Fuzzy little things that I find interesting.

Political musings from someone who thinks the S-D curve is more important to politics than politicians.

Month: February, 2012

Why Evil should fail.

File Leadership Mistakes Of The Galactic Empire

Mistake #1: Building an organization around particular people, rather than institutions.

Perhaps the biggest mistake of the Galactic Empire made is its singular focus on the preservation of power for the Emperor and a few of his chosen lackeys. There is a constant through line we see starting with A New Hope and running through to the end of the Return of the Jedi of the Emperor consolidating more and more power into his own hands and that of his right-hand man, Darth Vader. In A New Hope, the Galactic Senate is disbanded in favor of regional governors hand-selected by the Emperor. …

Mistake #3: Having no tolerance for failure.

In an early part of the Empire Strikes Back, the Empire attempted to wipe out the Rebel Alliance once and for all in the Battle of Hoth. However, because Admiral Ozzel took the Imperial Fleet out of lightspeed too close to the Hoth system, the Rebel Alliance was able to detect the Imperial approach and quickly begin its defense. Enraged by this error, Darth Vader used the Force to choke Admiral Ozzel to death. Captain Piett, Ozzel’s second-in-command, was then promoted to Admiral and given command of the Imperial Fleet.

This swift, decisive punishment of failure is a huge error of management. …

The key takeaway that I got from the original Star Wars trilogy when I was young was that evil failed and good succeeded because evil was selfish and self-centered: what made evil “evil” also made evil bad managers who routinely wasted expensive human resources (such as strangling various leaders to death), who routinely committed and sacrificed huge resources based on personal pursuits rather than organizational ends, and which failed to pay attention to “on the ground” information, in favor of a handful of charismatic leaders who are routinely out of touch with the dynamic conditions of the battlefront, preferring the evil organizer’s charismatic (or violent) leadership even when facts on the ground warrant otherwise.

It’s also one of the reasons why I was less than satisfied by the battle scenes from the Lord Of The Ring movies. Because on the ground, aside from being ugly and misshapen, and aside from being told that the ugly ones were Evil and the beautiful ones were Good, I could really see no difference between the troops on the ground. Both sides were equally motivated, similarly equipped (though with different tools), and with ground troop information apparently flowing from ranks up through the managerial ranks rather than from the top down. (The Orc commanders on the ground even lead from the front, giving us a wonderful scene where an Orc commander barely side-steps a falling chunk of debris, spitting on it after it embeds itself in the grass just a few feet from the commander.)

There were, in the Lord Of The Ring movies, no real difference in terms of managerial structure, organizational bottom-up behavior, taking the initiative, battle planning and preparation–certainly certain commanders were supernatural in nature (the Nazguls in particular have no will but are extensions of Sauron’s will), but aside from them it’s clear that “evil” listens to it’s troops, devises plans, and even provides incentives so the people on the ground feel like they are invested in the project. (The Orcs who kidnap Merry and Pippin look forward to the rewards of human and hobbit flesh on the successful completion of their mission.)

For evil to be realistic, it needs to lose not because they’re the wrong skin color, misshapen, or ugly–but because evil is not inclusive, does not foster cooperation, and does not permit dissenting voices with alternate viewpoints to participate in the debates–or even has debates at all. That is, evil should not lose because it is simply “evil”–that is a relative moral judgement anyway, says the man who readily eats the flesh of cows for lunch–evil should lose because organizationally evil is inefficient. It may plan in advance and build up greater resources in secret to launch it’s invasion–as Xerxes did when invading Greece, or as the Germans did during the opening battles of World War II, but ultimately it should fail due to managerial and organizational failures caused by out of touch self-centered rulers who in their megalomania attempt to punish the sea for not cooperating or started blaming everyone around him when the facts on the ground no longer matched his orders.

To that end it is also worth understanding what “evil” is, within the context of a movie. For myself a utilitarian definition of “evil” as “wasteful” and “self-centered” (meaning unwilling to be inclusive by whatever metric that means) is far more interesting than a definition of “evil” which snarls or acts in a distasteful way or has an aesthetic which does not match the common aesthetic. And that becomes quite interesting, because evil then can be as charismatic, likable and fashionable as we wish–but fail in the end because of evil’s self-centeredness.

That is far more interesting than the tradition in old westerns that the bad guys wear black hats, or (in today’s modern action adventures) evil is ugly and misshapen. Because if evil is evil because it is ugly, then what difference is there between “good” and “evil”–after all, “good” is just the pretty and popular kids that we’re told to root for, rather than the outcasts who are outcast because the pretty people don’t like them.

Failure Or War: Abandoned Children Edition.

In A Conflict Of Visions author Thomas Sowell lays out two different world views or visions of the political world, which are in conflict, which underly the political struggles in the world today. These two visions are the Unconstrained Vision, a utopian view of human nature as perfectible and one which can be elevated beyond the need for petty material and systemic things, and the Constrained Vision of human nature which sees human nature as a fixed constant which cannot be changed, but which can be regulated via the rule of law and coaxed to better things via the carrot and stick of the free market.

In modern times, the Unconstrained Vision of human nature has become increasingly associated with the more utopian fantasies of the Progressive Liberal Movement, one which envisions a group of Bodhisattvas who will lead the rest of humanity to salvation, both through example and through leadership. The unconstrained vision of Europe lead it’s out-of-touch leaders through a social experiment to unify Europe under one banner: while the unification of Europe was just a part of the Game of Thrones being played on the world stage, it was a unification driven by a firm and deep belief in the Unconstrained Vision: with the right combination of policies and political will, the Bodhisattvas of Brussels would impose it’s will and elevate the rest of Europe to it’s righteous salvation as a third axis, a third superpower beside the United States and Russia China India.†

The unconstrained view, naturally, looks at the whole of humanity: their sight is at mass movements and mass improvements, and since they are locked into the belief that it is through the divine grace of the Bodhisattvas of Brussels and of Washington D.C. that we will evolve, it’s just a matter of destroying those who do not believe as they do–those who (for example) believe in a Constrained Vision, and a matter of enacting the right laws and the right social vision. And if these “Bodhisattvas” get it wrong, well, it’s just a matter of tweaking the formula, and altering the laws–and destroying the enemies of this great social experiment, of course.

And what does it matter if a few people get destroyed along the way? It’s about the greater good.

It is this realization that the Unconstrained View, the thing which motivates the vision of political theory now practiced by the Progressive Left, can never admit failure (since to do so would be to admit a failure in a Star Trek-like vision of mankind as one that can be elevated to greatness on a spiritual and moral axis) and must instead forever experiment in it’s Sisyphian attempt to finally push that bolder for once and for all to the top of the hill, regardless of the destruction it creates about us, that makes me see stories like this and weep:

Children abandoned by Greek parents as cuts also sees country running out of medicine

Children are being abandoned on Greece’s streets by their poverty-stricken families who cannot afford to look after them any more.

Youngsters are being dumped by their parents who are struggling to make ends meet in what is fast becoming the most tragic human consequence of the Euro crisis.

It comes as pharmacists revealed the country had almost run out of aspirin, as multi-billion euro austerity measures filter their way through society.

To the Progressive Left and it’s utopian vision of a perfectible mankind, these children are being abandoned on the streets not because their policies are utterly and completely morally bankrupt, but because of conspiratorial “forces” which fight against their desire to elevate mankind. It’s almost as if they see mankind in a struggle between Good and Evil, and their attempts to impose Good through policies and procedures and social reforms and a unified currency are being sabotaged by evil bankers and currency analysts and investment advisers not because of a fiduciary responsibility to make sure the people whom they invest for (including elderly retirees) are paid back, but because at some level they are in league with Satan.

But the reality is this: these children are being discarded by their parents because they can no longer afford to keep them. And they can no longer afford to keep them because the endless promises made by the Bodhisattvas in Brussels cannot be kept, because utopia is not a real place, because in this world of woe and pain there is only so much stuff in the world, and there is never as much stuff in the world as we would like, and far less than has been promised to the Greeks, who when they relied on these promises stopped looking after themselves.

Greece has run out of money. This is not just some fact on a ledger sheet, or some line that can be plotted on the Bloomberg Terminal, along side TED spreads and U.S. 10 year treasury interest rates.

This is children, abandoned on the streets.

This is a generation of discarded children.

It is an article of faith to the Left that on occasion you have to break a few eggs in order to make an omelet.

Meet the broken eggs.

† It is my contention that while we think of China as a contrasting superpower alongside the United States, China is at best a regional player, just as Russia proved to be in the 80’s, and as India will rise to outshine China in perhaps 20 to 30 years. But that’s incidental to this essay. What’s important is that in Europe, they see a bilateral world with the United States and (fill in the blank), and they want to create–have been struggling to create–a third seat representing the “classical western world.”

Energy Prices and Standards of Living.

Obama Likes High Gasoline Prices, But Won’t Admit It

But it’s not just Obama; much of the elite would prefer higher energy prices because it “solves” a number of “social problems” which the elite rail against. For example, higher gas prices reduce driver miles on highways, which in turn reduces government responsibility for creating fast and efficient highway transportation corridors. And this is important not because it reduces pollution but because it forces cities that are compact along certain transportation corridors: because at least one half of a light rail trip is typically by foot, it forces city development into a more traditional “ring” development pattern with an inner core, and concentrated development patterns around each of the rail stops, or with well-planned “park-and-ride.”

Increased fuel costs combined with an emphasis on light rail and a de-emphasis on freeway development, in other words, tends to create a much larger exurban ring which is more expensive to get to, in terms of time and fuel. It creates, in a sense, a tax on living in a sprawling suburban house while forcing property taxes on those suburban properties to subsidize light rail transit which in theory will make it harder and more expensive to live in those suburban houses.

Now some people reading this may be thinking “this is exactly what we need!”

California Zillow Home Value Index

Sure, but think of the consequence: if it is more expensive to have one particular (and demonstrably desirable) lifestyle than to have another (and demonstrably less desirable) lifestyle, basic economics will dictate that only those with money will live in that particular desirable lifestyle. If we then limit the supply of that lifestyle and subsidize the creation of the other mode or lifestyle, supply and demand will assure that the limited but desirable thing will become even more expensive.

Eventually you will see a situation where only the rich can afford to live in a suburban track, while everyone else is forced into compact urban apartments.

This is in fact the reality currently experienced in San Francisco, Los Angeles and increasingly in San Diego. In Los Angeles county median housing prices are around $383,000, which assuming a 10% down, means you need a monthly salary of around $9,000/month, or a household income of $108k/year–an amount which can only be afforded by around 16% of the population in an area where the median household income is around $48k/year.

But then, the fewer cars on the road, the better the driving will be for those who can still afford to drive. The quieter the suburban neighborhoods for those who can still afford to own a home.

I have a theory that the standard of living has increased over the past 2,000 years directly because of the decline in the price of energy. When “energy” was derived from tying a donkey to a wheel and forcing him to turn a grinding stone, assuming the donkey can output around 1 horsepower (or around 745 watts per hour the donkey runs in a circle), the total cost of power per kilowatt/hour is the cost of buying a donkey, keeping him alive, providing him shelter, and hitching him to the equipment to turn.

And I guarantee you that was a lot more expensive than the average of 8-12 cents/kilowatt hour many people pay for electricity today.

Cities in medieval times were compact because people needed to huddle together for protection behind a city wall, because transportation costs were prohibitively high for the average person: people walked because they could not afford to keep and board and maintain a horse. And given that people tended to spend an average of 5% of their day in transportation costs (source), this implies a city which can be traversed on foot in less than an hour.

Only the wealthy could afford a home outside the city wall on a sprawling estate: because the cost of applying justice across a wide expense is also limited by transportation costs, to own a sprawling estate means employing your own protection, since the constabulary would probably have to arrive on foot as well. So the cost of living in a modest home in the countryside was–well, only the kings and lords could afford it.

Today a gallon of gasoline packs 33 kilowatt/hours of energy, or around the amount of energy expended by running one horse for 44 hours. Compared to our medieval ancestors, we expend unimaginable amounts of energy just driving at unimaginable speeds to a sprawling complex of unimaginably large and wealthy homes, stopping by unimaginably well stocked food markets.

We have a much higher standard of living, in terms of square footage per person for living space, in terms of calories consumed, life expectancy, time spent on leisure, or just about any other imaginable metric than our medieval ancestors. And all because of cheap energy.

And making energy expensive rolls this all back.

Some may want to roll the clock back: some suffer from the mistaken assumption that our ancestors, even though their lives were dirty and mean and short, were somehow “better off” than we are today. Bullshit. And let me be clear: my native american ancestors (many of whom are alive in the 805 area code) did not live as “one with nature” because they were somehow superior; they were closer to the dirt because they were dirt poor. You don’t voluntarily walk around with nothing to cover yourself than an animal skin on a cold California winter because of some sort of moral superiority; you do it because you have nothing else. Just as you don’t live in a mud hut scrabbling to survive by pulling edable weeds from the ground because of respect for nature; you do it because you don’t have any other choice.

And sure this means you’re probably in better touch with nature than modern man picking up some boxes of frozen TV dinners from the grocery store, but that’s because you have to be: it’s either being very aware of your surroundings or dying; there is no third choice.

Just as if you live in a war zone, you have to be very aware of your surroundings as well–though there isn’t countless new-age books printed on the moral and ethical superiority in living in a war zone amongst violent neighbors seeking to kill each other.

My theory is that the elite want energy prices to go up. They want to roll the clock back to a time when only medieval lords could afford sprawling estates in the countryside. They want to subsidize mass transit so that the mass of people can be kept within the city walls, so as not to pollute the countryside. They want to segregate “us” from “them.”

And making it more expensive to drive; well, that’s just step one.

Same story, three sites, three headlines.

This is how your perception of the news is shaped. The underlying story: Apple went to the Fair Labor Association asking for the FLA to perform audits on a number of Apple’s supply chain providers, including Hon Hai Precision Industry Co., Ltd., also known by Foxconn, to verify that Foxconn is obeying the law, fair labor standards in China, and Apple’s own code of ethics which goes beyond the legal protections provided by China. (source)

The three headlines:

Apple asks Fair Labor Association to audit Foxconn factories

This headline suggests that Apple is the active player in the action: it was Apple who took action.

Fair Labor Association begins independent audits of Foxconn factories

The headline makes no link to Apple or Foxconn, as if Apple has little to do with Foxconn. The body of the text makes Apple the passive participant: Apple announces Foxconn is being audited–but no suggestion as to why: the unsophisticated reader may see other headlines and think that Foxconn is a subsidiary of Apple, and that Apple is announcing the completion of an audit the same way that another company announces the completion of an IRS audit into accounting irregularities.

Apple isn’t exactly the instigator in this headline or in this article, since the key fact that Apple asked for the audit is left out. You have to follow the link to Apple’s own announcement to find that Apple asked for the audit.

In structure this article is similar to articles that describe how an outside agency (such as the SEC) is wrapping up an investigation of accounting irregularities despite internal audits by that company.

Fair Labor Association begins inspections of Apple manufacturing partner Foxconn

Notice that Foxconn has become “Apple’s manufacturing partner.” They’re not quite a wholy owned subsidiary in this headline, though it’s getting pretty close. Also note selected quotes in the article say things like:

Apple said on Monday that its suppliers have pledged full cooperation with the FLA, offering unrestricted access to their operations.

This makes it sounds like Foxconn is a subsidiary partner of Apple and acts at Apple’s orders, almost as if Foxconn is a subsidiary entity wholy or partially owned by Apple. And not only do we not learn that Apple has kicked off the investigation, but it makes it sound like Apple is pledging cooperation against corporate desire, rather than at Apple’s request. This is compounded by statements like:

Apple’s announcement of the FLA audits comes after a number of reports, including high-profile stories from The New York Times and CNN, highlighted labor issues in Apple’s supply chain. The Times article suggested that Apple has known about those issues in its supply factories for years without requiring that they be addressed,…

Nevermind that it was Apple’s own audits and invesitgations that revealed the nature and shape of the problems that the New York Times is now reporting.

Three headlines, three reports, almost the same story, but…

Two of them leave out the key fact that Apple was the one who asked for the audit. One of them makes Apple sound on the defense. One makes Apple sounds combative and defensive.

One of the stories makes it sound like Foxconn is a wholly own subsidiary of Apple, and not a mass manufacturer who also makes products for Acer, Amazon, Asus, Cisco, Dell, Gateway, HP, Intel, IBM, Lenovo, MSI, Motorola, Netgear, Nintendo, Nokia, Panasonic, Samsung, Sharp, Sony, Toshiba and Vizio, none of whom joined the Fair Labor Association, nor who have taken any actions even remotely similar to Apple.

News story bias is interesting because it can come about by selectively omitting facts, structuring your story to resemble a particular template, and highlighting facts which help shape the story to fit within that selected narrative.

The Apple story is of course a simple one: we know the facts, and we can see three stories which purportedly tell the same story–but actually don’t. And we can easily see the bias in the selective telling of certain facts and highlighting others.

And it’s one that many computer saavy pundits can read and say “yeah, I see the bias” without being hit over the head with confirmation bias over political issues. Because if three different outlets can spin a simple news item (“Apple asked for review of Foxconn practices by the Fair Labor Association”) into three completely different colored “stories”, it should be clear that on stories reporters are more biased for or against, they will do the same thing writ large.

Even assuming, of course, that well-connected reporters aren’t deliberately spinning things on behalf of the politicians they support, with the coordination of those politicians: Is the White House manipulating the media through Media Matters?

The Proposition 8 Ruling

Ban on gay marriage struck down

The panel unanimously ruled that the sponsors of Proposition 8 had a legal right to be in the appeals court to challenge a federal District judge’s ruling in 2010 striking down the ballot measure, but it also rejected the sponsors’ plea to wipe out that ruling on the theory that the trial judge had a conflict of interest because he is gay and is in a long-term relationship with another man.

The majority summed up its ruling this way: “By using their initiative power to target a minority group and withdraw a right that it possessed, without a legitimate reason for doing so, the people of California violated the Equal Protection Clause [of the federal Constitution]. We hold Proposition 8 to be unconstitutional on this ground.”

The biggest one that concerned me was the Article III (standing) issue, and it appears the Ninth Circuit unanimously ruled the sponsors did have standing.

On the rest, it’s interesting to see the Ninth Circuit attempted to thread the needle by declaring that while (a) there is no universal nation-wide right for homosexuals to marry in the Constitution, (b) California does not have a right to pass a law *prohibiting* homosexuals from marrying.

Apparently they managed to thread the needle by finding that homosexuals had a limited “right” (somehow–though it was never formally granted through the legislative process but instead granted by fiat by the courts), it was illegal to then take that right away.

Now, let me be clear: I believe homosexuals should have the nation-wide right to marry. However, overturning a properly passed California Constitutional Amendment strikes me as having other legal ramifications beyond just this one law.

For example, once permission is granted by a particular agency to do a particular activity, does this ruling means that it is now illegal to take that right away? For example, snake handlers have had their religious practices circumvented in several states: does this mean laws prohibiting snake handling are unconstitutional? (And don’t bother with a First Amendment argument; for the most part the courts have held that you can *believe* whatever you want, but you cannot *do* whatever you want. You may have the sincere and time-honored belief that sacrificing little boys on a pyramidal altar by ripping their hearts out is the only way to heaven–but this is not a license to murder little boys on an altar.)

Or hell, I’d be interested in understanding the Ninth Circuit’s thinking about the 18th Amendment: since it outlawed alcohol–a right previously recognized but then outlawed by that Amendment: would the 18th Amendment have been considered unconstitutional because it further restricted pre-existing rights?

I see this going to the Supremes, and I’m going to be fascinated as to how they rule–especially since the argument that you cannot take away the rights of a minority group–well, fuck; that’s what legislation is: finding things we don’t want people to do and outlawing those activities. It’d be funny if the legal principle struck upon could be effectively extended to–um, well–outlaw the process of making laws.

Are Sky Scrapers an anachronism of the “big everything” blue model?

CRE: Another Half Off Sale

Atlanta’s 55-story Bank of America Plaza, the tallest tower in the Southeast, is set to be sold at an open outcry auction on the steps of the Fulton County Courthouse tomorrow after landlord BentleyForbes missed mortgage payments. It bought the skyscraper in 2006 for $436 million … the 1.25 million-square-foot building has lost 54 percent of its value …

So here’s an interesting question: as more and more wealth generation activity stem from software and thus becomes “virtual” (from the software that is used to replace hardware to the software used to replace business processes and the like), and as more and more things like retail are done on-line (and thus can be relocated anywhere where there is a logistics hub and some large warehouses), will large office complexes become an anachronism?

After all, the existence of large offices reflects land-use decisions when city cores became the central control hub for last generation’s mass-production “centralize everything” economy. But if we are moving to a point where, in the equation on producing goods, centralization doesn’t really buy us very much–and we have to pay for it through concentrated land-use and traffic jams–does having large office complexes make any sense?

It’s no wonder, by the way, that the city of Los Angeles is converting more and more of it’s downtown corridor into residential lofts. That could very well be the wave of the future–people choosing to live in the tall buildings as a lifestyle choice, rather than having to commute to the tall buildings because that’s where the jobs are.

Maybe the Bank of America Plaza can be converted to a mixed-use property?

Failure or war.

Rocks, Hard Places

Greece has reached the latest of many last ditches this weekend.

Sorry; it’s just inevitable: the Euro will fail or the whole place will devolve into war.

Today’s correlation is not causation department


From Correlated.org:

In general, 29 percent of people say they have nice handwriting. But among those who have had a urinary tract infection, 46 percent say they have nice handwriting.

“Ol’ Billy was right: shoot all the lawyers; shoot them tonight.”

It’s takers versus makers and these days the takers are winning

In a world of bailouts and crony capitalism – which is to say, in the world we live in today – a rational businessperson has to compare the return on investment between improving a product or service, or lobbying the government for goodies.

Frequently, the latter looks better: If you spend $1 million on lobbying, and get a $1 billion subsidy from the government, that’s a thousand-fold return on your money.

My own take is that this is just part of the “I, me, mine” mentality of the boomers institutionalized by a leadership composed primarily of Boomers, writ large, and extends to areas beyond the government.

For example, I know a fellow who is being sued by a patent troll. This patent attorney is suing my friend and a number of other companies on a junk patent for a basic technology patent which is arguably functionality predating the patent, on a fundamental concept (a mobile phone sending data captured from a user to a remote server and getting a response) that is essential to most networked mobile applications, and which, even if it were a reasonable patent rather than junk, doesn’t apply to any of this fellow’s applications anyway. (No data captured by the user is transmitted remotely.)

The patent doesn’t cover a core discovery or invention; it is simply a license for an unscrupulous lawyer to pad his own pocket by suing people whose applications may or may not fit within the parameters of the junk patent, based on the idea that it is expensive for a non-lawyer to either represent himself or find a lawyer.

This is simply legal blackmail.

Courtesy of a system constructed by lawyers, from the laws that favor issuing a junk patent and thus requiring expensive litigation to sort out, to the laws that establish a licensing scheme that makes hiring lawyers expensive, making litigation an expensive option to begin with.

The takers are winning.

We’ve become a nation where “I, me, mine” has been institutionalized, where “fair” has been replaced by “what can I get away with”, where reasonableness has been replaced with litigation and legally blackmailing people with the threat of litigation.

You can’t run a nation this way forever. Eventually it collapses or someone snaps.

Small sprouts of good economic news.

The economy has been sucking wind for four years now, and is moving on it’s fifth year. We’ve had prognostications about how we’re seeing the decline and fall of America–a prediction that has been made about America since there has been an America.

The latest prognostications have suggested that we’re becoming China’s “bitch” (never mind the Chinese experiment finds itself on shaky grounds), that we’re no longer competitive. We don’t even make our own iPhones, reflected in our declining participation rate.

Clearly, we are a country in decline.

Or are we?

Suddenly we are starting to get some good news–and the doomsday prognostications seem weaker.

As a nation we’re deleveraging, manufacturing may be on a long-term rise, and the latest jobs report was quite good.

But here’s the thing:

Yes, we’re in the middle of a new industrial revolution, where computerization is reshaping our economy: when was the last time you bought a record from a record store? We’re seeing the very products we buy transformed before our eyes.

Software is king.

But this is a long-term trend which, perhaps in another twenty years, will leave us in a world as unrecognizable to those of us who were alive in the 1980’s as the world of the 1940’s would be unrecognizable to someone from the 1890’s.

In the short term, however, our major economic woes stem from one single economic event: the collapse of the housing bubble. It has hurt the construction business, where the majority of small business formation activity takes place. It has hurt purchases of major appliances and furniture and all those other sectors of the economy which service new housing construction: if no new houses are being built, no new refrigerators and stoves and couches and shelves and knick knacks are needed to go into that nonexistent new house.

It has also hurt unrelated small businesses whose owners rely on equity from their house to fund expansion plans: no home equity, no home equity line of credit to fund your small business.

This collapse was a result of ARM resets making it impossible for a large number of people who bought houses with a sub-prime loan and a 5 year teaser rate to afford the sudden increase in mortgage payments when their ARMs reset. This caused the economy to collapse in 2008.

So of course we won’t see a solid recovery until 2013.

That’s because we’re talking about ARM resets, with a 5 year reset period. And of course ARMs are still resetting: people are still losing their homes. There is a huge backlog of shadow inventory which is depressing new home construction, and a huge number of home distressed sales keeping new home sales down.

And guess what?

2008 + 5 = 2013.

This recession was always going to be 5 years long, precisely the amount of time between people getting subprime loans and the time those ARMs reset. And during those five years we’ve engaged in a substantial restructuring, so when jobs come back our economy will be much stronger for it.

We are now far more worried about financial stability–which has led to us de-leveraging. We’re more worried about Europe, so investors are leery: when Europe fails (as it must), we are positioning ourselves to insulate our banks from more than a minor disruption in cash flows. And we’re far more worried about economic efficiency and making the necessary changes in our unfunded liabilities (unfunded pension plans and social security), setting the stage for major reforms.

All in all, the next year will see some thawing.

And Q1/Q2 of 2013 will see a full economic recovery, hampered only by a Eurozone failure that will make major headlines and worry a lot of pundits, but only represent a relatively minor economic headwind here in the United States.

And when the world blows up (when China unwinds, when Europe unwinds), America will be the last ones standing, and stronger than ever.