April 2014 Archives

Home Again

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Sorry for not notifying you that i would be away for a while. I have been traveling in Europe with my wife and a granddaughter during her vacation week. Something I never did. Times have changed. We visited the Netherlands where I spent a year teaching in 2001. That was like coming home. Then a quick trip to F├╝rth in Germany to show her the house where my wife was born and left in 1939. I have a few days work to get through and I will get back to posting to this website.

Passover Thoughts

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seder table

Last night my wife and I celebrated Seder with cousins as we have in the past. I find this occasion a relatively rare opportunity for reflection on my Judaism. What I mean here is that, although age does bring more reflection, my thoughts only rarely rest on my religious upbringing and practices. This Holiday celebrates the liberation of the Jews from slavery under Egyptian rulers and their long journey to find a place to settle that followed. As so often, I am triggered by what David Brooks has written in the NYTimes. His column today focuses on Passover, and, more specifically on what he called “rebinding,” the passage from a set of enslaving laws to the very different set written in the Torah.

He argues that the escape from Egypt was very disorderly because Moses, the leader of the Jews was not a very orderly, organized person. It took God’s intervention in bringing ten plagues down to facilitate the hasty escape. His point seems that, once out of bondage, the laws of the Torah brought order to the lives of the Jews.

…Exodus is a reminder that statecraft is soulcraft, that good laws can nurture better people. Even Jews have different takes on how exactly one must observe the 613 commandments, but the general vision is that the laws serve many practical and spiritual purposes. For example, they provide a comforting structure for daily life. If you are nervous about the transitions in your life, the moments when you go through a door post, literally or metaphorically, the laws will give you something to do in those moments and ease you on your way.

The first sentence above is much in the air today where our politics in the US is riven by a strong difference about the consequence of laws that restricts one’s actions. After a period of passing laws that provide a “comforting structure’ for many—gays, blacks, poor, sick—who must wander through the desert in their absence, we appear to be backing away from what the Jews learned back in biblical times. Comfort does not mean luxurious ease, but a context free of worry and suffering. Another word to use here is freedom, as in the two negative items in Roosevelt’s Four Freedoms: want and fear.

The rituals of the Seder are found in the Haggadah, which retells the story of the Exodus. It contains a number of passages with the general line of God telling “you” to do something. Most of the time, this is taken in the singular referring to commands to each separate individual. But it can also be taken in the plural as directed to the community as a whole. I find the latter to be the more compelling and central to my vision of flourishing. The self that finds solace and comfort in the world is not some mystical ego or homunculus residing in the body, but a self created by reflections of the assessments of the communities in which one exists and acts.

The laws that protect one’s property, tangible and intangible, that seem to have become predominant today, are very different from the fundamentally moral laws of the Bible. There are, for sure, prohibitions agains the misappropriation of one’s property, but the more dominant theme is about behaving as a community. If there is a single lesson for us today from the Passover story, it is this. We exist by virtue of being a community with a set of moral laws that guide our communal life.

One further thought from the column. Brooks ended it with this paragraph.

The 20th-century philosopher Eliyahu Dessler wrote, “the ultimate aim of all our service is to graduate from freedom to compulsion.” Exodus provides a vision of movement that is different from mere escape and liberation. The Israelites are simultaneously moving away and being bound upward. Exodus provides a vision of a life marked by travel and change but simultaneously by sweet compulsions, whether it’s the compulsions of love, friendship, family, citizenship, faith, a profession or a people.

I completely disagree with Dessler’s quote about moving from freedom to compulsion. Compulsion is the antithesis of freedom and of the authenticity of being. The whole idea of order in society is to allow individuals to find their authentic selves. The metaphor simply doesn’t work even with the attempt to “sweeten” it. One must love simply out of care for the world of human life and nature. It is only a short distance from compulsion to love to compulsion to obey. I am a bit shocked by Dessler and Brooks’s language. Of course, this passage is taken out of its context and I may be misinterpreting Dressler’s use of the word. In any case it seems inappropriate during Passover. The passage from freedom to compulsion is the exact opposite of the Passover story.

Stealing or Merely Profiting from One's Smarts

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willy sutton

The news media have been buzzing with stories of the piles of money that some traders have been amassing using the sophisticated method called high frequency trading (HFT). The NYTimes magazine carried a story last Sunday about a small group that discovered the secret behind the success of HFT and set out to defeat it returning sanity and fairness to the financial world. Concurrently, the author Michael Lewis has just published a book on the same subject. I tried to work through the technology involved but got bogged down.

In a nutshell, these traders relied on minuscule gaps in the time between orders got entered into the computers that automatically match buyers and sellers and the time the orders were executed. My first thought on reading about this was that I was getting ripped off as an investor, relying on the earnings and growth of securities for my livelihood now being retired. But that’s not what is happening. The price I pay whenever I make trades (rarely) may be distorted by this practice, but than only imperceptibly. The traders made their money by the huge volume of orders they execute, talking only a tiny amount each time.

The big loser is all of us, that is the US economy and society as a whole. The money taken out of the market goes to the richest people in America and only makes them richer. If they turned around and reinvested the money or spent it, the economy would be the same size as if the funds filtered through the market and ended up providing jobs and growth. (I am not promoting growth as my readers know, but looking at just this peculiar case.) To some extent, this practice contributes to growing inequality. I do not have the data to determine how much this contributed to inequality relative to outrageous wages and benefits paid to CEOs.

From what I read, HFT may or may not be illegal. Only last week, the US Attorney General said that he was going to see if this practice broke insider trading laws. It is immoral whether currently legal or not. It’s immorality has roots all the way back to the Jewish Bible and probably to other even older cultures. The Torah has a strict prohibition against stealing and to act fairly or justly in matters of commerce. One does not withhold the wages of workers.The Talmud says that every fraudulent dealing, every gain obtained by betting or gambling or by raising the price of breadstuffs through speculation, is theft. But what is HFT if it not gambling or speculation.

From the very little I know about securities law, the point of most regulations is intended to protect some investors from being defrauded by others, using practices that give them an unfair advantage. As I noted, HFT has an insignificant impact on my investments, but it is a fraud perpetuated on the whole of American society. The idea of the stock market, a pinnacle if not the linchpin of capitalism, is to provide funds to build and lubricate industry. Those who apply the oil are entitled to profit by their efforts, but only within limits. The moral argument countering the ancient judgments on such activities is that the financial market benefits the whole society and so, on balance, is legitimate.

The money involved in HFT would otherwise be primary fodder for the economic machine that provides goods and services for everyone. It is only that aspect that offsets the old prohibitions against usury and fraud. In the case of HFT, it is quite clear that the money involved has little or nothing to do with lubricating the economy. It is purely money going in search of money without ever leaving Wall Street. These traders are using a morally justified means for immoral ends.

Willie Sutton, the notorious bank robber (pictured), is said to have answered a question about why he was robbing banks with “Because that’s where the money is.” The parallel to HFT is ominously close. If you asked the HFT traders why they are taking money without doing anything to earn it, the answer would be much the same. Is it stealing? If stealing is taking someone else’s property without any quid pro quo, HFT comes pretty darn close. If there is a difference, it is only that the money they extract is doesn’t seem to have an owner. But this is not correct; the money belongs to all of us because, without this skimming, the funds would more directly add to the common pot.

That’s not the end of the story. A democracy like ours relies on a foundation of trust and fairness to function. Inequality is eroding whatever stock of trust and fairness has accumulated over time. Joe Nocera noted this in his regular NYTimes column writing, “The tactic smells to high heaven, creating an unlevel playing field that costs investors money.”