What Does Healthier Mean?

Words matter.

Organic food is the fastest growing segment of the food market.

The reasons are varied but are essentially based on the belief that organic foods are healthier because they are exposed to and contain fewer chemicals harmful to humans. The world has many developed, affluent societies with aging populations for whom longevity has become a prominent issue. In developing countries, especially China, food safety is quite literally a matter of life and death. Organics appeal to both sets of concerns.

So when researchers at Stanford University issued a study suggesting the additional health value derived from organics was illusory and quite possibly contrived, it caused quite a stir.

A few years ago, organic advocates would probably have been devastated by the criticism from one of the world's most prestigious universities. Not any more.

Critics of the study challenged the researchers' methodology while other commentators, such as the one below, raised pertinent questions about the vocabulary employed to communicate what may well have been a bias or predisposition inherent in the study.

Either way, notice has been served. Prominent academics and 'experts' no longer get a free pass when it comes to matters of popular concern. The internet has democratized knowledge and communications. And we are all healthier for that. JL

Curtis Brainard comments in the Columbia Journalism Review:

“Healthier” is a word the media often use without enough care, and that shortcoming was on full display during last week’s coverage of a study examining the nutritional value and presence of contaminants in organic versus conventional foods.

Should YouTube Censor the Anti-Muslim Video Sparking World-wide Violence?

YouTube and its parent, Google, are faced with a difficult choice.

Their policy has always been quite publicly defined. Nothing will be censored unless it contains hate speech, advocates violence against others or is the subject of a local law banning specific content.

The video "Innocence of Muslims" is subject to none of those conditions. But it has sparked rioting and violence around the world that have left four American diplomats dead as well as rioters and security personnel in a growing list of countries.

The dilemma is whether to moderate its own policy in the face of the physical dangers to human beings the video has sparked - or whether to stand firm in honor of the best traditions of free speech, civil liberties and civilized discourse.

Most of the commentary on the 'net has castigated YouTube for taking the video off in Egypt and Libya where the violence began. The critics' claim is that YouTube and its parent company, Google, have already violated their principles by caving in to extremists' cynical manipulation of popular will in those nations. But then it is easy to be critical when you are sitting in the air-conditioned comfort of your handsome, comfortable office or home in the placid safety of New York or San Francisco.

Others believe that extraordinary circumstances require extraordinary action. You take the video off the net as a matter of public safety in a volatile world. And then, of course, there are many Muslims who claim to be genuinely offended by a deliberate attempt to insult the holiest evocation of their faith.

The challenge is that in a world of global communications, certain messages may seem obnoxious but tolerable in some parts of the world but terminally offensive in others. This controversy is exacerbated by the fact that some of the protest is now and has been in the past (such as the cartoon controversy in Denmark a few years back), manipulated by elements intent on using it to further their political, ideological and military ends.

The free speech advocates are right to be concerned about the longer term implications of censorship. Is every image or statement offensive to one group automatic grounds for deletion? And is it utterly self-serving? Will Muslim groups support the deletion of images offensive to Judaism? We already know the answer to that question is a caustic no.

The problem is that many governments are using the riots as a way of currying sympathy with the mob. They claim, wink-wink, that they'll move their security forces in when things have calmed a bit. The manipulation of public opinion against 'the other,' any other is as old as history. It has had its most recent, horrific uses in Germany, Bosnia and Rwanda, among others.

YouTube is not the UN. But it has derived much of its success from its globalism. In the world of modern, instantaneous communication but ancient cultures and beliefs, it may have to consider revisiting its standards to reflect its arguably unwanted but undeniable power. JL

Ari Melber comments in The Nation:

The protests against the now infamous YouTube video disparaging the Prophet Mohammad have thrust YouTube, and its parent company Google, into a tough situation.

While the company says it values free speech and usually only removes videos that violate its policies, it is experimenting with a deliberately inconsistent approach to the crisis surrounding the video, “Innocence of Muslims.”

More Americans Are Opting Out of the Banking System

There are so many of them that there is even a term for it: meet the 'unbanked' population.

How big? 20% of households in the US do not have a bank account. Another 8 or 9% have only one bank account for the entire family.

Two generations worth of declining household incomes, stubborn unemployment and rising transaction fees have made banking uneconomical for many. The banks have contributed to this situation by closing branches in neighborhoods considered demographically undesirable and by raising fees on accounts they do not believe will meet their financial hurdle rates.

The disadvantages to working families in terms of access to loans, mortgages, college financing and car purchases contributes to a growing cycle of alienation and dislocation, Families isolated from mainstream lifestyle choices ultimately become a burden to society in other ways.

The positive aspects of this trend are that such households are no longer as likely to be victimized by unprincipled lenders who stick them with unaffordable lending options whose details are difficult to fathom even for trained attorneys.

There is also a tremendous market opportunity here. While banking industry lobbyists have worked hard to restrict access to this market just in case the industry decides it wants back in, big retailers like Walmart and others have attempted to meet the demand. And just as supermarkets, fast food chains, auto retailers and others have found ways to profit from this segment of the population while providing needed services of above-average quality, so too will entrepreneurial spirits in the financial services industry once the metrics of need and service interpose. JL

Danielle Douglas reports in the Washington Post:

In the aftermath of one of the worst recessions in history, more Americans have limited or no interaction with banks, instead relying on check cashers and payday lenders to manage their finances, according to a new federal report.

FBI's Nationwide Biometric Facial Recognition System Ends Anonymity As We Knew It

Not that we are convinced anyone will really care until they or a close relative runs afoul of the system, but the FBI is deploying a bleeding-edge facial recognition software tracking capability across the US.

According to reports, once the FBI has your faceprint, they can match against their data base and begin tracking. And just in case you are thinking that cosmetic surgery is the answer, the next stages involve DNA analysis and voice identification.

For those who think, oh, it's the government they'll never get it right, there will be cost overruns and the whole thing will be scrapped: newsflash; it is on budget and already 60% deployed.

Privacy advocates are, of course, alarmed. But then they have been in a constant state of alarm for years. And that is not a put-down. It is just a reflection of the relative lack of concern the average citizen has demonstrated for the actual or potential loss of privacy they have experienced. The reason is probably that it is not always apparent this tracking is happening, there is no obvious loss of freedom of movement or action - and it is not costing them anything explicitly.

The announcement is unlikely to spark massive protests from a population more concerned about putting food on the table than whether someone is watching them. Especially as so many invite that attention every day via social networks, YouTube, Twitter, et al. You dont know what you've lost till it's gone, indeed. JL

Michael Kelley reports in Business Insider:

The FBI has begun installing state-of-the-art facial recognition technology across the country as part of an update to the national fingerprint database,

How Green Is My Cloud? Tech Companies, Cloud Computing and Energy Use

This started as a weak signal. But the heavens are starting to rumble thunderously.

The questions about the energy usage required to power cloud computing were initially considered by many the concern of an obsessed minority. Their worries were sublimated by fascination with the technological potential, the financial opportunity and the strategic implications for corporate competition.

But this is becoming a mainstream concern. Executives take pains to address it even when not asked. Press releases emerge. Articles are written. Analysts assess the countervailing claims.

The reason, as so often happens with environmental and sustainability issues in business, has less to do with what is right and more to do with what is efficient. There are two primary impacts: one is cost-related. Energy use reduces margins, which reduces free cash flow and affects however one measures profit. Which, in turn, impacts stock price performance, compensation and executive longevity. Talk about hitting someone where it hurts...

The second set of issues has to do with brand and reputation. Most tech companies, more than other corporations, like to be thought of as clean. That is usually how their founders were brought up and how their education and their peer-group have inclined them. It is also how many of their customers and, increasingly, investors like to be perceived. So in the global battle for pre-eminence in the tech sphere, every new issue is an opportunity and a threat. The opportunity is to convince others that what you are doing is smart AND good. The threat is that something bad will happen, you will be blamed, your brand sullied, your honor besmirched. Which might also affect stock price and those related factors.

Instinct and self-interest will prevail. The companies are playing catch-up because this was not top-of-mind when the trend broke. But they get the message. And they know that if they falter, plenty of observers will feel free to announce it to the world. JL

Roddy Scheer and Doug Moss comment in Scientific American:

Why is Greenpeace upset with some leading tech companies for so-called “dirty cloud computing?

All is Forgiven: Credit Card Companies Think You're Wonderful - Again

Nothing personal, but it is, as they say, not about you.

Strictly business. It's about your ability to pay your bills. Which means that your credit card debt can be rolled up into asset-backed securities which can then be sold to investors.

So everyone benefits: you get more credit to buy lattes and large screen TVs. Investors get some new debt-securities to stuff in their portfolios since no one with a pulse trusts the equity markets. And investment banks? Well, heck, they get paid for packaging and selling this effluent. Nothing fancy, just doing their job keeping America and England and France and wherever financially solvent. God's work, as one I-bank CEO called it a while back.

Except, of course, that this is how it started The Last Time. Before that event whose name shall not be spoken. When even really smart, savvy executives discovered they had no frickin' idea what all this financial innovation meant, or obligated them to or implied.

So if that fall nip is in the air and splurging a little here and there feels right, have at it. Just remember what your parents told you about too much of a good thing. Because we have been down this road before. And it doesn't end in a good place. JL

Nick Summers reports in Bloomberg BusinessWeek:

Banks are returning to a practice they abandoned after the financial crisis: taking Americans’ credit-card debt, slicing and dicing it, and selling it off as bonds.

What Is This Money Thing Anyway?

It's all about the Benjamins.

Or at least it was until their value and that of their brethren in euros, renminbi, yen and a host of other currencies began to raise questions about substance.

To the extent that the financial crisis and recession have generated discussion about Meaning, it has come not from anguished calls to fairness, but from the fact that creditors could not count on being paid what they were owed. A system that had relied upon Gentlemen's Agreements (backed up by the turgid prose of legal documentation)suddenly discovered that its assumptions might no longer be valid.

In addition, the dramatic rise of the internet and with it, technological interfaces controlling credit, debit, transactions wealth transfers and the like became increasingly dominant. Even military experts were stumped by the question of how to protect the wealth of nations whose physical presence had largely morphed into bits and bytes.

Even cash is becoming obsolete as mobile phones become wallets.

So, as the following article attempts to explain, money is about rules of engagement. About the very human need for organization and systemic regularity. Chaos and uncertainty are more expensive than the alternative. Which, come to think of it, may be why money tends to support government rather than not. JL

So questions about the purpose of money

Sell on News reports in Macrobusiness via Naked Capitalism:

One of the consequences of economics pretending to be a science, when it is not, is the tendency to attempt to explain financial behaviour from its base constituent parts, rather as a physicist might build up a picture of a compound from its molecules. This repeatedly results in observations that are either banal or based on circular arguments. And once those observations are generalised, taken beyond their thought experiment circularity, they become consistently misleading.

No More Naked Body Scans? TSA Seeks New Airport Sensors

DARPA invented the internet so it should be able to figure out whether you're hiding a gun in your underpants.

At least that's the theory.

The US Transportation Security Administration (TSA) those folks who scan your luggage and you at airports has a secret. And the secret is that those scanners you wait in line for and that some people thought gave the security folks a chance to see you naked are not always capable of providing the prurient thrills so many were worried or titillated about.

The problem is that the current generation of supposedly infallible scanners tend to make some booboos. They are prone to either over or under-reporting the presence of dangerous substances - aside from those...well, you get the idea.

So TSA has contracted with DARPA - the legendary Defense Advanced Research Projects Agency, the Pentagon's supersmart, supersecret unit charged with developing cutting edge, unspeakably cool stuff. This assignment is perfect for DARPA: figure out a way to effectively, quickly and accurately screen millions of resentful people every day, many of whom are trying to smuggle Cuban cigars, fake silk scarves, cocktails nuts of dubious provenance and even the occasional explosive device.

And do this in what may be the one corner of the economy where people actually express concerns about privacy. On the internet, they'll give their entire life story, complete with passwords, to perfect strangers they cant even see. At the airport, they dont even like taking off their shoes to avoid exposing their socks (and maybe being blown up).

Whatever. It sounds like we will soon have a new technology to complain about. But maybe it will have Wifi. JL

Lorenzo Francheschi-Bicchierai reports in Wired:

Two years ago, the Department of Homeland Security stepped up its campaign to install controversial body scanners at airports nationwide. At the time, the agency claimed the machines could spot all sorts of hidden weapons and contraband.

Today, more than 700 of the imagers are in place at 180 airports. But the so-called “naked” scanners may not be quite as all-seeing as they were originally billed to be.

Insurers Facing Largest Loss: Not from Hurricane, but From Summer Drought

As one part of the country prepares to lose millions getting soaked by a hurricane, another is losing billions from a drought.

The 2012 summer drought is so bad that insurers face the largest agricultural losses in US history. Because agriculture has become a big, nay huge, business, farmers, like executives in other industries hedge potential risks by taking out insurance. And they have every intention of collecting.

The good news, if it can be called that, is that the government will pick up much of that tab. The reason is that it offers crop reinsurance programs and farm issues tend to dominate the economies of a number of states. In an election year, there will be no quibbling about the cost, even from self-styled deficit hawks.

Four years after the worst financial crisis in 80 years, the nation now faces the worst agricultural crisis in the same period. Images of the Joad family and other desperate 'Okies' from John Steinbeck's acclaimed 1939 novel,'The Grapes of Wrath,' may come to mind, but farmers today are executives, futures traders, environmental experts, supply chain managers and sophisticated financiers. The insurance companies, having weathered the financial crisis thanks to government bailouts, now face another challenge as the drought wipes out their farm state business partners.

The only upside may be that now that the financial services industry is once again threatened, the primary cause - climate change - may actually receive more respect from those whose finances are most at risk. It takes a village, indeed. JL

Javier Blas and Alistair Gray report in the Financial Times:

The insurance industry faces its biggest ever loss in agriculture as the worst drought to hit the US in more than half a century devastates the country's multibillion-dollar corn and soybean crops, triggering large claims.

Are You Worth More Dead Than Alive?

Wouldnt it be lovely if this were a theoretical question?

For increasing numbers of people, it represents a hard-nosed series of calculations about risk, chance and economics.

As the financial crisis, jobs crisis and recession continue to take their toll on formerly middle and working class families, the unpleasant reality of sickness, health and survival mandate that value - and values - relative to their longevity and what may be left over for their survivors becomes a much more urgent conversation.

The immediate issue is life insurance. And whether you are sufficiently ill or old or both to optimize the chances of cashing in so that you and yours can figure out how to capture and optimal slice of the proceeds.

This is not a game, though one might argue that game theory may be relevant. Lots of data are required and lots of assumptions must be tested. But technology and science have now given business the tools to better predict one's chances as well as to assign a value to them.

The life insurance industry has always done this, of course. That is how they make their living. It's just that the erosion of other form's of income now make the analysis and its outcome more important to more people. It is unfortunate that it has come to this, though others might argue that it is fortunate at least one alternative exists. That said, if the cost gets too high, this benefit, like so many others, will be withdrawn in the name of yet more efficiencies whose ultimate beneficiary will be anyone but the people for whom they were originally designed, back when human life had more value for society than it appears to do today. JL

James Vlahos reports in the New York Times:

Selling your life and selling a house have more in common than you’d think. The seller puts a listing on the market. Prospective buyers do research and get inspections; there are offers and counteroffers until the seller accepts a bid. The seller doesn’t literally peddle his own life, of course, but his life-insurance policy.

The distinction is in many ways moot, however, as the sales value is inextricably linked to a cold-eyed estimation of how much longer the seller has to live.

Should Nike Cancel Release of Its $315 Sneaker?

Rights versus responsibilities. Free markets versus regulation. Ethics versus economics.

And the subject is: health care? oil drilling? income inequality? Or sneakers?

Yeah, sneakers.

Or, to be more precise, basketball shoes.

There has been concern for some time that the marketing by Nike, Addidas, Reebok and the other major athletic apparel firms - but especially Nike - of ever more expensive sneakers was exploitative and ethically questionable. The people to whom they are marketed, young men and women, age 12-24, put pressure on their parents to purchase slickly advertised vanity products that their families can ill afford. Especially as recent reports note middle class incomes have dropped precipitously and the numbers of families considered middle class has shrunk by over 10%.

Nike answers virtuously - and a tad defensively - that no one HAS to purchase the shoes, that less expensive versions are available (in what sizes, quantities and locations it does not specify)and that, well, it's a free country, a man's got a right to buy what he wants, etc.

But the debate is intensifying. Fights have broken out at stores because one of the company's marketing ploys is to create an aura of exclusivity around the product by limiting the number available for sale. And the argument about pricing wont go away. It's one thing to fight about the cost of life-saving pharmaceuticals, but play shoes?

The argument touches a nerve in our civilization because people are torn about the trade-off between opportunities and obligations. Questions about the individual's expectations from society versus his or her responsibility to contribute to it. And what of the role of business? Nike argues it is simply addressing market demand. Others claim companies have a broader role than they may be willing to acknowledge.

The sense here is that you can not legislate common sense. But spurring people's worst instincts may not be a wise long term strategy either. JL

Emily Chertoff reports in The Atlantic:

Nike touches a nerve in the debate over race and marketing with $315 shoes -- and black leaders may finally be saying 'enough.'

The Past Decade Was the Worst in US Middle Class History

Never is one of those words you want to use REALLY carefully.

It is not just absolute, it is absolutely negative. And most Americans, most westerners and, in fact, most connected global citizens live in a relatively positive culture. The glass tends to be half full rather than half empty. The future usually looks bright. Hope is held out, for whatever reason.

But we officially have a 'never' here. It underscores the severity of the economic situation and illuminates why the political atmosphere is so toxic.

Since the Second World War, the US middle class has never had a worse decade than that through which they suffered in the 2000s.

The middle class, the bedrock of the US economy, has lost 10% of its population. From 61% to 51% last year. And make no mistake, 10% is a big number. The word 'decimate' is derived from the loss of 10%. It's root is ancient, 'deci' referring in Latin to ten. The usually invincible Roman legions determined through experience that when a unit lost 10% of its numbers as casualties, it was decimated, meaning that it had been rendered unfit for further combat.

So, the loss of 10% of the middle class may well be contributing to the economy's stagnation. In a consumer driven economy, like that of the US, the loss of 10% of middle class purchasing power and leadership and entrepreneurial activity may have rendered the economy ineffectual. On top of the job losses, the financial insecurities and the increasing concentration of wealth among the top 1%.

In addition, people between the ages of 55-64 have been especially hard hit. These are the pre and early retirees, people who have saved and often prospered, but are now generally past their peak earning years.

This matters because people tend to vote in proportion to their age (approximately 21% of 21 year olds, approximately 55% of 55 year olds...). And this is a Presidential election year. People are angry. At declining incomes, declining net worth, declining standards of living. And given their ages, they are not in a position to make up the losses. Whatever their experience and tacit knowledge, companies, like athletic teams, tend to go with younger candidates. Even if they are willing and able, older people often dont have the technical skills now required.

Interestingly, the report on which this information is based notes that blame is placed on Congress, banks and large corporations. George W. Bush is held more responsible for this state of affairs by those surveyed than any other national leader.

Which may or may not be a political portent for 2012. But that knowledge could be a sign of why business is fighting so hard to elect one candidate rather than another. JL

Anna Fifield reports in the Financial Times:

America’s middle class suffered its worst decade in modern history during the 2000s as net worth and wages declined, according to a report from the Pew Research Center

Where Has the Small Investor Gone?

They get it. They get that the system is managed to optimize returns for the brokers and big institutions. They get that the regulators think protecting the financial services industry is their top priority. They get that politicians are dependent on finance contributions. They get that high frequency trading and other financial 'innovations' are designed to benefit those that created them.

They are not protesting in the streets, because they also get that they have little hope of changing the system that way.

So, they may not be the brightest or best informed or most connected or wealthiest. But they understand when what little they have is being frittered away. And they are just smart and energetic enough to seek alternatives. So the changes that will inevitably come from the loss of trust in the capital markets will be driven by the decline of funds flows into those self-same markets.

Isn't that how capitalism is supposed to work? JL

Barry Ritholtz comments in The Big Picture:

Lots of folks are wondering what happened to the Main Street-mom-and-pop retail investors. They seem to have taken their ball and gone home. I don’t blame them for feeling put upon, but it might be instructive to figure out why. Perhaps it could even help us determine what this means for risk capital.

We see evidence of this all over the place: The incredibly light volume of stock trading; the abysmal television ratings of CNBC; the closing of investing magazines such as Smart Money, whose final print issue is on newsstands as it transitions to a digital format; the dearth of stock chatter at cocktail parties. Why, it is almost as if America has fallen out of love with equities.

eBay Bans Sale of Magic Spells and Potions

Is nothing sacred?

Forget wizards' rights, whatever happened to the free market?

eBay sells a lot of strange things. And trust us, the volume of ordinary office supplies and farm implements sold in bulk can seem far weirder than the occult or the merely mysterious.

But somebody got their nose in a snit. So eBay is eliminating some items out of what it calls the Metaphysical Category. It remains deeply concerned about 'intangible' items (like brands or business services, inquiring minds want to know?), because, we guess, they are, well, not tangible, at least to mere mortals.

Seriously, however, one has to wonder: why would anyone care? It's a market. There are sellers and, apparently, there are occasionally buyers. And the costs, as the article below makes plain, are not bargains. We could understand if there had been complaints about quality (frog has still not returned to human form...)but one wonders if this was really something a bit more worrisome. Like an easy concession to religious authorities who care about such blasphemies. eBay is not known for being the least bit political, but buying a little goodwill on the right to save for an ideological rainy day would not be totally unheard of.

In the meantime, anyone with excess inventory of eye of newt, lizard's leg or howlet's wing will just have to wait for the market to recover. JL

Katy Waldman reports in Slate:

Buying and selling on the milky way of enchantment we call the Internet is about to get a lot more boring. Starting Aug. 30, eBay will add magic spells and potions to its list of “prohibited items,” meaning that any attempts to post or purchase these items on the site will be blocked.

EBay unveiled its new rules in a 2012 Fall Seller Update, probably after fierce lobbying from the Ministry of Magic. So if you were waiting for the right time to monetize a hex you invented or buy an elixir that makes everything you touch turn to popcorn, wait no longer.

Starbucks' Mobile Payment Deal and the Decline of Cash

Starbucks had already struck deals with Google and Apple to let customers use their technologies to buy coffee.

But this deal is different.

The coffee purveyor is not just making another mobile payment system available, it is investing $25 million in Square, the mobile tech company, and Starbucks CEO Howard Schultz is joining its board. Which is not just any old start-up collection of friends and relatives: it was founded by Twitter co-founder Jack Dorsey and other directors include Sun Microsystems co-founder, former Kleiner Perkins general partner and iconic venture capitalist Vinod Khosla, former Morgan Stanley analyst/tech guru Mary Meeker and former US Treasury Secretary Larry Summers. These are not the sort of people inclined to lend their names and time to ventures which have a small chance of success.

Starbucks processes about $1 million a week in mobile purchases. So, it has demonstrated both a market for - and a commitment to - the mobile payment concept. But with this investment it reinforces the notion that mobile is a strategic imperative, not just a convenient attention-getter.

The reason is that mobile may help the company address both its desperate need to reduce wait times in its stores, especially as prices rise, and it offers an alternative source of revenue and profit related to but not dependent on the sale of coffee. While many smart phone owners are reported to be positively inclined towards mobile payments, few actually do so. Starbucks' customers could provide the critical mass needed to kick-start this phenomenon. In doing so, it will strengthen its core business and benefit as an investor from the larger trend, enabling further investment in a growing array of allied enterprises.

The use of cash may or may not decline as a result. But its use will probably shift. Starbucks stands to benefit from a burnished reputation as a savvy investor - and as an operator with a strategic vision. JL

Peter Cohan reports in Forbes:

Mobile payments service provider, Square, got a $25 million investment from Starbucks valuing the start-up at $3.25 billion — that could mark the beginning of the end of cash. Meanwhile, this deal could boost Starbucks’ profits and puts Square’s competitors on notice.

Square has more than two million users of its small square credit and debit card reader that attaches to a cell phone. Square charges a fee of 2.75% of the transaction cost — it keeps some of that and passes the rest to the credit card company. And starting in the fall, Square will begin processing all credit and debit card transactions at 7,000 U.S. Starbucks stores.

Many Americans Die With No Financial Assets

Almost 50% of Americans, citizens of the largest wealthy nation on earth, have fewer than $10,000 in financial assets.

But the real problem is that the trend lines are getting worse. The numbers were considerably better prior to the financial crisis in 2008. And married couples appear to be far wealthier than their unmarried cohorts. This is not as comforting as it might seem since the older people get, the less likely both spouses will survive.

The public policy issue is also a business issue. A consumer driven economy like that of the US relies on the ability of its citizen-consumers to spend. Cutting government programs like Social Security may not only threaten the lives of those who depend on it, it may threaten the livelihoods of those businesses which depend on those selfsame people.

A globally competitive economy requires a strong domestic base. To remain competitive, therefore, policies that enhance that domestic market are essential to the long term growth of increasingly global businesses. The fragility of the consumer asset base suggests that there is little margin for error. JL

Peter Dizikes reports in MIT News:

It is a central worry of many Americans: not having enough money to live comfortably in old age. Now an innovative paper co-authored by an MIT economist shows that a large portion of America’s older population has very little savings in bank accounts, stocks and bonds, and dies “with virtually no financial assets” to their names.

Authenticity: The Market versus The Law

Art is where this story begins. But it is starting point for a bigger debate about expertise - and trust.

As in so many aspects of society today, people and institutions turn to the courts and the legal system to resolve disputes that might once have been decided by reasoned discussion.

Perhaps the financial stakes have become too high. Or perhaps we have lost patience with the seemingly interminable wrangling of the litigation process. Or maybe we just no longer trust anyone else sufficiently to render fair judgment. Not that public opinion polls about the judicial system are all that edifying.

But the issue has to do with values more than value. There was a time not so long ago when a person's or institution's reputation was like gold. An asset to be protected and cherished. It was the bedrock upon which commercial transactions between those who might never meet and whose correspondence was based on the often uncertain pillars of time and faith relied. Global commerce was dependent on trust. What courts there were could not be reliably render verdicts fairly, if at all.

Today's challenge is different. Communications are instantaneous - and sometimes, thanks to the algorithmic power available - anticipatory. But rather than cementing bonds of trust, this appears to have hastened the decline in 'sense and sensibility.' Once, a reputation besmirched meant a business destroyed. Today, we inhabit a world of endless rebranding and redemption.

We rely on judges and juries, whose knowledge - let alone wisdom - is no better than our own because we have come to see experts and expertise as suspicious. Anyone with resources can buy a favorable opinion. The weight of all that education and verbiage cancels each other out.

So whether it is the value of a painting, a house or a business, we defer to others. Perhaps not trusting our own beliefs as much as the verdict itself. JL

Patricia Cohen reports in the New York Times:

Federal District Court Judge Paul G. Gardephe’s résumé includes many impressive accomplishments but not an art history degree. Nonetheless he has been asked to answer a question on which even pre-eminent art experts cannot agree: Are three reputed masterworks of Modernism genuine or fake.

Judge Gardephe’s situation is not unique. Although there are no statistics on whether such cases are increasing, lawyers agree that as art prices rise, so does the temptation to turn to the courts to settle disputes over authenticity.

When Hard Numbers Go Soft: Assets and Optimism

Tactics and strategy.

Businesses focus on what works in the short term. Investors and regulators wring their hands about the long term.

The twain occasionally meet but the incentives - compensation, promotion, job security (such as it is) and recognition are skewed to the immediate. Which is one reason why there is such distrust in the various markets for goods and services. Individuals are pulling money out of equities. Businesses are choosing not to make illiquid investments. Governments are pulling back on the programs for which they have traditionally been counted to get society through rough patches in the economy.

And a big part of the problem may be the overly optimistic write-up of assets - be they tangible or intangible - that drive organizational performance. Recent scandals have laid bare the unseemly side: JP Morgan's weak management information system; the doctored Libor interest rate calculations, Facebook's disappointing IPO, and now, to add to the uncertainty, Knight Trading's failed computer system. A system designed and installed to make the firm more competitive by increasing the speed at which it could process information and trades. Only its staff were not given enough time to learn how to use it properly - and someone forgot to tell them that the flip side of its speed was its relative lack of managerial controlability.

We also see it in another contemporary opportunity: iconic British soccer franchise Manchester United will go public today - in the United States. Which would be simply curious if the previous attempt - in Singapore - was pulled for various marketing and technical reasons (which is the polite phraseology for a combination of lack of interest and sub-optimal growth prospects). The controlling Glazer family needs to monetize its investment. But will anyone who is not a flipper or diehard fan really want to touch this?

The overarching problem is that in our desperation to sell, we have loosened standards and fought bitterly against any suggestion that they be tightened. This reflects a fear of the future and of the quality of the assets we manage now. Whether we intend it to or not, that fear communicates itself throughout the economy and causes the sort of stasis we now experience. Even the political opposition to any stimulus or economy policy that might help a sitting President or Prime Minister is driven by the concern that the pie is shrinking meaning those who have do not want to surrender anything they have of value.

This lack of candor in assessments, valuations and audits has already stifled growth. There is no investment without trust. The question is why we continue to believe there are 'Greater Fools' still extant in an information rich environment. Without greater honesty and transparency, we may well discover that the greater fools are, indeed, us. JL

Wolf Richter reports in Business Insider:

Normally we see the gory details only after a firm collapses, like Enron or Lehman, when vultures tear open its guts to fight over shriveled assets that had appeared fat and healthy on paper, and some of them had been written up repeatedly to create—which our accounting system encourages us to do—paper income.

Other outfits get bailed out. JPMorgan among them. A distinction made behind closed doors.

The Primary Driver of GDP Growth Is a Strong Rule of Law

Putting laws on the books is relatively easy. Enforcing them is the true test of a society's character.

As we contemplate the Libor scandal in which banks manipulated for their own gain the key metric for global interest rates, or the murder of a dozen random movie goers by a gun-toting mad man, we are forced to confront this civilization's commitment to the rule of law.

In the Libor case it appears that those involved calculated the odds and decided that the risk justified the rewards. It is not yet clear for how many years this went on, but so far, only one bank CEO has lost his job - and he was very well paid for his efforts in the interim. Certainly the absence of any serious charges, let alone convictions regarding responsibility for the financial crisis confirms the sense that the law is no longer considered an impediment to personal initiative.

In the gun massacre case, a coalition of gun sellers allied with ideologues looking to score political advantage will negate any effort to rethink US gun laws.

The result of both cases is to reduce trust. The connection with economic trends is that businesses and individuals are not inclined to invest when they believe the system is designed to place the majority of them at a disadvantage. And an economy without trust and investment soon fails to be an economy. JL

Washington's Blog reports (Hat tip Yves Smith):

Economist Woody Brock says that a nation’s GDP growth is based mainly on whether or not it follows the rule of law.

Is Your Home Becoming a Cyberattack Magnet?

Convenience works both ways. It helps you do many tasks more easily. And it does the same thing for those whose interest is in taking things from you.

The highly touted benefits of managing your lights, garage door and coffee maker from your smartphone are no exaggeration. But they are also increasingly making the average home more vulnerable to those interested in stealing codes, data and access to your online financial wealth - to say nothing of neutering your home alarm system. They may also use your devices to mask their hacks on others.

The problem is that we have become enamored of gee-whiz technological power whose utility is less essential than magical. And there is nothing wrong with that. In fact, the common uses may spur further advances that could have significant impact on our lives. But in the meantime, those whose intent is less pure are finding this fascination quite useful to them. And the current anti-government regulation mood makes it more difficult for those concerned with security, even if privately employed, to offer better protection.

There is a point at which the liberating effect of convenience collides with the common sensical need to think more carefully about the practical impact of such trends on our real, tangible lives. And that point appears to be here. JL

David Goldman reports in CNN:

If the Jetsons were real, they probably would have gotten hacked a lot. In the classic 1960s animated sitcom, everything in the space-age family's home was networked and could be controlled by the press of a button on a remote control.

That fantasy is becoming a reality. New technology allows practically everything in your home -- from your door locks to your thermostat to your TV -- to be controlled by an Internet-connected device like a smartphone.