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Pointman’s is a great site for socio-political commentary not only on the present but also the past.

On January 5, 2018, Pointman wrote about phony political parties, jaundiced voters and declining governments. Please take the time to read ‘The Misrepresentation of the People Act’ in full.

Excerpts follow, emphases mine.

Political party set-ups are essentially the same wherever one lives:

The actual names vary from country to country; Republican or Democrat, Conservative or Labour, Liberal or Labor. There are always a few tiddler or schism parties wandering aimlessly around the political edges going nowhere accompanied by nothing other than their own strident outrage at something or another, but the essential shape is two big mainline parties, or in some cases as in Germany, comfortable coalitions of such long-standing that they might as well be one party anyway.

As we know, one party is in power for a time, then the opposition party takes hold of the reins, then the cycle repeats. Sometimes this works. Sometimes it doesn’t:

When it works as it should, it’s a pragmatic recognition of the debilitating aspects of the same party being in power for too long, and also acts as a natural emetic to get rid of them. That hackneyed old saying about the corrupting effect of power is very true …

Where this paradigm breaks down is when the leaders of both the parties begin to treat the whole election process as a turn and turn about thing; okay, you’ve won power for a couple of administrations and then it’ll be our turn. We won’t rock the boat too hard for you other than giving you a jolly strict telling off when you make a public cockup of something. The unspoken but understood caveat on being an effectively quiescent opposition party is that the big players in it still get a decent share of the power and money floating around that’s commensurate with such tacit co-operation.

When the system doesn’t work, it is because both parties have too many commonly-shared interests:

The people running these parties, and being run themselves by big money interests in various shapes and forms, tend to share the same education, privileged background and über political world views of what used to be termed internationalism but has now mutated into a bastardised consensus of smug political globalisation, because that’s what’s really good for their super rich patrons.

For the low-information person, including a voter, a change of government looks stable and normal. However, that is not necessarily the case:

it’s inherently unstable since it lacks any feedback to correct the corruption such power in perpetuity will inevitably engender. It pushes the day of reckoning further ahead, but that day will arrive in the end.

As always, the basic cause allowing this situation to develop is electorates disinterested in politics who sleepwalk into this mess. For too many years they’ve listened to the vague promises of jam tomorrow from political con men whose only talent is stringing the mark along.

That has troubled me, personally, especially when I speak with Americans who invariably elect the same people for years and years on end. These are congress-critters and senators who are useless in serving their constituents, yet Americans keep re-electing them. It really bugs me a lot.

Now and then, someone new and fresh emerges on the scene who is elected, but they seldom seem to be around very long. But, no one cares, and the cycle of electing self-serving politicians continues:

There is a propriety Antipodean shortcut into this situation which involves electing a reasonably sane leader who’s very quickly stabbed in the back by one of his underlings who turns out to be incompetent but has the saving grace of being eminently corrupt. Anyway, this combination of lazy electorates and seemingly Alzheimer stricken populations who can’t quite connect promises made and promises not fulfilled, will eventually break down.

This definitely happened in the United States, and one man is doing his very best to rectify the situation. That said, there is still a lot of rot in both the Democrat (un-‘Democratic’) and Republican parties, to the extent that politically-aware voters have dubbed both the Uniparty. And, what follows is a highly accurate description of the end result that the Uniparty and, in other countries, long-term coalitions bring about:

It’s all about them, not you. The vested interests prosper at the expense of impoverishing the ordinary person, irrespective of their race, colour, creed or politics …

By this late stage, the bulk of electorates are totally jaundiced about any involvement in the political process and those actively engaged in it as foot soldiers are starting to suspect they’re not even a minor player in the game, but the football. They’re regarded by their betters as highly motivated, but easily manipulated drones busy at work producing honey for their masters.

By this time we’re heading into stage 4 cancer in the body politic, but the status quo of those deeply entrenched in power will start to defend itself by any and all means available, whether legal or not. Imagine getting the snouts of a hungry herd of swine out of a steaming swill-filled trough, and you’ve got a pretty good idea of the immensity of the task.

The next stage is to create a new — phony — third political party that sweeps into power:

As the new broom of the faux opposition party being elected isn’t working any more, it’s possible to invent a third party that’s making all the right reformist noises but is still a cat’s-paw of the current background interests.

Much of the time, these parties are unsuccessful.

Pointman says this happened in Greece …

It was a freshly minted party by the power mongers which just continued on in the same old way, but was quickly found out.

… and in France, with Emmanuel Macron in 2017:

with a hitherto unknown leader Fifi Macron mincing around in front of it and making all the right noises. A few months in, he promptly junked the modest tax reforms of the previous nominally left-wing administration which were a tad too expensive on his extremely rich backers who’d put him into power to do just that. At the same time, he started lumping more and more taxes on blue and white-collar workers.

Today, Emmanuel Macron is facing the prospect of a ninth weekend of demonstrations by overly taxed, low income French men and women: the yellow vest movement — les gilets jaunes:

Despite disparaging reports you might have heard about them, they’re painfully ordinary people struggling to survive in Macron’s France. There’s a lot of them and they’re composed of that most dangerous segment of any electorate, those pushed into a corner with no way out and not much to lose.

As I listen to French talk radio (RMC) every weekday, I have been following this movement with interest — and the way in which Les Grandes Gueules are covering them. For the first few weeks, the hosts and panellists were empathetic. Before Christmas, their opinions became more critical, which made for interesting discussions as some panellists are still on the side of les gilets jaunes. Fair enough, shops and restaurants lost a lot of trade in cities at the heart of the protests, but the media seemed to focus on the violence rather than the vast majority of peaceful protesters. This year, the media, including the two Grandes Gueules presenters, are shifting the narrative a bit towards the ‘we’ve all had enough of les gilets jaunes‘.

One thing that did not help the yellow jackets’ cause was the vehicular break-in at one of the French ministries last weekend. The other was a boxer who started punching policemen, also last weekend. He had no criminal record prior to that.

Once the weekend demonstrations became a regular fixture — about a month in — violent rabble-rousers started infiltrating the movement, which has attracted a few extremists from both the Left and the Right.

This ongoing violence gave the media carte blanche to negatively cover the movement as a whole. Lately, there has been less coverage of the ordinary gilet jaunes who gather to protest because they cannot make ends meet.

The media were rightly, in my opinion, taken to task for it today. Here is Michel Onfray, a philosopher, who tells them the media have been labelling les gilets jaunes racist, sexist, homophobic and everything else pejorative under the sun. And he accuses the two Grandes Gueules hosts of similar negative coverage — equally ‘staggering’ (sidérant). They did not like that at all:

This weekend, it will be interesting to see if the government — via the police — allows any protests to go ahead.

Pointman already sussed that on January 5, and referred to preventive arrests made near the end of 2018:

Riot cops or paramilitary thugs are deployed to brutally suppress public demonstrations against an administration that’s becoming a dictatorship in all but name. Not only are public demonstrations being physically attacked, but wholesale arrests and incarcerations start to become the norm. Behind the scenes, preventive arrests start to be made. With regard to the weekend after weekend protests in France, numbers like 1400 arrests made are bandied about by the Quisling media, but what’s not being disclosed is 1000 of these were preventive arrests. Arrest and imprisonment of people before any protest has even been made. When that begins, we’re on the slippery slope with occasional stops for doing things like arresting schoolchildren and treating them like POWs.

He reminds us of the situation in Venezuela:

If the government manages to put down what is in effect a rebellion, you end up with a dictatorship with a nice name like the Democratic People’s Republic of Whatever, as happened in Venezuela and with the usual dire results for the inhabitants.

The alternative is something akin to America’s Revolutionary War, which had a good outcome.

Pointman then discussed President Trump and the constant opposition he is facing:

A third and extremely rare outcome is a natural leader primarily in touch with the people rising to power. Even more rarely, if not uniquely, that person comes from the super-rich classes, who’re usually the power brokers and puppet masters behind the various thrones, and refuses to accommodate them. They will bring to bear every power at their command to destroy him, because he’s betrayed what should be his natural class, is re-energising swathes of the electorate to re-engage with politics and they’re rallying to the colours of someone who’s actually doing things for them.

That is exactly why Trump haters should rethink their position. President Trump has done and will do more to help America and her people than any president in living memory.

As far as Europe is concerned, Macron won’t last beyond one term (if that) and Merkel has seen the writing on the wall for her chancellorship:

The heart of power within the EU was Germany with France as the supporting act, but Fifi is finished and Merkel has become an electoral liability even for her own party. Like the stricken battleship Bismarck, she’s alone and steaming around in circles with no flotilla rushing to her aid. A few more torpedoes and she, like the EU, will be out of the game.

Eastern Europe, he says, is breaking away from Western Europe’s outlook on the world, recognising the sovereignty of the nation state rather than globalism.

Ultimately, voters everywhere in the West need to wake up, smell the coffee and become more engaged with what is going on. Are we being represented or, as Pointman posits, misrepresented? I think we know the answer.

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On Holy Saturday, the last day of Holy Week, Catholics and Protestants look forward to celebrating our Lord’s resurrection and preparing a feast for family and friends.

You might find my past posts about Holy Saturday helpful in understanding its significance:

What happens on Holy Saturday?

Holy Saturday and food traditions

Last week, I summarised the first part of English food journalist Mary Berry’s look at Easter food traditions in various countries and denominations, encompassing those in England, Jamaica, Russia and Poland.

The second, concluding part of Mary Berry’s Easter Feast on BBC2 aired this week. Berry’s enthusiasm for Easter as both a religious and gastronomic feast matches mine, which is part of what made the programme so enjoyable.

Christians make special breads at this time of year to recall Jesus as the Bread of Life. Lamb is also popular, as He is the Lamb of God, the once perfect sacrifice for our sins. As the Archbishop of York, the Right Revd John Sentamu explained, ‘Easter is the Passover of the Lord’.

Greece – tsoureki

Berry visited St Sophia’s Cathedral in London, a breathtakingly beautiful Greek Orthodox church.

Fr Savas, the priest who gave her a tour of the cathedral, said that 1,000 faithful normally attend Midnight Mass on Holy Saturday. Everyone takes a lit candle home and blesses their home with the light of the Resurrection.

Fr Savas’s cousin Katarina made the traditional Easter bread — tsoureki — for Berry. It is a plaited (braided) bread with a red coloured hard boiled egg at the top. The three plaits symbolise the Holy Trinity. The egg symbolises Jesus Christ, and the red colour represents His blood that He shed for our redemption.

Tsoureki dough is an enriched one, resembling a brioche. It is flavoured with two spices: one, mastiha, which comes from tree resin and the other, mahlepi, from ground cherry stones which gives it an almond flavour.

Before baking, the tsoureki is glazed with egg wash and topped with sesame seeds. My Little Expat Kitchen has a recipe that looks like the one Katarina used.

The Netherlands – Easter Men

With the help of her grandchildren, Berry showed us the Dutch Easter Men recipe that she makes every year.

She saw them many years ago on a trip to Holland around Easter and was intrigued.

Berry likes the simplicity of the one-rise bread dough used to make this charming little bread of a man holding an egg — the risen Christ — in his arms.

Once the dough is risen, Berry portions it out and cuts into each one to shape the head, the arms and the legs. She secures a raw egg in the folded arms and decorates the heads with raisins or blackcurrants for simple facial features. She glazes the men with egg wash and bakes them for 25 minutes. The egg cooks as the bread bakes.

This is a simple, straightforward recipe that children will enjoy. They can help shape the limbs, once cut, and decorate the faces.

The Philippines – lechon

Berry visitied a Catholic Filipina, May, who made her a roast pork dish called lechon, an Easter staple in the Philippines.

May explained that, traditionally, lechon is a whole hog roast. Her father used to roast several hogs at Easter when she was growing up in the Philippines. Friends, neighbours and family would then join in for a massive Easter feast.

For home cooks, May recommends pork belly. She brined one with thyme, crushed lemongrass and bay leaves. After several hours, she removed the pork belly from the brine and patted it completely dry, enabling it to crisp when baking.

May laid it out flat, skin side down, and, in the centre, placed a few stems of crushed lemongrass, several spring onions cut lengthwise in half and added a lot of crushed garlic on top before seasoning well with salt and pepper. She then rolled the pork belly tightly and tied it well with butcher’s string.

Once roasted, the lechon had a glossy, dark outer skin. Inside, the meat was moist and tender. The belly fat had cooked out, with some going into the meat. As this recipe has no crackling — the outer skin is too hard to eat — it might be suitable for cooks who prefer less fatty, yet succulent, pork.

May explained that the Spanish introduced lechon to the Philippines centuries ago.

The dish is also popular in Cuba.

England – roast lamb

Berry went to York to watch the Archbishop of York, John Sentamu — a political prisoner from Idi Amin’s Uganda who moved to England 42 years ago — make her own recipe for roast lamb.

Sentamu and his wife Elizabeth both talked about how important Easter was for their large families in Africa. Sentamu’s mother taught him and his siblings how to cook. His father insisted not only on roast lamb on Easter but also curried goat and curried chicken.

He and Elizabeth have been using Berry’s lamb recipe ever since they saw it on television years ago. Berry confessed that she’d long forgotten about it, but it looks very tasty, especially with the touches the Sentamus have added over the years.

The Archbishop cut the main bone out of the leg of lamb. He took several thin slices of deli ham, spread a herb (predominantly rosemary leaves) and garlic mix over each slice and layered them neatly one on top of the other. He rolled the layered ham neatly and inserted it into the middle of the lamb.

He layered his roasting tray generously with tarragon and placed the lamb on top. Around it he put several onion halves. He took a bottle of white wine and poured it until it just covered the onions.

Once the roast was resting, he strained the juices from the roasting pan and made a sumptuous gravy. My mouth was watering. The Sentamu family must surely look forward to lunch on Easter!

Italy – Easter dove bread

Colomba di Pasqua is a traditional Italian bread made in a dove mould, although it can be made in a round one.

The dove symbolises Christ, the Prince of Peace.

To see it made, Berry visited Maria, who cooks for the priests and visiting clergy at St Peter’s Italian Church in London’s Little Italy.

The dough is enriched, as for a brioche, and contains currants and orange peel. It requires a 12-hour rise.

Maria placed the dough into a dove-shaped mould and topped it with whole almonds and crushed sugar. This recipe, which includes a picture, resembles Maria’s. The sugar bakes into the top of the bread leaving an appetising topping.

I wished I’d been with the two very happy priests when she served it to them. They tucked in with gusto.

Easter feast

Nearly all of the show’s participants and their families gathered at Berry’s parish church in the Home Counties not far from London for a sumptuous Easter feast.

They brought their special dishes and Berry brought hers. If you can see the hour-long episode, you’ll agree with me that it was a once-in-a-lifetime, unforgettable occasion. I would love to have been there.

Everyone got along famously and tried to learn each other’s language. It was a beautiful sight as many promised to keep in touch with each other.

I hope that everyone’s Easter feast is as special as Mary Berry’s.

As we eat, may we remember the risen Christ and give thanks for His resurrection from the dead and His promise to us of life everlasting.

The migrant situation continues to unfold, some say in ‘biblical proportions’.

The photo of Aylan Kurdi on the beach is still featured in news media around the world and pundits are still talking about it, pointing to the need to take in hundreds of thousands of people.

Never mind that the Kurdi family was safe and left Turkey — yes, Turkey — only because the father wanted dental implants!

My other posts on this subject include an explanation of the Calais crisis and the European situation from earlier in the summer through to last week.

The drama continues.

Denmark

On September 9, 2015, The Telegraph reported that a ferry service between Germany and Denmark was suspended temporarily as migrants refused to disembark.

They wanted to go on to Sweden where benefits start sooner and are more plentiful.

Motorway traffic and trains nearby were also disrupted.

The article shows a photo of young men looking as if they were being persecuted holding signs saying they want to go to Sweden. One reads ‘I dont wont Dinmrk’. Another says ‘Helpe us’.

They are so fortunate to have made it that far without hindrance. One has to wonder about their ‘refugee’ status when they refuse to register with Danish authorities and insist on going on to Sweden. Surely, if one is truly suffering, one will accept any country and welfare conditions in Western Europe.

As with so many other stand-offs of this nature, there was a compromise (emphases mine):

Wednesday’s standoff was eventually resolved as around 100 migrants agreed to remain in Denmark, while the remaining 240 or so were allowed to disembark and continue their journey onward.

Denmark’s police chief said on Thursday that his officers have been ordered not to stop hundreds of refugees and migrants who have entered the country via Germany.

Jens Henrik Hoejbjerg says it is purely a police decision, adding Danish officers “can’t detain foreigners who do not want to seek asylum (in Denmark).”

There was no immediate reaction from the Danish government.

“Where they have gone I don’t know. I think they were picked up by private cars or have taken taxis further away. We are no longer monitoring them,” police commissioner John Andersen told news agency Ritzau.

“We didn’t want to empty the train by force,” he added.

Three hundred migrants, including children, were walking along the motorway nearby:

“We are trying to talk to them and tell them that it is a really bad idea to walk on the motorway,” a police spokesman said.

Indeed, but the whole idea is to create chaos. Forget about the legitimate passengers, some of whom were probably travelling on business, the migrants make this all about themselves and their needs.

Hungary

Another Telegraph report from September 9 said that a group of migrants broke through a line of Hungarian police stationed at the border with Serbia.

The migrants spotted a gap in Hungary’s new €100 million border fence. Slipping through, they trespassed on private property — maize and sunflower fields — to reach a nearby motorway which police then had to close.

Other migrants took to walking along the railway line just across the border.

The article states:

With Hungary at breaking point, the UNHCR announced that it expects another 30,000 migrants to enter Hungary in the next 10 days.

The migrants refuse to go to camps set up to process their cases and provide them with shelter.

The following videos give a better idea of what the Hungarian authorities are attempting to manage. The first shows what is going on in a town 230 kilometres from Budapest:

The second shows what really happened with the man and the pregnant woman on the railway tracks elsewhere in Hungary. When this story broke several days ago, the narrative — carried by many news outlets — said that police pushed a pregnant woman onto a railway line and that her husband had to dive in to stop them.

This is not what happened. The police did not push the woman down, her notional husband did, with force. One wonders about her condition now as well as that of the child in her arms and the foetus in her womb:

The violence from the migrants and their disregard for the police is eye-opening. Are these men real refugees or criminals?

Greece

Thousands of migrants continue to arrive on the Greek islands of Kos and Lesbos.

The Telegraph reported that a British couple now working in the Netherlands went to Lesbos for a holiday, but their hearts went out to the refugees, so they spent their time on the beach handing out water and a welcome:

“We’ve been asked ‘which country are we in now?’ Others know that they have landed in Greece but think they are close to Athens. They have no idea where Lesbos is,” said Ms Postill, 51.

“I think that if I was in their situation, I would probably try to reach Europe too. There are camps for refugees in Jordan and places like that but there is no work, nothing to do.”

Mr Priddy said many of the refugees they encountered were educated people. “We’ve met robotic engineers, a lawyer who helped prosecute Saddam Hussein, a doctor who spent 10 years in the UK, people who can speak three European languages.”

One cannot help but wonder why educated, influential people cannot apply for refugee status through the proper channels. It doesn’t make sense.

There is another side to the migration chaos in Greece, less heart-warming than what the British couple were experiencing.

Elsewhere in Lesbos, thousands of migrants marched down a main thoroughfare demanding better care from Greek authorities:

Chanting as they marched through the streets, some carried cardboard signs that read: “Don’t exploit refugees”.

Holy moly. It’s a bit difficult for authorities to get tens of thousands of people processed within a few hours. Again, such boldness seems odd from people who are truly seeking asylum. Sounds more as if economic migrants and criminals are doing this.

The horrifying reality is that:

The island of some 100,000 residents has been transformed by the sudden new population of some 20,000 refugees and migrants, mostly from Syria, Iraq and Afghanistan – and the strain is pushing everyone to their limits.

Not surprisingly, some of the residents on this resort island are unhappy:

In the video, one local man is seen shouting to the crowd, telling them to “go back to Turkey.”

In the end, authorities worked over a 24-hour period to process 15,000 migrants on Lesbos:

We worked very hard all night, without any sleep, and this is the result – we emptied the stadium in less than 24 hours,” Major-General Zacharoula Tsirigoti, the police officer in charge of the operation, told The Telegraph. “Everything is under control now. I didn’t expect to be able to do it in 24 hours.”

With Hungary threatening to build a bigger fence along its border with Serbia and to close the frontier, we expect the flow will increase, as people try to get into Hungary before the gates shut,” she said.

The report says the migrants cheered as they set sail on the ferries provided. No doubt the locals did, too. In the preceding days:

… up to 20,000 refugees, many of them Syrian, were sleeping rough in parks, streets and the port area of Lesbos’ main town, Mytilini.

They were unable to leave the island because there were not enough Greek officials to issue them with onward travel permits, stoking frustration that sometimes exploded into clashes with riot police.

An extra 65 police and coast guard officers were drafted in from Athens to register the refugees in a dusty, disused football stadium in Mytilini, in an all-night operation in which vast queues formed.

Specially laid-on ferries then transported around 6,000 refugees and migrants from Mytilini to Athens in just 24 hours, with more boats due to take another 4,500 refugees to the port of Piraeus near Athens on Wednesday.

The locals are terrified or angry. There are two short YouTube videos in English with Polish subtitles that I am having problems embedding, so will have to forego. One of them features a clearly upset lady who says that she and her neighbours cannot leave their homes. She does not feel as if she can take her child to school. In another, a man uses an old Anglo-Saxon word to get migrants to leave from his doorstep, telling them they are no longer in a war zone.

Italian-Austrian border

The following account from a Polish lady travelling between the border between Italy and Austria on September 6 is illuminating. It comes from a Biased BBC reader whose wife received the first person account from the woman, a close friend:

Half an hour ago on the border between Italy and Austria with my own eyes I saw a great many immigrants … With all solidarity with people in difficult circumstances I have to say that what I saw arouses horror … This huge mass of people – sorry, that’s right – but it’s an absolute wilderness … Vulgar, throwing bottles, loud shouts of “We want Germany” – and Germany is now a paradise? I saw an elderly Italian women surrounded in her car, pulled her by the hair out of the car and wanted the car drive away. The coach in which I was in the group tried to push over? [Faeces] thrown at us, banging on the door to be opened driver, spat on the glass … I ask for what purpose? How does this wilderness is to assimilate in Germany? I felt for a moment like a war … I really feel sorry for these people, but if they reached Poland – I do not think that they will receive from us any understanding … We have three hours to the border through which ultimately passed. The whole group of police cordon was transported back to Italy. Coach is damaged, faeces smeared, scratched, broken windows. And this is supposed to be an idea of the demographics? These big powerful hordes of savages? Among them was actually not women, no children – the vast majority of aggressive were young men … Just yesterday I read the news on all the websites subconsciously compassion, worried about their fate and today after what I saw just afraid and yet I am happy, they do not choose our country as their destination. We Poles are simply not ready to accept these people – neither culturally nor financially. I do not know if anyone is ready. EU walks pathology which has not had a chance to ever see, and sorry if anyone offended his entry … I think that drove up the car with humanitarian aid – mainly food and water and they just rolled their car they … With megaphones Austrians imparted a message that there is consensus that crossed over the border – they wanted to register them and let go on – but they did not understand these messages. I do not understand. And it was all the greatest horror … For those few thousand people nobody understood neither Italian nor the angielksu, or German, or Russian, or Spanish … What mattered was right fist … They fought for permission to move on and this agreement have – but did not realize that they have it! The coach of the French group hatches were open – everything was in the middle in a short time has been stolen, some things lying on the groundNever in my short life, I had no opportunity to watch such scenes and I feel that this is just the beginning. On a final note, it is worth helping, but not at any price.

More tomorrow.

This post is for adults only.

Those of a sensitive disposition are also forewarned as some readers may find the content disturbing.

As the content is so distressing, I would advise people to refrain from eating whilst reading it.

Lloyd de Mause (pronounced ‘de-Moss’) is an American social thinker who specialises in psychohistory — uncovering the whys and wherefores of our behaviour over millenia.  The next few posts feature his research into child abuse and the treatment of women in societies around the world from antiquity to the present day.

You might find his research either edifying or objectionable. However, it will provide food for thought, especially to readers who have ever wondered why so many children are treated as being lower than animals. These excerpts from deMause’s The Origins of War in Child Abuse and his 1997 lecture, ‘The History of Child Abuse’, will shed light on what might be atavistic human traits or learned behaviour.

I do not agree with de Mause’s conclusion that laws against corporal punishment and obligatory visits by ‘child helpers’ will produce a kinder, less violent society. I can think of real life examples for and against.

De Mause also believes that less corporal punishment will give way to fewer wars. I’m not sure about that, either. Fallen man will always look for violence and subjugation of another. Just read the news in peacetime. Some of the suspects had violent upbringings, others did not.

Content and summaries below are from de Mause’s lecture, ‘The History of Child Abuse’. Emphases are mine.

De Mause states that children have been beaten, molested, starved and sacrificed since ancient times in cultures around the world through to the present day. He posits that abusive parents and other adults view children as ‘poison containers’:

receptacles into which adults project disowned parts of their psyches, so they can control these feelings in another body without danger to themselves.

An abusive mother often feels insecure and unloved:

As one battering mother put it, “I have never felt loved all my life. When the baby was born, I thought he would love me. When he cried, it meant he didn’t love me. So I hit him.² Rather than the child being able to use the parent to detoxify its fears and anger, the parent instead injects his or her bad feelings into the child and uses it to cleanse his or herself of depression and anger.

A more complex, socially acceptable example is that of the Bimin-Kuskusmin of New Guinea, where it is taboo for a woman who has recently given birth to sleep with her husband. Consequently, the mother sleeps with the child and transfers her sexual feelings and gestures to them, particularly to sons. As this separation from the husband can last up to four years, a frustrated mother can cause a small boy pain in his genital area:

One three-year-old boy describes how whenever his mother was sad or angry she masturbated him so roughly that it hurt him, and he struggled to get away, complaining of a pain in his penis. “It hurts inside,² he told the ethnologist. “It goes Œkoong, koong, koong’ inside. I think it bleeds in there I don’t like to touch it anymore …”

The boy told the ethnologist that in order to overcome the pain in his privates, he cut himself on the leg, thereby creating a new pain which distracted him from the original one.

De Mause observes:

Boys in many New Guinea groups today, for instance, are so traumatized by the early erotic experiences, neglect and assaults on their bodies that they need to prove their masculinity when they grow up and become fierce warriors and cannibals, with a third of them dying in raids and wars. In fact, I have found that rather than the incest taboo being universal–as anthropologists claim–it is incest itself that has been universal for most children in most cultures in most times. A childhood more or less free from adult sexual use is in fact a very late historical achievement, limited to a few fortunate children in a few modern nations.

He then looks at late 20th century statistics on incest in the United States, Canada, Latin America,  England and Germany. I couldn’t help think of the eagerness of education ‘experts’ to push for sex education among younger and younger children in our schools when I read this:

In America … Adjusting statistically for what is known about these additional factors [those from higher risk groups who were not interviewed, e.g. criminals, psychotics, prostitutes], I have concluded that the real sexual abuse rate for America is 60 percent for girls and 45 percent for boys, about half of these directly incestuous.

A recent Canadian study by Gallup of 2,000 adults has produced incidence rates almost exactly the same as those found in the United States. Latin American family sexual activity–particularly widespread pederasty as part of macho sexuality–is considered even more widespread. In England, a recent BBC “ChildWatch” program asked its female listeners–a large though admittedly biased sample–if they remembered sexual molestation, and, of the 2,530 replies analyzed, 83 percent remembered someone touching their genitals, 62 percent recalling actual intercourse. In Germany, the Institut für Kindheit has recently concluded a survey asking West Berlin schoolchildren about their sexual experiences, and 80 percent reported having been molested.

Of India, he states:

Childhood in India begins, according to observers, with the child being regularly masturbated by the mother, the girl “to make her sleep well,” the boy “to make him manly.” The child sleeps in the family bed, witnesses and most likely takes part in sexual intercourse between the parents

Child marriage was, of course, a long-standing Indian practice. When laws were passed in 1929 trying to outlaw it, the government was overwhelmed by men insisting that early marriage was an absolute necessity, since little girls were naturally very sexual and must be married early if they are to be restrained from seducing adults …

The Indian subcontinent, in fact, still has many groups, such as the Baiga, where actual incestuous marriage is practiced, between fathers and daughters, between mothers and sons, between siblings and even between grandparents and their grandchildren–thus disproving the oft-repeated anthropological truism that “no known tribe has ever permitted incest” because if it were allowed society would surely cease functioning. In many of these villages, the children move at the age of 5 or 6 from the incestuous activities of the family bed to spend the rest of their childhood in sex dormitories, where they are initiated by older youth and men into intercourse with a succession of other children, none for longer than three days at a time, under threat of gang rape.

China’s social history, he says, shows:

the same institutionalized rape rituals as in India, including the pederasty of boys, child concubinage, the castration of boys to be used sexually as eunuchs, marriage of young girls to a number of brothers, widespread boy and girl prostitution and the regular sexual use of child servants and slaves. So prevalent was the rape of little girls that Western doctors found that, as in India, few girls entering puberty had intact hymens. Even the universal practice of foot binding was for sexual purposes, with a girl undergoing extremely painful crushing of the bones of her feet for years in order that men could make love to her big toe as a fetish …

Childhood in Japan:

still includes masturbation by mothers “to put them to sleep.” Parents often have intercourse with their children in bed with them, and “co-sleeping,” with parents physically embracing the child, often continues until the child is ten or fifteen. One recent Japanese study found daughters sleeping with their fathers over 20 percent of the time after age 16. Recent sex surveys report memories of sexual abuse even higher than comparable American studies, and “hot lines” of sexual abuse report mother-son incest in almost a third of the calls … Even today, there are rural areas in Japan where fathers marry their daughters when the mother has died or is incapacitated, “in accordance with feudal family traditions.”

In the Middle East:

Historically, all the institutionalized forms of pedophilia which were customary in the Far East are documented extensively for the Near East, including child marriage, child concubinage, temple prostitution of both boys and girls, parent-child marriage (among the Zoroastrians), sibling marriage (quite common among Egyptians), sex slavery, ritualized pederasty and child prostitution. Masturbation in infancy is said to be necessary “to increase the size” of the penis, and older siblings are reported to play with the genitals of babies for hours at a time. Mutual masturbation, fellatio and anal intercourse are also said to be common among children, particularly with the older boys using younger children as sex objects. The nude public baths (hammam) are particularly eroticized in many areas, being especially notorious as a place of homosexual acts, both male and female.

Girls are used incestuously even more often than boys, since females are valued so little. One report found 80 percent of Near Eastern women surveyed recalled having been forced into fellatio between the ages of 3 and 6 by older brothers, cousins, uncles and teachers. The girls rarely complain, since “if there is any punishment to be meted out, it will always end up by being inflicted on her.” Arab women know that their spouses are pedophiles and prefer having sex with children to having sex with them. Their retribution comes as follows. When the girl is about 6 years old, the women of the house grab her, pull her thighs apart and cut off her clitoris and often also her labia with a razor, thus usually ending her ability to feel sexual pleasure forever.

De Mause views the clitoridectomy as an act of incest. Of genital mutilation of girls and boys, he says:

In all these cases, the child is being used for the sadistic sexual pleasure of the parent. In fact, circumcision ceremonies are often followed by drinking parties that end in intercourse, so sexually arousing is the circumcision—in some areas, the traveling circumcizer is actually accompanied by some prostitutes, who know how sexually excited villages become after the ceremony …

Oh, the carnality of it all. If this does not illustrate man at his hungriest for flesh to abuse, then what does?

Any time that people lust after flesh, whether to beat it or abuse it sexually, they would do well to ask why they feel that need. Sadly, most who engage in this practice are too caught up in flesh to step back for a moment to examine their thoughts and desires.

De Mause explains how the child as ‘poison container’ works in contemporary Greece:

As one peasant community in rural Greece puts it, you must have children around to put your bad feelings into, especially when the “Bad Hour” comes around. An informant describes the process as follows:

One of the ways for the Bad Hour to occur is when you get angry. When you’re angry a demon gets inside of you. Only if a pure individual passes by, like a child for instance, will the “bad” leave you, for it will fall on the unpolluted.

Newborn infants, in particular, were perfect poison containers because they were so “unpolluted.” The newborn then became so full of the parent’s projections that even if he or she is allowed to live (up to half the children in early societies were murdered at birth), the infant had to be tied up–tightly swaddled in bandages for up to a year or more—to prevent it from “tearing its ears off, scratching its eyes out, breaking its legs, or touching its genitals,” i.e., to prevent it from acting out the violent and sexual projections of the parents.

It seems to me from personal observation that many adults coo over a tiny infant only to demonise it when it starts developing an inquisitive nature or personality a few years later. The much loved, much indulged baby becomes a ‘little devil’ or, more benignly, an ‘imp’ or a ‘rascal’. Admittedly, most of us tested the waters in our early years, but observe how quickly adult opprobrium sets in and lasts until our adulthood. Then, it often reverts back to indulgence, excuse-making and the need of the parent for the child.

I know a number of middle-aged married American mothers who say of their adult offspring, ‘I hope they don’t move away. I need all my babies around me’, or ‘All my children and their families live within a three-block radius; they are there when I need them’.

So, it seems that once trained to be independent, the parent views the adult child as cleansed anew — reborn, as it were — and becomes a revered ‘poison container’ for the parent’s anxieties and fears in their advancing years.

This, too, is something which seems to have gone on since time began.  Perhaps it is a good thing in that a parent finally feels free and able to invest positive emotional energy in the adult child. However, in a pathological situation, it happens when the child has his best years ahead of him personally and professionally. In the worst sense, the parent is still controlling the child’s development, dreams and aspirations.  In this case, the parent still relies on carnality and the need for the ‘poison container’.

De Mause points out that anxious adults used children as sacrificial poison containers to ensure commercial and other successes. Child sacrifice was a means of appeasing the gods, a practice that began in pagan times and continues into the present day:

Typical was Carthage, where a large cemetery has been discovered called The Tophet filled with over 20,000 urns deposited there between 400 and 200 B.C. The urns contained bones of children sacrificed by their parents, who often would make a vow to kill their next child if the gods would grant them a favor–for instance, if their shipment of goods were to arrive safely in a foreign port. Some urns contain the bones of stillborn babies along with the bones of two-year-olds, indicating that if the promised child was not born alive, an older child had also to be killed to satisfy the promise. The sacrifice was accompanied by a music, wild dancing and riotous orgy, and was probably accompanied by the ritual rape of virgin girls, as it was with the Incans. Plutarch told how the priests would “cut their throats as if they were so many lambs or young birds; meanwhile the mother stood by without a tear or moan [while] the whole area before the statue was filled with a loud noise of flutes and drums…” Sacrifice, rape and genital mutilation of young girls continues to take place today in the Andean mountains, particularly to ward off the guilt coming after successful cocaine deliveries. These ceremonies, from antiquity to today, resemble closely the satanic rituals made familiar recently in the newspapers, using the infliction of rape, sexual mutilation and other horrors in order to visit upon child victims elements of the traumas of the satanists’ own childhood.

Furthermore:

That child sacrifice was carried out mainly by the rich in each of these early societies confirms my theory that it is a guilt-reducing technique. Whenever new ventures were begun, children would be sacrificed. Whenever a new building or bridge was built, a child would be buried within it as a “foundation sacrifice.” Children still play at capturing a child and making it part of the bridge in “London Bridge’s Falling Down.” Children’s bodies were particularly useful in curing disease. Whatever one’s physical ills, a child could be used to “absorb” the poison that was responsible. When, for instance, one wanted to be cured of leprosy, one was supposed to kill a child and wash one’s body in its blood. When one wanted to find out if a house whose previous occupants had died of plague was still infected or not, one rented some children to live in it for several weeks to see if they died–rather like the use of canaries in mines to detect poisonous gas. When one was impotent, depressed or had venereal disease, doctors prescribed having intercourse with a child. As late as the end of the nineteenth century, men who were brought into Old Bailey for having raped young girls were let go because “they believed that they were curing themselves of venereal disease.” Raping virgins was particularly effective for impotence and depression; as one medical book put it, “Breaking a maiden’s seal is one of the best antidotes for one’s ills. Cudgeling her unceasingly, until she swoons away, is a might remedy for man’s depression. It cures all impotence.” And, of course, whenever a parent had a disease, they always had their children handy to absorb the poison. Thus British doctors in the nineteenth century regularly found when visiting men who had venereal disease that their children also had the same disease–on their mouths, anuses or genitals.

De Mause sees the advancement of women as the way out of this situation. He theorises that the better women are able to mother, the better off families — and societies — are. And the way for them to become better mothers is by coming to grips with their past — especially the traumas:

The crucial relationship in this evolution is the mother-daughter relationship. If little girls are treated particularly badly, they grow up to be mothers who cannot rework their traumas, and history is frozen. For instance, although China was ahead of the West in most ways during the pre-Christian era, it became “frozen” and fell far behind the West in evolutionary social and technological change after it adopted the practice of footbinding girls. Similarly, the clitoridectomy of girls in Moslem societies has inhibited their social development for centuries, since it likewise puts a brake on the ability of the next generation of mothers to make progress in caring for their children.

However, there is more complexity to this than meets the eye, because we have all been conditioned not only by our family influences, but those which are cultural and historical as well. More on this tomorrow.

Meanwhile, let this serve as a message that we should not be regressing to the past, as Christian complementarians and their Muslim counterparts would have us do, but to move forward in God’s grace to make use of all the precious gifts He has given us and our offspring. If there is one thing in this life we really should do ‘for the children’, this is it.

Tomorrow: De Mause’s six childrearing modes

Yesterday’s post provided not only background on Dr David X Li but also a brief history of mathematical models used in the world of finance and insurance which gave rise to quantitative finance, of which Li was a significant part.

Quantitative finance, in turn, allowed a number of new financial instruments to be traded.  The highly-specialised physicists and economists devising and implementing these mathematical models are called quants.

Although traders have made derisive remarks about quants, it’s thanks to the quants that traders make even greater sums of money.  When an investment goes according to plan, the greater the risk, the greater the reward.  Of course, the down side is that when things go wrong, the losses are tremendous.

However, we have had an added complication over the past two decades with these new financial vehicles which quantitative finance has enabled.  Essentially, investors’ appetites have been whetted for more and more of them.  This has the very real potential for producing global economic crises, such as the one we are seeing unfold right now.

Any financial and mathematical experts should note that what follows is intended to be a layman’s approach to understanding how we got where we did. It is not a financial white paper!  Sources will be linked throughout.

Who was Gauss?

David X Li’s Gaussian copula was named after Carl Friedrich Gauss (1777-1855), a brilliant mathematician and statistician who lived in Goettingen, part of what was the German Kingdom of Hanover, now Lower Saxony.  Some of my readers will be interested to know that he was raised in a Lutheran household.

Although his name might be unknown to many of us, Gauss is one of our greatest mathematicians of all time and had a lasting influence not only on mathematics but also on science.  A full list of his many achievements can be found on Wikipedia’s page of topics named after him.

Gauss loved formulae and called mathematics ‘the queen of sciences’. Christians owe him a debt of gratitude, because, in an attempt to discover his date of birth (unrecorded by his illiterate mother), he ended up devising a formula to calculate when Easter Day had occurred throughout history as well as when it would occur in future.  (He knew he had been born on a Wednesday, eight days prior to the Feast of the Ascension. Ascension Day is 40 days after Easter.  Using the date of Easter for 1777 as the point of reference, he worked out that he was born on April 30 that year.)

Dr Li’s Gaussian copula at work

Li devised his Gaussian copula in 2000.  Copula is a Latin word meaning ‘coupling’, ‘link’ or ‘tie’.  Yesterday’s post has more background on Li as well as his reasons for developing this copula for use in quantitative finance by investment banks.

Li’s Gaussian copula isn’t the only one in use.  A brief description along with the accompanying calculations of copulas shows that quants employ a variety of them. Some of these are run through or created by an algorithm, the intriguingly named Monte Carlo integration.

Wikipedia explains how quants use copulas to measure risk and probability as well as derive pricing (emphases mine):

In risk/portfolio management, copulas are used to perform stress-tests and robustness checks: panic copulas are glued with market estimates of the marginal distributions to analyze the effects of panic regimes on the portfolio profit and loss distribution. Panic copulas are created by Monte Carlo simulation, mixed with a re-weighting of the probability of each scenario.[8]

… As far as derivatives pricing is concerned, dependence modelling with copula functions is widely used in applications of financial risk assessment and actuarial analysis – for example in the pricing of collateralized debt obligations (CDOs).[9] Some believe the methodology of applying the Gaussian copula to credit derivatives to be one of the reasons behind the global financial crisis of 2008–2009.[10][11] Despite this perception, there are documented attempts of the financial industry, occurring before the crisis, to address the limitations of the Gaussian copula and of copula functions more generally, specifically the lack of dependence dynamics and the poor representation of extreme events.[12] There have been attempts to propose models rectifying some of the copula limitations.[12][13][14]

Others will disagree with me, but I do not think that Li really thought he had created a mathematical monster which he deliberately let loose on an unsuspecting world.  From my reading, it seems as if he was excited to have found a solution to one of investment banking’s most intractable problems, that of default correlation.

In other words, the financial institutions coming up with sophisticated investments concerning loans and debt need to know the probability that a company, country or individual will default, when that might be, if there will be a knock-on effect and how widespread that effect will be.  Think of these banks as casinos and investors as gamblers: the house is supposed to win!

Li’s mistake was to apply one insurance situation, the broken heart syndrome — how soon a widow(er) will die after the death of a spouse — to finance.  His actuarial scenario has considerably fewer variables.  Financial instruments have much more complex dependencies.  What’s more, events triggering these dependencies appear to be quite random with unexpected effects from one region of the world to another.

And that is why there is big money to be made.  Equally, it also explains why our global economy is in meltdown.

A risky, frisky investment landscape

Quantitative finance’s mathematical models, including Li’s Gaussian copula, have enabled a number of newish types of investments to dominate the upper strata of the marketplace. Whilst you and I might never have the money — or the nerve — to buy one of these, their trade affects our lives enormously.  Keep in mind when you read of ‘government’ money below, that means your taxes!

Derivatives:

A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.

This is a more straightforward type of financial instrument involving speculation on commodities, foreign exchange rates and, most often, interest rates.  I have oversimplified this, so for more detail, please see the Wikipedia link to find out how these work.

The risk scenarios are many and have already produced problems not only for banks but also for governments.  Here are two examples from Wikipedia.  The first involved AIG and the US government:

American International Group (AIG) lost more than US$18 billion through a subsidiary over the preceding three quarters on Credit Default Swaps (CDS).[18] The US federal government then gave the company US$85 billion in an attempt to stabilize the economy before an imminent stock market crash. It was reported that the gifting of money was necessary because over the next few quarters, the company was likely to lose more money.

Most recently:

UBS AG, Switzerland’s biggest bank, suffered a $2 billion loss through unauthorized trading discovered in September, 2011. [21]

Why are these sums so huge?

The problem with derivatives is that they control an increasingly larger notional amount of assets and this may lead to distortions in the real capital and equities markets. Investors begin to look at the derivatives markets to make a decision to buy or sell securities and so what was originally meant to be a market to transfer risk now becomes a leading indicator. (See Berkshire Hathaway Annual Report for 2002)

Credit default swaps:

A credit default swap (CDS) is similar to a traditional insurance policy, in as much as it obliges the seller of the CDS to compensate the buyer in the event of loan default. Generally, this involves an exchange or “swap” of the defaulted loan instrument (and with it the right to recover the default loan at some later time) for immediate money – usually the face value of the loan.

However, there is a significant difference between a traditional insurance policy and a CDS. Anyone can purchase a CDS, even buyers who do not hold the loan instrument and may have no direct “insurable interest” in the loan. The buyer of the CDS makes a series of payments (the CDS “fee” or “spread”) to the seller and, in exchange, receives a payoff if the loan defaults.

Wikipedia’s page explains the various types of CDSs available.  The market for these instruments has exploded during the 20 years they have been around.  The CDS market is worth several trillion dollars.  That’s scary enough, but CDSs require no reporting to government agencies and are not traded on any exchanges.  Therefore, they lack transparency, which is dangerous where those sums of money are concerned.

Wired explains why CDSs are popular:

If you’re an investor, you have a choice these days: You can either lend directly to borrowers or sell investors credit default swaps, insurance against those same borrowers defaulting. Either way, you get a regular income stream—interest payments or insurance payments—and either way, if the borrower defaults, you lose a lot of money. The returns on both strategies are nearly identical, but because an unlimited number of credit default swaps can be sold against each borrower, the supply of swaps isn’t constrained the way the supply of bonds is, so the CDS market managed to grow extremely rapidly. Though credit default swaps were relatively new when Li’s paper came out, they soon became a bigger and more liquid market than the bonds on which they were based.

It is not always necessary for the buyer of some CDSs to own the underlying debt.  The CDS in such a situation is a naked CDS.  Controversy lingers whether naked CDSs precipitated Greece’s economic crisis.  Wikipedia presents two points of view. This is what opponents of naked CDSs say:

Critics assert that naked CDS should be banned, comparing them to buying fire insurance on your neighbor’s house, which creates a huge incentive for arson. Analogizing to the concept of insurable interest, critics say you should not be able to buy a CDS—insurance against default—when you do not own the bond.[29][30][31] Short selling is also viewed as gambling and the CDS market as a casino.[14][32] Another concern is the size of CDS market. Because naked credit default swaps are synthetic, there is no limit to how many can be sold. The gross amount of CDS far exceeds all “real” corporate bonds and loans outstanding.[5][30] As a result, the risk of default is magnified leading to concerns about systemic risk.[30]

Naked CDS supporters say these instruments can actually help an economy:

Without speculators buying and selling naked CDS, banks wanting to hedge might not find a ready seller of protection.[14][29] Speculators also create a more competitive marketplace, keeping prices down for hedgers. A robust market in credit default swaps can also serve as a barometer to regulators and investors about the credit health of a company or country.[29][37]

Despite politicians’ assertions that speculators are making the Greek crisis worse, Germany’s market regulator BaFin found no proof supporting the claim.[35] Some suggest that without credit default swaps, Greece’s borrowing costs would be higher.[35]

Who knows?

Collateralised Debt Obligation:

Collateralized debt obligations (CDOs) are a type of structured asset-backed security (ABS) with multiple “tranches” that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand. CDOs’ value and payments are derived from a portfolio of fixed-income underlying assets. CDO securities are split into different risk classes, or tranches, whereby “senior” tranches are considered the safest securities. Interest and principal payments are made in order of seniority, so that junior tranches offer higher coupon payments (and interest rates) or lower prices to compensate for additional default risk.

Wired explains that Li’s Gaussian copula ignored the underlying securities in these tranches.  All the quants needed to worry about was the correlation number his copula produced.  That would tell them all they needed to know. This meant rapid pricing and quick release to market.

As a result, just about anything could be bundled and turned into a triple-A bond—corporate bonds, bank loans, mortgage-backed securities, whatever you liked. The consequent pools were often known as collateralized debt obligations, or CDOs. You could tranche that pool and create a triple-A security even if none of the components were themselves triple-A. You could even take lower-rated tranches of other CDOs, put them in a pool, and tranche them—an instrument known as a CDO-squared, which at that point was so far removed from any actual underlying bond or loan or mortgage that no one really had a clue what it included. But it didn’t matter. All you needed was Li’s copula function.

The CDS and CDO markets grew together, feeding on each other. At the end of 2001, there was $920 billion in credit default swaps outstanding. By the end of 2007, that number had skyrocketed to more than $62 trillion. The CDO market, which stood at $275 billion in 2000, grew to $4.7 trillion by 2006.

CDOs were linked to the subprime mortgage crisis just a few years ago.  Wikipedia says:

The CDO provided a key link between the global pool of fixed income investor capital and the U.S. housing market. In a Peabody Award winning program, NPR correspondents argued that a “Giant Pool of Money” (represented by $70 trillion in worldwide fixed income investments) sought higher yields than those offered by U.S. Treasury bonds early in the decade. Further, this pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment banks on Wall Street answered this demand with financial innovation such as the mortgage-backed security (MBS) and collateralized debt obligation (CDO), which were assigned safe ratings by the credit rating agencies. In effect, Wall Street connected this pool of money to the mortgage market in the U.S., with enormous fees accruing to those throughout the mortgage supply chain, from the mortgage broker selling the loans, to small banks that funded the brokers, to the giant investment banks behind them. By approximately 2003, the supply of mortgages originated at traditional lending standards had been exhausted. However, continued strong demand for MBS and CDO began to drive down lending standards, as long as mortgages could still be sold along the supply chain.[24] A sample of 735 CDO deals originated between 1999 and 2007 showed that subprime and other less-than-prime mortgages represented an increasing percentage of CDO assets, rising from 5% in 2000 to 36% in 2007.[25]

Bottom line: big trouble

As you can see, real life proved Li and the quants wrong. Quants use a number of different models, none of which appears to be perfect.  And Li’s, based on correlation, is a disaster when used for  sophisticated financial instruments.  Nassim Nicholas Taleb, author of The Black Swan, said:

The thing never worked. Anything that relies on correlation is charlatanism.

Wired points out that the quants were aware of the fallibility of their models early on:

In 1998, before Li had even invented his copula function, Paul Wilmott wrote that “the correlations between financial quantities are notoriously unstable.” Wilmott, a quantitative-finance consultant and lecturer, argued that no theory should be built on such unpredictable parameters.

As the Wired article states, at best, only 99% of the risk can be eliminated.  Reading this, we ask, ‘Well, what’s the problem?’  The answer is that when the remaining 1% of risk goes wrong, everything goes pear-shaped.

The mortgage-CDO link was built on the assumption that the housing market would remain buoyant with few defaults.  (I could have told them that was erroneous, but I am pessimistic by nature.) Unfortunately, when it started taking a dive, the same calculations continued to be used.

However, investment banks overlooked or ignored warnings.  Their money-spinning, global instruments were too exciting.  The business they generated was not to be missed. The investors’ greed was — and still is — palpable.

Wired explains why the madness didn’t stop a few years ago:

The [bank] managers, who made the actual calls, lacked the math skills to understand what the models were doing or how they worked. They could, however, understand something as simple as a single correlation number. That was the problem.

Another example of a little knowledge being a dangerous thing.

Wired adds:

“Li can’t be blamed,” says [Kai] Gilkes of CreditSights. After all, he just invented the model. Instead, we should blame the bankers who misinterpreted it. And even then, the real danger was created not because any given trader adopted it but because every trader did. In financial markets, everybody doing the same thing is the classic recipe for a bubble and inevitable bust.

The article concludes:

In the world of finance, too many quants see only the numbers before them and forget about the concrete reality the figures are supposed to represent. They think they can model just a few years’ worth of data and come up with probabilities for things that may happen only once every 10,000 years. Then people invest on the basis of those probabilities, without stopping to wonder whether the numbers make any sense at all.

As Li himself said of his own model: “The most dangerous part is when people believe everything coming out of it.”

Is there an immediate solution? Probably not.  However, what won’t help is the relentless printing of more money by Western governments, which will undoubtedly serve to perpetuate the cycle.  Can we stop investors’ greed?  No.  Should we push for more regulation or transparency on some of these investments?  Changes must be made but preferably not through legislation.  Let the market sort itself out for once.  Peer pressure can be brought to bear.

Tomorrow: Primary school maths prove you can’t get something out of nothing

Sue from Muffled Vociferation (in the UK links at the bottom of my blogroll) has been giving her readers regular updates on the state of the European Union, our modern-day Tower of Babel.

The recent protests in Spain have spilled into other countries, including the UK, where an international protest took place on May 29, 2011.  On Monday, May 30, Sue wrote:

.. things are not looking so good. Dear Jean-Claude [Trichet — President of the European Central Bank] is obviously hoping that some sort of divine intervention is going to save the Euro and EU. The bickering over bailouts has begun to take its toll and the love affair between Germany and France is way past the mediation stage. They’ve tried just about everything with Greece from handing over millions of Euros to bullying tactics which would make the ECHR’s hair stand on end!

European Monetary Affairs Commissioner Olli Rehn is adamant that Greece will not default and return to the Drachma. The sheer audacity of the man is enough to take any normal person’s breath away ” I do not see a withdrawal from the monetary union as a serious option. It would harm the Greek economy and be a setback for European integration. The euro is more than a currency; it’s the central political project of our community. For this reason, too, we would not accept a Greek withdrawal”.  NOT ACCEPT?

This non-acceptance reminds me of a conversation I had a year ago with someone who, like me, loves Europe but loathes the idea of the European Union He said, ‘Surely, we just withdraw, keeping all our trade agreements in place’I said that if the UK withdrew, the EU would not ‘accept’ our withdrawal and would make an example of us by refusing our products and denying us free trade with our European partners, which has been in place long before there was a bloated EU HQ in Brussels.

What began as freer trade in the latter part of the 20th century has now turned into a bewildering bureaucracy staffed with dozens of people who are unknown — and those are just the ministers and members of the European Parliament!  We are told what size and shape of fruit and vegetables we can buy, just to cite one well-known example.  This helps no one.  Farmers are throwing out loads of produce every year because they cannot bring it to market.  In the UK, our hard-pressed fishermen are forced to dump tonnes of fish a year because they can only catch certain fish at certain times of year.  Yes, it’s a policy intended to conserve fish stocks, yet it results in thousands (at least) of discarded fish per year which could be feeding the British public, the poorest of whom are always being hectored by our Government to improve their diets.  Earlier this year Channel 4 carried a documentary on this subject, fronted by foodie and farmer Hugh Fearnley-Whittingstall — a shocking exposé.  But, I digress.

Back to Sue, who says the EU officials have underestimated the current and growing discontent among members of the public:

Now led by the Spanish and Greeks, spontaneous demonstrations of dissatisfied citizens are showing their distaste for having to pay with their livelihoods and homes for the incompetence of those who have forcibly thrust them into a club that benefits no-one but themselves.

On May 31, she added (emphases mine):

The people who have gathered in Trafalgar Square, Syntagma Square, Bastille Square and Puerta del Sol Square are not just a young mob of students, social workers and civil servants and UK Uncut troublemakers. They are ordinary people, yes there are socialists, communists, civil servants and students,  but more importantly there are people who have lost their jobs and homes too.

Just remember, even though the PIIGS were recipients of all that EU funding, their citizens were not given a referendum on the EU either. They too, trusted their politicians just as we did, hoping that what they did, would enable them to create better futures for themselves and their children. They may have taken advantage of low interest loans but they were encouraged to do so and if they had been warned of the risks, they would probably have thought twice.

It’s all very well for those of us not caught up in the debt trap to say, ah well, it’s their fault but whether you like it or not, some greedy, corrupt people did very well out of their misery. Even now, the powers that be, are being paid extortionate salaries with solid gold pensions while Europe crumbles under their feet …

And — Sue’s news from June 1 points to a possible return of the Greek drachma.  Are they going ahead with a withdrawal from the euro??  As you can see, the exchange rates from Reuters has no information — yet.

I am cautiously optimistic and hope that this could be the beginning of the end of this rather unhappy experience which has served only to benefit a privileged few bureaucrats.  I’d love to have put ‘public servants’, but they know nothing about service, just lining their pockets with our taxes, more and more of which go towards their salaries and pensions.

A number of Europeans — British included — believed that the EU would represent a model for freedom of travel and employment, linked to a stable common currency.  Some of us here in the UK — myself included — were disappointed when we didn’t adopt the euro.  Now, most of us are relieved.  As my mother always said, ‘Things happen for a reason’.  Thank goodness!

I hope that Greece — and the other euro countries — will be able to do the right thing and wish them the very best in extricating themselves from the current economic turmoil.

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