Helping to Develop a Perspective on Current Events

per-spec-tive, noun. a. the faculty (mental ability) of seeing all the relevant data in a meaningful relationship.  b. a mental view, outlook or survey.

Global Climate Scares

Global Cooling Scare (1974 - 1975)

Global Warming Scare (Now)

TIME - Global Cooling 

Time Magazine
Another Ice Age?
Jun. 24, 1974



Newsweek - Global Cooling

TIME - Global Warming


TIME - Global Warming





Mankind is destroying the earth
with global warming...

Al Gore


or not...

Al Zore

Ponzi Schemes

A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.

Bernard Madoff's Ponzi Scheme

Madoff's swindle was an illegal Ponzi scheme in which individuals voluntarily placed their money, thinking that they were investing in a stable high-yield account. In reality they were not investing in marketable assets, rather the money from later investors was directly transferred to earlier investors, with any leftover funds being used by Madoff. The only investors who were lucky enough to get their original investment back were those who invested early and received a large amount of interest, and/or those who withdrew early and regained their funds before the scheme collapsed. Like other Ponzi schemers, Madoff counted on the fact that it was unlikely that a large number of investors would withdrew all their money at the same time causing a "run on the scheme"; however, that was exactly what happened in 2008.


US Social Security System

Social Security is a system (quasi Ponzi scheme?) in which many individuals voluntarily work a job that requires some of their income (through taxes) to be "invested" in a Social Security Trust Fund. This trust fund has no marketable assets, and money is transferred from later tax payers (current workers) to earlier tax payers (retired workers), with any leftover funds being used by the federal government. The luckiest "investors" (tax payers) are the ones who live a long life and retire early in the history of Social Security program, when there are many more working people paying into the system than there are retired people taking money out of the system. The Social Security system cannot collapse as suddenly as a true Ponzi scheme, since all tax payers cannot simultaneously withdraw their "investment" at the same time. The majority of people* only receive money from the Social Security system after reaching the official retirement age. Many people consider Social Security to be a type of government-controlled insurance, and would not call it a Ponzi scheme. Since the Social Security system was created by the US government, it would be difficult to call it an illegal scheme. 

* Two-thirds of retirees receive at least half of their income from Social Security. One in six Social Security beneficiaries receive survivor benefits as the spouses and dependents of deceased workers. Another sixth receive disability benefits.

Bernard Madoff arrested over alleged $50 billion fraud

Fri Dec 12, 2008 12:22pm EST

By Edith Honan and Dan Wilchins

NEW YORK (Reuters) - Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion "Ponzi scheme" in what may rank among the biggest fraud cases ever.

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.

Madoff told senior employees of his firm on Wednesday that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme," with estimated investor losses of about $50 billion, according to the U.S. Attorney's criminal complaint against him.

A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.

On Thursday, two agents for the U.S. Federal Bureau of Investigation entered Madoff's New York apartment.

"There is no innocent explanation," Madoff said, according to the criminal complaint. He told the agents that it was all his fault, and that he "paid investors with money that wasn't there," according to the complaint.

The $50 billion allegedly lost would make the hedge fund one of the biggest frauds in history. When former energy trading giant Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets.

U.S. prosecutors charged Madoff, 70, with a single count of securities fraud. They said he faces up to 20 years in prison and a fine of up to $5 million.

The Securities and Exchange Commission filed separate civil charges against Madoff.

"Our complaint alleges a stunning fraud -- both in terms of scope and duration," said Scott Friestad, the SEC's deputy enforcer. "We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors."

Dan Horwitz, Madoff's lawyer, told reporters outside a downtown Manhattan courtroom where he was charged, "Bernard Madoff is a longstanding leader in the financial services industry. We will fight to get through this unfortunate set of events."

A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.

Authorities, citing a document filed by Madoff with the U.S. Securities and Exchange Commission on January 7, 2008, said Madoff's investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management. Those clients may have included other funds that in turn had many investors.

The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.


An investor in the hedge fund said it generated consistent returns, which was part of the attraction. Since 2004, annual returns averaged around 8 percent and ranged from 7.3 percent to 9 percent, but last decade returns were typically in the low-double digits, the investor said.

The fund told investors it followed a "split strike conversion" strategy, which entailed owning stock and buying and selling options to limit downside risk, said the investor, who requested anonymity.

Jon Najarian, an acquaintance of Madoff who has traded options for decades, said "Many of us questioned how that strategy could generate those kinds of returns so consistently."

Najarian, co-founder of, once tried to buy what was then the Cincinnati Stock Exchange when Madoff was a major seatholder on the exchange. Najarian met with Madoff, who rejected his bid.

"He always seemed to be a straight shooter. I was shocked by this news," Najarian said.


Madoff had long kept the financial statements for his hedge fund business under "lock and key," according to prosecutors, and was "cryptic" about the firm. The hedge fund business was located on a separate floor from the market-making business.

Madoff has been conducting a Ponzi scheme since at least 2005, the U.S. said. Around the first week of December, Madoff told a senior employee that hedge fund clients had requested about $7 billion of their money back, and that he was struggling to pay them.

Investors have been pulling money out of hedge funds, even those performing well, in an effort to reduce risk in their portfolios as the global economy weakens.

The fraud alleged here could further encourage investors to pull money from hedge funds.

"This is a major blow to confidence that is already shattered -- anyone on the fence will probably try to take their money out," said Doug Kass, president of hedge fund Seabreeze Partners Management. Kass noted that investors that put in requests to withdraw their money can subsequently decide to leave it in the fund if they wish.

Bernard L. Madoff Investment Securities has more than $700 million in capital, according to its website.

Madoff remains a member of Nasdaq OMX Group Inc's nominating committee, and his firm is a market maker for about 350 Nasdaq stocks, including Apple, EBay and Dell, according to the website.

The website also states that Madoff himself has "a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."

The company's website may be found here:

(Additional reporting by Christian Plumb, Phil Wahba, Michelle Nichols and Jennifer Ablan in New York and Rachelle Younglai in Washington; Editing by Andre Grenon, Bernard Orr and Alex Richardson)



Why is Social Security often called a Ponzi scheme?

Charles Ponzi, an Italian immigrant, started the first such scheme in Boston in 1916. He convinced some people to allow him to invest their money, but he never made any real investments. He just took the money from later investors and gave it to the earlier investors, paying them a handsome profit on what they originally paid in. He then used the early investors as advertisements to get more investors, using their money to pay a profit to previous investors, and so on.

To keep paying a profit to previous investors, Ponzi had to continue to find more and more new investors. Eventually, he couldn't expand the number of new investors fast enough and the system collapsed. Because he never made any real investments, he had no funds to pay back the newer investors. They lost all the money they "invested" with Ponzi.

Ponzi was convicted of fraud and sent to prison for two years. When he came out, he returned to Italy, where he became a top economic adviser to Benito Mussolini.

Just like Ponzi's plan, Social Security does not make any real investments -- it just takes money from later "investors," or taxpayers, to pay benefits to earlier, now retired, taxpayers. Like Ponzi, Social Security will not be able to recruit new "investors" fast enough to continue paying promised benefits to previous investors. Because each year there are fewer young workers relative to the number of retirees, Social Security will eventually collapse, just like Ponzi's scheme.

May 11, 1999


There are many reasons for the popularity of Social Security. It is the only part of the welfare state which promises benefits to nearly every person. It is also seen to relieve adult children of the responsibility of supporting their elderly parents, and it helps the elderly poor for whom there is a great deal of sympathy.

There is only one problem: the system is a fraud. In theory, Social Security is a form of "insurance." In practice, it is a "Ponzi scheme." Historian Mark Knutson, writes that in the summer of 1920, [Charles K.] Ponzi claimed he was giving investors just a portion of the 400% profit he was earning through trade in postal reply coupons. As Ponzi paid the matured notes held by early investors, word of enormous profits spread through the community, whipping greedy and credulous investors into a frenzy. Investigation later revealed that there were no coupons or profits – earlier notes were paid at maturity from the proceeds of later ones. The simplicity and grand scale of his scheme linked Ponzi's name with a particular form of fraud.

This type of fraud is called a pyramid scheme. To pay off earlier "investors" in such a scheme, an ever larger number of participants must to be added.

In the early 1970s, a federal law known as ERISA (Employment Retirement Income Security Act) was passed after it was found that many corporate pension plans were paying current beneficiaries directly from current contributor's funds. When income declined, the corporate pension plans were terminated - just like the late investors in Ponzi's scheme. (The whole idea that businesses should handle employee savings due to federal tax preferences helped create this problem in the first place.) Under ERISA, any employer who failed to fully fund its pension plan could be held criminally liable.

Charles Ponzi went to prison. But the politicians who run Social Security are not held liable for what is normally considered criminal behavior. 

The Prussian Model

Many Americans believe that Social Security is an integral part of our free enterprise system, but it is neither American nor free enterprise. The original Social Security system was created by the Prussian/German leader Otto von Bismarck in 1883. Bismarck was looking for a way to win the support of the working people, who were unhappy with the high taxes needed to support the large German military and the high prices created by the government-protected industrial cartels.

He wanted to find a way to con people into believing that they were going to get something from the state, without its actually having to deliver. He asked an actuary how long most people could be expected to live. The answer was 65 years. Bismarck then set the age of eligibility for his social security system at 65, knowing full well that most of the people would have died before they received a dime from the system. In spite of this, the system was wildly popular.

The Prussian concept of Social Security was an authoritarian one – based on the false premise that people are incompetent to look after their own affairs and need a paternalistic socialist state to force them to provide for their own retirement.

In the US during the 1930s, President Franklin D. Roosevelt was looking for a way to gain the support of the working people who were unhappy with the continuing Great Depression and the high taxes needed to support his New Deal programs. So the Social Security program was created in 1935 (just in time for the 1936 elections). 

The Social Security "Trust Fund" Myth

Republican and Democrat politicians tell us that the money each employee "contributes" to Social Security goes into a "trust fund." The money from this fund is "invested" in federal government bonds. Upon retirement, the "reserve" made up of "contributions" and the interest on the bonds would be used to pay benefits to the retiree.

From the beginning, in spite of the claims that it was an old-age insurance program, Social Security paid its benefits from current cash flow, rather than paying benefits out of interest accrued on a reserve fund as a private pension plan would do. As Social Security taxes were paid into the system, the funds were immediately doled out to beneficiaries. As more taxpayers retired, they would be paid from the money taken from younger taxpayers – just like Ponzi's investors.


The Social Security program does have a few similarities to a Ponzi scheme. The main point is that it is a system where the later contributors pay for the returns of earlier contributors and if the number of later contributors dwindle to a point where they cannot support the existing promised benefits then the system would collapse. Second, the money collected is not invested to produce more money so the system pretty much depends on new taxpayers. Finally, the earlier participants of Social Security do get a bigger return on their money.

So why is Social Security not a Ponzi scheme? Well, first of all it does not make wild claims about making money fast. It also does not claim to be investing your money so it is not actually fraudulent. It is also based on taxes so it is not a voluntary scheme like the original. Finally, when a person dies then the payout stops under Social Security so it is possible that some people who contribute never see a single penny returned. The Social Security Administration actually calls the program a "pay-as-you-go insurance system" and claims that it is sustainable as long as the population demographics of retirees and working people stay stable.

Regardless of the semantics, in the near future there will be many more retirees than working folks so the demographics shift will make Social Security pay out more than it takes in. According to the 2008 Social Security Administration report the program could cover 75 percent of scheduled benefits until 2082 after the current surplus exhausts in 2041. This means that young people like me probably cannot count on solely Social Security for our retirement. Just in case Social Security collapses, I think everyone should be putting at least the amount paid in Social Security taxes in an IRA or mutual fund for the sake of a better financed retirement.



The Social Security Trust Fund is held in Treasury Bonds.

This means that whatever money that goes into the Trust Fund (amounts above the current payout) is nothing more that a big fat I.O.U. from Congress. The money doesn't sit there waiting, it gets spent in the current budget.

Once the out-go exceeds the funds going in, Congress will have to start paying benefits out of the Trust Fund, i.e. paying back on those Treasury Bonds, which comes out of currently collected taxes.

The only way that can happen is by either cutting back in other spending (which we know isn't going to happen) or raising tax revenues.

That is the moment that I'm scared of. I know Social Security won't be there for me, and I seriously doubt it will be there for my parents (with its current design).



Unlike a typical private pension plan, the Social Security Trust Fund does not hold any marketable assets to secure workers' paid-in contributions. Instead, it holds non-negotiable United States Treasury bonds and U.S. securities backed "by the full faith and credit of the government". The Office of Management and Budget has described the distinction as follows:

These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense.... They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. (from FY 2000 Budget, Analytical Perspectives, p. 337)



“What often confuses people [about the Trust Fund] is that they see these securities as assets for the government. When an individual buys a government bond, he or she has established a financial claim against the government. When the government issues a security to one of its own accounts, it hasn't purchased anything or established a claim against some other person or entity. It is simply creating an IOU from one of its accounts to another. Hence, the building up of federal securities in federal Trust Funds – like those of Social Security – is not a means in and of itself for the government to accumulate assets. It certainly establishes claims against the government for the Social Security system, but the Social Security system is part of the government. Those claims are not resources that the government has at its disposal to pay future Social Security benefits... The key point is that the Trust Funds themselves do not hold financial resources to pay benefits – rather, they provide authority for the Treasury Department to use whatever money it has on hand to pay them.” (David Stuart Koitz, “Social Security Taxes: Where Do Surplus Taxes Go and How Are They Used?” Congressional Research Service, April 29, 1998 )




National Institutes of Health Research Spending on Various Diseases 

Yearly US Deaths by Selected Diseases

US National Institutes of Health (NIH)
Research Spending by Disease


* Estimated NIH Research Spending for 2009

Chart of Estimated NIH Research Spending (US$ in 2009) per Patient Death

Pirates - Then and Now

America Launches Anti-Piracy Mission (1801)

China Launches Anti-Piracy Mission (2008)

Barbary War - Enterprise
Enterprise capturing Tripol

First Barbary War
On Jefferson's inauguration as president in 1801, Yussif Karamanli, the Pasha (or Bashaw) of Tripoli, demanded $225,000 from the new administration. (In 1800, Federal revenues totaled a little over $10 million.) Putting his long-held beliefs into practice, Jefferson refused the demand. Consequently, in May 1801, the Pasha declared war on the United States, not through any formal written documents but by cutting down the flagstaff in front of the U.S. Consulate. Morocco, Algiers, and Tunis soon followed their ally in Tripoli.

In response, Jefferson sent a group of frigates to defend American interests in the Mediterranean, and informed Congress. Although Congress never voted on a formal declaration of war, they did authorize the President to instruct the commanders of armed vessels of the United States to seize all vessels and goods of the Pasha of Tripoli "and also to cause to be done all such other acts of precaution or hostility as the state of war will justify." Enterprise capturing Tripoli

The schooner USS Enterprise defeated the 14-gun Tripolitan corsair Tripoli after a fierce but one-sided battle on August 1, 1801.

The American navy went unchallenged on the sea, but still the question remained undecided. Jefferson pressed the issue the following year, with an increase in military force and deployment of many of the navy's best ships to the region throughout 1802. USS Argus, USS Chesapeake, USS Constellation, USS Constitution, USS Enterprise, USS Intrepid, USS Philadelphia and USS Syren all saw service during the war under the overall command of Commodore Edward Preble. Throughout 1803, Preble set up and maintained a blockade of the Barbary ports and executed a campaign of raids and attacks against the cities' fleets.


In 1786, Thomas Jefferson and John Adams went to negotiate with Tripoli's envoy to London, Ambassador Sidi Haji Abdrahaman or (Sidi Haji Abdul Rahman Adja). Upon inquiring "concerning the ground of the pretensions to make war upon nations who had done them no injury", the ambassador replied:

It was written in their Koran, that all nations which had not acknowledged the Prophet were sinners, whom it was the right and duty of the faithful to plunder and enslave; and that every mussulman who was slain in this warfare was sure to go to paradise. He said, also, that the man who was the first to board a vessel had one slave over and above his share, and that when they sprang to the deck of an enemy's ship, every sailor held a dagger in each hand and a third in his mouth; which usually struck such terror into the foe that they cried out for quarter at once.

Jefferson reported the conversation to Secretary of State John Jay, who submitted the Ambassador's comments and offer to Congress. Jefferson argued that paying tribute would encourage more attacks.

In 1798, Napoleon seized Malta in route to his campaign in Egypt. Requesting safe harbor to re-supply his ships, he waited until his ships were safely in port, and then turned his guns on his hosts. The Knights of Malta were unable to defend themselves from this internal attack. After holding the Barbary Pirates in check for centuries, they were forced to leave their island stronghold. Napoleon's actions created a power vacuum in the Mediterranean which the pirates exploited.



Chinese and Somali Pirates
Chinese destroyers and supply ship at port in Sanya, southern Hainan province, before leaving for their first overseas mission, 26 Dec 2008

Somali Pirate Attacks
Three Chinese warships were on their way to the Gulf of Aden Friday to join international efforts to fight Somali pirate attacks. Japan's prime minister also said Japan may consider joining the anti-piracy mission.

China's official news agency Xinhua reported that two destroyers and a supply ship carrying Special Forces troops left from a base in the southern province of Hainan Friday.

The commander of the three warships, Rear-Admiral Du Jingchen, described the mission as the vessels were preparing to leave.

He said each ship will have different tasks and assignments, but the main mission is to protect ships in Gulf of Aden, and escort ships to protect them and their cargo.

China announced Tuesday that it planned to join anti-piracy efforts after the United Nations Security Council authorized nations to attack pirate bases from air and land.

The Chinese ships will join warships from other countries including India, Russia, NATO and the United States.

Somali pirates have stepped up their attacks against ships plying the waters off Somalia's coastline over the past year, seizing tens of millions of dollars in ransom fees.

The International Maritime Bureau reports that 63 of 199 piracy incidents recorded worldwide in the first nine months of 2008 were in waters off Somalia and in the Gulf of Aden.

, , December 26, 2008



Somali Pirates on Chinese ship
Pirates holding the crew of the Chinese fishing vessel Tianyu No. 8
Piracy off the Somali coast has been a threat to international shipping since the beginning of Somalia's civil war in the early 1990s. Since 2005, many international organizations, including the International Maritime Organization and the World Food Programme, have expressed concern over the rise in acts of piracy. Piracy has contributed to a rise in shipping costs and impeded the delivery of food aid shipments. Ninety percent of the World Food Programme's shipments arrive by sea, and ships have required a military escort. According to the Kenyan foreign minister, Somali pirates have received over $150 million (US dollars) in ransom money during the 12 months prior to November 2008.

Somali pirates have attacked dozens of vessels with a fraction of those attacks resulting in a successful hijacking. Between the beginning of 2008 and November 19, 2008 there have been 95 attacks which includes 39 successful hijackings. Most of these attacks occur in the Gulf of Aden but the Somali pirates have been increasing their range and have started attacking ships as far south as off the coast of Kenya in the Indian Ocean.


Automotive Fuel Duel

Ethanol from Corn

Gasoline from Crude Oil

Ethanol energy content = 75,700 Btu/gallon (LHV)

Raw material (corn) cost trend:Corn

Corn Price

Transportation options for ethanol: water carrier, rail, truck  (why not pipeline?)

Gasoline energy content = 115,000 Btu/gallon (LHV)

Raw material (crude oil) cost trend:Oil Barrel

Oil Price

Transportation options for gasoline: pipeline, water carrier, rail, truck

Fuel Duel related links...

Ethanol 85 (E-85) Versus Unleaded Gasoline: Comparison of Power and Efficiency in Single Cylinder, Air-Cooled Engines

Review of Transportation Issues and Comparison of Infrastructure Costs for a Renewable Fuels Standard

Pipeline Considerations for Ethanol


US Fatalities - a Comparison

[source] [source]

January 22, 1973
US Supreme Court ruled on legality of
premature termination of human life.


September 11, 2001
Suicidal Islamic men destroyed
World Trade Center in New York City.
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