Catching Fog

You have to be a special kind of stupid to believe that Hugo Chavez, the now former president of Venezuela, was a good guy. And yet, people who claim to be liberal, who claim to be believers in freedom and tolerance, seem to be very happy to praise the most descipicable tyrants. Of course, it has been this way for a very long while. Hollywood is filled with people such as Michael Moore, Sean Penn, Oliver Stone and others who think that Chavez was a wonderful man who only sought the best for the poor and downtrodden. Somehow, if you say the right sappy words, you can get away with tossing your opponents in prison, prohibit those you dislike from running against you, muzzle the press, install your cronies, and stuff your Swiss bank accounts.

Chavez sided with the Communist dictator Fidel Castro, loved the mullahs of Iran, and couldn’t say a bad word about any of the world’s dictators. Consistently, there are those in Hollywood and elsewhere who turn a blind eye to human rights abuses as long as those committing them say nice words about the poor and say bad things about the US.

These people are a special kind of stupid.

What was Hugo Chavez actually like? Consider this description from Freedom House in 1999:

Hugo Chávez, the coupist paratrooper-turned-politician elected who was elected president in a December 1998 landslide, spent most of 1999 dismantling Venezuela’s political system of checks and balances, ostensibly to destroy a discredited two-party system that for four decades presided over several oil booms but has left four out of five Venezuelans impoverished. Early in the year, Congressional power was gutted, the judiciary was placed under executive branch tutelage, and Chávez’s army colleagues were given a far bigger say in the day-to-day running of the country. A constituent assembly dominated by Chávez followers drafted a new constitution that would make censorship of the press easier, allow a newly strengthened chief executive the right to dissolve congress, and make it possible for Chávez to retain power until 2013. Congress and the Supreme Court were dismissed after Venezuelans approved the new constitution in a national referendum December 15….

Venezuela’s political rights changed from 2 to 4, its civil liberties rating from 3 to 4, and its status from Free to Partly Free, due to the decision of President Hugo Chávez, ratified in a national referendum, to abolish congress and the judiciary, and by his creation of a parallel government of military cronies.

More recent information from Freedom House in 2010:

Freedom House today condemned ongoing efforts by the Venezuelan government to bring criminal charges against the owners of Globovision, the only remaining independent television station in the country. Freedom House called the continuing persecution of the station’s ownership a transparent effort to silence one of the few remaining voices that are willing to criticize the policies of President Hugo Chavez in advance of upcoming parliamentary elections.

Two major shareholders in the private television station have recently come under pressure from the Chavez administration. Co-owner Guillermo Zuloaga was forced to flee the country to avoid arrest on charges many believe to have been fabricated by the government. Additionally, the government took over the bank of another shareholder, Nelson Mezerhane, and threatened to seize Mezerhane’s Globovision shares as part of the bank takeover. Currently in Florida, Mezerhane cannot return to Venezuela without fear of arrest.

“President Chavez’s denial that these actions are politically motivated would be more credible if not for his systematic efforts over the last decade to close the space for independent voices, particularly the voices of those who oppose his policies,” said Paula Schriefer, director of advocacy at Freedom House. “Chavez’s continued intolerance for criticism only serves to further weaken what little is left of Venezuela’s democratic credentials.”

Frank La Rue, special rapporteur at the United Nations for freedom of expression, denounced the “harassment” of Zuloaga and said that the arrest warrant was “politically motivated, aimed solely at silencing Zuloaga.”

Reports of crack-downs on independent media have continually plagued Venezuela during the Chavez administration but have increased in intensity as the opposition prepares for parliamentary elections in September. Venezuela dropped two points this year in Freedom of the Press due to increased violence against journalists and the closing of more than 30 radio and television stations under the controversial Law of Social Responsibility in Radio and Television.

Venezuela is ranked Not Free in Freedom of the Press 2010 and Partly Free in Freedom in the World 2010, Freedom House’s survey of political rights and civil liberties.

Things have not gotten better.

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Banking and investments seem impossibly mysterious to many people who have trouble just getting their checkbook to balance.

Let’s begin by looking at what’s called the “money supply.” The money supply is the total amount of money available to the economy at any particular moment. What is money? It’s more than just the metal slugs and slips of green paper in your pocket. Money is simply anything that can be used to settle a debt.

How is the money supply measured? There are four ways of measuring it, referred to as the M0, M1, M2 and M3. M0 money is physical currency: the coins and green paper you carry around–that is, the money in actual circulation–and the cash assets held in a central bank.

M1 money includes the stuff of M0 with the addition of money in “demand accounts”–that is, checking accounts. M1 is the measure that economists use to quantify the amount of money that is in actual circulation.

M2 is made up of everything in M1, with the addition of time deposits (those things like Certificates of Deposit that you can’t access for a specific period of time), savings deposits, and non-institutional money-market funds. Economists use M2 when they are trying to predict inflation.

M3 is made up of everything in M2 and includes large time deposits, institutional money-market funds, short-term repurchase agreements, and other larger liquid assets. It is used by economists when they want to measure the entire supply of money within an economy.

These different sorts of money that exist in the money supply statistics arise from the practice known as fractional-reserve banking.

What’s that?

When a bank gives out a loan, money is actually created by the bank. If you deposit a hundred dollars into the bank, they lend it out ten times with a fractional-reserve rate of twenty percent. This means that of the initial one hundred dollars, twenty percent of it, or twenty bucks, is set aside and kept in the vault, while the remaining eighty percent, or eighty bucks, is loaned out. The recipient of the eighty dollars then spends that money. The receiver of that eighty dollars then deposits it into a bank. The bank then sets aside twenty percent of that eighty dollars, or sixteen dollars, as reserves and lends out the remaining sixty-four dollars. As the process continues, more commercial bank money is created, since the bank only is keeping as a reserve twenty percent of any of the money given to it. The rest it loans out. That’s how the bank makes money on the money you put into it. Otherwise, the bank would have to charge you for holding on to your money. This creation of money by this means inflates the money supply. If the economy grows to match the increase in this money supply, then wages and prices remain stable. If things get out of balance, then you get “inflation.”

The banks lend the money at an interest rate based on how much it costs them to get the money they are lending out, and based on the amount of risk they are taking in making the loan: if banks and other lenders are careful, then they will receive back more money than they lent out, thus making a profit and allowing them to continue lending money. If they are not careful, then they can wind up in a situation where they do not have enough funds to lend any more money, or worse, cannot repay those who have deposited money into the bank.

If you recall the movie A Wonderful Life, when the depression hits and people panic, creating a “run” on the bank, George Baily calms the situation by pointing out that the money the people in his town have put in his Savings and Loan is not in the vault–it’s been lent out to their friends and neighbors: “it’s in Joe’s house.”

This fractional-reserve banking works because over any typical period of time, demands by people to take the money out of the bank–redemption demands– are for the most part offset by new deposits or issues of notes. The bank thus needs only to satisfy the excess amount of redemptions. Second, only a minority of people will actually choose to withdraw their demand deposits or present their notes for payment at any given time. Third, most people keep their funds in the bank for a prolonged period of time. And finally, banks usually keep enough cash reserves in the bank to handle all the demands for cash.

If the demands for cash are unusually large, however, the bank will run low on reserves and will be forced to raise new funds from additional borrowings (that is, by borrowing from the money market or by using lines of credit held with other banks), and/or sell assets, to avoid running out of reserves and defaulting on its obligations. If creditors are afraid that the bank is running out of cash, they have an incentive to redeem their deposits as soon as possible, triggering a bank run.

Bank runs are very unusual today, largely because of the systems set in place following the Great Depression, such as deposit insurance and the current requirements now of how much of a reserve banks must keep. The interest rates that we pay or get for our deposits are determined to a large extent by how much banks charge other banks for the money they lend to each other. The government sets the interest rate that banks charge one another. The decision on what rate to charge is based on how well the economy as a whole is doing. If it isn’t doing well, or if there is a fear that it won’t, the rate will be lowered: that will put more money into circulation. If there is a fear that inflation may be in the works, the interest rate will be raised, thus lessoning the money supply.

How does the stock market work into all of this? It is simply a public market for the buying and selling of securities–that is a percentage shares–in businesses. It is a way for businesses to raise money that they can then use to expand; if the business is successful, they will make a profit, which will allow them to pay back all the people who purchased a percentage of the company, or if people keep the stock, then those share holders will receive a percentage of the profit as a dividend payment. People may buy and sell shares of the company at any time, however, and the price of a company’s shares will rise or fall based on how well the company is doing, or how well people imagine it is doing.

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The heavens declare the glory of God;
the skies proclaim the work of his hands.
— Psalm 19:1

The Earth is 7927 miles in diameter.

The Moon is 2163 miles in diameter, and averages 238,857 miles away from the Earth. This is the equivalent of 1.3 light seconds away. Light travels 186,300 miles per second.

The Sun is 864,000 miles in diameter, more than large enough for the Earth-Moon system to slip inside with room to spare. The Earth is an average of 93 million miles away. This is the equivalent of 8.3 light minutes away — the distance light can travel in 8.3 minutes.

Pluto, the furthest planet from the sun, averages 3.67 billion miles from the Sun. This is the equivalent of 5.5 light hours away.

More than 99 percent of the mass of the solar system is in the Sun, whose mass is 4.385 times 10 to the 30th pounds (4,385,000,000,000,000,000,000,000,000,000,000). This is 333,000 times the mass of the Earth.

The Sun is made of mostly hydrogen gas which is heated by continuous nuclear fusion at the core, where the temperatures are near 27 million degrees Fahrenheit. The visible surface of the Sun has an average temperature of 9950 degrees Fahrenheit and continuously radiates power of 3.85 times 10 to the 26th watts (38,500,000,000,000,000,000,000,000,000) into space. The Earth intercepts less than half of one-billionth of that power.

The Sun is a fairly typical star; most stars range from one tenth to ten times the size of our Sun. Antares, the reddish star in the constellation of Scorpius is five hundred times the size of our Sun. Our Sun and all the planets to the orbit of Mars could easily fit inside it. Antares is 400 light years from Earth.

A light year is the distance that light can travel in one year — about 5.88 trillion miles.

Alpha Centauri is the nearest star to Earth. It is 4.3 light years away — 25,000,000,000,000 miles away. The fastest men have ever traveled in space was 25,000 miles per hour (escaping Earth’s gravity on their way to the moon — which took them three days to reach). It would take 115,340 years to travel to Alpha Centauri at that speed.

Let’s look at these distances another way. Suppose you could drive your car to the Sun, 93 million miles away. At sixty miles an hour it would take you almost one hundred seventy-seven years to get there. Now imagine how long it would take you to get to Alpha Centauri in your car.

In their book, The Planetary System by Morrison and Owen, they write (pages 24-25):

To gain an appreciation of the size of the solar system and the distances between the various planets, we can make use of a scale model. Let’s reduce every dimension in the solar system by a factor of 200 million. On this scale, the Earth is the size of an orange, and our Moon would be a grape, orbiting the orange at a distance of six feet. The Sun would be a little less than half a mile away, and it would have a diameter of twenty-three feet, the height of a two-story building. It is the great distance of the Sun from the Earth that makes it appear to be about the same size as the Moon when we see both of them in our skies.

Although the Earth and the other inner planets in this model are only the size of pieces of fruit, we do have some bigger planets. At this scale, Jupiter would be a large pumpkin, still small compared to the Sun but eleven times larger than Earth. Considering the Saturn system, we find that if we measure it from one edge of the rings to the other, the planet and its rings would just fit between the Earth and the Moon. Saturn’s own large satellites would lie far beyond the moon. Obviously scales in the outer solar system are considerably grander than those we find for the planets closer to the sun.

Moving further out, we pass Uranus and Neptune before encountering Pluto, another grape like our Moon at an average distance of 18.5 miles from the twenty-three foot Sun. This is still not the edge of the solar system, however. That lies at a point where the gravitational field of the Sun is changed by the fields of passing stars. Here is where the great spherical cloud of comets lies, at a distance of some 20,000 miles from our scale model Sun. This means that our scale model solar system is about four times the size of the real Earth.

This exercise illustrates how large the Sun is, how much space exists between the planets, even in the inner solar system, and to what an enormous distance the Sun’s gravitational influence extends. The latter simply emphasizes once again how huge the distances are between the stars. The nearest star, Alpha Centauri, is five times as far from the Sun as the comets; to include it, our model would have to extend to a dimension of 100,000 miles.

Our Sun is a star in the Milky Way Galaxy, a pinwheel-shaped glob of stars 100,000 light years across and 10,000 light years thick. The Sun is 30,000 light years from the center of this galaxy. It takes 230 million years for the Milky Way to revolve once on its axis. Our Milky Way Galaxy contains at least 100 billion stars (some estimates put it at 400 billion).

The nearest other galaxy (excluding the Magellanic Clouds about 150,000 light years away) is the Andromeda Nebula which is about two million light years away from Earth (the average distance between all the galaxies in the universe) and it is 200,000 light years in diameter — twice as big as the Milky Way.

The observable universe is 30 billion light years in diameter and contains approximately 100 billion galaxies (each of which then has at least 100 billion stars, often more). Yet, the observable universe (all 30 billion light years of it) is perhaps only a fraction of one percent of the size of the universe as a whole.

When I consider your heavens,
the work of your fingers,
the moon and the stars,
which you have set in place,
what is mankind that you are mindful of them,
human beings that you care for them? –Psalm 8:3-4

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