Brain Structure

 

Is there some kind of structural evolution occurring in the human brain as as result of the proliferation of information technology and its instantiates (cell phones, video games, text chat, video chat, email)?

It has been established that environment, culture and behavior result in modifications to brain structure. Mark Prensky has observed that brain plasticity requires intense concentration for several hours a day, five days a week in order to bring about neural changes — thus musicians constantly practice and the modifications supporting scientific thought requires immersion in an analytical environment or laboratory. Presnky’s hypothesis is that a child’s current environment of videogames, instant messaging, MTV and email is programming his brain for high speed multitasking.

I think back on the “chat” systems of the early 1990’s, primarily inter-relay chat or IRC. It was typical behavior for the cogensi to run multiple conversations. Characteristic of these ‘chats’ were extended periods between responses corresponding to slow networks; ‘net-splits’ where server-to-server links disconnected from each other and conversants disappeared; and the simple fact that the other party was engaged in multiple conversations of their own and was busy typing. As a consequence of these ‘communication channel effects’ one tended to become multi-threaded — that is to say, develop the ability to maintain multiple running conversations simultaneously. This is significantly different from, yet similar to, multi-tasking. Tasks tend to be discrete packages of work that are dispatched as capacity becomes available. A conversation thread has inherently stateful properties such as the mental image being built of the other party through successive messages, the intended strategy for conveying an idea or concept, as well as the past conversation history. People who engaged in IRC activity developed the ability to manage across multiple threads.

Current numbers suggest that a digital native, that is to say a child developing in a digital environment with access to email, cell phones, text chat and videogames has developed this ability as part of a standard development process. It is estimated [Prensky] that a child from birth to age 18 is exposed to 10,000 hours of video games, 20,000 hours of television, and 200,000 hours of email or instant messaging activity. It is not unheard of to observe a child studying from a traditional book while watching television, making a cell phone call or text call, and chatting on a MySpace/Facebook. The ability to effectively do this suggests that a brain structure that supports a multi-threaded environment must exist.

Traditional educators would have the student studying in a quiet environment, absolved from interacting with the usual digital digressions. Indeed, traditional teaching is single threaded, conveying a single concept through the classroom presentation. If the brain structure is evolving through exposure to digital technology, then traditional educational precepts may be incorrect and new methods of teaching will need to be developed.

Visualize a teacher presenting three different sets of problems, related in concept, but of different levels of difficulty, simultaneously and interactively. This would be inherently confusing to a single-threaded student but may provide a method to actually teach content in the NCLB single classroom.

If, in fact, the brain structure is evolving to support multi-threaded operations, there may be other manifestations. One indicator may be an increased prevalence of Attention Deficit [Hyperkinetic]Disorder (AD[H]D) [also HKD]. One analysis of the disorder postulates that the ventral tegmental area (VTA) is insufficiently activated to sustain concentration. This and other disorder models assume that the brain is wired as a single threaded entity. A brain with multiple idle threads waiting in the pool, may begin using some of those idle threads to process some totally unrelated and irrelevant activity with the result of an apparent attention lapse. ADD treatment protocols may work by affecting the reticular activating system (RAS), as stated, but by reducing that number of simultaneous threads available.

What is significant here is that the evolutionary development of a multi-threaded brain structure requires a certain amount of time, which is dependent on the saturation of the digital technology into the culture. The pressure to adapt to a multi-threaded activity environment will be large due to peer pressure and social context. The ability to manage multi-threaded activities will likely lag as management processes, which typically have to be trained by reflection, tend to lag the activities they are managing. As a result, while there is pressure to develop and use these techniques, with the consequent cortical rewiring, there is little understanding of, or methods available for their management. The result of a modified brain structure without the overlying thread management system could easily lead to ADD.

Virtually all of the activities a teenage child is exposed to has characteristics which support a multi-threaded operational state. Cell phone texting, instant messaging, and social networking chats all are subject to the same channel effects mentioned in conjunction with IRC. The delays are shorter due to higher available bandwidth and better technology, but the inherent multi-threaded nature is still there. Email, once viewed as the “instant” replacement for written memos has been relegated to the same status in the new digital age as “snail mail” was in the earlier transition. Video games, multi-player games (WOW) and the like all require a multi-threaded attention span.

This is a wake-up call for educators and health management officials. Efforts need to be made to develop appropriate management techniques for the multi-threaded brain to allow a person to more effectively manage his thought processes in the non-digital environment as well as the digital environment. Educators need to understand how to train train these techniques for the new brain and not rely on drugs to constrain the new structure into a parody of the old single-threaded brain. And sociologists need to be aware that the world has changed yet again, and that the pace is even faster than ever before.

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Nancy Pelosi Hugo Chavez
Speaker of the House
Nancy Pelosi
Venezuelan President & Dictator
Hugo Chavez

 

Yesterday, Nancy Pelosi, Speaker of the House, refused to allow an up-down vote on the passage of the Columbian Free-Trade Agreement (HR 5724) as authorized under the Presidential Fast Track Authority. Speaker Pelosi has instead modified House rules, ex post facto, so that the vote required by the fast-track provisions can be circumvented.

This despite the fact that the House Democrats have repeatedly, through more than 250 consultations with Columbia, insisted on and won additional language in the trade agreement forcing Columbia to provide more protection for trade unionists in the country — in the past it has been open season on organizers, though through no fault of Alvaro Uribe, the President of Columbia. Thank FARC. President Uribe has, in fact, worked to reduce this violence and has delivered impressive initial results, reducing violence by more than 80% since 2002. This is also an agreement which Charles Rangel, Chairman of the House Ways and Means, and Bill Clinton support, as does President Bush. It is good for the United States and good for Columbia. Even Hillary Clinton’s staffer Mark Penn is^H^H was working towards this bill’s passage.

The standard media drivel is that this is the work of the labor unions in the United States, but, as with all things political, the phrase ‘cui bono’ comes to mind. 90% of Columbian goods arriving in the United States are duty free and the balance are subjected to very minimum tariff. US goods in Columbia are assessed a 35% tariff, which would be eliminated as part of the Trade Agreement. This means that companies producing goods for Columbia would be more price competitive, be able to sell more goods (in what apparently is a pending recession), and would be able to hire more union labor to produce the goods. In other words, this trade agreement is a good thing for the labor unions. The unions do, however, make a good smoke screen. What is going on under the smoke should give any American a case of the chills.

Nancy Pelosi, acting in her persona as Secretary of State, visited Damascus last year and presented the House position on national policy. It was argued at the time that this was technically treason and in fact has been previously prosecuted as such under the Logan Act of 1798. Clearly, Speaker Pelosi feels that it is in the interest of the House to establish foreign policy.

In light of the evidence of other Democrats (Kennedy D-MA) making arrangements with Hugo Chavez, perhaps more is going on here than meets the eye. Could it be that the real reason for dumping the Columbia Trade Agreement is that Pelosi has made a deal with Chavez to attempt to weaken Columbian President Uribe. It’s no secret, since a suitcase full of money and computer files revealed that Chavez is bankrolling and providing strategic intelligence to FARC.

Should all this be suprising? No. The anti-war left did it to Cambodia, stiffing our Cambodian allies after we pulled out of Vietnam, at a cost of about 1.7 million deaths at the hands of the Khmer Rouge. They are seeking to do the same in Iraq when we know Iran is actively seeking to destabilize the Iraqi government. What consequence is Columbia against sad examples of this magnitude?

Not supporting Columbia, especially when President Uribe has compromised so much at the request of the Democrats in the House, is as shameful an act as been seen in a decade.

Sometimes it takes somebody to step back from the tactical morass of the pending primaries and presidential elections and take a look at the significant issues. I am referring to actual decision trees that must be traversed to establish policies that affect the United States, as opposed to emotional and class-divisive issues that are used for political short-term electoral positions.

Now political pundits will say that there is nothing other than the tactical political position — after all, the goal is to get elected and you can’t resolve real issues if you aren’t in a position of power or authority. But candidates mired in the short term tactical issues — addressing irrelevancies for a point here or there against their opponents — can become intellectually bankrupt of vision. Then, even if elected, they cannot address the real issues, or perhaps have compromised their political capital to the extent they are totally ineffective.

By and large, I want to address issues that can be managed in some concrete fashion, not issues that parties believe should be managed. Party issues that are litmus test issues, such as abortion, cannot have a resolution in the current political system. 40% of people oppose abortion, 40% are “pro-choice”, and the rest either don’t care or have mixed positions. Given this distribution, any executive is not going to be able to generate a policy that has an immediate impact on the United States. One might be able to create an environment where one position or another might be enabled in a future act, but such environments are very fragile. The issue of stem cells is a case in point — for all the posturing, the issue became irrelevant when Japanese scientists persuaded ordinary skin cells to transform back into undifferentiated stem cells (and with the added benefit that they were donor specific.)

So enumerated below are some issues and my tags:

AbortionAbortion — (easy since I’ve already addressed it in brief) Doesn’t matter. Can’t be resolved in the current system. Trying to make this a plank is a waste of time. Yes, there are moral and ethical issues on both sides and the current treatment is inconsistent and there are deep feelings on both sides. Doesn’t matter. Irrelevant.

ImmigrationImmigration — The United States needs to get its act together here. We have two contradictory processes at work that need to be reconciled. Our food supply is dependent on manual labor imported from outside. To increase the pay scale to the point compatible with a job an American Union Worker would take will increase the cost of food. Economically we are chained to cheap imported labor. The presence of people in the country who exist outside the legal system creates massive economic costs, yet it still somewhat to our benefit to educate and care for a certain number of these people — the cost of not doing so may be greater still.

Further, much of America’s growth is due to legal immigration, its innovation due to contributions from immigrants. From the technological and innovative point of view, why would be want to train and educate students from other countries, and rather than employ them here with a H1B, send them back to India, or China, or Pakistan where they can use what we have taught them to develop competing businesses.

The current set of immigration policies are horrible with no consistent underlying vision or plan. We need to restore the United States to that land of opportunity that calls people from all walks of life to participate in achieving their dreams, and makes them want to be legal participating citizens in the American democratic process.

The Plank: Recognize that America is built on immigration and adjust policies to reflect this fact. Increase or eliminate H1B visa limitations. Devise a guest worker program as a means to satisfy our current economic dependency while at the same time requiring such workers to exist within our legal framework (i.e., valid driver licenses, auto insurance, immunizations, etc.). Finally, enforce the subsequent laws.

BusinessBusiness Investment — The current governmental bureaucracies (both State and Federal) have created an environment where investment is going elsewhere: London, China, Russia. Our policies and laws like Sarbanes-Oxley have made the hurdle of listing in the United States financially onerous. The FDA has made developing new drugs near-impossible with the result that corporations are being fined millions of dollars for reporting their research protocols to doctors (off-label touting is a crime); deciding drugs need not be approved because existing drugs are already available (competition anyone?); and generally making the process so complex and lengthy that the evil pharmaceutical companies have to charge an arm and a leg to break even of the research and development. The Justice department obtains some of its own budget from the fines levied in actions. (oops)

These, and many more government bureaucracies have to be checked, reduced or eliminated. The government can and should regulate commerce so that the playing field is level, but by and large, issues such as who can compete should be left to the market to decide.

The sub-prime/securitization/derivatives financial liquidity crisis is providing another opening for government to over-regulate. The market is already sorting out (in the British SAS sense of the phrase) the people who were stupid. Banks are moving assets back to their balance sheets. Hedge funds are unwinding and assets are being marked to real market value. Government interference here is what created the mess. Let’s not multiply the problems.

The plank: The Government’s role should be to provide transparency. Hold hearings, investigate processes and systems but without moralizing and demonizing the industries. And then do nothing while the system, now aware of the problems, corrects itself.

In general, any law passed by Congress establishing a regulatory or oversight mission (and its associated bureaucracy) needs a sunset provision and a requirement for periodic review to determine whether its still needed. Establish a goal to cut by 10% annually both the budget and employee count of every major department. (The Jack Walsh method.)

TaxA Rational Tax Policy — The current situation is not sustainable. The class-based tax warfare must stop. Now we have the situation where the top 1% of the country’s earners pay 39% of the Federal income tax; and that 60% of the people pay less than 1%, if any. And what do we hear from Congress: “Taxes need to be more progressive.” and “We can’t have executives making $30 million dollars.” and (of course) “We have to ensure that the rich pay their fair share.” So what occurs when 0.1% of the earning population pays 99% of the income tax? What happens if they get pissed off and leave? (oops!)

Also, it is unconscionable that a PhD in accounting and mathematics, let alone a typical citizen can’t read their tax return instructions. The entire system (and the IRS) needs to be abolished and replaced with a simplified taxation system that requires no more than one page to fill out. And keep Congress out of it. Their attempts to “fix” things got us into this mess. Remember the AMT, supposedly legislated to insure that 140 people who paid no tax forty years ago, never ever got a free pass again? And now 30 million Americans have to figure their taxes twice and pay because they are now “rich”!

The Plank: Set up a commission to oversee the collection of taxes — ten members max — like the Fed. Make any revision to the code require a supermajority of 80% Congress. Make it flat or at most two tiered with no exclusions. Most people would pay a higher rate just to not fill out the forms ( or pay their tax accountants to do it for them — they would save money.) Dump the AMT, eliminate capital gains tax or any reinvestment double taxation. Simplify — forbid social reform and manipulation via taxation.

WarThe War in Iraq — Doesn’t matter. We are there, we can’t leave until its stable. Why beat a dead horse. We kill more teenagers on the highways than in the armed forces. Fix foreign policy and this will go away. Irrelevant

Foreign PolicyForeign Policy — Which one? The White House, The State Department, The Trade Office, the CIA?

The Plank: Downsize the bureaucracies and reduce the competing agendas. Let’s get some consistency in the message America sends to the rest of the world. Like Patrick Swayce in Roadhouse: Be nice, be nice, be nice until it’s time to stop being nice. Let’s treat Russia and China and other countries with respect and some understanding that they have legitimate concerns. America, for better or worse, is a superpower and is likely to remain so.

Castle RomeoNuclear Proliferation — Doesn’t matter. The first world knows this through detente. The third world has to learn. And it’s not as if we can really do anything about it — any physics grad with some practical engineering experience can do it.

Few alive today have an understanding of the effects of these weapons. If a state uses one against another state, that state is toast. Self-correcting problem. Irrelevant.

JudicialThe Judiciary — At first I was going to assign this a ‘doesn’t matter’ but I rapidly came to the conclusion that it does in the long term. Two things:

Any president should have the right to select and should have the expectation that his selection be confirmed unless there are really significant problems with the choice. By problems, I mean competency, legal and qualification problems, not fundamental philosophical differences. When the people select a president through an election, they are (hopefully) voting for a vision and a philosophy and they expect that that vision will have its day in the sun. Selecting like-minded people is an executive’s prerogative. This includes judges and attorneys-general. This is part of the implementation of the vision (and philosophy). Using the confirmation process as a weapon deprives the People of the United States of their choice of a vision. Conflicting visions each deserve a chance so confirmation should be competency-driven instead of philosophically-driven.

Since certain judicial positions are life positions, judicial appointments establish long-term trends and enable conditions for follow-on legislation by establishing the interpretative environment for that legislation. When the judicial system is strictly constructionalist, this does not matter, but whenever judges use their authority to bypass legislative strictures, and have become ‘activists’, different concerns arise. For those who believe that certain positions are warranted and have an intrinsic value independent of that determined by the will of the people (as expressed by a majority of the legislative body), judical activism is a key component in achieving these positions. Consequently, judicial appointments become critical in preserving this channel of change, and this is reflected in the acrimonious confirmation process of today.

I note in passing that a conservative position of strict construction with regard the the US Constitution is not inherently an adverse position. At most it is a neutral position with respect to ‘active change’. At most, supporters of changes currently enabled via judicial activism have only to assure that their laws pass Constitutional muster. Of course, the entire reason for judicial activism is not for reviewing laws, but for circumventing the legislative process in the first place. If they could get their laws passed, there would be no need for judicial activism. This activism is also not the exclusive province of the left. In the early 20th century, laissez-faire courts blocked Federal regulation of interstate commerce on the basis of the ‘santity of private commerce’, an appeal beyond any reasonable Constitutional interpretation.

The Plank: Confirm presidential appointments on the basis of competency and not philosophy. Develop policy to prevent and avoid judicial activism. Let the process work by confirming presidential selections, and let Democracy work by reducing judicial activism.

[Many thanks to AOC for his erudite analysis and review.]

Ron Paul, in a press conference today called for the complete encirclement of the Pentagon. “Clearly, the Pentagon, as a three dimensional representation of the pentagram, represents the most probable gateway to the demon realm from which Cthulu will return. Given the money that conservatives are willing to spend building walls against the surge of illegal immigrants, a better use would be to build permanent fortifications against the likely emergence of evil.”

Ron Paul went on to express grave concerns about the current Democratic hopefuls noting that recent blog posts on both Clinton’s and Obama’s behalf for the ‘Demonic Rectification of the Earth’ indicate that the Democratic party has been suborned by the forces of evil. “Anti-war positions espoused by both candidates clearly are an attempt to misdirect attention from the Pentagon where activities have increased in anticipation of their control of the White House.”

Asked about his proposals to bring the troops home immediately if elected, Congressman Paul stated “These troops could be better used to surround the Pentagon. As long as we maintain a closed circle, the inter-realm gateway cannot be opened.” Paul intends to use the troops to maintain a triple row of soldiers connected hand-to-hand to seal the gateway until a more permanent silver impregnated wall can be constructed.

The commodities market reacted swiftly bidding silver to an all-time high of $24.67 per troy ounce, up $8.00 over Monday’s close.

BlagojevichDay
Illinois Governor Day

Where o where is our Public Official A? Since being surrounded on all sides by indicted friends and assistants, Governor Blogojevich has been hesitant to show his face in public. He has been sending his minions out to do his gubernatorial touting. We would like to coax him out of his hole and to do that we proclaim April 1st, Illinois Governor Day.

Punxsutawney Phil has nothing on us. On this day, should Governor Rod see his own shadow, we can be assured of six more months of corruption. (And we are sure he will given the kleig lights and cameras recording the event.)

Sadly, Illinois is once again reprising the Bill Murray role waking up day after day to another Illinois Governor who appears to be headed for the big house (Hint: It isn’t in Springfield or Washington.)

A difference of opinion between intelligent design and evolution is ongoing — anyone who looks into the structure of the cell and sees the myriad of operations occurring has to stop and wonder: How can evolution account for this? And if evolution is a culling process, what generated the initial set of entities to be culled? On the other hand, intelligent design advocates have to answer some questions also: Why does the mitochondria structure in the cell exist? How does one account for adaptations? Where did that pesky reverse transcriptase come from?

Anyone looking at a system as complex as the cell is inclined to make statements that such complexity could never have evolved. One would do well, however, to look into the phase space of a very simple coupled polynomial system. The phase space solution set of these polynomials become chaotic in the mathematical sense of the word. An incredible complexity exists in even the simplest equations. Steven Wolfram has show that simple generators can produce the complex patterns on a mollusk shell. So complexity in itself is not an indicator of intelligent design.

Consider the mitochondria structure in the cell. This is a structure which provides cellular energy. Current thinking is that, at some point, a cellular organism ingested a bacterium of similar structure to the mitochondria, and instead of the bacterium’s proteins being digested, as usually happens, the bacterium instead survived as a symbiote within the cellular organism. The fact that the structure exists indicates a fortuitous occurrence rather than a structured design — unless one wants to argue that this ingestion was part of the design.

Also adaptations clearly occur. Man has been adapting domestic animals and grains for millennia. MRSA is a bacterium which has adapted to the human immune system, much as AIDS has adapted to the human T cell. And clearly these adaptations have passed beyond the somatic. The existence of reverse transcriptase throws a monkey wrench into the orderly intelligent design process. No electrical engineer would design a control system with a pole in the left hand plane, which is what a molecular design with reverse transcriptase amounts to.

So if God exists as an intelligent designer, are we to believe that it is as Woody Allen quips: ” …the worst you can say about Him is that basically He’s an underachiever.”

Evolution theorists have to do a little introspection also. Evolution in its strictest sense is the process by which adaptations make the transition from the somatic to the germ line. That is to say, adaptations that are passed along to offspring. Organisms with the adaptation, in the sense that they are more suited to the environment, survive to procreate. Less well adapted to the environment, they do not survive and eventually they are eliminated (rendered extinct). Thus evolution is a culling process — the fittest are those organisms which survive, with continued existence being the only criteria. But this begs the questions of the adaptations in the first place. Where did they come from and what was the source of the original pool from which viable processes were ‘selected’? Evolution is a backwards acting process, a culling of options. Somewhere in the process there is a need for new adaptations, new structures. There is some support for the hypotheses that radiological mutations provides such a pool. Other thought suggests that matter is endowed with self-organizing properties.

The physical world is described by the laws of thermodynamics. The second law, which states that entropy tends to increase, leads to the ultimate final state being the heat death of the universe. Evolutionists are constrained by this law. There is a preferred direction for processes. Combining things together into a higher energy state seems to violate the second law. If, as Ben Stein notes, life evolved from lightning striking the mud puddle, there are a lot of missing links, most of which violate the second law.

Note that the fact that they are missing is not surprising: Why shouldn’t they be missing. Millions of years could have passed under identical geological conditions which produced our fossils without proteins and amino acids being preserved — they are just too fragile. Only after life adapted and generated shells, bones and mineral inclusions could there be a preserved slice of the process to study.

But life itself seems to violate the second law. The significant factor, the one spark that distinguishes life from all other matter seems to be the ability to self-organize. The question is whether self-organization is another natural law which we have overlooked or the result of some prime mover or intelligent designer. Certain nanostructures are known to self organize — the so-called self-assembly process. So it is conceivable that all that electrified mud self organized into amino acids, complex phosphate chains, proteins and that the sieve of selection gave us the foundations of cellular metabolism.

Is self-organization a result of a process that has been overlooked and is responsible for that initial pool of selectees we evolved from? Or is this process the indicator that there is some higher intelligence guiding the development of life, but in a way that is far more clever and inscrutable than either side in the debate supposes?

When you receive your brand new credit card in the mail, you also receive a sheet with the terms and conditions of the arrangement you have established with the issuing bank. These terms govern how the bank views and manages its relationship with you. Typically these terms and conditions are variable in the sense that the issuing bank can revise and modify the terms without regard for you, the consumer. It’s a contract with you where you don’t have the benefit of legal representation, or even a voice in the process. Moreover, these term sheets tend to be very fine print, dense and written with a lawyer’s attention to comma placement and nuances the average reader would overlook. The last one I reviewed was about eight pages of 6 point type (Except of course for the Schumer box.)

What happens is, of course, that the consumer never reads the fine print. They read the box and the APR, but typically gloss over the billing cycle period, the ‘adjustments’ to the interest rate as a function of your payment behavior, grace period exceptions to cash advances, cash advance fees, late fee charges, overlimit fee charges, and the like.

Apparently financial institutions pull the same tricks with each other although I suspect that the fine print extends to 50 or so pages. Take, for example, a collateralized mortgage obligation (CMO) where the servicing agreement permits the servicer (the organization which actually accepts your mortgage payments and sends you notices, etc.) to advance payments on behalf of defaulted homeowners (essentially additional loans at 12% or more interest). These ‘servicer advances‘ go back into the trust and terms may be written so that these funds go to the junior security holders. That is to say the mezzanine tranche or lower quality segments of the portfolio.

For those unfamiliar with how asset-backed securities are offered, there are usually three segments or tranches: the senior or low risk, the middle or mezzanine, and the retained or equity tranche which is usually high risk. The equity and mezzanine tranches are subordinated to the senior tranche in that all senior obligations are paid out prior to any payment to the other tranches.

In the event of a foreclosure, the servicer advance funds are paid out first to these junior securities, even before the holders of the senior AAA rated securities receive any payment. Consequently, the foreclosed home sale may produce no proceeds to the AAA holder and may in fact generate a liability. If the servicer owns the junior security, then there is no incentive whatsoever to resolve defaults. The subordination of senior debt to the servicer advances makes the AAA rating of these senior securities a myth.

Additionally, terms in some securities permit borrowers to sell collateral and reinvest the proceeds in other assets, including ‘junk’ bonds. Most permit unlimited amounts of swaps obligations with debt that is senior to or equal to the original priority of repayment. Because the terms do not specify an acceptable risk level for these assets, the collateral backing the debt is compromised. Thus an AAA rating is meaningless — by the time the swap obligations are satisfied, or if the repurchased asset becomes valueless, nothing is left to payout the original debt.

So given the complexity of these arrangements, traders who participate in these markets are likely to look at a security and view its price, its predicted paper return and its rating and leave it at that. No one reads into the fine print, and even if they do, they are faced with much the same choice as the credit card consumer. The security is written and offered as-is. Optimistic traders (especially ones who never have experienced a down market) purchase the security confident in its value, until that is, the underlying asset defaults and sets off a chain of events which leaves the ‘investment grade security’ well below grade. These traders are like consumers who run up credit card debt trusting in low rates and generous payment terms, and who miss a payment, and subsequently find that a great deal becomes a terrible deal with little or no warning.

And now we have a liquidity crisis. No one wants to borrow or loan against securities that have been found out to be riddled with loopholes. While politicians wring their hands in anguish over the poor defaulted homeowner, the real Aegean stable is the financial industry. Until the term sheets are rationalized and simplified to the point where a trader knows his asset’s value, the confusion and resultant liquidity lock will remain. Alt-A packages are likely engineered in the same manner and they haven’t been touched yet. Look for another round of grief as these securities are reassessed.