"Reprehensible" Defined by Example: Gross defends pyramid schemes, CIA defends torture

Two articles yesterday in Slate.com offer absolutely textbook examples of what the word "reprehensible" means:

Slate.com's financial editor says, "bubbles are great for the economy." It's one of the most disgusting examples of sleight-of-hand I've ever seen, when Slate.com's "Moneybox" editor argues that the bubble-and-burst cycle is how everything great about the America economy has ever gotten built: that there would never have been railroads without the railroad stock bubble, that there would never have been telegraphs and telephones without the telegraph stock bubble, that there would never have been Internet commerce or broadband to the home without the dot-com bubble. His only idea, the one that he repeats over and over again to try to keep you from thinking about anything else, is "good ideas get funded ten times," that a bubble is what happens when all of America agrees that something would be a good idea, and they build ten times as much of it as can possibly be paid for before the loans are due.

I'm guessing that Daniel Gross, being a financial journalist, didn't lose any more in the dot-com bubble than I did. Or maybe a little more. Otherwise he'd know what's so reprehensible, so morally loathsome, about what he's saying when he says that what's great about bubbles is that the initial investors lose everything, leaving the second generation of investors able to pick up really valuable permanent infrastructure for 1/10th of what it cost to build ... the part where almost everybody loses everything, destroying the part of the American Dream where we promise people that if they live frugally and invest their money for the benefit of their kids, their kids will live a better life.

Look, we make this more complicated than we have to by having two words that mean almost the same thing: "investment bubble" and "pyramid scheme." Because an investment bubble is mathematically identical to a Ponzi scheme, and differs from it only in minor organizational details for the tiny minority at the top of the pyramid. What drives people to invest in both pyramid schemes and in investment bubbles, as someone points out to Gross in the Q&A on the site, is "momentum," namely that they see other people making money off of this thing. What they don't ever figure out in time is that the money that's getting paid to the first people in is coming from people like them. Once they're in, to keep the returns going, they have to find a geometrically expanding number of suckers for each new crop of "investors" to harvest their "returns" from. As with all things that expand via geometric progression, you eventually run out of suckers to recruit. At which point the return on investment drops to zero. At which point anybody who hasn't gotten paid off yet just lost everything. And by the simple math of geometric progression, that group is at least half of the people who bought in, and may run closer to 3/4ths or even 90%.

Pyramid schemes like Ponzi's eponymous scheme are illegal because they're inherently crooked, a blatant attempt to fleece half or more of the investors by delivering something to them that the schemer knows is fundamentally worthless, that the investor sells to the sucker knowing that the sucker is going to lose their investment. Regulators are supposed to treat investment bubbles the same way, but fewer people go to jail I'm afraid.

Clinton's CIA "bin Laden" expert says, "the Rendition Program has been the single most effective counterterrorism operation ever conducted." Michael Scheuer, the man at the CIA that Bill Clinton put in charge of going after al Qaeda, is the guy who designed the "extraordinary rendition" program. He's very proud of this, and thinks that it's the great thing since sliced bread, as he explained in a statement he gave to the House Foreign Affairs Committee. The history that he gives is that it started with a simple idea: an awful lot of bin Laden's deputies had arrest warrants out on them in their home countries; what's wrong with the CIA serving those arrest warrants? He says that the CIA, to head off complaints about us handing people over to torturers, asked nicely that the countries we handed these people over to not torture them. And to eliminate any incentives for torture, the CIA told the countries we returned these guys to that there wasn't any information we wanted from them, we just wanted them off the streets. Of course, he all but says out loud that of course these guys were tortured, but hey, we had deniability.

He says that when Bush took over, he wanted three changes to the program: first of all, screw only going after guys with arrest warrants outstanding. Secondly, screw handing them over to other governments, the CIA should keep 'em. Third, heck yes we want them tortured. Even so, Scheuer is just okay with these changes. Why? Because, he says, the CIA is 100% sure that they only did this to Bad Guys, that never once did they make a mistake and imprison or torture anybody who wasn't a high-ranking active-duty al Qaeda terrorist leader. How does he know this? Because the CIA says so, and because they had people with prosecutorial experience review the cases. That's right. In case it isn't obvious why this is so disgusting over and above the fact that it amounts to an official policy of capturing people without warrant, holding them without trial, and torturing them even though torture never produces useful information, what's completely over-the-top reprehensible about this is that it was enough to have a prosecutor convict someone.

I'm not crazy about having to share a planet with guys like Daniel Gross and Michael Scheuer. They practically define the word "reprehensible."