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That Time in 1979 When the U.S. Government Defaulted

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© Kristoffer Tripplaar/Pool/Corbis

As the Congressional debate over the debt ceiling rages on this week, more analysts are raising the question of what would happen if the country defaults on U.S. Treasury bonds. For finance types, the notion of the U.S. government defaulting is nearly unthinkable; Treasury securities are considered to be effectively risk-free. Murmurs that the ongoing wrangling over the debt ceiling could lead to even a brief default have provoked plenty of worrying on both sides of the congressional aisle. Could the government really default?

It sure could. It’s happened before!

In the spring of 1979, Congress was in the midst of a similarly heated debate about raising the debt ceiling, Legislators eventually reached a last-minute deal to raise the debt ceiling and (they thought) save the day, but something went wrong. The Treasury didn’t redeem $120 million worth of securities that matured in April and May.

In other words, the U.S. Treasury defaulted on its securities even though Congress settled the debt-ceiling issue. What happened? It’s not totally clear.

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Ball State University finance professor Terry Zivney later co-authored a paper entitled “The Day the United States Defaulted on Treasury Bills,” and when he appeared on NPR’s All Things Considered earlier this month, he admitted the default was still a bit of a mystery even to him.


By all indications, the 1979 default seems to have been the result of a run of bad luck. The deal over the debt ceiling was a decidedly eleventh-hour affair, and when it sparked a run on Treasury securities by investors, the department got backlogged on its paperwork. Moreover, the Treasury later explained that it had problems with the word-processing and printing software that printed its checks. (This defense is otherwise known as, “We wanted to pay you, but you know how these dang computers are!”)

A Costly Blip

This event wasn't exactly a cataclysmic default. The $120 million in unredeemed securities was a tiny fraction of the Treasury’s $800 billion in debt at the time. The government quickly got its act together and paid off investors—the Treasury still considers the episode to be a delay rather than a default—but Zivney’s research found that the blip had real consequences for the economy.

After the default, investors no longer saw Treasury securities as totally risk-free options, so the government suddenly had to pay a higher interest rate when it wanted to borrow money. Zivney and co-author Richard Marcus estimate that as the result of the small 1979 default, the Treasury had to up the interest rate it was paying by 0.6 percent on all of its debt. That may look like a tiny number, but when it’s spread across the Treasury’s entire debt, it adds up quickly.

It’s not clear how much we can learn about our current situation from an apparently inadvertent default over three decades ago, aside from maybe the painfully obvious point that a new default would be a very bad thing. But the next time you hear someone say a government default would be unprecedented, you’ll know better.

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iStock // Ekaterina Minaeva
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technology
Man Buys Two Metric Tons of LEGO Bricks; Sorts Them Via Machine Learning
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iStock // Ekaterina Minaeva

Jacques Mattheij made a small, but awesome, mistake. He went on eBay one evening and bid on a bunch of bulk LEGO brick auctions, then went to sleep. Upon waking, he discovered that he was the high bidder on many, and was now the proud owner of two tons of LEGO bricks. (This is about 4400 pounds.) He wrote, "[L]esson 1: if you win almost all bids you are bidding too high."

Mattheij had noticed that bulk, unsorted bricks sell for something like €10/kilogram, whereas sets are roughly €40/kg and rare parts go for up to €100/kg. Much of the value of the bricks is in their sorting. If he could reduce the entropy of these bins of unsorted bricks, he could make a tidy profit. While many people do this work by hand, the problem is enormous—just the kind of challenge for a computer. Mattheij writes:

There are 38000+ shapes and there are 100+ possible shades of color (you can roughly tell how old someone is by asking them what lego colors they remember from their youth).

In the following months, Mattheij built a proof-of-concept sorting system using, of course, LEGO. He broke the problem down into a series of sub-problems (including "feeding LEGO reliably from a hopper is surprisingly hard," one of those facts of nature that will stymie even the best system design). After tinkering with the prototype at length, he expanded the system to a surprisingly complex system of conveyer belts (powered by a home treadmill), various pieces of cabinetry, and "copious quantities of crazy glue."

Here's a video showing the current system running at low speed:

The key part of the system was running the bricks past a camera paired with a computer running a neural net-based image classifier. That allows the computer (when sufficiently trained on brick images) to recognize bricks and thus categorize them by color, shape, or other parameters. Remember that as bricks pass by, they can be in any orientation, can be dirty, can even be stuck to other pieces. So having a flexible software system is key to recognizing—in a fraction of a second—what a given brick is, in order to sort it out. When a match is found, a jet of compressed air pops the piece off the conveyer belt and into a waiting bin.

After much experimentation, Mattheij rewrote the software (several times in fact) to accomplish a variety of basic tasks. At its core, the system takes images from a webcam and feeds them to a neural network to do the classification. Of course, the neural net needs to be "trained" by showing it lots of images, and telling it what those images represent. Mattheij's breakthrough was allowing the machine to effectively train itself, with guidance: Running pieces through allows the system to take its own photos, make a guess, and build on that guess. As long as Mattheij corrects the incorrect guesses, he ends up with a decent (and self-reinforcing) corpus of training data. As the machine continues running, it can rack up more training, allowing it to recognize a broad variety of pieces on the fly.

Here's another video, focusing on how the pieces move on conveyer belts (running at slow speed so puny humans can follow). You can also see the air jets in action:

In an email interview, Mattheij told Mental Floss that the system currently sorts LEGO bricks into more than 50 categories. It can also be run in a color-sorting mode to bin the parts across 12 color groups. (Thus at present you'd likely do a two-pass sort on the bricks: once for shape, then a separate pass for color.) He continues to refine the system, with a focus on making its recognition abilities faster. At some point down the line, he plans to make the software portion open source. You're on your own as far as building conveyer belts, bins, and so forth.

Check out Mattheij's writeup in two parts for more information. It starts with an overview of the story, followed up with a deep dive on the software. He's also tweeting about the project (among other things). And if you look around a bit, you'll find bulk LEGO brick auctions online—it's definitely a thing!

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Health
One Bite From This Tick Can Make You Allergic to Meat
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iStock

We like to believe that there’s no such thing as a bad organism, that every creature must have its place in the world. But ticks are really making that difficult. As if Lyme disease wasn't bad enough, scientists say some ticks carry a pathogen that causes a sudden and dangerous allergy to meat. Yes, meat.

The Lone Star tick (Amblyomma americanum) mostly looks like your average tick, with a tiny head and a big fat behind, except the adult female has a Texas-shaped spot on its back—thus the name.

Unlike other American ticks, the Lone Star feeds on humans at every stage of its life cycle. Even the larvae want our blood. You can’t get Lyme disease from the Lone Star tick, but you can get something even more mysterious: the inability to safely consume a bacon cheeseburger.

"The weird thing about [this reaction] is it can occur within three to 10 or 12 hours, so patients have no idea what prompted their allergic reactions," allergist Ronald Saff, of the Florida State University College of Medicine, told Business Insider.

What prompted them was STARI, or southern tick-associated rash illness. People with STARI may develop a circular rash like the one commonly seen in Lyme disease. They may feel achy, fatigued, and fevered. And their next meal could make them very, very sick.

Saff now sees at least one patient per week with STARI and a sensitivity to galactose-alpha-1, 3-galactose—more commonly known as alpha-gal—a sugar molecule found in mammal tissue like pork, beef, and lamb. Several hours after eating, patients’ immune systems overreact to alpha-gal, with symptoms ranging from an itchy rash to throat swelling.

Even worse, the more times a person is bitten, the more likely it becomes that they will develop this dangerous allergy.

The tick’s range currently covers the southern, eastern, and south-central U.S., but even that is changing. "We expect with warming temperatures, the tick is going to slowly make its way northward and westward and cause more problems than they're already causing," Saff said. We've already seen that occur with the deer ticks that cause Lyme disease, and 2017 is projected to be an especially bad year.

There’s so much we don’t understand about alpha-gal sensitivity. Scientists don’t know why it happens, how to treat it, or if it's permanent. All they can do is advise us to be vigilant and follow basic tick-avoidance practices.

[h/t Business Insider]

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