Tokyo Spring!

It is a beautiful spring day in Tokyo and the cherry blossoms are out in force. Here are a few pictures from Shibuya taken with my cell phone this morning.

from Nabeshima Shoto Park

and at a small house in Shoto

Enjoy!

An Inconvenient Fact

From The Australian is this much-quoted article pointing out yet again that recent data does not support the global-warming hypothesis. Not only is there no warming but the idea that human-generated CO2 causes warming is at best overly simplistic and at worst just plain wrong. 

But what interested me was this paragraph towards the end of the article:

What The Age decided to spare its readers was the following: "Well-meaning intellectual movements, from communism to post-structuralism, have a poor history of absorbing inconvenient fact or challenges to fundamental precepts. We should not ignore or suppress good indicators on the environment, though they have become extremely rare now. It is tempting to the layman to embrace with enthusiasm the latest bleak scenario because it fits the darkness of our soul, the prevailing cultural pessimism. The imagination, as Wallace Stevens once said, is always at the end of an era. But we should be asking, or expecting others to ask, for the provenance of the data, the assumptions fed into the computer model, the response of the peer review community, and so on. Pessimism is intellectually delicious, even thrilling, but the matter before us is too serious for mere self-pleasuring. It would be self-defeating if the environmental movement degenerated into a religion of gloomy faith. (Faith, ungrounded certainty, is no virtue.)"

The more inconvenient the facts, the more important that the data be published and reviewed. 

Fortunately, the Internet makes it much harder to suppress inconvenient facts. 

Unfortunately a lot of powerful and influential people are going to look really silly as the evidence mounts. 

And as noted by Steven Milloy in his Junk Science column the consequences of making policy based on bad science are no laughing matter. It is unacceptable for leaders to ignore the data. 

(credit to Drudge Report for noting the first two articles I've linked in this post.)

More Fun with Passports

Bloomberg has more news on all this. It seems McCain's and Hillary Clinton's passport data were also accessed. 

Now the press is finally reporting what is in a passport file. Not much it turns out (as I suspected):

The State Department said the only document kept in an individual's passport file is the application package. The application form includes information such as place of birth and Social Security number. The passport system has between 180 million and 200 million applications in its database.

"Passport files do not contain travel information, such as visa and entry stamps, from previous passports,'' State Department spokesman Sean McCormack said. "Almost all passport files contain only a passport application form as submitted by the applicant.''

Come to think of it, anyone who has a passport would know what is in an application. Presumably this also includes a fair number of reporters. Funny how this question wasn't asked earlier. 

Another interesting factoid is that some 200 million applications are in the database. I thought that only something like 25% of US Citizens had passports (75 million or so). But I suppose the number would increase considering passport renewals and the sudden increase in applications due to new requirements for travel to Canada, Mexico, and the Caribbean. 

We also learn that there are 2600 contractors and 1800 employees. 4400 total staff seems like a lot, but perhaps not unreasonable given the volume of work. I wonder how it compares to other countries or for processing other kinds of documents. . .

All in all, it is a fact that when you submit a passport application, you are providing certain personal information to the State Department. It is exactly the same kind of information you provide the IRS, a bank, and all manner of public and private entities. Lots of people see this information in the course of their work. In some small percentage of cases, your information may be looked at without good reason, but so long as the data is not leaked outside, or used for illicit purposes, the issue is minor. As a practical matter we accept this level of access to our personal information because of the convenience it provides. 

Nevertheless, there does appear to be room for improvement:

1) sensitive data such as social security number or address could be masked in the system and made available only when it is really needed.

2) sensitive persons should have their data blocked from general access, such that only specially authorized staff can view it.

3) the reporting system for breaches must be strengthened so that issues are reported faster.

4) training should not use live data. . .dummy data, and test systems should be used for training. only after the training is completed should staff be given access to the live system. 

These types of controls are no different from what regulators require of the private sector, with the FDA and financial regulators being two that come to mind.

Obama's Passport Records - An Exercise in IT Security Analysis But No More

According to this Reuters lead story also covered by CNN, 3 State Department employees improperly accessed Obama's passport records 3 times in the past 3 months. 

Obama's campaign is already calling it an "outrageous breach of security and privacy." 

Hillary's campaign has called it "reprehensible." 

Even Joe Biden has weighed in with his usual verbosity:

 "I am deeply troubled that State Department contract employees sought access to Sen. Barack Obama's passport files. Firing or disciplining those responsible is an important first step. But we need to understand why these employees had access to this information in the first place, why they sought the information, and why it took over two months for this matter to come to light. I urge the Secretary of State to promptly refer this matter to the State Department Inspector General for investigation."

Interestingly, none of these stories cover several pertinent facts relating to the details of the incident, which fortunately AP reported as linked on Breitbart.com:

1) State Department computer systems identify when there is access to files of high-profile persons, and the accesses in this case were flagged. 

2) There does not appear to have been any leakage of data outside of the State Department.

3) The State Department performs background checks on contractors but does not ask about political affiliation. 

From a purely computer security perspective, it is good news that the access was self-discovered, and that there is a process for investigating whether the access was valid, and that this was reported up the management chain. Disciplinary action was taken (firings in this case) as the reason for access was not valid. 

There is however room for improvement. Specifically, access to sensitive persons should be "default deny" and additional clearances and approvals should be necessary for any access. Furthermore, the process of escalating the incidents should have been much faster, ideally the same day. I should also think that members of Congress and the Courts should have special protections on their records, if for no other reason than as a best practice for constitutional separation of powers. 

Now that's the most that departmental administrators can fix. As for the political noise over "why they (the contractors) sought the information" in the first place, we can only speculate. Personally, I doubt it was anything much. After all, what is in passport files anyway? A copy of a birth certificate? An address to mail the passport to? A picture? Personal information should be protected, but I doubt there is much in Obama's file that isn't already public anyway. There certainly couldn't be anything scandalous. Could there? 

This makes for an interesting little exercise in information security analysis, but this isn't a scandal, and hardly a lead story (unlike, say a 20-year association with a racist, America-hating, church). . .the contractors might even have been Obama supporters for all we know. 

Update 3/23/2008: Wow - my last line above was just a throw-away comment and pure speculation. But it seems the head of one of the two contract companies that support the State Departments passport system is an adviser to the Obama campaign! CNN link here.

Bear Stearns - And the Importance of Liquidity

What are the three most important things for capital markets? Liquidity, liquidity, and more liquidity! Without it, you get what happened to Bear Stearns over last weekend - the collapse of a venerable firm. 

But I would like to correct some of the worst of the commentary I've seen around various blogs and columns:

1) The Fed pumping liquidity into the system is not a bailout. The Fed is supposed to ensure liquidity. 

2) JP Morgan's purchase of Bear Stearns at fire sale prices is not a government bailout. It is good business and furthermore served to restore confidence. Have a look at JP Morgan's stock price after the deal was announced if you don't believe me. 

3) Lehman Brothers, Citigroup, and other major firms are not next in line to collapse. Bear Stearn's problems go back to the collapse of their hedge funds earlier this year, and the signs of capital adequacy problems have been going on throughout the year. I have the benefit of the earnings results from Lehmans, Goldman Sachs, and Morgan Stanley. . .but it seems the worst is behind us. Indeed Cramer (of Mad Money fame) is even suggesting markets have hit bottom. 

4) Capitalism works - the JP Morgan buyout is proof of this, not evidence to the contrary. 

If anything, there isn't enough capitalism. This analysis from Cato and this Bloomberg commentary identify the true culprit in the sub-prime mess: Land use regulation that distorts the true supply/demand pricing in several states. The states most affected are Hawaii, California, Florida, Maryland, Oregon, Washington, and most of New England. It is probably not a coincidence that those states are where the biggest sub-prime default problems lie. Couple this with regulations requiring bankers to extend more loans to "disadvantaged" areas, and you get further market distortion. 

As usual, the right answer is more capitalism and less regulation. Not the other way around.

Now if we could just reduce taxes (how about starting with the AMT) homeowners and even subprime borrowers might even have a bit more cash at hand to keep up on their mortgage payments. 

And what is the definition of having cash on hand available for payments? Liquidity! 

Obamanation

Well it seems Barack Obama is just another politician. He's trying to have it both ways. His speech on race in America was well crafted, but the content leaves one wondering who is the real Obama? OK, so he repudiated the worst of Jeremiah "God damn America" Wright's sermons. But he was still willing to (metaphorically) throw his white grandmother under the bus. 

I'm sorry Barack, you blew it. Hillary is going to cream you in Pennsylvania, and the angry white male swing voters in the Democratic party will now flee in droves. Start thinking about what you are going to do next, because it won't be in politics. 

Good analysis from IBD here entitled "Obama merely changes the subject"

Update (3/21/2008): According to this report in Reuters, Obama thinks Iraq is a drag on the U.S. economy.  Megan McCardle has already exposed that myth. If anything, US military spending is likely pumping fiscal stimulus into the US economy in the form of payments to US soldiers, contractors, and companies. Of course Obama wants to put all this money in other things (the usual list: health care, roads and bridges, perhaps even some diversity-sensitivity training for his grandmother, etc. . .). There is no mention of returning the "peace-dividend" to taxpayers. 

So not only is Obama a typical hypocritical politician. He's also ignorant about economics. 

Update (3/29/2008): It seems Obama has weathered the storm and Hillary is likely to remain behind in pledged delegates and total popular vote. Hillary was caught out in a flat out lie regarding her visit to Bosnia, and this was even reported by CBS! Obama has also upped the ante by releasing his tax returns from 2000 to 2006. . .so it ain't over 'til it's over!

But there is much to be concerned about. Obama has yet to demonstrate a grasp of several economic fundamentals.  Professor Bainbridge (found via the link on Instapundit) has a good breakdown of a recent speech on financial regulations that highlights some things that are right but more that is wrong. 

Free persons' approach to climate change

The link in the title is from a samizdata.net post that poses a good question: How would free individuals handle climate change, assuming that climate change is real? This is an important question because climate change does indeed occur. Witness the ice ages and thawing periods that have existed since before the dawn of man. If climate trends are accelerated by human activity, then the question is even more important. Several commentators give the answer from a libertarian perspective and that's where I would start. 

Let's start with an individual who lives in a more or less free market economy. That individual should do what is necessary to be prepared. This starts with getting an education, working or trading to build up savings and a credit history, and then being in a position to adapt. The adaptation could be subtle, such as buying electricity for more air-conditioning in the summer, or it could be more radical, such as moving away from a disadvantaged area to a better one.  So far so good. 

Now let's extend to communities of people. There are several choices a community could make. One would be to fight the elements, perhaps joining together to hold back the seas, just as the Dutch have done for centuries. Indeed the idea is not new, going back even to Ancient Egypt and irrigation along the Nile. Of course, when such work goes badly, you get New Orleans in the aftermath of Hurricane Katrina. But the point is, communities of free people may chose to associate address a common need. 

Of course, being the good free trader and free marketer that I am, I would favor the wisdom of Adam Smith's invisible hand to make sound decisions on the way forward. Landowners in at-risk coastal areas could sell out to those willing to take the risk or make investments in shoreline conservation. 

Now here's where it gets even more interesting. I'd further state that anyone should be able to immigrate to anywhere, so long as he or she is willing to adapt to the laws and norms of their new home. I already live in Japan, where I have a working visa, and where I must pay taxes (not much fun this week!) but those are choices that I made. I have been fortunate to have skills that are in demand in Japan that justify my visa status. The next step would be to allow even more immigration - all legal of course. For example the way people are allowed to move around within the EU (more or less) is a good model. 

So what if human activity is actually putting the whole planet and the very survival of the species at risk? This is what the global-warming fearmongers would have you believe. But just for the moment, let's assume it is all true. To my mind the solution is NOT to craft huge international governing bodies to manage the selling of CO2 credits or some other fictitious commodity in the hopes of modifying behavior. Even worse would be a transnational government that simply tells you what energy you may or may not use, say like North Korea. 

Cuba barely works now, and Zimbabwe is rolling downhill fast. Even Venezuela is on a dangerous path into not being able to feed its own people. So those aren't the right models. 

What is the right model? The inescapable conclusion is more trade, more immigration, freer markets, and sound systems of property rights and rule of law. Any system that tries to do more will become ever more corrupt to the point where it becomes about power, and not about addressing the consequences of inevitable climate change. 

Update (3/20/2008): There is more and more news that there has been no warming trend over the last 5 years. This article from NPR is just one of many citing hard evidence that contradicts the global warming hypothesis, but where the reporter and those quoted in the piece nevertheless try to find justifications for the trend that won't upset the global warming orthodoxy. Perhaps they should watch CSI and learn how to follow the evidence! 

Weekly Round Up - The Ides of March!

So happy March 15th! Yesterday, March 14th was "White Day" in Japan, where men give chocolates and other gifts to the women who gave them chocolate on Valentine's Day. Time to catch up on various events of the week. Spitzer commentary deserves a separate post. Here's news on the rest. 

Seems to me the de-escalation of tensions in Latin America was a big win for Colombia and a defeat for Chavez. Potential evidence that Venezuela and Ecuador had been assisting the FARC with substantial money in addition to safe haven just outside Colombia is highly damaging to Chavez and Correa. Uribe comes out on top with even stronger approval ratings in his own country. FARC is nothing more than a narco-terrorist gang. They are not romantic revolutionaries. They are murdering thugs. But then again so was Che Guevara. The Free Trade Agreement between the US and Colombia should be ratified immediately!

McCain's gaffe on vaccine links to autism is problematic. But then again so is his belief in the linkage of man-made CO2 to global warming. Either way, at least he's not as idiotic on national security and economic matters as Obama or Hillary. . .don't even get me stated on Jeremiah Wright. 

McCain/Romney? I could get behind that. 

Apparently German law bars American PhD's from being addressed as "doctor". Oh well - as a friend once said: "I don't care what my title is, so long as I'm paid the most!"

Bush's speech before the Economic Club of New York this week was brilliant. . .If he could run again for a 3rd term, I'd vote for him over any of the current crop of candidates. . .oh and the news from Iraq is better too! Here's a key section of the speech on the economy:

In a free market, there's going to be good times and bad times. That's how markets work. There will be ups and downs. And after 52 consecutive months of job growth, which is a record, our economy obviously is going through a tough time. I want to remind you, this is not the first time since I've been the president that we've faced economic challenges. We inherited a recession, and then there were the attacks of September the 11th, 2001, which many of you saw firsthand, and I made the difficult decisions to confront the terrorists and extremists on two major fronts: Afghanistan and Iraq. And then we had devastating natural disasters. And the interesting thing, every time this economy has bounced back better and stronger than before. So I'm coming to you as an optimistic fellow.

Just great. 

Dollar/Yen hit 100 - is that good or bad??? well at least I am paid in Yen!

As for the current political landscape in Japan? well. . .why bother. . .same old same old. But spring is in the air and the cherry blossoms will soon be out in Tokyo. I can't wait! 

Spitzer? I don't even know here!

OK so the title is a bad joke that I lifted from somewhere else. But Eliot Spitzer is an even bigger joke. Like many, I am enjoying the shadenfreude of how that self-righteous pr**k has been hoisted by his own petard. But I am somehow frustrated that he got so far in the first place. Spitzer is the worst kind of limousine liberal: wealthy by inheritance but the enemy of self-made wealth, a member of an elite class who claims cynically to be on the side working class, a prosecutor who doesn't just apply the law but who must destroy anything in his way. So naturally I have a lot of opinions on this. Here are my observations in no particular order:

Even while apologizing to his family and his constituents, Spitzer still managed to admit nothing and hire the best lawyers, hoping beyond hope to somehow wiggle out of the whole thing. I'm sure he still sees this as a matter of legal nuance, not as a matter of right and wrong. 

So why does Bill Clinton get away with equally inappropriate behavior but Spitzer doesn't? Simply answer is that Bubba is cute and Spitzer isn't.  To wit compare "Awww shucks everyone I got caught with ma pants down 'round my ankles. . .I promise to pull 'em up again everyone but you gotta admit she sure is purty!" to "I am a f**king steamroller!" 

So should prostitution be a crime? Well the Mann Act of 1910 is somewhat anachronistic and the requirements for banks to report on suspicious transactions would strike me as lacking the requirements for probable cause before warrants are issued. Nevertheless, these laws are clear and well understood, and well within the cultural and legal traditions that underpin all of Western Civilization. Ask yourself this simple question: What percentage of prostitutes are there by choice? Protection from victimization is a good argument against legalizing prostitution. 

So why is it assumed that Spitzer's wife is innocent? One explanation for why she is "standing by her man" is that she isn't spotless herself. Who is to say she hasn't cheated on him? I'm not saying she has or has not, just that she isn't necessarily blameless in all of this. 

Is New York's Lieutenant Governor up to the job? What I have read doesn't instill confidence. 

Back to Spitzer. Here are some additional thoughts and links to some good jokes about the whole thing. 

He was done in as much by his hubris. No one is above the law. Good riddance. 

And what makes anyone think Hillary or Obama are any better? 

Japan Internet Controls: we fear what we don't understand

As reported in the International Herald Tribune, the government of Japan is preposing to regulate "influential, widely read news-related sites as newspapers and broadcasting are now regulated."

This is interesting at two levels: Firstly, you may not have known the degree to which newspapers and broadcasting in Japan are regulated. Secondly, the government of Japan really doesn't know how to handle the internet.

For example, what is to stop someone from commenting on Japanese matters from outside Japan in a server hosted outside Japan. Even this blog qualifies as an externally hosted site, even though I post from Japan.

But the real insight here is that the Japan officialdom does not like criticism, and will use every tool at its disposal to stifle it. The code words are things like "we must not have confusion" or "we must preserve harmony." As much as those catch-phrases are red flags to the American ear, in Japan harmony is considered a virtue often trumping truth or honesty.

But then, I guess I'll know I've made it when regulators come knocking at my door!

Liechtenstein and Banking Secrecy

When was the last time you saw Liechtenstein in the news? My first visit there was in 1983 when I was a student in Austria, and I can't recall it being in the news since, at least not for anything significant. But now Liechtenstein is caught up in a banking secrecy and tax evasion row with Germany.

I'm with Liechtenstein on this one and here's why. Banking customers can reasonably expect a degree of privacy when it comes to their personal information and financial records. If there are allegations of illegal acts, including tax evasion, then due process should be followed to release any associated records. In the meantime, innocent until proven guilty.

What appears to have happened here is that German intelligence authorities paid an informant, named by some publications as Heinrich Kieber, up to 5 million Euros for DVDs of client information held in a Liechtenstein bank.

As of this writing, although several German taxpayers have settled up under threat, I am aware of no legal ruling confirming tax evasion by anyone. What would appear to be illegal are both the actions of the informant for selling confidential customer information and the actions of the German (and possibly also British) governments for espionage.

I'd also have to admonish the bank, LGT, for lax security controls that appear to have allowed one person, acting alone, to access and download a large volume confidential account information.

In addition, possession of an account with strong banking secrecy does not imply wrong-doing. There are many legitimate reasons why one would want such data secret, including the simple desire for privacy.

I've said nothing in this post about taxation rates or the motivations for evasion. That's not the point. What is at issue is that Germany appears to have resorted to extra-legal means to acquire information that could have been acquired through an EU legal process.

The Cato Institute has a good article in defense of tax havens. In addition to keeping taxes low for everyone by keeping tax-hungry jurisdictions honet, "(r)esearchers have found that tax havens consistently rank as the best governed, most stable, fastest growing and most prosperous places in the world. Promoting better policy in other nations, though, may be their most important role. "

Updated news here.