Retroactive immunity / PAA update

C-Net notices something important; the whole retroactive immunity for domestic spying thing would apply to internet firms too, such as email providers, and backbone carriers. Conveniently, the Wall Street Journal reports that the NSA has been very deeply into recreating the old Echelon internet data-mining system that Congress ordered disassembled. Even more interesting, the Electronic Frontier Foundation reports that a new whistleblower has reported another "secret room" at a major wireless backbone provider, also for data monitoring, like the "secret room" whistleblower Mark Klein revealed at AT&T.

In other data-related news, the International Herald-Tribute notes that the US Treasury has started putting sites on "blacklists," and ordering US-based registrars to yank the domains offine without notice. In this article, a British travel agency operating in Europe offering tours of Cuba to Europeans had a US-based registrar - so the Treasury Department had them pulled down.

In a rare moment of investigative journalism, 60 Minutes had a rather significant story on the politicisation of the Justice Department under the Bush Administration in general, and more specifically, under the guidance of Karl Rove. In this atmosphere, perhaps it is not surprising that some people are raising questions about a massive Federal investigation into a prostitution ring, under the White-Slave Traffic Act of 1910. Personally, as I posted elsejournal:

Don't get me wrong. I'm sure he's guilty as sin. But isn't it just really unfortunate that one of the very few people who has been very publicly on the case of the massive, overweening fraud in the finance, ratings, and monoline insurance businesses - the very one who got Warren Buffet to set up a new monoline insurer that's actually sound so that future muni and state bonds could be issued less impaired - gets taken out right as the crises spawned by the clusterfuck of all this fraud really starts to hit? And as the ratings agencies turn to pure fraud to pretend the existing monolines have value? And as everyone is looking for some sort of way out that doesn't actually involve taking any of these actual losses, and people are talking massive, and I mean massive, government bailouts?

Isn't that timing just wretched?

And in a rare moment of Congressional action, the House has responded to the Justice Department's refusal to enforce their subpoenas of Harriet Miers and Joshua Bolten (by orders of the Chief Executive) by filing civil suit to enforce the same. Perhaps this is a far, far, far belated start to things. One can hope, anyway.

Something I haven't been talking about but it's bubbled to the surface

Okay, so, there are these things called "black swan events." They're unpredictable (or at least, essentially unpredicted) disruptions of major scale. Near-turm peak oil with a substantial decline rate - over 2% - would probably qualify as one, despite some predictions of it, since that continues to be unplanned for and has a 20-year recovery timeframe. It causes massive systemic disruption along the way.

There is a huge - I mean massive - derivatives market out there in financials. I don't understand it. At all. As far as I can tell, nobody really does. I've been trying to get some vague hint of a grip on its scale since I first really started hearing about it in 2006. I've heard numbers like $150 trillion notational dollars (and up!) and haven't known what to do with that kind of number. Because what do you do with that kind of number, when your GDP is $15 trillion? Seriously - what?

It's my favourite, by which I mean most terrifying, candidate for a black swan economic event. And I still don't have a good grip on it. Either all this shit cancels itself out once things start to fall down - in that there's a big set of swaps that add up in the end to zero, or close to it - and it ends up not mattering, or the game is over. Completely, totally, fucking over, and it's time to unplug the machine, swap the power supply, and hope you can salvage the processor. It's one of those two things. I have been, and continue to be, betting on the former, despite what comes next here.

Marketwatch's Paul Ferrell reports that the actual number is more like $516 trillion notational, with an actual fall-out value of somewhere around $11 trillion. That's, again, against a GDP of $15 trillion. And as Financeguy on the Market Ticker Forums points out tonight, that market, like most of the other ones, is in trouble.

Now, you can't really plan for this. You can't really plan for a hard reboot of the entire financial system. I can't tell you what to do because I don't know. It's the kind of situation where since you cannot, definitionally, plan for the bad case, you plan for the one you can plan for, even if it's less likely, or unlikely. And in that case, it all falls in on itself and reduces to a much smaller number that, while nasty, can be handled as part of the rest of the credit implosion.

That's how you end up hoping the economy only takes a $1 trillion dollar hit over the next couple of years, instead of, well... who knows?

And that's why I haven't been talking about it. Because I'm hoping it just goes away.