January 2009 Archives

Sat Jan 31 15:47:09 PST 2009

Vitamin-C - A Food Preservative Essential For Life

Do you reach for a bottle of vitamin-C tablets when you feel a cold coming on? Vitamin-C, or ascorbic acid, is reputed to have the ability to strengthen the immune system and improve our ability to fight back against invading influenza viruses. Hence, many people dose themselves with vitamin-C tablets, or citrus fruit, at the onset of a cold.

Medical trials of vitamin-C's effect on colds, both as a treatment, and as a preventative have shown only modest value. On average, taking a vitamin-C supplement may reduce the number of days of cold which one person suffers per year by around 10 percent. This is much less than a day of relief for most people from a typical cold. And the results are very variable with the most positive results coming from those who may be bordering on vitamin deficiency. So vitamin-C as a treatment or preventative measure for colds has only limited value.

However, vitamin-C is certainly an effective treatment for vitamin-C deficiency and vitamin-C deficiency, or scurvy, produces extremely undesirable effects. The lack of vitamin-C reduces the ability of the body to synthesize collagen, resulting in a range of skin problems including weakened gums, spots, and bleeding from mucous membranes.

Humans cannot synthesize vitamin-C, and a diet that lacks vitamin-C will result in scurvy. The recognition of this fact, and the resulting compulsory eating of citrus fruit for British sailors, resulted in the use of the general expression 'Limey' in America for a British person. (One imagines that the lime colored skin of the British sailors may have strengthened the use of the term...)

Ascorbic Acid

From a chemical perspective the ascorbic acid molecule (which is shown above) is effective at absorbing free radicals and allowing itself to be oxidized in preference to surrounding molecules. It has three oxygen atoms close together attached to its ring structure, (these are shown in red in the model above), and these oxygen atoms can readily donate protons to passing molecules or absorb electrons from passing free radicals.

Consequently, ascorbic acid is often added to foods as a preservative. The fact that it is also a vitamin, which our bodies cannot synthesize, makes its use as a food preservative acceptable.

Posted by ZFS | Permanent link | File under: general


What Causes Recessions

Despite their willingness to advise governments and appear on television, few economists comment on the causes of recessions. For those interested, here is a short summary of the key causes of recessions.

The financial news has not been good lately. Markets have declined, massive commitments been made on the behalf of tax payers, and jobs have been lost. But what causes recessions?

Recessions are operationally defined as two successive quarterly declines in gross domestic product, where gross domestic product, or GDP, is a measure of the total output of a given economy. A nation's GDP is the sum of domestic spending and investment, government spending, and money earned from exports to other countries, minus expenditure on imports. GDP therefore measures the monetary output of a given economy and does not capture unpaid work, or the environmental cost of that output, among a variety of deficiencies. However, GDP is the widely accepted benchmark of national financial well being and in particular allows us to discuss, in relatively simple terms, whether an economy is growing or declining.

Based on this definition then, recessions occur when the sum of the components of GDP decline for two successive quarters. For example, if consumers continue to earn, but stop buying, GDP will decline. Similarly, a reduction in government spending can also lead to a recession, if it is not accompanied by an immediate increase in general domestic spending. In fact, a direct means of increasing GDP is provided by increasing government spending. This approach has already been aggressively followed in the present recession, and should mean that GDP, as it is officially defined and monitored, can be said to be on the rise, and this recession officially, if temporarily, cured, for countries with governments able to increase their spending in the short term.

Although government spending is one measure of economic health, as governments have to acquire their funds somewhere, (typically from taxation), most people think in terms of more traditional forms of industrial and economic output when they think of production. Such measures include the numbers of nuts and bolts, potatoes, computers, cars, and television shows, for example, produced and sold. Each transaction adds to the nation's GDP. Particularly valuable to the GDP are transactions which produce transfers of money which can circulate through the economy. Here the profit from a sale is reinvested in the development of a new product, for example, or the return on a service is converted into further purchases in local stores. When the transactions of the economy are able to echo healthily and rapidly through the economy, small increases in efficiency are able to scale the entire economy positively, and GDP rises.

Hence, healthy GDPs tend to be seen where there is an interest in making improvements to existing ways of doing things and where there is an appetite to consume the resulting economic benefits.

The converse is also true. When money is extracted from the economy and not reinvested in goods, services, or transactions, then GDP shrinks. Weapons manufacturing, for example, takes commodities, goods and money permanently from the economy and places their economic value in a stockpile which typically will not ever yield any further economic circulation. Wars, where plunder has been rule out, also efficiently extract money from the economy. Not only are goods removed and transactions stopped, but large numbers of potential consumers are prevented, in one way or another, from participation in the economy.

Multi-generational bonuses and stock incentives, similarly rapidly acquire an illiquid nature and their immobility cools the economy. Thousands of bankers collecting multi-million dollar bonuses yield a multi-billion dollar loss of value from the economy. Re-injecting such large sums into the economy requires imagination, not just the acquisition of a sports car or two, so this presents a problem. Bankers are, when it comes to their own money at least, conservative and risk averse, and the siphoning of client's, and now tax payer, money into bonus accounts does little to stimulate an economy.

The economic drains of, overspending on weapons, protracted wars, and excessive bonuses remove transactions from the economy and progressively increase the chances of a recession occurring. However, as recent years demonstrate, recessions arrive suddenly, taking consumers, politicians, and august economists by surprise. Indeed, triggering events are needed. These may take the form of changes in commodity prices, changes in the availability of credit, or changes in consumer temperament.

Commodity prices necessarily fluctuate according to the balance of supply and demand. However, when oil prices, for example, vary by several hundred percent in as little as a year, while demand varies by less than 10 percent, long range planning becomes very difficult, and conservative responses will result. In the 1970s significant changes in oil production volumes caused substantial oil price variations and acted as the trigger of a major recession. More recently, speculation fueled by low interest rates, and perversely risky insurance policies (or swaps as they became known to avoid regulation), fueled dramatic and rapid variation in prices.

When volatility is high, planning becomes difficult, and financial gurus, who generally favor linear extrapolation in the development of their long term visions, fall silent. Lack of vision leads to a lack of confidence, mass market exit ensues, and the cause for recession is in place.

Once the intrinsic drag on the economy is set up in the form of wars and bonus bonanzas, and a trigger is in place, in the form of wide fluctuations in prices based on a foundation of uncertainty of values, the stage is set for recession. When the final trigger arrives, public confidence is broken, shaken by declining markets, and worrying financial news, and discretionary spending dries up. At this point the reckless consumer suddenly becomes a worried saver, and the financial wizards now in possession of that investment money, will have no thought of rapidly returning that money to the economy. It will be consigned to accounts earning only slightly less interest than their year-end bonuses and provide no immediate benefit to the troubled economy.

The twin causes of recessions then are activities which prevent the circulation of money in the economy, which prepare the ground, and triggers which break up normal spending behavior patterns. Given these causes, the antidote for recession should be the encouragement of money circulation, reversing the trend which setup recessions, and triggers which lead to reduced consumer conservatism.

It will be interesting to see if government spending policies are sufficient to reverse the current recession. Given the definition of recessions, and the inclusion of government spending in GDP, the immediate impact is likely to be positive, an important consideration for those facing re-election. However, the long term success of the economy depends on production, and this is favored by increasing the rewards of production, not simply increasing government spending.

Posted by ZFS | Permanent link


Fixing a PDA - Getting a Psion Revo Back into Service

Several years ago I bought a Psion Revo, or Diamond Mako, as this particular version was called. The Psion Revo is a very nicely made keyboard based PDA, with an apparently significant design flaw in its battery charging technology.

Several years ago I bought a Psion Revo, or Diamond Mako, as this particular version was called. The Psion Revo is a very nicely made keyboard based PDA, with an apparently significant design flaw in its battery charging technology. The battery problem caused the machine to be unable to accept a full charge whereupon the machine would only operate for a few minutes before failing through lack of energy. I have had the machine locked in a draw for several years but finally decided to liberate it and give it one last chance to be useful. First I tried charging the Revo, the indicator for rapid charge didn't come on, so the problem was still present although the battery must after many years of neglect, have been completely flat. I decided to consider replacing the rechargeable AAA cells inside the machine. I followed the instructions posted at "http://www.r3uk.com/index.php/tech-tips/34-disassembly-guides/3-psion-revodiamond-mako-disassembly-and-battery-replacement". The instructions are easy to follow, and soon I had removed the battery pack. However, I didn't have any new batteries to solder together, so I decided to give the old battery pack one last try. I snapped he connector back together, and with everything hanging together outside the case, I tried the charger one more time. This time the rapid charging light came on and stayed on for many hours. I left the machine charging away overnight, and came back to find that the machine was trickle charging as the designers had intended. So, I now suspect that the problem with Revo charging was caused in part by a poor battery connector. That was the only thing that changed between my first attempt to charge the unit and the second successful attempt.

Sadly Psion no longer make PDAs. If they had continued making machines based on the 'SIBO' technology of the Series 3a machines, everyone in the world would have been using them for the last decade. But Psion gave up their technological lead and converted to a more complex beast - such is progress. Even so, I will be a happy camper if the Revo keeps on charging correctly.

I have loaded the machine up with various interesting pieces of software saved for many years after my original skirmish with the machine. There is a sketching/paint program (as the Revo has a dainty stylus this makes much sense). There is a program for logging time spent on projects ('Worktime') and a program that I wrote which lets you make connected box type diagrams - which is a lot of fun - even if the screen is rather small.

I have not seen anyone else complain of the battery connector on the Revo. Perhaps my example is just a one off. I should have been a little suspicious of the fact that the connector is glued together. Why do you need to glue a connector if that particular part of the design is not under mechanical stress? But perhaps Psion knew that there was a problem with the connector not being able to pass relatively high charging currents, and were trying to work around the problem by getting the connector to work as well as possible by bringing its two halves into a quasi-pressurized relationship. We may new know. I have reassembled the Revo without any glue on the connector and I will be monitoring its charging and other characteristics. I am having fun using it - even if it was not a Psion 3a, it was a great PDA - what a shame about the reliability problems.

Posted by ZFS | Permanent link


In Defense of Jim Cramer

What does one make of Jon Stewart's skewering of CNBC's Jim Cramer and the ineffectiveness of financial journalists.

Jon Stewart of the Daily Show versus Jim Cramer of CNBC's Mad Money, the headline proclaimed. I absentmindedly clicked on the link, and what did I find? Simply that Viacom had requested that YouTube remove the copyrighted footage from the video site.

Naturally, I was then curious, and Googled further for the interview. The web obliged, and I duly watched the footage, complete with lengthy adverts, presumably providing much needed revenue for the Daily Show. From a comedic perspective, the interview was, however, a bust, as they say. Stewart was disappointed that Cramer was not, CNBC, a financial journalist or Rick Santelli, and Cramer seemed to be there to praise Jon Stewart and occasionally admit responsibility for defrauding the investing public.

Stewart seemed, to me at least, to miss the point of Santelli's famous rant, which did not blame the financial crisis on mortgage defaulters, but instead questioned the wisdom of the government appearing to condone or forgive risky financial behavior, by bailing out those who could not pay their mortgages with tax payer money. The details of the mortgage bail out are far less favorable to borrowers than either Santelli or Stewart apparently recognizes or at least reports, the lenders will extract the major payout, and borrowers and tax payers alike will be duped.

However, faced with a broad attack on his employer and financial journalism as a whole, Cramer winced and floundered. He variously admitted complete responsibility, praised Stewart, blamed CEOs, and attempted to turn the conversation toward Madoff. This pin wheel like defense was not particularly effective against an array of finely targeted and edited clips of Cramer opinions and admissions, and Stewart pressed home his attack with uncharacteristic gusto, like a television lawyer breaking a witness on the stand. Whilst watching this (between Viacom's adverts) one had the distinct impression that Cramer had been handed a different script prior to the interview, or a Rohypnol laced iced tea, and perhaps, in turn, Stewart's autocue was particularly carefully and steadily fed on this occasion.

There was an implication in Stewart's line of attack that CNBC should have been more insightfully pressing in their pursuit of the truth behind investment banker greed. Yet, in reality Cramer and Stewart share a common need for ratings. Ratings attract advertisers and pay salaries and dividends. Stewart's show is owned by Viacom, a company with billions of dollars in revenue, derived from selling advertising slots targeted to teenagers. CNBC is owned by GE by way of NBC, a larger company, with an older audience, but with no lesser need for ratings.

Nirvana for both Viacom and CNBC is an enormous audience of docile viewers, passively watching footage about their hero's cribs, amid a thicket of lucrative advertising messages. As the audience is bled dry of its discretionary spending power, the status quo is maintained, the poor are taxed, and the hosts and networks extract as their due their percentage. At some point, as Stewart noted in the interview, value is work, and truth be told neither network nor show contains much value or work.

Posted by ZFS | Permanent link


How and Why TARP Funds Found Their Way to a Small Number of Bankers

When the luminary on the radio said that we needed to move on and not find scapegoats in the aftermath of the current financial meltdown I have to say I was initially quite convinced by what I heard. It was important, the luminary said, to look forward and not backward, and to not demonize hardworking people. Quite right too, I thought. It is much better to focus on the future rather than the distant past.

Then I glanced at the news, and saw a few column inches, not many in comparison with the fulsome coverage given to the OctoMom, but a few, discussing the latest problem to have befallen a bank.

On this occasion the problem had a slightly different twist. This was not a case of investing in borrowers with insufficient income to repay a loan, or gambling with credit default swaps. This was merely a question of the apportioning of holiday bonuses.

Clearly organizations like banks are unashamedly sales based, similar in many ways to used car lots, though not as honorable. This particular organization had put together a sales incentive plan which involved large compensation packages going to executives at the end of the year in 2008, despite the company as a whole having wracked up crippling losses for their investors. Additionally, to add insult to grievous financial injury, the organization concerned promptly required a government backed rescue by another bank. However, the bonuses paid out to executives of the failing company, on the basis of their huge annual loss, were $3.6bn dollars.

Now when you spread out $3.6bn among many people your money does not go all that far. If, for example, you have a million recipients, each would receive 3.6 thousand dollars. Many people would be happy to receive such a sum of money, and likely there are many, many people in the world who could acquit themselves as well as these sterling professionals at the task of running a formerly successful financial organization into bankruptcy.

However, interestingly, there were far fewer than 1 million executives who divided the $3.6bn. Precisely how many has not yet been divulged, as unsurprisingly, there seems to be a degree of reticence as to who the actual recipients were. Prior to its demise, the failed sales organization employed a total of around 60,000 people. So, assuming each person in the company had been an executive, each would have received $60k, more than a typical teacher's annual salary, as a year end bonus in 2008, having bankrupted their company.

But, more than likely, the largesse was not evenly distributed among the employees and instead a relatively small number of 'seasoned professionals' walked away from the collapse with extraordinarily well provisioned nest eggs, a few small, medium and large islands, and their children's education and legal fees covered for generations.

Say for example there were 60 recipients of the $3.6bn, each on average would have taken possession of $60m. Or if there were 600 recipients, it would be $6m each, if it were 6 executives, each would have ended the year with a much needed $600m fillip. It is fun to do the division. (I continue to fear that the moderately large numbers involved effectively cloak the financial wizardry from both politicians, who count only as far as registered voter numbers and citizens, who count only as far as the number of days to the next pay check).

However, given the bonus bonanza to the end of a loss making year, and the indications of management effectiveness that this portrays, the demise of the bank can hardly be a surprise to many in the financial world.

But, perhaps those dupes who end up paying the final tab can be forgiven for being a little surprised. Those bill payers are, in large part, owing to the TARP legislation, ordinary tax payers.

The tax-payer bailout money, to the tune of many billions of dollars went to Bank of America, who needed that money to support the ailing Merrill-Lynch, the sales organization that so handsomely rewarded its failed sales executives.

Once more an organization's executives have separated many customers from their commissions, many investors from their 401k's, and many tax payers from their tax dollars, laughing all the way to the Bank of America. (As it were).

I therefore cannot agree with the luminary. If tax payers, investors, legislators, and executives do not examine what happened, make corrections, and learn lessons, these circumstances will be repeated indefinitely.

There will always be a fear that unscrupulousness is the norm and any form of investment unwise unless the lessons are learned. That fear will undoubtedly stunt the world's economies. Where executives, auditors, and rating agencies signed off on accounts which were palpably incorrect, laws and penalties should be applied, and appropriate fines and punishment administered, and the excess money should be returned to tax payers.

Personally, I do not favor jail time for financial wrong doers in addition to repayment of ill gotten gains. This after all would cost tax payers hundred of thousands of dollars more per conviction per year (as incarceration is a costly undertaking) and would contravene an important rule of capitalism and common sense: don't throw good money after bad. However, a productive and vigorous contribution to the Peace Corps, building hospitals in Afghanistan, Darfur, Sudan, or Gaza, would provide a wonderful opportunity to give back to society. Far better than setting up innumerable charitable foundations which continue to separate money from the needy, less temptation to engage in tax efficiency 'schemes', wonderful exercise, and an opportunity to see the world.

Of course, these business dealings may have been the entirely legitimate and routine transactions of well educated and sophisticated financial wizards. A thorough and public investigation would allow this to be assessed. Far from looking backward this would seem to be basic common sense.

Posted by ZFS | Permanent link