leadership perspective.

Is that something to worry about? Time will tell. However, this trend coupled with new FCC regulations allowing consolidation of media across markets may prove to be a recipe for fewer voices influencing the public. Thanksfully, the Internet has created a broader market place for ideas. Ideally, this broader market place will allow the undue influence of the emerging Iron Rectangle from becoming too rigid. This emerging trend is what they (the media) missed this week...


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Unconventional Wisdom - We're Buying What They Are Selling

Sound bites work. It's why people use them. Don't expect any substantive debate. In the most recent GOP debate, Ron Paul made mention of the important issue of a declining dollar and monetary policy. Before anyone's eyes could glaze over through a discussion of substantive albeit arcane issues, the CNN moderator Anderson Cooper quickly redirected the conversation. That type of in depth dialog doesn't sell. We're not buying it. What we are buying are platitudes about "change" and the fact that "Washington is broken." Every four years it's a lot more of the same spoon fed bite sized meaninglessness. They're selling because we're buying. Sphere: Related Content

What They (The Media) Missed - Sublime Subprime

The subprime crisis has been described simplistically as a function of either predatory lending or people irresponsibly living beyond their means. The images created are ones of loan sharks confusing less financially versed Americans or credit card debt ladened borrowers who should have never got the money in the first place because they can never seem to keep their wallets closed. The truth does have to do with greed and recklessness but is a lot more complicated.

Banks started developing sophisticated investment vehicles for their high end clients. These were bundles of mortgages. Traditionally, the mortgage default rate has been less than 1%. These derivative securities were considered fairly safe because of the statistics associated with the mortgage market. Mortgage insurers rated many of these bundles of mortgage as being low risk. Interestingly, the fees they are paid are paid by the banks selling these mortgage bundles. The banks got the "low risk" stamp on these investment vehicles. To further entice customers, many banks guaranteed the principle on any investment in these mortgage bundles...hence, the CDO or collateralized debt obligation. The markets for CDOs flourished and banks began needing more mortgages to underly these CDOs. Many banks even purchased loan origination companies and put pressure on these institutions to write more loans. Everyone was incentive to pump out more loans. The high end banking community was being compensated on selling more CDOs. The mortgage broker was being compensated based on the number of loans they wrote. As prime loans became scarcer, the loan originators began writing loans for less credit worthy folks (sub prime). This began to change the traditional risk profile associated with these loans. Everyone in the chain was incented to make more loans. As promotion ladened loans with low interest grace periods entered their higher interest transitions, credit crunched sub prime borrowers could no longer afford their loan payments. As a result, loans began to go bad and a much higher rate than traditionally expected. What was perceived to be a low risk investment became significantly more risky. The CDOs were sold and resold creating a magnified impact through the economy.

Part of the craze of the sub prime crash was driven by artificially low interest rates. When such a spread of rates occurs, greed takes over. The systemic break down is what the they missed in their explanation of a complex failure with no easy fix. Sphere: Related Content