2008 Oil Price Spike caused by Wall Street

Sing the glories of capitalism as practiced by Wall Street! The 2008 oil price increases, where petroleum prices reached as high as $147 per barrel, was caused by speculators. So we are told today.

Technological limits on laptop hard drives

A question from Rajan about laptop hard drives (in the comments on a previous post) is answered here.

Krugman on why markets can't fix the health care problem

In the face of market religionists, it probably doesn't hurt to state what is almost obvious, again and again. Here is Krugman's blog entry.

I say almost obvious, because it took a seminal paper by Kenneth Arrow in 1963 to spell out the argument; but when you "get" it, it seems obvious.

The conclusion:

All of this doesn’t necessarily mean that socialized medicine, or even single-payer, is the only way to go. There are a number of successful health-care systems, at least as measured by pretty good care much cheaper than here, and they are quite different from each other. There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.

The Gates arrest

How, even going by the police account only and not what Gates said about what happened, the policeman was in the wrong.

No one who is familiar with law enforcement can miss the significance of Crowley's report. As so often happens with documentary evidence, a person seeking to create a false impression spends lots of time nailing down the elements he thinks will establish his goal, but forgets about the larger picture. Under color of law, Crowley entered a residence to investigate a possible break-in, and after his probable cause had evaporated, he continued to act under color of law, but without any justifiable purpose. And he covered it up with false charges. Figuring that his best defense was a criminal charge, Crowley did what bad cops do. He decided he would look better if Gates looked worse. Perhaps one day cops will figure out that trumped-up charges worsen a case of investigating something that turns out not to have been a crime.

New Technology

It may not seem like much, but to me the new class of memory devices - Solid State Drives - that are just entering the consumer market are very significant because they very much improve the efficiency of the home computer; and that means eventually, that new classes of applications may emerge.

In the modern processor, the fastest component is the CPU - the central processing unit that actually performs the computations. To get the instructions and data it needs to operate, the CPU relies on a hierarchy of memory systems. This is necessary because memory that is fast — near-CPU speed — is expensive.

The current hierarchy of memory subsystems is
L1 cache
L2 cache
L3 cache
RAM
Hard disk

Latency measures the time it takes between the CPU making a request for something from memory and starting to get the reply. Here is an excerpt from a table from Anandtech for Intel's latest processor, the Core i7 (Nehalem); I expect the numbers are typical for any processor running at a few gigahertz.

L1 latency - 4 CPU cycles
L2 latency - 11 CPU cycles
L3 latency - 39 CPU cycles
RAM latency - 107 CPU cycles
Hard disk latency - approx 10.5 million cycles.

( The average latency of a 7200 rpm hard disk is 4.2 milliseconds - the time for a half-rotation of the disk. A 2.5GHz processor has a cycle time of 0.4 nanoseconds. That is where the 10.5 million cycles comes from. There are faster disks and clever arrangements of disks one can make to reduce this somewhat, but the number remains of the order of millions of cycles. )

SSDs offer to fill the gaping hole that exists in the memory hierarchy. For instance, the just-released second generation of Intel main-stream (as opposed to enterprise class) SSDs, the Intel X25-M has a latency of 65 microseconds, or

SSD latency - approx 160,000 cycles - that is a hundred times faster than hard disk.

Apart from the speed of starting to fulfill the CPU request for data, we are interested also in getting a large throughput, because it would not do much for performance if the CPU had to wait for a long time for the request to complete. The Intel SSD has impressive performance numbers, but it appears that going through the standard processor-to-hard drive interface (SATA) robs a lot of performance potential. The Fusion ioextreme that uses the computer's PCI express bus instead, highlights that potential. See this review.

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In my opinion - if "intelligence" is in part speed of reaction, then the CPUs of today are greatly underperforming because of this memory performance wall they crash into. Even SSDs are a thousand-fold slower than RAM. Intelligence or its computer simulacrum is receiving input from the world, interpreting it on the basis of a model of the world, and taking actions accordingly. Any reasonably complete model of the world must be fairly large, and so to have affordable intelligent systems in the home, the processors of those systems cannot be spending most of their time twiddling their thumbs for bringing the representation of the model to the processor.

Our brains get over this problem with much slower components by being massively parallel. Human designers of computers have great trouble with even mild parallelism. Even to get computers to parallelize themselves on such a scale, we would (IMO) need fundamental breakthroughs in the state of the art.

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PS: to put the issue of latency into a human context - let us say humans effectively operate at the level of speech or writing at one cycle per second. Imagine two humans conversing. Then L1 cache is like a really slow conversation, taking 4 seconds to receive the response to a question. RAM latency is like waiting for two minutes. Hard disk latency is like waiting for a whole year!

PPS: In this analogy, the SSD latency is equivalent to roughly two days; a processor second is somewhere around 200-250 years.

Lawyers and the Law

One of my nephews remarked to the effect that the Law (i.e., the police and government officials) in the US show you some respect only if you have an attorney. In that context, this Matthew Yglesias post is interesting.

Germany and Finland spent three times as much of their gross domestic product as we do on civil legal services for the poor. At the high end, England outspends the United States twelve times.

PS: to be sure, this is assistance related to civil, and not criminal, matters.

Fundamental science

Bee has a post up on her blog, about what a fundamental theory means.

A theory is fundamental if it cannot be derived from another, more complete, theory. More complete means the theory is applicable to a larger range. Note that a fundamental theory can be derivable from another theory if both are equivalent to each other (though one could plausibly argue then one should consider both the same theory).

I believe this notion of fundamental misses a point. It is not that the definition is wrong or useless. I just don't think it is the most fruitful way to think about the world. I couldn't convey the point very well. So here is Samir Okasha, in his very slim volume "Philosophy of Science — A Very Short Introduction". This is from Chapter 3, Explanation in Science, from a section titled "Explanation and Reduction". After discussing the idea that everything is ultimately physical entities,

Does this mean that, in principle, physics can subsume all the higher-level sciences? Since everything is made up of physical particles, surely if we had a complete physics, which allowed us to predict perfectly the behaviour of every physical particle in the universe, all the other sciences would become superfluous?

Most philosophers resist this line of thought. After all, it seems crazy to suggest that physics might one day be able to explain the things that biology and economics explain. The prospect of deducing the laws of biology and economics straight from the laws of physics looks very remote. Whatever the physics of the future looks like, it is most unlikely to be capable of predicting economic downturns. From from being reducible to physics, sciences such as biology and economics seem largely autonomous of it.

This leads to a philosophical puzzle. How can a science that studies entities that are ultimately physical not be reducible to physics? {emphasis added}. Granted that the higher-level sciences are in fact autonomous of physics, how is this possible?

According to some philosophers, the answer lies in the fact that the objects studied by the higher-level sciences are 'multiply realized' at the physical level. To illustrate the ideas of multiple realization, imagine a collection of ashtrays. Each individual ashtray is obviously a physical entity, like everything else in the universe. But the physical composition of the ashtrays could be very different – some might be made of glass, others of aluminium, others of plastic, and so on. And they will probably differ in size, shape, and weight. There is virtually no limit on the range of different physical properties that an ashtray can have. So it is impossible to define the concept 'ashtray' in purely physical terms. We cannot find a true statement of the form 'x is an ashtray if and only if x is ....' where the blank is filled by an expression taken from the language of physics. This means ashtrays are multiply realized at the physical level.

Philosophers have often invoked multiple realization to explain why psychology cannot be reduced to physics or chemistry, but in principle, the explanation works for any higher-level science. Consider for example, the biological fact that nerve cells live longer than skin cells. Cells are physical entities, so one might think that this fact one day will be explained by physics. However, cells are almost certainly multiply realized at the microphysical level. Cells are ultimately made up of atoms, but the precise arrangement of atoms will be very different in different cells. So the concept 'cell' cannot be defined in terms drawn from fundamental physics. There is not true statement of the form 'x is a cell if and only if x is....' where the blank is filled in by an expression taken from the language of microphysics. If this is correct, it means that fundamental physics will never be able to explain why nerve cells live longer than skin cells, or indeed any other facts about cells. The vocabulary of cell biology and the vocabulary of physics do not map onto each other in the required way. Thus we have an explanation of why it is that cell biology cannot be reduced to physics, despite the fact that cells are physical entities.

Not all philosophers are happy with the doctrine of multiple realization, but it does promise to provide a neat explanation of the autonomy of the higher-level sciences, both from physics and from each other.

PS: In summary, if the idea of multiple realization is valid, cell biology cannot be derived from physics; cell biology is only constrained to be compatible with physics. Then cell biology is as fundamental a theory as physics using Bee's definition.

I'm with Digby

Dismayingly, I feel myself in a tiny minority wherever the Gates episode is discussed. It is good to know that at least one A-list blogger gets it.

I've watched too many taser videos over the past few years featuring people of all races and both genders being put to the ground screaming in pain, not because they were dangerous or threatening and not because they were so out of control there was no other way to deal with them, but because they were arguing with police and the officer perceived a lack of respect for the badge.

I have discovered that my hackles automatically going up at such authoritarian behavior is not necessarily the common reaction among my fellow Americans, not even my fellow liberals. The arguments are usually something along the lines of "that guy was an idiot to argue with the cops, he should know better," which is very similar to what many are saying about Gates. He has even been criticized for being a "bad role model," thus putting young black kids at risk if they do the same things.

The whole essay is worth reading. I do believe that the "submit to authority" mindset that Digby analyzes is responsible for a great many other problems that we have.

...A policeman using his discretion to arrest a man in his own home because he was not deferential enough is just one more incident along a long road of creeping authoritarianism.....

We are accepting this kind of thing as if it's just an inevitability because of the attitudes this police officer very thoughtfully lays out in his essay: we are told that we must defer to authority or risk all hell breaking loose.

And I would suggest that it is just that attitude that led to people in this country recently endorsing unilateral illegal invasions, torture of prisoners and the rest. You remember the line --- "the constitution isn't a suicide pact." To which many of us replied with the old Benjamin Franklin quote: "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety."

Bottom line:

Sure, we should treat the cops with respect and society shouldn't encourage people to be reflexively hostile to police. They have a tough job, and we should all be properly respectful of people who are doing a dangerous and necessary job for the community. But when a citizen doesn't behave well, if not illegally, as will happen in a free society, it is incumbent upon the police, the ones with the tasers and the handcuffs and the guns, to exercise discretion wisely and professionally. And when they don't, we shouldn't make excuses for them. It's far more corrosive to society to allow authority figures to abuse their power than the other way around.

Henry Louis Gates may have acted like a jackass in his house that day. But Sergeant Crowley arresting him for being "tumultuous" was an abuse of his discretion, a fact which is backed up by the fact that the District Attorney used his discretion to decline to prosecute. Racially motivated or not he behaved "stupidly" and the president was right to say so.

US Box Office

US and Canada box office gross, as an example of discretionary spending that has less than doubled from 1994 to present (compared to spending on pets which more than doubled).

Total U.S. & Canada Box Office Grosses

Year	Box Office*
2008	$9.78
2007	9.629
2006	9.138
2005	8.832
2004	9.215
2003	9.165
2002	9.272
2001	8.125
2000	7.468
1999	7.314
1998	6.760
1997	6.216
1996	5.817
1995	5.269
1994	5.184
1993	4.897
1992†	4.563
1991	4.80
1990	5.02
1989	5.03
1988	4.46
1987	4.25

*in billions

Since this came up in several places...

This is what Professor Gates claims:

I said yes, I turned and closed the front door to the kitchen where I’d left my wallet, and I got out my Harvard ID and my Massachusetts driver’s license which includes my address and I handed them to him.

This is missing from the police report.

US Pet Health Care - 2

From a comment made by CIP in the first post on this thread, one is led to search for the American Pet Products Association. One is led to this page, with the following information. Before presenting however, the point is that this is discretionary spending growing faster than inflation and faster than even human health care expenditures. (It is not clear to me whether an explosion in the number of pets or whether success in marketing is responsible.)

SPENDING

The following spending statistics are gathered by APPA from various market reseach sources and are not included in the organization's bi-annual National Pet Owners Survey.

Total U.S. Pet Industry Expenditures

Year Billion

2009 $45.4 Est.

2008 $43.2

2007 $41.2
2006 $38.5
2005 $36.3
2004 $34.4
2003 $32.4
2002 $29.5
2001 $28.5
1998 $23
1996 $21
1994 $17

Estimated 2009 Sales within the U.S. Market

For 2009, it estimated that $45.4 billion will be spent on our pets in the U.S.

Breakdown:
Food $17.4 billion
Supplies/OTC Medicine $10.2 billion
Vet Care $12.2 billion
Live animal purchases $2.2 billion
Pet Services: grooming & boarding $3.4 billion

Actual Sales within the U.S. Market in 2008

In 2008, $43.2 billion was spent on our pets in the U.S.

Breakdown:
Food $16.8 billion
Supplies/OTC Medicine $10.0 billion
Vet Care $11.1 billion
Live animal purchases $2.1 billion
Pet Services: grooming & boarding $3.2 billion

PS: Market research:

While the statistics are impressive, we believe the real story lies in the changing attitude of owners toward their pets, and the new demographic that has emerged. Pets in the U.S. are no longer considered property, but are thought of more like children. Owners are becoming guardians, not masters.

US Pet Health Care

Andrew Biggs has a graph purporting to show that household veterinarian health care costs grew at the same rate as health care costs from 1984 to 2008: eyeballing it, it is a factor of 2.6-2.75.



This chart is making the rounds on the blogs, and is used to make various points about health care reform.

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Let's look at health care cost per animal (or person).

Here are two pages with 2001 and 2007 stats on pet ownership from the American Veterinary Medical Association (AVMA):

2001
2007

Just taking dogs for example:

Veterinary expenditure per animal per year :
2007: $200
2001: $179

For comparison, the Consumer Price Index was 175.1 in January 2001 and 207.3 in December 2007 (202.4 in January 2007). (txt file). That is, veterinary care costs per dog grew at or slower than the Consumer Price Index.

Costs per animal rose by almost 12% during this period. If you eyeball Biggs' graph, overall veterinarian health costs rose from roughly $8 billion to $11 billion, which is nominally a growth of 37.5%. It can only make sense if the "veterinary expenditure" in the AVMA numbers is what the person paid the veterinarian, rather than all pet dog health care costs -- the rest would presumably be pharmaceuticals and medical tests. (But see ASPCA estimated costs of a pet at the link at the bottom of this post. It would indicate that veterinary expenditures are all pet health care expenditures.)

The problem with health care costs is that they were and are growing much faster than inflation. e.g., this from 2006, about health insurance increases:

Health-care costs are trending lower than in recent years but still well above the consumer price index. According to a Morgan Stanley Managed Care Survey, the average 2005 renewal increase was 14.8 percent.

This figure is down from 2004, which showed an average price increase of 15 percent and yet, still lower than 2003 when health-care inflation was at 20.4 percent.

While health inflation remains at these challenging levels, the consumer price index in 2003 was 2.3 percent, 2004 was 2.7 percent and 2005 was 3.4 percent.

The health insurance increases shown by Morgan Stanley's Managed Care survey suggest that health-insurance inflation ranges from 4.35 to 8.87 times the consumer price index for all urban consumers.

The health insurance cost is a good measure of cost/person per year, akin to the cost/dog per year.

Upshot: I don't believe Andrew Biggs' graph. Also see my comment on CIP's thread.

PS: ASPCA's 2008 pet care costs seems to be inline with the AVMA.

PPS: Note that Biggs' graph for vet care has a peak around 1995. Since the economy was growing at a healthy clip at that time, the reasons for the decline are precisely what?

Moore's Law and Camera Sensors

There is an interesting discussion on Luminous Landscape about Moore's Law and digital camera sensors. Moore's Law would suggest, e.g., that the number of pixels in a full-frame (35 mm) sensor should continue increasing to the hundred megapixel level; while the laws of optics suggest that such sensors would quickly resolve the tiny diffraction circles of even lenses at large apertures, and so increasing the resolution would be pointless.

It occurs to me that having lots of extra pixels might serve other purposes. For instance, it might be used to increase the dynamic range of the sensor. That is, the pixels on a CMOS sensor has a certain range of dimmest to brightest light it can register (a range of about 11-12 exposure values). At even brighter levels, the pixel simply responds at the top of its dynamic range; i.e., further increase in input light does not produce any (significant) change in what the pixel records.

Now, a very high pixel count sensor could devote two pixels instead of one to each picture pixel. (A picture pixel is already composed of R, G, B sensor pixels; we'd be doubling that). One of the pixels would be normal, the second would have an optical attenuating filter. So when the normal pixel is saturated, the filtered pixel would be somewhere in the middle of its range. It would be an easy process for the camera processor to pick the normal pixel, when the normal pixel is within its useful range, and to pick the optically filtered pixel when the normal pixel is saturated, and translate the output of the optically filtered pixel appropriately.

A similar effect could be had by having large pixels and small pixels. Say, a large pixel has twice the area of a small pixel. For a given exposure, large pixels would be used for the lower range of brightness and the small pixels would be used when the large pixels saturate.

This way, the very large sensor resolution could be traded for a smaller picture resolution but a higher dynamic range.

PS: I'm quite sure that camera designers have already thought of this. It might be interesting to dig out the relevant patents.

PPS: the small/large pixel idea won't work. A photographic scene is characterized by the light power per unit area of its parts; the choice of aperture and shutter speed reduces that from the point of view of the sensor, to light energy per unit area; and the same light energy per unit area would saturate large and small pixels just the same.

Some notes on the movie "New York"

New York (IMDB): starring John Abraham, Katrina Kaif, Imran Khan, Neil Nitin Mukesh.

The movie depicts FBI detainees undergoing Abu Ghraib-type torture and including water-boarding, and confinement in an extremely tiny space.

What we do know is that overseas, the FBI was initially engaged in interrogations of prisoners in Iraq, Afghanistan and Guantanamo Bay, along with the CIA and Department of Defense. FBI agents were shocked by what they witnessed and actually opened war crimes files for their fellow interrogators. But the Ashcroft Department of Justice/John Yoo Office of Legal Counsel (that advises the President) told the FBI that these practices were legal and authorized. The FBI then closed the war crimes files, but also instructed its agents to discontinue their participation in these interrogations.

You can listen to a discussion of the Inspector-General's report on this subject on the Brian Lehrer show of May 23, 2008. You can hear John Miller, Deputy Director, FBI, asserting that the FBI follows the same pre-9/11 rules both in the US and overseas.

So the movie points a finger at the wrong US government agency.

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The second thing I want to point out is that there is a strong if not easily visible connection between the government adherence to the law and respect for human rights and liberty. The Bush administration broke laws that originated with the US Congress; broke laws that originated with ratified international treaties, that as per the Constitution, are as binding as any law Congress makes; and violated a longstanding tradition that the US did not torture its prisoners even in moments of great stress - during the Revolutionary War, the Civil War and World War II. It is not that the law wasn't broken before by the US government; but rather that it was never broken as a matter of national policy, authorized by the President and the Department of Justice.

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A minor point - the Department of Justice are not the President's lawyers. They are supposed to be an independent agency, and the Attorney-General is the chief law enforcement officer. For any politician to try to interfere with a determination of what to investigate would itself be a violation of the law. In that sense, President Obama can only express his wish that no Bushies be prosecuted for breaking the law, but it is not binding on the Department of Justice. The President's lawyers are the members of the Office of Legal Counsel.

QOTD

“We’ve spent billions on air bags, antilock brakes, better steering, safer cars and roads, but the number of fatalities has remained constant,” said David Strayer, a psychology professor at the University of Utah and a leading researcher in the field of distracted driving.

“Our return on investment for those billions is zero,” he added. “And that’s because we’re using devices in our cars.”

The NYT, in an article on using cellphones while driving.

However, most US state legislatures are unwilling to do anything.

What about hands-free?

Scientists note that there are limits to how much the brain can multitask. The brain has trouble assessing separate streams of information — even if one is visual and the other aural, said Steve Yantis, professor of psychological and brain sciences at Johns Hopkins University.

Further, he said, when people talk on the phone, they are doing more than simply listening. The words conjure images in the mind’s eye, including images of the person they are talking to. That typically doesn’t interfere with driving. The problem starts when a car swerves unexpectedly or a pedestrian steps into traffic, he said, and the mind lacks the processing power to react in time.

“There is zero doubt that one’s driving ability is impaired when one is trying to have a cellphone conversation — whether hands-free or hand-held, it doesn’t matter,” said David E. Meyer, professor of psychology at the University of Michigan.

In fact, some scientists argue that hands-free laws make driving riskier by effectively condoning the practice. As early as July 2003, researchers at the National Highway Traffic Safety Administration reached that conclusion based on what they referred to, in a proposed draft of a cellphone policy for the agency, as “a significant body of research worldwide.”

The draft policy said: “We are convinced that legislation forbidding the use of handheld cellphones while driving will not be effective since it will not address the problem. In fact, such legislation may erroneously imply that hands-free phones are safe to use while driving.”

The agency’s current advice is that people should not use cellphones while driving and that hands-free devices do not eliminate the risks of distracted driving.

Why paper books are the best

Letting corporations, no matter how bound by the law and by good intentions, into your home is dangerous. The equivalent of the following with a paper book would require a search warrant.

NYT

In George Orwell’s “1984,” government censors erase all traces of news articles embarrassing to Big Brother by sending them down an incineration chute called the “memory hole.”

On Friday, it was “1984” and another Orwell book, “Animal Farm,” that were dropped down the memory hole — by Amazon.com.

In a move that angered customers and generated waves of online pique, Amazon remotely deleted some digital editions of the books from the Kindle devices of readers who had bought them.

An Amazon spokesman, Drew Herdener, said in an e-mail message that the books were added to the Kindle store by a company that did not have rights to them, using a self-service function. “When we were notified of this by the rights holder, we removed the illegal copies from our systems and from customers’ devices, and refunded customers,” he said.

Amazon effectively acknowledged that the deletions were a bad idea. “We are changing our systems so that in the future we will not remove books from customers’ devices in these circumstances,” Mr. Herdener said.

Fortunately, I only have to resist the almost inevitable trends of the future, with corporations increasingly owning the digital me (via patents on genes they in a sense already own the genetic me; and well-intentioned idiots who keep pushing for organ donation to be the default unless you opt out, they will own the physical me, too), for a finite span of years.

Increasingly, apart from the people who run companies or own significant portions of them, we are all just human fodder to corporate economic machines. Who was fearful that we would be ruled by machines one day? We already are! The only purpose regular people have is to satisfy the appetite of these machines. If I endanger in a miniscule way, the bottom line of my health insurance company, my physical existence will be at risk - they will end their coverage.

We are taught in corporate courses about the value of good character - because it affects the bottom line! Something like "Leaders who were perceived to have outstanding character and empathy achieved stronger bottom line results." If some study found that being malicious promoted the bottom line, you can know what the business books would be purveying. The correct response to the above is that if studies found that bad character went with good business results, then the business is immoral.

That is the future, to become the ever-smiling, well-dressed automata who decorate corporate brochures. Y'all are welcome to it!

Punks and Nerds

The Nerds, the Punks and their audience an year ago. This was one of the Long Branch Pier Village Thursday by the Sea concerts.

Well, almost exactly one year later, the Punks and the Nerds performed again in the same venue. A selection of photographs are here:

The Punks and The Nerds

Pixar's Up

Pixar's animated movie, Up — I strongly approve of it.

Hot!

Long ago, in Madras (when it was still Madras and not yet Chennai in all languages), I read one of Victor Mollo's Bridge in the Menagarie series (which, by the way, I strongly recommend). One of the lines there that stuck with me went something like this "It was hot, 24 C in the shade and even hotter in Fahrenheit".

I found that very funny. A cool evening in Chennai might be 30 C. 24 C is hot? Hilarious!

Today, in my area of NJ, it is 80 F, (i.e., 26.6 C), breezy and not humid; and even doing light work, like deadheading the roses, has me sweating like a pig and coming in for water or juice every twenty minutes. Me, who grew up in the tropics. And yes, I still have that pencil-like build which is most efficient at dissipating heat.

PS: This stuff (coconut water) is really good!

Goldman Sachs and Forward Trading

This dkos diary says:

Over the past 48 hours, we're now hearing from many financial services professionals, and they're alluding to the reality that "frontrunning," the illegal practice of jumping ahead of legitimate stock/bond/equity trades to capitalize upon them, is pretty much a common practice; one that has run rampant throughout Wall Street for a very long time.

And the story has Goldman Sachs leading the charge!

What is frontrunning?

Wikipedia explains it:

Frontrunning is the illegal practice of a stock broker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers. When orders previously submitted by its customers will predictably affect the price of the security, purchasing first for its own account gives the broker an unfair advantage, since it can expect to close out its position at a profit based on the new price level. Front running may involve either buying (where the broker buys for their account, before filling customer buy orders that drive up the price) or selling (where the broker sells for its own account, before filling customer sell orders that drive down the price).

We are told that Goldman Sachs has visibility of the entire exchange and is able to execute transactions faster, so in the time between your trade starts and your trade completes, They are able to complete their own transaction.

Smoke on the water...

...fire in the sky

QOTD

In educating myself this spring about education, I was aghast to learn that American children drop in I.Q. each summer vacation — because they aren’t in school or exercising their brains. – Nicholas D Kristof in the NYT

The IQ-metricians would have conniptions over this, because IQ is supposed to be largely genetically determined and fairly constant - hardly seasonally variable! I applaud anything that upsets IQ-metricians.

Matt Taibbi on Goldman Sachs

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Much more, here

PS: Some more quotes which are shocking. Remember the spike in oil prices?

. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

Is America any kind of democracy anymore?

By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.

{emphasis added; the US GDP is about $14 trillion.}