Tidbits Quotations on May 10, 2010
To Accompany the May 10, 2010 edition of Tidbits
Bob Jensen at Trinity University


Video on IOUSA Bipartisan Solutions to Saving the USA

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).
This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.


I thought the show was pretty balanced from a bipartisan standpoint and from the standpoint of possible solutions.

Many of the possible “solutions” are really too small to really make a dent in the problem. For example, medical costs can be reduced by one of my favorite solutions of limiting (like they do in Texas) punitive damage recoveries in malpractice lawsuits. However, the cost savings are a mere drop in the bucket. Another drop in the bucket will be the achievable increased savings from decreasing medical and disability-claim frauds. These are important solutions, but they are not solutions that will save the USA.

The big possible solutions to save the USA are as follows (you and I won’t particularly like these solutions):



Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


Here is the original (and somewhat dated video that does not delve into solutions very much)
IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com )

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

Watch the World Premiere of I.O.U.S.A.: Solutions on CNN
Saturday, April 10, 1:00-3:00 p.m. EST or Sunday, April 11, 3:00-5:00 p.m. EST

Featured Panelists Include:

  • Peter G. Peterson, Founder and Chairman, Peter G. Peterson Foundation
  • David Walker, President & CEO, Peter G. Peterson Foundation
  • Sen. Bill Bradley
  • Maya MacGuineas, President of the Committee for a Responsible Federal Budget
  • Amy Holmes, political contributor for CNN
  • Joe Johns, CNN Congressional Correspondent
  • Diane Lim Rodgers, Chief Economist, Concord Coalition
  • Jeanne Sahadi, senior writer and columnist for CNNMoney.com

Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


CBS Sixty minutes has a great video on the enormous cost of keeping dying people artificially alive:
High Cost of Dying --- http://www.cbsnews.com/video/watch/?id=5737437n&tag=mncol;lst;3
(wait for the commercials to play out)

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

"The Looming Entitlement Fiscal Burden," by Gary Becker, The Becker-Posner Blog, April 11, 2010 ---

"The Entitlement Quandary," by Richard Posner, The Becker-Posner Blog, April 11, 2010 ---

David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)

Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.

. . .

In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.

. . .

Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.

Continued in article --- http://www.newsweek.com/id/224694/page/1


Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of The Ascent of Money. In late 2009 he puts forth an unbooked discounted present value liability of $104 trillion for Social Security plus Medicare. In late 2008, the former Chief Accountant of the United States Government, placed this estimate at$43 trillion. We can hardly attribute the $104-$43=$61 trillion difference to President Obama's first year in office. We must accordingly attribute the $61 trillion to margin of error and most economists would probably put a present value of unbooked (off-balance-sheet) present value of Social Security and Medicare debt to be somewhere between $43 trillion and $107 trillion To this we must add other unbooked present value of entitlement debt estimates which range from $13 trillion to $40 trillion. If Obamacare passes it will add untold trillions to trillions more because our legislators are not looking at entitlements beyond 2019.


The Meaning of "Unbooked" versus "Booked" National Debt
By "unbooked" we mean that the debt is not included in the current "booked" National Debt of $12 trillion. The booked debt is debt of the United States for which interest is now being paid daily at slightly under a million dollars a minute. Cash must be raised daily for interest payments. Cash is raised from taxes, borrowing, and/or (shudder) the current Fed approach to simply printing money. Interest is not yet being paid on the unbooked debt for which retirement and medical bills have not yet arrived in Washington DC for payment. The unbooked debt is by far the most frightening because our leaders keep adding to this debt without realizing how it may bring down the entire American Dream to say nothing of reducing the U.S. Military to almost nothing.

Niall Ferguson,
"An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1

This matters more for a superpower than for a small Atlantic island for one very simple reason. As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon's present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028.

Over the longer run, to my own estimated departure date of 2039, spending on health care rises from 16 percent to 33 percent of GDP (some of the money presumably is going to keep me from expiring even sooner). But spending on everything other than health, Social Security, and interest payments drops from 12 percent to 8.4 percent.

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America's debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president's first term should be the administration's most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn't come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.

Video:  "The Decline of Classic Maya Civilization: A Systems Perspective," by Jeremy Sabloff ---

The decline and abandonment of many key cities in the Southern Maya Lowlands around A.D. 800 has long attracted scholarly and public attention. While archaeologists now understand contrary to previous thought that Maya civilization did not collapse at this time, as a number of Maya cities continued to thrive up until the 16th century Spanish Conquest, the causes of the relatively rapid demise of cities such as Tikal, Palenque, and Copan remain of great interest. New archaeological, epigraphic, and environmental information have enabled archaeologists to form better models that provide more systemic perspectives on this decline than ever before. Sabloff examines the new data and models and discusses their potential relevance to problems facing the world today.

So if you read outrageous stories like the one on new-home sales, remember the old adage: "If it sounds too good to be true, it's probably just the media not doing its job."

"That housing sales boom is without foundation," by John Crudele, New York Post, April 29, 2010 ---

A galaxy is composed of gas and dust and stars—billions upon billions of stars.
Carl Sagan, Cosmos, chapter 1, page 3[27]

Changes to the tax code’s section 6041:  The IRS Will Soon Be Buried in a new "galaxy" of 1099 Forms
I apologize for the wording of this blog that may offend some readers
I forward it only because it will affect accountancy, especially tax accountants and their clients
"Another Pelosi Easter egg in ObamaCare: IRS mandate on business," by Ed Morrissey, Hot Air, April 29, 1010 ---

That means any time a business pays any one entity $600 or more in a year, they will have to create a 1099 to file with the IRS. That means that the businesses have to get all of the tax information for every vendor, provide separate accounting for every payee, and then send the forms to both the IRS and the payees at the end of every year — as the payees do the same with their vendors, and so on. Edwards puts the scope in context:

Do any of you know if this will also apply to foreign subsidiaries that mostly buy goods and services in their home countries.
What about domestic company purchases products from foreign vendors such as Canadian or Indonesian vendors?

Also if your university pays $1,200 to British Airways for your visit to the European Accounting Association annual meetings will your university have to file a British Airways 1099 form? Will a similar 1099 have to be filed for the European hotel that does not even have a U.S. tax ID number?

The purpose of this legislation might extend well beyond the intent to collect Federal taxes. It could become a massive database on international vendors and workers.

Nobel Laureate Gary Becker and Judge Richard Posner disagree over prospects of a VAT tax ---
Becker:  http://uchicagolaw.typepad.com/beckerposner/2010/04/should-the-us-introduce-a-value-added-tax-becker.html
Posner:  http://uchicagolaw.typepad.com/beckerposner/2010/04/should-the-united-states-institute-a-federal-valueadded-tax-posner.html
Jensen Comment
I'm will Posner on this!

"Tearing down, building up homes in Buffalo:  Mayor defends housing record; says there's much to be done," by Patrick Lakamp and Susan Schulman, Buffalo News, May 10, 2010 --- http://www.buffalonews.com/2010/05/02/1038267/tearing-down-building-up.html

Even though he acknowledges many of the houses are not worth what they cost to build, Buffalo Mayor Byron W. Brown defends the city's policy of building subsidized single-family homes.

The city is "moving in the right direction with housing," Brown says, and getting closer to the day when private developers come in and build market-rate homes without City Hall providing subsidies to cover half the cost of the house.

But for now, Buffalo will continue to demolish dilapidated houses, build subsidized homes and support some rehabilitation of existing housing, he said.

"In some parts of the city, people who can afford to buy homes in certain areas will get full value out of their assessment," Brown said. "And in other parts of the city, people who might be just as dedicated and just as invested in their homes, can't get that kind of value out of them. We think that should change. And it can change, with strategic investment."

In a wide-ranging interview on housing issues, his first since The Buffalo News published "The Houses That City Hall Built," a series on subsidized housing, Brown addressed topics from the high cost of subsidized housing and the city's reliance on faith-based development organizations to housing rehabilitation costs and plans for future housing.

The series found that Buffalo's 1,500 subsidized homes are now assessed 12 percent below their initial $123 million price tag, and that houses that went back on the market sold for an average 24 percent below their original price.

The series also disclosed that subsidized homes built in recent years cost upwards of $200,000 per house, with subsidies going to developers as well as homeowners — totaling as much as $100,000.

During the interview, the mayor:

• Expressed his desire to see private developers take the lead in housing development — preferably market-rate — as they did until the end of the Masiello administration, when the city turned to nonprofit agencies to develop subsidized housing.

• Called the city's soil remediation policy extreme and said he wants to find a way to modify its requirements, lowering the cost of preparing a lot for a new home while still making sure the soil is safe.

• Defended killing a $12 million East Side rental housing plan — even though it meant losing $2.2 million in state funds, as well as federal tax credits worth an estimated $7.4 million — because he said it benefited a Cleveland developer but didn't help city residents become homeowners.

• Defended the support the city has given the Rev. Richard A. Stenhouse, now one of the key developers on the city's East Side, thanks to federal funds he's received from City Hall.

• Said the high cost of rehabilitating some houses makes it easier to approve building new housing.

"We know that there's got to be rehab," Brown said. "We want there to be some new construction — market-rate — and we have had developers talk to us. So we know there is some market-rate demand in the city, which is exciting.

"We know there has to be demolition," he added.

The city, which has one of the largest percentage of vacant homes among major U.S. cities, has torn down more than 3,100 structures since Brown became mayor in January 2006.

"Even though there are some in the community that have some real concerns about that, there are others in the community who are clamoring for demolition, who are begging for demolition," the mayor said.

"I can take you down some streets right now that look like the Third World," Brown said.

Private developers are interested.

"We are anxious to be involved in the city again," said David DePaolo, executive vice president of Marrano/Marc Equity, which developed Main-LaSalle Place, a market-rate development in North Buffalo.

"In the past, when we were involved in a real public-private partnership [with the city], when they relied on our expertise, we were very successful together," added Dennis M. Penman, vice president of M.J. Peterson Corp., which has built subsidized and market-rate houses in the city in past years.

Organizations involved in housing rehab would like to do more work.

HomeFront Inc., a West Side nonprofit organization, says it's now rehabbing three or four houses a year, but could do five times as many with additional funding.

"Given the right support ... we feel very confident we could get our output up to at least 20 homes a year," said HomeFront Executive Director Bryan M. Cacciotti.

Other housing advocates caution that virtually all new housing built in Buffalo likely still requires some type of subsidies, although that could mean the city picking up the cost of land or infrastructure — as has been the case with past market-rate projects — rather than direct subsidies to homeowners or developers.

Community advocates also caution that new houses should be strategically placed.

"You don't want new in the middle of a devastated community," said Michael Clarke, who heads the Buffalo office of the Local Initiatives Support Corp., a nonprofit community housing organization. "You want new houses in places where there is a developing economy and a community priority."

Clarke also suggested private developers get involved in rehabilitation as well as new construction.

"If the private guys can be enticed to get involved in rehabilitation efforts, that would be a benefit to everyone," he said.

"Unpaid Interns Are Exploited?" by John Stossel, Townhall, May 5, 2010 ---

Do you employ unpaid student interns -- college students who work in exchange for on-the-job training?

If so, President Obama's Labor Department says that you're an exploiter. The government says an internship is OK only if it meets six criteria, among them that the employer must get "no immediate advantage" from the intern's activities. In fact, the employer's work "may be impeded."

Impeded? No immediate advantage?

I'm in trouble, then. I have an intern at Fox Business News, and I'm getting immediate advantages from her work all the time. I've had interns my whole career and gotten lots of immediate advantage from them. Occasionally, I've been impeded -- but the better interns did the research that made my work possible. I'd asked my TV bosses to pay for research help, but they said, "You think we're made of money?"

So I asked colleges if students wanted internships. Many did, and from then on I got much of my best help from unpaid college students.

Did I exploit them? Obama's Labor Department says it's hired 250 new investigators to catch exploiters like me. I tried to get the department to answer my questions on tomorrow's FBN show, but it declined.

So I invited Village Voice writer Anya Kamenetz, who wrote a column titled "Take This Internship and Shove It" in The New York Times. (http://tinyurl.com/2anss9s)

"We have minimum wage laws in this country for a very good reason," she replied. "We had them to avoid exploitation like child labor.

But what's wrong with a free internship if a student learns something about the career he wants to pursue?

I was a little stunned by Kamenetz's answer: "Employers could say we cannot afford to pay anybody, so why should we be forced to pay the guy who cleans the floors?"

Because they wouldn't get people to clean floors if they didn't pay. But I guess I shouldn't expect a New York writer to understand markets.

"Interns are people that come in and work for below minimum wage," she said. "They pull the bottom out of the labor market, and it's less fair for everybody."

So it should be banned?

"There are a lot of ways to fill in the need for interns and the need for college students to get experience. One way is for colleges to pay stipends."

But they won't.

"They will if the law is enforced. Another way is for companies to hire students that are eligible for federal work-study."

Oh, I see. The taxpayers should pay for my interns.

"Nobody is saying that these interns should go away," Kamenetz added. "What they're saying is a company should put money in their budgets to pay people the minimum wage to work for them, and that is just the basic issue of fairness. If you start working for free, where's it going to end?"

Give me a break. It would end when the interns have the skills to earn market salaries. Minimum-wage law and union rules already killed off apprentice jobs on construction sites. Contractors say: If I must pay high union wages, I'll hire experienced workers. I'd lose money if I hired a kid and helped him learn on the job.

My interns often told me that working -- unpaid -- at WCBS or ABC was the best learning experience of their lives: "I learned more from you than at college, and I didn't have to pay tuition!" It was good for them and good for me.

Kamenetz said, "Studies show that when companies pay their interns, they design the internships better."

Please. A few years ago, my old employer, ABC, started paying our interns. That was good for well-connected students who got internships, but bad for those who were turned down. ABC cut the number of interns by more than half. There's no free lunch.

What's happened to the rights of contract and free association? If student and employer come to an agreement, both expect to benefit or it wouldn't happen. The student is no indentured servant. If the employer "exploits" the student, the student can quit. The contract ought to be nobody's business but theirs.

Butt out, federal bullies. Grown-ups can take care of ourselves.

"Derivatives Clearinghouses Are No Magic Bullet:  Will the Dodd bill create another kind of institution that's too big to fail?" by Harvard's Mark J. Roe, The Wall Street Journal, May 6, 2010 ---

As the Senate finalizes its financial reform legislation, a consensus is developing that if we could just get derivatives traded through a centralized clearinghouse we could avoid a financial crisis like the one we just went through. This is false. Clearinghouses provide efficiencies in transparency and trading, but they are no cure-all. They can even exacerbate problems in a financial crisis.

If I agree to sell you a product next month through a clearinghouse, I'll deliver the product to the clearinghouse and you'll deliver the cash to the clearinghouse on the due date. Let's say we both have many trades going through the clearinghouse and we've posted collateral to cover any single trade that fails. This is more efficient than each of us posting collateral privately for each trade. Moreover, we're not worried that I won't deliver or you won't pay because we both count on the clearinghouse to deliver and pay up if one of us doesn't.

This clearing system makes trading more efficient. If you default, the cost is spread through the clearinghouse so I don't get hurt severely. And if the clearinghouse has enough collateral from you, there's no loss to spread. But there's also a potential downside: The clearinghouse reduces our incentives to worry about counterparty risk. Your business might collapse before you need to pay up, but that's not my problem because the clearinghouse pays me anyway. The clearinghouse weakens private market discipline.

Still, if the clearinghouse is as good or better at checking up on your creditworthiness as I am, all will be well. But one has to wonder how good a clearinghouse will be, or can be.

Consider two of our biggest derivatives-related failures—Long-Term Capital Management in 1998 and the subprime market in 2008. When Russia's ruble dropped unexpectedly, LTCM was exposed on its more than $1 trillion in interest-rate and foreign-exchange derivatives. It could not pay up and collapsed. Ten years later the market rapidly revalued subprime mortgage securities, rendering several institutions insolvent. AIG was over-exposed in credit default swaps tied to the value of subprime mortgages.

Could a clearinghouse really have been ahead of the curve in getting sufficient capital posted before these problems became serious and well-known? I'm not so sure. Worse yet, major types of derivatives have built-in discontinuities—"jump-to-default" in derivatives-speak.

For a credit default swap, one counterparty guarantees the debt of another company to you, in return for you paying a fee for that guarantee. If no one goes bankrupt, the counterparty just collects the fees from you. But if the guarantee is called because the company you were worried about goes bankrupt, the counterparty must all of a sudden pay out a huge amount immediately.

Yet the guarantor is often called upon to pay in a weak economy, just when it can itself be too weak to pay. You get credit default protection on your real-estate investments from me, just in case the economy turns sour. But just when you need me the most, in a sour economy, I turn out to be so overextended I can't pay up. Collateralizing and monitoring such discontinuous obligations will not be so easy for the clearinghouse.

Moreover, if trillions of dollars of derivatives trading goes through a clearinghouse, we will have created another institution that's too big to fail. Regulators worried that an interconnected Bear or AIG could drag down the economy. Imagine what an interconnected clearinghouse's failure could do.

AIG needed $85 billion in government cash to avoid defaulting on its debts, including its derivatives obligations. Could one clearinghouse meet even a fraction of that call without backup from the U.S.? True, we could have many clearinghouses, each not too big to fail—but then maybe each would be too small to do enough good.

The Senate bill would allow a clearinghouse to grab new collateral out from failing derivatives-trading banks to cover old, but suddenly toxic, debts the banks owe to the clearinghouse. This could harm other creditors and cause the firm to suffer a run. Nevertheless, to protect itself in a declining market, a clearinghouse would have to make those big collateral calls. That's good if it protects the clearinghouse. But it's bad if it starts a run on a weakened but important bank.

One key but missing element in the search for reform has yet to gain traction in Washington. Derivatives players obtained exceptions from typical bankruptcy and bank resolution rules in the past few decades for their contracts with a bankrupt counterparty. This allowed them to grab and keep collateral other creditors cannot. That gives derivatives traders reason to pay less attention to their counterparties' riskiness and weakens market discipline. These rules should be changed before the Senate is done.

To say that a clearinghouse solution is very incomplete is not to say there is an easy solution out there. We may be unable to do more than to make incomplete improvements and muddle through.

Derivatives trades first of all should not just be centrally cleared, but should also be taken out from the government-guaranteed entities, such as commercial banks (or at least we need to impose tight capital requirements on those banks that deal in derivatives). Derivatives traders like doing business with Citibank because they know the government won't let Citibank go down. But this puts taxpayers at risk. It would be better to run those trades through an affiliate, not through the bank, so counterparties realize they might not be bailed out if the affiliate failed. If a banking affiliate's counterparty is the clearinghouse, then the clearinghouse will have incentives to make sure that the affiliate is well-capitalized. This is particularly so if the clearinghouse won't get any special priority treatment in a bankruptcy.

Critics of proposals to establish separate bank affiliates for derivatives trading complain about the large amount of capital that would be needed for such affiliates. But the capital that might be needed to buttress a bank affiliate indicates some level of the value (i.e., the taxpayer subsidy) to derivatives players of trading with a too-big-to-fail entity that they know the government will step in to save. They are implicitly getting insurance and should pay for it.

And, since a clearinghouse is itself at risk of being too big to fail, regulators need to police its capital and collateral requirements. If the derivatives market sees the clearinghouse as too big to fail, the potential for derivatives players making overly risky derivatives trades becomes real. Clearinghouses can help manage some systemic risk if they're run right. If not, they can become the Fannie and Freddie of the next financial meltdown.

Mr. Roe is a professor at Harvard Law School, where he teaches bankruptcy and corporate law.

Bob Jensen's timeline on the history of derivative financial instruments frauds and accounting rules for derivatives contracts ---

Do you suppose we could also add CEO emotions to annual reports?
Or maybe this is the dawn of emotional corporate logos!

"The New Face of Emoticons:  Warping photos could help text-based communications become more expressive," by Duncan Graham-Rowe,  MIT's Technology Review, March 27, 2007 --- http://www.technologyreview.com/Infotech/18438/

Computer scientists at the University of Pittsburgh have developed a way to make e-mails, instant messaging, and texts just a bit more personalized. Their software will allow people to use images of their own faces instead of the more traditional emoticons to communicate their mood. By automatically warping their facial features, people can use a photo to depict any one of a range of different animated emotional expressions, such as happy, sad, angry, or surprised.

All that is needed is a single photo of the person, preferably with a neutral expression, says Xin Li, who developed the system, called Face Alive Icons. "The user can upload the image from their camera phone," he says. Then, by keying in familiar text symbols, such as ":)" for a smile, the user automatically contorts the face to reflect his or her desired expression.

"Already, people use avatars on message boards and in other settings," says Sheryl Brahnam, an assistant professor of computer information systems at MissouriStateUniversity, in Springfield. In many respects, she says, this system bridges the gap between emoticons and avatars.

This is not the first time that someone has tried to use photos in this way, says Li, who now works for Google in New York City. "But the traditional approach is to just send the image itself," he says. "The problem is, the size will be too big, particularly for low-bandwidth applications like PDAs and cell phones." Other approaches involve having to capture a different photo of the person for each unique emoticon, which only further increases the demand for bandwidth.

Li's solution is not to send the picture each time it is used, but to store a profile of the face on the recipient device. This profile consists of a decomposition of the original photo. Every time the user sends an emoticon, the face is reassembled on the recipient's device in such a way as to show the appropriate expression.

To make this possible, Li first created generic computational models for each type of expression. Working with Shi-Kuo Chang, a professor of computer science at the University of Pittsburgh, and Chieh-Chih Chang, at the Industrial Technology Research Institute, in Taiwan, Li created the models using a learning program to analyze the expressions in a database of facial expressions and extract features unique to each expression. Each of the resulting models acts like a set of instructions telling the program how to warp, or animate, a neutral face into each particular expression.

Once the photo has been captured, the user has to click on key areas to help the program identify key features of the face. The program can then decompose the image into sets of features that change and those that will remain unaffected by the warping process.

Finally, these "pieces" make up a profile that, although it has to be sent to each of a user's contacts, must only be sent once. This approach means that an unlimited number of expressions can be added to the system without increasing the file size or requiring any additional pictures to be taken.

Li says that preliminary evaluations carried out on eight subjects viewing hundreds of faces showed that the warped expressions are easily identifiable. The results of the evaluations are published in the current edition of the Journal of Visual Languages and Computing.

Continued in article

Bob Jensen's threads on visualization of multivariate data are at



Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Return to the Tidbits Archives ---


Shielding Against Validity Challenges in Plato's Cave ---

Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen

What went wrong in accounting/accountics research?  ---

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


Bob Jensen's threads on accounting theory ---

Tom Lehrer on Mathematical Models and Statistics ---

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/