A Piece of Paper Worth a Billion Dollars

Slate’s The Big Money had an amusing post the other day about some fake Treasury Bonds that were seized earlier this year. The post is mostly about the implausible conspiracy theories that were subsequently hatched, but what’s interesting to me is the implausible nature of the fake bonds themselves.

In two separate incidents, Italian authorities confiscated stacks of bonds with a  total face value of $250 billion. A collection of US debt that large is itself pretty unlikely, but what really pushed it over the frontier of believability was the fact that these stacks weren’t all that tall. Denominations for single bonds, that is, single certificates, went as high as $1 billion.

To understand just how far beyond the realm of reasonable this is, you need to know that a) the government stopped printing paper certificates in 1986 and b) in the days in which it did print certificates the highest denomination was $100,000. The total amount of authentic paper bonds still in circulation is $105 million. That’s million with an M.

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Damned Lies, Statistics, and the Great Recession

Free Money Finance last week pointed me to an AP article from the end of September headlined “Income gap widens as poor take hit in recession”. (Your local news outlet may have used a different title.)

The piece recounts how the recession has lowered incomes across the board but hit the deserving poor and ever-wholesome middle class harder than the fat cats on the top. Kinda ho-hum as mainstream media reports on the Great Recession go. The AP story was run in a few places (see link above and here and here too) but hardly made a splash. Why would it? It just confirms what everybody knows to be true.

But it isn’t true. Or, at least, the conclusions in the article are completely unsupported by the data it pretends to be based on.

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Post 200

This is the 200th post at Bad Money Advice. As it is also a cold and rainy Friday morning here in Boston, this seems like as good a time as any to reflect and take stock.

I started Bad Money Advice on a much colder morning this past January. My primary goal was, and still is, my own amusement and satisfaction. Unemployment saddled me with a lot of free time and extra energy and I wanted something to do more substantive than on-line poker.

So far so good. BMA amuses me. I’ve got something to say and, apparently, have found an audience of people willing to listen.

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The Money Culture War

Yesterday’s New York Times carried a column worth reading by David Brooks. It is a little confused, even by the standards of Times columns, but the gist of it is a call to arms for a brand new culture war, this one over money.

I’m all for that.

Brooks starts out by recalling a centuries old idea.

The theory was that great nations start out tough-minded and energetic. Toughness and energy lead to wealth and power. Wealth and power lead to affluence and luxury. Affluence and luxury lead to decadence, corruption and decline.

This was a theory invented for, and more or less exclusively applied to, the fall of the Roman Empire. But don’t let the fact that it’s long since been cast aside by historians distract you. Brooks thinks we’ve gone soft.

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Five Lessons of the Great Recession We Probably Won’t Learn

As I wrote on Friday, lists of lessons we have learned from the current economic troubles have been enjoying a vogue lately. A dim view of my fellow humans prevents me from being so optimistic as to believe that we are going to emerge from this fiasco meaningfully wiser. But I do have a list of lessons that we could learn from recent experience. But probably won’t.

In the best case scenario, regulators are just as smart and capable as the people they regulate. And, just to be clear, best case scenarios are rare. Many of the complaints about how the Fed, SEC, et al. blew it by not foreseeing and preventing the Wall Street meltdown are unfair. If the thousands of people making seven figures at meltdown ground zero didn’t see it coming, why would we expect the hundreds of government employees watching them from the outside to pick up on it?

25 years is not forever. Amongst my many brilliant theories is this: especially in the realm of culturally significant business phenomena, if something has been going on for more than 25 years people will mistake it for a permanent always-has-been-always-will-be thing.

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