Spain gets Mugged again!

[Thailandnotes]

Re: Spain gets Mugged again!

Gimme an F. Gimme an I. Gimme an R. Gimme an E...

http://www.guardian.co.uk/commentisf...?newsfeed=true

“In both cases Spanish multinationals had prioritised the repatriation of dividends over investment. This indirect form of asset stripping was driven by the priorities of bankers in London and New York. Behind the Repsol-YPF affair, in particular, was something very close to the sick capitalism that caused the 2008 crisis: high-yield, high-risk assets, sliced and diced via complex derivatives.

“Repsol, like all oil companies, has a double life. On one hand it makes money through producing, transporting, refining, and marketing oil and gas. On the other, it is a proxy for gambling on oil as a commodity and, through derivatives, for speculating on that speculation. Investment banks are similarly divided in their priorities. Sometimes they invest, though more usually they get rich by carrying money they borrow at low interest to places where they get higher yields.

“While high yields almost always mean higher risks, there is a fiction of control over these risks through derivatives – in particular insurance contracts called "swaps".

“In the murky world of derivatives, however, the same bank group may indirectly be guaranteeing its own risks, and the trade in risks becomes bigger than the real investment. The whole pyramid stands so long as there is some real-world thing that pays, in theory, a high and steady yield – whether it is subprime mortgages, or a high rent from an oil asset.

“Spain privatised Repsol between 1989 and 1997, just at the time when "deregulation" in the US and Britain turned banks from investors into high-rolling gamblers. Repsol grew from a tiny Spanish refining and marketing "downstream" company into the world's 15th largest petroleum company, with operations on every continent. It specialised in deals where Anglo-American companies fear to tread, such as Iran, offshore gas in Venezuela under Chávez, and offshore oil in Cuba, enjoying bumps in its share price and valuation as it nominally acquired access to reserves.

“In 1999, Repsol bought its most important international asset, YPF. Over the past decade the main value of YPF as far as Repsol was concerned was not the oil or gas it produced and sold, but its value as collateral on the basis of which debt could be contracted.

“YPF, under Repsol, paid extraordinarily high dividends to its foreign owners – some 9% in 2011 – which it paid for by borrowing. So while YPF debts soared and Argentina's oil went undrilled, Repsol both banked profits and "invested" Argentinian capital elsewhere in its corporate structure. As the rating agency Standard & Poor's commented on 19 April: "Repsol does not guarantee any of the debt at YPF." Madrid got the juice, but the liabilities all fell on Buenos Aires.

“High dividends allowed Repsol also to cash out of 25% of its YPF holding by selling it on to the Eshkenazi family, with the capital coming from Credit Suisse, Goldman Sachs, BNP Paribas, Standard Chartered and Citibank, with banks then making money buying and selling derivative contracts on Repsol and YPF debt.

“Spain has threatened Argentina with retaliation, quickly followed by the EU, Britain, and the US. The anger in Madrid and in Brussels is of an old-fashioned kind – Argentina is both refusing to hand over its present and future pocket money to Spain and reducing Europe's global assets.

“But the fury on the pages of the Financial Times and the Wall Street Journal is not ultimately about oil or profits, nor even about the bad precedent it might set for future expropriations elsewhere. Rather, it is provoked by Argentina having interrupted a chain of securitisation anchored in the real world by its oil at one end, but with investment banks in London and New York, the holders of swap and other derivative liabilities on Repsol and YPF debt, at the other.”

[lektrode]

Re: Spain gets Mugged again!

I agree.
Enron was a good example in recent times that proves the point. As they did their paper trading, California had power problems.

+1
and again for what T&B wrote.

[lektrode]

Re: Spain gets Mugged again!

Gimme an F. Gimme an I. Gimme an R. Gimme an E...

WHOOPS, der(ierre) it is....

“High dividends allowed Repsol also to cash out of 25% of its YPF holding by selling it on to the Eshkenazi family, with the capital coming from Credit Suisse, Goldman Sachs, BNP Paribas, Standard Chartered and Citibank, with banks then making money buying and selling derivative contracts on Repsol and YPF debt.

“YPF, under Repsol, paid extraordinarily high dividends to its foreign owners – some 9% in 2011 – which it paid for by borrowing. So while YPF debts soared and Argentina's oil went undrilled, Repsol both banked profits and "invested" Argentinian capital elsewhere in its corporate structure. As the rating agency Standard & Poor's commented on 19 April: "Repsol does not guarantee any of the debt at YPF." Madrid (and GS, citi ) got the juice, but the liabilities all fell on Buenos Aires.
....
......
...
“But the fury on the pages of the Financial Times and the Wall Street Journal is not ultimately about oil or profits, nor even about the bad precedent it might set for future expropriations elsewhere. Rather, it is provoked by Argentina having interrupted a chain of securitisation anchored in the real world by its oil at one end, but with investment banks in London and New York, the holders of swap and other derivative liabilities on Repsol and YPF debt, at the other.”

[GRG55]

Re: Spain gets Mugged again!

Gimme an F. Gimme an I. Gimme an R. Gimme an E...

http://www.guardian.co.uk/commentisf...?newsfeed=true

“In both cases Spanish multinationals had prioritised the repatriation of dividends over investment. This indirect form of asset stripping was driven by the priorities of bankers in London and New York. Behind the Repsol-YPF affair, in particular, was something very close to the sick capitalism that caused the 2008 crisis: high-yield, high-risk assets, sliced and diced via complex derivatives.

“Repsol, like all oil companies, has a double life. On one hand it makes money through producing, transporting, refining, and marketing oil and gas. On the other, it is a proxy for gambling on oil as a commodity and, through derivatives, for speculating on that speculation. Investment banks are similarly divided in their priorities. Sometimes they invest, though more usually they get rich by carrying money they borrow at low interest to places where they get higher yields.

“While high yields almost always mean higher risks, there is a fiction of control over these risks through derivatives – in particular insurance contracts called "swaps".

“In the murky world of derivatives, however, the same bank group may indirectly be guaranteeing its own risks, and the trade in risks becomes bigger than the real investment. The whole pyramid stands so long as there is some real-world thing that pays, in theory, a high and steady yield – whether it is subprime mortgages, or a high rent from an oil asset.

“Spain privatised Repsol between 1989 and 1997, just at the time when "deregulation" in the US and Britain turned banks from investors into high-rolling gamblers. Repsol grew from a tiny Spanish refining and marketing "downstream" company into the world's 15th largest petroleum company, with operations on every continent. It specialised in deals where Anglo-American companies fear to tread, such as Iran, offshore gas in Venezuela under Chávez, and offshore oil in Cuba, enjoying bumps in its share price and valuation as it nominally acquired access to reserves.

“In 1999, Repsol bought its most important international asset, YPF. Over the past decade the main value of YPF as far as Repsol was concerned was not the oil or gas it produced and sold, but its value as collateral on the basis of which debt could be contracted.

“YPF, under Repsol, paid extraordinarily high dividends to its foreign owners – some 9% in 2011 – which it paid for by borrowing. So while YPF debts soared and Argentina's oil went undrilled, Repsol both banked profits and "invested" Argentinian capital elsewhere in its corporate structure. As the rating agency Standard & Poor's commented on 19 April: "Repsol does not guarantee any of the debt at YPF." Madrid got the juice, but the liabilities all fell on Buenos Aires.

“High dividends allowed Repsol also to cash out of 25% of its YPF holding by selling it on to the Eshkenazi family, with the capital coming from Credit Suisse, Goldman Sachs, BNP Paribas, Standard Chartered and Citibank, with banks then making money buying and selling derivative contracts on Repsol and YPF debt.

“Spain has threatened Argentina with retaliation, quickly followed by the EU, Britain, and the US. The anger in Madrid and in Brussels is of an old-fashioned kind – Argentina is both refusing to hand over its present and future pocket money to Spain and reducing Europe's global assets.

“But the fury on the pages of the Financial Times and the Wall Street Journal is not ultimately about oil or profits, nor even about the bad precedent it might set for future expropriations elsewhere. Rather, it is provoked by Argentina having interrupted a chain of securitisation anchored in the real world by its oil at one end, but with investment banks in London and New York, the holders of swap and other derivative liabilities on Repsol and YPF debt, at the other.”

1) Every oil company throughout history that has ever been expropriated and nationalized was because they "didn't reinvest enough".
2) Resource development, extraction and processing is an incredibly capital intensive business, the oil industry subset of that especially so.
3) The track record of governments that own national oil companies is one of equally starving the company of reinvestment capital as they milk it to pay for other government spending promises and graft...there are very few exceptions.
4) #3 is the reason that it is rare for national oil companies to maintain their production within their own home country, despite all the rhetoric from the politicians and company officials.
5) Argentina will succumb to the siren song of Goldman Sachs and you can be assured the politicians there will in short order be up to their Latino eyeballs trying to "front end" the extraction of cash using all manner of structured financial product, backed by the diminishing reserve base and production cashflows of YPF.

There are two things about the media that amuse me the most...journalists that know nothing about religion trying to explain "radical Islam" to us wretched infidels, and journalists that know squat about resource investment trying to explain to us how the oil industry works.

[Thailandnotes]

Re: Spain gets Mugged again!

1) Argentina will succumb to the siren song of Goldman Sachs

I'm here for the education and appreciate your comments.

I was hoping the “very” in “there are very few exceptions” was a hyperlink.

(I wonder if anyone on this forum can provide a recent link to an insightful critique of Morales.
Almost all western press coverage confuses readers by lumping Bolivia and Argentina together.) **

I watched the roll out of “modern telecommunications” in several developing countries in the late seventies. Typically, there was a government phone company and a new private phone company (foreign owned). The newly installed lines were better. Hey, they were new. But within a few years, the bribes to get a new line from the private or government phone companies were equal.

Sitting on a toll road in the US. Condition of road...poor. Stuck in traffic. Fee to drive it up 20 percent. Road owned by foreign company. This is FIRE.

**Googling Morales/Bolivia...Below is about as good as you get with a quick look. Pretty weak.

"Bolivia is South America’s poorest country, with about 60 percent of the population of 9.1 million mired in poverty.

Under President Evo Morales, who was elected in 2006, the country has seen a stretch of economic growth unrivaled in Bolivia’s turbulent recent history, largely a result of high prices for mineral exports and prudent economic policies. Even after spending heavily on cash payments to poor families, Mr. Morales’s government has still maintained a budget surplus.

Mr. Morales, an Aymara Indian, is the most powerful leader the country has seen since the 1950’s. He is the first indigenous president of a country where more than 60 percent of the population identify themselves as indigenous.
In January 2011 Mr. Morales suffered a rare policy setback. While he was out of the country, the government announced an abrupt 73 percent increase in the price of gasoline.

Protesters ransacked government offices and burned photographs of Mr. Morales, who caused the increase by cutting government subsidies. Coca growers, long an important base of support for the president, blocked a main highway in protest. Striking bus drivers publicly whipped those who dared pick up passengers. Five days later the increase was rescinded.

The double shock of Mr. Morales, a leftist leader who often lambastes market-oriented policies, proposing the measure and then seeing his own supporters rise up against it reflects a Gordian knot faced by governments in energy-rich countries: the drain fuel subsidies put on public finances, and the political risks involved in curtailing them.

Protests Against a Powerful Neighbor: Brazil

Brazil, Bolivia’s richer and more powerful neighbor, is increasingly flexing its
newfound political and economic might. Brazil now relies on a sophisticated diplomatic corps, rising foreign aid payments and the deep pockets of its development bank to project its power across Latin America and beyond.
But perhaps no Brazilian project in South America has stirred as much ire as the one in Bolivia.

Financed by Brazil’s national development bank, the plan was to build a road through a remote Bolivian indigenous territory. But it provoked a slow-burning revolt; hundreds of indigenous protesters undertook a grueling 325-mile march from the Bolivian central lowlands to La Paz, the capital, denouncing their onetime champion, Mr. Morales, for supporting it.

Mr. Morales, an avowed environmentalist, suddenly found himself at odds with an important part of his political base, defending a Brazilian project that could increase deforestation. He eventually yielded to the protesters’ demands and ruled out the road.

Brazil continues to nurture an array of plans in Bolivia, including several hydroelectric projects and an ambitious antidrug policy that involves deploying drones on the border and training and equipping Bolivian security forces.
But the road dispute has put Brazil on watch in Bolivia.

Rewriting the Constitution

Earlier in his tenure, Mr. Morales succeeded in winning passage of a new Constitution meant to shift power toward the highland provinces, where poor, indigenous voters predominate, and away from the lowlands, where most of Bolivia’s food is grown and where its petroleum and ample natural gas reserves are located.

Shortly after taking office, Mr. Morales nationalized the country’s oil and natural gas industries. Feared as a radical move, the nationalization was in effect a renegotiation of terms with foreign energy companies that have stayed in Bolivia. As energy prices rose, the country’s finances improved markedly. At the same time, Mr. Morales closely allied himself with President Hugo Chavez of Venezuela, and took an increasingly critical stance toward the United States.

While the surge in energy revenues cooled talk of outright secession in the lowland provinces, officials there moved forward with votes on statutes seeking greater autonomy, arguing with Mr. Morales over everything from the distribution of natural gas revenues to control over regional police forces. Perhaps the most contentious issue has been Mr. Morales’s land reform project in Santa Cruz, the economically vibrant eastern department. Rich landowning families in the area have clashed with government officials seeking to distribute their landholdings to Aymara and Quechua Indian migrants.

Mr. Morales’s effort to rewrite the country’s Constitution to give more representation to Indians led to conflict around the country. Violence over the proposed charter reached a head in September 2008, when more than a dozen peasants, mostly supporters of Mr. Morales, were killed in a clash in the Amazonian department of Pando.

Vaguely worded items among the new Constitution’s 411 articles would broaden definitions of property to include communal ownership; allow Indians to mete out corporal punishment under their own legal systems; extend limited autonomy to regional prefects; and reaffirm state control over Bolivia’s ample natural gas reserves.

Officials in the lowlands, where most of Bolivia’s food and petroleum are produced, ridiculed the new charter. But others say the new Constitution addresses underrepresentation of Indians, pointing to articles that would reserve seats for them in Congress and in other areas of the fast-growing bureaucracy. Even Mr. Morales’s cabinet has just two Indian ministers; his top aides, the vice president (a former guerrilla) and the chief of staff (a former military officer), are light-skinned intellectuals.

The Constitution was approved in a referendum on Jan. 25, 2009, with unofficial figures indicating close to 60 percent of the country voting in its favor. Citing the same counts, both state and private news media said at least four departments, or provinces, in Bolivia’s rebellious eastern lowlands had rejected the charter by wide margins.

[Prazak]

Re: Spain gets Mugged again!

I thought this situation in Iraq was well known, especially by the always informed iTulip crowd. I really do wonder when Americans are going to start asking their politicians why their young sons are dying in foreign deserts...

It is sadly ironic. And it has an equally pathetic analog in Afghanistan with so many mining contracts going to Chinese companies.

If it has a silver lining, I suppose it rebuts the "Bush invaded Iraq to control its oil" crowd. I suppose a naive and incompetent hegemon is to be preferred to a coldly competent one.

[flintlock]

Re: Spain gets Mugged again!

You erroneously assume Americans automatically become the beneficiaries simply because they foot the military bill. The looting of that country is a combined effort of many parties. And those oil money are still traded in dollars, American oligarchies still get a cut, a large cut of the pie.

Agree. Lots of money to be made for all. Besides, we have multinational companies these days. Its a stretch to call some of these "American" companies.

I personally believe most US foreign policy today has more to do with economics/profits than self defense. Though one could argue economic self defense I suppose. But I believe its more to do about self enrichment and personal power grabbing than any patriotic concern for one's country or people. This goes across the board, all countries and companies, to some extent. There has always been an element of this historically, but I believe the concept of allegiance to one's country of birth is becoming obsolete in the global economy. So what's left if our leader's lack any sense of allegiance to our country? All I can see is a grab for power and wealth, usually in that order.

I still have a hard time grasping exactly why we fight? What's the official line, the "War on Terror"? Anyone still buying that? Now I might possibly believe that its part of some "Great Game" type strategy. But then I tend to doubt that our leadership has that much patience and discipline today to be doing that. Perhaps the people responsible don't really know themselves why they are doing it, other than that just how the game is played?

[flintlock]

Re: Spain gets Mugged again!

My only suppositions are that either:

1: The Davos crowd has no national allegiance any more. The international "nobility" don't much care who exactly gets the cash as long as it's one of their own. After all, anyone willing to squirrel away all their cash in offshore tax havens certainly is no patriot. (The premise of globalization always seemed to me that the U.S. would accept responsibility for protecting the interests of any and all multi-national corporations).

2: The formerly Trotskyist Neocons actually thought they'd spread international capitalism and democracy with a sword and didn't care about cost recovery for the U.S. (Interestingly, it has occurred to me that now upon the era of the Arab Spring, an historian could easily write a book calling W., Rumsfeld, Cheney et. all geniuses for transforming the Middle East into a democratic region).

3: The only reason the whole war even took place was to get Halliburton immediate contracts and cash, and once the media pressure turned up, they opened everything up to competitive international bid. (This is a hyper-cynical view).

But between the fact that U.S. taxpayers are asked to pay for the war (with lives as well as money), the reconstruction, universal healthcare for every Iraqi, and get little to no oil contracts for U.S. corporations in return, one must wonder why the war took place.

If I had to guess, I'd say that #1 has the most weight in this scenario.

But I'm no expert here. I was involved in none of these decisions. And I'd be interested in others' ideas on the matter.

I lean towards #1 also. But they would love you to think #2 was the answer. #3 is why some went along with the plan, but probably not the ultimate answer. To fight a war you need political coalitions, so part of all three were probably used to pull it off.

[gnk]

Re: Spain gets Mugged again!

It is sadly ironic. And it has an equally pathetic analog in Afghanistan with so many mining contracts going to Chinese companies.

If it has a silver lining, I suppose it rebuts the "Bush invaded Iraq to control its oil" crowd. I suppose a naive and incompetent hegemon is to be preferred to a coldly competent one.

I'm still in the '"Bush invaded Iraq to control its oil" crowd.'

Would you rather see American Corporations in the Middle East being "protected" by a Middle-East occupying Chinese Red Army or the other way around?

Who serves at whose pleasure? I guess there are shades of grey.

One side owns a ton of "paper" promises made by the other, while the other has the greatest military in the history of the world - spread globally. Sure, holding someone else's "paper" gives one control over the other. But in a SHTF scenario, the paper becomes meaningless, the military remains.

I see a real conflict between the two. The world is slowly entering one of its darkest periods. We hit a "Malthusian point" already - not in terms of survival, but in terms of most of the world's inhabitants enjoying a modern lifestyle. We just haven't realized it yet.

[thriftyandboringinohio]

Re: Spain gets Mugged again!

"War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes."

"I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents."

US Marine Major General Smedley Butler

[astonas]

Re: Spain gets Mugged again!

Yep. And when you get right down to it, there is nothing that says that motivations 1, 2, and 3 can't all exist in the same head, at the same time. People lie to themselves all the time about their real motives, or at the very least are often unaware of how much one aspect of their world-view is shaping other aspects of their thinking. For example, even if Dick Cheney was completely convinced that motivation 3 wasn't a factor in his drive toward war, that doesn't mean that his background at Halliburton didn't define his worldview such that what was good for the oil industry was what was good for America.

Furthermore, and others (perhaps JK?) can probably attest to this more definitively than I, but my understanding of the way the brain works is that our thought mechanisms are far more hidden from us than we generally believe. Many times when we think we are making a "decision" to do something, detailed high-resolution brain imaging reveals that we make the decision itself based on impulse, and engage our rational thinking centers only after the fact, to rationalize a logical path that explains the decision. (There've also been some fascinating early split-brain studies that explored this effect in a more extreme form.) In each case, the subject is completely convinced that they made a logical choice, based on reasoning, and will argue so quite vehemently if challenged.

This is also why I tend to place less faith in individuals who are very certain of their beliefs. They are actually MORE, not less, likely to be wrong. (I recall a study of crime witnesses in court cases that showed an inverse relationship between their certainty and their likelihood of being consistent with objectively measured facts.) The more sure you are of a memory, the more likely it is to be wrong. It has to do with the way memory reinforces itself by re-imagining a set of events. The more often you think about a set of events, the more certain you become. But each time you re-imagine it, it has a chance of being changed slightly. Your most certain memories are not the most reliable, but the least, since they've been re-imagined most often, and thus are subject to the most drift by this re-imagining.

For this reason, my suspicion is that most people elected to office get so good at spinning their actions that they wind up believing their own marketing pitch, and their own stump speech. (They repeat the same words literally hundreds of times on a campaign.) You almost have believe them, too, to be convincing enough to win elections. If you don't, and present any capability for a nuanced world-view, you look untrustworthy, like you're "flip-flopping". So I fall into the camp of saying that all three of the above motivations, plus several more (desire to win elections by appearing "strong on defense", overcompensation for 9/11, etc.) were all present and active. And I suspect that not even the people making the decisions are aware of how much each driver played a role in their thought-process. They came to the conclusion, entirely unconsciously, of what they wanted to do. And each person rationalized it to themselves based on the moral code they had created for themselves. When George Bush spoke of making decisions "from the gut" he was probably being far more accurate than he ever realized.

Seen through this lens, it is not so much a judgement on our leadership or system as it is an acknowledgement of the uncomfortable truths of just how little control we have over our own minds. The only way to make decisions that are truly reason-based is to regularly and deeply challenge one's own assumptions and world-view. My suspicion is that this was not a habit of the administration in question, which was, if anything, noted for the extreme, unflinching, moral certitude it brought to the White House.

Bottom line: if you meet someone who thinks they know "the truth" about something, anything at all, run away. Basic neurobiology says that their very certainty provides a reasonable indicator that they are, in fact, dead wrong.

[GRG55]

Re: Spain gets Mugged again!

...Bottom line: if you meet someone who thinks they know "the truth" about something, anything at all, run away. Basic neurobiology says that their very certainty provides a reasonable indicator that they are, in fact, dead wrong.

Measured against what? Your certainty of what is "the truth"?

[astonas]

Re: Spain gets Mugged again!

Measured against what? Your certainty of what is "the truth"?

Of course not! Such experiments are generally conducted in a controlled setting. For example, if a series of images are shown to a person, (with the sequence of images recorded), and they are later asked what the images were, their certainty generally correlates inversely with the actual accuracy of their memory (compared to the recorded data).

The only way to measure reality is with objectively verifiable data. The one thing that is not credible is a person's assertion of certainty. No matter who that person is.

And when it comes to assessing the reasoning behind one's own decisions, the brain has been shown to be incredibly adept at fooling itself. So there really isn't an "objective" truth to be found here, even if one could ask, and believe the answer, of the person making the decision.

If one were a logical positivist, one might even go so far as to say that the question was meaningless. ;)

[jiimbergin]

Re: Spain gets Mugged again!

Of course not! Such experiments are generally conducted in a controlled setting. For example, if a series of images are shown to a person, (with the sequence of images recorded), and they are later asked what the images were, their certainty generally correlates inversely with the actual accuracy of their memory (compared to the recorded data).

The only way to measure reality is with objectively verifiable data. The one thing that is not credible is a person's assertion of certainty. No matter who that person is.

And when it comes to assessing the reasoning behind one's own decisions, the brain has been shown to be incredibly adept at fooling itself. So there really isn't an "objective" truth to be found here, even if one could ask, and believe the answer, of the person making the decision.

If one were a logical positivist, one might even go so far as to say that the question was meaningless. ;)

Sounds like a bunch of nonsense to me. I say with certainty that I exist. Now am I just fooling myself?

[astonas]

Re: Spain gets Mugged again!

Sounds like a bunch of nonsense to me. I say with certainty that I exist. Now am I just fooling myself?

Of course not. There are objective ways of verifying that. But entirely internal mental processes, such as abstract memory, and evaluating one's own motivation, do not have such objective touchstones. And as counterintuitive as it seems, the mind has been shown to be less reliable when it is more certain. The only way to know this for sure, of course, is in a controlled setting, when data is collected that the individual does not have access to when recalling the information (by, for example, writing down the sequence of images that are being shown, and not showing the subject your list when asking them to recall them.)

You may be certain that you exist, and correct in that confidence, because at any moment you can and do probe the question by testing it. "If I look down, do I see a body?" "If I apply pressure on the table, do I feel compression of my hand?" etc. Every moment of consciousness is essentially an experiment that implicitly re-validates the premise. And you have performed this "test" every moment of your life, and never gotten a negative answer. That's pretty good evidence. You should be certain.

But some very counterintuitive things happen inside the brain, which can be most evident when certain portions of the brain get damaged. I remember from one of my neuroscience classes a disorder whereby one ceases to acknowledge a part of one's own body as belonging to oneself. It is called "spatial neglect". The subject can see in the mirror that they have a whole body, but unless they work very hard at it, or use external reminders, they don't dress or groom a portion of it. They might for example shave one half of their face, and dress only one half of their body. Their mind simply does not acknowledge the neglected half to be a part of the "self". Does that mean that it is not a part of their self? Of course not! But the mind is completely certain that it is not! The brain damage causes the neglect, but the certainty, and the brain's ability to reconcile objectively incompatible truths ("The person in the mirror has two arms; That image is a reflection of "me."; I do not have two arms.") is innate even to the healthy brain.

Other examples that demonstrate the powerful ability of the human mind to embrace the objectively incorrect have been seen in so-called "split-brain" studies. There was a time when a treatment for epilepsy was the severing of the corpus collosum, which is the tissue that connects the two halves of the brain. Studies that were performed on these individuals showed that they could generally function fairly normally (which is why the treatment continued to be used for a time). But the split between the brain hemispheres could be probed by flashing images or words briefly in either the left or the right portion of their field of view. (An image on the left was processed by the right side of the brain, and an image on the right was processed by the left. When the right brain was shown, for example, a hand, and then was shown a glove, The person could clearly articulate that the two belonged together. But when asked why, they would give an answer that was based on what the LEFT side of the brain (which handles logic and language) was exposed to, perhaps the words "foot", and "chicken". The compensation mechanism was not a surprise to the researchers, but the extreme certainty of the answer was. The subject would respond with a piece of tortured logic to connect the words: ("well, obviously, all chickens must have feet, and besides, chickens live at about foot-height.") One part of their brain had decided the answer. Another had decided the reason. And there was no need for them to interact for certainty to be established. The right brain had come to the correct answer and conveyed its certainty. But the reasons for that certainty did not need to relate to the reasons given.

Later, when brain-imaging methodologies became more developed, it could be seen that not only was it possible for decisions to be made independently of logical reasoning, but that even in normal, healthy, brains the reasoning centers of the brain frequently act AFTER the portion of the brain that "makes" a decision. Thus, even when we BELIEVE that our thought process is doing this:

1. take inputs
2. think about them
3. make decision

There is a large class of "decisions" that in fact go like:

1. take inputs
2. make decision (based on an instinct developed by previous experiences or thoughts)
3. come up with a reasonable way to describe the decision in terms of the inputs (this description, may in turn affect FUTURE decisions, by altering the collection that comprises one's "previous experiences")

There is further evidence to be had in looking at sleep- and consciousness- studies, but I don't want to belabor the point unless someone is really interested. PM me if you want to know more.

In any event, yeah, it sounds really weird. But the brain and how it works IS really weird. And technology has now progressed to the point where we can measure it, and see just how weird.

We want to believe that we are reasonable creatures, but, unless we make a special effort, we are in fact mostly merely rational ones.