[Numeracy 362] Re: Freirean Math, plutonomics
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Tue May 11 12:32:40 EDT 2010
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There really is nothing that mystifying about the derivatives used in
the housing market. Here is how I explain it on a very general level. I
take a pool of debt I expect to go unpaid and a pool of debt I expect to
get paid and possibly a pool of debt I expect to get paid but with
penalties. Split the pools up so that some of each is mixed together.
Basically you are using probabilities to create mixes of loans that
should limit loss on high-risk loans. One thing that made it complicated
was the use of fractions of loans being used to create the pools and the
probabilities of payback in each pool. When it was time to close the
accounts how do you round those fractional amounts that fall below a
penny when there are people out there actually expecting to be paid in
actual currency? It doesn't take much education to see that housing
prices were unrealistic, loan risks were unrealistic, and that we were
headed for an economic correction because spending with credit was far
outpacing savings and income increases while causing rising prices and
rising costs. (What we all need is a change in our attitudes about the
material things we need and about paying for items now not at some
future date.) Derivatives work to balance out when calculated over time,
but not when you shorten the timeframe for payback because you have
directly changed your calculation outcomes (a basic math concept in
probabilities.). Add to the mix complex instruments like pay -the
-interest -only mortgages or fluctuating payments like the ballooning
interest rates and the math looks impossible, but the intent is clear:
make money but don't pay the actual cost of the item. No one could
predict the exact date the of the bubble burst, but everyone knew it was
coming because the balance of value to cost was getting out of line and
it was increasingly unlikely to be thirty years down the road when the
correction occurred (the time when the mortgages would be paid); the
calculation were projections made assuming the full time period of the
loan when they knew they were unlikely to reach maturity (or didn't
bother to think about it.) People took predictions to be facts instead
of probabilities and they didn't follow common sense rules in making
purchases of homes or derivatives. (Couple that with governments like
the one in Nevada where all their predictions for cash flow were based
off the housing boom without regard to its probable end and you get the
mess we are in.)
More than knowing the actual math you needed to know the purpose of
the math to determine if this was a good bet or not. So long as you
could quickly hand it off it was a good bet; maybe we should be teaching
the game of hot potato to our children?
Carol King
Fernley Adult Education
Cking @lyon.k12.nv.us
________________________________
From: numeracy-bounces at nifl.gov [mailto:numeracy-bounces at nifl.gov] On
Behalf Of Michael Gyori
Sent: Thursday, May 06, 2010 6:01 PM
To: The Math and Numeracy Discussion List
Subject: [Numeracy 351] Re: Freirean Math, plutonomics
David,
How well-educated do those who hold the purse strings really want us to
be? Education, very much so in the United States, is controlled by
corporations. Then again, knowledge of the math behind derivatives isn't
what's going to bring about a shift in how societies are structured. You
can have all the revolutions you may wish, and a select few will come to
power and take charge of affairs. It comes down to core values and to
what degree our choices are guided by them once we're the ones who yield
power.
Michael
Michael A. Gyori
Maui International Language School
www.mauilanguage.com <http://www.mauilanguage.com/>
________________________________
From: david dirtyknees <neesdd at gmail.com>
To: numeracy at nifl.gov
Sent: Thu, May 6, 2010 8:42:05 AM
Subject: [Numeracy 346] Freirean Math, plutonomics
Susan, Michael and All,
I was watching a program about Wall Street recently, followed closely by
Michael Moore's Capitalism. The same point was made in both that the
best mathematicians don't go to work in fields we might expect (science,
technology, engineering, etc.) anymore, but now go to Wall Street where
they create the math behind derivatives that is far too complex for most
of us to grasp. This has effectively enslaved most of us and nullified
much of our democracy through engineered financial crises where
democracy is shelved to allow for swift action.
I know that sounds alarmist, but if you learn about plutonomics and view
the history of how America wealth has shifted from being middle-class at
the end of WW2 to having 99% of the wealth owned the top 1% of the
population now, it is clear that math is being used in ways that serve
the interests of the wealthy to our detriment.
Math must have been an ally to the common person at some points in our
development, but in my lifetime, I worry that math has become an enemy
of the people. Is there a Math-Freire or a New-Marx around who could
help us understand how to educate ourselves and our students to
understand plutonomics, and then take action through the last vestige of
democracy we have, the vote?
David Dirty Knees
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