For those of us who dwell in that hypothetical construct known as reality, the following E.L. Doctorow keynote address — critical of ideological fundamentalism of all types — is a breath of fresh air.
Its from the April 2007 joint meeting of the American Academy of Arts and Sciences and the American Philosophical Society on the theme of "The Public Good: Knowledge as the Foundation for a Democratic Society" titled "The White Whale."
Here is an excerpt:
"What does it say about the United States today that this fellowship of the arts and sciences and philosophy is called to affirm knowledge as a public good? What have we come to when the self-evident has to be argued as if–500 years into the Enlightenment and 230-some years into the life of this Republic–it is a proposition still to be proven? How does it happen that the modernist project that has endowed mankind with the scientific method, the concept of objective evidence, the culture of factuality responsible for the good and extended life we enjoy in the high-tech world of our freedom, but more important for the history of our species, the means to whatever verified knowledge we have regarding the nature of life and the origins and laws of the universe…. How does it happen for reason to have been so deflected and empirical truth to have become so vulnerable to unreason?
For some time now we have been confronted by a religiously inspired criminal movement originated in the Middle East that advertises its values by suicidal bombings, civilian massacres and the execution of arbitrarily selected victims by the sawing off of their heads. However educated, well-to-do and politically motivated the leaders of this conspiracy may be, they have invoked an extreme fundamentalist reading of their sacred text to mentally transport their rank and file back into the darkness of tribal war and shrieking, life-contemptuous jihad.
So that history, as we look to that part of the world, seems to be running backward, as if civilization is in reverse, as if time is a loop…
Apart from this uncanny synchronous spin, the domestic political fantasy life of these past seven years finds us in an unnerving time loop of our own making–in this country, quite on its own, history seems to be running in reverse and knowledge is not seen as a public good but as something suspect, dubious or even ungodly, as it was, for example, in Italy in 1633, when the church put Galileo on trial for his heretical view that the earth is in orbit around the sun.
I am not a scientist and don’t deal in formulas, but as a writer I would, in the words of Henry James, take to myself "the faintest hints of life" and convert "the very pulses of the air into revelations." That surely provides me with a line to unreason. And so when I read that the President of Iran denies the historical truth of the Holocaust, and when I hear the President of the United States doubting the scientific truth of global warming, I recognize that no matter what the distance they would keep between them, and whatever their confrontational stance, they are fellow travelers in the netherworld.
Two things must be said about knowledge deniers. Their rationale is always political. And more often than not, they hold in their hand a sacred text for certification.
The entire screed is well worth your time reading it. Joe Kernan, I am talking to you.
The White Whale
The Nation, June 26, 2008 (July 14, 2008 print edition)
Welcome to the second half of 2008.
We begin the second half pretty much the same way we finished the first half: Equities under pressure in Asia, Europe, and judging by the futures in the US, domestically as well.
One of the things that us foolish idealists hope for is that the current set of crises will force the fantasy brigades to actually start interacting with that hypothetical construct known as reality. Perhaps by confronting the actual problems facing the economy, we can actually begin the process of repairing them by taking the painful write-downs and instituting the medicinal policies that make sense.
Such hopes are misplaced. The latest evidence of such comes from no other than Blackstone Group (BX) CEO Stephan Schwarzman. On the occasion of the private equity firm’s one year IPO anniversary, Schwarzman places the fault for the current crises squarely on FASB 157.
You read that correctly: This was not the fault of incompetent lending to borrowers who could never afford to pay back mortgages; nor was it the fault of the rating agencies that slapped AAA on paper that turned out to be garbage; nor was it the responsibility of an MIA Fed that utterly failed in their responsibilities as the chief supervisor of the banking system; nor was it the liability of fund managers who in a misguided grab for yields bought billions of dollars worth of securities that they had no idea of the specific details contained therein.
No, it was the accountants’ faults.
You see, those persnickety bean counters forced banks and brokers to actually write down paper for which there was no market.
Therein lies the foible of Schwartzman’s Folly, for if you own marketable securities for which there is no market, then by definition, these are not really marketable securities.
How then to price all of this paper on the books? Why, just rely on the people who bought them in the first place! Never mind that they don’t understand what they own, they failed to do their due diligence before buying this garbage in the first place. Do not acknowledge these folks have an enormous personal incentives NOT to mark this junk down.
You can trust them! They’re good people.
Perhaps this helps to explain why Blackstone Group’s stock is off nearly 50% since the IPO: The foolish shareholders of BX have been making the mistake of marking the stocks-to-market. My suggestion: Forget that they are a private equity firm, and consider instead your own approximate fair value interpretation of what the company is worth!
Attention fund managers: Here is my new Stephan Schwarzman inspired idea. Y’all should be buying Blackstone in the open market today at $18, and at the four o’clock close, be marking it at $36. That will be not only be your fair value interpretation of what it’s worth, but it reflects a 100% gain instantly.
And, that’s before the $.30 dividend.
Indeed, for those investors struggling with the current selloff, I suggest you forgo mark-to-market accounting at present, and instead start implementing mark-to-subjective-self-interested valuations. Your portfolio returns, and you’re outside investors, will thank you for the immense improvements in your performance.
Musical reference and soundtrack via the Talking Heads
FASB 157 — Delayed, or Not? (November 15, 2007)
SFAS 157: Market Prices Too Low? Just Ignore Them! (March 31, 2008)
Are Bean Counters to Blame?
ANDREW ROSS SORKIN
NYT, July 1, 2008
Summary of Statement No. 157
Fair Value Measurements
Mohamed El-Erian Argues for Propping Up Asset Prices
Naked Capitalism, MARCH 18, 2008
We looked at what Murdoch was altering at the WSJ not too long ago in Murdoch’s WSJ Changes Creates Opening for NYT, FT.
Rupert Murdoch: The Last Hope for Journalism?
Part I: Murdoch’s Methods
Parts II & III after the jump.
Murdoch’s WSJ Changes Creates Opening for NYT, FT (April 2008)
Mr. Murdoch Goes to War
Atlantic, July/August 2008
Portfolio has an interesting discussion on what they term the “He-Said-She-Said” economy: “Inflation, energy, home prices, and tax rebates. Ordinary Americans and Wall Street professionals are at odds on issues like these and others at the center of the current economic malaise, according to the CNBC/Portfolio Wealth in America survey. And these differences have implications…Read More