The Big Picture

Has Household Wealth Recovered?
The Government Actually Spied On Bad Guys Before 9/11
Does Math Exist or Is It a Human Creation?
Congress is Less Popular than Lice, Colonoscopies or Nickelback
Where the Wealthy Folk Are
10 Sunday Reads
2014 Aston Martin Vanquish (Convertible)

Posted: 24 Jun 2013 02:00 AM PDT

Household Wealth: Has It Recovered?
William T. Gavin
Federal Reserve Bank of St. Louis Economic Synopses, 2013, No. 16

Adjusting for inflation, population growth, and a risk-free real interest rate shows there is still a substantial gap between the peak of household wealth in 2007 and the level today.

The 2012:Q4 flow of funds data released on March 7, 2013, by the Federal Reserve reported that the net worth of households and nonprofit organizations rose to $66.1 trillion.¹ Taking this as a measure of household wealth, the financial press reported that household wealth had risen to within 2 percent of its previous (pre-recession) peak in 2007:Q3. Determining whether households are nearly as wealthy now as then is complicated. Hard-to-measure factors, such as human capital, the distribution of wealth, and the tax liabilities of the wealthy, could be considered in a more extensive analysis. Here, I make a determination that depends on some factors more easily measured—population growth, inflation, and a risk-free real interest rate. The risk-free real interest rate matters because it determines how large the flow of future real consumption guaranteed from a given amount of wealth can be.

I use the chain price index for personal consumption expenditures (PCE) to deflate nominal household wealth. I also divide total wealth by the population of the United States. To account for changes in the real interest rate, I assume a representative household that wants a constant monthly income for the next 10 years. The household invests in a 10-year annuity indexed for inflation with no default risk. The inflation-adjusted risk-free real interest rate is measured by the rate on long-term Treasury inflation-protected securities (TIPS). Annuity payments are similar to mortgage payments. For example, when a bank makes a 10-year conventional fixed-rate mortgage loan, it receives a fixed amount each month for 120 months, at which time the mortgage is paid off and monthly payments end. An annuity pays the holder in a similar fashion.

The table shows the different measures of household wealth—the interest rate on long-term TIPS and the per capita levels of real PCE—for three particular quarters: 2007:Q3, when the flow of funds measure of household wealth peaked; 2009:Q2, when the recession ended and that measure troughed; and 2012:Q4, the most recent quarter for which the data are available.

As shown in the first column, aggregate household wealth in 2012:Q4 was $66.1 trillion, 26 percent higher than the end-of-recession level and only 2 percent lower than the 2007 peak. After adjusting for population growth, it is still 23 percent higher than the 2009 trough but 6 percent lower than the pre-recession peak. Inflation has been modest, but it makes real wealth appear even lower today. Per capita real household wealth in 2012:Q4 was just 14 percent above the 2009 trough and 15 percent below the 2007 peak. The TIPS interest rate in 2007:Q3 (the fifth column in the table) was 2.38 percent—near its 2.35 percent end-of-recession trough—but fell to –0.09 percent in 2012:Q4. (For simplicity, as shown in the table, I assume that the rate was zero in 2012:Q4.) Based on the TIPS interest rate, the annuity value of household wealth in 2012:Q4 was just 1.7 percent above its end-of-recession trough but still 24 percent below its 2007 peak.

An interesting observation emerges when the artificial 10-year annuity is compared with the monthly average of per capita real PCE. The comparison shows that monthly income from household wealth would have been 77 percent of per capita real PCE in 2007:Q3, just 60 percent by the end of the recession, and an even lower 58 percent by 2012:Q4. Although flow of funds data suggest household wealth has nearly rebounded to its pre-recession peak, adjusting for inflation, population growth, and a risk-free real interest rate shows there is still a substantial gap between the peak of household wealth in 2007 and the level today.

Note

¹ See line 42 in the March 7, 2013, data release for the Balance Sheets of Households and Nonprofit Organizations; http://www.federalreserve.gov/releases/z1/Current/z1r-5.pdf.

Download PDF

The Government Actually Spied On Bad Guys Before 9/11

Posted: 23 Jun 2013 10:30 PM PDT

The Bush and Obama Administrations' Justification for Mass Surveillance Has Been DEBUNKED

Preface: The Bush and Obama administrations both claimed that spying on Americans was justified by 9/11. Specifically, they said that they could have caught one of the 9/11 hijackers living in San Diego if they could have spied on phone calls on American soil.

However – as demonstrated below – that claim is totally false.

Investigative journalist ProPublica notes:

In defending the NSA's sweeping collection of Americans' phone call records, Obama administration officials have repeatedly pointed out how it could have helped thwart the 9/11 attacks: If only the surveillance program been in place before Sept. 11, 2001, U.S. authorities would have been able to identify one of the future hijackers who was living in San Diego [named Khalid al Mihdhar (to help remember his last name, think of "mid-air" whenever you see his name.)].

Last weekend, former Vice President Dick Cheney invoked the same argument.

***

Indeed, the Obama administration's invocation of the Mihdhar case echoes a nearly identical argument made by the Bush administration eight years ago when it defended the NSA's warrantless wiretapping program.

The reality is different.

Initially, an FBI informant hosted and rented a room to Mihdhar and another 9/11 hijacker in 2000.

Investigators for the Congressional Joint Inquiry discovered that an FBI informant had hosted and even rented a room to two hijackers in 2000 and that, when the Inquiry sought to interview the informant, the FBI refused outright, and then hid him in an unknown location, and that a high-level FBI official stated these blocking maneuvers were undertaken under orders from the White House.

As the New York Times notes:

Senator Bob Graham, the Florida Democrat who is a former chairman of the Senate Intelligence Committee, accused the White House on Tuesday of covering up evidence ….The accusation stems from the Federal Bureau of Investigation's refusal to allow investigators for a Congressional inquiry and the independent Sept. 11 commission to interview an informant, Abdussattar Shaikh, who had been the landlord in San Diego of two Sept. 11 hijackers.

So mass surveillance of Americans isn't necessary, when the FBI informant should have apprehended the hijackers.

Moreover, the NSA actually did intercept Mihdhar's phone calls before 9/11.

We reported in 2008:

We've previously pointed out that the U.S. government heard the 9/11 plans from the hijackers' own mouth. Most of what we wrote about involved the NSA and other intelligence services tapping top Al Qaeda operatives' phone calls outside the U.S.

However, as leading NSA expert James Bamford - the Washington Investigative Producer for ABC's World News Tonight with Peter Jennings for almost a decade, winner of a number of journalism awards for coverage national security issues, whose articles have appeared in dozens of publications, including cover stories for the New York Times Magazine, Washington Post Magazine, and the Los Angeles Times Magazine, and the only author to write any books (he wrote 3) on the NSA – reports, the NSA was also tapping the hijackers' phone calls inside the U.S.

Specifically, hijackers Khalid al-Mihdhar and Nawaf al-Hazmi lived in San Diego, California, for 2 years before 9/11. Numerous phone calls between al-Mihdhar and Nawaf al-Hazmi in San Diego and a high-level Al Qaeda operations base in Yemen were made in those 2 years.

The NSA had been tapping and eavesdropping on all calls made from that Yemen phone for years. So NSA recorded all of these phone calls.

Indeed, the CIA knew as far back as 1999 that al-Mihdhar was coming to the U.S. Specifically, in 1999, CIA operatives tailing al-Mihdhar in Kuala Lumpur, Malaysia, obtained a copy of his passport. It contained visas for both Malaysia and the U.S., so they knew it was likely he would go from Kuala Lumpur to America.

We asked top NSA whistleblower William Binney – a highly-credible 32-year NSA veteran with the title of senior technical director, who headed the agency's digital data gathering program (featured in a New York Times documentary, and the source for much of what we know about NSA spying) – what he thought of the government's claim that mass surveillance of Americans would have caught Mihdhar and prevented 9/11.

Binney responded:

Of course they could have and did have data on hijackers before 9/11. And, Prism did not start until 2007. But they could get the data from the "Upstream" collection. This is the Mark Klein documentation of Narus equipment in the NSA room in San Francisco and probably other places in the lower 48. They did not need Prism to discover that. Prism only suplemented the "Upstream" material starting in 2007 according to the slide.

Details here and here.

Indeed, widespread spying on Americans began before 9/11 (confirmed here, here, here and here.

And U.S. and allied intelligence heard the 9/11 hijackers plans from their own mouths:

According to Le Monde, the intelligence services of America's close ally France and of other governments had infiltrated the highest levels of Al-Qaeda's camps, and actually listened to the hijackers' debates about which airlines' planes should be hijacked, and allied intelligence services also intercepted phone conversations between Al-Qaeda members regarding the attacks

According to journalist Christopher Ketcham, America's close ally Israel tracked the hijackers' every move prior to the attacks, and sent agents to film the attack on the World Trade Centers

The National Security Agency and the FBI were each independently listening in on the phone calls between the supposed mastermind of the attacks and the lead hijacker. Indeed, the FBI built its own antenna in Madagascar specifically to listen in on the mastermind's phone calls

According to various sources, on the day before 9/11, the mastermind told the lead hijacker "tomorrow is zero hour" and gave final approval for the attacks. The NSA intercepted the message that day and the FBI was likely also monitoring the mastermind's phone calls

Shortly before 9/11, the NSA also intercepted multiple phone calls to the United States from Bin Laden's chief of operations

The CIA and the NSA had been intercepting phone calls by the hijackers for years (see also this)

According to the Sunday Herald, two days before 9/11, Bin Laden called his stepmother and told her "In two days, you're going to hear big news and you're not going to hear from me for a while." U.S. officials later told CNN that "in recent years they've been able to monitor some of bin Laden's telephone communications with his [step]mother. Bin Laden at the time was using a satellite telephone, and the signals were intercepted and sometimes recorded." Indeed, before 9/11, to impress important visitors, NSA analysts would occasionally play audio tapes of bin Laden talking to his stepmother.

And according to CBS News, at 9:53 a.m on 9/11, just 15 minutes after the hijacked plane had hit the Pentagon, "the National Security Agency, which monitors communications worldwide, intercepted a phone call from one of Osama bin Laden's operatives in Afghanistan to a phone number in the former Soviet Republic of Georgia", and secretary of Defense Rumsfeld learned about the intercepted phone call in real-time (if the NSA monitored and transcribed phone calls in real-time on 9/11, that implies that it did so in the months leading up to 9/11 as well)

But even with all of that spying, the government didn't stop the hijackers … even though 9/11 was entirely foreseeable.

ProPublica notes:

"There were plenty of opportunities without having to rely on this metadata system for the FBI and intelligence agencies to have located Mihdhar," says former Senator Bob Graham, the Florida Democrat who extensively investigated 9/11 as chairman of the Senate's intelligence committee.

These missed opportunities are described in detail in the joint congressional report produced by Graham and his colleagues as well as in the 9/11 Commission report.

***

Mihdhar was on the intelligence community's radar at least as early as 1999. That's when the NSA had picked up communications from a "terrorist facility" in the Mideast suggesting that members of an "operational cadre" were planning to travel to Kuala Lumpur in January 2000, according to the commission report. The NSA picked up the first names of the members, including a "Khalid." The CIA identified him as Khalid al Mihdhar.

The U.S. got photos of those attending the January 2000 meeting in Malaysia, including of Mihdhar, and the CIA also learned that his passport had a visa for travel to the U.S.

***

Using their true names, Mihdhar and Hazmi for a time beginning in May 2000 even lived with an active FBI informant in San Diego.

***

Let's turn to the comments of FBI Director Robert Mueller before the House Judiciary Committee last week.

Mueller noted that intelligence agencies lost track of Mihdhar following the January 2000 Kuala Lumpur meeting but at the same time had identified an "Al Qaida safe house in Yemen."

He continued: "They understood that that Al Qaida safe house had a telephone number but they could not know who was calling into that particular safe house. We came to find out afterwards that the person who had called into that safe house was al Mihdhar, who was in the United States in San Diego. If we had had this [metadata] program in place at the time we would have been able to identify that particular telephone number in San Diego."

In turn, the number would have led to Mihdhar and potentially disrupted the plot, Mueller argued.

(Media accounts indicate that the "safe house" was actually the home of Mihdhar's father-in-law, himself a longtime al Qaida figure, and that the NSA had been intercepting calls to the home for several years.)

The congressional 9/11 report sheds some further light on this episode, though in highly redacted form.

The NSA had in early 2000 analyzed communications between a person named "Khaled" and "a suspected terrorist facility in the Middle East," according to this account. But, crucially, the intelligence community "did not determine the location from which they had been made."

In other words, the report suggests, the NSA actually picked up the content of the communications between Mihdhar and the "Yemen safe house" but was not able to figure out who was calling or even the phone number he was calling from.

***

Theories about the metadata program aside, it's not clear why the NSA couldn't or didn't track the originating number of calls to Yemen it was already listening to.

Intelligence historian Matthew Aid, who wrote the 2009 NSA history Secret Sentry, says that the agency would have had both the technical ability and legal authority to determine the San Diego number that Mihdhar was calling from.

"Back in 2001 NSA was routinely tracking the identity of both sides of a telephone call," [9/11 Commission Executive Director Philip Zelikow] told ProPublica.

**

There's another wrinkle in the Mihdhar case: In the years after 9/11, media reports also suggested that there were multiple calls that went in the other direction: from the house in Yemen to Mihdhar in San Diego. But the NSA apparently also failed to track where those calls were going.

In 2005, the Los Angeles Times quoted unnamed officials saying the NSA had well-established legal authority before 9/11 to track calls made from the Yemen number to the U.S. In that more targeted scenario, a metadata program vacumming the phone records of all Americans would appear to be unnecessary.

In other words, the NSA had the technical ability and legal authority to intercept calls between Midhar and Yemen before 9/11 … and it actually did so.

In reality – despite the government continually grasping at straws to justify its massive spying program – top security experts say that mass surveillance of Americans does not keep us safe. Indeed, experts say that mass surveillance interferes with catching bad guys.

Does Math Exist or Is It a Human Creation?

Posted: 23 Jun 2013 04:00 PM PDT

Math is invisible. Unlike physics, chemistry, and biology we can’t see it, smell it, or even directly observe it in the universe. And so that has made a lot of really smart people ask, does it actually even EXIST?!?! Similar to the tree falling in the forest, there are people who believe that if no person existed to count, math wouldn’t be around . .at ALL!!!! But is this true? Do we live in a mathless universe? Or if math is a real entity that exists, are there formulas and mathematical concepts out there in the universe that are undiscovered? Or is it all fiction? Whew!! So many questions, so many theories… watch the episode and let us know what you think!

Is Math a Feature of the Universe or a Feature of Human Creation? | Idea Channel | PBS

Hat tip boingboing

Congress is Less Popular than Lice, Colonoscopies or Nickelback

Posted: 23 Jun 2013 02:30 PM PDT

I Tweeted this the other day, but decided it needed to be on the blog:

Click to enlarge

Source: Wonkblog

Where the Wealthy Folk Are

Posted: 23 Jun 2013 09:00 AM PDT

Source: The Economist

There are 12 million people on the planet that had investible assets of more than $1 million dollars.

Collectively, this group controls $46.2 trillion dollars (2012).

A quarter of them live in America (3.4m); followed by almost a sixth in Japan (1.9m) and a twelfth in Germany (over 1m). China and Great Britain round out the top 5.

All data via The Economist.

10 Sunday Reads

Posted: 23 Jun 2013 06:00 AM PDT

Good Sunday Morning! Yet another glorious day, a streak that is increasingly destined to end. If you are stuck indoors today, well then we have some items for your reading pleasure:

• Lowenstein: The Federal Reserve's Framers Would Be Shocked (NYT) see also Markets Might Be Misreading Fed's Messages (Real Time Economics)
• 7 mutual fund ads you'll never see (Marketwatch)
• China's economy is freezing up. How freaked out should we be? (Washington Post) see also All About the Maos: Charting China's Cash Crunch (China Real Time)
• Martin Wolf: How Austerity Has Failed (NYRB)
• Is Mark Zuckerberg the new Bill Gates? (pandodaily)
• Bank of America's Foreclosure Frenzy (Bloomberg)
• Going Dutch — Could Fee Hurdles Come Down Everywhere? (WSJ/Moneybeat)
• Booz Allen, the World’s Most Profitable Spy Organization (Businessweek)
• Why Tesla Thinks It Can Make Battery Swapping Work (MIT Technology Review)
• Take It Outside (WSJ)

Whats for brunch?

Ireland's Not So Rosy Turnaround

Source: NYT

2014 Aston Martin Vanquish (Convertible)

Posted: 23 Jun 2013 03:00 AM PDT

Source: Autoblog

Behold the 2014 Aston Martin Vanquish Volante in all its convertible glory. Like its hard top twin, the convertible Vanquish boasts a

• 5.9-liter V12 engine with 565 horsepower and 457 pound-feet of torque.
• Top speed of 183 miles per hour
• Three-layer top can be put up or down at speeds of up to 30 mph in around 14 seconds.
• 6ix-speed automatic transmission
• Weight distribution of 51:49

Yours for the low, low price of $297,995