Bernanke's Financial Crisis 101: Four Questions

Yesterday the chairman of the Fed, Ben Bernanke, gave a lecture to students of Morehouse College on the financial crisis. Bernanke provided an introduction to the crisis by posing and answering four questions in light of the four questions that children supposedly asked during passover. Fortunately the folks at Bloomberg recorded this lecture, and I watched it on YouTube. Here are my notes from the talk:

I've broken the notes down into the four questions Bernanke posed, with my synopsis of the answers he provided.

1. How did we get here?

There are many videos and explanations of this one, so you probably know this already. Basically, foreigners started lending U.S. banks lots of money, so much that banks and financial institutions (fints) had a hard time finding reliable people to loan this foreign money to, and began loaning money to unreliable people. The housing bubble just made fints even more willing to loan to unreliables, and package unreliable loans in ways which made them seem like safe investments. Basically, we as a nation were making lots of loans to unreliable people.

2. What has the Fed been doing about this?

Well, first, they cut the overnight loan rate to 0%, and plan to keep it low for a while. They also agreed to make short term loans to banks (this in turn mkes banks more willing to give out mortgages). They used "targetted lending" to help markets outside of banking (commercial paper, basically a short term loan, is an example of a market the Fed helped out succesfully). The Fed is also issuing programs to help ordinaries like us get credit, and finally it is buying securities in the open market. Basically, the Fed is doing quite a bit to help out! And it should .After all, this IS their job...

3. Could the Fed's actions lead to an inflation problem?

Bernanke didn't actually answer this question. Instead, he basically said that inflation isn't necessarily a bad thing. Bernanke noted that the Fed wants to maintain an inflation rate of 2%, and that currently inflation is below this. He also pointed out that deflation is a bad thing (is often an indicator of a struggling economy). My conclusion from this is Bernanke does think there will be an inflation problem, especially since he's trying to calm people down about it.

4. Why did the Fed and Treasury act to prevent the bankrupcy of Bear Sterns and AIG?

Bernanke first pointed out that he is very much in favor of letting troubled companies go bankrupt. But, because AIG is connected to the health of so many institutions, letting AIG fail would also force many other companies to fail. Furthermore, this could cause a global panic, which is never good in economics. 

Bernanke said that in order to avoid a situation like this in the future, the "rules of the game" need to change. First, all large financial institutions like AIG need to have federal oversight. Second, we need a system to deal with the failure of large fints. This would basically be the equivalent of the FDIC for large companies. I think that this is a very good idea.

So there you have it. I thought the talk was very understandable, and fun to hear. Hopefully these notes were informative, if not incredibly fun, to read.

My Favorite OpenMosaic so Far

I started a website called openmosaic.org last summer. The goal was to create a mosaic which anybody could edit, and to see how it changed over time. The mosaic has had some interesting drawings in the future, but I think this is my favorite so far. I really love the skier. Thank you to whoever made this!

Lessons From Carnegie Mellon Visit Days

My journey across the U.S. and back (the first of 4 in 6 weeks) proved very educational. For one, I took away several lessons from Manuel Blum's talk on how to succeed in grad school. Here are a few:

On Reading

A book is not a scroll. It is random access. That is the beauty of books. That you can start and stop reading anywhere.

On Writing

1. Have something to say.
2. Say it.
3. Stop when you have said it.
4. Finally, give it an accurate title

Finally...

Brains are muscles, and should be exercised regularly.

These lessons were worth traveling across the U.S. for. I thought they were worth sharing.

Ten Reasons Why Pittsburgh is Wonderful

After the horror stories my friends told me about how old and boring Pittsburgh is, I came to this city quite apprehensive about how much fun I was going to have. After nine weeks of living in Pittsburgh, I can safely say that my friends were wrong. Here are ten reasons why (in no particular order).

The Allegheny River

Building a raft and floating it down the Allegheny River for three days was one of the most memorable experiences in my life. I've never built something and then trusted it with my life. It was wonderful to finish such a big project, and get to spend three days on the peaceful Allegheny. There are so many peaceful places just outside of Pittsburgh, many people just don't get to venture out that far.

Bridges

Pittsburgh is a city of bridges. It's a lot of fun to see the multitude of industrial bridges crisscrossing the rivers on all sides. It's especially fun at sunset, or at night. Or during fireworks. Pittsburgh's bridges are beautiful.

Schenely Park

Pittsburgh has several large parks sprinkled amongst its many neighborhoods. My favorite was Schenely park. It had a fun 3 mile loop I would bike many afternoons. My favorite part about Schenely is the view. Pittsburgh is a beautiful city, and it's nice to know that such a great view was always just a short bike ride away.

La Prima Coffee


I finally found a good cafe in Pittsburgh. The best part is, La Prima is actually a coffee roaster. They have an industrial-style cafe on the strip that serves amazing mochas. They serve their cafe latte italian style--in glass mugs at a bar. The best part is the people at the La Prima warehouse are really nice. They gave us a tour of the place and a free bag of coffee just for stopping by after hours. I've never been greeting with such kindness from a coffee roaster.

The Strip


The Strip is the Pike Place Market of Pittsburgh, minus all of the flower stands and flying fish. It has fresh produce, plenty of people, and lots of asian stores. It's a great place to visit on a Saturday morning to get all sorts of goodies.

CMU Rooftops
There's something exciting about going on rooftops. Anu took me to the top of CMU's the very first day I got here, and I still remember them. It was so much fun to see CMU from such an interesting perspective.

Mt. Washington


Mt. Washington is a large hill (not mountain) just across the river (to the south) of downtown Pittsburgh. To get to the top, you take an incline (or furnicular). The view from there is gorgeous, both during the day and at night. I still haven't fulfilled my dream of going up there on a motorcycle, though...

Randomness


Pittsburgh is full of random stores and activities. Here are a few:

• A recycled bicycle store.
• Breweries in churches, hookah bars in churches, clubs in churches.
• City-wide water balloon fights.
• City-wide art shows.
• Amazing fireworks during and after baseball games.
• Free movie showings at Schenely park.
  

People

The best part about Pittsburgh though has been by far the people I've met. From roommates to labmates to random people I've bumped into on airplanes, everyone has been so open and welcoming. It's not often that you get to meet friends in Pittsburgh that you know you'll stay in touch with for a while. But here I think I've met at least one, hopefully a few.

A Surprise in the Mail

I received a nice surprise today in an orange envelope, first class mail. I didn't receive a scholarship, get a job offer, or win a million dollars. Instead I received a plastic bag filled with puzzle pieces that made up a giant letter my friend Sarah had written me.


I've gotten some pretty interesting messages in the past (in the form of cookies in the mail or flowers falling from the sky, courtesy of my ex-boyfriend), but I've never gotten such an interestingly packaged letter. Receiving and putting together this letter was definitely the highlight of my day. I've taken a few photos and a video of the puzzle going up on my wall, if you're interested.



I'm always surprised by how much of a difference things such as letters or cookies can make. Getting a letter from any of my friends always brightens my day. I sent Sarah some cookies, which inspired her to send me this giant letter, which I then put on my wall to remind me every day that somebody in Seattle cares about me. Sending surprises in the mail is something I am looking forward to doing more of in the near future (more about this in my next post).

Rafting The Allegheny Day 1 (8/7/08)

Today started off quite early. We all agreed to meet at Chris’s at 6:00 am, and by 6:30 were off to Giant Eagle to get some ice to cool off our produce for the trip. After getting ice we hopped into Chris’s tiny red car and headed off to Warren, PA. During our breakfast stop at McDonald’s we saw our first taste of the vicious thunderstorm to come. This was mixed news. On the one hand it promised for quite a rafting trip, on the other hand it meant the river would be nice and high, something that proved to be quite a blessing.
When we arrived at the Starbrick launch area the weather was beautiful. By the time we finished loading our raft it had gotten cloudy, and rain had started falling by the time we pushed off. We decided to press on nevertheless, and tempt fate with a call to lunch. Bad idea. The weather got progressively worse until we found ourselves, 3 rafters in the middle of a meal, stuck in the eye of a ferocious thunderstorm. Lightning was striking all around us, and far too close for comfort. At one point I saw a flash of light that was far too bright and immediately afterward thunder far too loud. These lightning bolts were hitting within a kilometer. As we were trying to battle the storm and keep the tuna from falling overboard, we began drifting far too close to shore and some trees waiting to snag our boat up and turn it over. We were unable to avoid the trees near shore, and plowed straight into one backwards, nearly toppling our boat. Luckily, we made it out alive. Finally, the storm ended and the sun came out. We spent the rest of the day appreciating the sun, clouds and rain sans thunder. Surprisingly enough, rafting wasn’t as boring as Chris had feared. There were moments when you could relax, but these only lasted about 15 minutes before yuou’d need to get up to steer or decide which side of an island to travel down.
We ended up camping on an island near Steward’s island about 10 miles from our starting point (near Tidioute). The island we picked was quite wild. Chris had to chop out the overgrown vegetation with his paddle. Nevertheless, the pebbled shore provided a great place for cooking and a campfire, and after a little while we had chicken Fajitas and a fire going. The fajitas were delicious. Since we had so much space to store food we were really able to take some rather fancy meals with us. After some s’mores, it was time to face the long, wet night ahead. We could already see the lightning flashing in the distance. We could only hope that the weather would clear up the next day.

Rafting The Allegheny Day 2 (8/8/08)

After a wet night we awoke to a misty morning. All of our stuff was wet, so after hanging up stuff to dry and packing up, we headed off, slightly damper than before. Chris wanted to cook breakfast on the raft, so he pulled out his stove and began making sausages and pancakes with Julia. The sausages were great, but the pancakes kept sticking to the pan. Note: always bring vegetable oil if you plan to make pancakes!
We spent the rest of our day swimming, navigating, paddling, reading, chatting, pulling the raft along the shallows, looking at clouds, and joking around. Even though dark clouds teased us along the horizon, we were lucky enough to avoid any thunderstorms today. Today was the most relaxing day of our trip. The public islands we were seeing so frequently began to end around 5:00 pm, so we decided to head in early and camp on a public island instead of risk getting thrown out of a private island in the middle of the night.
We ended up camping on a very habitable island the second night. We certainly weren’t the first people to camp on that island, and were able to take advantage of the camping area previous campers had set up. After a quick round of slinging practice, it was time to make a fire and cook dinner. Dinner this time was chicken curry. Dinner was delicious, and after a short firewood-gathering break it was time to make s’mores. After some riddles and a few good conversations, we all looked up and saw the stars. There were so many! We spent a good part of the night staring at the stars (pretending we knew what constellations we were looking at), and spotting shooting stars before going to bed. We even saw the Milky Way. What a magical night!

Rafting The Allegheny Day 3 (8/9/08)

We needed to cover a lot of ground today, so decided to wake up early and start paddling as soon as we could. We began paddling into the mist at 8:30, which gave us plenty of time to reach our goal. This day was the only day when the sun was out all day, and we could feel it. The sun was scorching hot, which made us appreciate the shade all those storm clouds were hideous. The sun, combined with tough paddling through dead spots and needing to carry the raft through almost a half-mile of shallow water made us very exhausted at the end. We went through some choppy waters, at one point nearly losing Julia as we hit an unexpected underwater rock. As we neared our goal, the wind began blowing the raft backwards, which, given our condition just added insult to injury.
Going backwards was frustrating, and we were exhausted, so decided to pull out early on the dock of the Eagle Creek motel. After packing up, getting one last picture, and tying the raft down, it was time to go. We all said our goodbyes to the Allegheny which had given us such a great adventure, and headed back to the concrete jungle of Pittsburgh. It was wonderful to see such a beautiful part of Pennsylvania.

Rafting the Allegheny

Me, Chris and Bryan on a test launch

I sort of plopped into this adventure by accident. I overheard two grad students in the HCI office talking about a rafting trip, asked them about it, got invited, and now I'm here. We (Chris, Bryan and I) built a 6 x 9 ft raft and are going to spend three days floating down the Allegheny river on it. The car is packed (complete with stuffed trunk and giant raft on top), and I'm heading over to Chris's in about 5 hours.

We are going to be floating until Saturday, and I will write more when I get back. But, you can look at photos of the building process and track our progress as we float along the river (assuming we get cell phone reception) at www.alleghenyrafters.com.

This should be an interesting experience. I wonder what sorts of crazy things will happen...Can't wait to write about the results of this experience (both building and floating).

Sensing Human Activity Using Financial Data

One of my latest projects, to help people visualize where they spend their money, and how often they visit places. The larger the polygon over a location, the more often you visit it. The more red/purple the polygon, the more you've spent there.


Spending information provides an interesting lens through which to view our lives. It is an imperfect lens to be sure, but nevertheless can reveal a surprisingly large amount of information if looked at the right way.

This summer I'm exploring different ways of detecting (and in some cases improving upon) aspects of human activity by looking at their spending data. You can learn all about the details of my project on my project website, which also contains a weekly journal of what I've been up to. If you want to learn more, check out the site!