pumpkinstrokemarrow

And then we were amused to see yesterday that the water called 'Highland Spring' counts as organic, despite it probably having had the fizz added, as it did not appear to be naturally fizzy. Probably something inorganic from Teeside. Amused, as we would probably sue everyone in sight if we found out that there was anything organic in the water, provided that is that it did not kill us first. Such are the wonders of consumer speak.

Then prompted by some foreigners going out into the fresh breeze for a fag, to wonder whether one would be allowed to smoke herbal tobacco, that is to say dried vegetables which did not include tobacco proper. A quick inspection of the regulations showed that the regulators had thought of that one. I quote: "“smoking” refers to smoking tobacco or anything which contains tobacco, or smoking any other substance, and, “smoking” includes being in possession of lit tobacco or of anything lit which contains tobacco, or being in possession of any other lit substance in a form in which it could be smoked". So infusing something combustible with inorganic nicotine is not doing to do. Maybe one could get some sort of a buzz from drinking something nicotine flavoured? Have to be careful with the dose as Agatha C. tells us that liquid nicotine is quite a useful poison.

Moving onto a higher plane, readers may recall the story of the bankers and the plumbers of August 16, 2007. I was reminded by the TLS entering the fray with a review of some banking books by one Stephen Fay, lately editor of 'Wisden Cricket Monthly', assuming that is that Mr G. has not linked me to the wrong Fay. Anyway, his story was rather different from mine.

We start by extending mortgages to all sorts of poor people who can't afford to buy a house so that they can afford to buy a house.

We then bundle up all these mortgages into things called CDOs which can be bought and sold. If I own the CDO I get the income stream from all the poor people.

We then invent a new kind of insurance called a CDS which enables me to buy insurance against someone, not necessarily anyone I have any legitimate interest in, but possibly one of the poor people above, defaulting on their repayments. CDSs can be bought and sold too and the amount of money tied up in CDSs for some particular default might well be out of all proportion to the size of the default concerned. CDSs become an industry in their own right, nothing much to do with houses for the poor. (I ought to add that these things are not off the wall. There are perfectly sensible uses for the them. The catch is that there are insensible uses for them too).

We then say that if I am holding a paired CDO and CDS that they cancel out and that they do not need to appear on my balance sheet. Which means that if I am a bank I can happily buy lots of these CDOs in the hope and expectation that their value will rise and that they will generate a decent income. A lot more than would be permitted if they did appear on my balance sheet.

There were then some mathematical types whose job it was to work out a fair price for CDOs and CDSs. Very highly paid types with PhDs but who, it seems, got it very wrong. Not helped by their employers being suckered into thinking that mathematical models described the real world. (A corollary of which was that, mathematicians having made models of the world in which sensible equilibria were reached, everybody else believed that the real world (that is to say the world where busybody governments did not interfere with the business of god-fearing bankers) would reach sensible equilibria. A form of mathematical hubris).

The straightforward consequence of all this was than banks wound up holding vastly more CDOs than they could properly afford and which they had bought at the wrong price anyway. It turned out that the poor people who could not afford to buy houses really could not afford to buy houses. Insurance companies were stuffed by collapsing CDSs. Banks were stuffed by collapsing CDOs. So the whole thing unravelled and we are getting our dustbins emptied three times a year and the bankers have had their bonuses cut by 5%. Long live the Trident!