Ali’s blog

Mostly quant stuff with occasional digressions

The IMF’s increased funding

Posted by alifinmath on April 7, 2009

Just reading Michael Hudson’s piece on the implications of increased funding for the IMF. It’s said that the truth hurts. That it surely does. This is another deeply depressing piece from Hudson. An excerpt:

Not much substantive news was expected to come out of the G-20 meetings that ended on April 2 in London – certainly no good news was even suggested. Europe, China and the United States had too deeply distinct interests. American diplomats wanted to lock foreign countries into further dependency on paper dollars. The rest of the world sought a way to avoid giving up real output and ownership of their resources and enterprises for yet more hot-potato dollars. In such cases one expects a parade of smiling faces and statements of mutual respect for each others’ position – so much respect that they have agreed to set up a “study group” or two to kick the diplomatic ball down the road.

The least irrelevant news was not good at all: The attendees agreed to quadruple IMF funding to $1 trillion. Anything that bolsters IMF authority cannot be good for countries forced to submit to its austerity plans. They are designed to squeeze out more money to pay the world’s most predatory creditors. So in practice this G-20 agreement means that the world’s leading governments are responding to today’s financial crisis with “planned shrinkage” for debtors – a 10 per cent cut in wage payments in hapless Latvia, Hungary put on rations, and permanent debt peonage for Iceland for starters. This is quite a contrast with the United States, which is responding to the downturn with a giant Keynesian deficit spending program, despite its glaringly unpayable $4 trillion debt to foreign central banks.

Loan-sharking backed by military might is the neo-colonial system of rule.

Postscript: Just found this at globalresearch.ca:

Declaring something a success doesn’t necessarily make it so. We learned this at the Bush-led G-20 summit only four months ago, when global leaders were expected to do something far-reaching in response to the world-wide economic crisis, instead of chatting about it. When nothing came of the meeting, we were told that the summit “succeeded” because it “laid the groundwork” for the next G-20 gathering, recently led by Obama.

The four months between G-20 summits was one of rising massive unemployment and social misery for millions of people, creating an urgency that was unmet by the world leaders in London.

The truly pitiful joint-response of the summit sparked zero inspiration in the peoples of the world. The corporate controlled media, however, hailed the meeting a success of epic proportion and awarded Obama the title of Messiah.

What were these successes? The triumph most blasted through the media was the one trillion dollars of stimulus spending agreed upon, to be funneled through the globally-hated International Monetary Fund (IMF).

It needn’t be said that one trillion dollars, on a global scale, is peanuts. It should be mentioned, however, that much of this money was committed prior to the summit, and inserted into the G-20 numbers to beef up public relations.

Another G-20 “triumph” paraded through the media was a $100 billion dollars committed to the equally-hated World Bank, supposedly to help the poorest of the poor countries. This benevolent act — itself peanuts— was immediately contradicted by the Wall Street Journal:

“…anyone who has followed our editorials on the corrupt uses to which the bank’s [World Bank] existing $30 billion annual budget is routinely put can easily imagine that much of the G-20’s financial benevolence will never reach its intended targets in poor countries.”

And then you have the hot topic issue of financial regulation, the complete absence of which allowed the illusory financial boom to go on for years, thus intensifying the current recession. Regulation was a central demand of the European countries, who are seeking curbs on the U.S. financial institutions that out-competed European companies, while invading their economies with “top-rated” stocks and bonds that were actually worthless.

But a special hobby of Obama’s has been to prop up these institutions, as he continues to give billions of dollars of U.S. taxpayer money to U.S. mega-banks and insurance companies. This dynamic shaped Obama’s opinion on the G-20 debate: he agreed only to a vague and toothless international regulatory committee to be set up in the unforeseen future.

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The post-quant future

Posted by alifinmath on April 7, 2009

It’s been clear to me for well over a year that neoliberalism (aka deregulated global finance capitalism) is dead, and that as a corollary, so too is quant employment in meaningful numbers.

A lot of physics, math, and engineering people have been going into quant finance not because of the attraction of easy lucre but simply because job opportunities in their own disciplines have shriveled. Until 1970 a freshly-minted physics Ph.D. could literally step into a job. But since then it has become progressively more difficult. Unemployed, misemployed, and underemployed physics and math Ph.D.s have become a commonplace phenomenon. For this reason, droves of them have gravitated towards Wall Street and the City of London. But this has now come to an abrupt halt over the last year or so. Sure, a few quants are still being hired — but they tend to be experienced ones who are hired for pricing specific products with which they already have experience (see here for more detail). And a lot of experienced quants are out on the street looking vainly for work. Graduates of even the best programs — CMU and Haas — are having problems with internships, let alone real jobs. These problems will not subside.

So what is the future for quantitative types? There’s an article by Gillian Tett in today’s FT:

Until three years ago, smart, numerate students took it for granted that one of the fastest ways to become rich and successful was to dive into the world of complex finance, producing structures such as collateralised debt obligations (CDOs).

Now, however, those CDO dreams have crumbled. By late last year, large western banks had shed more than 125,000 jobs. Thousands more have gone since then, many in high finance. The betting in the management consultancy industry (which is cutting back too) is that some 300,000 global jobs linked to banking could vanish before the crisis ends.

That is striking, given that the City of London was thought to employ some 350,000 financial workers two years ago. An entire financial army, in other words, is being demobilised – of all ages and ranks.

Tett goes on to suggest how highly trained physics and math people could go on to benefit the real economy but I remain a sceptic. If societies cannot productively use these highly trained people, the societies themselves don’t have much future. A dog-eat-dog laissez-faire regime wreaks havoc with most human beings (except for the oligarchic minority that benefits). And trained people are among the victims. 1990s Post-Soviet Russia is one glaring example. But contemporary USA has become another.

On a philosophical note, the way a society trains and deals with its best and brightest gives us a good idea about how efficient and progressive it is. Thus, for example, a third-world dump like Pakistan — a failed state, a worthless heap of garbage — has no social mechanisms for training and dealing with its brightest (perhaps because it doesn’t exist as a society to begin with). I’ve no doubt that other third-world heaps of garbage — say Zimbabwe or Brazil — are approximately the same. But the opposite is true in, say, Scandinavia or Germany. It’s a testament to how the USA has itself been converging to third-world status that it lacks social mechanisms to productively employ its best and brightest — except in parasitical occupations such as financial ‘engineering.’

The group of people with IQ > 135 are the prize possession of any society. From this group come the mathematicians, physicists, design engineers, tech entrepreneurs, architects, whiz programmers, and so on. If a society has no mechanism for training these people and harnessing their efforts, it is doomed and en route to systemic failure. The “Third World” is characterised not only by not having such mechanisms, and not only by “brain drain,” but also by not having many such people in the first place: IQ differences exist among different ethnicities. India and Pakistan, with their average IQ of 82, are not going to produce many people with IQs over 120 or 135 (since intelligence roughly follows a Gaussian distribution). Likewise for Brazil, with an average of 87. But now I’m clearly digressing; more can be found in Lynn and Vanhanen’s  flawed but interesting IQ and the Wealth of Nations.

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Chore-chore

Posted by alifinmath on April 6, 2009

An amusing article by Lucy Kellaway in today’s FT:

I suspect that when the inevitable rush of banking divorces starts it won’t be because wives can no longer afford a new Gucci handbag. It will be chore war instead. As it is, two-thirds of divorces over the age of 40 are initiated by women. And 80 per cent of the arguments they start are about who does what at home.

… The other friend says she does 105 per cent of the work in her house. Her husband’s contribution is -5 per cent, as he makes a terrible mess and forgets to pick up the children from drama club. This woman is a formidable manager when at work, and so it is strange that she has failed to motivate her husband to lend a hand.

She said she had tried everything: negotiating, sulking and pep talks. The only thing that worked was having a tantrum. This was very effective in the short term, but in the longer term the status quo returned, and an even greater tantrum was required the next time.

In my own experience nothing is more guaranteed to create disharmony than fussing about 50:50. I have just done a little test and asked some couples I know about the division of labour in their houses. In each case the man says that he does two or three times more than his wife thinks he does. In my household my husband feels he does 40:60; I think it is more like 10:90. I don’t mind him doing 10 per cent; I do mind him thinking it is 40 per cent. A spreadsheet is not going to resolve this as the weighting of chores is a subjective matter. He places a higher value on taking his sons to cricket than I do. I do a lot of jobs that he does not value at all.

Subjective weightings … hmmm. Well, Lucy does have a point. It is difficult to make two (or more) people agree on much of anything. Housework can be enervating. Strange how marriages make or break on ostensibly mundane matters such as housework.

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The Norwegian “Janteloven”

Posted by alifinmath on April 4, 2009

To understand the Norwegian national character, one must know the “janteloven,” which is ten different rules — but all of which are variants on but one theme:

Don’t think that you are special.
Don’t think that you are of the same standing as us.
Don’t think that you are smarter than us.
Don’t fancy yourself as being better than us.
Don’t think that you know more than us.
Don’t think that you are more important than us.
Don’t think that you are good at anything.
Don’t laugh at us.
Don’t think that anyone cares about you.
Don’t think that you can teach us anything.

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I Tried The Springer Test Again

Posted by alifinmath on April 3, 2009

If I were a Springer-Verlag Graduate Text in Mathematics, I would be Lawrence C. Washington’s Introduction to Cyclotomic Fields.

I am a carefully written exposition of a central area of number theory that can be used as a second course in algebraic number theory. Starting at an elementary level, I cover p-adic L-functions, class numbers, cyclotomic units, Fermat’s Last Theorem, and Iwasawa’s theory of Zp-extensions, leading the reader to an understanding of modern research literature. Many exercises are included.

Which Springer GTM would you be? The Springer GTM Test

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What Springer GTM Book Would You Be?

Posted by alifinmath on April 3, 2009

If I were a Springer-Verlag Graduate Text in Mathematics, I would be David Eisenbud’s Commutative Algebra with a view towards Algebraic Geometry.

I am an attempt to write on commutative algebra in a way that includes the geometric ideas that played a great role in its formation; with a view, in short, towards Algebraic Geometry. I cover the material that graduate students studying Algebraic Geometry – and in particular those studying the book Algebraic Geometry by Robin Hartshorne – should know. The reader should have had one year of basic graduate algebra.

Which Springer GTM would you be? The Springer GTM Test

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Global Finance Capitalism Is Dead

Posted by alifinmath on April 2, 2009

I was reading a piece by Waldon Bello here. And I’ve been thinking: global finance capitalism is dead. As a corollary, the American military and financial empire is dead. The imperial system — where the periphery contributed tribute to the US and the aging imperial hubs of Western Europe is dead and buried. The US and Britain are running around trying to resuscitate it — but their efforts resemble the frantic running around of a chicken that has just had its head cut off.

All the old indices — per cent rates of growth, unemployment levels, jobs created — have become meaningless in the sense that none of them are subject to control and management. Well, to be honest, all of  the macroeconomic controls have already been dismantled over the last thirty years in our neoliberal age. A more important point is that “growth’ will have to cease being a fetish: the biosphere cannot afford it. Patterns of consumption and investment based on “growth” (i.e., increased exploitation of nature) will have to cease. In this connection, there’s an eminently watchable interview of Dmitry Orlov here by the “Russia Today” network.

The new world that will emerge with the collapse of US military power, US transnational corporations, and US-dominated agencies (IMF, World Bank) will not be any kinder than the old one — it just won’t be dominated by one hegemon. In this connection I was just reading about how the Shanghai Cooperation Organisation (SCO) is beginning to flex its muscles (read here). The SCO is really just Russia and China. We’ll probably see more of these regional organisations in the years to come and the member states of these will cooperate more on defence and barter deals.

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The G20: What Really Mattered

Posted by alifinmath on April 2, 2009

Forgive me if I have a somewhat blase and cynical opinion of these summits and conferences. The lofty proclamations, the soaring rhetoric, the various photo-ops, the fancy limos and waiting jets. I’m more interested in what the “leaders” had for dinner. In the Guardian:

The politicians and their wives will begin their meal at Downing Street with a starter of organic Scottish salmon served with samphire and sea kale, and a selection of vegetables from Sussex, Surrey and Kent.

For the main course, Oliver has plumped for slow-roasted shoulder of lamb from the Elwy Valley in north Wales, with Jersey Royal potatoes, wild mushrooms and mint sauce.

Dessert will be an old teatime favourite – bakewell tart and custard.

Nothing so tasty for the protesters, I’ll warrant. Ah well, the prerogatives of power.

Sarkozy had the cojones to say some things which urgently needed to be said, and he was backed up by Merkel. Again in the Guardian:

In a day of breathless diplomacy in London, ranging across arms control and financial capitalism, Brown and Barack Obama emphasised a developing convergence, only for Nicolas Sarkozy, the French president, and Angela Merkel, the German chancellor, to lay down “non-negotiable red lines” on issues such as hedge funds and tax havens which they insisted had to be met today and not deferred until future gatherings. The belligerent tone jarred as it came hours after Brown, standing side by side with Obama in the gilded splendour of the Foreign Office, had declared that the leading countries were hours away from securing a deal to reform the global economy.

Far from rowing back from the aggressive posturing which Sarkozy had adopted before flying to London, the French leader resumed the theme, saying this was no time for making “fancy speeches” and dismissing the idea of a summit later in the year. Speaking at a Knightsbridge hotel, he said he trusted Obama, but he blamed America, saying: “The crisis didn’t actually spontaneously erupt in Europe, did it?”

The German leader joined in. “This is a historic opportunity afforded us to give capitalism a conscience, because capitalism has lost its conscience and we have to seize this opportunity,” she said.

Seems like Obama and Brown are trying to inject some life into no-holds-barred Anglo-American finance capitalism, and the continental Europeans want no part of it. Well, I reluctantly have to give Sarkozy credit for speaking up. And before I forget, I should also give credit to the Czech President for also speaking up some days ago.

The US is exporting its problems and worthless dollars to the rest of the world. A well-informed piece by Michel Hudson can be found here.

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What “friendship” entails

Posted by alifinmath on April 1, 2009

I’ve been thinking about the word “friendship” for some days. In the USA, a “friend” is someone whom you’ve had coffee with a couple of times. The most egregious recent example of abuse of language is a Facebook “friend” — who can be removed as a “friend” with a few mouse clicks. Indeed, I hear Burger King had an offer a while back of a value meal if a participant was willing to jettison a dozen such “friends.” But here in Norway — and in Scandinavian and Baltic Europe generally — the word has a different connotation, a different resonance altogether. It is difficult to make friends here — but once made, they are there for life and will stick by one’s side through thick and thin. In other words, relationships are more authentic here.

I remember being impressed with a YouTube video some months back, where one dog saves another dog’s life on a Chilean highway. Now that is friendship. I bet that dog wouldn’t give up his pal for the offer of a free junk burger, plastic fries, and diet soda. In a land where the food, the education, the politics is fake, why should the smiles, the words, the promises, the “friendships” be any more authentic?

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The Crisis of Capitalism

Posted by alifinmath on April 1, 2009

“The crisis of capitalism” is an expression a Marxist would traditionally use. And “Marxist” is what I am. But these days it’s tripping from the tongues of a lot of people. I do hear sales of Marx’s magnum opus, “Das Kapital,” are up in both the US and Europe as people struggle to make conceptual sense of what’s happening. But it’s more than merely a crisis of capitalism; it’s a crisis of modernity, of which capitalism is but one component (albeit crucial). The crisis of modernity is a crisis of imperialism, of militarism, of population growth, and of ecological devastation. It foreshadows worse to come.

At one time I used to think mathematics could explain the world. The naivete of brash and callow youth. I lost that hubris a long time ago. In fact most of my posts on this blog have had nothing to do with math for quite some time. I have begun to suspect not only mathematics specifically but reason generally. The world cannot be understood completely (or maybe at all) on a rational basis. Unconscious psychological drives — both individual and collective — lie at the root of our world. The tools of reason are ineffectual, utterly useless, in understanding these drives. These drives are behind the various crises in our lives — both individual and collective. The global crisis referred to above cannot be fathomed on a rational basis (though I’m guilty of reading countless analyses and interpretations).

Our educational system develops the power of reason — but not much else. The world of unconscious drives remains a mystery. In fairness, it’s a murky, strange, and mysterious world — full of shadows, illusions and madness. There may not be a reliable compass for this world. Yet it underpins our world of sense-experience.

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