There is not doubt, as we look into our own abilities, money becomes a unique measure of our capabilities. Our talents and material goods is the method of choice for exchanging the currency of abilities. But what about our internal measures of success? Pleasure of knowledge, fear from a bad trade or any other “gut feeling” we experience when we approach measurable points.
As in the prior consciousness post, the more we look into success, the more we look inward the person behind that success.
The same applies to money.
Now, the opposite seems to occur to crave for money, the more money is craved the less individuals look inward -into their conciousness- for money.
We say “money does not get you happiness” or “money is not everything” many more popular sayings about the limited capability of money. Still, we have not learn how to teach inward rewarding with outward results in a proficient manner.
In Maslow hierarchy of needs:
1. Physiological (biological needs)
2. Safety
3. Love/belonging
4. Status (esteem)
5. Actualization
**If you need to browse about Maslow, I'll suggest a quick browsing at:
http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs
If we look were we stand in our present society.
Some of us are stuck in a range from 3-4 and very few get into 5 in a real way. But it seems we have regress to #2 as a society. This is not a personal choice but the result of leaders choice, many are coy about challenging this regression.
The big step begins understanding how we pass from a linear left side of the brain thinking to a right side the brain thinking in a coordinated manner and obtain superior results.
This is what the book “A New Whole Mind” explores.
As we read present religious books and other motivational books.
We encounter the content travelling from the left side linear thinking to take-over actions in a non-linear way but forgetting to touch in how this is measured. These books usually fault at respecting and open some light into measuring equally both capacities of the brain, with its right and left side thinking.
Usually, the mantra is expressed in the common line “do what you love and you will be reward it.”
The intended meaning of reward is monetary, a total left brain approach, and the acting of love is no measurable nor can be taught in a clear way, what we need is a right brain treat of consciousness to be able to actually apply the content of those "self-help, God-help" books.
We are not taught to think in tangled non-connected manner, when in fact this is what we need in most of our human and non-human interactions. At the same time, we expect tangible measurements, if we are in love, usually it means we are somehow a little bit irrational. We do most things in search of these “irrational feelings” and demand tangible measurements.
We often for some unknown reason get a strong physical reaction to something or someone. It can come from influence of thinking or by the influence of our actions, but how do we is coming from a good place, where is this coming from?
If I feel great when I have a great stock trade or I feel awful when I have a bad one, does that means that stock trades –my actions- as a subject of many –trades- doing the same thing have a soul?
Thus, today’s tangled question: do stock trades have a soul?
Wednesday, August 30, 2006
Monday, August 28, 2006
Consciousness The Last Great Frontier
If you are interested in the present, and want to know what is shaping the future, you must be interested in the research about CONSCIOUSNESS.
This incredible piece is by R. J. AUMANN a Nobel Price Winner of Economics.
Discussion Paper # 391 May 2005
תוילנויצרה רקחל זכרמ
CENTER FOR THE STUDY OF RATIONALITY
THE HEBREW UNIVERSITY OF JERUSALEM
URL: http://www.ratio.huji.ac.il/
Abstract
(Note: due to software translation of symbols you might find some duddles in the text. I will correct those as I work with the original text.)
Consciousness is the last great frontier of science. Here we discuss what
it is, how it difers fundamentally from other scientific phenomena, what
adaptive function it serves, and the difculties in trying to explain how it
works. The emphasis is on the adaptive function.
1. Introduction
Consciousness is the last great frontier of science. Sixty years ago, life was not
understood; it was a mystery. With the discovery of DNA, that mystery was
solved; today, we more or less understand, at least in principle, how life works.
But we do not at all understand how consciousness works.
We start by deÞning our terms; already there, there are dificulties. By con-
sciousness, we mean, in the Þrst instance, the ability to experience. To see, hear,
smell, feel, taste, desire, enjoy, sufer, like, dislike, love, hate, fear, become excited by an idea, be saddened by a loss. We do not mean to sense. A machine can
"sensor" also senses. Machines read; record sounds; detect odors, touches, and
favors; win at chess. They can even be programmed to exhibit a frownie, or
emit downbeat sounds when something isn't right. But presumably they do
not experience.
What, exactly, does "experience" mean? Ah, that is where the dificulty lies.
The word cannot be deÞned in technical terms that do not refer to the concept
itself. Experience cannot be defined in terms that a machine can understand.
If you yourself are not conscious have never experienced something then you
will not understand what the term means; just as little as congenitally deaf people
∗Center for the Study of Rationality, and Departments of Mathematics and Economics, The
Hebrew University of Jerusalem, 91904 Jerusalem, Israel
understand what music means. To be sure, they can understand about the vibra-
tions of taut strings, about air waves, about the workings of musical instruments,
and even about musical notation and rhythm; but they can never understand what
music is. For that, one must hear it. Similarly, someone who is not conscious
cannot understand experience.
Ernst Mayr, in The Growth of Biological Thought,1 distinguishes between two
fundamental questions in biology: “how” and “why”. “How” refers to mechanism,
“why” to function. The question “how do we digest food?” is answered by
describing the process, involving saliva, chewing, swallowing, processing in the
stomach and intestines, absorption into the bloodstream, and so on; and, disposing
of wastes. The question “why do we digest food?” is answered by saying that
food must be digested in order to provide vital ingredients for the functioning of
the body, particularly energy.
To these questions, we add a third, which logically comes before the other
two: “what”. This refers to the descriptive aspect of biology, and of science
in general. The answer to the question “what is digestion?” is that it is the
process whereby food is transformed to a state that the body can use. “What”
questions also include observational, descriptive, and classifying matters, and also
methodological or conceptual matters, like “what is a species?”
The remainder of this essay is divided into three sections: “What”, “Why”,
and “How”. In the Þrst, we discuss what consciousness is, and how it differs
radically from other scientiÞc phenomena. In the second, we discuss a possible
function of consciousness, from the evolutionary viewpoint; and the third discusses
the mechanism. Unfortunately, the “How” section is particularly short: We really
have nothing to say about this, other than to describe the difficulties.
2. What
We have deÞned consciousness as the ability to experience. This puts the phe-
nomenon into a completely different category from other scientiÞc phenomena, in
several ways.
(i) Unlike almost every–indeed every–other scientiÞc phenomenon, conscious-
ness is completely subjective. No veriÞable outside characteristics of consciousness
are known. No matter how complex an organism’s behavior is, a computer could
conceivably be programmed to mimic that behavior. An individual can observe
1Cambridge, Massachusetts: Belknap Press, 1982.
2
consciousness only in himself.
SpeciÞcally, I can observe consciousness in myself only; I cannot be certain
that anybody else really is conscious. To be sure, since other people appear
roughly similar to me, and act similarly, I may surmise that they, too, are con-
scious; but I’m not certain. Each individual can be certain of consciousness only
in himself, where he directly observes it.
(ii) Whereas the phenomenon of consciousness is highly subjective, it is, para-
doxically, the only phenomenon of which the observer is absolutely certain. All
other phenomena and observations could conceivably be attributed to hallucina-
tions, dreams, and/or mental illness. But also hallucinations, dreams, and the
ravings of a madman are experiences; in each case, the observer is sure that he
is experiencing–is “conscious”–and he is right (we include dreams under the
heading of consciousness).
(iii) Sometimes, people express perplexity as to the nature of the problem.
They do not see anything mysterious about consciousness, and do not understand
in what way it is different from other neurological functions like, say, the regulation
of breathing. Asked whether a computer could in principle be conscious, they
answer, “why not?”
We are dumbfounded by this reaction, and can only conjecture that these
people are themselves not conscious. To me, it is evident that no combination
of silicon chips and wires could conceivably “experience” in the sense that I do.
Consciousness involves something beyond the merely physical and mechanical.
(iv) It seems only slightly less evident that no combination of off-the-shelf
chemicals could experience in the sense that I do. But here, we are entering a
gray area. By all indications, the day is not far off when it will be possible to
synthesize a human being.2 Will such a golem be conscious?
Each of the possible answers–“yes” and “no”–is problematic. “Yes” is prob-
lematic because a combination of chemicals is in principle no different from a
combination of silicon chips and wires, which we intuitively feel cannot experi-
ence. But “no” is also problematic, because there is no reason to believe that a
golem that is identical, molecule for molecule, with a live human being would not
in all respects–including consciousness–be like that human being.
2In an email message dated March 22, 2005, the U.S. National Academy of Sciences an-
nounced that “The U.S. National Academy of Sciences and other members of the InterAcademy
Panel, a worldwide organization of science academies, have stated that a worldwide ban on hu-
man reproductive cloning–a technique that attempts to produce a child–is justiÞed.” If it is
being banned, it is presumably within reach; and then, no bans can prevent it from happening.
3
(v) Are animals conscious? On the face of it, there is no reason to suppose
that they cannot be. But as stated above (in (i)), it is not even clear that all
humans–other than me–are conscious. By analogy with me, I can surmise that
other human beings are conscious; but the analogy is less compelling in the case
of animals. The further one gets from human beings on the evolutionary scale, the
less compelling the analogy. So the short answer is, “possibly; we don’t know.”
(vi) Consciousness may have levels. For example, dreaming is certainly an
expression of consciousness, but perhaps at a lower level than waking conscious-
ness. Newborn children, and the mentally impaired, may be conscious at a lower
level. In the opposite direction, people taking certain drugs sometimes report a
“heightened state of consciousness.”
Here again, we are at a loss, because we cannot really imagine what it is like to
be, say, a newborn child. We personally have never taken drugs, so cannot make
a judgment in the opposite direction either. We are stuck in our own conceptual
prison: Consciousness is about subjective experience, so it is difficult to imagine
levels of consciousness other than our own.
Though it may have various levels, its existence at any level already poses the
conceptual problems discussed here.
(vii) Conscious experience appears to be associated with certain physiological-
neurological processes in the brain, like the simultaneous Þring of many neurons
in a well-deÞned group of neurons.3 This, however, does not explain how con-
sciousness works–just as little as noticing that human reproduction is associated
with sexual intercourse explains how reproduction works.
(viii) Up to now we have discussed only the “input” component of conscious-
ness: experience. There are also two other vital components. One is the “process-
ing” component: thought, including intention. The other is the “output” compo-
nent: volition–consciously choosing to do something, and doing it. True, a person
could be conscious, but have no power to take any action–as when asleep, or as
a result of a totally debilitating stroke. But under most normal circumstances,
thought and volition are intimately associated with consciousness. Indeed, as
we shall presently see, it is the combination of all three elements–experience,
thought, and volition–that enables consciousness to perform its function.
3Communicated by Prof. Rafael Malach of the Weizmann Institute of Science, Rehovot.
Based on this observation, Professor Malach makes the fascinating suggestion that a group of
individuals acting in concert may also be conscious.
4
3. Why
We next address the issue of “why”: What is the function of consciousness, from,
say, the evolutionary viewpoint?
The answer we propose is based on the two related notions of decentralizing
and decoupling–roughly speaking, splitting a difficult or complex task into several
easier or less complex tasks, often with the aid of an auxiliary “driving force.”
Here are some examples:
(i) Tearing a Manhattan telephone book in two–perhaps the grand-
daddy of all decoupling processes. Taken as is, it is very difficult. But if one Þrst
separates the book into a number of thinner parts, then one can easily tear each of
these parts in two, thus accomplishing the task. Here the difficult task is tearing
the whole book; the easier tasks are tearing each of the thinner parts; and the
decoupler is separating the entire book into the thinner parts.
(ii) Operating an economy. An economy can be centrally planned, as in a
Kibbutz (Israel cooperative village). A central planner decides how much of each
good will be allocated to each individual, how much–and where–each individual
will work, and so on. In theory, the entire economy of a whole country could be
planned in this way. That is the conception behind socialist economies, like that
of the former Soviet Union.
Centrally planning an entire economy is enormously complex and difficult. To
start with, the informational requirements–Þnding out what each person wants
to consume and what he is capable of producing–seem utterly beyond reach.
But even if that could somehow be achieved, the problemof getting the people to
do what you want them to do, and the sheer complexity of the task, makes the
efficient central planning of an entire economy practically unachievable. Indeed,
socialist economies like that of the Soviet Union achieve levels of efficiency that
are far below those of advanced “free” economies.
What enables free economies to work more efficiently is that they are, by and
large, decentralized. Within limits, each person seeks to acquire the goods and
services that he wants, and to work at the tasks that he wants and that he is
able to perform. There is no problem in getting the people to do what you want
them to do, as each individual makes his own choices. And, the complexity of the
task is greatly reduced, as the task of operating the economy is transferred from
a central planner to individuals, each planning only the segment of the economy
that interests him–usually, his own consumption and production. Instead of one
planner (or planning agencies) planning many billions of transactions, we have
5
several million planners planning thousands of transactions each. The total size
of the task is perhaps roughly the same, but the task is decoupled into millions of
individual tasks–and so is much more easily accomplished.
The driving force that makes the whole process work is individual motivation.
Each individual is motivated to seek for himself the best “deal” that he can get–
the goods and the work that he likes most–and it is this that operates the entire
economy. That is Adam Smith’s “invisible hand.”
(iii) Money and prices. Primitive decentralized markets work by barter:
Two or more people get together and exchange goods or services, to the mutual
beneÞt of all parties to the transaction; the process may be repeated as often
as desired. One may hope that the Þnal outcome is optimal, in the sense that
no traders could have done better by trading with each other.4 In practice, in
reasonably large markets–or even in fairly small ones–identifying the bartering
groups, and deciding on the barters to be implemented, is so complex, involved,
and fraught with uncertainty that barter is unlikely to achieve an outcome that
is anywhere close to optimal.
Enter the institutions of money and prices. Rather than bartering, each trader
sells his goods at market prices; with the proceeds he buys the goods he desires,
again at market prices. Then if the prices are “right,” the market “clears”: the
demand for each good exactly matches the supply. Moreover, the resulting reallo-
cation of goods is optimal (in the above sense); and in large markets, all optimal
outcomes are achievable in this way.
Thus, the unsophisticated but highly complex, involved, and uncertain bar-
tering process is replaced by the price mechanism, which, though a lot more so-
phisticated than barter, is far easier to execute: it requires only that each trader
buys what he likes,5 given his budget.6 Here the complex task is achieving opti-
mality; the simpler tasks are for each trader to decide what he wants, given his
budget; and the decoupler is the price mechanism. And again, the driving force is
individual motivation. Each individual is motivated to “maximize over his budget
set”–sell and buy, at the given market prices, so as to be left with those goods
and services that he most prefers.
4More precisely, no group of traders could have improved the welfare of all its members by
trading within the group only. In economic theory, such outcomes are called core outcomes.
5Unlike barter, where each trader needs some knowledge about the preferences of the traders
with whom he trades, and also about at least some of the others, so that he will know with
whom to trade.
6The proceeds from the sale, at market prices, of the goods that he brought to the market.
6
An interesting aspect of this decoupling is that historically, it has emerged by
itself in every reasonably advanced society, without being imposed by any plan-
ning entity. Not only has the price mechanism emerged by itself, but the market
prices themselves also usually emerge by themselves–determined by supply and
demand–without being imposed by planning entities. And when planning enti-
ties do enter the process of price determination, as in the former Soviet Union or
with rent control in various cities, they often wreak havoc, causing shortages and
other distortions.
Whereas this example is related to the previous one (Example ii), they are
not the same. In the previous example, the point was decentralizing the economy,
letting each individual see to himself. In the current example, the point is the
formation of a price system. Logically, the examples are independent; a centrally
planned economy can have a price system, and a decentralized economy can work
on barter.
(iv) Chess. The ideal way to play chess is to plan the entire course of play
from the beginning, taking into account anything the other player might do. In
practice, this is beyond the power of any man or machine. Instead, the players
“evaluate” the situation at each move, using numerical indices for the various
pieces; e.g., 8 for the queen, 5 for a rook, 3 for a bishop or knight, 1 for a pawn.
They also take account of the general characteristics of the position: develop-
ment of the pieces, castling, passed pawns, and so on. Using such criteria, each
player “looks ahead” for a few moves, trying to maximize his valuation of the
position at the end of that period, and taking into account that the other player
is doing likewise. Weaker players often do not look ahead more than a move or
two, and even that only partially. Stronger players may look as much as Þve or
six moves ahead, and sometimes even more; but they, too, do not examine all
possibilities–all “branches of the tree”–in the process. Human players do not
use a precise numerical valuation, but take a generalized view. Chess-playing com-
puter programs7 basically do use a precise numerical valuation function; though
even there, the “depth” of the look-ahead varies, with some branches of the tree
being examined more thoroughly than others.
Here the complex task is planning the whole game beforehand; and the simpler,
decoupled tasks are playing move by move, with a more or less modest look-
ahead. The overall, macroscopic driving force is, of course, the desire to win; but
7Like IBM’s “Deep Blue,” which several years ago defeated World Chess Champion Gary
Kasparov in a tournament (though there have been allegations that “Deep Blue” cheated by
enlisting human aid during the course of play).
7
“microscopically”–at each separate move–the driving force is to maximize the
valuation several moves ahead.
In Examples (ii) and (iii) above, the decoupling is achieved by spreading the
task over many individuals, each with his own motivation. In contrast, in this
case the decoupling is achieved by spreading the task over time. There is a single
overall motivation–winning–which is expressed at each move by looking ahead
a few moves and maximizing valuation.
(v) Solomon’s judgment. Rather than rendering his judgment (1 Kings 3,
16-28), King Solomon could have entered into a complex factual investigation of
the women’s claims. He “decoupled” the process by motivating them unwittingly
to reveal the truth themselves. Here the complex task is determining which woman
is the live baby’s mother; the simpler tasks are for the women to express their
preferences given the judgment; and the driving force is the women’s motherly
love.
(vi) Fair division. This may be achieved by cumbersome methods of direct
measurement. Alternatively, the process may be decoupled by the method of “one
cuts, the other chooses,” which motivates the parties themselves to divide fairly.
(vii) Evolution. Suppose a Creator had wanted to create the living world
as we know it. He could have designed each individual organism separately, to-
gether with the appropriate interactive adaptations. This would have been enor-
mously complex. Alternatively, He could have decoupled the process by means
of evolution–survival of the Þttest–which runs by itself, automatically, with no
need for “hands on” direction. Here the complex task is creating the world; the
decoupled alternative tasks are for each organism–or even each gene–to adapt
to its surroundings; and the driving force is survival of the Þttest.
These examples should give the reader some idea of what we mean by decou-
pling. What we now suggest is that consciousness serves as a decoupler that allows
human beings to perform tasks that otherwise would be unachievable because of
their complexity. Let us illustrate.
(a) Food. The body needs food for energy and other vital purposes. The
process of supplying food may be divided into two parts: (1) before it enters the
mouth, and (2) afterwards. Part 1 consists of triggering the individual to seek
food, and acquiring, preparing, and eating it. Part 2 consists of digesting it, i.e.,
transforming it into a state that the body can use (see Section 1, above).
Both parts are extremely complex, but Part 1 is by far the more so. We must
choose the food to buy, shop for it, store it, clean it, cook it, and serve it. We must
8
also choose and buy closets and a refrigerator to store it; sinks to wash it; stoves,
ovens, gas tops, microwaves, pots, pans, cake forms, pie dishes, utensils, mixers,
vegetable peelers and so on to prepare it; plates, bowls, platters, and utensils, to
serve it. We must earn money to buy the food and all the auxiliary items we have
mentioned, and those we have not mentioned. Earning money usually involves
various skills–not the least of them social–which must be acquired.
There is another fundamental difference between the two parts. Part 2 is
“hard-wired”: It works “automatically,” by mechanical, chemical, and electrical
means, with no conscious, voluntary component. Part 1 is precisely the opposite:
all conscious, all volitional. To start with, when the body runs short of the
required nutrients, it must be prompted to eat. Once this is done, the food must
be acquired, prepared, and eaten. Conceivably, parts of the process could be hard-
wired: A gauge could tell the brain when the stomach is empty; the eye and brain
could identify food, then send signals to the hand automatically to take it and
put it in the mouth. But it seems unlikely that acquiring the food and preparing
it, and earning the necessary money, could all be hard-wired.
How, then, does the process work? What drives it?
The answer is simple, even obvious: hunger. And, the other side of the same
coin: enjoyment of food.
Hunger does not mean an empty stomach. An empty stomach by itself will
not prompt us to eat. We need the pain or discomfort of hunger, and/or the
pleasure of food, to make us eat. Pain and pleasure depend on consciousness. If
you are not conscious, you cannot experience pain or pleasure. So consciousness
is an important component of the mechanism that supplies us with nutrients.
Moreover, it decouples the nutritive process into the two parts we have described:
until the food reaches the mouth, and afterwards.
Indeed, it does much, much more: The entire process of acquiring, preparing,
and serving food is decoupled into many small steps. Each step is conscious,
with a well-deÞned goal; it is motivated. Going to market, picking the items to
buy, standing in line at the check-out counter, bringing the items to your car,
unloading, putting in the refrigerator, all the myriad tasks involved in cooking,
all the myriad tasks involved in earning the money with which to buy the food,
all the myriad tasks involved in all stages of the process–all together, and each
one separately–are driven by hunger, through the medium of consciousness; they
are motivated.
More precisely, the experiences of hunger and food enjoyment are the overall,
macroscopic driving forces, like the desire to win in chess (Example iv above). The
9
thought process, which is the second component of consciousness (see Section
2, Item viii), translates this into many small tasks–making money, baking a
cake, and so on–each with its own driving force, like valuation-maximizing in
chess. And then volition–the third component of consciousness–comes into play,
enabling the individual actually to carry out these individual tasks.
It is important to note that while “hard-wired” processes like digestion may be
highly complex, they are fairly repetitive. Digestion works on the same materials,
in the same way, every day; there are few, if any, surprises. The processes of food
acquisition and preparation are much less repetitive; they require a good deal
of instantaneous adaptation to various different environments, environments that
may be unfamiliar. Consciousness is particularly important for motivating and
carrying out these non-repetitive tasks.
Finally, we remark that themechanisms provided by nature to facilitate eating–
hunger and the enjoyment of food–may sometimes “misÞre.” It is well known
that severely undernourished people whose hunger leads them to overeat may
well die as a consequence; there are documented cases of people who survived
the concentration camps during the Holocaust, only tragically to die in this way.
Even better known is that the enjoyment of food may cause people to overeat or
to eat foods that are not nutritious. While not immediately fatal like with the
concentration camps, this may nevertheless be detrimental to health; or at least,
serve no useful adaptive purpose.
(b) Sex. Biologists identify two basic drives in living organisms: nourishment
and reproduction.8 What we have said about food applies, mutatis mutandis, also
to sex. It is hunger and the enjoyment of food–not the need for nourishment!–
that makes people eat. Similarly, it is not the desire for offspring that makes
them have sex; it is the sex drive–the enjoyment of sex. Enjoyment is a function
of consciousness. You cannot enjoy if you are not conscious. Many people do
consciously want offspring, but that is not why they have sex.9
As with nourishment, the process of reproduction has several distinct parts:
(1) before the semen enters the woman’s body; (2) conception and pregnancy;
8It is interesting that in several places, the Talmudic literature identiÞes these two basic
drives. In the biblical verse relating how Joseph’s master, Potiphar, “left everything in Joseph’s
hands, except for the bread that he (Potiphar) eats” (Genesis 39, 6), the Midrash takes the
“bread” to mean Potiphar’s wife. And when Jethro’s daughters tell him that “an Egyptian man
saved us,” and Jethro says, “where is he? Call him and let him eat bread” (Exodus 2, 19-20),
the Midrash takes the “bread” to mean the daughters themselves.
9Thus, homosexuals will usually not have relations with persons of the opposite sex. When
they want offspring, they prefer adopting, or artiÞcial insemination.
10
and (3) childhood, when the offspring cannot fend for itself. The Þrst two parts
are decoupled by the sex drive. The second part, though highly complex, is hard-
wired; once sex has taken place, there is no conscious intervention until birth.
After birth, parental love takes over; like hunger and the sex drive, this depends
on consciousness. As with food, the Þrst and third parts of the process–which
are not hard-wired–split up into a myriad of distinct small steps, starting with
dating and earning the required money; each is conscious, each has a well-deÞned
goal, each is motivated.
Like with food, the hard-wired part of the process is fairly repetitive, the other
parts not.
Unlike food, sex is programmed to be proßigate. In a single season, a single
ßowering tree produces many hundreds of thousands of blossoms, and billions
of grains of pollen. It is doubtful if even one of these comes to fruition. In
each ejaculation there are hundreds of millions of sperms, at most one of which
is used. Many sexual episodes lead nowhere, many relationships lead nowhere,
many dates lead nowhere. The sex drive leads to many activities that have no
chance of producing offspring: sex with birth control, sex after the reproductive
age, homosexuality, masturbation, oral sex, bestiality, pornography, and so on.
Love and sex play dominant roles in advertising, literature, Þlm, music, painting,
photography, dance, almost all cultural activity. In the case of food, we used the
term “misÞre” to describe situations in which food does not provide nourishment.
In the case of sex, the corresponding situations are so ubiquitous that they must
be considered a part of the process.
(c) Pain. It has long been recognized that pain calls attention to something in
the body having gone wrong, so that it can be attended to. Again, pain depends
on consciousness; if you are not conscious, you cannot experience pain. Machines
cannot suffer.
As before, we have here a decoupling process. Pain motivates the individual to
seek medical or surgical treatment. Unlike with food and sex, though, the effect of
treatment is not entirely automatic; repeated intervention may be required. Pain
decouples the treatment process into many distinct small steps, motivating the
individual at each step to do what is required in order to alleviate his condition.
It, too, may “misÞre,” as when a medical or surgical treatment causes more pain
than what the patient can suffer.
To summarize: Consciousness enables the decoupling of highly complex,
non-repetitive tasks into many simpler tasks, mainly through the element of mo-
tivation.
11
4. How
This is the shortest of our sections: We have little to contribute on this score,
other than to say that the neurological phenomena that have been observed to be
associated with consciousness do not explain how it works; the “how” remains a
deep mystery.
One last remark is worth making. “How” questions are usually answered
by analogy with something else, with which we are familiar. For example, the
workings of the circulatory system are explained by analogy with plumbing. But
consciousness is unique; there is nothing else in the world that is even remotely
like it. Since there is nothing like it, what analogy can we use to explain it? And
if not by analogy, how else can it be “explained?”
12
This incredible piece is by R. J. AUMANN a Nobel Price Winner of Economics.
Discussion Paper # 391 May 2005
תוילנויצרה רקחל זכרמ
CENTER FOR THE STUDY OF RATIONALITY
THE HEBREW UNIVERSITY OF JERUSALEM
URL: http://www.ratio.huji.ac.il/
Abstract
(Note: due to software translation of symbols you might find some duddles in the text. I will correct those as I work with the original text.)
Consciousness is the last great frontier of science. Here we discuss what
it is, how it difers fundamentally from other scientific phenomena, what
adaptive function it serves, and the difculties in trying to explain how it
works. The emphasis is on the adaptive function.
1. Introduction
Consciousness is the last great frontier of science. Sixty years ago, life was not
understood; it was a mystery. With the discovery of DNA, that mystery was
solved; today, we more or less understand, at least in principle, how life works.
But we do not at all understand how consciousness works.
We start by deÞning our terms; already there, there are dificulties. By con-
sciousness, we mean, in the Þrst instance, the ability to experience. To see, hear,
smell, feel, taste, desire, enjoy, sufer, like, dislike, love, hate, fear, become excited by an idea, be saddened by a loss. We do not mean to sense. A machine can
"sensor" also senses. Machines read; record sounds; detect odors, touches, and
favors; win at chess. They can even be programmed to exhibit a frownie, or
emit downbeat sounds when something isn't right. But presumably they do
not experience.
What, exactly, does "experience" mean? Ah, that is where the dificulty lies.
The word cannot be deÞned in technical terms that do not refer to the concept
itself. Experience cannot be defined in terms that a machine can understand.
If you yourself are not conscious have never experienced something then you
will not understand what the term means; just as little as congenitally deaf people
∗Center for the Study of Rationality, and Departments of Mathematics and Economics, The
Hebrew University of Jerusalem, 91904 Jerusalem, Israel
understand what music means. To be sure, they can understand about the vibra-
tions of taut strings, about air waves, about the workings of musical instruments,
and even about musical notation and rhythm; but they can never understand what
music is. For that, one must hear it. Similarly, someone who is not conscious
cannot understand experience.
Ernst Mayr, in The Growth of Biological Thought,1 distinguishes between two
fundamental questions in biology: “how” and “why”. “How” refers to mechanism,
“why” to function. The question “how do we digest food?” is answered by
describing the process, involving saliva, chewing, swallowing, processing in the
stomach and intestines, absorption into the bloodstream, and so on; and, disposing
of wastes. The question “why do we digest food?” is answered by saying that
food must be digested in order to provide vital ingredients for the functioning of
the body, particularly energy.
To these questions, we add a third, which logically comes before the other
two: “what”. This refers to the descriptive aspect of biology, and of science
in general. The answer to the question “what is digestion?” is that it is the
process whereby food is transformed to a state that the body can use. “What”
questions also include observational, descriptive, and classifying matters, and also
methodological or conceptual matters, like “what is a species?”
The remainder of this essay is divided into three sections: “What”, “Why”,
and “How”. In the Þrst, we discuss what consciousness is, and how it differs
radically from other scientiÞc phenomena. In the second, we discuss a possible
function of consciousness, from the evolutionary viewpoint; and the third discusses
the mechanism. Unfortunately, the “How” section is particularly short: We really
have nothing to say about this, other than to describe the difficulties.
2. What
We have deÞned consciousness as the ability to experience. This puts the phe-
nomenon into a completely different category from other scientiÞc phenomena, in
several ways.
(i) Unlike almost every–indeed every–other scientiÞc phenomenon, conscious-
ness is completely subjective. No veriÞable outside characteristics of consciousness
are known. No matter how complex an organism’s behavior is, a computer could
conceivably be programmed to mimic that behavior. An individual can observe
1Cambridge, Massachusetts: Belknap Press, 1982.
2
consciousness only in himself.
SpeciÞcally, I can observe consciousness in myself only; I cannot be certain
that anybody else really is conscious. To be sure, since other people appear
roughly similar to me, and act similarly, I may surmise that they, too, are con-
scious; but I’m not certain. Each individual can be certain of consciousness only
in himself, where he directly observes it.
(ii) Whereas the phenomenon of consciousness is highly subjective, it is, para-
doxically, the only phenomenon of which the observer is absolutely certain. All
other phenomena and observations could conceivably be attributed to hallucina-
tions, dreams, and/or mental illness. But also hallucinations, dreams, and the
ravings of a madman are experiences; in each case, the observer is sure that he
is experiencing–is “conscious”–and he is right (we include dreams under the
heading of consciousness).
(iii) Sometimes, people express perplexity as to the nature of the problem.
They do not see anything mysterious about consciousness, and do not understand
in what way it is different from other neurological functions like, say, the regulation
of breathing. Asked whether a computer could in principle be conscious, they
answer, “why not?”
We are dumbfounded by this reaction, and can only conjecture that these
people are themselves not conscious. To me, it is evident that no combination
of silicon chips and wires could conceivably “experience” in the sense that I do.
Consciousness involves something beyond the merely physical and mechanical.
(iv) It seems only slightly less evident that no combination of off-the-shelf
chemicals could experience in the sense that I do. But here, we are entering a
gray area. By all indications, the day is not far off when it will be possible to
synthesize a human being.2 Will such a golem be conscious?
Each of the possible answers–“yes” and “no”–is problematic. “Yes” is prob-
lematic because a combination of chemicals is in principle no different from a
combination of silicon chips and wires, which we intuitively feel cannot experi-
ence. But “no” is also problematic, because there is no reason to believe that a
golem that is identical, molecule for molecule, with a live human being would not
in all respects–including consciousness–be like that human being.
2In an email message dated March 22, 2005, the U.S. National Academy of Sciences an-
nounced that “The U.S. National Academy of Sciences and other members of the InterAcademy
Panel, a worldwide organization of science academies, have stated that a worldwide ban on hu-
man reproductive cloning–a technique that attempts to produce a child–is justiÞed.” If it is
being banned, it is presumably within reach; and then, no bans can prevent it from happening.
3
(v) Are animals conscious? On the face of it, there is no reason to suppose
that they cannot be. But as stated above (in (i)), it is not even clear that all
humans–other than me–are conscious. By analogy with me, I can surmise that
other human beings are conscious; but the analogy is less compelling in the case
of animals. The further one gets from human beings on the evolutionary scale, the
less compelling the analogy. So the short answer is, “possibly; we don’t know.”
(vi) Consciousness may have levels. For example, dreaming is certainly an
expression of consciousness, but perhaps at a lower level than waking conscious-
ness. Newborn children, and the mentally impaired, may be conscious at a lower
level. In the opposite direction, people taking certain drugs sometimes report a
“heightened state of consciousness.”
Here again, we are at a loss, because we cannot really imagine what it is like to
be, say, a newborn child. We personally have never taken drugs, so cannot make
a judgment in the opposite direction either. We are stuck in our own conceptual
prison: Consciousness is about subjective experience, so it is difficult to imagine
levels of consciousness other than our own.
Though it may have various levels, its existence at any level already poses the
conceptual problems discussed here.
(vii) Conscious experience appears to be associated with certain physiological-
neurological processes in the brain, like the simultaneous Þring of many neurons
in a well-deÞned group of neurons.3 This, however, does not explain how con-
sciousness works–just as little as noticing that human reproduction is associated
with sexual intercourse explains how reproduction works.
(viii) Up to now we have discussed only the “input” component of conscious-
ness: experience. There are also two other vital components. One is the “process-
ing” component: thought, including intention. The other is the “output” compo-
nent: volition–consciously choosing to do something, and doing it. True, a person
could be conscious, but have no power to take any action–as when asleep, or as
a result of a totally debilitating stroke. But under most normal circumstances,
thought and volition are intimately associated with consciousness. Indeed, as
we shall presently see, it is the combination of all three elements–experience,
thought, and volition–that enables consciousness to perform its function.
3Communicated by Prof. Rafael Malach of the Weizmann Institute of Science, Rehovot.
Based on this observation, Professor Malach makes the fascinating suggestion that a group of
individuals acting in concert may also be conscious.
4
3. Why
We next address the issue of “why”: What is the function of consciousness, from,
say, the evolutionary viewpoint?
The answer we propose is based on the two related notions of decentralizing
and decoupling–roughly speaking, splitting a difficult or complex task into several
easier or less complex tasks, often with the aid of an auxiliary “driving force.”
Here are some examples:
(i) Tearing a Manhattan telephone book in two–perhaps the grand-
daddy of all decoupling processes. Taken as is, it is very difficult. But if one Þrst
separates the book into a number of thinner parts, then one can easily tear each of
these parts in two, thus accomplishing the task. Here the difficult task is tearing
the whole book; the easier tasks are tearing each of the thinner parts; and the
decoupler is separating the entire book into the thinner parts.
(ii) Operating an economy. An economy can be centrally planned, as in a
Kibbutz (Israel cooperative village). A central planner decides how much of each
good will be allocated to each individual, how much–and where–each individual
will work, and so on. In theory, the entire economy of a whole country could be
planned in this way. That is the conception behind socialist economies, like that
of the former Soviet Union.
Centrally planning an entire economy is enormously complex and difficult. To
start with, the informational requirements–Þnding out what each person wants
to consume and what he is capable of producing–seem utterly beyond reach.
But even if that could somehow be achieved, the problemof getting the people to
do what you want them to do, and the sheer complexity of the task, makes the
efficient central planning of an entire economy practically unachievable. Indeed,
socialist economies like that of the Soviet Union achieve levels of efficiency that
are far below those of advanced “free” economies.
What enables free economies to work more efficiently is that they are, by and
large, decentralized. Within limits, each person seeks to acquire the goods and
services that he wants, and to work at the tasks that he wants and that he is
able to perform. There is no problem in getting the people to do what you want
them to do, as each individual makes his own choices. And, the complexity of the
task is greatly reduced, as the task of operating the economy is transferred from
a central planner to individuals, each planning only the segment of the economy
that interests him–usually, his own consumption and production. Instead of one
planner (or planning agencies) planning many billions of transactions, we have
5
several million planners planning thousands of transactions each. The total size
of the task is perhaps roughly the same, but the task is decoupled into millions of
individual tasks–and so is much more easily accomplished.
The driving force that makes the whole process work is individual motivation.
Each individual is motivated to seek for himself the best “deal” that he can get–
the goods and the work that he likes most–and it is this that operates the entire
economy. That is Adam Smith’s “invisible hand.”
(iii) Money and prices. Primitive decentralized markets work by barter:
Two or more people get together and exchange goods or services, to the mutual
beneÞt of all parties to the transaction; the process may be repeated as often
as desired. One may hope that the Þnal outcome is optimal, in the sense that
no traders could have done better by trading with each other.4 In practice, in
reasonably large markets–or even in fairly small ones–identifying the bartering
groups, and deciding on the barters to be implemented, is so complex, involved,
and fraught with uncertainty that barter is unlikely to achieve an outcome that
is anywhere close to optimal.
Enter the institutions of money and prices. Rather than bartering, each trader
sells his goods at market prices; with the proceeds he buys the goods he desires,
again at market prices. Then if the prices are “right,” the market “clears”: the
demand for each good exactly matches the supply. Moreover, the resulting reallo-
cation of goods is optimal (in the above sense); and in large markets, all optimal
outcomes are achievable in this way.
Thus, the unsophisticated but highly complex, involved, and uncertain bar-
tering process is replaced by the price mechanism, which, though a lot more so-
phisticated than barter, is far easier to execute: it requires only that each trader
buys what he likes,5 given his budget.6 Here the complex task is achieving opti-
mality; the simpler tasks are for each trader to decide what he wants, given his
budget; and the decoupler is the price mechanism. And again, the driving force is
individual motivation. Each individual is motivated to “maximize over his budget
set”–sell and buy, at the given market prices, so as to be left with those goods
and services that he most prefers.
4More precisely, no group of traders could have improved the welfare of all its members by
trading within the group only. In economic theory, such outcomes are called core outcomes.
5Unlike barter, where each trader needs some knowledge about the preferences of the traders
with whom he trades, and also about at least some of the others, so that he will know with
whom to trade.
6The proceeds from the sale, at market prices, of the goods that he brought to the market.
6
An interesting aspect of this decoupling is that historically, it has emerged by
itself in every reasonably advanced society, without being imposed by any plan-
ning entity. Not only has the price mechanism emerged by itself, but the market
prices themselves also usually emerge by themselves–determined by supply and
demand–without being imposed by planning entities. And when planning enti-
ties do enter the process of price determination, as in the former Soviet Union or
with rent control in various cities, they often wreak havoc, causing shortages and
other distortions.
Whereas this example is related to the previous one (Example ii), they are
not the same. In the previous example, the point was decentralizing the economy,
letting each individual see to himself. In the current example, the point is the
formation of a price system. Logically, the examples are independent; a centrally
planned economy can have a price system, and a decentralized economy can work
on barter.
(iv) Chess. The ideal way to play chess is to plan the entire course of play
from the beginning, taking into account anything the other player might do. In
practice, this is beyond the power of any man or machine. Instead, the players
“evaluate” the situation at each move, using numerical indices for the various
pieces; e.g., 8 for the queen, 5 for a rook, 3 for a bishop or knight, 1 for a pawn.
They also take account of the general characteristics of the position: develop-
ment of the pieces, castling, passed pawns, and so on. Using such criteria, each
player “looks ahead” for a few moves, trying to maximize his valuation of the
position at the end of that period, and taking into account that the other player
is doing likewise. Weaker players often do not look ahead more than a move or
two, and even that only partially. Stronger players may look as much as Þve or
six moves ahead, and sometimes even more; but they, too, do not examine all
possibilities–all “branches of the tree”–in the process. Human players do not
use a precise numerical valuation, but take a generalized view. Chess-playing com-
puter programs7 basically do use a precise numerical valuation function; though
even there, the “depth” of the look-ahead varies, with some branches of the tree
being examined more thoroughly than others.
Here the complex task is planning the whole game beforehand; and the simpler,
decoupled tasks are playing move by move, with a more or less modest look-
ahead. The overall, macroscopic driving force is, of course, the desire to win; but
7Like IBM’s “Deep Blue,” which several years ago defeated World Chess Champion Gary
Kasparov in a tournament (though there have been allegations that “Deep Blue” cheated by
enlisting human aid during the course of play).
7
“microscopically”–at each separate move–the driving force is to maximize the
valuation several moves ahead.
In Examples (ii) and (iii) above, the decoupling is achieved by spreading the
task over many individuals, each with his own motivation. In contrast, in this
case the decoupling is achieved by spreading the task over time. There is a single
overall motivation–winning–which is expressed at each move by looking ahead
a few moves and maximizing valuation.
(v) Solomon’s judgment. Rather than rendering his judgment (1 Kings 3,
16-28), King Solomon could have entered into a complex factual investigation of
the women’s claims. He “decoupled” the process by motivating them unwittingly
to reveal the truth themselves. Here the complex task is determining which woman
is the live baby’s mother; the simpler tasks are for the women to express their
preferences given the judgment; and the driving force is the women’s motherly
love.
(vi) Fair division. This may be achieved by cumbersome methods of direct
measurement. Alternatively, the process may be decoupled by the method of “one
cuts, the other chooses,” which motivates the parties themselves to divide fairly.
(vii) Evolution. Suppose a Creator had wanted to create the living world
as we know it. He could have designed each individual organism separately, to-
gether with the appropriate interactive adaptations. This would have been enor-
mously complex. Alternatively, He could have decoupled the process by means
of evolution–survival of the Þttest–which runs by itself, automatically, with no
need for “hands on” direction. Here the complex task is creating the world; the
decoupled alternative tasks are for each organism–or even each gene–to adapt
to its surroundings; and the driving force is survival of the Þttest.
These examples should give the reader some idea of what we mean by decou-
pling. What we now suggest is that consciousness serves as a decoupler that allows
human beings to perform tasks that otherwise would be unachievable because of
their complexity. Let us illustrate.
(a) Food. The body needs food for energy and other vital purposes. The
process of supplying food may be divided into two parts: (1) before it enters the
mouth, and (2) afterwards. Part 1 consists of triggering the individual to seek
food, and acquiring, preparing, and eating it. Part 2 consists of digesting it, i.e.,
transforming it into a state that the body can use (see Section 1, above).
Both parts are extremely complex, but Part 1 is by far the more so. We must
choose the food to buy, shop for it, store it, clean it, cook it, and serve it. We must
8
also choose and buy closets and a refrigerator to store it; sinks to wash it; stoves,
ovens, gas tops, microwaves, pots, pans, cake forms, pie dishes, utensils, mixers,
vegetable peelers and so on to prepare it; plates, bowls, platters, and utensils, to
serve it. We must earn money to buy the food and all the auxiliary items we have
mentioned, and those we have not mentioned. Earning money usually involves
various skills–not the least of them social–which must be acquired.
There is another fundamental difference between the two parts. Part 2 is
“hard-wired”: It works “automatically,” by mechanical, chemical, and electrical
means, with no conscious, voluntary component. Part 1 is precisely the opposite:
all conscious, all volitional. To start with, when the body runs short of the
required nutrients, it must be prompted to eat. Once this is done, the food must
be acquired, prepared, and eaten. Conceivably, parts of the process could be hard-
wired: A gauge could tell the brain when the stomach is empty; the eye and brain
could identify food, then send signals to the hand automatically to take it and
put it in the mouth. But it seems unlikely that acquiring the food and preparing
it, and earning the necessary money, could all be hard-wired.
How, then, does the process work? What drives it?
The answer is simple, even obvious: hunger. And, the other side of the same
coin: enjoyment of food.
Hunger does not mean an empty stomach. An empty stomach by itself will
not prompt us to eat. We need the pain or discomfort of hunger, and/or the
pleasure of food, to make us eat. Pain and pleasure depend on consciousness. If
you are not conscious, you cannot experience pain or pleasure. So consciousness
is an important component of the mechanism that supplies us with nutrients.
Moreover, it decouples the nutritive process into the two parts we have described:
until the food reaches the mouth, and afterwards.
Indeed, it does much, much more: The entire process of acquiring, preparing,
and serving food is decoupled into many small steps. Each step is conscious,
with a well-deÞned goal; it is motivated. Going to market, picking the items to
buy, standing in line at the check-out counter, bringing the items to your car,
unloading, putting in the refrigerator, all the myriad tasks involved in cooking,
all the myriad tasks involved in earning the money with which to buy the food,
all the myriad tasks involved in all stages of the process–all together, and each
one separately–are driven by hunger, through the medium of consciousness; they
are motivated.
More precisely, the experiences of hunger and food enjoyment are the overall,
macroscopic driving forces, like the desire to win in chess (Example iv above). The
9
thought process, which is the second component of consciousness (see Section
2, Item viii), translates this into many small tasks–making money, baking a
cake, and so on–each with its own driving force, like valuation-maximizing in
chess. And then volition–the third component of consciousness–comes into play,
enabling the individual actually to carry out these individual tasks.
It is important to note that while “hard-wired” processes like digestion may be
highly complex, they are fairly repetitive. Digestion works on the same materials,
in the same way, every day; there are few, if any, surprises. The processes of food
acquisition and preparation are much less repetitive; they require a good deal
of instantaneous adaptation to various different environments, environments that
may be unfamiliar. Consciousness is particularly important for motivating and
carrying out these non-repetitive tasks.
Finally, we remark that themechanisms provided by nature to facilitate eating–
hunger and the enjoyment of food–may sometimes “misÞre.” It is well known
that severely undernourished people whose hunger leads them to overeat may
well die as a consequence; there are documented cases of people who survived
the concentration camps during the Holocaust, only tragically to die in this way.
Even better known is that the enjoyment of food may cause people to overeat or
to eat foods that are not nutritious. While not immediately fatal like with the
concentration camps, this may nevertheless be detrimental to health; or at least,
serve no useful adaptive purpose.
(b) Sex. Biologists identify two basic drives in living organisms: nourishment
and reproduction.8 What we have said about food applies, mutatis mutandis, also
to sex. It is hunger and the enjoyment of food–not the need for nourishment!–
that makes people eat. Similarly, it is not the desire for offspring that makes
them have sex; it is the sex drive–the enjoyment of sex. Enjoyment is a function
of consciousness. You cannot enjoy if you are not conscious. Many people do
consciously want offspring, but that is not why they have sex.9
As with nourishment, the process of reproduction has several distinct parts:
(1) before the semen enters the woman’s body; (2) conception and pregnancy;
8It is interesting that in several places, the Talmudic literature identiÞes these two basic
drives. In the biblical verse relating how Joseph’s master, Potiphar, “left everything in Joseph’s
hands, except for the bread that he (Potiphar) eats” (Genesis 39, 6), the Midrash takes the
“bread” to mean Potiphar’s wife. And when Jethro’s daughters tell him that “an Egyptian man
saved us,” and Jethro says, “where is he? Call him and let him eat bread” (Exodus 2, 19-20),
the Midrash takes the “bread” to mean the daughters themselves.
9Thus, homosexuals will usually not have relations with persons of the opposite sex. When
they want offspring, they prefer adopting, or artiÞcial insemination.
10
and (3) childhood, when the offspring cannot fend for itself. The Þrst two parts
are decoupled by the sex drive. The second part, though highly complex, is hard-
wired; once sex has taken place, there is no conscious intervention until birth.
After birth, parental love takes over; like hunger and the sex drive, this depends
on consciousness. As with food, the Þrst and third parts of the process–which
are not hard-wired–split up into a myriad of distinct small steps, starting with
dating and earning the required money; each is conscious, each has a well-deÞned
goal, each is motivated.
Like with food, the hard-wired part of the process is fairly repetitive, the other
parts not.
Unlike food, sex is programmed to be proßigate. In a single season, a single
ßowering tree produces many hundreds of thousands of blossoms, and billions
of grains of pollen. It is doubtful if even one of these comes to fruition. In
each ejaculation there are hundreds of millions of sperms, at most one of which
is used. Many sexual episodes lead nowhere, many relationships lead nowhere,
many dates lead nowhere. The sex drive leads to many activities that have no
chance of producing offspring: sex with birth control, sex after the reproductive
age, homosexuality, masturbation, oral sex, bestiality, pornography, and so on.
Love and sex play dominant roles in advertising, literature, Þlm, music, painting,
photography, dance, almost all cultural activity. In the case of food, we used the
term “misÞre” to describe situations in which food does not provide nourishment.
In the case of sex, the corresponding situations are so ubiquitous that they must
be considered a part of the process.
(c) Pain. It has long been recognized that pain calls attention to something in
the body having gone wrong, so that it can be attended to. Again, pain depends
on consciousness; if you are not conscious, you cannot experience pain. Machines
cannot suffer.
As before, we have here a decoupling process. Pain motivates the individual to
seek medical or surgical treatment. Unlike with food and sex, though, the effect of
treatment is not entirely automatic; repeated intervention may be required. Pain
decouples the treatment process into many distinct small steps, motivating the
individual at each step to do what is required in order to alleviate his condition.
It, too, may “misÞre,” as when a medical or surgical treatment causes more pain
than what the patient can suffer.
To summarize: Consciousness enables the decoupling of highly complex,
non-repetitive tasks into many simpler tasks, mainly through the element of mo-
tivation.
11
4. How
This is the shortest of our sections: We have little to contribute on this score,
other than to say that the neurological phenomena that have been observed to be
associated with consciousness do not explain how it works; the “how” remains a
deep mystery.
One last remark is worth making. “How” questions are usually answered
by analogy with something else, with which we are familiar. For example, the
workings of the circulatory system are explained by analogy with plumbing. But
consciousness is unique; there is nothing else in the world that is even remotely
like it. Since there is nothing like it, what analogy can we use to explain it? And
if not by analogy, how else can it be “explained?”
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Sunday, August 27, 2006
Suspicious Trading
Whispers of Mergers Set Off Suspicious Trading
By GRETCHEN MORGENSON
The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem.
It is against the law to trade on inside information about an imminent merger, of course.
But an analysis of the nation’s biggest mergers over the last 12 months indicates that the securities of 41 percent of the companies receiving buyout bids exhibited abnormal and suspicious trading in the days and weeks before those deals became public. For those who bought shares during these periods of unusual trading, quick gains of as much as 40 percent were possible.
The study, conducted for The New York Times by Measuredmarkets Inc., an analytical research firm in Toronto, scrutinized mergers with a value of $1 billion or more that were announced in the 12-month period that ended in early July. The firm analyzed the price, the total number of shares traded and the number of individual trades in each stock during the weeks leading up to the announcement and looked for large deviations from trading patterns going back as far as four years.
Although any number of factors can lead to spikes in trading, deviations of the kind observed by Measuredmarkets are among the data used by regulators to spot insider trading. Of the 90 big mergers in the period, shares of 37 target companies exhibited abnormal trading in the days and weeks before the deals were disclosed.
Christopher K. Thomas, a former analyst and stockbroker who founded Measuredmarkets in 1997, said that his company’s analysis led to the conclusion that the aberrant activities most likely involved insider trading. Measuredmarkets provides examples of unusual trading to institutions, individuals and a regulatory organization in Canada.
It is always possible that a company’s stock moves because of developments in a particular industry or business sector, or because a prominent newsletter, columnist or blogger has written something that could prompt investors to take action. But in the companies that were analyzed, no such influences seemed to be at work. The companies were not the subject of widely dispersed merger commentary during the periods of abnormal trading, nor did they make any announcements that would seem to explain the moves.
The analysis by The New York Times found that, in a handful of the mergers, significant progress toward a deal was being made on the days unusual trading occurred. For example, the day that four bidders were putting together buyout offers for Amegy Bancorp, a Houston bank company, trading in its stock quadrupled.
Attempts to quantify the amount of potential insider activity in deals have come up short in the past, in part because the regulators with access to detailed information do not release it. The Securities and Exchange Commission does not disclose, for example, the percentage of referrals it receives from exchanges that wind up as cases.
The S.E.C. would not comment on the study but said that it had looked at Measuredmarkets’ system and concluded that surveillance techniques of self-regulatory organizations like the New York Stock Exchange were more sophisticated.
Securities regulators, traders and academics agree that merger waves lead to more illicit trading on nonpublic information. In Britain, regulators have made insider trading a primary focus and have shifted their scrutiny to brokerage firms and institutional investors, rather than individuals, involved in mergers.
Like Measuredmarkets, the Financial Services Authority in British has found a pattern of stock trading ahead of mergers. In 2004, 29 percent of companies involved in mergers experienced abnormal trading before public announcements, according to a March 2006 study of large British companies subject to takeovers. In 2001, the comparable figure was 21 percent.
The British study compared the stocks’ price movements with previous returns, adjusted for overall market moves. The comparison period was 240 trading days, ending 10 days before the merger announcement.
In this country, the S.E.C. has focused more on individuals than on institutions in its investigations. And even though merger activity has rocketed in recent years, the number of its cases involving insider trading has held in a range of 40 to 59 annually since 2000, the S.E.C. said.
Some economists and academics assert that insider trading is essentially a victimless crime and therefore not worth deploying regulatory armies to battle. But there are losers, including small investors who miss out on gains, when such trading moves markets.
Moreover, many investors are troubled by what they now see as rampant insider trading, saying it fosters the perception that insiders can profit in the markets at the expense of outsiders.
“Martha Stewart got hurt very badly for something that happens every single day on Wall Street,” said Herbert A. Denton, president of Providence Capital, a money manager and an adviser to minority shareholders. “It’s a falseness and a hollowness to the capitalist system when you are pretending that things are pristine and they are not. Either the S.E.C. should get very, very serious and prosecute a lot of people or forget about it.”
Although Ms. Stewart was investigated for insider trading, she was found guilty of other related charges.
The S.E.C.’s handling of one insider-trading investigation is the subject of scrutiny by Congress after the firing last September of Gary J. Aguirre, a former staff attorney at the agency. Mr. Aguirre contends that his investigation into possible insider trading by Pequot Capital Management, a prominent hedge fund, was thwarted for political reasons by his superiors. He was fired after complaining, even though he had just received a merit pay increase.
Mergers and acquisitions present particularly rich opportunities for profiting on insider information, a violation of the securities laws written to keep all investors on a level playing field. That is why all those involved in corporate unions, from law firms to investment banks to those in between like printers, are supposed to keep quiet during the process.
Officials from the nation’s top securities regulators met on Aug. 18 to discuss emerging trends in insider trading, said Joseph J. Cella, chief of the office of market surveillance at the S.E.C. “We are certainly cognizant of the uptick in merger-and-acquisition activity,” he said.
The companies identified by Measuredmarkets represented many industries and received bids not only from corporate rivals, but also from private investor groups and management-led buyout teams. They included Amegy Bancorp, the subject of a $1.7 billion takeover announced last September by Zions Bancorp, the large Utah bank; CarrAmerica Realty, a real estate investment trust acquired for $5.6 billion by the private investment company Blackstone Group after a March announcement; Dex Media, a directory publisher whose $9.5 billion purchase by the R. H. Donnelley Corporation was disclosed in October; the IDX Systems Corporation, a health care systems company whose $1.2 billion acquisition by General Electric was announced in September; and Texas Regional Bancshares, which the Argentinian bank BBVA said it would acquire in June for nearly $2.2 billion.
In each of the five cases, the abnormal trading occurred during periods of significant behind-the-scenes progress in the mergers, as outlined by the companies themselves in regulatory filings long after the deals were struck.
In the Amegy bank deal, the volume of shares traded more than quadrupled on a day when four of the bank’s bidders were analyzing its financial records and preparing offers. Volume jumped in CarrAmerica’s shares on Feb. 17, the day the real estate investment trust struck a confidentiality agreement with a potential bidder and Goldman Sachs began providing the bidder with an analysis of CarrAmerica’s books.
Trading in Dex Media increased sharply last Sept. 14, the day that management, legal teams and financial advisers representing the company and Donnelley met. And the price and the number of shares traded in IDX jumped on Sept. 7, when its chief executive and a G.E. executive talked and G.E. agreed to increase its bid by 5 percent.
Officials at the companies said that they were unaware of unusual trading in advance of the deals and declined to speculate on reasons for the action.
Measuredmarkets has no way to identify who might have been behind the anomalous trading. But a few of the deals that it flagged are already under scrutiny by regulators.
In June, for example, the S.E.C. froze $1 million in trading gains of South American investors who profited on the June 12 buyout announcement of the Maverick Tube Corporation, an oil equipment maker, by Tenaris SA, a steel company with headquarters in Luxembourg. Anadarko Petroleum’s June bid for the Kerr-McGee Corporation, a smaller rival, is also being investigated, according to a July 13 report in The Houston Chronicle; the transaction closed in August. The S.E.C., following its usual practice, declined to comment on the report.
The takeover crowd includes corporations, management-led buyout teams as well as private equity firms, which represent wealthy private investors. Companies’ directors are reaching out to many potential bidders these days to ensure shareholders get the best price. In the process, they are expanding the number of people with knowledge of the deals.
Still, it is undeniable that brokerage firms, with their varied businesses all under one roof, remain particularly well-positioned to capitalize on inside information. Not only do these firms advise buyers and sellers in mergers, giving them immense access, they also have proprietary trading desks that invest the firm’s money in stocks and other securities, money management units that invest for clients and trading desks that profit mightily by executing trades for hedge funds.
Brokerage firms contend that barriers within their operations keep deal information from seeping out. But regulators at the Financial Services Authority in Britain are challenging these assertions.
In a July 7 speech, Hector Sants, managing director of wholesale and institutional markets at the F.S.A., described why his focus was shifting to institutions. “Our spotlight will shine in particular on relationships between investment banks and their clients,” he said, “because we believe the risk of market abuse is highest where a client can be made an insider on a forthcoming deal.”
The fast and furious pace of deals this year is increasing the opportunities for mischief. In each of the last three months, according to Thomson Financial, the value of announced mergers has exceeded $100 billion — the longest stretch of such volume since 2000.
Although the number of deals in the first seven months of this year slipped to 685 from 763 in the same period in 2005, the dollar amount of transactions rose 31 percent in that time, Thomson Financial said.
Regulators on the front lines also seem to be spotting more irregularities. Officials in the market surveillance unit of New York Stock Exchange Regulation Inc. have made more referrals to the S.E.C. this year than they did in the comparable period last year. As of last month, those regulators had referred 76 cases for possible investigation, up from 60 a year earlier. In 2005, the surveillance unit referred 111 cases, 63 percent more than the previous year.
The number of insider-trading cases filed by the S.E.C., though, has been relatively static. Walter G. Ricciardi, deputy director of enforcement at the S.E.C., said that 9 percent of the cases filed by the commission since Feb. 1 have been based on insider trading, which can encompass merger or any other news that would affect a company’s market price. On a percentage basis, the cases have ranged from 7 percent to 12 percent of the agency’s total since 2000.
“The yield is less probably than in comparable areas,” Mr. Ricciardi explained of insider-trading inquiries. “A lot of times the trading may look like something crazy, but you’ve got to have evidence.”
Recent cases have centered on some relatively small players. In late December, for example, the S.E.C. sued Gary D. Herwitz, an accountant, and Tracey A. Stanyer, an executive vice president at Sirius Satellite Radio, for trading ahead of news in late 2004 that Sirius was going to award a $500 million contract to Howard Stern, a radio show host.
Each settled with the S.E.C., without admitting or denying wrongdoing. Mr. Herwitz paid $52,000. Mr. Stanyer paid $35,000 and was barred from serving as officer or director of a public company. Mr. Herwitz pleaded guilty to insider trading in federal court in Brooklyn and was sentenced to two years’ probation and a $20,000 fine earlier this year.
In May, the S.E.C. sued Jason Smith, a letter carrier in New Jersey, contending he leaked grand jury information to a 14-person ring that included low-level employees of Merrill Lynch and Goldman Sachs, a worker for a printing company and a retired seamstress in Croatia. Regulators say that scheme generated $6.7 million in profits.
What about cases involving larger or more sophisticated investors? “We certainly see institutional-type accounts that have come into the market with extraordinarily good timing on a repeat basis; we have investigated those,” said Mr. Cella of the S.E.C. “But to get the evidence to prove a violation of the statute under which we allege insider trading is difficult.”
And that is true whether the case involves individuals or institutions.
The British securities regulator, for its part, has cited the possibility of hedge funds profiting on insider information as a foremost concern. David Cliffe, a press officer at the F.S.A., said that hedge funds must be keenly watched because they have extensive and close relationships with investment banks that are in a position to provide nonpublic information in exchange for lucrative trading commissions.
Spotting abnormal trading is far simpler than bringing a successful insider-trading prosecution, as Mr. Cella of the S.E.C. noted. Still, the trading anomalies identified by Measuredmarkets are intriguing.
Consider Koch Industries’ bid for Georgia-Pacific on Nov. 13. Senior officials of the companies first met to discuss a merger on Oct. 5. Koch Industries proposed to limit its purchase to certain Georgia-Pacific assets after the company, which makes forest products, had spun off other businesses to the public. Subsequent company filings noted that Danny W. Huff, Georgia-Pacific’s chief financial officer, told Koch officials on Oct. 7 that such a deal would “probably not” be acceptable to his company’s board.
Merger talks continued through October and into November. Both sides conducted corporate analyses — known as due diligence — from Nov. 8-11. Koch Industries’ board voted to approve a bid on Nov. 10.
That day, volume in Georgia-Pacific shares jumped 37 percent above its 2005 average and the number of trades in the stock rose significantly as well, Measuredmarkets found. On Friday, Nov. 11, volume increased yet 66 percent more from the previous day’s high level. Georgia-Pacific shares rose 5.5 percent over the period. The company made no announcements either day, and the overall market rose 1.3 percent over the two days.
On Sunday, Nov. 13, Koch Industries announced that it would pay $21 billion for Georgia-Pacific, or $48 a share, a 39 percent premium to the closing price the previous Friday. Anyone who bought Georgia-Pacific shares on either Nov. 10 or Nov. 11 stood to gain 40 percent in just a few days.
A spokeswoman for Koch Industries did not return phone calls seeking comment.
Another case in point is the surprise merger, announced May 7, between the Wachovia Corporation, a bank holding company based in North Carolina, and Golden West Financial, a West Coast savings and loan. This time the unusual trading showed up both in the stock of Golden West Financial and in its call options.
Traders buy call options, giving them the right to purchase shares of the underlying company at a set price within a specified period, when they expect the stock to rise. Options provide the potential for a sharp profit because each option represents 100 shares.
On May 3, the number of Golden West’s call options that changed hands was triple the daily average. Subsequent filings show that was the day Wachovia’s board met to review a possible acquisition of Golden West and the day after Golden West’s board met to weigh the bid.
Officials at Wachovia and Golden West said they did not know why the volume rose.
The probability of detection appears small, based on the number of cases brought in the United States, and the penalty for insider trading is often a negotiated settlement that may not involve much more than giving up the gains.
An example is the S.E.C.’s conclusion of a case in 2004 with an employee of Fleet Boston. The employee, the S.E.C. said, made $473,000 by trading on knowledge of the bank’s buyout by Bank of America. The commission exacted $525,000 in a settlement, which included his profits, prejudgment interest of $1,576.67 and a civil penalty of $51,842.36.
The penalty portion of such settlements, Mr. Ricciardi said, typically equals the illegal profits. The Insider Trading Sanctions Act of 1984 allows for a penalty of up to three times those profits.
The S.E.C. dispenses a reward, up to 10 percent of the penalties, Mr. Ricciardi said, to tipsters whose information leads to a successful case.
When stocks gyrate because nonpublic information about deals has leaked out, many people are harmed. The most affected are those who sell shares in the company before it is taken over at a significant premium. An investor who sold Georgia-Pacific shares on Nov. 9, just before the unusual trading, missed a 46 percent gain. Those who sold the Andrx Corporation, just before unusual trading began last February missed, a 36 percent gain.
Others also lose. The company that makes the acquisition, for example, may wind up paying more. Investment advisers typically include a company’s target share price and total market capitalization in the analysis of what an acquirer should be willing to pay. If a stock rises in the days or weeks during negotiations, the purchase price could be driven higher. A rising price could even scuttle a merger if the deal becomes too costly to the prospective buyer.
Jenny Anderson contributed reporting for this article, and Donna Anderson contributed research.
By GRETCHEN MORGENSON
The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem.
It is against the law to trade on inside information about an imminent merger, of course.
But an analysis of the nation’s biggest mergers over the last 12 months indicates that the securities of 41 percent of the companies receiving buyout bids exhibited abnormal and suspicious trading in the days and weeks before those deals became public. For those who bought shares during these periods of unusual trading, quick gains of as much as 40 percent were possible.
The study, conducted for The New York Times by Measuredmarkets Inc., an analytical research firm in Toronto, scrutinized mergers with a value of $1 billion or more that were announced in the 12-month period that ended in early July. The firm analyzed the price, the total number of shares traded and the number of individual trades in each stock during the weeks leading up to the announcement and looked for large deviations from trading patterns going back as far as four years.
Although any number of factors can lead to spikes in trading, deviations of the kind observed by Measuredmarkets are among the data used by regulators to spot insider trading. Of the 90 big mergers in the period, shares of 37 target companies exhibited abnormal trading in the days and weeks before the deals were disclosed.
Christopher K. Thomas, a former analyst and stockbroker who founded Measuredmarkets in 1997, said that his company’s analysis led to the conclusion that the aberrant activities most likely involved insider trading. Measuredmarkets provides examples of unusual trading to institutions, individuals and a regulatory organization in Canada.
It is always possible that a company’s stock moves because of developments in a particular industry or business sector, or because a prominent newsletter, columnist or blogger has written something that could prompt investors to take action. But in the companies that were analyzed, no such influences seemed to be at work. The companies were not the subject of widely dispersed merger commentary during the periods of abnormal trading, nor did they make any announcements that would seem to explain the moves.
The analysis by The New York Times found that, in a handful of the mergers, significant progress toward a deal was being made on the days unusual trading occurred. For example, the day that four bidders were putting together buyout offers for Amegy Bancorp, a Houston bank company, trading in its stock quadrupled.
Attempts to quantify the amount of potential insider activity in deals have come up short in the past, in part because the regulators with access to detailed information do not release it. The Securities and Exchange Commission does not disclose, for example, the percentage of referrals it receives from exchanges that wind up as cases.
The S.E.C. would not comment on the study but said that it had looked at Measuredmarkets’ system and concluded that surveillance techniques of self-regulatory organizations like the New York Stock Exchange were more sophisticated.
Securities regulators, traders and academics agree that merger waves lead to more illicit trading on nonpublic information. In Britain, regulators have made insider trading a primary focus and have shifted their scrutiny to brokerage firms and institutional investors, rather than individuals, involved in mergers.
Like Measuredmarkets, the Financial Services Authority in British has found a pattern of stock trading ahead of mergers. In 2004, 29 percent of companies involved in mergers experienced abnormal trading before public announcements, according to a March 2006 study of large British companies subject to takeovers. In 2001, the comparable figure was 21 percent.
The British study compared the stocks’ price movements with previous returns, adjusted for overall market moves. The comparison period was 240 trading days, ending 10 days before the merger announcement.
In this country, the S.E.C. has focused more on individuals than on institutions in its investigations. And even though merger activity has rocketed in recent years, the number of its cases involving insider trading has held in a range of 40 to 59 annually since 2000, the S.E.C. said.
Some economists and academics assert that insider trading is essentially a victimless crime and therefore not worth deploying regulatory armies to battle. But there are losers, including small investors who miss out on gains, when such trading moves markets.
Moreover, many investors are troubled by what they now see as rampant insider trading, saying it fosters the perception that insiders can profit in the markets at the expense of outsiders.
“Martha Stewart got hurt very badly for something that happens every single day on Wall Street,” said Herbert A. Denton, president of Providence Capital, a money manager and an adviser to minority shareholders. “It’s a falseness and a hollowness to the capitalist system when you are pretending that things are pristine and they are not. Either the S.E.C. should get very, very serious and prosecute a lot of people or forget about it.”
Although Ms. Stewart was investigated for insider trading, she was found guilty of other related charges.
The S.E.C.’s handling of one insider-trading investigation is the subject of scrutiny by Congress after the firing last September of Gary J. Aguirre, a former staff attorney at the agency. Mr. Aguirre contends that his investigation into possible insider trading by Pequot Capital Management, a prominent hedge fund, was thwarted for political reasons by his superiors. He was fired after complaining, even though he had just received a merit pay increase.
Mergers and acquisitions present particularly rich opportunities for profiting on insider information, a violation of the securities laws written to keep all investors on a level playing field. That is why all those involved in corporate unions, from law firms to investment banks to those in between like printers, are supposed to keep quiet during the process.
Officials from the nation’s top securities regulators met on Aug. 18 to discuss emerging trends in insider trading, said Joseph J. Cella, chief of the office of market surveillance at the S.E.C. “We are certainly cognizant of the uptick in merger-and-acquisition activity,” he said.
The companies identified by Measuredmarkets represented many industries and received bids not only from corporate rivals, but also from private investor groups and management-led buyout teams. They included Amegy Bancorp, the subject of a $1.7 billion takeover announced last September by Zions Bancorp, the large Utah bank; CarrAmerica Realty, a real estate investment trust acquired for $5.6 billion by the private investment company Blackstone Group after a March announcement; Dex Media, a directory publisher whose $9.5 billion purchase by the R. H. Donnelley Corporation was disclosed in October; the IDX Systems Corporation, a health care systems company whose $1.2 billion acquisition by General Electric was announced in September; and Texas Regional Bancshares, which the Argentinian bank BBVA said it would acquire in June for nearly $2.2 billion.
In each of the five cases, the abnormal trading occurred during periods of significant behind-the-scenes progress in the mergers, as outlined by the companies themselves in regulatory filings long after the deals were struck.
In the Amegy bank deal, the volume of shares traded more than quadrupled on a day when four of the bank’s bidders were analyzing its financial records and preparing offers. Volume jumped in CarrAmerica’s shares on Feb. 17, the day the real estate investment trust struck a confidentiality agreement with a potential bidder and Goldman Sachs began providing the bidder with an analysis of CarrAmerica’s books.
Trading in Dex Media increased sharply last Sept. 14, the day that management, legal teams and financial advisers representing the company and Donnelley met. And the price and the number of shares traded in IDX jumped on Sept. 7, when its chief executive and a G.E. executive talked and G.E. agreed to increase its bid by 5 percent.
Officials at the companies said that they were unaware of unusual trading in advance of the deals and declined to speculate on reasons for the action.
Measuredmarkets has no way to identify who might have been behind the anomalous trading. But a few of the deals that it flagged are already under scrutiny by regulators.
In June, for example, the S.E.C. froze $1 million in trading gains of South American investors who profited on the June 12 buyout announcement of the Maverick Tube Corporation, an oil equipment maker, by Tenaris SA, a steel company with headquarters in Luxembourg. Anadarko Petroleum’s June bid for the Kerr-McGee Corporation, a smaller rival, is also being investigated, according to a July 13 report in The Houston Chronicle; the transaction closed in August. The S.E.C., following its usual practice, declined to comment on the report.
The takeover crowd includes corporations, management-led buyout teams as well as private equity firms, which represent wealthy private investors. Companies’ directors are reaching out to many potential bidders these days to ensure shareholders get the best price. In the process, they are expanding the number of people with knowledge of the deals.
Still, it is undeniable that brokerage firms, with their varied businesses all under one roof, remain particularly well-positioned to capitalize on inside information. Not only do these firms advise buyers and sellers in mergers, giving them immense access, they also have proprietary trading desks that invest the firm’s money in stocks and other securities, money management units that invest for clients and trading desks that profit mightily by executing trades for hedge funds.
Brokerage firms contend that barriers within their operations keep deal information from seeping out. But regulators at the Financial Services Authority in Britain are challenging these assertions.
In a July 7 speech, Hector Sants, managing director of wholesale and institutional markets at the F.S.A., described why his focus was shifting to institutions. “Our spotlight will shine in particular on relationships between investment banks and their clients,” he said, “because we believe the risk of market abuse is highest where a client can be made an insider on a forthcoming deal.”
The fast and furious pace of deals this year is increasing the opportunities for mischief. In each of the last three months, according to Thomson Financial, the value of announced mergers has exceeded $100 billion — the longest stretch of such volume since 2000.
Although the number of deals in the first seven months of this year slipped to 685 from 763 in the same period in 2005, the dollar amount of transactions rose 31 percent in that time, Thomson Financial said.
Regulators on the front lines also seem to be spotting more irregularities. Officials in the market surveillance unit of New York Stock Exchange Regulation Inc. have made more referrals to the S.E.C. this year than they did in the comparable period last year. As of last month, those regulators had referred 76 cases for possible investigation, up from 60 a year earlier. In 2005, the surveillance unit referred 111 cases, 63 percent more than the previous year.
The number of insider-trading cases filed by the S.E.C., though, has been relatively static. Walter G. Ricciardi, deputy director of enforcement at the S.E.C., said that 9 percent of the cases filed by the commission since Feb. 1 have been based on insider trading, which can encompass merger or any other news that would affect a company’s market price. On a percentage basis, the cases have ranged from 7 percent to 12 percent of the agency’s total since 2000.
“The yield is less probably than in comparable areas,” Mr. Ricciardi explained of insider-trading inquiries. “A lot of times the trading may look like something crazy, but you’ve got to have evidence.”
Recent cases have centered on some relatively small players. In late December, for example, the S.E.C. sued Gary D. Herwitz, an accountant, and Tracey A. Stanyer, an executive vice president at Sirius Satellite Radio, for trading ahead of news in late 2004 that Sirius was going to award a $500 million contract to Howard Stern, a radio show host.
Each settled with the S.E.C., without admitting or denying wrongdoing. Mr. Herwitz paid $52,000. Mr. Stanyer paid $35,000 and was barred from serving as officer or director of a public company. Mr. Herwitz pleaded guilty to insider trading in federal court in Brooklyn and was sentenced to two years’ probation and a $20,000 fine earlier this year.
In May, the S.E.C. sued Jason Smith, a letter carrier in New Jersey, contending he leaked grand jury information to a 14-person ring that included low-level employees of Merrill Lynch and Goldman Sachs, a worker for a printing company and a retired seamstress in Croatia. Regulators say that scheme generated $6.7 million in profits.
What about cases involving larger or more sophisticated investors? “We certainly see institutional-type accounts that have come into the market with extraordinarily good timing on a repeat basis; we have investigated those,” said Mr. Cella of the S.E.C. “But to get the evidence to prove a violation of the statute under which we allege insider trading is difficult.”
And that is true whether the case involves individuals or institutions.
The British securities regulator, for its part, has cited the possibility of hedge funds profiting on insider information as a foremost concern. David Cliffe, a press officer at the F.S.A., said that hedge funds must be keenly watched because they have extensive and close relationships with investment banks that are in a position to provide nonpublic information in exchange for lucrative trading commissions.
Spotting abnormal trading is far simpler than bringing a successful insider-trading prosecution, as Mr. Cella of the S.E.C. noted. Still, the trading anomalies identified by Measuredmarkets are intriguing.
Consider Koch Industries’ bid for Georgia-Pacific on Nov. 13. Senior officials of the companies first met to discuss a merger on Oct. 5. Koch Industries proposed to limit its purchase to certain Georgia-Pacific assets after the company, which makes forest products, had spun off other businesses to the public. Subsequent company filings noted that Danny W. Huff, Georgia-Pacific’s chief financial officer, told Koch officials on Oct. 7 that such a deal would “probably not” be acceptable to his company’s board.
Merger talks continued through October and into November. Both sides conducted corporate analyses — known as due diligence — from Nov. 8-11. Koch Industries’ board voted to approve a bid on Nov. 10.
That day, volume in Georgia-Pacific shares jumped 37 percent above its 2005 average and the number of trades in the stock rose significantly as well, Measuredmarkets found. On Friday, Nov. 11, volume increased yet 66 percent more from the previous day’s high level. Georgia-Pacific shares rose 5.5 percent over the period. The company made no announcements either day, and the overall market rose 1.3 percent over the two days.
On Sunday, Nov. 13, Koch Industries announced that it would pay $21 billion for Georgia-Pacific, or $48 a share, a 39 percent premium to the closing price the previous Friday. Anyone who bought Georgia-Pacific shares on either Nov. 10 or Nov. 11 stood to gain 40 percent in just a few days.
A spokeswoman for Koch Industries did not return phone calls seeking comment.
Another case in point is the surprise merger, announced May 7, between the Wachovia Corporation, a bank holding company based in North Carolina, and Golden West Financial, a West Coast savings and loan. This time the unusual trading showed up both in the stock of Golden West Financial and in its call options.
Traders buy call options, giving them the right to purchase shares of the underlying company at a set price within a specified period, when they expect the stock to rise. Options provide the potential for a sharp profit because each option represents 100 shares.
On May 3, the number of Golden West’s call options that changed hands was triple the daily average. Subsequent filings show that was the day Wachovia’s board met to review a possible acquisition of Golden West and the day after Golden West’s board met to weigh the bid.
Officials at Wachovia and Golden West said they did not know why the volume rose.
The probability of detection appears small, based on the number of cases brought in the United States, and the penalty for insider trading is often a negotiated settlement that may not involve much more than giving up the gains.
An example is the S.E.C.’s conclusion of a case in 2004 with an employee of Fleet Boston. The employee, the S.E.C. said, made $473,000 by trading on knowledge of the bank’s buyout by Bank of America. The commission exacted $525,000 in a settlement, which included his profits, prejudgment interest of $1,576.67 and a civil penalty of $51,842.36.
The penalty portion of such settlements, Mr. Ricciardi said, typically equals the illegal profits. The Insider Trading Sanctions Act of 1984 allows for a penalty of up to three times those profits.
The S.E.C. dispenses a reward, up to 10 percent of the penalties, Mr. Ricciardi said, to tipsters whose information leads to a successful case.
When stocks gyrate because nonpublic information about deals has leaked out, many people are harmed. The most affected are those who sell shares in the company before it is taken over at a significant premium. An investor who sold Georgia-Pacific shares on Nov. 9, just before the unusual trading, missed a 46 percent gain. Those who sold the Andrx Corporation, just before unusual trading began last February missed, a 36 percent gain.
Others also lose. The company that makes the acquisition, for example, may wind up paying more. Investment advisers typically include a company’s target share price and total market capitalization in the analysis of what an acquirer should be willing to pay. If a stock rises in the days or weeks during negotiations, the purchase price could be driven higher. A rising price could even scuttle a merger if the deal becomes too costly to the prospective buyer.
Jenny Anderson contributed reporting for this article, and Donna Anderson contributed research.
Monday, August 21, 2006
Why the Rich Get Richer
by Robert Kiyosaki
How to Profit From a Cooling Real Estate Market
All over the U.S. there are stories of a rise in real estate foreclosures. Many people who took those exotic mortgages -- borrowing 125% of home value or choosing adjustable-rate mortgages -- are struggling to make their payments, and some aren't making it.
Also, a glut of new property supply, especially condominiums, is coming on line. A friend of mine, a very seasoned real estate investor, says in San Diego County, once one of the hottest real estate markets in the country, thousands of new condominiums are getting ready to come to market -- just as the market softens. He estimates that over 12,000 new units are coming on line, and the market, at the best of times, can only absorb about 1,000 condominiums a year. If he's correct, that means 12 years of supply will be ready for market in the next year.
As interest rates rise and the number of eager new buyers begins to diminish, adding supply to an already bad real estate market for sellers may mean a very good market for buyers and for property investors.
Hungry Alligators
The people who are in the most trouble are flippers -- people who aim to buy low and sell high within a short space of time. Many were buying condominiums off the plans, which means the projects were yet to be built, in the hopes that when the homes were completed, they would sell for a tidy profit. The trouble is many of these flippers, lured into the market by stories of people making a huge killing earlier with a similar strategy, are now the ones to be slaughtered. Now, they either lose their deposit or have to cough up the money for the purchase in the hopes there's a greater fool than they were somewhere out there real estate.
If you recall, the same thing happened around the year 2000 as amateurs jumped into the stock market, buying up tech stocks or any IPO with a dot-com after the company name.
In the coming months, I predict we'll see an increase in people dumping real estate they can't afford. They'll be forced to sell because they'll be eaten alive by a phenomenon known as negative cash flow. Investment properties that you have to feed money to every month are fondly known as alligators -- if you can't afford to feed the property every month, it eats you.
I know of one so-called real estate investor (and I prefer to call people like him speculators rather than investors) who has three homes he thought he could flip for a profit -- but he priced them too high. Now, $7,500 comes out of his pocket every month to feed the negative-cash-flow alligators. The problem is, he and his wife don't earn that much a month. Their three alligators are literally eating them out of house and home, consuming the profits they made from other flips -- and their savings.
To add more pain to the misery, they still have to pay the capital-gain taxes they made from their previous successful flips. They're toast. The alligators are eating them alive. They can't afford to feed them, and they can't afford to sell them because the prices they paid for these alligators are more than they're worth today. And this is only one story -- out of who knows how many. Over the next couple of years, keep your eyes open for some great bargains.
It's Time for the Pros
Some people say we're now entering a bad real estate market. I disagree. I think we're entering a great market. A bad one is when amateur investors become real estate experts and they bid up prices. They make housing expensive for homeowners, often adding little to no value to the property. They simply muddy the waters and make a valuable investment, a home, expensive.
Now, I must admit, I sometimes do buy to flip, so I can't be too critical. Yet it's the amateurs who come late to the party -- and who eventually donate their money back to the professionals. What I'm saying is: Now is the time to turn pro. Now is not the time to be an amateur. It's the amateurs who jump in when the market is hot. It's the professional who comes in when it's cooling down. Get the message?
When the red-hot bull market of real estate was beginning to overheat, you didn't have time to make considered decisions. Sellers were receiving multiple, over-asking-price offers. In a bull market, you had to be quick, have money, and be a little foolish. Now that the market is cooling down, sellers are a little bit more humble. You have more time and can do your due diligence carefully. You can negotiate better terms and make a better deal, especially if the seller has his leg inside an alligator's jaws.
Bad News That's Good
But don't be in too much of a hurry. I think we still have some bad news yet to come -- and I believe it may come from the bond market. I suspect that many of our foreign investors who have been buying our debt may be becoming more cautious about investing in American assets, especially U.S. bonds. Many foreign bankers may be having doubts about the U.S. government paying the interest on our debt. In other words, many investors will be moving increasingly out of their cash into tangible assets such as gold, silver, and other metals. Again, this is only a suspicion. We should know more by September of this year.
If investors stop buying U.S. government debt, who knows what might happen? The U.S. may need to raise interest rates even higher, which will drive home values down even further. So be patient, keep looking at real estate, but keep your hand on your wallet (unless of course you find a seller with a really mean alligator eating him alive).
A year ago, I sent out a warning to investors, especially flippers, to cash out quickly. I received a lot of irate e-mails from people who thought I was turning on them. They thought I was spreading bad news. Little did they know that by forecasting a real estate downturn, I was spreading good news -- good news for real investors and bad news for amateur alligator wrestlers.
Recent ColumnsGo
Forth and Multiply -- Your MoneyTuesday, August 22, 2006Lazy People Don't Get RichTuesday, August 8, 2006Bet on Gold, Not on Funny MoneyTuesday, July 25, 2006Why the Rich Get Richer ArchivesDiscuss this column on our message boards
More From Robert Kiyosaki
Thinking of Quitting Your Job?
Want to start a business but afraid of failing? Robert Kiyosaki shares his successes and failures to illustrate 10 key lessons for entrepreneurs.
Robert Kiyosaki, author of the best-seller Rich Dad Poor Dad, quit his job at age 31 -- and he's never looked back.
Before you do something stupid, read this book. www.richdad.com
How to Profit From a Cooling Real Estate Market
All over the U.S. there are stories of a rise in real estate foreclosures. Many people who took those exotic mortgages -- borrowing 125% of home value or choosing adjustable-rate mortgages -- are struggling to make their payments, and some aren't making it.
Also, a glut of new property supply, especially condominiums, is coming on line. A friend of mine, a very seasoned real estate investor, says in San Diego County, once one of the hottest real estate markets in the country, thousands of new condominiums are getting ready to come to market -- just as the market softens. He estimates that over 12,000 new units are coming on line, and the market, at the best of times, can only absorb about 1,000 condominiums a year. If he's correct, that means 12 years of supply will be ready for market in the next year.
As interest rates rise and the number of eager new buyers begins to diminish, adding supply to an already bad real estate market for sellers may mean a very good market for buyers and for property investors.
Hungry Alligators
The people who are in the most trouble are flippers -- people who aim to buy low and sell high within a short space of time. Many were buying condominiums off the plans, which means the projects were yet to be built, in the hopes that when the homes were completed, they would sell for a tidy profit. The trouble is many of these flippers, lured into the market by stories of people making a huge killing earlier with a similar strategy, are now the ones to be slaughtered. Now, they either lose their deposit or have to cough up the money for the purchase in the hopes there's a greater fool than they were somewhere out there real estate.
If you recall, the same thing happened around the year 2000 as amateurs jumped into the stock market, buying up tech stocks or any IPO with a dot-com after the company name.
In the coming months, I predict we'll see an increase in people dumping real estate they can't afford. They'll be forced to sell because they'll be eaten alive by a phenomenon known as negative cash flow. Investment properties that you have to feed money to every month are fondly known as alligators -- if you can't afford to feed the property every month, it eats you.
I know of one so-called real estate investor (and I prefer to call people like him speculators rather than investors) who has three homes he thought he could flip for a profit -- but he priced them too high. Now, $7,500 comes out of his pocket every month to feed the negative-cash-flow alligators. The problem is, he and his wife don't earn that much a month. Their three alligators are literally eating them out of house and home, consuming the profits they made from other flips -- and their savings.
To add more pain to the misery, they still have to pay the capital-gain taxes they made from their previous successful flips. They're toast. The alligators are eating them alive. They can't afford to feed them, and they can't afford to sell them because the prices they paid for these alligators are more than they're worth today. And this is only one story -- out of who knows how many. Over the next couple of years, keep your eyes open for some great bargains.
It's Time for the Pros
Some people say we're now entering a bad real estate market. I disagree. I think we're entering a great market. A bad one is when amateur investors become real estate experts and they bid up prices. They make housing expensive for homeowners, often adding little to no value to the property. They simply muddy the waters and make a valuable investment, a home, expensive.
Now, I must admit, I sometimes do buy to flip, so I can't be too critical. Yet it's the amateurs who come late to the party -- and who eventually donate their money back to the professionals. What I'm saying is: Now is the time to turn pro. Now is not the time to be an amateur. It's the amateurs who jump in when the market is hot. It's the professional who comes in when it's cooling down. Get the message?
When the red-hot bull market of real estate was beginning to overheat, you didn't have time to make considered decisions. Sellers were receiving multiple, over-asking-price offers. In a bull market, you had to be quick, have money, and be a little foolish. Now that the market is cooling down, sellers are a little bit more humble. You have more time and can do your due diligence carefully. You can negotiate better terms and make a better deal, especially if the seller has his leg inside an alligator's jaws.
Bad News That's Good
But don't be in too much of a hurry. I think we still have some bad news yet to come -- and I believe it may come from the bond market. I suspect that many of our foreign investors who have been buying our debt may be becoming more cautious about investing in American assets, especially U.S. bonds. Many foreign bankers may be having doubts about the U.S. government paying the interest on our debt. In other words, many investors will be moving increasingly out of their cash into tangible assets such as gold, silver, and other metals. Again, this is only a suspicion. We should know more by September of this year.
If investors stop buying U.S. government debt, who knows what might happen? The U.S. may need to raise interest rates even higher, which will drive home values down even further. So be patient, keep looking at real estate, but keep your hand on your wallet (unless of course you find a seller with a really mean alligator eating him alive).
A year ago, I sent out a warning to investors, especially flippers, to cash out quickly. I received a lot of irate e-mails from people who thought I was turning on them. They thought I was spreading bad news. Little did they know that by forecasting a real estate downturn, I was spreading good news -- good news for real investors and bad news for amateur alligator wrestlers.
Recent ColumnsGo
Forth and Multiply -- Your MoneyTuesday, August 22, 2006Lazy People Don't Get RichTuesday, August 8, 2006Bet on Gold, Not on Funny MoneyTuesday, July 25, 2006Why the Rich Get Richer ArchivesDiscuss this column on our message boards
More From Robert Kiyosaki
Thinking of Quitting Your Job?
Want to start a business but afraid of failing? Robert Kiyosaki shares his successes and failures to illustrate 10 key lessons for entrepreneurs.
Robert Kiyosaki, author of the best-seller Rich Dad Poor Dad, quit his job at age 31 -- and he's never looked back.
Before you do something stupid, read this book. www.richdad.com
Saturday, August 12, 2006
Latin America Sustaining The US Debt
BY R G PAGES—staff writer—
INSTEAD of serving to protect the population the current economic model of the Latin America and the Caribbean is forcing them to emigrate.
For experts meeting at the 7th International Conference on Globalization and the Problems of Development in Havana, the region’s principal export line is that of persons and large-scale emigration to the developed nations.
With the neoliberal reforms of the 1990s exports grew in Latin America, but not on the basis of the development of national industries.
The current model has seen a reduction in employment, increased emigration and a lack of growth overall in its Gross Domestic Product (GDP).
This is a notable paradox because a growth in exports should signify a higher GDP and, with a few exceptions, this is not occurring. Mexican expert Arturo Huerta reasoned that the internal Latin America markets are still being restricted. Governments are adopting policies of cutting back on inflation and public spending and not extending the infrastructure of works to the benefit of the population
Demand and wages are being contracted in defense of external interests, noted Huerta, a professor at the Autonomous University of Mexico.
He analyzed what happens with nations dependent on the export of their mining products. Gold has been rising in price since 2001, associated with insecurity on the US stock market, of the dollar and the behavior of the economy.
Thus gold is presently extremely profitable, because foreign investors in gold mines do not pay taxes on profits or aggregate value and thus the governments of countries with reserves of this important natural resource receive no contribution to their GDP.
As gold extraction requires high technology. Investment in the sector does not increase employment. By not paying taxes, foreign investments give nothing to the country owning that natural resource. Thus gold exports increase but the GDP does not.
Remittances entering the countries of the region have grown and now represent the second largest entry of capital in global form. However, one cannot say that these remittances have a positive impact, because it should be the function of national economies to improve the populations’ living standards.
PERVERSE TRANSFER
Jaime Stay, a professor at Mexico’s Puebla University, believes that there is a very close relationship between the flight of capital, external debt and the functioning of the US economy.
The US economy acts like a black hole by attracting large volumes of capital from the rest of the world. Capital enters the Latin American region in the form of loans or bank credits and simultaneously produces the flight of that capital toward the developed nations, essentially the United States.
The exit of capital can assume many forms. One of them is related to the corruption involved in a large part Latin American governmental dealings. There are daily examples of how corruption has come down to setting up bank accounts elsewhere, such as in tax havens.
Capital flight is accompanied by another phenomenon, which is not strictly the flight of capital abroad, but appears in the so-called net transfer of resources. It is a serious problem, because the net income from capital is less than the net payment that has to be made for that income at a previous point.
Jaime Stay exposed the fact that the exit of profits without interest payments reaches a higher total than that of capital income.
This phenomenon, which was apparent in Latin America during the external debt crisis of the 1980s, has reappeared with absolute totals larger than those of that decade. The exit of profits has grown steadily year after year up until 2004.
“We have a net transfer of capital from the underdeveloped countries, which cannot confront the gravest problems impeding their development, to nations of advanced capital – starting with the US economy,” Stay affirmed.
It is a perverse transfer. The less developed countries are constantly contributing to the developed ones, in an unjust relationship that might well date back to colonial times. It is ethically unjustifiable when we are supposedly living in a world in which opportunities for everyone should be extended.
SNOWBALLING
Claudio Katz, a professor at Buenos Aires University, noted that the monetary, credit and social policy of every country in the region is subordinated to what the International Monetary Fund imposes on them in order to meet their external debts.
He described how in the Argentine case, the way in which the external debt is being discussed at the moment is going to bring problems, although the government is conducting itself with more dignity and a taking up a more confrontational position with the IMF.
Katz believes that the Argentine government initiated negotiations on its debt erroneously, by acknowledging that it exists, when it is known that it is a fraudulent debt and very much in question.
The Buenos Aires professor warned against reassuming the system of repaying the external debt in the form of bonds, given that, in the long term, this generates a fiscal surplus for decades in order to be able to price new bonds emitted. Having a fiscal surplus, he added, means reducing social spending on education and housing.
“Apparently we are easing a problem without foreseeing that huge snowball that is indebtedness,” Katz explained.
Brazilian professor Theolonio dos Santos, from the Fluminense University of Rio de Janeiro, similarly analyzed the problem of the flight of capital from Latin America to the developed countries, again essentially to the United States.
He gave this example: a Latin American country is given a $100-million loan at an interest rate of 45%. That means that for every $100 given, $45 has to be returned in interest. The government of that country needs to increase its bank reserves to make itself attractive to the World Bank and the International Monetary Fund.
Then what happens? The $100 million it was given in credit – with the 45% interest – is placed in a US bank where it is only taxed at an annual interest rate of 5%. In the course of time, the Latin America nation is ruined because all the capital that enters has to be directed to paying debts and commissions.
Although it seems irrational, that is what has occurred with the Latin American economies. In Brazil, Theolonio noted, $46 billion entered the country in the form of high-interest loans. Afterwards, that money was deposited as a reserve in the United States at only 4-5% interest.
If a Brazilian housewife asks to borrow money and has to pay 48% interest on it, and then deposits that money in another account (equal to the reserve in US banks) at only 5% interest, she will be ruined. If you own a property be prepared to lose it because all the money will go on paying interest and commissions.
GOVERNMENTS’ HANDS TIED
The inability of governments to manage their own resources is one of the consequences of the model imposed on Latin America.
The independence of state central banks and the thinking that there must be huge resources in those central banks so as to maintain that reserve is placing nations in very difficult positions.
Professor Dos Santos stated that the Central Bank of Brazil has raised the interest rate that the state has to pay it and with that policy is spectacularly increasing the public debt. In order to pay those high rates of interest, governments have to spend less. It is an absurd situation that translates into an absence of public works.
It is argued that bank interest rates have to be high to prevent growing demand and avoid inflation, which are viewed as the main enemy.
In the name of preventing inflation, they are compromising public resources. Brazil is the most serious case in the region, the professor noted. “My country is paying $750 billion just on servicing its internal debt, not to mention its external debt, another payment whose interest rate is taken from the world market.
The distribution of profits in Brazil remains within the financial system to the detriment of the business sector and traders who have to pay extortionate interest.
For Arturo Huerta: “We do not have a monetary policy or a fiscal policy. We have recourse to privatizations and the politicians are incapable of saying that we have to break with these models.”
Katz stressed that the most incredible aspect of privatization is that 10 years of the process have gone by and there is no study of what has already happened.
“With privatizations they wanted to send us this message: the state is ridding itself of deficient public enterprises and has money that can be invested in education and health. However, what has in fact happened is that we have a colossal public debt and are unable to invest in social programs. Argentina, a country that has traditionally had a 6% unemployment rate, now has one of 16-20%. Privatizations have led to 44% of its population falling into poverty and 35% of its children suffering from malnutrition.
Katz confirmed that the flight of capital from Argentina almost equals that of its external debt.
With privatizations the peoples have begun to realize that they have no benefits, as is the case in Bolivia with water and gas.
Huerta observed that Mexican sold off its banking system and went into crisis. In order to rescue it, the country had to spend out more than $100 billion, the cost of which is being paid by the people. A government that loses its central bank and its strategic economic sectors has no future whatsoever. Sovereign control of the national economy has to be respected.
A country that is unable to generate its own currency cannot have economic sovereignty. Latin American money is controlled by international finance capital, which wants the currency of the country in which it invests to be stable, thus forcing the imposition of high bank interest rates on the state in question.
The region has to recover control of its monetary policy in order to subsequently adopt a fiscal policy that is an incentive to economic growth, Huerta noted.
Unfortunately, no political party in the region is proposing the rescue of monetary control in its program.
Oscar Ugarteche, professor at the Catholic Pontificate University of Peru, stated that while the Latin American countries have high international reserves in US banks, his nation is registering an immense budgetary deficit in the order of 5% of its GDP.
However, now the Bolivarian Alternative for the Americas, a redefined economic model that promotes integration on the basis of a genuine policy of regional development.
INSTEAD of serving to protect the population the current economic model of the Latin America and the Caribbean is forcing them to emigrate.
For experts meeting at the 7th International Conference on Globalization and the Problems of Development in Havana, the region’s principal export line is that of persons and large-scale emigration to the developed nations.
With the neoliberal reforms of the 1990s exports grew in Latin America, but not on the basis of the development of national industries.
The current model has seen a reduction in employment, increased emigration and a lack of growth overall in its Gross Domestic Product (GDP).
This is a notable paradox because a growth in exports should signify a higher GDP and, with a few exceptions, this is not occurring. Mexican expert Arturo Huerta reasoned that the internal Latin America markets are still being restricted. Governments are adopting policies of cutting back on inflation and public spending and not extending the infrastructure of works to the benefit of the population
Demand and wages are being contracted in defense of external interests, noted Huerta, a professor at the Autonomous University of Mexico.
He analyzed what happens with nations dependent on the export of their mining products. Gold has been rising in price since 2001, associated with insecurity on the US stock market, of the dollar and the behavior of the economy.
Thus gold is presently extremely profitable, because foreign investors in gold mines do not pay taxes on profits or aggregate value and thus the governments of countries with reserves of this important natural resource receive no contribution to their GDP.
As gold extraction requires high technology. Investment in the sector does not increase employment. By not paying taxes, foreign investments give nothing to the country owning that natural resource. Thus gold exports increase but the GDP does not.
Remittances entering the countries of the region have grown and now represent the second largest entry of capital in global form. However, one cannot say that these remittances have a positive impact, because it should be the function of national economies to improve the populations’ living standards.
PERVERSE TRANSFER
Jaime Stay, a professor at Mexico’s Puebla University, believes that there is a very close relationship between the flight of capital, external debt and the functioning of the US economy.
The US economy acts like a black hole by attracting large volumes of capital from the rest of the world. Capital enters the Latin American region in the form of loans or bank credits and simultaneously produces the flight of that capital toward the developed nations, essentially the United States.
The exit of capital can assume many forms. One of them is related to the corruption involved in a large part Latin American governmental dealings. There are daily examples of how corruption has come down to setting up bank accounts elsewhere, such as in tax havens.
Capital flight is accompanied by another phenomenon, which is not strictly the flight of capital abroad, but appears in the so-called net transfer of resources. It is a serious problem, because the net income from capital is less than the net payment that has to be made for that income at a previous point.
Jaime Stay exposed the fact that the exit of profits without interest payments reaches a higher total than that of capital income.
This phenomenon, which was apparent in Latin America during the external debt crisis of the 1980s, has reappeared with absolute totals larger than those of that decade. The exit of profits has grown steadily year after year up until 2004.
“We have a net transfer of capital from the underdeveloped countries, which cannot confront the gravest problems impeding their development, to nations of advanced capital – starting with the US economy,” Stay affirmed.
It is a perverse transfer. The less developed countries are constantly contributing to the developed ones, in an unjust relationship that might well date back to colonial times. It is ethically unjustifiable when we are supposedly living in a world in which opportunities for everyone should be extended.
SNOWBALLING
Claudio Katz, a professor at Buenos Aires University, noted that the monetary, credit and social policy of every country in the region is subordinated to what the International Monetary Fund imposes on them in order to meet their external debts.
He described how in the Argentine case, the way in which the external debt is being discussed at the moment is going to bring problems, although the government is conducting itself with more dignity and a taking up a more confrontational position with the IMF.
Katz believes that the Argentine government initiated negotiations on its debt erroneously, by acknowledging that it exists, when it is known that it is a fraudulent debt and very much in question.
The Buenos Aires professor warned against reassuming the system of repaying the external debt in the form of bonds, given that, in the long term, this generates a fiscal surplus for decades in order to be able to price new bonds emitted. Having a fiscal surplus, he added, means reducing social spending on education and housing.
“Apparently we are easing a problem without foreseeing that huge snowball that is indebtedness,” Katz explained.
Brazilian professor Theolonio dos Santos, from the Fluminense University of Rio de Janeiro, similarly analyzed the problem of the flight of capital from Latin America to the developed countries, again essentially to the United States.
He gave this example: a Latin American country is given a $100-million loan at an interest rate of 45%. That means that for every $100 given, $45 has to be returned in interest. The government of that country needs to increase its bank reserves to make itself attractive to the World Bank and the International Monetary Fund.
Then what happens? The $100 million it was given in credit – with the 45% interest – is placed in a US bank where it is only taxed at an annual interest rate of 5%. In the course of time, the Latin America nation is ruined because all the capital that enters has to be directed to paying debts and commissions.
Although it seems irrational, that is what has occurred with the Latin American economies. In Brazil, Theolonio noted, $46 billion entered the country in the form of high-interest loans. Afterwards, that money was deposited as a reserve in the United States at only 4-5% interest.
If a Brazilian housewife asks to borrow money and has to pay 48% interest on it, and then deposits that money in another account (equal to the reserve in US banks) at only 5% interest, she will be ruined. If you own a property be prepared to lose it because all the money will go on paying interest and commissions.
GOVERNMENTS’ HANDS TIED
The inability of governments to manage their own resources is one of the consequences of the model imposed on Latin America.
The independence of state central banks and the thinking that there must be huge resources in those central banks so as to maintain that reserve is placing nations in very difficult positions.
Professor Dos Santos stated that the Central Bank of Brazil has raised the interest rate that the state has to pay it and with that policy is spectacularly increasing the public debt. In order to pay those high rates of interest, governments have to spend less. It is an absurd situation that translates into an absence of public works.
It is argued that bank interest rates have to be high to prevent growing demand and avoid inflation, which are viewed as the main enemy.
In the name of preventing inflation, they are compromising public resources. Brazil is the most serious case in the region, the professor noted. “My country is paying $750 billion just on servicing its internal debt, not to mention its external debt, another payment whose interest rate is taken from the world market.
The distribution of profits in Brazil remains within the financial system to the detriment of the business sector and traders who have to pay extortionate interest.
For Arturo Huerta: “We do not have a monetary policy or a fiscal policy. We have recourse to privatizations and the politicians are incapable of saying that we have to break with these models.”
Katz stressed that the most incredible aspect of privatization is that 10 years of the process have gone by and there is no study of what has already happened.
“With privatizations they wanted to send us this message: the state is ridding itself of deficient public enterprises and has money that can be invested in education and health. However, what has in fact happened is that we have a colossal public debt and are unable to invest in social programs. Argentina, a country that has traditionally had a 6% unemployment rate, now has one of 16-20%. Privatizations have led to 44% of its population falling into poverty and 35% of its children suffering from malnutrition.
Katz confirmed that the flight of capital from Argentina almost equals that of its external debt.
With privatizations the peoples have begun to realize that they have no benefits, as is the case in Bolivia with water and gas.
Huerta observed that Mexican sold off its banking system and went into crisis. In order to rescue it, the country had to spend out more than $100 billion, the cost of which is being paid by the people. A government that loses its central bank and its strategic economic sectors has no future whatsoever. Sovereign control of the national economy has to be respected.
A country that is unable to generate its own currency cannot have economic sovereignty. Latin American money is controlled by international finance capital, which wants the currency of the country in which it invests to be stable, thus forcing the imposition of high bank interest rates on the state in question.
The region has to recover control of its monetary policy in order to subsequently adopt a fiscal policy that is an incentive to economic growth, Huerta noted.
Unfortunately, no political party in the region is proposing the rescue of monetary control in its program.
Oscar Ugarteche, professor at the Catholic Pontificate University of Peru, stated that while the Latin American countries have high international reserves in US banks, his nation is registering an immense budgetary deficit in the order of 5% of its GDP.
However, now the Bolivarian Alternative for the Americas, a redefined economic model that promotes integration on the basis of a genuine policy of regional development.
Thursday, August 10, 2006
There is not War in Iraq
Congress failed to pass a war resolution.
Thus, qualifying the present occupation of Iraq as an illegitimate act war, which is intrinsically anti-American and breaches the Constitution.
The Constitution states and grants to the people's House of Representatives the only right to enact and act in legal war actions.
What we have in Iraq is an ongoing occupation, clearly an unconstitutional act by the President.
The members of the House of Representatives for decades have stopped exercising and claiming the rights of citizens grant in the Constitution. This includes a vote for a series of laws under the titles of The Patriot Acts, without even reading the content.
The indecent stance of the House Members is summa pauper in this case.
No only they failed to read the law or even spend one minute debating such usurpation of people's freedoms. Coump the egregious behavior by the use of talking points to justify anything that has come from the present leadership. Radicals as Rove never found better allies than the majority elected democrats. Isn;t that scary!!!
When we hear "freedom is not free," clearly is not, we have lost a large amount of freedom and we are paying dearly for those loses.
These Orwellian titled laws seem to be a present habit and it is the most damming piece of biased absolutist legislation since the McCarthy era. It contains the most destructive provisions damming freedom and civil rights in America.
House members by consenting in some cases or by coalescent behavior in other cases, continue to fail to represent the people, that is something people must start to demand and act with stronger stance against such egregious behavior.
The House Members allow Presidents for decades to use war acts and usurp freedom without due process or abiding to basic American values. The puzzling is how most people continues seated watching TV.
In a few instances seems the tide is shifting, as the primary election of Ned Lemont, this primary election has rocked the world of the entrenched politicos.
This entrenchment supine position of politicos is not a single party situation, but both parties practice it and thy are as guilty as sin.
Can you call for term limits?
Such continuous actions by House members are the driver for their poor respect by the people. Congress has less than 25% of approval rating.
Still, this will not eliminate the fact these same cadre will be re-elected in 98% of cases, with incumbents controlling the election as de facto right.
Maybe we start to see some changes with people actions been more participative and vocal in the primaries.
If people do not participate in primaries, the stuffing of the election is done.
The key is to participate in the primaries.
The teaching of others about this important event, until we have party line free open line elections -then might the best win- and not the anointed by the parties elitist Politburo, we need to grow the debate.
We must demand truth, openness and debate, no lies and convenient usurpation of rights.
Thus, qualifying the present occupation of Iraq as an illegitimate act war, which is intrinsically anti-American and breaches the Constitution.
The Constitution states and grants to the people's House of Representatives the only right to enact and act in legal war actions.
What we have in Iraq is an ongoing occupation, clearly an unconstitutional act by the President.
The members of the House of Representatives for decades have stopped exercising and claiming the rights of citizens grant in the Constitution. This includes a vote for a series of laws under the titles of The Patriot Acts, without even reading the content.
The indecent stance of the House Members is summa pauper in this case.
No only they failed to read the law or even spend one minute debating such usurpation of people's freedoms. Coump the egregious behavior by the use of talking points to justify anything that has come from the present leadership. Radicals as Rove never found better allies than the majority elected democrats. Isn;t that scary!!!
When we hear "freedom is not free," clearly is not, we have lost a large amount of freedom and we are paying dearly for those loses.
These Orwellian titled laws seem to be a present habit and it is the most damming piece of biased absolutist legislation since the McCarthy era. It contains the most destructive provisions damming freedom and civil rights in America.
House members by consenting in some cases or by coalescent behavior in other cases, continue to fail to represent the people, that is something people must start to demand and act with stronger stance against such egregious behavior.
The House Members allow Presidents for decades to use war acts and usurp freedom without due process or abiding to basic American values. The puzzling is how most people continues seated watching TV.
In a few instances seems the tide is shifting, as the primary election of Ned Lemont, this primary election has rocked the world of the entrenched politicos.
This entrenchment supine position of politicos is not a single party situation, but both parties practice it and thy are as guilty as sin.
Can you call for term limits?
Such continuous actions by House members are the driver for their poor respect by the people. Congress has less than 25% of approval rating.
Still, this will not eliminate the fact these same cadre will be re-elected in 98% of cases, with incumbents controlling the election as de facto right.
Maybe we start to see some changes with people actions been more participative and vocal in the primaries.
If people do not participate in primaries, the stuffing of the election is done.
The key is to participate in the primaries.
The teaching of others about this important event, until we have party line free open line elections -then might the best win- and not the anointed by the parties elitist Politburo, we need to grow the debate.
We must demand truth, openness and debate, no lies and convenient usurpation of rights.
Wednesday, August 09, 2006
No Man Is an Island
Anthony Kennedy's surprising charge to the American Bar Association.
By Dahlia Lithwick
HONOLULU—There is something about Waikiki that can render the 5,000 lawyers swarming this town for the American Bar Association convention disinclined to think. The convention center, the streets, and what seems like every hotel in town are overrun with them, lugging around their bright yellow beach bags and their ubiquitous LexisNexis name tags. (Pity the Honolulu drivers whose chances of running down an attorney have skyrocketed to about 1-in-3 this week.)
Seemingly simple decisions, decisions attorneys make in 30 seconds if they're on the clock, may consume 15 minutes in Hawaii. I listen to them debating—the snapper or the ahi, change before mai tais on the beach or after, attend the 11:30 panel on innovations in forensic accounting or flip over and tan the backs of their thighs—and I listen to the long pauses in between. In Waikiki, the billable hour stretches long and languid. Beach books replace case files. Deep thoughts are few and far between.
Unless you are Supreme Court Justice Anthony Kennedy. I find myself devoting 15 whole minutes, as I prepare to attend his keynote address Saturday evening, to deciding whether to shower first or to tan the backs of my thighs. As I dart for the ladies' room outside the Hawaii Ballroom at the Sheraton Waikiki—perhaps I can at least wash the salt water off my face—I almost trip over the tall gangliness of the justice himself, flawless in a dark suit and navy tie. The stern commander has arrived to oversee his vast battalion of 60-year-old men in hibiscus-print shirts.
The conference organizers seem to have contracted this same aloha spirit of timelessness. Instead of the obligatory six minutes of musical prelude, we are treated to a gorgeous 45 minutes of song and dance from students at Kamehameha High School. Each song lasts seven minutes. The dancers' hands convey opuses, yet no one checks their watch.
Kennedy takes an enormous amount of abuse from his critics—who have sometimes included me—for his unremitting, agonizing, thinking-ness. His speech here in Hawaii is vintage Kennedy, ranging across history (pit stops at Henry II, Newton, and Blackstone); intellectual theory (Marx, Holmes, and Solzhenitsyn); and—of course—geography. He tells of his own travels in China and Bangladesh and across Africa. He peppers his speech with language to shame a Peretz—prolix, essentiality, and dualisms. The punch line to his opening joke is: "a faint reflection of my former existential self." (This slays the lawyers.)
But Kennedy—for all that he cannot seem to stop being Kennedy, even in Honolulu—arrives with a serious project. He is charging the assembled attorneys to do the job of selling to a doubting world "the essentiality of the rule of law." "Make no mistake," he warns, "there's a jury that's out. In half the world, the verdict is not yet in. The commitment to accept the Western idea of democracy has not yet been made, and they are waiting for you to make the case." Referring to terrorism and violence and totalitarianism, he says, "The tide has gone out, and we are on the beach."
It's a tall order to swallow with your aquamarine bikini-tini. But it's a quintessentially Kennedy point: "Our best security, our only security, is in the world of ideas, and I sense a slight foreboding." The world of ideas may be far from Honolulu. But the world of ideas is the only place Kennedy calls home. To that end, he assigns himself a seemingly impossible task: He wants to define "rule of law" so we can start to peddle the concept worldwide. It is not enough to sell the world on the U.S. Constitution, he says. That is merely a set of "negative commands." He is looking for a positive formulation for the rule of law.
And suddenly he begins to sound like a 4 a.m. UNICEF commercial, describing the number of hours of human labor required to get clean drinking water in Africa and the number of babies who die there each year from diarrhea. "This can be fixed," he says. "This is not rocket science." He tells of the numbers of men who must languish in prison in Bangladesh for a year because they can't pay the $3 fine that would keep them out of jail. (He says he offered $1,000 to keep the next year's worth of men out of jail, and one can't help but wonder if he'd likewise offer to personally pay for decent defense counsel for next year's crop of indigent capital defendants in America.) "Can the world embrace the rule of law under such conditions?"
He describes the American conception of law as a "liberating force, a covenant, a promise." And in spite of the lofty intellectualism and the big words, this speech captures my imagination and that of the assembled crowd for its two quintessential Kennedy traits. The first is the vast sprawl of his imaginative world. He travels the planet and reads widely and he attends lectures on water purification. Then he applies all that knowledge to his conception of the law. And whether you like that expansive scope, listening to him is still a tonic to the smallness and smug certainty that has characterized our political leadership in this country for the past six years. It offers a welcome break from the hermetically sealed constitutional worldview of some of his detractors. Kennedy is a legendary agonizer. But his comments here reveal the extent to which that agony is not an end in itself. His sense of justice and equality is a work in progress, informed by what he learns from people all over the planet who know more than he does. There's something reassuring in his sense that the world is a fluid place.
Which brings us to Kennedy's second great characteristic, the one that has launched a thousand heart attacks over at the National Review Online: Kennedy believes that justice has a purpose. It is not a neutral set of ideals. It is a promise that humans "can dare, can plan, can have joy in their existence." It's premised on the view that poverty and hopelessness and alienation should cause us worry. Maybe that premise is too ambitious. Maybe it is truly not the province of the law to pave over the differences between those who are suffering and those who are not. But Kennedy at least recognizes that all this suffering and alienation is the handmaiden of lawlessness; and that it is as much the task of lawyers to fight lawlessness as it is to serve some dispassionate, neutral machine called the law.
We cannot sell this cold, rational notion of justice and democracy and—as he warns these lawyers—"You can make this case. You must make this case."
Kennedy's inability to find certain, easy answers and his tendency to hold grandiose hopes for the law are fodder for his detractors. This is the Kennedy of Casey, and Lawrence, and Rapanos, and it's the Kennedy that plows up fields of constitutional law and sows seeds of confusion and inscrutable grandeur in their place. This is the Kennedy who drives conservatives nuts with his notion that the courts must fight injustice, regardless of the messiness that ensues. But as he concludes with the charge that our freedom rests on our ability to sell the world on democracy, the crowd is on its feet.
Maybe the fact that Kennedy is suddenly experiencing his moment in the sun isn't just a historical accident of a four-four court with a guy in the middle who can't seem to make up his mind. Perhaps this country is actually ready for what he's selling: the twin notions that the world is an enormous, embattled, struggling place and that the law has a responsibility to try to fix it. Not just in service of the Constitution, but in the service of freedom.
Dahlia Lithwick is a Slate senior editor.
Article URL: http://www.slate.com/id/2147247/
Copyright 2006 Washingtonpost.Newsweek Interactive Co. LLC
By Dahlia Lithwick
HONOLULU—There is something about Waikiki that can render the 5,000 lawyers swarming this town for the American Bar Association convention disinclined to think. The convention center, the streets, and what seems like every hotel in town are overrun with them, lugging around their bright yellow beach bags and their ubiquitous LexisNexis name tags. (Pity the Honolulu drivers whose chances of running down an attorney have skyrocketed to about 1-in-3 this week.)
Seemingly simple decisions, decisions attorneys make in 30 seconds if they're on the clock, may consume 15 minutes in Hawaii. I listen to them debating—the snapper or the ahi, change before mai tais on the beach or after, attend the 11:30 panel on innovations in forensic accounting or flip over and tan the backs of their thighs—and I listen to the long pauses in between. In Waikiki, the billable hour stretches long and languid. Beach books replace case files. Deep thoughts are few and far between.
Unless you are Supreme Court Justice Anthony Kennedy. I find myself devoting 15 whole minutes, as I prepare to attend his keynote address Saturday evening, to deciding whether to shower first or to tan the backs of my thighs. As I dart for the ladies' room outside the Hawaii Ballroom at the Sheraton Waikiki—perhaps I can at least wash the salt water off my face—I almost trip over the tall gangliness of the justice himself, flawless in a dark suit and navy tie. The stern commander has arrived to oversee his vast battalion of 60-year-old men in hibiscus-print shirts.
The conference organizers seem to have contracted this same aloha spirit of timelessness. Instead of the obligatory six minutes of musical prelude, we are treated to a gorgeous 45 minutes of song and dance from students at Kamehameha High School. Each song lasts seven minutes. The dancers' hands convey opuses, yet no one checks their watch.
Kennedy takes an enormous amount of abuse from his critics—who have sometimes included me—for his unremitting, agonizing, thinking-ness. His speech here in Hawaii is vintage Kennedy, ranging across history (pit stops at Henry II, Newton, and Blackstone); intellectual theory (Marx, Holmes, and Solzhenitsyn); and—of course—geography. He tells of his own travels in China and Bangladesh and across Africa. He peppers his speech with language to shame a Peretz—prolix, essentiality, and dualisms. The punch line to his opening joke is: "a faint reflection of my former existential self." (This slays the lawyers.)
But Kennedy—for all that he cannot seem to stop being Kennedy, even in Honolulu—arrives with a serious project. He is charging the assembled attorneys to do the job of selling to a doubting world "the essentiality of the rule of law." "Make no mistake," he warns, "there's a jury that's out. In half the world, the verdict is not yet in. The commitment to accept the Western idea of democracy has not yet been made, and they are waiting for you to make the case." Referring to terrorism and violence and totalitarianism, he says, "The tide has gone out, and we are on the beach."
It's a tall order to swallow with your aquamarine bikini-tini. But it's a quintessentially Kennedy point: "Our best security, our only security, is in the world of ideas, and I sense a slight foreboding." The world of ideas may be far from Honolulu. But the world of ideas is the only place Kennedy calls home. To that end, he assigns himself a seemingly impossible task: He wants to define "rule of law" so we can start to peddle the concept worldwide. It is not enough to sell the world on the U.S. Constitution, he says. That is merely a set of "negative commands." He is looking for a positive formulation for the rule of law.
And suddenly he begins to sound like a 4 a.m. UNICEF commercial, describing the number of hours of human labor required to get clean drinking water in Africa and the number of babies who die there each year from diarrhea. "This can be fixed," he says. "This is not rocket science." He tells of the numbers of men who must languish in prison in Bangladesh for a year because they can't pay the $3 fine that would keep them out of jail. (He says he offered $1,000 to keep the next year's worth of men out of jail, and one can't help but wonder if he'd likewise offer to personally pay for decent defense counsel for next year's crop of indigent capital defendants in America.) "Can the world embrace the rule of law under such conditions?"
He describes the American conception of law as a "liberating force, a covenant, a promise." And in spite of the lofty intellectualism and the big words, this speech captures my imagination and that of the assembled crowd for its two quintessential Kennedy traits. The first is the vast sprawl of his imaginative world. He travels the planet and reads widely and he attends lectures on water purification. Then he applies all that knowledge to his conception of the law. And whether you like that expansive scope, listening to him is still a tonic to the smallness and smug certainty that has characterized our political leadership in this country for the past six years. It offers a welcome break from the hermetically sealed constitutional worldview of some of his detractors. Kennedy is a legendary agonizer. But his comments here reveal the extent to which that agony is not an end in itself. His sense of justice and equality is a work in progress, informed by what he learns from people all over the planet who know more than he does. There's something reassuring in his sense that the world is a fluid place.
Which brings us to Kennedy's second great characteristic, the one that has launched a thousand heart attacks over at the National Review Online: Kennedy believes that justice has a purpose. It is not a neutral set of ideals. It is a promise that humans "can dare, can plan, can have joy in their existence." It's premised on the view that poverty and hopelessness and alienation should cause us worry. Maybe that premise is too ambitious. Maybe it is truly not the province of the law to pave over the differences between those who are suffering and those who are not. But Kennedy at least recognizes that all this suffering and alienation is the handmaiden of lawlessness; and that it is as much the task of lawyers to fight lawlessness as it is to serve some dispassionate, neutral machine called the law.
We cannot sell this cold, rational notion of justice and democracy and—as he warns these lawyers—"You can make this case. You must make this case."
Kennedy's inability to find certain, easy answers and his tendency to hold grandiose hopes for the law are fodder for his detractors. This is the Kennedy of Casey, and Lawrence, and Rapanos, and it's the Kennedy that plows up fields of constitutional law and sows seeds of confusion and inscrutable grandeur in their place. This is the Kennedy who drives conservatives nuts with his notion that the courts must fight injustice, regardless of the messiness that ensues. But as he concludes with the charge that our freedom rests on our ability to sell the world on democracy, the crowd is on its feet.
Maybe the fact that Kennedy is suddenly experiencing his moment in the sun isn't just a historical accident of a four-four court with a guy in the middle who can't seem to make up his mind. Perhaps this country is actually ready for what he's selling: the twin notions that the world is an enormous, embattled, struggling place and that the law has a responsibility to try to fix it. Not just in service of the Constitution, but in the service of freedom.
Dahlia Lithwick is a Slate senior editor.
Article URL: http://www.slate.com/id/2147247/
Copyright 2006 Washingtonpost.Newsweek Interactive Co. LLC
Monday, August 07, 2006
The Responsible Way To Continue Pax Americana
By choosing to go to Iraq on the cheap, we are encountering a barrage of obstacles and criticism from locals in Iraq and in America.
Today, such poor planning and execution is putting the whole endeavor at question.
This should not be the case if a well crafted and properly implemented occupation was debated. But, most people defected of their responsibilites as citizens, and let the poor judgement of their elected representavies to act without responsible questioning.
It is still time to reverse the present erroneous approach in Iraq.
Americans citizens continue to build a negative image of the reason for the occupation and overthrow od the Iraqi Government and finding difficult support of the occupation and the expansion in the present form.
Unless, some “humanitarian reason” is stated as "immediate need" and "compassion" is attached to the message. The idea of “humanitarian reason” usually is one of those cover all up, good and bad, catch word, in 99% of the cases used for other than its connotation. Orwell serve us or-well.
When the Pax Americana was announced as a de facto strategy by President Reagan, following the steps of President Wilson, it was a welcome event by the elites around the globe. These elites could count on their Washington compadres to preclude resistance at home, in case of their people in “democratic votes” elected the “wrong candidates” or taking the "wrong direction" thus allowing swift action via American “operations” as now in Iraq in the past in Chile, Iran, France, Germany and other 160 interventions since the beginning of the twentieth century.
The idea of American “interests” supported such concept of military action both cover or uncover operations.
The “defense of our interest” was enough of a concept to rally around the intervention.
What is always missing and continues to be missing is: the debate on, can we do it better and where and what are the benefits for all citizens in a specific way.
We gladly continue to apply this foreign policy of empire control, via “protecting the American interests”. It always lacks the full understanding and engagement of the American citizen to bear the great responsibility of these actions.
A growing apathy forgets to ask for the benefits as citizens of such empire expansive and expensive actions.
Pax Americana is rooted around the planet to some extend as a welcome event.
Clearly, the jury is still out if the English empire when hit a wall in 1940’s for economic over extension, is a crude example of the present state of Pax Americana. The present economic state has the citizens as the largest debtors in the planet. The country as a whole is the largest debtor in history of the globe, a dangerous place to be.
As we continue this strategy of mild control but under control, from time to time needs some tinkering. The change of a turned disloyal government as in Baghdad was part of keeping the flock under control. Also, it helps to send a message to others that there is not two ways about dealing with the Empire.
The problem with this "only military approach will fix it" is the constant erroneous way of using power.
At its core, this is the "only way" of military action, historically has identified powers in state of decline and in inminent change for the worse.
As of today, the Empire uses 40% of all global GDP in military endeavors but only accounts for 28% of all global GDP.
Clearly, the economic growth needs to surpass military expenditures if we plan for a larger and responsible Pax Americana.
The use of economic might versus the use of military might is need it for any sustaining power to last. A balance for military cost of global GDP should not be more than 7% and the economic growth should be no less than 4%. Thus, growing the military expenditures at unison with economic growth, no in the reverse as in the past twenty five years.
The use of constat warfare -the endless war on terror- has created a tremendous drain in the American economy and the citizens, and the largest bad ill for anything that this Pax Americana is meant to be.
We need a more cohesive economic approach, as we know and applied it always yields better results. It could be regime change or reverse elections. the economic approach benefits the American citizens with large monetary rewards versus using expenditures in war, thus, continuing to destroys American’s assets and create little benefits for the citizens.
Most people deny the facts, or the concept of Pax Americana, by attaching themselves to fallacies, or by accepting the rhetoric and demagoguery of leaders, evading the responsibility that conveys to accept such imperial responsibility.
This is a dangerous stance as citizens and creates apathy.
We are also seeing a serious lack of participation in elections and debates, this has put in question if America is a Democratic Empire or is evolving into a dictatorial Empire –Patriot Act at home, pre-emptive wars abroad.
Civil liberties of Americans have deteriorated more than ever, as Justice Kennedy commented on August 6 of 2006 “we are losing our democracy, faster than we are fighting for it”. This loath at home of civil liberties is the result of a poor planning in foreign policy and evades the responsibilites that result of poor decissions, and continue to act irresponsiblity in the frame of Pax Americana.
The lost capacity to argument forward looking ideas from part of citizens how best use the Pax Americana, it erodes any benefit that might have created, and it should be a serious questioning of our leaders.
By accepting the responsibilities of having soldiers based in 169 countries fighting an average of five armed conflicts a year for the past fifty years and with more than seventeen million people directly in the feeral payroll engaged in controlling the globe, we need to take seriously our role.
As citizens of the Empire we need to demand a new approach, a real monetary and economic driven approach that benefits all and no only a few. We must take the empirial responsibilities seriously.
Today, such poor planning and execution is putting the whole endeavor at question.
This should not be the case if a well crafted and properly implemented occupation was debated. But, most people defected of their responsibilites as citizens, and let the poor judgement of their elected representavies to act without responsible questioning.
It is still time to reverse the present erroneous approach in Iraq.
Americans citizens continue to build a negative image of the reason for the occupation and overthrow od the Iraqi Government and finding difficult support of the occupation and the expansion in the present form.
Unless, some “humanitarian reason” is stated as "immediate need" and "compassion" is attached to the message. The idea of “humanitarian reason” usually is one of those cover all up, good and bad, catch word, in 99% of the cases used for other than its connotation. Orwell serve us or-well.
When the Pax Americana was announced as a de facto strategy by President Reagan, following the steps of President Wilson, it was a welcome event by the elites around the globe. These elites could count on their Washington compadres to preclude resistance at home, in case of their people in “democratic votes” elected the “wrong candidates” or taking the "wrong direction" thus allowing swift action via American “operations” as now in Iraq in the past in Chile, Iran, France, Germany and other 160 interventions since the beginning of the twentieth century.
The idea of American “interests” supported such concept of military action both cover or uncover operations.
The “defense of our interest” was enough of a concept to rally around the intervention.
What is always missing and continues to be missing is: the debate on, can we do it better and where and what are the benefits for all citizens in a specific way.
We gladly continue to apply this foreign policy of empire control, via “protecting the American interests”. It always lacks the full understanding and engagement of the American citizen to bear the great responsibility of these actions.
A growing apathy forgets to ask for the benefits as citizens of such empire expansive and expensive actions.
Pax Americana is rooted around the planet to some extend as a welcome event.
Clearly, the jury is still out if the English empire when hit a wall in 1940’s for economic over extension, is a crude example of the present state of Pax Americana. The present economic state has the citizens as the largest debtors in the planet. The country as a whole is the largest debtor in history of the globe, a dangerous place to be.
As we continue this strategy of mild control but under control, from time to time needs some tinkering. The change of a turned disloyal government as in Baghdad was part of keeping the flock under control. Also, it helps to send a message to others that there is not two ways about dealing with the Empire.
The problem with this "only military approach will fix it" is the constant erroneous way of using power.
At its core, this is the "only way" of military action, historically has identified powers in state of decline and in inminent change for the worse.
As of today, the Empire uses 40% of all global GDP in military endeavors but only accounts for 28% of all global GDP.
Clearly, the economic growth needs to surpass military expenditures if we plan for a larger and responsible Pax Americana.
The use of economic might versus the use of military might is need it for any sustaining power to last. A balance for military cost of global GDP should not be more than 7% and the economic growth should be no less than 4%. Thus, growing the military expenditures at unison with economic growth, no in the reverse as in the past twenty five years.
The use of constat warfare -the endless war on terror- has created a tremendous drain in the American economy and the citizens, and the largest bad ill for anything that this Pax Americana is meant to be.
We need a more cohesive economic approach, as we know and applied it always yields better results. It could be regime change or reverse elections. the economic approach benefits the American citizens with large monetary rewards versus using expenditures in war, thus, continuing to destroys American’s assets and create little benefits for the citizens.
Most people deny the facts, or the concept of Pax Americana, by attaching themselves to fallacies, or by accepting the rhetoric and demagoguery of leaders, evading the responsibility that conveys to accept such imperial responsibility.
This is a dangerous stance as citizens and creates apathy.
We are also seeing a serious lack of participation in elections and debates, this has put in question if America is a Democratic Empire or is evolving into a dictatorial Empire –Patriot Act at home, pre-emptive wars abroad.
Civil liberties of Americans have deteriorated more than ever, as Justice Kennedy commented on August 6 of 2006 “we are losing our democracy, faster than we are fighting for it”. This loath at home of civil liberties is the result of a poor planning in foreign policy and evades the responsibilites that result of poor decissions, and continue to act irresponsiblity in the frame of Pax Americana.
The lost capacity to argument forward looking ideas from part of citizens how best use the Pax Americana, it erodes any benefit that might have created, and it should be a serious questioning of our leaders.
By accepting the responsibilities of having soldiers based in 169 countries fighting an average of five armed conflicts a year for the past fifty years and with more than seventeen million people directly in the feeral payroll engaged in controlling the globe, we need to take seriously our role.
As citizens of the Empire we need to demand a new approach, a real monetary and economic driven approach that benefits all and no only a few. We must take the empirial responsibilities seriously.
Friday, August 04, 2006
TO GO BEYOND THOUGHT
From Parabola Magazine
An interview with Karen Armstrong
http://www.parabola.org/magazine/current_excerpt.php4
Parabola: Can you describe the Axial Age and the light it might shed on the difference between thinking and knowing?
Karen Armstrong: You were supposed to get underneath thinking. In India in particular, the concern was that thinking as well as feeling were not what constituted the deepest self of the human being, that it was something other. This didn't mean that they weren't interested in being intelligent and rigorous and analytical, but the goal was to go beyond thought. People in the Axial Age were reaching out for an ultimate realityÑand it could be called Brahman or God or nirvana or the Tao--that couldn't be encapsulated in human thought and language.
P: Why can't it be encapsulated?
KA: Because human beings experience transcendence. We have ideas and experiences that go beyond our conceptual grasp.
P: Does rational thought blind people to the elusive aspects of our experience?
KA: No. We need rational thought. Plato described the two different ways of approaching truth as mythos and logos. Mythos is a more silent, intuitive way of looking at reality and logos is more of a scientific, discursive, logical way, and we need both. We've always needed logistic thought, if only to sharpen an arrow correctly.
P: But we need mythos as well.
KA: Yes. When a child dies, we want a scientific explanation but that's not all we need. We need some kind of different kind of thinking that helps us deal with the turbulence of our inner world at such a time. Myth is an early form of psychology. There are all these stories about gods going down into the underworld to slaughter demons. We all have to learn how to negotiate our unconscious worlds. We have to go into the labyrinth of our own selves and fight our own monsters.
We've always been aware that there are two ways of approaching truth, one through reason and science and the other through an intuitive knowing. The word mythos comes from the Greek word which means to close the mouth or close the eyes. Mystery and mysticism come from the same root. So they are associated with a sense of darkness, with going into a realm where you don't see very clearly, where things are more obscure and will remain obscure.
It is also a realm of silence rather than wordy thought. We approach this kind of knowing in art. At the end of a great symphony or when you've listened to a great poem there's often nothing to say. You're being pushed beyond rational thoughts and distinctions into a silent intuitive space.
P: What is the proper role of thought in religious search?
KA: Well, thinking can only take you so far. Action, behavior, especially compassionate behavior, is more important than thinking. By constantly exercising compassion, the golden rule, you enter a different state of consciousness. This rather than thinking will get you to enlightenment.
P: It's amazing that all the religious movements came to that same conclusion. But can it be that simple?
KA: Yes. The Buddha said compassion can bring you the release of the mind. This is a synonym in the early Buddhist scriptures for the ultimate enlightenment of nirvana. The New Testament is full of the same wisdom. Charity and loving kindness bring you into the presence of God, not thinking things. In the Western Christian world we've come to place too much emphasis on thinking certain beliefs.
What the sages in the Axial Age were discovering was second-order thinking, where you watch the mind thinking. Socrates for example could make you realize that you don't know what you think you know. He demonstrated that thought can do a whole lot of things but that it always finishes with unknowing. Socrates could take a person through a series of questions until he realizes that he hasn't a clue what, say, courage is, even though he's been on the battlefield. Often the people who came to Socrates--as far as we can tell from Plato's accountsÑthought they knew their minds. After ten minutes with Socrates they realized they didn't know anything. In the Axial Age people were testing the limits of what thought can do. It can take us a long way but we keep bumping up against an unknowing. Socrates said that is where you really begin your quest, when you realize you know nothing.
P: You're talking about a very fertile kind of not knowing, not just obliviousness, not just stone ignorance.
KA: Yes, and it's a humbling thing. Instead of being full of ourselves, we begin to realize that the world is deeply mysterious and elusive. We realize that we haven't got the tight grasp on reality that we think.
P: In The Great Transformation and in all your writing you make a distinction between belief and this more fertile state.
KA: We've made a fetish of belief in the Western Christian world, so that we call religious people "believers," as though accepting certain doctrines is the main thing they do. But this is very eccentric.
P: And dangerous, as you've pointed out in your writings, about the way fundamentalism leads to violence.
KA: And dangerous. As the Taoists said way back in the Axial Age, to expect certainty from religion is immature and unrealistic. It was a sign of an undeveloped spirituality, a childish viewpoint. There is no certainty. The Taoists found a great freedom in not being certain about things. They didn't have to pompously declaim facts and doctrines and truths. Keats spoke of "negative capability," when the mind is capable of resting in doubts and uncertainty without any irritable straining after facts and reason. It's quite a trick of the mind to allow yourself to be in that fertile state of unknowing, to just let yourself stay in the darkness.
P: We're in a frightening place in world history. Your predictions about religious war have come true, and our whole environment is in a perilous shape. From your study of the origin of the great religious traditions, what really matters?
KA: The exercise of compassion is what matters in our world. The Dalai Lama says "my religion is kindness." Confucious said "religion is altruism"Ñdethroning yourself from the center of your world and putting another there. Now this requires intelligent thought. You really have to think and practice the golden rule about what the other person really wants rather than what you think he ought to want. When we speak to people we should behave as Buddha or Socrates did. Address them where they really are and not where we think they should be. We have to put ourselves in the place of another, and we have to be able to do this globally.
P: This state of compassion, of engagement, does take thinking.
KA: It does. It takes constant, flexible intelligence. Each case will be different so principles are really not the point. You have to be flexible to respond to each situation that arises, especially in a time where everything is changing so fast.
We have to investigate. We have to find out more about the world. I've had some extraordinary conversations with highly educated Americans who have asked me where the Palestinians have come from, as if they marauded in off the desert. I've had to explain Palestine. There is so much ignorance.
All the great sages have said that we must see things as they really are. Don't bury your head in the sand and say that environmental catastrophe isn't going to happen, for example. In the Axial Age, the prophets of Israel called those positive thinkers who thought that Jerusalem was not going to fall because God was with them "false prophets." You cannot achieve enlightenment that way. It takes information gathering and that does not mean being content with the little scraps of sound bytes that are handed out by politicians or Fox News.
P: Often, in our culture, people treat yoga and meditation like a kind of spa treatment. Our practice of the precepts doesn't keep pace with our practice of various techniques.
KA: Absolutely. I saw a place in Toronto called the yoga lounge, next to a nail parlor. You could do a little yoga or meditation and hop in to have your nails done. This is not what yoga is. In the Axial Age, it was based on a five-point moral program. At the top of the list was ahimsa or nonviolence. This did not only mean that you couldn't kill or maim somebody but that you weren't to say a cross word or make an impatient gesture or swat an insect. Until your guru was satisfied that this was second nature to you, you couldn't begin to sit in the yogic position. What religious knowledge was about was not just thinking but behaving. Living a self-effacing, nonviolent life style was just as important as your mastery of sacred texts.
P: In your book you describe an evolution from external blood sacrifice to internal sacrifice--and in the case of Buddhism, to sacrifice of the concept of self. Yet when I think of living this way, completely open, defenseless, radically honest, it's as if certain primal emotions come alive. The ego doesn't want to be sacrificed, to be killed.
KA: Yes, but when you've mastered this way of life you start to experience incredible joy because you're training yourself to go beyond the frightened ego, who often needs to destroy other people and bolster itself up. If you let that go, a lot of your fear goes down.
We are programmed to defend ourselves, but if we take ourselves out of that mind state, if we start divesting ourselves of ego, we enter a different state of consciousness.
P: What came through your book is the emergence of another way of thinking--with conscience. You cover huge swaths of history in detail. Yet, there's a beautiful base note of compassion. It comes through as the last word, the ultimate religious act.
KA: The point is that there was no collusion. This is the conclusion reached by these spiritual geniuses who worked as hard at finding a cure for the spiritual ills of society as we are working to find a cure for cancer. This is the conclusion they came to. Not because it sounded nice but because they found it worked. The Buddha always said, "Test my teaching against your experience." They found that if you did live in this way you experience an enhancement of being. The Chinese Confucians spoke of human heartedness, of becoming more humane.
P: Axial sages thought the heart and mind should work as one.
KA: Yes.
P: So what happened? How did these wonderful insights of the Axial Age harden into rigid principles and hierarchy?
KA: Well of course not many people actually want to be transformed. They don't want to lose themselves. Most people expect from religion a little moral uplift once a week.
P: We live in the place and the age when religion has become another consumer item or service.
KA: Yes, it is a commodity. People say wouldn't it be great if there was another Buddha. But I'm not sure such a great sage could manage today. The media and the exposure could easily destroy them, encouraging narcissism, for example.
P: How do we find our way out of this trap of spiritual materialism? Can we think our way out?
KA: Basically, I don't think we need any great figure to come along. We know what to do. The golden rule, that's all it is. All the traditions teach the same. Instead of waiting for some lead, just go on, just start practicing. And perhaps start demanding it from our politicians and religious leaders, too.
P: That is a radical suggestion.
KA: But everybody knows about the golden rule or compassion. "I may have faith that moves mountains," says St. Paul. "But if I lack charity it's worth nothing at all." And then there's imagination, which is the ability to think yourself into the position of another.
P: We tend to minimize imagination, as if it has to do with fantasy, distraction.
KA: I think it is the religious faculty. The religious imagination is endlessly trying to envisage the eternally absent God, that which always eludes us. I think it's the moral faculty too, because you have to use it to think yourself into the position of the other.
P: What you're saying is extraordinary because there is such a strong tendency to go on facts, to stick to life as it is, and yet we really can't.
KA: We can't because this is part of the way our minds go. We keep bumping up against mystery. There's great enlightenment to be had by accepting that, and if everybody did it the world would be a much better place.
An interview with Karen Armstrong
http://www.parabola.org/magazine/current_excerpt.php4
Parabola: Can you describe the Axial Age and the light it might shed on the difference between thinking and knowing?
Karen Armstrong: You were supposed to get underneath thinking. In India in particular, the concern was that thinking as well as feeling were not what constituted the deepest self of the human being, that it was something other. This didn't mean that they weren't interested in being intelligent and rigorous and analytical, but the goal was to go beyond thought. People in the Axial Age were reaching out for an ultimate realityÑand it could be called Brahman or God or nirvana or the Tao--that couldn't be encapsulated in human thought and language.
P: Why can't it be encapsulated?
KA: Because human beings experience transcendence. We have ideas and experiences that go beyond our conceptual grasp.
P: Does rational thought blind people to the elusive aspects of our experience?
KA: No. We need rational thought. Plato described the two different ways of approaching truth as mythos and logos. Mythos is a more silent, intuitive way of looking at reality and logos is more of a scientific, discursive, logical way, and we need both. We've always needed logistic thought, if only to sharpen an arrow correctly.
P: But we need mythos as well.
KA: Yes. When a child dies, we want a scientific explanation but that's not all we need. We need some kind of different kind of thinking that helps us deal with the turbulence of our inner world at such a time. Myth is an early form of psychology. There are all these stories about gods going down into the underworld to slaughter demons. We all have to learn how to negotiate our unconscious worlds. We have to go into the labyrinth of our own selves and fight our own monsters.
We've always been aware that there are two ways of approaching truth, one through reason and science and the other through an intuitive knowing. The word mythos comes from the Greek word which means to close the mouth or close the eyes. Mystery and mysticism come from the same root. So they are associated with a sense of darkness, with going into a realm where you don't see very clearly, where things are more obscure and will remain obscure.
It is also a realm of silence rather than wordy thought. We approach this kind of knowing in art. At the end of a great symphony or when you've listened to a great poem there's often nothing to say. You're being pushed beyond rational thoughts and distinctions into a silent intuitive space.
P: What is the proper role of thought in religious search?
KA: Well, thinking can only take you so far. Action, behavior, especially compassionate behavior, is more important than thinking. By constantly exercising compassion, the golden rule, you enter a different state of consciousness. This rather than thinking will get you to enlightenment.
P: It's amazing that all the religious movements came to that same conclusion. But can it be that simple?
KA: Yes. The Buddha said compassion can bring you the release of the mind. This is a synonym in the early Buddhist scriptures for the ultimate enlightenment of nirvana. The New Testament is full of the same wisdom. Charity and loving kindness bring you into the presence of God, not thinking things. In the Western Christian world we've come to place too much emphasis on thinking certain beliefs.
What the sages in the Axial Age were discovering was second-order thinking, where you watch the mind thinking. Socrates for example could make you realize that you don't know what you think you know. He demonstrated that thought can do a whole lot of things but that it always finishes with unknowing. Socrates could take a person through a series of questions until he realizes that he hasn't a clue what, say, courage is, even though he's been on the battlefield. Often the people who came to Socrates--as far as we can tell from Plato's accountsÑthought they knew their minds. After ten minutes with Socrates they realized they didn't know anything. In the Axial Age people were testing the limits of what thought can do. It can take us a long way but we keep bumping up against an unknowing. Socrates said that is where you really begin your quest, when you realize you know nothing.
P: You're talking about a very fertile kind of not knowing, not just obliviousness, not just stone ignorance.
KA: Yes, and it's a humbling thing. Instead of being full of ourselves, we begin to realize that the world is deeply mysterious and elusive. We realize that we haven't got the tight grasp on reality that we think.
P: In The Great Transformation and in all your writing you make a distinction between belief and this more fertile state.
KA: We've made a fetish of belief in the Western Christian world, so that we call religious people "believers," as though accepting certain doctrines is the main thing they do. But this is very eccentric.
P: And dangerous, as you've pointed out in your writings, about the way fundamentalism leads to violence.
KA: And dangerous. As the Taoists said way back in the Axial Age, to expect certainty from religion is immature and unrealistic. It was a sign of an undeveloped spirituality, a childish viewpoint. There is no certainty. The Taoists found a great freedom in not being certain about things. They didn't have to pompously declaim facts and doctrines and truths. Keats spoke of "negative capability," when the mind is capable of resting in doubts and uncertainty without any irritable straining after facts and reason. It's quite a trick of the mind to allow yourself to be in that fertile state of unknowing, to just let yourself stay in the darkness.
P: We're in a frightening place in world history. Your predictions about religious war have come true, and our whole environment is in a perilous shape. From your study of the origin of the great religious traditions, what really matters?
KA: The exercise of compassion is what matters in our world. The Dalai Lama says "my religion is kindness." Confucious said "religion is altruism"Ñdethroning yourself from the center of your world and putting another there. Now this requires intelligent thought. You really have to think and practice the golden rule about what the other person really wants rather than what you think he ought to want. When we speak to people we should behave as Buddha or Socrates did. Address them where they really are and not where we think they should be. We have to put ourselves in the place of another, and we have to be able to do this globally.
P: This state of compassion, of engagement, does take thinking.
KA: It does. It takes constant, flexible intelligence. Each case will be different so principles are really not the point. You have to be flexible to respond to each situation that arises, especially in a time where everything is changing so fast.
We have to investigate. We have to find out more about the world. I've had some extraordinary conversations with highly educated Americans who have asked me where the Palestinians have come from, as if they marauded in off the desert. I've had to explain Palestine. There is so much ignorance.
All the great sages have said that we must see things as they really are. Don't bury your head in the sand and say that environmental catastrophe isn't going to happen, for example. In the Axial Age, the prophets of Israel called those positive thinkers who thought that Jerusalem was not going to fall because God was with them "false prophets." You cannot achieve enlightenment that way. It takes information gathering and that does not mean being content with the little scraps of sound bytes that are handed out by politicians or Fox News.
P: Often, in our culture, people treat yoga and meditation like a kind of spa treatment. Our practice of the precepts doesn't keep pace with our practice of various techniques.
KA: Absolutely. I saw a place in Toronto called the yoga lounge, next to a nail parlor. You could do a little yoga or meditation and hop in to have your nails done. This is not what yoga is. In the Axial Age, it was based on a five-point moral program. At the top of the list was ahimsa or nonviolence. This did not only mean that you couldn't kill or maim somebody but that you weren't to say a cross word or make an impatient gesture or swat an insect. Until your guru was satisfied that this was second nature to you, you couldn't begin to sit in the yogic position. What religious knowledge was about was not just thinking but behaving. Living a self-effacing, nonviolent life style was just as important as your mastery of sacred texts.
P: In your book you describe an evolution from external blood sacrifice to internal sacrifice--and in the case of Buddhism, to sacrifice of the concept of self. Yet when I think of living this way, completely open, defenseless, radically honest, it's as if certain primal emotions come alive. The ego doesn't want to be sacrificed, to be killed.
KA: Yes, but when you've mastered this way of life you start to experience incredible joy because you're training yourself to go beyond the frightened ego, who often needs to destroy other people and bolster itself up. If you let that go, a lot of your fear goes down.
We are programmed to defend ourselves, but if we take ourselves out of that mind state, if we start divesting ourselves of ego, we enter a different state of consciousness.
P: What came through your book is the emergence of another way of thinking--with conscience. You cover huge swaths of history in detail. Yet, there's a beautiful base note of compassion. It comes through as the last word, the ultimate religious act.
KA: The point is that there was no collusion. This is the conclusion reached by these spiritual geniuses who worked as hard at finding a cure for the spiritual ills of society as we are working to find a cure for cancer. This is the conclusion they came to. Not because it sounded nice but because they found it worked. The Buddha always said, "Test my teaching against your experience." They found that if you did live in this way you experience an enhancement of being. The Chinese Confucians spoke of human heartedness, of becoming more humane.
P: Axial sages thought the heart and mind should work as one.
KA: Yes.
P: So what happened? How did these wonderful insights of the Axial Age harden into rigid principles and hierarchy?
KA: Well of course not many people actually want to be transformed. They don't want to lose themselves. Most people expect from religion a little moral uplift once a week.
P: We live in the place and the age when religion has become another consumer item or service.
KA: Yes, it is a commodity. People say wouldn't it be great if there was another Buddha. But I'm not sure such a great sage could manage today. The media and the exposure could easily destroy them, encouraging narcissism, for example.
P: How do we find our way out of this trap of spiritual materialism? Can we think our way out?
KA: Basically, I don't think we need any great figure to come along. We know what to do. The golden rule, that's all it is. All the traditions teach the same. Instead of waiting for some lead, just go on, just start practicing. And perhaps start demanding it from our politicians and religious leaders, too.
P: That is a radical suggestion.
KA: But everybody knows about the golden rule or compassion. "I may have faith that moves mountains," says St. Paul. "But if I lack charity it's worth nothing at all." And then there's imagination, which is the ability to think yourself into the position of another.
P: We tend to minimize imagination, as if it has to do with fantasy, distraction.
KA: I think it is the religious faculty. The religious imagination is endlessly trying to envisage the eternally absent God, that which always eludes us. I think it's the moral faculty too, because you have to use it to think yourself into the position of the other.
P: What you're saying is extraordinary because there is such a strong tendency to go on facts, to stick to life as it is, and yet we really can't.
KA: We can't because this is part of the way our minds go. We keep bumping up against mystery. There's great enlightenment to be had by accepting that, and if everybody did it the world would be a much better place.
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