THE STRANGE LOGIC OF SUPPORTING SUPERSIZED RISKS

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Dear You--

We've heard a lot about banks that are too big to fail, but this chart demonstrates, in a rather striking manner, how disproportionately large the top four banks have become. Together the total assets of the Big Four substantially exceed the total assets of the rest of the 8,095 banks put together. It is also noteworthy that the Big Four assets alone exceed $7 trillion - or roughly half the GDP of the entire country. 

It is hard not to be impressed by the vast size of the Big Four, but the picture becomes decidedly less impressive when one recalls that it was these very same banks who needed baling out not much more than a year ago. They were not the repositories of brilliant financial acumen they purported to be, but instead decidedly flawed organizations whose greed, ignorance and speculative excesses had practically brought the world economy to its knees, and initiated the most serious recession since the Great Depression with dire consequences for the U.S. economy as a whole, and particularly grievous effects on the employment situation with the loss of over 8 million jobs.

If these banks had been normal businesses they would have been put in to receivership without a second thought. As it is, they have not only been supported with the $700 billion plus TARP money, but also in innumerable other ways by the Fed with particular reference to extraordinarily cheap money which they have been able to re-invest in Treasury Bills and elsewhere at a guaranteed profit. This is social welfare for the Rich and Corporate Interests carried to excess; and it is wrong because: (1) It favors large financial interests disproportionately. (2) It is the antithesis of the free market economy we profess to believe in. (3) The banks themselves weren't put into receivership as would have been the case with most other businesses. (4) These banks haven't fundamentally changed their ways and in absolute defiance of both fairness and commonsense, have been left too big to fail.

It is ironic to contemplate all this on a day when the Republicans once again blocked a bill that would have put $30 billion at the disposal of smaller banks to be used to invest in Small Business. Not only do the Republicans come across as complete hypocrites and obstructionists, but one has to wonder why the Obama Administration is tilted so heavily towards Wall Street and the Big Banks.


On the other end of the scale, we have serious problems with many of our small banks with approaching 1,000 on the FDIC watch list and FDIC takeovers of insolvent banks running at unprecedented levels. Quite how we get credit and investment flowing at adequate levels under these circumstances is a matter we have to resolve as a matter of urgency. I deal with this issue in Titanic Nation: How to Avoid Icebergs: The Case For Fundamental Chane In The American Way Of Life.


Farewell for the moment. Write soon. I miss your wit and your company.




Victor.

ONE OF OUR AIRCRAFT CARRIERS IS MISSING; OR PERHAPS WE COUNTED WRONG

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Dear You—

The more I find out about what we are spending on defense – a much higher figure than what passes for our official defense budget – the more I have to shake my head in incredulity, and wonder why the American people accept this cesspool of corruption and incompetence with such equanimity. You are going to reply that few people understand the scale of the problem, and even fewer seem to care, and you are probably right; but a reasonable person might consider that the fact that over a $1 TRILLION PER YEAR is now involved would make someone, somewhere rise to the occasion, and mount an effective protest. Theoretically, it should be Congress, but since they are complicit in both the creation and maintenance of this mega-theft from the American people, it appears we shall have to look elsewhere. Arguably, we might do worse than the GAO – the Government Accountability Office – who have just issued two reports which castigate the Pentagon (the Department of Defense) for being unable to keep track of either its acquisition programs, or its current assets. In effect, the Pentagon is not quite sure what it is buying and is even more unsure of what it has bought, what it has paid, or where it all is..

Given that we are talking about some of the most costly and lethal weapons in the world here - everything from nuclear weapons to bombers costing over $2 billion each, that is not reassuring. It would appear that right now, if some nautically inclined Al Quaeda operative decided to attach his row boat to an aircraft carrier and steal it, we mightn’t even notice. Our stock control is that bad; and our cost control is worse. Let me quote directly from the July 13 2010 response to the GAO report issued by Pentagon Controller Robert Hale – as reported in Inside the Pentagon on July 29 2010. In effect, he pleaded guilty but promised to do better – which is pretty much what every previous controller has been saying for years. This is not a new problem. It is a chronic scandal of extraordinary seriousness which is not being resolved.

"The Department has begun laying a foundation for addressing weaknesses that currently impair our ability to identify, aggregate and account for the full cost of military equipment assets," Hale wrote. He added that members of DOD are working together to "define department-wide cost accounting requirements and develop the process and system capabilities needed to support better cost accounting and management."

"DOD has also acknowledged that it needs to do more to fix the problem. According to the study, interviews with top officials revealed that part of the problem is that DOD's size and complexity hampers consensus on solutions.

One might think, by the tone, that the Pentagon's "size and complexity" was a new discovery! I don't know whether to weep or to laugh. I cover a lot of this in Titanic Nation How to Avoid Icebergs: The Case For Fundamental change In The American Way Of Life, but reality keeps on intruding to point out that no matter how critical my analysis is in the book, the scale of the actual administrative chaos is even worse.

Meanwhile, as members of the MICC – the Military Industrial Congressional Complex get ever richer, our soldiers are fighting and dying in two wars, and this Great Nation is getting ever deeper into debt. The phrase ‘cynical exploitation’ comes to mind.

Farewell for the moment. Write soon. I miss your wit and your company.



Victor.

THE RED BARON – PART 2

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Dear You—

It’s another gorgeous day. I feel decidedly tempted to head out for a walk, and probably will, but first let me tell you why the movie, The Red Baron, resonated so much with me.

Primarily it has to do with my much loved grandmother, Vida Lentaigne who served as a volunteer nurse from about 1916 onwards under circumstances not entirely dissimilar to those portrayed in the movie. Of course, there was one important distinction: she worked for the British, not the Germans, although she nursed both because a casualty received attention regardless of nationality. She had been brought up surrounded by servants, and all the trappings of wealth and privilege, so the grim business of cleaning out infected wounds, mopping up blood and puke, and coping with the horror of the kind of terrible injuries inflicted by bullets, high explosives, gas and the bayonet, took some getting using to. But she told me that she felt compelled to serve at a time when so many of the young men in her social circle were in uniform and being killed. She said the sheer scale of the losses was devastating. Practically every male friend she had was killed.

My grandmother died in 1976 aged 78 - active and creative until close to the end; and no day goes by that I don’t think of her, and miss her.

The other memory that The Red Baron brought back was that of another movie, The Blue Max, which was actually made very near where were lived in Ireland, at the Ardmore Studios, and which starred George Peppard, James Mason and Ursula Andress. Later, I was to go flying with one of the stunt pilots from the movie and to have other adventures – both aeronatic and romantic - which will have to wait for my memoirs.

The Blue Max of the movie was the term given to the  Pour le Mérite award. Let me quote Wilipedia on the subject: The Pour le Mérite was first founded in 1740 by King Frederick II of Prussia, named in French, the language of the Prussian royal court at the time. Until 1810, the Order was both a civilian and military honor. In January of that year, King Frederick William III decreed that the award could be presented only to serving military officers. The Pour le Mérite is correctly called an "order", in which a man or woman is admitted into membership, and should not be referred to as a "medal" or "decoration."

I have only been in one aerial dogfight in my life – and we were merely simulating one for about 15 minutes – but it was still one of the most exciting and intense experiences I can recall as we each maneuvered to get on the other’s tail and administer a fatal burst. The real Red Baron, Manfred von Richthofen, regarded 50 meters as the optimum killing range. 

Farewell for the moment. Write soon. I miss your wit and your company.

Victor.

THE RED BARON - PART 1

Dear You--

I saw the movie, The Red Baron, the other night and thoroughly enjoyed it although apparently it was a disaster at the box office. It had outstanding set direction and convincingly conveyed a sense of place and period - Northern France during WW I - even though it was actually shot in and around Prague (one European city I regret I have never visited). A German production, with a big budget by European standards (18-19 million Euros or about $25 million - nothing by Hollywood standards) it portrayed an entirely credible picture of an arrogant and privileged aristocrat with a special talent for air combat, and the natural leadership qualities of his class, who - as his comrades get killed one after the other - realizes that what is doing is pointless, and that his primary value is as a propaganda symbol for both a cause and a regime he no longer believes in. There is also a rather touching love story with a nurse, which purists have criticized as being historically dubious, but which I rather liked. 

The movie had special associations for me which I'll tell you about in my next letter; and no jokes about my being old enough to have fought in it!

Farewell for the moment. Write soon. I miss your wit and your company.

Victor.

AND FOR MY NEXT NETWORKING TRICK

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Dear You--

As I may have mentioned, I’m a member of various writing groups as a consequence of a friend of mine, a certain retired Marine colonel, kicking me in the butt and saying: “You’ve got to network, Victor.” Since I was brought up in a culture which abhors self-promotion  (“Just not done, old chap!) this transition has come hard, but here is a current  extract from a discussion group called BookLink on Linkedin.

Moderator: Do you find writing therapeutic? (We have ways of making you write)

Victor O’Reilly: (I'm new at this networking stuff - so positively no jokes). Writing is a decision making process and you have to train your mind to think that way or it's a decidedly stressful occupation. On the other hand, if you develop the necessary disciplines - something that takes years of practice (just as in music) then the mere sight of a keyboard will bring you into ‘The Zone’ - a state which is extraordinarily therapeutic. Then, of course, Windows crashes and you turn into a Whirling Dervish.

I would like to add that I find typing into Linkedin's narrow Comment box a right, royal pain, particularly as one cannot edit a comment once posted. Software people, who rarely write anything other than code, and who have Pizza warped minds, don't seem to get this stuff. But, I digress - and shall now slide gracefully back into the Zone.

Linda Watson: Victor, you've really cheered me up - how many years does it take before the mere sight of keyboard gets you 'into the zone'? If it's less than thirty, I might just get there!! At the moment, I'm finding that I agree with Chris - greatly challenging and at times even soul destroying, but never therapeutic or cathartic. But then I don't consider myself to be a 'writer' - (I thought that real writers got pleasure from the process). I'm just someone who has written a couple of books.

PS I've just edited this within 14 minutes - have they put it back, then?

Victor O'Reilly: Linda, "a couple of books" sounds like real writing to me. As I suspect we all know, the only way to really learn how to write is to write. In my case, I decided that I wouldn't agonize over the perfect word or phrase but instead would focus on getting my muscle memory working . A classic tool for this purpose is a journal, but instead I chose letters to a former girlfriend who I had first met in 1972. I don't think my letters started until the early Nineties, but I do know I woke up one day and found I had gained a facility for the written word that I had lacked before. That doesn't mean I'm claiming to be a good writer. That is for others to judge. It does mean that that I have become very comfortable with my craft and am now trying to raise the bar in terms of style, and plotting, and sheer readability. I don't expect to ever quite achieve my objectives, but the journey is truly food for the soul. When I write, which is every day, I'm a truly happy man. Of course, a downside of such a situation is that one's loved ones get jealous because they suspect that my one true passion, whatever  be the truth of it, isn't for them. Of course, I may be making all of this up, but I can tell you that getting into the Zone - into a state of flow - shouldn't take thirty years. So now break out those old address books, and find a former lover, and set to work.

Zounds! Once posted, my entries seem to remain un-editable so I guess you will have to live with my crude first draft. My apologies to one and all. I guess I'll have to write in Word in future and cut and paste AFTER editing. I'm told some people can produce a perfect draft first time, but I'm decidedly not one of those lucky people.

Linda Watson: But what if one doesn't have a former lover, Victor .......

Victor O'Reilly: (What a truly mind-boggling thought!). Linda, your not having a former lover defies credulity (forgive me, I'm a European) but fortunately literary license covers near every eventuality: Invent one. The real thing can be a lot of trouble.

So now you know how us creative folks while away these long hot days.

Farewell for the moment. Write soon. I miss your wit and your company.

Victor.

THE DIVINE RIGHT OF KINGS & CORPORATIONS – PART 2

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Dear You—

I’ve been asking myself why there has been so little outrage over both The Great Recession and the general decline in the economic wellbeing of about 80 percent of the population – otherwise known as the American Middle Class. This isn’t to say that many people aren’t decidedly upset, but more to observe that there has been no mass reaction against the status quo, but instead a whole series of different reactions which, not infrequently make little sense. The following are some thoughts on the subject.

1. The decline of the Middle Class has been going on for so long – since the early Seventies – that most people aren’t aware of it.
2. Relatively few people understand how much better many other countries are doing than the U.S. and therefore they tend to accept the propaganda that what is happening in the U.S. is unavoidable and an inevitable result of globalization.
3. Although individual journalists do an excellent job, the media as a whole are corporately owned and focus more on infotainment than information. Further, there is a vast amount of self-censorship by journalists who may well know the issues, but also know full well that if they write about them, they won’t get published.
4. Most people don’t understand that the current American Business Model – based upon largely unfettered Corporate power – is not the only way to run a free-enterprise economy.
5. People prefer the devil they know to new and strange ways of doing things.
6. Ignorance of the issues is pervasive to an extent which does not bode well for the future of this Great Nation.

 As you well know, all of this is much on my mind because of the work I have been doing on Titanic Nation: How To Avoid Icebergs: The Case For Fundamental Change In The American Way Of Life.  Amazing to think it will be out soon. I guess it may seem an odd thing for a thriller writer to spend several years researching but, of course, I trained as an economist and am strongly of the view that if anything brings America down, it will be its own mismanagement of the economy, not terrorism.

I think I’d better end with an economists’ joke:

Economists in parades

There is also a joke about the last Mayday parade in the Soviet Union.

After the tanks and the troops and the planes and the missiles rolled by there came ten men dressed in black.

"Are they Spies?" Asked Gorby?

"They are economists," replies the KGB director, "imagine the havoc they will wreak when we set them loose on the Americans" 

Farewell for the moment. Write soon. I miss your wit and your company.

Victor.

THE DIVINE RIGHT OF KINGS & CORPORATIONS - PART 1

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Dear You—

It’s strange the way we accept so much as “just the way things are,” and effectively impossible to change, when such fundamental beliefs are so often proved to be flawed, at best; or, more often, just plain wrong. For instance, it was once generally accepted that the world was flat, and you’d fall off the edge if you journeyed that far, but I am now reliably informed that the Earth is round, and that we are sort of glued to the surface by this thing called ‘Gravity. If you doubt me, try jumping off a rooftop – I recommend six stories or more – and, if you fly up, then you’ll have proved me wrong. As to the consequences of my being proved right, let me assure you that you’ll be fine on the way down; and after you stop, you will have nothing to worry about any more.

In much the same vein, there was once a time when The Divine Right of Kings was accepted dogma. Such a belief meant that a King was literally ‘God-given’ and therefor entitled to do pretty much whatever he wanted – whether it was declaring war, grabbing another man’s wife, or taxing the nation on a whim. That belief passed, as well, after Oliver Cromwell chopped off King Charles I’s head in the interests of parliamentary democracy, and the remaining monarchs eventually decided that cutting a deal with the people was better than being cut down to size by them. Louis XVI’s unfortunate encounter with a guillotine blade in 1793 accelerated the trend so his significant – if inadvertent - role in advancing our political freedoms should not be minimized.

You might think that having found out that gravity exists, and having got rid of any king who believed in Divine Right, we’d have enough sense to keep greedy power-grabbers in line, but instead we’ve handed over control of this Great Nation to Corporate Interests – as if that was the most natural thing in the world. Worse, based upon no legal right or precedent whatsoever, we’ve made corporations into legal humans with all the rights and privileges of U.S. citizens, but with the additional advantages of being immortal, and being able to operate globally. In effect, large Multi-National Corporations (MNCs) are answerable to no one. That raises the power inherent in Divine Right to a whole new level, one never reached by mere monarchs. It means that the Divine Right of Corporations is in a class of its own. It ensures that Corporate Interests now rule us more effectively than any mere monarch. Why not? Who is there to tackle corporate power? Corporations not only manipulate what we think, and control every facet of our lives, but they own our government. Under the protection of the Supreme Court, Congress has been – quite legally - bought. And to add insult to injury, when one works for a corporation, the hard fought rights contained in the U.S. Constitution, do not fully apply.

One might forgive all this if our Faustian bargain with Corporate Interests resulted in prosperity for all, but the fact is that the current American Business Model, which is based almost entirely on large corporations, has resulted in the following: (1) The worst recession since the Great Depression. (2) The loss of approximately 8.5 million jobs. (3) Effective unemployment and underemployment rates of around 20 percent. (4) Low pay and declining earnings for the bulk of our population, the Middle Class, since the early Seventies. (5) The outsourcing of much of our manufacturing base. (6) Massive pollution of our environment. (7) A way of life which is generally considered to be unsustainable. (8) The corruption of the integrity of our food chain. (9) One of the worst healthcare systems in the developed world at roughly twice the cost. (10) The creation of a Military Industrial Congressional Complex which now spends more on defense and National Security than the rest of the world put together.

Given all this, a reasonable person might not ask why we are not re-thinking the American Business Model in the most fundamental way, yet all we’re doing is tinkering with the status quo. What has happened to us? George Washington must be spinning in his grave.

Farewell for the moment. Write soon. I miss your wit and your company.

Victor.

IN PRAISE OF THE TRADITIONAL LETTER

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Dear You--