http://www.nytimes.com/2008/10/12/opinion/12dooling.html?_r=1&oref=slogin

That's a NYT piece that tees the reader up for an essay on higher financial math and the implications it has for all of us in this economic mess we are in.

Here's the essay:

http://edge.org/3rd_culture/dysong08.1/dysong08.1_index.html

The more I read about this stuff, the more I remain convinced that we hid our inability to generate wealth for many years, creating imaginary, virtual wealth while sending the real deal overseas, without innovating to compensate for doing that.

If we were actually innovating, as in creating new markets with technology, then the outsourcing should be a means by which we leverage the lesser state of other nations to our mutual benefit.

They take the lower tier of technology, build and grow from it, while we advance the state of ours, doing the same thing. All parties do R & D, with their new found wealth to compete and contribute to the pool of core tech by which this all can occur.

I'm up for that. It's cool, it's American and it would work.

Problem is, we quit innovating! Our powerful interests were content to pull value from the wealth we had built, without doing the work to leverage it for additional wealth in the future.

Bastards.

The result today is gonna be a painful re-valuation exercize where we find out just how much has been pulled from us. From there, we see where our new REAL position is, and can know the scale of the burden we face to catch up and secure our standard of living.

Will that burden be too high for us to do that?

Don't know. It scares me to think about it.

All of you "don't lose until you sell" people need to think about the implications of this stuff.

IMHO, you might be lucky to maintain parity, if anything.

Also, consider that we are pouring what liquid wealth we have into a complex set of financial devices that may well not actually convince others that the funny money is real.

Should that happen, and I think there is a significant risk of exactly that happening as currency is based on trust, we are giving away that which we need to build our way out of this crap.

Something to think about while we debate how much money to pour into this crap every month.

You want an example of 'funny money'. Try the 60 trillion dollar unregulated OTC ( over the counter ) market AKA : Credit default market. This side betting horseshit dealing market puts up huge bucks like a giant unregulated hedge fund that insures company A against company C by company B ( who puts up the side bet here). So that company C wont go under a certain benchmark stock level , eventhough company A hasnt any stock in that company but has it in company D which is a competitor to company C. This all so that A wont completely lose money whether company C or D does bad, that way either which way company A comes out smelling like a rose. Because company D might over take C in A's dealings with stock in C.

And I still dont know if I got all those letters right ! If you google this , it explains it better than I can, ...but...

If you read the Article in Grace Cheng's financial News it explains this 60 trillion market which right now is over inflated and is going under decompression and affecting the regulated markets all over the world. Already the Feds are fixing to make this market transparent and ultmately may just do away with it all together, with the cooperation of the rest of the world markets.

60 trillion is a number all of the major economies would or could NEVER bail out and wont , but we are right now suffering because of this wild wild west unregulated market.

Google : credit default swaps

Fun!!

All I need to know, at this stage, is that we have a very significant of our wealth on record, not backed by any significant fraction of real wealth.

That will settle, it will be ugly, then we can build.

Also that means, throwing lots of money at it, DOES NOT FIX THE PROBLEM, and that sucks.

I want to put that money toward building real wealth, not preserving the illusion of too much virtual wealth. Some of that is good, I get that.

No worries.

Not being able to easily identify how much is a bad thing is the problem. Also, it's not my problem, nor is it the American peoples problem in general.

However, all of us will lose something, and that's worth some investment; PROVIDED we get hard, real equity stakes in the companies we are "fixing". That will do two things:

1. Everybody takes ownership of the problem.

2. Provides a very strong incentive for big financials to suck it up and get things fixed on their dime, or they get owned and they HATE that.

There is also some evidence that some of the trading is being manipulated by computers , perhaps by intention, not just a normal sell off reaction by investors. Essentially creating a kind of economic terrorist action. Film @ 11 on that

There has been , also , a breach of the World Bank, and it looks as if it was an inside job. To what degree it might be is not yet known. Investigations ongoing in Johannasburg S.A.

I think the terrorist action is just bull shit cover for our adoption of overly complex wealth valuation math.

Flat out, the pool of real value was made to be bigger than it really is. That, plus extending a lot of easy credit to mask the implications that come with outsourcing our ability to build wealth brought this to a head, not some terrorist.

It's going to be a very painful lesson, if we don't get out there and start building stuff again. Good news on that front is we see Obama talking jobs and focusing on building alternative energy and infrastructure.

That's good stuff, and will get the fix in, even if it takes a while.

Also good news is that we are taking some ownership of the failures, in the form of equity stakes in the firms asking for the help! The regulation on executive compensation that's tied to is damn good too.

If you manage the public trust and fuck that up, you are going to get owned by the public you are supposed to serve. That is a very potent object lesson and will do nicely to put the incentive on getting things running again, like few things will.

The whole "bucket of money with no strings attached idea" didn't force some accounting for the damage. Without that, there is NO incentive to right things.

Now that they lose some of their wealth, in the form of public ownership, they will bust their ass double time to prevent it from getting worse.

Love it. Good on the Government right now. It's a very worthy start.