|
[QUOTE=only_human;161597][QUOTE] Originally Posted by ewmayer
My Comment: I wonder to what extent the Peso's plunge is due not to declining exports to the U.s. but rather to the millions of Mexican migrants (legal and illegal) who have been sending billions of dollars back home from their work in the U.S. but whose jobs are now vanishing at a frightening rate.[/QUOTE]The Central Bank of Mexico tracks this but I haven't looked at it much. [URL]http://www.banxico.org.mx/SieInternet/consultarDirectorioInternetAction.do?accion=consultarCuadro&idCuadro=CE81&locale=en[/URL] I see a drop in November and December. I didn't compare the previous year because I was not sure what data I was looking at when I attempted to do so. The following article thinks that the strong dollar is encouraging more remittances: [URL="http://www.palmbeachpost.com/business/content/business/epaper/2008/12/14/sunbiz_mexicodollar_1214.html"]Strong dollar means Mexico migrants send more home[/URL] AP Dec 12, 2008[/QUOTE] February 9, 2009 Time Magazine (page 13) finds that the same percentage of Latino immigrants is sending money but the amount per person is dropping. Perhaps, in group aggregate, workers are transitioning from more lucrative construction jobs into less remunerative positions[QUOTE]For the first time since the Mexican central bank started keeping track, remittances to the country fell in 2008, from $26.1 billion to $25.1 billion. After oil exports, money sent home from workers abroad--mostly from the U.S.--is the largest source of foreign income in Mexico. The central bank expects remittances to keep falling in 2009, thanks in part to layoffs in the U.S. construction sector; Mexico's overall GDP is also expected to shrink. A January report from the Pew Hispanic Center showed that while the same percentage of Latino immigrants is sending money as in previous years, the amount per person is dropping. An estimated 70% sent less money in 2008 than in 2007.[/QUOTE]Remittances by year (in billions of dollars) 2000 6.6 2001 8.9 2002 9.8 2003 15.0 2004 18.3 2005 21.7 2006 25.6 2007 26.1 2008 25.1 |
Anyone else smell frying bacon? | Metaphor abuse
Thanks for the Mexican-remittance data, only_human ... I'll be *very* interested to see what the figure for 2009 ends up being. My guess is that it might threaten to drop back below $20 billion this year.
------------- [url=http://money.cnn.com/2009/02/09/news/economy/stimulus_senate/index.htm]Stimulus bill passes key Senate hurdle[/url]: [i]Lawmakers move to put a compromise $827 billion economic stimulus plan to final vote Tuesday.[/i] [quote]WASHINGTON (CNN) -- The Obama administration's $827 billion economic stimulus plan moved toward passage in the Senate on Monday as a compromise version of the bill cleared a key procedural hurdle. Monday's 61-36 vote ended the prospect of a Republican filibuster that could have killed the measure, which President Barack Obama and Democratic congressional leaders say is necessary to pull the country out of an economic nosedive and create new jobs. Three Republicans -- Arlen Specter, of Pennsylvania, and Susan Collins and Olympia Snowe of Maine -- joined Democrats in voting to cut off debate on the measure. Sixty votes were needed. "The time to act is now," said Senate Majority Leader Harry Reid, D-Nev. Reid said Americans understand recovering from the current recession will take some time -- "but they do not have patience for a Congress that points fingers, drags its feet or fails to act." A vote on final passage is scheduled for Tuesday. Negotiators from the Senate and the House of Representatives would then have to hammer out a single bill from their differing versions, but Reid said he expected that could be done by Friday. The nonpartisan Congressional Budget Office reported last week that the package is likely to create between 1.3 million and 3.9 million jobs by the end of 2010, lowering a projected unemployment rate of 8.7 percent by up to 2.1 percentage points. But the CBO warned the long-term effect of that much government spending over the next decade could "crowd out" private investment, lowering long-term economic growth forecasts by 0.1% to 0.3% by 2019. The price tag of $827 billion is roughly the same in both houses of Congress. But the version that senators advanced Monday -- which was hammered out in talks led by Collins and Nebraska Democrat Ben Nelson -- replaced billions in spending with tax cuts. Collins said the compromise was "not perfect," but called it "bipartisan, targeted and effective." And Nelson said their version "trimmed the fat, fried the bacon and milked the sacred cows." "It focuses like a laser beam on tax cuts for the middle class and job creation for millions of Americans," Nelson said.[/quote] [b]My Comment:[/b] Putting aside the fact that Senator Nelson just managed the astonishing feat of using no less that four inane metaphors (one blatantly ripped off from a Bill Clinton speech) in a mere two sentences, how in the hell can one call it "effective"? It hasn`t even been enacted yet! And getting a mere *three* Republicans to help put you over the top on a cloture (filibuster-ending) vote is "bipartisan"? Whatever it is you`re smoking, Ben, it must be pretty potent stuff. [quote]But the House version of the bill passed without any Republican votes, and most Republican senators oppose the plan. Minority Leader Mitch McConnell, R-Ky., said GOP senators were suffering from "sticker shock." "Everybody knows the economy's in serious trouble and everybody expects the government to act," he told reporters Monday afternoon. But he said the current bill "just doesn't add up to timely, temporary and targeted, which is what we all thought this was going to be about." McConnell said the actual cost of the package was more than $1 trillion when interest on the increased debt was included. And Sen. John McCain, the party's 2008 presidential nominee, called the package a "generational theft."[/quote] [b]My Comment:[/b] Hmm, "generational theft" - you mean like a certain trillion-dollar-plus war started on bogus pretenses? Or the roughly $5-Trillion-dollar current-account-deficit you guys ran up under the leadership of Herr Bush? Irony is well and truly dead up on Capitol Hill. |
I didn't hear much of tonight's press conference, but I noted two items Obama mentioned.
One was that January's job-loss figure was the equivalent to putting all of Maine out of work. Sure enough, in that article was ... [quote]... and Susan Collins and Olympia Snowe of [B]Maine[/B] -- joined Democrats in voting to cut off debate on the measure.[/quote]The other was his reminder (which I think needs to be repeated about 5 trillion times so that it penetrates some thick skulls) that the most recent Republican administration added [quote=ewmayer;162277]roughly $5-Trillion-dollar[/quote]to our national debt. Reminder: The next-most-recent two Republican administrations (Reagan-Bush) quadrupled (to $4 trillion) the national debt ($1 trillion) that [I]they[/I] inherited. These facts should be repeated over and over and over and over ... until Republicans stop their misrepresentations about relative partisan fiscal responsibility. |
Geithner's Bank Rescue Plan = "We Are Clueless"...
..."but we should absolutely not punish Big Finance heads who made incredibly risky choices, speculated in recklessly greedy fashion and collected huge bonuses while driving their companies into insolvency and into the waiting arms of the U.S. Government`s [a wholly-owned subsidiary of Goldman Sachs Inc] Private-Equity Arm":
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=arHEFLiYqAG8&refer=news]U.S. Stocks Drop, Led by Financial Shares, as Geithner Announces Bank Plan[/url]: [i]U.S. stocks retreated, sending the Standard & Poor’s 500 Index to its first drop in four days, after Treasury Secretary Timothy Geithner said he’s yet to decide on the best way to revive the financial system.[/i] [quote] Feb. 10 (Bloomberg) -- U.S. stocks fell, sending the Standard & Poor’s 500 Index to its biggest drop since Barack Obama’s inauguration, while Treasuries rallied and the dollar slumped against the yen on skepticism that the government’s bank rescue will work. Bank of America Corp. and Citigroup Inc. lost more than 9 percent after Treasury Secretary Timothy Geithner said he’s still “exploring a range of different structures” to bail out lenders.[/quote] [b]My Comment:[/b] "Exploring a range of options" = "We Are Clueless". That in itself might not be so bad, but it appears that [strike]Pauson the Younger[/strike] Geithner rejected proposals which would have imposed tougher conditions on financial institutios receiving aid. [url=http://globaleconomicanalysis.blogspot.com/2009/02/insanity-prevails.html]Mish comments[/url]: [quote]Notice how insane this is. The market cap of Citigroup(C), JP Morgan Chase(JPM), and Bank of America (BAC) combined is $158 billion, yet the program is going to provide an initial $250 billion to $500 billion (with more insanity coming) just to deal with "soured mortgage-related assets". ... Just how sane is it to attempt to "unfreeze" commercial, student, auto and credit card loans when unemployment is soaring, savings are at zero, and consumers are in debt up to their eyeballs?[/quote] [b]World Snapshot:[/b] [url=http://www.bloomberg.com/apps/news?pid=20601086&sid=a3XsvYowgaGM&refer=news]Brazil Stocks Tumble on Concern Over U.S. Bank Bailout Plan; Ipsa Declines[/url]: [i]Brazilian stocks fell, erasing an earlier rally, as commodities tumbled on speculation a U.S. stimulus plan may not ease the global recession.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601086&sid=axnDBuzfdpdQ&refer=news]Mexico Bought $1.1 Billion of Pesos in Three Days Last Week to Stem Tumble[/url]: [i]Mexico’s central bank bought $1.1 billion worth of pesos directly from banks last week to prop up the currency, sparking the biggest decline in foreign reserves in three months.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601081&sid=aWaZemKd599w&refer=australia]Australia's Business Confidence Plunges to Lowest Ever as Exports Decline[/url]: [i]Australian business confidence tumbled in January to a record low as global demand for exports wanes, adding to signs the economy will fall into its first recession in almost two decades.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601085&sid=aUGhfTlPfqtU&refer=europe]European Stocks Fall on Economy Concerns; Kazakhmys, Commodity Shares Drop[/url]: [i]European stocks declined the most in almost a month, led by companies most tied to the economy, on concern U.S. plans to increase spending and shore up banks won’t be enough to revive growth.[/i] [quote]“The question is where is this going to stop?” said Emmanuel Soupre, a fund manager at Neuflize OBC in Paris, which oversees about $23 billion. “The size of the figures involved is intimidating the market. We’re facing the unknown and it is worrying investors.” [/quote] [b]My Comment:[/b] Indeed. [url=http://www.bloomberg.com/apps/news?pid=20601102&sid=apsI1pqWFA3Y&refer=uk]Royal Bank, HBOS Executives Apologize to Lawmakers for U.K. Banking Crisis[/url]: [i]The executives responsible for the near collapse of Royal Bank of Scotland Group Plc and HBOS Plc apologized for their role in the U.K. financial crisis that required the biggest government bailout in history.[/i] [quote]Tom McKillop and Fred Goodwin of RBS and Andy Hornby of HBOS said they were sorry for the turmoil, which forced Prime Minister Gordon Brown’s government to pay 37 billion pounds ($55 billion) for stakes in both banks. “I apologized in full and am happy to do so again,” Goodwin, former chief executive of RBS, told the British Parliament’s Treasury Committee in London today. “There’s a profound unqualified apology for all of the distress been caused. It’s affected everyone.” The comments, echoed by the other three former bankers giving evidence, were aimed at reducing anger within the government and among lawmakers from all political parties about the cost of the rescue, which is spiraling into the hundreds of billions of pounds. The government has taken on more than 1 trillion pounds in liabilities including a 70 percent stake in RBS and 43 percent of Lloyds Banking Group Plc, which purchased HBOS to prevent a run on the bank. The Treasury fully nationalized Northern Rock Plc and Bradford & Bingley Plc. [b] Lawmakers’ Anger [/b] With so much taxpayer money at risk, lawmakers are upset at reports that RBS is considering paying bonuses to staff for 2008. Brown’s spokesman yesterday said the prime minister was “very angry” and urged bankers whose contracts guarantee bonuses to consider whether they deserve them. Goodwin offered an explanation to the committee, noting that the “rates and currencies business probably had a record year in 2008,” and “the people sitting in there will be expecting to be rewarded.” [u] McKillop, RBS’s former chairman, said the system of paying large bonuses is a way of keeping staff with “very transportable” specialist banking skills. He said the U.K. banking industry had “a lot of angst” about the pay culture, which he said was imported from the Wall Street in the U.S.[/u][/quote] [b]My Comment:[/b] Uh, that`s one "import" most of the rest of the world would probably not object to the UK imposing a stiff tariff on. |
The lowdown on Geithner's bank-rescue plan
In case any of you might have been wondering why the equity markets reacted so negatively to U.S. Treasury Secretary Tim “Timmay!” Geithner’s much-ballyhooed bank rescue plan which was officially announced to be in the planning stages this morning, perhaps this will help clarify things for you - One of the reader/commentators over on [url=http://www.ritholtz.com/blog/2009/02/sell-on-the-news/#comments]Barry Ritholz`s blog[/url] has a nice "for dummies" synopsis of the Geithner "Plan for a plan":
[quote]The Geithner plan: 1. Pleased to announce that we have a plan to make a really good plan. 2. When we have the plan it will be really big. In fact it may be even bigger if needed. 3. There will be lots of things in the plan so we are not going to be really sure what is working and what isn’t. We are trying to be all things to all people, which is really difficult. 4. We are going to partner with the guys who got us into this mess and hope they don’t trick us. 5. I know I look like I am 16 years old, but trust me — we are not making this up as we go along. 6. We will make mistakes, but at least we plan to tell you about them after they happen. 7. Things may get worse before they get better. Things can’t get better unless they get worse. It is all relative. 8. TARP I had issues and we don’t plan to repeat those mistakes, unless we do and then “our bad”. 9. The plan will be flexible to deal with changing conditions. So flexible in fact that you are not really going to be able to figure out what our plan is until after we are done and we are not sure we will ever be done. 10. Some homeowners are worth helping and some others are not. Same for banks. We plan to let you know which is which once we have decided on a plan to decide. That is the plan, so please plan to go back to focusing on the awesome stimulus plan that may or may not also not work as planned.[/quote] |
The other problem is that in Monday's new conference, Obama promised a "terrific" presentation by Geithner!
From a transcript at [URL]http://www.nytimes.com/2009/02/09/us/politics/09text-obama.html?pagewanted=1&_r=1&fta=y[/URL] (with my boldface) [quote]... And so tomorrow my Treasury secretary, Tim Geithner, will be announcing [B]some very clear and specific plans[/B] for how we are going to start loosening up credit once again. ... Before I even think about what else I've got to do, my first task is to make sure that my secretary of the Treasury, Tim Geithner, working with Larry Summers, my national economic adviser, and others, are coming up with the [B]best possible plan to use this money wisely, in a way that's transparent, in a way that provides clear oversight[/B] ... ... I don't want to preempt my secretary of the Treasury; [B]he's going to be laying out these principles in great detail tomorrow.[/B] But my instruction to him has been let's get this right, let's create a template in which we're restoring market confidence. ... Again, Helene, I -- I -- and I'm trying to avoid preempting my secretary of the Treasury; I want all of you to show up at his press conference as well. (Laughter.) [B]He's going to be terrific.[/B] ... And beyond that, I'm going to make sure that [B]Tim gets his moment in the sun tomorrow[/B], all right? ...[/quote]After [I]that[/I] buildup, Geithner was bound to disappoint unless he laid out an enormously-detailed plan. I think someone forgot to make sure that Obama knew what Geithner was going to be presenting -- and that's pretty sorry considering that Geithner's presentation was originally scheduled for Monday. IMO if Obama had just refrained from uttering "very clear and specific", "in great detail", and "terrific", today's reaction would've been less negative. |
Muzak bankruptcy.
This one is close to home since I work with Muzak circuits on a regular basis. The last ones I set up were in an office in New York where a phone company had a major call center and needed music on hold. [url]http://ca.news.yahoo.com/s/capress/090210/business/muzak_bankruptcy[/url] [quote]The company had heavy debt load, and it filed to try to refinance some of its debt. Its total debt is between US$100 million and $500 million and it has assets of less than $50,000, Muzak said in a court filing. A company spokeswoman, Meaghan Repko, said total assets were actually higher, at roughly $320 million. That includes the Muzak LLC operating company, she said, which also filed for bankruptcy. She declined to give a more exact figure for the company's total debt. Many of its biggest creditors are music companies that license songs for use on Muzak playlists. While the company is known as the creator of elevator music, its business is now more focused on creating playlists for use in retail stores, installing professional sound systems and other services. Fort Mill, S.C.-based Muzak filed for court protection in the U.S. Bankruptcy Court in the District of Delaware in Wilmington. The company expects to continue to operate as is. A statement said it has "sufficient means" to support itself through a bankruptcy reorganization. The company got an extension last month on $105 million in debt, it said in a statement. The extension ran out Tuesday. Among its biggest unsecured creditors is U.S. Bank NA, which is owed $371 million according to a court filing. Bank lenders typically are classified as secured lenders. Secured lenders are paid before unsecured lenders. Other top unsecured creditors include vendors such as Universal Music Enterprises, owed $349,321; EMI Capital Records, $320,323; AT&T, $257,384; and Dish Network, $251,276. The American Society of Composers, Authors and Publishers is owed $213,020, the filing said. Sony Music, BMG Film & Television Music, United Parcel Service and Virgin Records were also listed among the unsecured creditors. A list of secured creditors should be filed later. Kirkland & Ellis was hired as its bankruptcy law firm. Moelis & Co. will serve as the company's financial adviser. [/quote] |
McGraw-Hill Nixes Ritholz Book Critical of S&P
...which may seem odd until one realizes that McGraw-Hill is the parent company of the Standard & Poors ratings agency:
[url=http://www.ritholtz.com/blog/2009/02/about-bailout-nation/]About [i]Bailout Nation[/i]...[/url] (EWM: Underlines are Mine - italic/bold/url from Ritholz`s post): [quote]Now, before you assume I am an idiot for doing a book that was critical of the ratings agencies with a publisher that owns S&P, understand that I properly anticipated this. My contract gave me [i]Final Edit[/i]. Not only that, I had previously discussed this issue months earlier with then publisher Herb Schaffner. (He was laid off in a big Q4 round of firings). Sometime over the summer, Herb informed me that the ratings agencies discussions would have to be handled “delicately and diplomatically.” I responded, “Sorry, Herb, but I don’t do diplomacy.” If they wanted someone who was subtle or diplomatic, boy did they have the wrong guy. I offered to return the advance check and we could all move on. He backed down, and I assumed — apparently quite wrongly — that this was the end of this issue. How can you write a book on this subject and not lambast the ratings agencies? I am not sure if this was in August or September, but that is my best guess as to the approximate time frame. Where was I? Oh, yes, the pushback on the changes. The stylistic changes were still objected to. The problems came not from [b]Legal[/b], but from [b]Corporate[/b] within McGH. [i]Legal had not even finished reviewing the manuscript at this time[/i]. [u] I came to the inescapable conclusion that this was an attempt by the McGH corporation to water down my content[/u]. All of the conversation with various editors strongly implied as much, and the same was made clear by them to my agent Lloyd. I even found an email from me to him, subject matter: [i]“McG Hill S&P Freaking Out”[/i] dated Monday, January 05, 2009 11:14 AM. Anyway, at this I drew my line in the sand at this point. My contract gave me FINAL EDIT. I informed McGraw Hill that at the manuscript was now finished, and I was done. No more changes to the Ratings Agency section. It was either “Fill or Kill.” In an email, I gave them until that Friday, to accept or reject the manuscript. That deadline came and went with no answer, and the following, Monday I went to lunch with my editor and told her I was ready to show the book to other publishers, as I assumed they had rejected it. She asked for another week (I agreed) and that Friday, they told me that, as per my request, they would drop my contract and allow me to sell the manuscript to other publishers. They gave me two nonsense excuses — the first, they were concerned about my libeling Senator Phil Gramm (My answer to that laugher: [i]Bullshit[/i]). The second excuse was an issue with sourcing and verifying the material. This was, of course, more nonsense. Nearly all of my sources are available online, and the others that are in books were all purchased from Amazon.com. Nothing obscure, no sources from deep within some library stacks or any unrecorded interviews with anonymous, now deceased, secret witnesses. It was all online, and readily available. And that does not address the small matter that McGraw Hill had pulled 90 pages of additional sources from the book as “redundant and unnecessary.” All of the book’s submitted [url=http://www.ritholtz.com/blog/2009/02/endnotessources/]footnotes/end notes can be found here[/url]. If you cannot verify those sources, BY CLICKING ON THE URLs, then you are totally incompetent and have no business being in publishing.[/quote] [b]My Comment:[/b] I suggest everyone reading this - especially those in academia - think twice before they order another book from [url=http://en.wikipedia.org/wiki/McGraw-Hill]McGraw-Hill or one of its subsidiaries[/url], or renewing that [i]Business Week[/i] subscription [And when it comes time to renew the BW subscription, suggest you include a polite "no thanks" note mentioning *why* they won`t be seeing your business again in the prepaid mailer]. Suppression of unpleasant truths should not be rewarded. Ha, I wonder if S&P pulled their usual behind-the-scenes-nothing-in-writing extortionary stunt of threatening their own corporate parent with a ratings downgrade if they "didn't play ball" on the "defamatory - except that it`s true" Ritholz book. That is the way these government-sanctioned protection rackets work. And the government itself were to "refuse to play ball" and threaten to strip S&P, Moody's et al of their special status, the ratingshouses could threaten Uncle Sam himself with a downgrade of his sovereign debt. Which would be well-deserved IMO, but given how long-overdue that step is, the timing would be ... well, more than a little odd to the outside observer. [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=apJRc8r_9GDE&refer=news]Bank of America's Bernstein Says Bank Rescue Won't Work, Urges Takeovers[/url]: [i]The U.S. Treasury’s bank-rescue plan won’t repair the financial system or revive credit markets, Bank of America Corp. strategist Richard Bernstein said as he recommended avoiding the industry’s shares.[/i] [quote]“Financial stocks are likely to be as toxic to portfolio performance as banks’ assets are to their balance sheets,” New York-based Bernstein wrote in a research note. They plunged yesterday, driving the Standard & Poor’s 500 Financials Index to an 11 percent drop, on skepticism the rescue package will work. Bernstein said the government should increase deposit insurance, seize assets, shut “large” banks and encourage takeovers. “The history of bubbles clearly shows that the significant consolidation of the financial sector is inevitable,” the strategist wrote. “The latest Treasury program is simply another attempt to stymie the consolidation process.” [/quote] [b]My Comment:[/b] Note this is coming from one of the biggest banks` *own* analysts! [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=adJ0_ImwFMcs&refer=news]Madoff's Wife Withdrew $10 Million on Eve of His Arrest, Complaint States[/url]: [i]Bernard Madoff’s wife withdrew $15.5 million from a brokerage account late last year, including $10 million on the eve of his arrest for securities fraud, according to a complaint filed by Massachusetts securities officials.[/i] [b]My Comment:[/b] "Mr. Madoff, who is currently under mansion arrest, was unavailable for comment." [BTW, I`m not making that up about the mansion arrest ... or maybe it's "swank NYC penthouse arrest". I forget which.] |
UK: "Worst Recession in 100 Years"
[url=http://money.cnn.com/2009/02/12/news/economy/retail_sales/index.htm]Jump in retail sales fuels skepticism[/url]: [i]Total sales rose 1% in January versus expectations for a decline, but economists question whether there's really a rebound. [/i]
[quote]The Commerce Department said total retail sales rose 1% last month versus a revised drop of 3% in sales in December. December sales were originally reported to have declined 2.7%. Economists surveyed by Briefing.com on average had forecast a decrease of 0.8% for January. Sales excluding autos and auto parts rose 0.9% compared to a revised 3.2% drop in the measure in December. December sales minus auto purchases were originally reported to have declined 3.1%. Economists had forecast a decrease of 0.4% in the measure for January, according to Briefing.com. Retail experts were quick to dismiss the rebound. "These numbers are a little puzzling to me," said Scott Hoyt, senior director of consumer economics with Moody's Economy.com "The gains in apparel purchases is a bit of a surprise given the numbers we've seen from retailers," he added.[/quote] [b]My Comment:[/b] That`s because these numbers are probably "completely fudged," like the bullshit "birth/death model" usded by the BLS to consistently come out with "labor statistics" indicating large increases in construction-sector employment during the past year. And speaking of unexpectedly high retail sales... [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=a7CXhFKkdH3Q&refer=news]French `Grand Sale' May Be Last Hurrah for Retailers as Purses Snap Shut[/url]: [i]Marie Laure Delaunay is so worried about the future, she went on a shopping spree during the recent “Soldes,” or “Grand Sale” in France. [/i] [quote]“I’m buying more now because I’m preparing for the crisis,” said the 58-year-old jewelry designer, dipping into piles of marked-down jackets at a Zara store near the Opera in central Paris as she sought bargains in the sale that ended yesterday. “Things will get worse, so I’m buying lots of spring clothes. That way, I won’t need to spend money later.”[/quote] [b]My Comment:[/b] Unless it happens to be summer, fall or winter "later". [quote]With the French economy heading into its biggest contraction since World War II, shoppers took advantage of discounts of as much as 80 percent. For President Nicolas Sarkozy that’s a mixed blessing: While it may boost current consumer spending, which accounts for 57 percent of the economy, it shows purse strings will be tightened as the French turn increasingly pessimistic. Consumers were left out of Sarkozy’s 26 billion-euro ($33.7 billion) economic stimulus package that focuses on corporate and infrastructure investment. More than a million people took to the streets in protests last month, asking the government to boost the minimum wage and step up spending on households. Worse may be in store, some economists say. “The job market has only started to deteriorate, with the end of temporary contracts for workers whose contribution to spending has never been very strong,” said Gilles Moec, an economist with Bank of America Merrill Lynch in London. “Going ahead, it’s the heart of the labor market that’s going to be hit and consumer spending is really going to take a blow.” Last Hurrah Consumers stocked up in January, leading French retail sales to rise for the first time in four months, the Bloomberg purchasing managers’ index showed. The French Fashion Institute estimates sales of textile and footwear rose by up to 5 percent from a year ago in the first two weeks of the Grand Sale that started on Jan. 7. “I am really surprised how good the sales are,” said Celine Perrin, a saleswoman at a Promod store in Paris as she surveyed women rummaging through clothes. “I’m worried demand will drop brutally after we introduce the spring collection.” [/quote] [b]My Comment:[/b] This seems like robbing Peter to pay Paul to me ... in France as in America the "shop `til you drop" unlimited-credit-card-balance days are over and not returning any time soon. Consumers in France are not nearly as indebted as their cousins in the States (the article notes that France has one of the highest savings rates in the EU), but with economic prospects looking exceedignly glum, is encouraging people to overspend - even at deeply discounted prices - not going to mean an even more sharp downturn in the retail sector once the artificial props are withdrawn? Once people are accustomed to deep discounts (and not feeling especially wealthy in the current economic climate), it quickly becomes impossible to sell anything at close to "full retail". So which makes more economic sense from the retail standpoint: Sell one banana at a profit, or ten at a loss? Actually, the answer is not obvious - selling one at a profit is better for the retailer's bottom line, assuming their staffing level is not geared toward the ten-banana sales model. OTOH selling ten at a loss is a way to keep more clerks and banana-shippers employed. But encouraging excess in either direction - too much spedning or excessive frugality - is bad. And speaking of deep-discount distress sales... [url=http://money.cnn.com/2009/02/12/real_estate/Latest_median_prices/index.htm]Home prices in record plunge[/url]: [i]National Association of Realtors reports that home prices dropped a record 12.4% in the final quarter of 2008 - the biggest year-over-year decline in 30 years.[/i] [quote]The vast majority of metropolitan areas, 134 out of 153, recorded price declines compared with the last quarter of 2007. "Home markets are weak just about everywhere," said Pat Newport, an analyst with HIS Global Insight, "but in a few states, distressed sales are driving transactions." Cape Coral-Ft. Myers, Fla., which has the third highest rate of foreclosure filings in the nation, according to RealtyTrac, prices fell a devastating 50.8% for the year, to $110,900 from $225,300. That was the most precipitous plunge for any metro area. In Saginaw, Mich., prices fell 41.4%; Riverside-San Bernardino, Calif., prices dropped 40.8%; and San Jose, Calif., prices declined 37.7%.[/quote] [b]My Comment:[/b] alas, even though I live only a few miles west of San Jose, here in Cupertino, prices have barely budged - we need more distressed homedebtors, dammit! ;) [b]UK: "Worst recession for over 100 years"[/b] [url=http://www.independent.co.uk/news/uk/politics/this-is-the-worst-recession-for-over-100-years-1605367.html]'This is the worst recession for over 100 years'[/url]: [i]Ed Balls, the PM's closest ally, warns that downturn is ferocious and says impact will last 15 years.[/i] [quote]Britain is facing its worst financial crisis for more than a century, surpassing even the Great Depression of the 1930s, one of Gordon Brown's most senior ministers and confidants has admitted. In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. The Schools Secretary's comments carry added weight because he is a former chief economic adviser to the Treasury and regarded as one of the Prime Ministers's closest allies. Mr Balls said yesterday: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out." He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible". The minister stunned his audience at a Labour conference in Yorkshire by forecasting that times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70 per cent. He also appeared to hint that the recession could play into the hands of the far right. "The economy is going to define our politics in this region and in Britain in the next year, the next five years, the next 10 and even the next 15 years," Mr Balls said. "These are seismic events that are going to change the political landscape. I think this is a financial crisis more extreme and more serious than that of the 1930s, and we all remember how the politics of that era were shaped by the economy."[/quote] [b]My Comment:[/b] A frank summing-up like that, in defiance of Gordon Brown`s continual optimism-spew ... that takes, well, Balls. [Aside: I find it amusing the the UK has an official government post with the title of "shadow Chief Secretary to the Treasury".] |
[QUOTE=ewmayer;162600]Once people are accustomed to deep discounts (and not feeling especially wealthy in the current economic climate), it quickly becomes impossible to sell anything at close to "full retail". So which makes more economic sense from the retail standpoint: Sell one banana at a profit, or ten at a loss? Actually, the answer is not obvious - selling one at a profit is better for the retailer's bottom line, assuming their staffing level is not geared toward the ten-banana sales model. OTOH selling ten at a loss is a way to keep more clerks and banana-shippers employed. But encouraging excess in either direction - too much spedning or excessive frugality - is bad.
[/QUOTE]Just one point of very non-scientific info for you, Ernst. I work in retail at a small independent supermarket, and we used to mark down products that were at or near the shelf date, figuring that getting anything was better than just tossing it and taking the full loss. Since things have really tightened up, we have stopped doing that because people will totally stop buying the product at full price waiting for the markdown, and that would be a totally unsustainable business model to follow....we can't afford to throw money out the door after people. Although I guess if we were a lender following an unsustainable business model, throwing money out the door at people, we could get the taxpayers to bail us out! Say, would you be willing to bail me out with a year-end bonus? |
[quote=schickel;162602]Just one point of very non-scientific info[/quote]On the contrary, accurate observations of real-world phenomena are quite in keeping with the scientific method. You described, from an informed position, the psychological reasoning used by people involved in the real-world situation. A scientific observation doesn't necessarily have to have numbers.
|
[QUOTE=ewmayer;162600] [Aside: I find it amusing the the UK has an official government post with the title of "shadow Chief Secretary to the Treasury".][/QUOTE]Actually, it doesn't.
Each political party worthy of the name [b]not[/b] in the government has a person who "shadows" each member of the government. The idea, as I understand it, is that the major opposition parties each have someone who pays close attention to what their counterpart in government is up to and responds appropriately. It also gives them practice in case their party should form the next government. Paul |
[QUOTE=xilman;162626]Actually, it doesn't.
Each political party worthy of the name [b]not[/b] in the government has a person who "shadows" each member of the government. The idea, as I understand it, is that the major opposition parties each have someone who pays close attention to what their counterpart in government is up to and responds appropriately. It also gives them practice in case their party should form the next government. Paul[/QUOTE] Ah, thanks for the clarification ... so a kind of "minority party understudy", then. This sounds vaguely akin to e.g. the "Minority whip" in the U.S. legislature, except we don't do it for cabinet posts. Paul, based on your UK on-the-ground perspective, would you say that Sec. Balls' comments are justifiable, or do they strike you as over-the-top in their pessimism? And speaking of pessimism from people whose last name starts with "Ball"... ---------------------------- Steve Ballmer, For Once Actually Making Sense From one of Mish`s recent posts, which echoes a Chinese proverb - and not the [url=http://en.wikipedia.org/wiki/Chinese_translation_of_crisis]apocryphal[/url], much-hackneyed "danger = opportunity" one so beloved of biznissmen and politicians: [url=http://globaleconomicanalysis.blogspot.com/2009/02/wealth-does-not-pass-three-generations.html]Wealth Does Not Pass Three Generations[/url]: [quote]Microsoft Chief Executive Steve Ballmer sketched a dire portrait of the world economy on Friday, likening it to market conditions in 1837, 1873, and 1929, each of which involved bank failures, high unemployment, and a depression. "This is a once-in-a-lifetime economic crisis," Ballmer told a retreat of House Democrats in Williamsburg, Va. "There is a lot of history around that, and frankly if you stop and think about it, 1837, 1873, 1929, 2008, it's almost exactly a whole lifetime between each of the major economic difficulties that we face." Ballmer said that economic growth in the last 25 years was fueled by innovation, globalization, and debt--and that the current levels of debt were unsustainable. "In 1929, for example, just before the stock market crash, the private debt-to-GDP ratio was 160 percent," he said. "Last year, private sector debt as a percentage of the GDP: 300 percent, far more leverage." His warning of a protracted downturn that could become a depression comes amid a stock market that is down by more than 40 percent from its October 2007 peak, and housing prices in many metro areas that have been falling consistently since July 2006--a feat not equalled since the Great Depression. "In my view, what we now have will be a fundamental economic reset," he said. "The economy is going to have to re-establish itself at a level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate."[/quote] [b]My Comment:[/b] Mish`s post goes on to explain the reasoning behind the proverb in terms of the modern economic theory of K-cycles ... interesting stuff. A close English analog would seem to be the trope "how quickly we forget", intended in a collective multigenerational sense. [Aside: I had a K-cycle once when I was younger, but I outgrew it and traded it in for a Honda.] ...and Barry Ritholz has this "temper tantrum" take on Wall Street`s reaction to U.S. Treasury Secretary Geithner`s speech Tuesday: [url=http://www.ritholtz.com/blog/2009/02/media-misreads-bailout-plan-reaction/]Media Misreads Bailout Plan Reaction[/url]: [quote]Both the NYT and the WSJ seemed to focus on the lack of details as the cause for the selloff. But that conclusion is belied by the “sell the news” reaction immediately as Geithner began speaking. No one could have digested anything iin that milli-second. I have a decidely different take. Wall street was hoping for another multi-billion, no strings attached, taxpayer funded giveaway. Instead, they got something much tougher than they expected. Hence, the selloff/tantrum. They wanted their candy and didn’t get it…[/quote] [b]My Comment:[/b] One of Barry`s readers replies with his own list of 6 reasons, the following 3 of which are rich: [i] 2 Herd mentality - probably involving idiots and their computers. 3 Thieves were hoping Uncle Stupid would at least hint at another means to get free money. Instead, the plans involved trickle up (2B to 1T of consumer lending to be made available) and no quick bucks for the fast buck artists. Implications that Uncle Stupid might be growing a brain stem also frighten thieves. 4 No easy answers to complicated questions. People are stupid. They don’t like to be reminded of it, though. Thus, they feel better about themselves if higher ups come down to their level. Instead of a solution that could be printed on a matchbook cover, only the outline was provided with details to follow. Half wits find this to be insulting. Especially stupid ones with money.[/i] |
[quote=ewmayer;162627][quote]if you stop and think about it, 1837, 1873, 1929, 2008, it's almost exactly a whole lifetime between each of the major economic difficulties that we face.[/quote][/quote]I thought Ballmer was exaggerating the increases in life expectancy (36 years, 56 years, 79 years), but [URL]http://www.infoplease.com/ipa/A0005140.html[/URL] shows that U.S. white male life expectancy at birth was 38 in 1850, 56 in 1919-1921, and 76 in 2004. However, most of the at-birth life expectancy increases have been due to reduction of infant/early mortality, so maybe Ballmer didn't think about (or expected us not to consider) that factor.
U.S. white males who had survived to age 30 (and thus might maturely comprehend lessons about "lifetime" economic crises) could expect eventual lifespans of 64 in 1850, 68 in 1919-1921, and 77 in 2004. So maybe the trend shows that we [I]are[/I] getting a bit smarter about crises after each one. Maybe this'll be the only "1-in-lifetime" economic crisis of the 21st century, and the next one will really surprise some early-22nd-centurians. Nah... |
I got a real kick from this list of 25 people to blame for the fiscal soup we are in.
[url]http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350,00.html[/url] |
[QUOTE=Fusion_power;162686]I got a real kick from this list of 25 people to blame for the fiscal soup we are in.
[url]http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350,00.html[/url][/QUOTE] Where was Barney?????? |
[QUOTE=Fusion_power;162686]I got a real kick from this list of 25 people to blame for the fiscal soup we are in.
[url]http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350,00.html[/url][/QUOTE] Quite a good list, actually … they rightly point out that both Clinton and Bush were big on financial deregulation (Glass-Steagal passed on Clinton’s watch) … of course Bush compounded the deregulatory lunacy with truly idiotic government-spending and tax-cut policies, not to mention a several-trillion-dollar “pet war project.” On to today's news roundup... ------------------------- Followup on my comment about the [alleged] January retail sales figures announced by the commerce Department yesterday ... This [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=ahM2dbtAi_Ps&refer=news]Bloomberg article[/url] today notes possible reasons for the [alleged] uptick, assuming it was not entirely a product of the Pollyanna statistics-monkeying so beloved of U.S. government agencies: [quote]The Commerce Department yesterday said retail sales unexpectedly rose in January, helped by spending on items such as clothing and food and higher prices for gasoline that boosted receipts at filling stations. Economists said the gains may not last, citing reports from other retailers and ongoing job losses. [/quote] [i]My Comment:[/i] So if there was a real 1% rise, it was basically due to the 10-15% jump in gasoline prices from their pre-Christmas lows (at my local Valero station, gas bottomed at $1.69 per gallon in December - yesterday it was $2.17) and a brutally cold January in most of the U.S. which boosted sales of cold-weather clothing, heating oil/electricity/natural-gas and other snow-related items of all kinds. [b]"Irony", defined:[/b] [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=apNDOtibG3HA&refer=news]Madoff Scandal Ensnares Catholic Order Following Patron Saint of Moralists[/url]: [i]Bernard Madoff may be testing the faith of followers of the patron saint of moralists and confessors, who sank money into the investment funds of the alleged mastermind of the largest Ponzi scheme in history.[/i] [quote]Roman Catholic priests and institutions linked to the Redemptorist society in the U.S. and Italy appear on a 162-page client list of Bernard L. Madoff Investment Securities LLC, filed in U.S. Bankruptcy Court in Manhattan on Feb. 4. The religious order follows the teachings of Saint Alphonsus Liguori who preached about ethical behavior.[/quote] [i]My Comment:[/i] This story should appear next to the definition of "irony" in all dictionaries henceforth. I expect were he still alive today (of course we couldn't call him "Saint" then), Mr. Alphonsus (a.k.a. "the Fonz" to his friends) would be less than pleased. But the redemptorist aspect would seem quite appropriate to Mr. Madoff. [b]A permabull in China's shop:[/b] [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=ackHHxtWoFHc&refer=news]China's Economy Shows Signs of Recovery as Stimulus Package Takes Effect[/url]: [i]China’s economy is showing signs that a 4 trillion yuan ($585 billion) stimulus package is taking effect.[/i] [quote]The world’s third-biggest economy may expand 6.6 percent in the second quarter after slowing to 6.3 percent in the three months to March 31, the weakest pace since 1999, according to the median estimates of 14 economists surveyed by Bloomberg News. China is trying to reverse an economic slide that has already cost 20 million jobs, raising the risk of social unrest as exports plunge and the property market sags. Spending on roads railways and housing has increased prices for iron ore, put a floor under industrial output and helped to drive a record $237 billion of new loans in January. “China looks set to be the first major economy to recover from the current global meltdown,” said Lu Ting, an economist with Merrill Lynch & Co. in Hong Kong. “China is the only economy in the world to see significant growth in credit to corporate and household sectors after September 2008, when the financial crisis worsened to a near collapse.” [/quote] [i]My Comment:[/i] Dream, Mr. Bulltard Ting ... the Chinese govt stimulus money is doing exactly zero to boost exports, and the Chinese economic model is more-or-less completely dependent on robust never-ending export growth. Asserting that "China is in recovery mode" is about as idiotic as all the economic "decoupling" myths which were relegated to history`s trash heap last year. However, the article does make a good point about China at least having deep enough pockets to weather several years of deep recession - they will need them: [quote]Even if the global recession is protracted, China has the ammunition to maintain growth, said Merrill Lynch’s Lu. It has public debt of only 18.5 percent of gross domestic product -- compared with 75 percent in India -- foreign currency reserves of $1.95 trillion, and a balanced budget. “China has perhaps the deepest pockets in the world,” said Lu. “It can relentlessly ramp up spending to create jobs and meet its growth target.” The government-backed Purchasing Managers Index, a measure of manufacturing, showed a second monthly increase in January after a record low in November. “The economy is bottoming,” said Tao Dong, chief Asia economist at Credit Suisse AG in Hong Kong, citing the PMI, the surge in bank lending, and spending on construction and machinery because of the infrastructure projects.[/quote] [i]My Comment:[/i] Again, another paid-to-be-eternally-bullish Merrill Lynch "analyst", confusing "stimulus spending" with "economic recovery". No wonder they lost their clients so much money last year. |
Credit Card DQs Soar | Eurozone's Mountain of Debt
[QUOTE=R.D. Silverman;161445]I am waiting for people, en masse, to start defaulting on their credit card debt. I can feel their attitude:
I am out of work because of banker/investor greed? I have lost half of my retirement funds while bankers are still getting large bonuses? Then screw them.........[/QUOTE] Mish Shedlock has a [URL="http://globaleconomicanalysis.blogspot.com/2009/02/whats-really-in-cards.html"]spotlight this morning[/URL] on this - from the USA Today article linked therein: [URL="http://www.usatoday.com/money/perfi/credit/2009-02-04-credit-card-debt-overdue_N.htm"]USA Today | More consumers fall behind on paying credit cards.[/URL] [quote]Credit card delinquencies are hitting record highs as more borrowers fall behind on bills amid rising unemployment and falling home values. The amount of credit card debt delinquent at least 60 days reached 3.75% in December, the latest month available, surpassing the previous high of 3.73% set in February 1998, according to Fitch Ratings, which rates corporate debt. Late payments on credit cards, a precursor to charge-offs, rose during most of 2008 before sharply accelerating in the fourth quarter. In December, credit card charge-offs — when banks write off the debt — rose to 7.5%, the highest level since 2005, when thousands of consumers rushed to file for bankruptcy and erase their card debt before a new law made it harder to do. Fitch expects charge-offs to approach 9% in the second half of 2009.[/quote] [B]Eurozone: Worrisome Levels of Corporate Debt[/B] - This is an example of reality contrasting sharply with the general sense of Europeans being more frugal than their profligate American cousins: [URL="http://www.businessweek.com/globalbiz/content/feb2009/gb2009025_570032.htm"]Europe's Wave of Toxic Debt[/URL] [quote]A decade of heavy borrowing has lofted euro zone debt to $11 trillion, and it's starting to come due just when companies are strapped for cash . More toxic debt soon could come crashing through the global financial system. The surprising source: Europe Inc. Once-stodgy Old World companies, from cement makers to phone operators to chemical companies, went on an unprecedented borrowing spree over the past decade that has left them up to their necks in debt. Corporate debt in the euro zone stands at more than $11 trillion, equaling some 95% of the region's economy, vs. only 50% in the U.S. Hundreds of billions in payments are coming due just as sales are slumping in the global economic crisis. In better times, companies might have gone to the bank to refinance. No more. Bank lending to euro zone companies plunged 40% last fall as the credit squeeze tightened. That helps explain why Europeans in January issued $159 billion in bonds, the highest level in two years. But the price is steep. Average yields on investment-grade European corporate bonds have almost tripled during the past year, even for relatively healthy companies such as Nokia (NOK) and German utility group E.ON (EONGN.DE). The higher cost of servicing debt "will entail a restriction in hiring, wage growth, and investment," says Gilles Moëc, a London economist with Bank of America (BAC). "The amount of debt to roll over is huge."[/quote] |
"God of Shorting" Paulson Strikes Again
Last post this week ... I promise! ;)
[url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aOErLCDkgGlo&refer=home]Paulson May Have Made $67 Million in 25-Minute Lloyds Plunge[/url] [quote] Feb. 13 (Bloomberg) -- Paulson & Co., the hedge fund run by billionaire John Paulson, may have made as much as $67 million in 25 minutes today as Lloyds Banking Group Plc lost about 5.9 billion pounds ($8.5 billion) in market value. Lloyds fell the most in 20 years after saying HBOS Plc, the U.K. lender it took over last month, would report a 10 billion- pound ($14.5 billion) pretax loss. The shares plunged as much as 43 percent in less than 25 minutes of London trading. Paulson held a Lloyds short position representing 0.79 percent of the bank, or 129.3 million shares, as of Jan. 20, according to a regulatory filing. DataExplorers.com, which tracks share borrowing from London, said 1.1 percent of the stock was on loan as of Feb. 11, the most recent data available. That’s down from as much as 8 percent six months ago and suggests Paulson held the bulk of the short position left. “It wasn’t really shorted at all before this share drop,” Julian Pittam, a managing director at DataExplorers.com, said in an telephone interview from London. “There’s little upside and lots of downside in banks when there’s this much political rhetoric and volatility going on.” Armel Leslie, a spokesman for the $36 billion New York- based hedge fund, declined to comment. There’s no indication that Paulson closed his short position, and there won’t be until a subsequent filing. Shares Tumble Lloyds closed down 32 percent at 61.4 pence. Paulson’s short position would have netted a gain of $54 million, based on the closing prices of the past two days. The Financial Services Authority, the U.K. market regulator, lifted a short-selling ban on financial companies on Jan. 16. The restrictions were imposed in September as politicians and investors blamed hedge funds for destabilizing markets. Under the FSA short-selling disclosure rules, an investor has to disclose when it has 0.25 percent of share capital shorted, and report again if it makes any changes of 0.1 percent of the overall share capital from that point, according to Darren Fox, a regulatory lawyer at Simmons & Simmons in London. Short sellers borrow shares and sell them with plans to buy them back at a lower price. FSA Chairman Adair Turner said Jan. 22 that there was no evidence that short selling has led to a significant fall in banking shares. [u] Paulson & Co. said its funds made more than $3 billion for the firm in 2007 by judging that the U.S. housing market and subprime mortgages would collapse. Paulson had previously disclosed short positions in Royal Bank of Scotland Group Plc, Barclays Plc and HBOS, the bank now owned by Lloyds.[/u][/quote] [b]My Comment:[/b] Damn, this Paulson fellow is *really* good ... unlike his namesake who recently departed the U.S. Treasury secretaryship. [url=http://money.cnn.com/2009/02/10/news/economy/yang_newdeal.fortune/index.htm]The truth about stimulus and the Depression[/url]: [i]Did FDR's New Deal prolong the Great Depression, as some critics of Obama's 'new New Deal' argue?[/i] [quote]NEW YORK (Fortune) -- You often hear President Obama`s stimulus plan referred to as the new New Deal. So it shouldn`t come as a surprise that some critics of the stimulus aren`t big fans of Franklin Roosevelt either. In fact, if you`ve been following the debate, you may have heard a surprising number of people put forth the notion that the New Deal actually prolonged the Great Depression. If that doesn`t sound like anything your high school history teacher taught you, you`re not alone. So let`s take a closer look at what the New Deal`s critics are claiming. It`s inarguably true that in the very short-term, the New Deal did not fix the economy. Roosevelt`s programs were first passed in 1933 but economists generally agree that the Great Depression did not end until 1939, when the country began preparing for World War II. Unemployment rates, which reached as high as 25%, took several years to recover and did not get below 9% until 1940. Critics say the New Deal failed because some of the government`s actions suppressed competition, slowing the economy`s ability to rebound. A central culprit was the National Recovery Administration (NRA), from 1933. The goal of the NRA was to lift wages for workers. But to do this, it encouraged industry leaders to meet and establish minimum prices and wages, effectively creating cartels. The result was wholesale prices rising 23 percent in two years. It`s hard to find anyone now who will defend the NRA, which academics agree was a bad program because it stifled competition. It was obvious to people even then that the NRA was seriously flawed; in 1935, the Supreme Court ruled the program unconstitutional "Anytime you put in price and wage controls, you are more likely than not to make the economy worse off," says Valerie Ramey, professor of economics at University of California, San Diego. "That`s the lesson of all economic history." Economists differ, though, in their estimates of how badly the NRA`s bad policies damaged the economy. On the more dire end of the scale, Harold L. Cole and Lee E. Ohanian, economics professors at the University of Pennsylvania and UCLA respectively, estimate the New Deal`s labor and industrial policies caused the Depression to last seven years longer than otherwise. (Here`s one of Cole and Ohanian`s papers.) But it`s important to remember that, like today`s stimulus, the New Deal was a program of many parts improvised as the economy continued to sink into oblivion. We think of it as a monolith now, but that`s not how it felt at the time. As Price Fishback, an economic historian at the University of Arizona, recently wrote, "It was a broad-ranging mix of spending, regulation, lending, taxation, and monetary policies that can best be described as `See a problem and try to fix it.`" (That should sound familiar to Hank Paulson.) In fact, one charge leveled at Roosevelt by his critics is that the uncertainty over the government`s strategy discouraged business from investing. This is the argument of economist Robert Higgs and journalist Amity Shlaes, who shows in her book "The Forgotten Man: A New History of The Great Depression" how business people struggled to respond to the government`s many actions. "We know uncertainty played a role but measuring how big an effect it had is really difficult," says Fishback. Because the New Deal was so sprawling, there are also programs that historians and economists agree were deeply effective, like establishing the Federal Deposit Insurance Corporation, or FDIC, which stopped the run on banks. The Civil Works Administration quickly employed 3.6 million people. And Fishback has done some research showing that an added dollar of public works and relief spending was tied to an increase in retail sales of 40 to 50 cents. There`s also a correlation between areas of the country that received more relief spending and lower infant mortality and property crime rates. "You don`t want to say, `Oh, don`t do any of it,` because some aspects did work, but they were impeded by other aspects that led the economy to be worse," says Ramey. As for what took so long for the unemployment figures to come back up, some economists who are sympathetic to Roosevelt point out how low the economy had fallen. "It was a broken economy on a scale we have never seen anything like," says Eric Rauchway, a history professor at the University of California, Davis and the author of "The Great Depression and the New Deal: A Short History." "To repair an economy that`s that broken you have to figure it`s going to take some time. That`s a homely explanation but that`s the best explanation I can do." So what`s the moral here? Roosevelt and his New Deal were not as saintly or ruinous as either side claims. As usual the truth lies somewhere in the middle. The biggest thing we have in common, perhaps, is that like Roosevelt, we can only take our best guess at what will work. And hopefully, the cure this time will take hold faster[/quote] [b]My Comment:[/b] One could question whether one dollar of government [strike]pork[/strike] stimulus spending resulting in 50 cents of retail slaes is a good rate of return, or whether infant mortality could have been lowered for far less cost via direct interventions targeting it. Also, borrowing huge sums of money for make-work and infrastructure projects is only OK if you have a reasonable expectation of paying the money back on the other side. In FDR`s case, it is interesting to ponder what might have happened had World War 2 *not* forced the kinds of truly massive spending and huge industrial-automation-and-productivity gains which (coupled with the fact that unlike most of the other large-country participants in the war, the U.S. was fortunate enough to emerge with its industrial base unscathed, in fact with its industry in far better shape than entering the war) finally put the economy on the road to recovery, how much longer might the nation have languished in "somewhere between awful and merely crappy" mode. The other interesting subtext here: merely by making such a direct comparison, [i]Fortune[/i] would seem to be admitting that we are in fact either on the cusp of, or already in, a full-blown depression. Barry Ritholz [url=http://www.ritholtz.com/blog/2009/02/25-people-to-blame-for-the-financial-crisis/]comments on the Time "Gang of 25" list[/url] posted several posts up; [quote]There is a strange and strangely interesting list of people to blame for the Financial crisis from Time magazine. It is quirky and odd and in more than a few places, misguided and ignorant. Despite its deep flaws, it is still kinda interesting. I normally don’t link to this sort of click bait — you must click through each individual adding 25 phony pages in an obnoxious attempt to improve traffic readings – but there is this interesting variation: Readers get to vote on each culprit. Surprisingly, they move Clinton, Bush and Greenspan way down the list. A few strange issues with the list: Why is Bernie Madoff here? He is a common thief (perhaps uncommon thief given the amounts he claimed to have stolen) but he had nothing whatsoever to do with the Financial crisis afflicting the global economy. What journalist would add him to the list of causes of the crisis? (Strike that moron from your reading list). The American Consumers are on the list, but not the irresponsible home buyers? Isn’t painting with an overly broad brush ? And Wen Jiabao, the premiere of China? How dare you buy our debt! Its all your fault! And where are Robert Rubin and Larry Summers on the list? MIA. They worked for President Bill Clinton, who I note in Bailout Nation signed both the Repeal of Glass Steagall, and the Commodities Futures Modernization Act [u]on their advice[/u].[/quote] |
[url]http://www.newstatesman.com/economy/2009/02/housing-societies-essay[/url]
|
Asia’s Export Economies In Free Fall
As a followup to my Friday post expressing extreme skepticism about the claims by two Merrill Lynch Asia analysts that the Chinese economy was already in the early stages of recovery, let's just look at some relevant headlines from this evening`s [url=http://www.bloomberg.com/news/regions/asia.html]Bloomberg Asia[/url] page:
[url=http://www.bloomberg.com/apps/news?pid=20601080&sid=acYH_ZqAefdw&refer=asia]Japan's Economy Shrinks at Annual 12.7% Pace, Most Since 1974 Oil Shocks[/url]: [i]Japan’s economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, as recessions in the U.S. and Europe triggered a record drop in exports.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601080&sid=ayTIPuhexIW0&refer=asia]Toyota's Japan Production Will Drop by 54% This Quarter as Sales Plummet[/url]: [i]Toyota Motor Corp., the world’s biggest carmaker, will slash domestic production 54 percent in the current quarter as demand plunges in the U.S. and Japan.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601080&sid=a0Dq.bPeZQHM&refer=asia]China Foreign Direct Investment Falls for Fourth Month on Global Recession[/url]: [i]Foreign direct investment in China declined for a fourth month in January as companies cut back on spending to weather the global financial crisis.[/i] [url=http://www.bloomberg.com/apps/news?pid=20601080&sid=ax6758vxQht4&refer=asia]India May Unveil Its Biggest Budget Deficit Since 1991 Amid Slowing Growth[/url]: [i]India may unveil its biggest budget deficit in 18 years as the government increases spending to protect the economy from the global recession ahead of elections in two months.[/i] Mish has a nice summary of the macroeconomic situation in key Asian countries: [url=http://globaleconomicanalysis.blogspot.com/2009/02/asias-export-economies-in-free-fall.html]Asia’s Export Economies In Free Fall; Protectionism On The Rise[/url] [quote][b]Asia Export Economy Details[/b] * Japanese exports fell 35 percent in December from a year earlier. Industrial production plunged a record 9.6 percent, month on month, in December. * Chinese exports declined for the third consecutive month in January, falling 17.5 percent from a year earlier, after a 2.8 percent decline in December. Imports plunged even further—43.1 percent, twice as much as December's 21.3 percent year-on-year drop. * More than 20 million Chinese migrant workers have lost their jobs so far, with some analysts warning of 50 million more job losses if the economy deteriorates further. * India exports fell 24 percent in January. According to official data, one million Indian workers in the export sector have lost their jobs since September. Another half a million workers are expected to lose their jobs by March. * New Delhi's public debt stands at 75 percent of its GDP, compared to just 18.5 percent in China, leaving less room for large stimulus packages. * South Korea's exports, the main driving force of the economy, plunged 32.8 percent in January. Finance minister Yoon Jeung-hyun warned on Tuesday that the fourth largest economy in Asia would shrink by about 2 percent this year. Credit Suisse has projected as much as a 7 percent contraction. * Taiwan, the sixth largest Asian economy, saw its exports fall 44.1 percent in January from a year earlier—the biggest fall since records began in 1972. Imports plunged 56.5 percent in the same month. For an economy where exports account for 70 percent of GDP, the impact is devastating.[/quote] [b]My Comment:[/b] Read the full article - the note about protectionism being on the rise applies equally well to Europe. There was much hue and cry by the U.S.` major trading partners last week about various buy-American provisions many of which didn`t make it into the final bill) in the $800B economic stimulus bill to be signed into law by Obama [url=http://money.cnn.com/2009/02/13/news/economy/house_final_stimulus/index.htm]this coming Tuesday[/url], but the fact is, most of the countries doing the complaining are also busy enacting trading barriers as we speak: [quote]Last Wednesday, the French automaker Peugeot announced it was shedding at least 11,000 jobs, and one day later, Renault announced its own plans to cut its workforce by 9,000. These job cuts have been agreed to by the French government and trade unions and are bound up with the announcement by French President Nicolas Sarkozy that he plans to subsidise domestic automakers with the sum of €6 billion. Sarkozy declared that, in his opinion, it was irresponsible "to continue to manufacture French cars in the Czech Republic." He demanded a halt to the transfer of production to other countries. "If we give financial aid to the automotive industry," he said, "we do not want them to set up a factory in the Czech Republic again." He also urged the carmakers to support French industries involved in supplying parts and services to French auto companies. Czech Prime Minister Topolanek reacted sharply to this openly protectionist policy and called for a special European summit to block it and similar policies. The conflict between Berlin and Paris runs deep. In his role as EU Council president last year, Sarkozy repeatedly raised the demand for an "economic administration" for the eurozone. He made it quite clear that he regarded himself as best suited to head such an administration.[/quote] |
[QUOTE=ewmayer;162954] but the fact is, most of the countries doing the complaining are also busy enacting trading barriers as we speak:[/QUOTE]
Protectionism ewmayer, you've once again opened my eyes. Isn't this (economic policy of restraining trade between nations) the same big problem the US (and everyone else) had in the 1930's? |
Protectionism in the 1930's has no direct parallels with today. The underlying problem is Globalization on an unprecedented scale. In the 1930's, countries tended to be rather isolated, what happened in one had relatively low impact on others. Today, the global economy is so interconnected that a burp in China is felt worldwide. The U.S. economy is in extremely dire straits at present. The ripple effects are wiping out economic sacred cows around the world. The lessons learned in the 1930's have been forgotten by most.
DarJones |
[quote=Fusion_power;162968]The lessons learned in the 1930's have been forgotten by most.[/quote]Well, it [I]has[/I] been about a lifetime since the 1930s. Folks who learned those lessons the hard and more effective ways are dying out.
- - - Hmmm... What has the N(o)C(hild)L(eft)B(ehind) Act said/mandated about history? Is history, like music or art, having to be skimped-on by schools struggling to meet the 3Rs criteria at a time when (conservative) candidates in (nonpartisan) state superintendent of public instruction primaries are vowing to cut (public-school) expenses (and smash teachers' unions)? (Or does NCLB consider history part of "Readin'"?) Are students being taught that "Hoover" means more than vacuum cleaners, a former head of the FBI, and a dam? Not that that is relevant to the current crisis -- I'm looking ahead. |
Eastern Europe could lead to worldwide meltdown
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aB0ulIeI8LxA&refer=news]Consumer Prices May Post First Annual Drop Since '55: U.S. Economy Preview[/url]: [i]Consumer prices in the U.S. probably posted their first annual decline since 1955 and new home construction fell further in January, economists said before reports this week.[/i]
[quote]The Labor report may renew concern among some Federal Reserve officials about the risk of prolonged declines in prices, which erode profits and make debts harder to repay. The housing figures will underscore the difficulty President Barack Obama will have in arresting the industry’s three-year slump. “Given the rising odds of deflation, there’s certainly no pressure on the Fed to raise rates and it gives them the green light for further credit easing,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. Meantime, housing is unlikely to recover in the first half of the year, he said. ... The Labor report may show that the overall cost of living climbed 0.3 percent in January from December, the first gain in six months, according to economists surveyed. The average cost of regular gasoline rose 10 cents to $1.79 a gallon last month from December, according to AAA. Core consumer prices, excluding food and fuel, likely rose 0.1 percent after no change in December. Labor’s report on producer prices, scheduled for Feb. 19, may show wholesale prices fell 2.5 percent last month from a year earlier, according to the Bloomberg survey median. Deflation Risk Economists are worried the deceleration in prices, or disinflation, may lead to outright deflation. The level of Fed policy makers’ concern about the economic downturn and its pressure on prices will be reflected in minutes of their January meeting, due on Feb. 18. “Excess economic slack is posing a significant risk of deflation,” Deutsche Bank Securities Inc. economists Joe LaVorgna and Carl Riccadonna in New York wrote in a Feb. 13 report. “Inflation could fall to uncomfortably low levels.” [/quote] [i]My Comment:[/i] What a perverse economic model we live in, where perpetual price and wage inflation is seen as a healthy norm. And indeed, a constant state of inflation does provide the illusion of material progress to workers whose pay rises along with prices, but more importantly inflation provides a net material benefit to several special-interest groups, if you will: Namely to those with first access to capital (banks and the wealthy) and to those seeking to mitigate the effects of their debt, most important here being our own federal government, for whom steady-but-not-too-high inflation and steady-and-as-low-as-possible interest rates on that debt (which the U.S. government has a unique ability to manipulate, due to the dollar being the world`s reserve currency) is the ideal scenario for allowing seemingly limitless borrowing. Imagine if you owned a credit card whose rate of interest was guaranteed to be lower than the rate of inflation ... assuming your wages rose to match inflation, you could live "beyond your means" in perpetuity, or until the credit card issuer (for the U.S. government that would be the buyers of their treasury debt) realized he was being had and decided to do something about it. [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=avdSM3l3EK9c&refer=news]White & Case Joins Laracy Gall for `Perfect Storm' of Hong Kong Insolvency[/url]: [i]White & Case LLP, the New York-based law firm with more than 60 lawyers in its three China offices, has allied itself with Hong Kong dispute resolution boutique Laracy Gall in readiness for a flood of corporate failures.[/i] [quote]“It’s a perfect storm,” John Hartley, head of White & Case’s Asia bank finance and restructuring practice, said in an interview in Hong Kong. “There’s a large amount of refinancing coming up, and capital is retreating with banks retracting lending and private equity and distressed opportunities funds facing redemptions.” Banks are curbing lending as shrinking earnings increase the risk companies will be unable to repay their debts. New loan agreements in Asia-Pacific excluding Japan dwindled to $4 billion this year from $32 billion in the same period a year earlier, data compiled by Bloomberg show. The global default rate on speculative-grade debt will peak at 16.4 percent in November, worse than in the Great Depression, according to Moody’s Investors Service. The tie-up will focus on insolvencies with a “center of gravity” in Hong Kong, including businesses from throughout Asia with holding companies in the city, according to Laracy Gall founder Nick Gall. The International Monetary Fund said last month that developing Asian economies will grow by 5.5 percent this year, the slowest pace since 1998, when the region was racked by its own financial crisis. Corporate insolvencies started rising in Hong Kong last year after falling since 2003, according to the Official Receiver’s Office. The situation is likely to worsen, with the city’s central bank warning more than HK$100 billion ($12.9 billion) of syndicated loans will mature this year, risking defaults if companies are unable to refinance the debt. ‘Bigger Than Expected’ “We saw this cycle coming, but didn’t expect it to be as big as it is,” Gall said. His firm’s 12 litigators have specialized in insolvency since it was founded in 2004 and will work with White & Case’s banking, capital markets and private equity teams in the alliance. Asian hedge fund assets fell 36 percent in 2008 as the biggest market declines since the Depression triggered losses and investor redemptions, Hedge Fund Research Inc. said in a report this month. Withdrawals forced funds to sell corporate bonds, pushing prices for the debt to record lows. Complex Agreements Few troubled companies can find so-called white knight investors to help them as they did in the 1998 Asian financial crisis, and many have complex debt and equity agreements to unwind, according to Hartley. Chinese steelmaker FerroChina Ltd. “is a fairly typical example, with debt raised onshore in China and offshore through the parent company,” he said. “These types of deal utilized short-term debt and assumed an IPO would take place to repay the debt. That clearly isn’t going to happen any time soon.” [/quote] [i]My Comment:[/i] Hong Kong, the canary in the coal mine for the overall state of the Asian economies. [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=ajcsLxgNPoms&refer=news]Kia, Kraft Retrench in Eastern Europe as Capitalism Backfires on Workers[/url]: [i]Eastern Europe’s past is the Iron Curtain. The next year may resemble the Rust Belt.[/i] [quote]Companies from Kia Motors Corp. and Kraft Foods Inc. to Bulgarian fertilizer producer Neochim AD are curtailing production or idling workers, throwing economies that tied their fortunes to western capitalism into a tailspin. “Nobody thought it would be like this,” says Dusan Dvorak, the spokesman for Kia’s two-year-old plant in northeastern Slovakia, which has cut the hours for its 2,700 workers by 25 percent. As Europe’s contraction engulfs former Soviet-bloc nations, governments are forced to shore up economies built on a now- teetering model: creating an eastern factory floor with cheap labor and land to feed western consumption. Leaders in the Czech Republic, Hungary and Poland are drawing up crisis plans. Angry workers have rioted in Bulgaria and the Baltic states. ... Kia’s factory, which produces the South Korean automaker’s Cee’d model for export to the west, has abandoned its goal of producing 300,000 cars a year by the end of the decade. This year’s target is down to 170,000 cars from 240,000 as demand slumps. “We don’t want to lay anyone off, but I don’t think anyone expected this,” Dvorak says. “Everybody was counting on high growth.” Slovakia’s exports have slumped 40 percent since reaching a record high in October, dragging output down 16.8 percent in December, the steepest drop since the country’s independence in 1993. Central Europe Cutbacks Similar production cutbacks have come in Poland, Hungary and the Czech Republic, whose exports have all fallen more than 30 percent since September. Hungarian industrial production slumped 23.3 percent in December from a year earlier, the most in almost two decades, the nation’s statistics office said today. ... “Expectations had been aroused dramatically since the fall of communism,” Jim Rogers, chairman of Rogers Holdings, said in an interview last week in Singapore, where his investment firm is based. “There are going to be lots more dashed expectations.” Rogers said he is shunning investment in eastern Europe on concerns the region’s economies will deteriorate further: “Eastern Europe is a mess.” ... Neil Shearing, emerging-Europe economist with Capital Economics Ltd. in London, predicts “there will be a push towards diversification” of industries and markets. “But a push toward protectionism, or any sort of self-sufficiency, would have a disastrous impact for these countries,” he says.[/quote] Alas, it is not protectionism in their own countries that the Eastern European workers need fear - it`s a wave of protectionism and "buy homemade" sentiment on the part of the developed nations which consume most of Eastern Europe`s industrial output. That has already begun - see the quote by French president Sarkozy in my post of yesterday for a shining example of reactionary economic nationalism. [quote]“I think social unrest will spread,” Shearing says. “It’s not difficult to feel some sympathy from the locals’ perspective. They were promised that closer integration with the West would bring an increase in standards of living, and now they have a large and deep recession.” It’s a bitter realization for Angela Dumitru, a 46-year-old machine operator for Northfield, Illinois-based Kraft, the world’s second-largest foodmaker, which is shuttering its Romanian chocolate factory after about 14 years. “When Kraft came, they said we are all family,” she said after pushing through a rusted turnstile at the factory. “I guess this family is growing apart.”[/quote] [i]My Comment:[/i] Welcome to the darker side of [i]Das Kapitalismus[/i]. (To the German nigglers - yes I *know* it should be "der", but you see, that doesn`t allow for the same Marxist [i]Wortspiel[/i]). The UK Telegraph`s house prophet of doom, Ambrose Evans-Pritchard, has this gloomy perspective on Eastern Europe: [url=http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4623525/Failure-to-save-East-Europe-will-lead-to-worldwide-meltdown.html]Failure to save East Europe will lead to worldwide meltdown[/url]: [i]The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point.[/i] [quote]Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut. Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the rouble. "This is the largest run on a currency in history," said Mr Jen. In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not. Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets. They are five times more exposed to this latest bust than American or Japanese banks, and they are 50pc more leveraged (IMF data). Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51pc in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia. Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus. ... Europe's governments are making matters worse. Some are pressuring their banks to pull back, undercutting subsidiaries in East Europe. Athens has ordered Greek banks to pull out of the Balkans. The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan – and Turkey next – and is fast exhausting its own $200bn (€155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights. Its $16bn rescue of Ukraine has unravelled. The country – facing a 12pc contraction in GDP after the collapse of steel prices – is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5pc in the fourth quarter. Protesters have smashed the treasury and stormed parliament. "This is much worse than the East Asia crisis in the 1990s," said Lars Christensen, at Danske Bank. "There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU." Europe is already in deeper trouble than the ECB or EU leaders ever expected. Germany contracted at an annual rate of 8.4pc in the fourth quarter. If Deutsche Bank is correct, the economy will have shrunk by nearly 9pc before the end of this year. This is the sort of level that stokes popular revolt. The implications are obvious. Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU "union bonds" should the debt markets take fright at the rocketing trajectory of Italy's public debt (hitting 112pc of GDP next year, just revised up from 101pc – big change), or rescue Austria from its Habsburg adventurism. So we watch and wait as the lethal brush fires move closer. If one spark jumps across the eurozone line, we will have global systemic crisis within days. Are the firemen ready? [/quote] |
Who was it who chastised me for considering inflation to be only price/wage inflation, and not the "real" inflation which was increase in money supply?
|
Everyone needs to read:
[url]http://www.nytimes.com/2009/01/04/magazine/04risk-t.html?_r=1[/url] |
China Stimulus Goes Straight to the Casino
[QUOTE=R.D. Silverman;163128]Everyone needs to read:
[url]http://www.nytimes.com/2009/01/04/magazine/04risk-t.html?_r=1[/url][/QUOTE] Thanks for the link, Bob. The "full stop" moment with respect to the "fantastically complex mathematical models" (besides their fantastical-complexity-resulting-in-a-single-magical-number-output, that is) is right here: [i] "VaR isn’t one model but rather a group of related models that share a mathematical framework. In its most common form, it measures the boundaries of risk in a portfolio over short durations, assuming a 'normal' market." [/i]"Assuming a 'normal' market..." good grief. Apparently none of these "best and brightest" financial whizzes learned a goddamned thing from the collapse of LTCM in 1998, except maybe that if you screw up really, really big, I mean unimaginably, systemic-riskily big, you will be bailed out at taxpayer expense. ------------------------------ [url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aeaBH8CUU9NY&refer=home]China Stimulus Diverted to Stock Market[/url]: [i]Chinese companies may be using record bank lending to invest in stocks, fueling a rally that’s made the benchmark Shanghai Composite Index the world’s best performer this year, according to Shenyin & Wanguo Securities Co.[/i] [quote]China’s domestic stock market capitalization has increased by $743.1 billion since November, when the government announced its 4 trillion yuan stimulus plan. The rally has drawn more Chinese investors. About 224,000 accounts were opened to trade equities on the Shanghai and Shenzhen exchanges last week, the fastest pace in almost two months. That’s still about a quarter of the record 1.07 million set up in the week to Sept. 7, 2007. The gains in the country’s yuan-denominated shares, restricted to its citizens and approved overseas institutions, contrasts with a decline in shares of Chinese companies listed in Hong Kong, where there are no restrictions on overseas investors. The Hang Seng China Enterprise Index of Chinese companies has lost 7.7 percent this year. ‘Superficial Exuberance’ China’s government bonds may rally with the end of the “superficial exuberance” that drove the surge in bank lending over the last two months, Qu Qing, Shenyin Wanguo’s head of bond research said in an interview today. [/quote] [i]My Comment:[/i] You really can fool some of the people all of the time - Mah-jongg culture meets irrational exuberance, equities-markets style. When the next big selloff hits, it`s gonna be brutal, especially on the large number of individuals and institutions who have "doubled down" on their bad bets since last Fall. [url=http://money.cnn.com/2009/02/17/news/economy/california_budget/index.htm]California faces budget crisis[/url]: [i]Lawmakers work to trim $42B deficit, with 20,000 jobs in jeopardy if budget not passed Tuesday.[/i] [quote]NEW YORK (CNN) -- California lawmakers were told to bring their toothbrushes and prepare for a long day Tuesday, with the goal of passing a budget as the state faces a $42 billion deficit and 20,000 layoff notices were set to go out to state workers Tuesday. "Bring a toothbrush, bring any necessities you want to bring, because I will not allow anyone to go home to resume their lives... as long as we know ... that 20,000 people will be laid off," Senate President Pro Tem Darrell Steinberg, D-Sacramento, told lawmakers late Monday. Lawmakers had missed a Monday night deadline to reach a budget deal, prompting Gov. Arnold Schwarzenegger's move on the layoff notices, Schwarzenegger spokesman Aaron McLear told CNN late Monday. The Republican governor, who declared a fiscal emergency in December, has butted heads for months with the Democratic majority over alleviating the state's $11.2 billion revenue shortfall this fiscal year alone. The cuts would save California $750 million for the year. The state's $42 billion deficit is for the current and next fiscal years. He warned lawmakers about the cuts last week, urging them to approve the latest budget proposal. However, voting was stalled over a 30-hour weekend session as the legislature mulled over 26 pieces of legislation that make up the budget package. The State Assembly postponed action until Tuesday. A single Republican vote was holding the budget from passing with a two-thirds majority, McLear said. Some Republican lawmakers, including state Sen. Abel Maldonado, R-Santa Maria, say they don't agree with the $14.4 billion in tax increases tied into the budget package.[/quote] [i]My Comment:[/i] I saw a longer interview with Senator Maldonado on the local news last night - while it`s easy to cast him as the "holdout villain" in this high-stakes standoff, remember that the Dems are only targeting him because he is well-known as that rare breed, a moderate Republican. And to be fair, his opposition to the tax increases was not simple knee-jerk new-new-taxes Republican dogma, it was more that he`s been trying for years to fundamentally reform the whole budget process so things aren`t constantly done in hasty crisis mode. He wants fundamental reforms on the table ... assembly speaker Karen Bass has said "now is not the time" to raise such issues with the state facing a budgetary meltdown, to which a key holdout like Maldonado would likely say, "au contraire - now is *exactly* the time to extract a pound of flesh." There also may be a [url=http://www.mercurynews.com/localnewsheadlines/ci_11711561]personal aspect[/url] to the holdout: [quote]Maldonado and Schwarzenegger have a tense relationship: In 2006, the senator publicly criticized the governor for not backing his unsuccessful campaign for state controller. "Where was he when I needed him?" Maldonado said of Schwarzenegger in the Sunday interview[/quote] [i]My Comment:[/i] There are additional costs beyond the obvious ones if the budget doesn`t pass - I heard a figure last night to the effect that stopping and later restarting the hundreds the big infrastructure projects which would come to a screeching halt tomorrow if the vote fails would cost upward of a quarter *billion* dollars, all of it above the normal cost of continuing the projects as scheduled. That`s quite the "substantial penalty for early withdrawal" there. [b]Madoff Ponzi Circle Widens Yet Again:[/b] [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aK6tg..PNMos&refer=news]R. Allen Stanford Accused by SEC of `Massive, Ongoing Fraud' Over Returns[/url]: [i]U.S. regulators accused R. Allen Stanford of running a “massive, ongoing fraud” while selling about $8 billion in certificates of deposit through Antigua- based Stanford International Bank Ltd. [/i] [quote]The bank made “improbable and unsubstantiated” claims about its ability to generate “safe” returns of more than 10 percent, and it misled investors about exposure to Bernard Madoff’s alleged Ponzi scheme, the Securities and Exchange Commission said today in a complaint against Stanford, firms he controls and two colleagues. The agency asked the Dallas federal court to freeze assets and appoint a receiver to return money to investors. The SEC has been investigating Stanford’s Houston-based investment firm, Stanford Group, since at least last summer over sales of certificates by the Antigua-based affiliate. The inquiry intensified after the December arrest of New York money manager Madoff, who allegedly confessed to masterminding a $50 billion fraud in which early investors were promised steady returns and paid with money from later participants. “We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” Rose Romero, director of the SEC’s Fort Worth office, said today in a statement. Stanford spokesman Brian Bertsch did not immediately return a call seeking comment. The SEC has asked former employees about the bank’s stated returns on investment, between 10.3 and 15.1 percent every year from 1995 until last year, according to documents and annual reports on the bank’s Web site. SIB says it has $7.2 billion in assets and 30,000 clients, according to the SEC.[/quote] [i]My Comment:[/i] 10-15% returns every year without fail for nearly 15 years didn`t raise any huge red flags in anyone`s mind at the SEC? What`s even more shocking is that the SEC is only now looking closely at a large number of such [alleged] multibillion-dollar frauds - where were they the past decade? Ah yes, Ayn Rand`s "Atlas Shrugged" in pocket and heads up their collective asses, all at taxpayer expense, that`s where they were (or what they were doing, for the grammatical sticklers). Ain`t unfettered free-market capitalism wonderful? But I suppose investors in the Stanford Ponzi, sophisticated and savvy as they surely were, were probably tricked by the [url=http://money.cnn.com/2009/02/17/news/companies/investment_scheme_accusation/index.htm]following language[/url] in the fund prospectus, which would put all but the most paranoid at ease: [quote]According to the SEC's complaint, filed in federal court in Dallas, the defendants told CD purchasers that their deposits were safe, falsely claiming that the bank re-invests client funds primarily in the portfolio; monitors the portfolio through a team of more than 20 analysts; [u]and is subject to yearly audits by Antiguan regulators[/u].[/quote] [i]My Comment:[/i] Now the irony here is that as much of a joke as the "yearly audits by Antiguan regulators" thing is, those [alleged] audits probably would have been more stringent than any U.S.-side audits were. (if any such ever took place before just recently, which is doubtful). One wonders which country is more deserving of the "banana republic" appellation. And speaking of unfettered free-market capitalism gone bananas ... the banks, despite now being the biggest welfare queens going, are still up to their usual tricks: [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aK2WRDMzn2y4&refer=news]Bailed-Out Banks Charge Taxpayers Highest Fees in FDIC-Backed Bond Sales[/url]: [i]Citigroup Inc. and Bank of America Corp., recipients of $90 billion in bailout funds from American taxpayers, are charging financial companies three times more to sell bonds under a U.S.-backed rescue program than government- controlled Fannie Mae and Freddie Mac pay to issue notes with similar maturities.[/i] [quote]The underwriters, which include New York-based Citigroup and Bank of America in Charlotte, North Carolina, are now under pressure from lawmakers to explain why they’re paying themselves and other bailed out banks tens of millions of dollars to manage government-guaranteed bond offerings after receiving more than $145 billion of financial aid from taxpayers. At a hearing of the House Financial Services Committee last week, Democratic Congresswoman Maxine Waters of California criticized the banks for paying themselves to underwrite FDIC- backed bonds rather than hire more smaller firms, including those owned by women and minorities, to sell the debt. “When they have an opportunity to have these small firms do the underwriting on these bonds, they’re hogging it all to themselves,” Waters, 70, said in an interview. “We have been wrestling with major Wall Street firms and banks about opening up opportunities to women and minorities. This is clearly the taxpayers’ money that we are allowing them to use.” According to people familiar with the matter, banks prefer to hire their own sales forces to sell their bonds because it is the most efficient way to unload billions of dollars of debt. They say that paying themselves to do so is little more than an accounting exercise, regardless of how much the fee is.[/quote] [i]My Comment:[/i] Translator`s notes: "People familiar with the matter" translates to "banking industry lobbyists". "Most efficient" = "Most money for us". "Accounting exercise" = "We scammed so much money this way, we are still busy 'accounting' it all." |
The news tonight is full of Chrysler and GM back at the trough asking for more money. Chrysler wants $5 Billion. GM will need about $20 Billion the best I can estimate. Can I hold my hand out and get some of that free bubble up?
[url]http://news.yahoo.com/s/ap/20090217/ap_on_bi_ge/autos_bailout[/url] DarJones |
The DJIA just matched its 20 Nov 2008 low
[QUOTE=Fusion_power;163147]The news tonight is full of Chrysler and GM back at the trough asking for more money. Chrysler wants $5 Billion. GM will need about $20 Billion the best I can estimate. Can I hold my hand out and get some of that free bubble up?[/QUOTE]
I would not be at all surprised to see one or more of the Big 3 forced into a Chapter 11 restructuring in the coming weeks. In the short run that would scare any of the small amount of remaining p*ss out of the market optimists, but in the long run it might well be the best way forward, main thing being that the government does enough guaranteeing-of-this-that-and-the-other-parts-of-the-deal to avoid a complete shutdown of the North American car market and automotive supply chain. ---------- ...within a couple tenths of a point. Now if you examine recent [url=http://finance.yahoo.com/q/hp?s=^DJI]historical price data[/url] for the industrial average you note that the 20 November low was a mere 1-day affair, which occurred a massive intraday panic-attack selloff, with the bipolar-mood-swing-afflicted late-Fall market rallying right back above 800 the very next day. Also, there was only one other day last year - 19 November, and only just barely - where the DJIA finished under 8000. We have already had 8 such days in 2009, including the last 5 in a row, despite the massive $800 economic stimulus plan passing the legislature and being signed into law by President Obama during that span. An extremely bearish sign. S&P500 (a rather broader indicator) still has a little ways further to go to hit the late-November low of 750-ish, but one more session like today`s puts it there. [b]The Quantum Mechanics of Investing[/b] On a lighter note, a brief foray into the emerging field of Investing Quantum Mechanics (IQM). Given today`s fugly market action I found myself wishing I`d held onto more of my shorts today ... but the quantum mechanics of investing being what they are, had I done so, the markets would have surely have rallied hugely. I believe this phenomenon is called the "Schrödinger`s Put" paradox. Now you may rightly ask, "but surely some of your fellow ultrabears held onto their shorts over the weekend, wouldn`t the same phenomenon apply to them?" And if so, why did the market tank, thus enriching them? An excellent question... [u]Many Investors, Many Worlds[/u] ...According to the many-worlds interpretation of IQM, it is in fact possible for *everyone* invested in the markets - longs and shorts alike - to realize a loss simultaneously, despite the one side seeing the other side perform oppositely. In other words, Alice is mad because her portfolio got hammered and she saw that during the same time Bob`s positions did fabulously well. But from Bob`s perspective it is in fact he who has taken the financial pounding of his life and Alice who is sitting pretty. This most-annoying of all quantum-mechanical investing states is in fact the norm during a true quantum-mechanical bear market (QMBM). |
An Austrian-School Primer on Money and Inflation
[QUOTE=cheesehead;163074]Who was it who chastised me for considering inflation to be only price/wage inflation, and not the "real" inflation which was increase in money supply?[/QUOTE]
Not sure if you are referring to me or some other poopy-head, but you sound aggrieved, so allow me to express sympathy with your having been so terribly wronged. Getting back to the business at hand, namely inflation, specifically of the monetary rather than the late-night-infomercial kind: ----------------- Nice [url=http://www.econlib.org/library/Enc/AustrianSchoolofEconomics.html]Austrian-Economic primer[/url] on money and inflation: [quote][b]Proposition 8: Money is nonneutral.[/b] Money is defined as the commonly accepted medium of exchange. If government policy distorts the monetary unit, exchange is distorted as well. The goal of [url=http://www.econlib.org/library/Enc/MonetaryPolicy.html]monetary policy[/url] should be to minimize these distortions. Any increase in the [url=http://www.econlib.org/library/Enc/MoneySupply.html]money supply[/url] not offset by an increase in money demand will lead to an increase in prices. But prices do not adjust instantaneously throughout the economy. Some price adjustments occur faster than others, which means that relative prices change. Each of these changes exerts its influence on the pattern of exchange and production. Money, by its nature, thus cannot be neutral. This proposition’s importance becomes evident in discussing the costs of [url=http://www.econlib.org/library/Enc/Inflation.html]inflation[/url]. The quantity theory of money stated, correctly, that printing money does not increase wealth. Thus, if the government doubles the money supply, money holders’ apparent gain in ability to buy goods is prevented by the doubling of prices. But while the quantity theory of money represented an important advance in economic thinking, a mechanical interpretation of the quantity theory underestimated the costs of inflationary policy. If prices simply doubled when the government doubled the money supply, then economic actors would anticipate this price adjustment by closely following money supply figures and would adjust their behavior accordingly. The cost of inflation would thus be minimal. But inflation is socially destructive on several levels. First, even anticipated inflation breaches a basic trust between the government and its citizens because government is using inflation to confiscate people’s wealth. Second, unanticipated inflation is redistributive as debtors gain at the expense of creditors. Third, because people cannot perfectly anticipate inflation and because the money is added somewhere in the system—say, through government purchase of bonds—some prices (the price of [url=http://www.econlib.org/library/Enc/Bonds.html]bonds[/url], for example) adjust before other prices, which means that inflation distorts the pattern of exchange and production.[/quote] [i]My Comment:[/i] Interested minds will want to read the whole essay - good stuff, which ends which this highly-pertinent comment: [quote]The implications of these ten propositions are rather radical. If they hold true, economic theory would be grounded in verbal logic and empirical work focused on historical narratives. [u]With regard to public policy, severe doubt would be raised about the ability of government officials to intervene optimally within the economic system, let alone to rationally manage the economy[/u]. Perhaps economists should adopt the doctors’ creed: “First do no harm.” The market economy develops out of people’s natural inclination to better their situation and, in so doing, to discover the mutually beneficial exchanges that will accomplish that goal. Adam Smith first systematized this message in [url=http://www.econlib.org/library/Smith/smWN.html]The Wealth of Nations[/url]. In the twentieth century, economists of the Austrian school of economics were the most uncompromising proponents of this message, not because of a prior ideological commitment, but because of the logic of their arguments.[/quote] |
[QUOTE=Fusion_power;162968]Protectionism in the 1930's has no direct parallels with today. The underlying problem is Globalization on an unprecedented scale. In the 1930's, countries tended to be rather isolated, what happened in one had relatively low impact on others. Today, the global economy is so interconnected that a burp in China is felt worldwide. The U.S. economy is in extremely dire straits at present. The ripple effects are wiping out economic sacred cows around the world. The lessons learned in the 1930's have been forgotten by most.
DarJones[/QUOTE] Yes, I agree. The US economy has evolved much since 1930. I wonder if the quest for energy independence through cleaner homegrown sources or even more domestic drilling of fossil fuels could be considered protectionist by some. |
Does a heroin addict try to protect his source of dope? Of course.
We are energy addicts. Enough said. I've gone a long way to get off the energy bandwagon, but can go much further still. DarJones |
[quote=AES;163158]I wonder if the quest for energy independence through cleaner homegrown sources or even more domestic drilling of fossil fuels could be considered protectionist by some.[/quote][URL]http://www.britannica.com/EBchecked/topic/479643/protectionism[/URL]
"policy of protecting domestic industries against foreign competition by means of [URL="http://www.britannica.com/EBchecked/topic/583535/tariff"]tariffs[/URL], [URL="http://www.britannica.com/EBchecked/topic/570986/subsidy"]subsidies[/URL], import [URL="http://www.britannica.com/EBchecked/topic/487650/quota"]quotas[/URL], or other restrictions or handicaps placed on the imports of foreign competitors." [URL]http://www.answers.com/topic/protectionism[/URL] gives several definitions from other sites. The common theme seems to be doing something (from britannica.com's list) to restrain or reduce imports that would compete with domestic goods, services, or products. Neither cleaner homegrown sources nor more domestic drilling of fossil fuels does anything but raise domestic production of energy sources above what it would be if they weren't done. They do nothing to impede imports other than just plain compete with them. (Shucks -- they might even have the effect of [i]lowering[/i] the price of imported oil!) Not protectionist. That doesn't make new offshore drilling a good idea; it just can't be termed protectionist. |
[QUOTE=ewmayer;163155][Quote]The implications of these ten propositions are rather radical. If they hold true, economic theory would be grounded in verbal logic and empirical work focused on historical narratives. With regard to public policy, severe doubt would be raised about the ability of government officials to intervene optimally within the economic system, let alone to rationally manage the economy.
Perhaps economists should adopt the doctors’ creed: “First do no harm.” The market economy develops out of people’s natural inclination to better their situation and, in so doing, to discover the mutually beneficial exchanges that will accomplish that goal. Adam Smith first systematized this message in The Wealth of Nations. In the twentieth century, economists of the Austrian school of economics were the most uncompromising proponents of this message, not because of a prior ideological commitment, but because of the logic of their arguments. [/QUOTE][/QUOTE]I would agree with this statement if it referred to intervention in the economy by huge aids or bail-outs. It is not the purpose of governments to help a few at the cost of all. But I think (I might be wrong) that the austrian school of economics whent farther and insisted on complete deregulation as well. And that is something else. Society is entitled to impose rules on the economy, just as society imposes rules on automobile traffic and so on. It can also try to help sectors that are thought beneficial for the whole of society (investment in research, renewable energy, healthcare, social care...) I also believe that no such thing as a free market exists, it is a purely theoretical concept. Jacob |
[QUOTE=Fusion_power;163147]The news tonight is full of Chrysler and GM back at the trough asking for more money. Chrysler wants $5 Billion. GM will need about $20 Billion the best I can estimate. Can I hold my hand out and get some of that free bubble up?
[url]http://news.yahoo.com/s/ap/20090217/ap_on_bi_ge/autos_bailout[/url] DarJones[/QUOTE] One opinion that I have not seen regarding the auto industry is that perhaps there are [b]too many &$#*!!&*# models[/b]. Would not costs be a lot lower if there were a lot fewer models?? And I don't mean that different companies have different models. That is to be expected. I mean that within any one company there are too many. |
[QUOTE=cheesehead;163166]Neither cleaner homegrown sources nor more domestic drilling of fossil fuels does anything but raise domestic production of energy sources above what it would be if they weren't done. They do nothing to impede imports other than just plain compete with them. (Shucks -- they might even have the effect of [i]lowering[/i] the price of imported oil!) Not protectionist.
That doesn't make new offshore drilling a good idea; it just can't be termed protectionist.[/QUOTE] I don't see it as being nearly that cut and dried ... a lot of the proposed "green stimulus" involves subsidies to domestic green-energy firms and market sectors, above the basic-research level. But a large number of countries already subsidize such industries (either by direct grants or tax breaks) as well as encouraging citizens and industry to adopt clean tech - another kind of subsidy. Similarly, government support for e.g. advanced fossil-fuel exploration and burning methods amount to a kind of subsidy, albeit again one which is so common that it is rarely questioned in the international arena. Perhaps two reason for there not being much fuss about these kinds of subsidies are (a) The "stop global warming for the greater good of all the world`s citizens" argument, and (b) Nations without sufficient fossil-fuel reserves to meet their own demands can always make the energy-independence-as-a-part-of-national-security argument, and I would say quite plausibly so. [QUOTE=S485122;163170]I would agree with this statement if it referred to intervention in the economy by huge aids or bail-outs. It is not the purpose of governments to help a few at the cost of all. But I think (I might be wrong) that the austrian school of economics whent farther and insisted on complete deregulation as well. And that is something else. Society is entitled to impose rules on the economy, just as society imposes rules on automobile traffic and so on. It can also try to help sectors that are thought beneficial for the whole of society (investment in research, renewable energy, healthcare, social care...) I also believe that no such thing as a free market exists, it is a purely theoretical concept.[/QUOTE] A good point - while I don`t see common-sense, non-onerous economic regulation of the "free markets" as being an oxymoron, many Austrian acolytes (e.g. Mish Shedlock, whose blog I frequently reference here) appear to have an extreme libertarian streak. However, the problem with regulation by powers other than the private-enterprise players themselves is that in inevitably involves government bureaucracy, and history shows us that it is the natural tendency for all government bureaucracies to grow and grow in a positive-feedback loop until they collapse under their own weight. I would say that a big problem with the current regulatory regimes in most large developed economies is that the huge bureaucracies administering the regulations (which perversely have a vested interest in making more regulation at every turn and making it as complex as possible) are so cumbersome that we now have more than enough regulations, which by their very complexity are impossible to enforce anywhere close to adequately. On this point I end up sounding like a Republican: we need fewer regulations, and they need to be diligently enforced. Look at China and its dire history of graft, corruption and industrial scandal - there is a classic example of government regulation run amok. They have all the right laws on the books, but because of the central government`s desire to maintain the illusion of control at all levels, they have completely lost control of the situation on the ground, allowing local party officials (who exploit the vastness and complexity of the government bureaucracy to get away with all kinds of fraud, corruption and even murder) to act as demigods in their assigned fiefs. This phenomenon is exactly described by the Austrians. Getting back to the U.S. mortgage-bubble-induced crisis, consider the following top-down and bottom-up approaches to preventing future replays of the story: 1) A complex new set of regulations on Big Finance to prevent them from the kind of rampant fraudulent securities-packaging they engaged in with mortgage-backed securities, a kind of "SEC on steroids"; 2) Actually start *enforcing* longstanding safe-lending practices, and make everyone involved in the food chain have a vested interest in seeing that mortgages are actually repaid by the borrower. Nothing new there - in fact this was longstanding practice, until the Era of Deregulation started under Reagan eroded all that hard-won common sense. I prefer (2), because local banks and mortgage brokers are in the best position to evaluate the financial status of would-be borrowers, i.e. they have all the "bureaucracy" that is required here, and said bureaucracy is paid for not by the taxpayer, but by the borrowers themselves. Sure, legislation limiting securitization might also be helpful, but my point is, had the underlying mortgages being securitized been sound, we might be viewing securitization in entirely different terms today, as a process which ends up encouraging banks to make loans by providing them with a wider capital base on which to draw than that resulting directly from their customer deposits. To me, the best role of government is to encourage the *individual* to do the right thing (which may also require punishing them for doing the wrong thing), and then to get out of the way. In my state of California we are currently facing an unprecedented budget deficit, and all the usual vested interests are screaming about proposed cuts to their piece of the money pie, and how 10% cuts in {state employment rolls | education | social programs | prisons | infrastructure projects} will have catastrophic consequences - but in fact the current state budget is [url=http://www.inteldaily.com/news/173/ARTICLE/9430/2009-01-27.html]more than double[/url] what it was a decade ago, and has grown at a pace far greater than inflation every year. Now ask yourself, "what did all that extra money buy"? From my perspective, the answer is a hearty "not a single damn thing that was really needed above 1999 budget levels." It vanished into a giant black hole of of wasteful spending on pet projects, exceedingly generous pay, health and retirement benefits for the bureaucrats and state employees, and of course, to support an ever-growing state bureaucracy. Is public transportation any better than when I moved to CA in 1999? Except for the usual ongoing capital projects, Nope. Are state human services any better? Nope. Is the educational system any better? Nope. Has state support for high tech innovation skyrocketed? Nope, in fact if anything it`s the other way around. |
[quote=ewmayer;163215]I don't see it as being nearly that cut and dried ... a lot of the proposed "green stimulus" involves subsidies to domestic green-energy firms and market sectors, above the basic-research level.[/quote]You're right that there may often be subsidies involved. I shouldn't have answered so literally.
|
GM Tries the Protection-Racket Approach
[url=http://money.cnn.com/2009/02/18/autos/breaking_views.breakingviews/index.htm]GM's mother of all scare tactics[/url]: [i]The automaker reckons bankruptcy would cost $100 billion or more, making the extra $16 billion it wants look like chump change.[/i]
[quote]Why should U.S. taxpayers give General Motors another $16 billion in aid? After all, just two months ago the ailing carmaker claimed the first $13 billion would do the trick. Because, as the company's executives argue in the recovery plan they submitted to the Treasury on February 17, letting GM fail and file for bankruptcy protection would require a stonking $100 billion or more in financing, the vast majority provided by the U.S. government. That makes its latest appeal for help look like chicken feed. It's the latest twist in GM's argument against entering Chapter 11 bankruptcy protection, following on from last year's claims it would upend the U.S. economy, eliminate more than three million jobs and imperil national security. Chrysler has adopted a similar approach, asking for another $2 billion - it's already got or been promised $7 billion - and claiming bankruptcy would cost up to $25 billion. Why do they think a bankruptcy filing would cost so much? It's largely a result of sharply reduced revenues based on the belief that far fewer people would buy a car from a bankrupt manufacturer, plus support required for suppliers and dealers. Bankruptcy would certainly be a painful process. But GM and Chrysler are relying in large part on a couple of short research reports, neither of which presents its methodologies in full. The logic is questionable. GM assumes bankruptcy would greatly damage its reputation. But the taint of failure is well established. After all, the last few years have been spent in crisis mode and the last three months in lobbying for ever increasing amounts of government assistance. Can its image really get that much worse?[/quote] [i]My Comment:[/i] Like Big Finance last year, GM is in full-on "OK, now this last multibillion-dollar capital injection is really, really, really the last one we will need" mode. At this point giving in to their extortion efforts is throwing good money after bad. Let them go bankrupt, fire all the top brass, use some of that money that would otherwise be wasted by GM execs in trying to maintain their own status quo as far as possible instead go to providing guarantees to car owners, buyers and parts suppliers (i.e. to keep the supply chain from collapsing), use the cover of Chapter 11 to finally force real concessions from all parties involved, and then start the long rebuilding effort, with an emphasis on car models for the future, not the cheap-oil-4-ever past. [url=http://money.cnn.com/2009/02/18/news/economy/obama_foreclosure/index.htm]Obama: Aid 9 million homeowners[/url]: [i]Wide-ranging $75 billion plan will use government money to subsidize rates and insure servicers against falling home prices.[/i] [quote]While still voluntary, the program contains a mix of carrots and sticks for mortgage servicers and investors, both of whom have been seen as resistant to modifying loans. The program would not only give servicers $1,000 for each modification, but would give them another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind. But the administration is also wielding a big stick. It will work with Congress to amend bankruptcy laws to allow judges to modify mortgages, a step community advocates say is badly needed but that the financial industry abhors.[/quote] [i]My Comment:[/i] Sorry, but I simply don`t see the idea of allowing judges to modify the terms of legally binding private contracts as passing constitutional muster. If there was clear evidence of predatory lending in a particular case that is one thing - but simply because someone got in over their head and bought way more house than they could ever reasonably afford, is no grounds for such an unprecedented assault on contract law. (and the specter of "unexpected consequences" of such an action looms very large). Someone holds that mortgage debt, meaning that the money paid to the previous owner or builder of the house came from *somewhere*. and for a judge to simple rule that "Joe homedebtor will have $100,000 of his debt forgiven" is a clear expropriation of private property without corresponding compensation to the lender of that money, and as such is unconstitutional. Just because we don`t like the lender and their industry practices over the past few years does not change that fact. Ask yourself this: Would a judge telling the person who sold you his house (possibly at a very handsome profit to themselves) to cough up $100,000 because "you paid more than you can afford" be constitutional? How is it any different from telling the bank who lent you the money to do the same? And what incentive would such action give the bank to ever engage in mortgage lending again? These first thoughts having been noted, it seems the way the government is trying to get around the above legal issues is by doing it under the umbrella of the bank bailouts, and by having the Treasury subsidize the cost to the lender of the loan modifications: [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=anivYFRvAz3s&refer=news]California Epicenter of Foreclosures Shows Steep Challenge Facing Obama[/url]: [i]It has taken Susan Erb just three years to see the value of her Merced, California, home plunge by more than half to $350,000. Next month, her mortgage payment jumps 20 percent to $3,321 and she knows she can’t afford it. Her bank won’t rework the loan unless she stops paying altogether.[/i] [quote]Obama said he supported revised U.S. bankruptcy rules that would let judges reduce mortgages on primary residences to fair- market value, as long as borrowers pay their debts under a court- ordered plan. His proposal will use government funds to match reductions lenders make in interest payments and lower borrowers’ payments to 31 percent of their monthly income. Treasury will share the cost when lenders reduce monthly payments by forgiving a portion of the borrower’s mortgage balance, the government said. The program may help as many as 4 million borrowers, and the average borrower’s home value could be stabilized against a price decline of up to $6,000. Banks accepting help from the government’s financial-system bailout must adopt loan modifications, the administration said. [/quote] [i]My Comment:[/i] Hey, I actually spent the last couple decades living within my means and saving diligently for an eventual home purchase (I have an admittedly un-American distaste for indebtedness, so never fancied the idea of carrying a mortgage, i.e. I'm strictly on the 100%-down-payment plan). Where's my bailout? Can I get my rent expenses for the last 20 years reimbursed, please? Also, I think I'm paying far too much in rent at my current location - could I get a judge to look at that, please? |
[QUOTE=ewmayer;163229][url=http://money.cnn.com/2009/02/18/autos/breaking_views.breakingviews/index.htm]GM's mother of all scare tactics[/url]: [i]The automaker reckons bankruptcy would cost $100 billion or more, making the extra $16 billion it wants look like chump change.[/i]
[i]My Comment:[/i] Like Big Finance last year, GM is in full-on "OK, now this last multibillion-dollar capital injection is really, really, really the last one we will need" mode. At this point giving in to their extortion efforts is throwing good money after bad. Let them go bankrupt, fire all the top brass, use some of that money that would otherwise be wasted by GM execs in trying to maintain their own status quo as far as possible instead go to providing guarantees to car owners, buyers and parts suppliers (i.e. to keep the supply chain from collapsing), use the cover of Chapter 11 to finally force real concessions from all parties involved, and then start the long rebuilding effort, with an emphasis on car models for the future, not the cheap-oil-4-ever past. [url=http://money.cnn.com/2009/02/18/news/economy/obama_foreclosure/index.htm]Obama: Aid 9 million homeowners[/url]: [i]Wide-ranging $75 billion plan will use government money to subsidize rates and insure servicers against falling home prices.[/i] [i]My Comment:[/i] Sorry, but I simply don`t see the idea of allowing judges to modify the terms of legally binding private contracts as passing constitutional muster. If there was clear evidence of predatory lending in a particular case that is one thing - but simply because someone got in over their head and bought way more house than they could ever reasonably afford, is no grounds for such an unprecedented assault on contract law. (and the specter of "unexpected consequences" of such an action looms very large). Someone holds that mortgage debt, meaning that the money paid to the previous owner or builder of the house came from *somewhere*. and for a judge to simple rule that "Joe homedebtor will have $100,000 of his debt forgiven" is a clear expropriation of private property without corresponding compensation to the lender of that money, and as such is unconstitutional. Just because we don`t like the lender and their industry practices over the past few years does not change that fact. Ask yourself this: Would a judge telling the person who sold you his house (possibly at a very handsome profit to themselves) to cough up $100,000 because "you paid more than you can afford" be constitutional? How is it any different from telling the bank who lent you the money to do the same? And what incentive would such action give the bank to ever engage in mortgage lending again? These first thoughts having been noted, it seems the way the government is trying to get around the above legal issues is by doing it under the umbrella of the bank bailouts, and by having the Treasury subsidize the cost to the lender of the loan modifications: [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=anivYFRvAz3s&refer=news]California Epicenter of Foreclosures Shows Steep Challenge Facing Obama[/url]: [i]It has taken Susan Erb just three years to see the value of her Merced, California, home plunge by more than half to $350,000. Next month, her mortgage payment jumps 20 percent to $3,321 and she knows she can’t afford it. Her bank won’t rework the loan unless she stops paying altogether.[/i] [i]My Comment:[/i] Hey, I actually spent the last couple decades living within my means and saving diligently for an eventual home purchase (I have an admittedly un-American distaste for indebtedness, so never fancied the idea of carrying a mortgage, i.e. I'm strictly on the 100%-down-payment plan). Where's my bailout? Can I get my rent expenses for the last 20 years reimbursed, please? Also, I think I'm paying far too much in rent at my current location - could I get a judge to look at that, please?[/QUOTE] OTOH, consider a home-owner who bought a home he COULD afford, made all payments on-time, etc. but now can't pay the mortgage because he has been laid off and has no work. Nor does he have any propsepcts of re-employment any time soon owing to the economy... BTW, I was in such a situation back in 2001 when RSA dumped me with no advance notice. I had to raid my IRA (and paid the 10% penalty) to pay my mortgage. Unemployment insurance covers food, and heat, and electricity, and perhaps a bit more like home & car insurance. It does not cover mortgages and local real estate taxes, and college tutition, and ......... |
PBS: "Behind the Meltdown" | Rats are Smarter...
The acclaimed PBS documentary series [i]Frontline[/i] had a piece on the financial-market meltdown yesterday, appropriately enough titled [url=http://www.pbs.org/wgbh/pages/frontline/meltdown/]Behind the Meltdown[/url]. It was too light for my taste on the longer-term financial-policy decisions by Greenspan et al which allowed the speculative credit/housing bubble to grow to such huge proportions, but entertaining nonetheless. For any of you who missed the broadcast, the full show is available via streaming video online at the PBS.org site.
[url=http://money.cnn.com/2009/02/17/pf/experts_Tetlock.moneymag/index.htm]Why the experts missed the crash[/url]: [i]Which forecasters should you trust on the direction of the economy and the markets? Ask Philip Tetlock, who knows the kind of expert worth listening to - and what to listen for.[/i] [quote]You've probably never wanted expert insight more than today - and never trusted it less. After all, the intelligent, articulate, well-paid authorities voicing these opinions are the ones who created the crisis or failed to predict it or lost 30% of your 401(k) in it. Yet we can't tear ourselves away. The crisis has brought record ratings to CNBC and its parade of talking heads. You're probably still entrusting your portfolio to the experts running mutual funds. Despite everything, we can't shake the belief that elite forecasters know better than the rest of us what the future holds. The record, unfortunately, proves no such thing. And no one knows that record better than Philip Tetlock, 54, a professor of organizational behavior at the Haas Business School at the University of California-Berkeley. Tetlock is the world's top expert on, well, top experts. Some 25 years ago, he began an experiment to quantify the forecasting skill of political experts. ... Remember Greek tragedy? The gods don't like mortals who get too uppity. In this case the biggest source of hubris was the mathematical models that claimed you could turn iffy loans into investment-grade securities. The models rested on a misplaced faith in the law of large numbers and on wildly miscalculated estimates of the likelihood of a national collapse in real estate. But mathematics has a certain mystique. People get intimidated by it, and no one challenged the models. [b] Americans were shocked at how wrong the experts were. You weren't. Why not? [/b] My research certainly prepared me for widespread forecasting failures. We found that our experts' predictions barely beat random guesses - the statistical equivalent of a dart-throwing chimp - and proved no better than predictions of reasonably well-read nonexperts. Ironically, the more famous the expert, the less accurate his or her predictions tended to be. [b] Money has written about human mental quirks that lead ordinary folks to make investing mistakes. Do the same lapses affect experts' judgment? [/b] Of course. Like all of us, experts go wrong when they try to fit simple models to complex situations. ("It's the Great Depression all over again!") They go wrong when they leap to judgment or are too slow to change their minds in the face of contrary evidence. And like all of us, experts have a hard time with randomness. I once witnessed an experiment that pitted a classroom of Yale undergrads against a lone Norwegian rat in a T-maze. Food was put in the maze in no particular pattern, except that it was designed to end up in the left side of the "T" 60% of the time. Eventually, the rat learned always to turn left and so was rewarded 60% of the time. The students, on the other hand, fell for a variant of the "gambler's fallacy." Picture a roulette player who sees a long sequence of red and puts all his money on black because it's "due." Or more subtly, he looks for complex, alternating patterns - the same kind of mental wild-goose chase that technical stock pickers go on. That's what happened to the Yalies, who kept looking for some pattern that would predict where the food would be every time. They ended up being right just 52% of the time. Outsmarted by a rat.[/quote] [i]My Comment:[/i] [url=http://en.wikipedia.org/wiki/Nassim_Taleb]Nassim Nicholas Taleb[/url] of [url=http://www.amazon.com/Fooled-Randomness-Hidden-Chance-Markets/dp/0812975219]Fooled by Randomness[/url] and [i]Black Swan[/i] fame would surely agree. |
[QUOTE=ewmayer;163237]
<snip> .[/QUOTE] What else would you expect from Yalies?:smile::smile: |
I was talking about Madoff with my girlfriend yesterday and I tried to put a face on 50 billion dollars by approximating like this: 3 years is roughly 1000 days (within 10%) and roughly calculating if Madoff moved into a new million dollar house each day he would spend a billion dollars in three years time and therefore $50 billion in 150 years. So he could throw away the $1,000,000 house he slept in each and every day of his life. Today I see this article:
[URL="http://money.cnn.com/galleries/2009/moneymag/0902/gallery.million_homes.moneymag/index.html"]What you can get for $1 million[/URL][QUOTE]Here's what it would have bought you recently in six major metro areas: three where prices have risen the most in the past year and three where they've tanked.[/QUOTE] They may not be palatial but at least you wouldn't have to look at any particular one for long. It looks like the Miami market is a bit cold right now so you can get this bargain "Amenities include not only a swimming pool but also a dock on Biscayne Bay complete with two boat lifts and a jet-ski lift." |
My Orthogonal Opinions
[QUOTE=ewmayer;159880]
[b]My Comment:[/b] I generally respect Rogers, except when he talks about Asia - he moved to Asia years ago with his lovely wife Paige and has become a notorious China permabull. [/QUOTE] I had to read this twice to make sure you didn't write: "...talks permabull." The only socially accepable behavior for a billionaire is to be divorced from several bimbos with big boobs and leave the keepers to guys who can't afford bimbos. He should be ashamed of himself. As far as I'm concerned, the only thing one needs to know about Jim Rogers, is that he's really only smart enough to stay one step ahead of the cartload of monkeys managing public funds, which is the right place to be, if you are a speculator. But not being able to be too smart makes it easier...(moving from mmx to xmm clears the top 64 bits? Why on earth, why?????) In a game theory class we played the following game: 1. Put your name and a number between 1 and 100 on a slip of paper. 2. Collect the slips and compute the arithmetic mean. 3. The player with the number closest to half the mean wins $20 The winning number was 22. This is very close to the expected value, if people had chosen randomly. Jim Rogers is the kind of person who picks something close to 25 and gives this as a reason. I'm the kind of person who picks something close to 12.5, one step ahead of Jim Rogers - and gets no cigar. Btw, played this game as a moderator in a physics class. Winning number was 18. A mathematician in the first row figured out that the Nash-equilibrium is 0 in roughly 0.2s...right answer - but no cigar? No fair! The winning number has become my measure of 'collective stupidity'. If you play this in the Senate/Congress, I wouldn't be surprised if you ended up with values>25 @no-one in particular The incentive for people to give themselves and their friends big bonus, is higher if they know the company is going to fail. It's not surprising that this is especially prominent in companies already on life-support, as spontaneus remission is the exception rather than the rule. Anyhoo, this is entirely rational behavior by the execs, so any public outrage is simply stupid, as usual. Actually, I think 'the public' is a lot cooler about this, than we are led to believe. It's more likely the administration trying to divert attention from itself: after all they're either hypocrites getting kick-backs or real r-tards who actually thought there was a chance that all this stimulus/bailout/spend-as-spend-can would work. Excursus: My spellchecker isn't working, even though Konqueror says that it has aspell or whatever. I got suspicious that it didn't flag 'hippocrite' as misspelled, mspelled, myspelled. Nope, still not working. Enjoy the doozies. /Excusus Spending money does not create jobs. Figuring out how to use $10 worth of resources, transforming them for $5 and selling them for $25, does. This also creates $10 of wealth, that wasn't there before. If this 'figuring out' were so easy that a person can do it, who's sole qualification is being more appealing to the median-voter, someone else would be doing it already. Unfortunately, the median voter's abilities are below average (log-normal!), so it isn't surprising that all democracies behave like under average fools. Which is still better than the extreme fool you'll get in an autocracy, a consequence of the bias-variance-dilemma, not some sort of human-rights bull. Bail-outing will stop as soon as the bail-outer needs a bail-out and cannot find a greater fool. It's that simple, and there is nothing we can do but wait until our government fails and can't pay its bills. After this has happend, he only way to stop it from happening again, is to design a constitution that makes deficit-spending impossible, because the cost of policy X will be always be larger than what the currently living population will have to pay for it. Forcing people to live forever simply isn't possible. Societies who learn from their mistakes survive, the others get wiped out. We have developed technology to produce enough food to keep us alive requiring less than 10 minutes of work/day, so I'm totally cool. Soap? Check! With all those morons out there, the effort to determine the probablilty that I should waste 10c of perfectly good shoesole to go voting for the mixed strategy Nash-equilibrium has been eliminated by rational ignorance. I have recieved life sentences in only 12 star-systems, so I consider myself too decent to run for office. Ballot? Check! etc. |
CA Budget Passes | Bye, Bye, Swiss Bank Secrecy
[url=http://money.cnn.com/2009/02/19/news/economy/california_budget/index.htm]California budget passed, awaits Schwarzenegger signature[/url]: [i]After an overnight session, California lawmakers pass a budget package that closes the $42B gap.[/i]
[quote]California lawmakers in Sacramento passed the state's budget -- closing a $42 billion deficit -- early Thursday, and it now awaits the signature of Gov. Arnold Schwarzenegger, who hailed the lawmakers. The budget package includes tax increases, spending cuts and borrowing to close the deficit. It was first approved by the state Senate during a grueling overnight session after lawmakers there agreed to demands from a holdout Republican senator. It was then passed speedily by the Assembly. ... Democrats in the Senate needed one Republican vote for passage. Sen. Abel Maldonado had been one Republican amenable to vote for the measure in exchange for various demands and lawmakers worked to meet them in order to get his support. Senators voted to approve Maldonado's demands to revise the state's constitution to permit open primaries for legislative, congressional and gubernatorial elections. They also passed another, the removal of a 12-cent additional gas tax increase.[/quote] [i]My Comment:[/i] The senate also acceded to Maldonado`s demands to freeze legislators` salaries in deficit budget years and to eliminate $2M in new office furniture budgeted for the state controller. I`m not sure how much removal of the gas tax hike will cost in terms of deficit-closing, but a quick mental back-of-the-envelope estimate: Figuring 10-15 million drivers in CA averaging 10000 miles per year at 25mpg gives $50 per driver per year for the lost surcharge, or around a half-billion dollars. That would pay for a lot of school repairs, but maybe the reasoning is that the gas tax hits working-class folks disproportionately. [url=http://money.cnn.com/2009/02/18/news/companies/ubs/index.htm]UBS admits helping tax evaders[/url]: [i]Swiss banking giant agrees to pay $780 million and hand over account information after helping U.S. clients evade the IRS.[/i] [quote]Switzerland's largest bank, UBS, has admitted helping U.S. taxpayers hide money from the IRS, and has agreed to pay $780 million in fines and restitution, and to turn over account information. The deferred prosecution agreement was approved Wednesday by a federal court judge in Fort Lauderdale, Fla. "UBS admitted to conspiring to defraud the United States by impeding the IRS," the Justice Department announced late Wednesday. The statement says that UBS, "in an unprecedented move" based on an order by Swiss authorities, has agreed "to immediately provide the U.S. government with the identities of, and account information for, certain U.S. customers of UBS's cross-border business." UBS (UBS) also has agreed to end its business practice of providing banking services to U.S. customers with undeclared accounts. "Swiss bankers routinely traveled to the United States to market Swiss bank secrecy to United States clients interested in attempting to evade U.S. income taxes," the Justice Department said. The government document says Swiss bankers made a total of about 3,800 trips to discuss their clients' accounts. The government said that because the bank has acknowledged responsibility for its actions, has cooperated fully, and has taken remedial actions, the United States will recommend dismissal of the criminal charge "provided the bank fully carries out its obligations under the agreement."[/quote] [i]My Comment:[/i] Nice ... you engage in a conspiracy to defraud the U.S. government on a massive scale, get caught, say "sorry - my bad", and basically bribe your way out of criminal prosecution. Must be nice to be an international banker. And best of all, they get to keep their remaining stash of [strike]concentration-camp-victim jewelry and tooth fillings bought from the Nazis[/strike] gold bullion. Thankfully, it seems the Feds are not content with the mere 250 client account disclosures agreed to by UBS in the above settlement, which begs the question, are there different factions in the Justice Department operating independently of each other here? [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=ankVHaolcS9c&refer=news]UBS Sued by U.S. to Disclose Names of Up to 52,000 Holding Secret Accounts[/url]: [i]The U.S. government sued UBS AG, Switzerland’s largest bank, to try to force disclosure of the identities of as many as 52,000 U.S. customers with secret Swiss accounts. [/i] [quote]Feb. 19 (Bloomberg) -- The U.S. government sued UBS AG, Switzerland’s largest bank, to try to force disclosure of the identities of as many as 52,000 U.S. customers with secret Swiss accounts. The lawsuit, filed today in federal court in Miami, alleges that 32,000 accounts contained cash and 20,000 held securities, according to the statement. U.S. customers failed to report and pay U.S. income taxes on income earned in those accounts, which held about $14.8 billion in assets in the mid-2000s, according to a statement from the Justice Department. “At a time when millions of Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes,” John A. DiCicco, acting assistant attorney general in the Justice Department’s tax division, said in the statement. [u] The suit came a day after UBS agreed to pay $780 million to settle investigations by the Justice Department and the Securities and Exchange Commission and disclose the names of about 250 account holders to avoid U.S. prosecution on a charge that it helped thousands of wealthy Americans evade taxes[/u].[/quote] |
U.S. Stocks at 6-Year Lows | Greenie the Bank Nazi
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=avE_A.ZCcC64&refer=news]U.S. Stocks Fall, Sending Dow Average to Six-Year Low; Citigroup Declines[/url]: [i]U.S. stocks dropped, sending the Dow Jones Industrial Average to a six-year low, as Hewlett-Packard Co. cut its profit forecast and concern about rising credit-card defaults dragged financial shares to the lowest level since 1995.[/i]
[quote]The S&P 500 slid 1.2 percent to 778.94, extending its 2009 loss to 14 percent in its worst start to a year. The Dow dropped 89.68 points, or 1.2 percent, to 7,465.95, the lowest since October 2002. The Russell 2000 Index declined 1.5 percent. “The market is trying to digest the severity of the economic slowdown and its effects on tech stocks and capital spending going forward,” said Giri Cherukuri, who helps manage $1.1 billion at Oakbrook Investments in Lisle, Illinois. “People are thinking it’s maybe going to be more severe than expected. That’s going to affect spending for the rest of 2009.” The S&P 500 fell for a third day yesterday as the Federal Reserve cut its forecast for the U.S. economy this year, while government reports showed industrial production shrank more than forecast and housing starts slid to a record low last month. Today, a Federal Reserve gauge of manufacturing in the Philadelphia region shrank at the fastest pace in more than 18 years. The Conference Board’s index of leading economic indicators climbed more than forecast as a jump in money supply masked continued deterioration elsewhere in the economy. [b] Hewlett-Packard Tumbles [/b] Hewlett-Packard fell $2.69, or 7.9 percent, to $31.39, its steepest tumble since August 2004. Fiscal first-quarter sales trailed estimates, and the company lowered its operating profit forecast for the year to a range of $3.76 to $3.88 a share from an earlier range of $3.88 to $4.03 as the recession saps demand for computers. Profits dropped 33 percent on average at the 394 companies in the S&P 500 that reported fourth-quarter earnings since Jan. 12, according to data compiled by Bloomberg. The period is poised to be the sixth straight quarter of decreasing profits, the longest streak on record. Health-care companies are the only group among 10 to report higher earnings. Bank of America, the largest U.S. bank by assets, fell for a fifth straight day, losing 64 cents to a 24-year low of $3.93. Citigroup, which has received $45 billion in U.S. bailout funds, tumbled 40 cents to a 17-year low of $2.51. [b] 14-Year Low [/b] The S&P 500 Financials Index retreated 5.2 percent to its lowest level since January 1995. Prudential Financial, the second-largest U.S. life insurer, fell $3.59 to $19.02. Prudential’s short-term debt rating was lowered by Fitch Ratings, rendering the holding company ineligible for the U.S. commercial paper program. Financial stocks led the S&P 500’s 38 percent decline in 2008, its steepest yearly loss since 1937, as the worst U.S. real-estate slump since the Great Depression produced credit losses of more than $1 trillion globally. The group, which lost 57 percent of its value last year, has fallen 40 percent this year as rising unemployment casts doubt on the ability of consumers to stay current on other forms of debt. The threat was highlighted today after the Labor Department said the number of Americans collecting jobless benefits jumped to a record 4.99 million two weeks ago, signaling the job market is still deteriorating. [u] The prospect that the federal government will nationalize some banks, rendering their equity worthless, is dogging Bank of America and Citigroup[/u] in particular, said Anton Schutz, president of Mendon Capital Advisors Corp. in Rochester, New York. [b] ‘Getting Destroyed’ [/b] Investors are “afraid the government’s going to wipe out everybody that’s got an interest,” Schutz said. “Nobody knows what the rule book is. In the meantime, the stocks are getting destroyed.” Mendon manages $150 million in financial stocks, including the two best-performing bank-stock mutual funds over the past three years. [u] Credit-card defaults are about to surpass a previous high of 7.53 percent as people losing jobs fail to repay debt, according to Fitch Ratings[/u]. The defaults may peak at 10 percent to 11 percent of loans by year-end under a stress scenario, Goldman Sachs Group Inc. analyst Brian Foran said yesterday in an e-mail, reducing 2009 earnings for issuers including an almost 40 percent cut for American Express Co. [/quote] [i]My Comment:[/i] Note that "Mr. Unfettered Free Market Capitalism" himself, Alan Greenspan, this week [url=http://www.ft.com/cms/s/0/e310cbf6-fd4e-11dd-a103-000077b07658.html]came out in favor of bank nationalization[/url], at least on a "temporary" basis. Dear me, what would his erstwhile muse Ayn Rand think of that? |
[QUOTE=ewmayer;163312][i]My Comment:[/i] Note that "Mr. Unfettered Free Market Capitalism" himself, Alan Greenspan, this week [url=http://www.ft.com/cms/s/0/e310cbf6-fd4e-11dd-a103-000077b07658.html]came out in favor of bank nationalization[/url], at least on a "temporary" basis. Dear me, what would his erstwhile muse Ayn Rand think of that?[/QUOTE]What is the world coming to? Just last Octoiber he also admitted that he was "in a state of shocked disbelief" when he "[url=http://www.nytimes.com/2008/10/24/business/economy/24panel.html]had failed to anticipate the self-destructive power of wanton mortgage lending[/url]."
Do you suppose there's any chance that the ardent free marketers might ever admit that [B]maybe[/B], just [B]maybe[/B], there could be a problem with too little regulation? Or is that too far out of their world view? |
Regulation Theater
[QUOTE=schickel;163325]Do you suppose there's any chance that the ardent free marketers might ever admit that [B]maybe[/B], just [B]maybe[/B], there could be a problem with too little regulation? Or is that too far out of their world view?[/QUOTE]
I think you suffer from the following fallacy: 1. We must do something. 2. X is something. 3. Therefore we must do X. The next time the guy at the airport takes away your 4 year old daughter's yoghurt according to regulation (if it's liquid it might be a bomb!), please remind yourself that it will be the same mechanism with which we'll get Mo' & Better (TM) regulation. Do you really want more regulation theater? It is extreeeeeeeeeeeeeeeeeeemly unlikely that regulation can prevent an economic crisis, will magically prevent companies from failing, and prevent people from doing stupid things, in general. It is veeeeeeeeeeeeery likely that regulation costs a lot and keeps us from getting stuff done. Regulations are good when they concern conventions, like the color of the traffic-light that's supposed to signal 'stop'. It is wishful thinking at it's worst to assume that regulations make a problem disappear. The road to hell is paved with good intentions. Minimum wage will NOT make people earn more money. It will simply make everybody below the cut-off lose his job. Why not set the minimum wage at $1.000.000? We're all millionaires! The point against regulation is that the regulator cannot regulate properly for lack of omniscience. There is also no mechanism in effect that will remove bad regulators. Bad companies are occasionally allowed to fail, but the worse regulations are working, the MORE resources they get. The US is sending more troops to Afghanistan? More? I thought the biggest idiot to date had left the office. Is there some sort of stupidity contest going on? The economic fallacy is that the regulators are trying recover sunk cost, which is impossible. I have no idea where people get the idea from that Alan Greenspan supported free markets, when it was his job to set the price of debt (interest rate) on a daily basis! That's not how free markets & the price mechanism work, and that's why they're going to blow up again and again, until the government is bankrupt. |
[URL]http://www.youtube.com/watch?v=RCqxq6xqoXI[/URL]
|
[quote=davieddy;163374][URL]http://www.youtube.com/watch?v=RCqxq6xqoXI[/URL][/quote]
[quote=youtube]This video is not available in your country.[/quote] What kind of cencorship is this? |
[quote=KriZp;163385]What kind of cencorship is this?[/quote]
Dunno where you live. But For your information the song was "Sin City" by Gram Parsons and the Flying Burrito Bros, and included the lyric "On the 31st floor, a gold-plated door won't keep out the Lord's Burning Rain" David |
[quote=__HRB__;163329][quote=schickel;163325]Do you suppose there's any chance that the ardent free marketers might ever admit that [B]maybe[/B], just [B]maybe[/B], there could be a problem with too little regulation? Or is that too far out of their world view?[/quote]I think you suffer from the following fallacy:
1. We must do something. 2. X is something. 3. Therefore we must do X.[/quote]A) Will you please explain how your 1-2-3 applies to schickel's text that you quoted? B) I'm not sure exactly how you intended "fallacy" in this context, but I note that your step 3 presumes another, unstated (and usually false) step: 2a. X is the only choice. [quote]It is extreeeeeeeeeeeeeeeeeeemly unlikely that regulation can prevent an economic crisis, will magically prevent companies from failing, and prevent people from doing stupid things, in general.[/quote]Exaggeration doesn't help your argument. One possible simple regulation could have required that sellers of CDSes and whatever-the-other-newfangled-type-was must disclose its risks, in plain English, to a potential customer. Then one of our local school boards would not have been fooled into buying what they were told was a safe-enough-for-a-school-board investment. Simple information regulations _can_ prevent some people from doing some stupid things -- not always, but often. [quote]It is veeeeeeeeeeeeery likely that regulation costs a lot and keeps us from getting stuff done.[/quote]Oh, yeah -- I guess printing a few extra sentences in boldface font on the front of derivative prospectuses would have cost a lot and would have scared some customers away, so yes, there's sometimes extra cost, and yes, sometimes a regulation informs someone that something is not in their best interest, which keeps some salesfolks from making extra sales -- yup. [quote]Regulations are good when they concern conventions, like the color of the traffic-light that's supposed to signal 'stop'. It is wishful thinking at it's worst to assume that regulations make a problem disappear.[/quote]You seem determined to twist and exaggerate "[B]maybe[/B], just [B]maybe[/B], there could be a problem with too little regulation" into something ludicrous. [quote]The road to hell is paved with good intentions.[/quote]So was the road to deregulation. [quote]Minimum wage will NOT make people earn more money. It will simply make everybody below the cut-off lose his job.[/quote]Oh, that's right -- last time we had a minimum wage increase there was massive unemployment ... NOT. [quote]Why not set the minimum wage at $1.000.000? We're all millionaires! [/quote]Why not exaggerate every reasonable suggestion into absurdity? We'll see that all proposed change is ridiculous! [quote]The point against regulation is that the regulator cannot regulate properly for lack of omniscience.[/quote]Now, there's a smooth exaggeration-into-absurdity at the end. Very smooth. [quote]There is also no mechanism in effect that will remove bad regulators.[/quote]Are all regulators appointed for life, exempt from all criminal and civil laws, and exempt from all investigation for misconduct? If so, I wasn't aware of that. - - - I've posted many times in other threads that what we need is a proper balance between the extremes of the Strict Father worldview of conservatives and the Nuturing Parent worldview of liberals. For achieving that, it would help to educate those near the extremes that people at the other end of the spectrum are fully human, too, and deserve to have their views thoughtfully considered without distortion, in order to achieve best results. HRB, Those who advocate deregulation have had an almost-30-year run, and succeeded in pushing the pendulum so far their way that the swing back will be awesome. I suggest that those opposed to the coming swing back take the role of reasonable negotiators to keep things from going too extreme on the other side, but not fool themselves that deregulation is always good. |
I don't do online videos (especially not while at work), so could someone tell me if davieddy's linked video is even remotely related to the thread topic?
|
[quote=ewmayer;163397]I don't do online videos (especially not while at work), so could someone tell me if davieddy's linked video is even remotely related to the thread topic?[/quote]
[URL]http://www.youtube.com/watch?v=RCqxq6xqoXI[/URL] You mean this one? (Hope it's clean) It's certainly related |
Can someone provide a summary, for those of us who've not yet converted from dialup to broadband?
|
[quote=cheesehead;163400]Can someone provide a summary, for those of us who've not yet converted from dialup to broadband?[/quote]
You're a good one to ask for a summary:smile: Can't you get my links in the US? I was hoping for better from Ernst. David |
[QUOTE=davieddy;163402]You're a good one to ask for a summary:smile:
Can't you get my links in the US? I was hoping for better from Ernst. David[/QUOTE] If folks who posted video links would at least do the rest of us the small courtesy of adding a few words what the video is about, the click-bait skeptics among us might be , well, less click-bait-skeptical. Posting links with zero contextual information is only one short step removed from spam - at least that's the way I treat 'em. |
Dodd Joins Bank Nazis | Russians Remember 1998
[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aK13N8OxMigc&refer=news]Dodd Says Short-Term Bank Nationalization Might Be Needed as Shares Slide[/url]: [i]Senate Banking Committee Chairman Christopher Dodd said banks may have to be nationalized for “a short time” to help lenders including Citigroup Inc. and Bank of America Corp. survive the worst economic slump in 75 years.[/i]
[url=http://www.bloomberg.com/apps/news?pid=20601109&sid=azObP8_4deuI&refer=news]Fannie Mae Rescue Hindered as Mitsubishi UFJ, Daiwa Call for U.S. Backing[/url]: [i]Asian investors won’t buy debt and mortgage-backed securities from Fannie Mae and Freddie Mac until they carry explicit U.S. guarantees, similar to those given on bonds issued by Bank of America Corp. or Citigroup Inc.[/i] [quote]Even after President Barack Obama vowed on Feb. 18 to sink as much as $400 billion of capital into Fannie Mae and Freddie Mac, double the original commitment, “there is still a concern that there is no guarantee” from the government, said Shimomura, who oversees $4 billion in non-yen bonds for the arm of Japan’s largest bank. “Looking at the risk, they’re not so attractive,” he said. “We need a guarantee before we’ll buy.” Foreign investors sold $170 billion of agency debt and securities in the second half of 2008, the largest amount since the Treasury began tracking sales in 1977, according to the most recent data. Asians, the biggest non-U.S. block of owners in the category, unloaded $70 billion worth from July through December, after scooping up $55 billion in the second quarter and being net buyers during much of the last decade. Lack of Confidence The sell-off and calls for a guarantee reflect a continuing lack of confidence among foreign investors five months after the U.S. seized control of Fannie Mae and Freddie Mac. The takeovers followed the biggest surge in mortgage defaults in three decades. Without restoring foreign demand, Federal Reserve Chairman Ben S. Bernanke will find it more difficult to cut rates on housing loans, which depend on the ability of the finance companies to attract investors for their securities at the lowest possible yield. Fannie and Freddie sell debt to fund their purchases of mortgage assets and also guarantee home-loan bonds sold by lenders. The Fed, which promised to buy as much as $100 billion of Fannie Mae, Freddie Mac and Federal Home Loan Bank corporate debt, may need to spend more, according to Margaret Kerins, an agency-debt strategist at RBS Greenwich Capital in Greenwich, Connecticut. [/quote] [i]My Comment:[/i] Dontcha just love all the doublespeak from Washington and the financial experts? They`ve gotten so used to massive federal deficits being the norm that they have their language all mixed up. Futile exercise though it is, let`s try to correct that: Things should read - "...sink as much as $400 billion of [strike]capital[/strike] [u]newly-borrowed money[/u]..." - "...Ben S. Bernanke will find it more difficult to cut rates on housing loans, which depend on the ability of the finance companies to attract investors for their [strike]securities[/strike] [u]newly-bundled US consumer mortgage debt[/u]..." - "The Fed, which promised to buy as much as $100 billion of Fannie Mae, Freddie Mac and Federal Home Loan Bank corporate debt, may need to [strike]spend[/strike] [u]borrow[/u] more..." [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aB6fW1.R07_o&refer=news]Russian Spenders Guard Money as Crisis Evokes Memories of 1998 `Nightmare'[/url]: [i]It took Marina Zaporozhtseva a decade to save for a new car after Russia’s last economic crisis. Scared of living through a repeat, she’s hanging on to her money.[/i] [quote]Back in 1998, when the country let the ruble plunge, defaulted on debt and millions of people’s savings were wiped out, the Moscow accountant couldn’t find a job and had to work as a cook to make ends meet. “Now, once again, there are nightmares at work,” said Zaporozhtseva, 46. “I have to think over every little purchase because I’m not sure if I’ll have a job tomorrow.” Russia has lurched into reverse after 10 years of uninterrupted growth driven by revenue from oil, gas, metals and consumer spending. While almost half of all Russians still have no savings, people with spare cash like Zaporozhtseva say they are guarding it to pay bills and survive as wages decline and the number of jobless rises beyond 6 million. The government expects the economy to shrink 2.2 percent this year after expanding about 7 percent a year since 1999. Already, household incomes have sunk with the 35 percent plunge in the ruble against the dollar since Aug. 1 and inflation surged to 13.4 percent in January because of the cost of imported goods. The Russian central bank has raised its benchmark repurchase rate four times since November, to 12 percent. “Consumers everywhere have been hit, but they’ve been hit twice as hard in Russia,” said Roland Nash, head of research at Moscow-based investment bank Renaissance Capital. “Russia has been hit twice: first through the tremendous drop in commodity prices, and second by the global financial crisis.” [/quote] [i]My Comment:[/i] Frugality ... now opening in Russia. |
[quote=ewmayer;163406]If folks who posted video links would at least do the rest of us the small courtesy of adding a few words what the video is about, the click-bait skeptics among us might be , well, less click-bait-skeptical.
Posting links with zero contextual information is only one short step removed from spam - at least that's the way I treat 'em.[/quote] Sorry. But there is some merit in allowing them to speak for themselves. Here is a clip of a pre-Beatles (and therefore Beachboys etc) combo strutting their stuff on a childrens TV program circa 1961. I'll freely admit it has got very little to do with this thread (unless the FBI are involved). But if my previous link was Sin City, then shame onyou for not putting 2+2 together. David [URL]http://www.youtube.com/watch?v=n-OgRpH7o3s[/URL] |
Dear Ernst,
You are a moderator who can remember Buddy Holly (even if not James Burton) so just move my supposedly irrelevant posts to the music thread and I'll argue with you there till the 'king cows come home. David I assume you remember Duane Eddy |
[quote=davieddy;163424]Sorry. But there is some merit in allowing them
to speak for themselves. Here is a clip of a pre-Beatles (and therefore Beachboys etc) combo strutting their stuff on a childrens TV program circa 1961. I'll freely admit it has got very little to do with this thread (unless the FBI are involved). But if my previous link was Sin City, then shame onyou for not putting 2+2 together. David And it was indeed the late great Gram Parsons [URL]http://www.youtube.com/watch?v=n-OgRpH7o3s[/URL][/quote] As regards this link, Buddy Holly has quite a lot to answer for. |
[QUOTE=cheesehead;163400]Can someone provide a summary, for those of us who've not yet converted from dialup to broadband?[/QUOTE]My employer has a block on Youtube and many other sites (with a rather nasty message. )And at home, I won't click on the link like that either. No context or description, no click.
|
see. we have liberals and conservatives here too.
For the record, the video link is marginally connected to the thread. I agree that it should have had some description added. The spin doctors are busy again today. Obama is not going to nationalize the banks. Unfortunately, the market is rapidly forcing his hand. I predict that at least 2 of the major banks will fail within 60 days because of plunging consumer confidence. The next major shoe to drop is when this 800 billion is spent and the politicians come back and say they need another 500 billion. Watch and see if I am correct. DarJones |
[QUOTE=cheesehead;163396]I've posted many times in other threads that what we need is a proper balance between the extremes of the Strict Father worldview of conservatives and the Nuturing Parent worldview of liberals. For achieving that, it would help to educate those near the extremes that people at the other end of the spectrum are fully human, too, and deserve to have their views thoughtfully considered without distortion, in order to achieve best results.[/QUOTE]
I'm an adult. I don't need a Strict Father or a Nuturing Parent anymore. If you are unable to lead a fulfilling life without a linear combination between a Strict Father and a Nuturing Parent, that is fine with me. The problem is that because you don't want to live without a Strict Father and a Nuturing Parent making descisions for you, you assume that I shouldn't. To make matters worse, you have the audacity to demand that I pay for the Strict Father preventing me from having consentual sexual intercourse with other adults. You also expect me to pay the Nuturing Parent for taking away my property, and giving it back to me, if I 'deserve' it. I think you're an adult too, fully capable of leading your own life, so you can stop posting such nonsense. |
HRB, When I read cheeseheads's post stating that "[I]what we need is a proper balance between the extremes of the Strict Father worldview of conservatives and the Nuturing Parent worldview of liberals..."[/I], I believe he's opposed to both extremes.
What is your argument with this? Are you saying that anarchism is the solution to our problems? |
[QUOTE=AES;163465]HRB, When I read cheeseheads's post stating that "[I]what we need is a proper balance between the extremes of the Strict Father worldview of conservatives and the Nuturing Parent worldview of liberals..."[/I], I believe he's opposed to both extremes.
What is your argument with this? Are you saying that anarchism is the solution to our problems?[/QUOTE] He isn't opposed to both extremes. He says he wants half of both. So basically he's satisfied the way things are, because Socialists & Conservatives happily take take turns in making life for the rest of us more difficult. Like every other good economist, I'm a minarchist. We're located in between the moderate classical liberals (like the Old Whig faction) and the anarcho-capitalists. The basic argument is that a government is required to provide the right amount of non-rivaled and non-excludable goods and a government is NOT required to provide rived or excludable goods that aren't otherwise available. A minarchist argues, that if a market fails to provide a private good, then it is a bad idea for the government to provide it. If it costs $10 to make good X, but you are only willing to pay $5 for X, then the government will have to tax you $5, and subsidize X, so you'd buy it. You end up paying $10 which you value at $5. There are no exceptions to this. The opposite to private goods, namely non-rivaled and non-excludable goods are also called public goods, which is confusing because most non-economists will think that a public library is a public good (it isn't). A typical example of a public good (in the economic sense) is the Police. It's the Police' job to catch bad guys and put them in prison. All the bad guys in prison cannot hurt you, so whether you are paying the police or not, they are doing you a service. But, if you can get this service without paying for it, why pay for it? If nobody pays there can be no Police, so that's where the government can & should step in by forcing its citizens to pay for the Police. Problems already start with the definition of 'bad guys'. Murderers, robbers, thieves etc. - we agree on those. But what when the police starts throwing people into prison, who are NOT a threat to you. Michael Phelps & everybody else who likes to get stoned does not threaten your life & liberty, so why should you pay people to have them locked up? The government is obviously providing too much police, because they're policing things that don't need policing, so they are already catching as many muderers, thieves and robbers as they can. If we need 50 more policemen to catch one person from stealing newspapers...we're being wateful. Public libraries, are NOT non-rivaled and non-excludable. If you have borrowed a book, someone else can't borrow it. If you shut the door you are outside and the books are inside. So, if you can't figure out how to run a library with a profit, the government shouldn't either. When you look at things as an economist, there are very few public goods at all, so there is a real chance of getting the amount of funds we set aside for them right. I wouldn't be surprised, if you could cover the cost of all public goods with a 3% universal sales tax to be collected monthly. This is much more efficient than taxing 300 million individuals once a year. At 3% the incentive to commit tax fraud is very low, so you would only need a fraction of what we are currently spending to prevent tax-evasion. |
[QUOTE=__HRB__;163474]He isn't opposed to both extremes. He says he wants half of both. So basically he's satisfied the way things are, because Socialists & Conservatives happily take take turns in making life for the rest of us more difficult.
Like every other good economist, I'm a minarchist. We're located in between the moderate classical liberals (like the Old Whig faction) and the anarcho-capitalists. The basic argument is that a government is required to provide the right amount of non-rivaled and non-excludable goods and a government is NOT required to provide rived or excludable goods that aren't otherwise available. A minarchist argues, that if a market fails to provide a private good, then it is a bad idea for the government to provide it. If it costs $10 to make good X, but you are only willing to pay $5 for X, then the government will have to tax you $5, and subsidize X, so you'd buy it. You end up paying $10 which you value at $5. There are no exceptions to this. The opposite to private goods, namely non-rivaled and non-excludable goods are also called public goods, which is confusing because most non-economists will think that a public library is a public good (it isn't). A typical example of a public good (in the economic sense) is the Police. It's the Police' job to catch bad guys and put them in prison. All the bad guys in prison cannot hurt you, so whether you are paying the police or not, they are doing you a service. But, if you can get this service without paying for it, why pay for it? If nobody pays there can be no Police, so that's where the government can & should step in by forcing its citizens to pay for the Police. Problems already start with the definition of 'bad guys'. Murderers, robbers, thieves etc. - we agree on those. But what when the police starts throwing people into prison, who are NOT a threat to you. Michael Phelps & everybody else who likes to get stoned does not threaten your life & liberty, so why should you pay people to have them locked up? The government is obviously providing too much police, because they're policing things that don't need policing, so they are already catching as many muderers, thieves and robbers as they can. If we need 50 more policemen to catch one person from stealing newspapers...we're being wateful. Public libraries, are NOT non-rivaled and non-excludable. If you have borrowed a book, someone else can't borrow it. If you shut the door you are outside and the books are inside. So, if you can't figure out how to run a library with a profit, the government shouldn't either. When you look at things as an economist, there are very few public goods at all, so there is a real chance of getting the amount of funds we set aside for them right. I wouldn't be surprised, if you could cover the cost of all public goods with a 3% universal sales tax to be collected monthly. This is much more efficient than taxing 300 million individuals once a year. At 3% the incentive to commit tax fraud is very low, so you would only need a fraction of what we are currently spending to prevent tax-evasion.[/QUOTE] OK, the state is a necessary evil. I agree. However, Cheesehead is not advocating socialism or conservatism. He suggests a balanced approach to governing. |
[QUOTE=AES;163478]However, Cheesehead is not advocating socialism or conservatism. He suggests a balanced approach to governing.[/QUOTE]
[B]My comment:[/B] [I]On an edge of a large hypercube There was one who thought: "Hyperdude!" "I have in the means - " "Of balancing extremes!" And lived content with hyperboob. [/I] |
[QUOTE=__HRB__;163474]Like every other good economist, I'm a minarchist. We're located in between the moderate classical liberals (like the Old Whig faction) and the anarcho-capitalists.
... A minarchist argues, that if a market fails to provide a private good, then it is a bad idea for the government to provide it. If it costs $10 to make good X, but you are only willing to pay $5 for X, then the government will have to tax you $5, and subsidize X, so you'd buy it. You end up paying $10 which you value at $5. There are no exceptions to this. ... A typical example of a public good (in the economic sense) is the Police. It's the Police' job to catch bad guys and put them in prison. All the bad guys in prison cannot hurt you, so whether you are paying the police or not, they are doing you a service. ...[/QUOTE]I will not comment on your statement that the only good economists share your opinions. Your arguments about goods can be applied to police as well. The fallacy of your line of argumentation lies in the fact that you swap between individual benefits and general benefits. I was quite surprised seeing the word socialism applied to some past USA politics. I fail to remember a period where there was no private ownership of the means of production for instance. Jacob |
[QUOTE=S485122;163484]I will not comment on your statement that the only good economists share your opinions.
[/QUOTE] Economics is still a young science, so you'll find many economists thinking they are able to make gold, like the predecessors of modern chemists. A good deal are outright frauds, but you don't seem to realize how many charlatans are selling you exactly the economic snake-oil you wish to hear. [QUOTE=S485122;163484]Your arguments about goods can be applied to police as well.[/QUOTE] I think you misunderstand (or I have not been clear about) the private/public qualifier. [url]http://en.wikipedia.org/wiki/Private_good[/url] [url]http://en.wikipedia.org/wiki/Public_good[/url] The articles aren't bad. If you're willing to spend some time learning what tools economists use to analyze and predict human behavior, you'll realize that economics can be very much a science. [QUOTE=S485122;163484]The fallacy of your line of argumentation lies in the fact that you swap between individual benefits and general benefits. [/QUOTE] It should be clearer now. [QUOTE=S485122;163484] I was quite surprised seeing the word socialism applied to some past USA politics. I fail to remember a period where there was no private ownership of the means of production for instance. [/QUOTE] You assume that ownership is the relevant criterion. But consider: If the government owns 25% of the stock and collects the dividend, or takes 25% of the profits by taxation: in both cases 25% of the resouces have been socialized. In 2005, at least 34% of the GDP was being socialized in the USA (it depends on how you count social security). IIRC, before the 'New Deal' it was 15%. Btw, Sweden 56% (and falling), Belgium 52% (and rising) President Obama will spend $1.000.000.000.000 of money that we're supposed to earn in the future. That is $3000 per capita or 8% of the GDP. Welcome to the Peoples Republic of America. |
[quote=__HRB__;163458]I don't need a Strict Father or a Nuturing Parent anymore. If you are unable to lead a fulfilling life without a linear combination between a Strict Father and a Nuturing Parent, that is fine with me.
The problem is that because you don't want to live without a Strict Father and a Nuturing Parent making descisions for you, you assume that I shouldn't.[/quote]Wow, you certainly seem to be judging worldviews by their titles. Do you think that the English language contains only words that are applicable to England, just because "English" is its name? Do you think "A Tale of Two Cities" was about the history of two urban centers? You seem to have no idea what those two worldviews are about. Do you know what a worldview is? [quote]To make matters worse, you have the audacity to demand that I pay for the Strict Father preventing me from having consentual sexual intercourse with other adults. You also expect me to pay the Nuturing Parent for taking away my property, and giving it back to me, if I 'deserve' it.[/quote]If you don't know what something is, why not just say so instead of going off on a riff that just confirms your ignorance anyway? Ignorance isn't a sin, but pretending that you know what something means when you really don't can lead to having folks laugh at you. |
[quote=davieddy;163402]You're a good one to ask for a summary:smile:[/quote]Why? I'm missing the reference.
[quote]Can't you get my links in the US?[/quote]I wrote the bit about dialup and broadband to hint that I still have only a slow, dialup connection, over which I'm reluctant to download any video without first knowing what it's about. It wasn't about not getting your links or even about suspicion; it was about cost-benefit analysis of sinking time into the download. |
[quote=__HRB__;163492]President Obama will spend $1.000.000.000.000 of money that we're supposed to earn in the future.[/quote]Did you ever criticize the past three Republican presidents for their $8,000,000,000,000 addition to our national debt?
|
[QUOTE=__HRB__;163492]The articles aren't bad. If you're willing to spend some time learning what tools economists use to analyze and predict human behavior, you'll realize that economics can be very much a science.
[/QUOTE]I wish I could find it in my history, I read an article in the last week that was very interesting. (Argh...I hate not being able to find stuff I've read but not saved a link to!) This article reported on a study that found that while you could have economic theory on one side to predict what people would do based on the economic value of things, on the other side you have, well, people. Based on the study, people make decisions based on the [B]perceived[/B] value of things, not solely on the [B]rational economic[/B] value of things. The upshot of which is that economists can predict, based on this policy or that policy, that people will behave one way, but people can behave unpredictably; in some cases, even acting against their best interests based on how they [I]percieve[/I] something. |
[QUOTE=schickel;163559]I wish I could find it in my history, I read an article in the last week that was very interesting. (Argh...I hate not being able to find stuff I've read but not saved a link to!) This article reported on a study that found that while you could have economic theory on one side to predict what people would do based on the economic value of things, on the other side you have, well, people.[/QUOTE]
The basic premise is that rational behavior is an advantage, and that evolutionary optimization leads to more and more rational behavior. So the asumption of rational behavior is asymptotically correct and the bias will disappear over time. All 'exact' science is essentially the study of good approximation. Pysicists routinely ignore relativistic and friction effects, when these are smaller than the error in measurement. [QUOTE=schickel;163559]Based on the study, people make decisions based on the [B]perceived[/B] value of things, not solely on the [B]rational economic[/B] value of things. The upshot of which is that economists can predict, based on this policy or that policy, that people will behave one way, but people can behave unpredictably; in some cases, even acting against their best interests based on how they [I]percieve[/I] something.[/QUOTE] Where did these people get funding? I could have gotten the same results in a one-liner: a significant fraction of people plays the state lottery. That we can't know what will happen when we do harebrained policy X is an argument against doing X, and an agrument for fiscal restraint. |
[QUOTE=cheesehead;163554]Did you ever criticize the past three Republican presidents for their $8,000,000,000,000 addition to our national debt?[/QUOTE]
I hereby *heavily* criticise the last three Rebublican presidents for $8,000,000,000,000 addition to our national debt. I wish people would stop arguing, that just because the previous Assholes-in-Chief put me $27.000,00 in debt, the current Asshole-in-Chief deserves to put me another $3.000,00 in debt, and I'm being unfair. |
[quote=__HRB__;163607]I hereby *heavily* criticise the last three Rebublican presidents for $8,000,000,000,000 addition to our national debt.[/quote]But did you notice their deficit spending while it was happening, or did you, like many, never bother to add it up as long as a Republican was in office? Did you post any deficit criticism publicly during previous administrations?
[quote]I wish people would stop arguing, that just because the previous Assholes-in-Chief put me $27.000,00 in debt, the current Asshole-in-Chief deserves to put me another $3.000,00 in debt,[/quote]Then you'll be pleased to notice that I'm not offering that argument. [quote]and I'm being unfair.[/quote]Well, that's what I'm trying to find out. You see, I just saw an ABC news report where some Republican senators were loudly complaining about piling up national debt that would have to be repaid by future generations. I don't recall having heard those, or any other Republican senators who were in office the past 8 years, making the same complaint with the same vehemence while the Bush administration was piling up $5 trillion in deficits. (When I was a Republican 40 years ago, the GOP stood for fiscal responsibility and balanced budgets. Now, it doesn't, and hasn't since 1980.) Since you seem to be critical of Obama about items other than deficit spending, I'm wondering whether you only discovered your aversion to federal deficits in the last couple of months or, if not, whether you decided to go public with your complaints in that regard only since Obama was elected. |
[quote=cheesehead;163615]But did you notice their deficit spending while it was happening, or did you, like many, never bother to add it up as long as a Republican was in office? Did you post any deficit criticism publicly during previous administrations?[/quote]
I joined here 12/2008. I stopped complaining in 2005 after the sonofaturd got reelected. Where would the point be? [quote=cheesehead;163615]Then you'll be pleased to notice that I'm not offering that argument.[/quote] Wonderful. So, what *is* your argument, that it's OK for the mo********** in charge to put everybody $3000 more in debt, to solve the problem of everybody being too much in debt? [quote=cheesehead;163615]You see, I just saw an ABC news report where some Republican senators were loudly complaining about piling up national debt that would have to be repaid by future generations. I don't recall having heard those, or any other Republican senators who were in office the past 8 years, making the same complaint with the same vehemence while the Bush administration was piling up $5 trillion in deficits. (When I was a Republican 40 years ago, the GOP stood for fiscal responsibility and balanced budgets. Now, it doesn't, and hasn't since 1980.)[/quote] Under what rock have you been living? [B]+++ Newsflash +++ Newsflash +++ Hypocrites discovered in the Senate! A team of scientist is on it way to document and study this unusual phenomenon. We now suspend Superbowl XLIV, so we can take you live to the US senate. +++ Newsflash +++ Newsflash +++ [/B] I'm convinced the only way Nixon was able to balance his budget, was through the "inflation tax" (google that term), and you have to go all the way back to Eisenhower until you find someone who did a comparatively good job. [quote=cheesehead;163615]Since you seem to be critical of Obama about items other than deficit spending, I'm wondering whether you only discovered your aversion to federal deficits in the last couple of months or, if not, whether you decided to go public with your complaints in that regard only since Obama was elected.[/quote] If complaining about the f***** a******* sending MORE troops to a country where we have no fucking business to be in the first place, makes me a White-Trash-Redneck-Conservative in your eyes, then so be it. Becomming an Obama fanboi, won't wash off the guilt you bear for helping Nixon get elected. [quote=Hillary Clinton, September 13, 2001:]"[B]Every nation has to either be with us, or against us[/B]. Those who harbor terrorists, or who finance them, are going to pay a price."[/quote] [quote=George "Dubyah" Bush, in an address to a joint session of Congress on September 20, 2001]"[B]Either you are with us, or you are with the terrorists.[/B]"[/quote] They all want to be Dark Lords. (Don't call Obama this, you racist!) [quote=Obi Wan Kenobi to Darth Vader] "Only a Sith deals in absolutes." [/quote] Q: The difference between Dianne Wilkerson and Ted Stevens? A: You tell me. |
[QUOTE=__HRB__;163628]
Becomming an Obama fanboi, won't wash off the guilt you bear for helping Nixon get elected. ...X...X They all want to be Dark Lords. (Don't call Obama this, you racist!) [/QUOTE] Which anarchist school of thought are you advocating again? [QUOTE=__HRB__;163628] Q: The difference between Dianne Wilkerson and Ted Stevens? A: You tell me. [/QUOTE] Dianne Wilkerson was not a US Senator. |
[QUOTE=AES;163631]Which anarchist school of thought are you advocating again?[/QUOTE]
None. In Europe I would call it [URL="http://en.wikipedia.org/wiki/Classical_liberalism"]liberalism[/URL], but here in the US I have to use the term [URL="http://en.wikipedia.org/wiki/Minarchism"]minarchism[/URL]. [QUOTE=AES;163631]Dianne Wilkerson was not a US Senator.[/QUOTE] That's true and I appologize for the crappy research. Her name is the first one Google offers for "senator arrested for corruption". The Democratic US-Senators are all honest; it's the Democratic Governors who are corrupt. I'm sure that this willl change within the next legislative period. The Republicans are more likely to limit themselves to the bare essentails (extra-marital affairs, nepotism) because they're on parole until the next election. At least, a Republican Congressman gets to [URL="http://en.wikipedia.org/wiki/Gary_Condit"]murder one of his interns[/URL] for free. Can't let a Democrat get away with murder and not be allowed to commit one too, right? A Republican Governor most outspoken against gambling, [URL="http://en.wikipedia.org/wiki/Elliot_spitzer"]will get caught playing poker[/URL]; but at least he will be using his own money, so I couldn't care less. In the mean-time, power-drunken Democratic US-Senators will get caught [URL="http://en.wikipedia.org/wiki/Ted_stevens"]accepting bribes[/URL] and [URL="http://en.wikipedia.org/wiki/Larry_Craig"]having sex with farm-animals in airport restrooms[/URL]. But nobody gives a damn, because we can't find a free spot to apply more [URL="http://en.wikipedia.org/wiki/Fentanyl"]Fentanyl[/URL] patches, and are too busy trying to locate a vein to inject 50cc of [URL="http://en.wikipedia.org/wiki/Carfentanil"]Carfentanil[/URL] with a sharpened turkey baster. |
[quote=__HRB__;163628]I joined here 12/2008. I stopped complaining in 2005 after the sonofaturd got reelected. Where would the point be?[/quote]I was simply wondering whether you were one of the hypocrites. I'll take your statement as an affirmation that you were complaining about the deficits run up by the Bush administration long before it ended, so my question is answered.
Had I seen your liberalism/minarchism answer, I would have ceased asking questions. [quote]Wonderful. So, what *is* your argument, that it's OK for the motherfucker in charge to put everybody $3000 more in debt, to solve the problem of everybody being too much in debt?[/quote]No, I've never argued that. As indicated above, I simply previously could not determine from what you'd posted whether you had suddenly become a deficit hawk only after Obama took office, and I had not yet seen your liberalism/minarchism answer, so I asked some questions in order to find out. I'm generally a fairly straightforward writer without sneaky purposes. If I had wanted to argue what you propose (that's it's fine-and-dandy for Obama to run up deficits), I'd have said so straight out. If you don't believe that, ask other long-time members. If you care enough to ask politely, I might even explain what _is_ my opinion about the stimulus/deficit/whatever. [quote]Under what rock have you been living? [B]+++ Newsflash +++ Newsflash +++ Hypocrites discovered in the Senate! [/B]< snip >[/quote]You seem to assume the worst about what I write. I was just giving a particular example to support my statement of why I was asking you those questions. There was no need for you to be sarcastic. [quote]you have to go all the way back to Eisenhower until you find someone who did a comparatively good job.[/quote]... which was during my formative years, so when I started my political thinking I had the idea that balanced budgets were the norm. [quote]If complaining about the fucking asshole sending MORE troops to a country where we have no fucking business to be in the first place, makes me a White-Trash-Redneck-Conservative in your eyes, then so be it.[/quote]There's no need for that reaction. I just wanted clarification of your stand on deficits. [quote]Becomming an Obama fanboi, won't wash off the guilt you bear for helping Nixon get elected.[/quote]A) As supported by my postings in another thread (about the run-up to the election), I've never been an Obama fanboy. I have been, and remain, cautious about the possibility that he will send our country's political pendulum too far left as it returns from the rightist position to which the Bush administration pushed it. B) As for Nixon: I was too young to vote in 1968. In 1972, as I've explained elsewhere, I was taken-in by some of the "dirty tricks" committed by the CREEP that summer. Once the Watergate hearings started, I acquired a better political sense. I don't feel [I]guilty[/I] about voting for Nixon in 1972; I was still politically naive then, and I was tricked by professionals. Fool me once -- shame on the GOP. I've never had misgivings about any of my later votes. |
[QUOTE=cheesehead;163643].[/QUOTE]
Peace, man. We were cool from the beginning. Since I can't buy you a beer, let's head over to the S.E.T.I. or Folding@Home forums and hijack a couple of threads. If we're in the mood, we can use Karl Rove tactics to attract new members to GIMPS by making real asses of ourselves in general and starting fights with everyone who said something positive about gimps in particular. |
[QUOTE]
The spin doctors are busy again today. Obama is not going to nationalize the banks. Unfortunately, the market is rapidly forcing his hand. I predict that at least 2 of the major banks will fail within 60 days because of plunging consumer confidence. [/QUOTE] It seems we have a WINNER! Citi is now asking good old Uncle Sam to take a 40% equity position. Citi's share price is sub $2 and all indications are that it will drop significantly today unless they can get a major stabilization deal worked out. Care to guess who will be next on the block? DarJones |
[QUOTE=Fusion_power;163684]It seems we have a WINNER! Citi is now asking good old Uncle Sam to take a 40% equity position. Citi's share price is sub $2 and all indications are that it will drop significantly today unless they can get a major stabilization deal worked out. Care to guess who will be next on the block?[/QUOTE]
Both Bank of America and Wells Fargo appear to be strong candidates ... with all the distress-sale mergers in the past year, there aren't that many humongo-banks left standing. As Nouriel Roubini said in an interview in [url=http://www.rgemonitor.com/roubini-monitor/255672/nationalize_the_banks]yesterday's WSJ[/url], [i]"You can't take two zombie banks, put them together, and make a strong bank. It's like having two drunks trying to keep each other standing." [/i] On to today's news roundup: ---------------------------------- [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a0XfqNIA7KA4&refer=news]U.S. Regulators Pledge More Money for Banks as Stress Tests Set to Begin[/url]: [i]U.S. financial regulators pledged to inject additional funds into the nation’s major banks to prevent their collapse and will this week begin examinations to determine if they have enough capital.[/i] [i]My Comment:[/i] If the banks were anything remotely well-capitalized, you wouldn`t have had to already throw hundreds of billions at them to keep them from collapsing, would you? The banks already had the most meaningful kind of stress test last year, and failed it dismally. Running some computer model - probably designed by the same kinds of folks who designed the arbitrage software that got the banks and hedge and hedge funds into such deep doo-doo to begin with, all while telling them that being leveraged 40-to-1 with toxic bad-mortgage-loan garbage was "manageable risk" - to assess solvency when the banks are already clearly insolvent even with massive government props, is an exercise in futility at best, and a dangerous overreliance on computer models to predict the unpredictable at worst. I keep saying it: Not one of these financial and policy whizzes appears to have learned a goddamned thing from the collapse of the LTCM hedge fund a decade ago, or from the bursting of the Japanese real estate bubble in the late 80s. And now the stakes are not just one overleveraged hedge fund, but an entire (also overleveraged) economy. And speaking of insolvent financial institutions... [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aNbr6ECVkOn4&refer=news]Janus Ratings Lowered to Junk by S&P Amid Stock-Market Rout; Shares Slide[/url]: [i]Janus Capital Group Inc.’s ratings, including its counterparty credit rating, were lowered to BB+, or junk, from BBB- by Standard & Poor’s Ratings Services.[/i] [i]My Comment:[/i] Anybody here have investments with Janus? It would seem that their in-house mythical [url=http://www.nationmaster.com/encyclopedia/Janus-(mythology)]two-faced deity[/url] has been spedning rather too much time looking sideways at its rivals (i.e. the chasing-yield game) left and right rather than forward and backward. [url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aGqIiR1PCrq8&refer=news]Geithner Bad Bank Alternative May Depend on Cut-Rate Loans to Hedge Funds[/url]: [i]Treasury Secretary Timothy Geithner’s financial-rescue plan may be doomed if he doesn’t offer low-cost loans to hedge funds and other investors to help them buy toxic assets weighing down bank balance sheets.[/i] [i]My Comment:[/i] Ooh, taxpayer-financed cut-rate loans to help hedge funds leverage up on toxic waste ... yeah, that`s a *really* good idea. Like his predecessor at Treasury, [strike]Paulson the Younger[/strike] Geithner appears to believe his key constituency is the Wall Street banksters and Hedge Fund Masters of the Universe. [url=http://www.bloomberg.com/apps/news?pid=20601085&sid=aGd5Xpy4TCgM&refer=europe]European Bank Bond Risk Soars to Record, Credit-Default Swap Prices Show[/url]: [i]The cost of protecting against a default on senior and subordinated bank debt soared to a record in Europe, credit-default swap prices showed.[/i] [i]My Comment:[/i] Several of the most-prominent members of the small coterie of economic analysts who have been consistently right about macroeconomic trends in the past several years - notably Nouriel Roubini, Ambrose Evans-Pritchard and Mike Shedlock - have been sounding the alarm bells the past several months about Eastern Europe, Russia and the Baltics, and Western European Banks` massive bad-loan exposure to same, and warning of an imminent "credit event" originating there. The amount of monetary exposure there [url=http://www.lewrockwell.com/north/north689.html]may even dwarf[/url] the bad-loan exposure of the U.S. banks, hard as that seems o believe. [url=http://www.bloomberg.com/apps/news?pid=20601085&sid=a18nxh0Mc10Y&refer=europe]Brown Says Depression When He Meant Recession as Approval Slips With Banks[/url]: [i]Responding to questions in Parliament on Feb. 4, U.K. Prime Minister Gordon Brown made the financial crisis sound worse than he intended. “We should agree as a world on a monetary and fiscal stimulus that will take the world out of depression,” he said, stumbling before the last word.[/i] [i]My Comment:[/i] I think Brown indeed meant "depression" but meant to *say* "recession". Mustn`t have the citizenry spooked by ugly reality, now ... must maintain comforting official delusion that "the problem is bad but manageable". |
I didn't know that I could get this P.O. ed. This is a quote from ewmayer's Cut-Rate loans to hedge funds link just above.
[QUOTE]“This is potentially a way of increasing liquidity, and if you could do that it may get you to a place where you can start making new securitizations,” which would allow increased lending, said Lee Cotton, an investor and former president of the New York-based Commercial Mortgage Securities Association. [/QUOTE] These jackasses don't seem to realize what got us in this mess to start with. They want the taxpayer to take all the risk and they get to take all the profit. Here is a quote from Larry Reid [url]http://news.yahoo.com/s/politico/20090223/pl_politico/19174[/url] [QUOTE]“It’s not nationalization, it’s protecting the taxpayers’ interests,” Reid (D-Nev.) told MSNBC’s Morning Joe program on Monday. .......... Reid on Monday morning argued that the federal government has been involved in private sector for decades – taking over large chunks of the railroad and the highway system when those industries got into massive financial trouble. “I think what we are doing in banking now at a time of distress is the right thing to do and we’re getting very close to stabilizing the banking industry," Reid told MSNBC.[/QUOTE] Talk about semantics! These people can turn a piece of half raw castrated bull meat into a sizzling hot juicy t-bone steak, Washington Style. DarJones |
[QUOTE=Fusion_power;163704]
Talk about semantics! These people can turn a piece of half raw castrated bull meat into a sizzling hot juicy t-bone steak, Washington Style. DarJones[/QUOTE] I thought it was well known: Sizzle sells better than Steak.//// |
A Fashion Bull in a Financial China Shop
1 Attachment(s)
[QUOTE=R.D. Silverman;163733]I thought it was well known: Sizzle sells better than Steak.////[/QUOTE]
And the MSM (mainstream financial media)'s appetite for being fed bull is insatiable. I forgot to post this when it first came out, thankfully I had saved the link - I found the "real bankers are far more dangerous, and don't need guns" angle wryly amusing: [url=http://www.time.com/time/arts/article/0,8599,1879148,00.html]Time.com Movie Review | The International: The Banker As Bad Guy[/url] [quote]Clive Owen, your standard-issue obsessed movie hero, fights for the length of [I]The International[/I] to bring down the rogue bank IBBC, which has committed financial and war crimes on a vast scale. Don't waste your time, or your life, says bank biggie Armin Mueller-Stahl. "The system guarantees IBBC's safety — because everyone is involved." This corrupt bank will be protected, in other words, by all the other corrupt banks. And regulators. And politicians. ... The challenge for The International — for any thriller that's waist-deep in cynicism — is to create a goal the hero can achieve, whether or not that makes any difference. In the movie world, Clive Owen can track, find and eliminate the bad guy. [u]In the real world, a banker like Skarssen is just one bad guy; and a million more just like him, in London, Geneva, Hong Kong and lower Manhattan, are panting to take his place. They all know that, these days, banks don't even have to steal to increase their wealth. They take a congressional slap on the wrist, then pocket trillions from the Treasury[/u].[/quote] ---------------------------------- Yves Smith over at [i]Naked Capitalism[/i] has a piece about the "complete joke" nature of the government-announced "stress test" of the big banks - I find the quote from the "unnamed official" which I underlined to be very telling: [url=http://www.nakedcapitalism.com/2009/02/now-its-official-stress-test-results.html]NakedCapitalism.com | Now It's Official: Stress Test Results Pre-Determined[/url] [quote]We have been skeptical that the pending Treasury stress tests on banks, designed to ascertain their state of health, were inadequately staffed and therefore could not do the job properly. Our big concerns were that they had too few bodies to test financial data versus underlying documentation adequately (usually done on a sampling basis) and they lacked the expertise (and perhaps the mandate) to vet risk models (which we all know have performed impeccably over the last two years. Is it a test if the results are pre-determined? Apparently Team Obama thinks so. From CNBC (hat tip reader Early Withdrawal): [i] Said one high-level official, “I think the market is missing that [u]the whole intent of this process is to show that the banks have enough capital for even worse outcomes than we currently envision[/u] and to show there’s a program in place to give banks access to that capital if they need it.”[/i][/quote] [i]My Comment:[/i] note, not "...to show [b]whether[/b] the banks have enough capital...", but "...to show [b]that[/b] the banks have enough capital." Am I reading too much into the statement, or did the "unnamed official" tip his hand? "Whether" certainly fits better with the rest of the sentence. As a followup to my note above about where Treasury Secretary Geithner`s loyalties lie, [i]The Big Picture[/i]'s Barry Ritholz has a post this morning titled [url=http://www.ritholtz.com/blog/2009/02/why-bankruptcy-for-autos-not-banks/]Why Bankruptcy For Autos But Not Banks?[/url] [quote]The news this morning would be amusing if it weren’t so sad. The Obama administration is undergoing a battle between its own good instincts with those of its Treasury Secretary. Away from Treasury, on the side of intelligence, new policies, a clean break from the Paulson/Bush plans — I believe during the campaign, it was called CHANGE — and inevitability, are prepackaged bankruptcies, clean balance sheets, and a fresh start. This is reflected in the Fed exploration of $40 billion in bankruptcy funding for GM. On the side of more of the dame, bad decision making, regulatory capture, worshiping sacred cows, and a hard-to-understand goal of saving the banks rather than the financial system, is the utterly absurd proposal to somehow spend 10X the market cap of Citigroup for a 40% stake in the apparently insolvent firm. This is an accounting maneuver, a convertible preferred that greatly dilutes the common shares, and adds no new capital. Put on paper, it allows the leverage to look less egregious. One can imagine an incredulous junior Treasury staffer — one who hasn’t been captured by the big banks, and is capable of basic arithmetic — saying the following: [i]“Explain this to me again: We put in many times the value of this company — we have already given them $45 billion dollars, and guaranteed almost $300 billion dollars worth of bad paper — and we get less than 50%? WTF? How the hell does THAT work? “ [/i] Its apparent that this sleight of hand doesn’t work to just about everyone except Tim Geithner (and a few others). At the same time, an industry that had nothing to do with the current crisis is on the fast track to a healthy pre-packaged bankruptcy. Moral Hazard aside, the different approaches reflect the relative importance of different sectors. Banks must be saved at all costs, but GM and Chrysler must go the bankruptcy route. The only explanation in treating the two industries so radically differently is an overt hostility to Unions on the part of many.[/quote] [i]My Comment:[/i] Actually, I think anti-union sentiment may be playing second fiddle to the well-established "United States Treasury ... A Wholly-Owned Subsidiary of Goldman Sachs Inc." effect. And I would be remiss to omit Mish`s [url=http://globaleconomicanalysis.blogspot.com/2009/02/purposeful-joint-lie-by-treasury-fed.html]commentary[/url] on the related (announced Feb 10th) Capital Assistance Program for the oh-so-well-capitalized banks: [quote][i]"This new capital will not cost anyone anything. It will be dispensed by magic fairies and recovered at a later date. We cannot share exactly how this magic works because under the rules of the magic ministry, we would be stripped of our magic hats and lose the rights to dispense magic if we did. Trust us. This is the proverbial free lunch that everyone says does not exist. However, like magic pixie dust, it does exist, it really does."[/i][/quote] ---------------------------------- [b]Why Financial-Panic when You /can Accessorize?[/b] With the next wave of bank nationalizations possibly just around the corner, I spent a few minutes poking around the "Collectibles > Historical Memorabilia > Banking & Insurance" section of eBay, and came across several items which you might find interesting. First off, we have this very spiffy [url=http://cgi.ebay.com/AIG-AMERICAN-INTERNATIONAL-GROUP-Wall-Clock_W0QQitemZ320342713908QQcmdZViewItemQQptZLH_DefaultDomain_0?hash=item320342713908&_trksid=p3286.c0.m14&_trkparms=72%3A1205%7C66%3A2%7C65%3A12%7C39%3A1%7C240%3A1318%7C301%3A1%7C293%3A1%7C294%3A50]quartz wall clock[/url] with its reassuring message. (AA Battery not included, but AAA rating from Standard & Poors is). And there is also a stylish, historic and only-a-tad-ironic [url=http://cgi.ebay.com/BEAR-STEARNS-ASSET-MANAGEMENT-CAP-ALL-BRAND-NEW_W0QQitemZ220323434532QQcmdZViewItemQQptZLH_DefaultDomain_0?hash=item220323434532&_trksid=p3286.c0.m14&_trkparms=72%3A1205|66%3A2|65%3A12|39%3A1|240%3A1318|301%3A1|293%3A1|294%3A50]baseball cap[/url]. As for me, I opted for a [url=]spiffy polo shirt[/url] - that should go well with the dark-blue Bear Stearns logo cap I bought last summer: |
Just heard two interesting ideas:
1) Proposal for government bailouts: Instead of handing out cash, issue vouchers to banks that can be redeemed only after they are used to grant new loans. The idea is to give the banks ability to make new loans without allowing the funds to be diverted to any other purpose (e.g., bonuses, mergers). (You know -- like the school vouchers beloved by conservatives, so it should be welcomed by them.) Also, put an expiration date on the vouchers -- so the banks have to use 'em or lose 'em. I don't know whether such vouchers help the problem of a bank's inadequate capitalization, but I don't pretend to understand all the details anyway. 2) There's a bank in a small Italian town that has three warehouses holding a few hundred thousand parmesan cheese wheels, each worth up to $3000 ([I]tractor-wheel-sized[/I] cheese wheels) -- collateral for its loan to a major cheese producer. The producer regularly inspects, and supervises rotation of, the stock. A bank guy (named Maxwell?) taps wheels with a silver hammer to check for the sound of voids or internal mold damage. The loans have a low interest rate because the cheeselateral is entirely under the bank's control. |
[QUOTE=cheesehead;163750]Just heard two interesting ideas:
1) Proposal for government bailouts: Instead of handing out cash, issue vouchers to banks that can be redeemed only after they are used to grant new loans. The idea is to give the banks ability to make new loans without allowing the funds to be diverted to any other purpose (e.g., bonuses, mergers). (You know -- like the school vouchers beloved by conservatives, so it should be welcomed by them.) Also, put an expiration date on the vouchers -- so the banks have to use 'em or lose 'em. I don't know whether such vouchers help the problem of a bank's inadequate capitalization, but I don't pretend to understand all the details anyway.[/QUOTE] This doesn't work because of 'moral hazzard' phenomena. For instance, the bank can give someone, who is deep in debt a loan at 50% interest per day. This someone then goes to a casino (i.e. invests into something with negative expected payoff with a large variance), places everything on black: if he wins, he and the bank make a nice profit. If he loses, no problem: he and the bank would have gone bankrupt anyway and the taxpayer is left with the loss. Funding investments that have negative payoffs, is a bad allocation of capital. Letting the bank fail is the only option that doesn't make things worse. For my thesis I studied the S&L crisis a lot, so I'm a bit of an expert on this. In my thesis I examined capping the interest rate for deposits by law, which eliminates competition between the banks, which would result in higher expected future profits and a lower incentive to gamble. There is a point where there is so much debt that regulation would force people to actually pay the bank interest for depositing money, which is of course nonsense. [QUOTE=cheesehead;163750] 2) There's a bank in a small Italian town that has three warehouses holding a few hundred thousand parmesan cheese wheels, each worth up to $3000 ([I]tractor-wheel-sized[/I] cheese wheels) -- collateral for its loan to a major cheese producer. The producer regularly inspects, and supervises rotation of, the stock. A bank guy (named Maxwell?) taps wheels with a silver hammer to check for the sound of voids or internal mold damage. The loans have a low interest rate because the cheeselateral is entirely under the bank's control.[/QUOTE] Adimit it, you only mentioned this because of your nick... Or are you suggesting regulation that the Citi-bank demand that people deposit Parmesan cheese before they get a mortgage? Let's also create regulation that lets banks accepts houses as collateral to finance the pruchase of Parmesan cheese, to finance a house, to finance cheese, to finance a house...problem solved? |
Cheesehead,
Gaming the system is a well entrenched American tradition. Consider the state lottery. Florida officials sold the lottery to their citizens by saying "Look how much more money we will raise for education!". At the time, the state was forking out several hundred million dollars per year for education from tax revenues. Fast forward a few years and now they have the state lottery and it is indeed bringing in hundreds of millions for education, but guess what, the state stopped using tax dollars for education. The end result is that education is getting about the same total dollars with the lottery that they were getting before the lottery. Now apply this scenario to your 'vouchers' that banks could use to make loans with. DarJones |
[QUOTE=__HRB__;163639]None.
In Europe I would call it [URL="http://en.wikipedia.org/wiki/Classical_liberalism"]liberalism[/URL], but here in the US I have to use the term [URL="http://en.wikipedia.org/wiki/Minarchism"]minarchism[/URL]. [/QUOTE] Thanks. Where has this model worked best, without evolving into something else? |
[quote=__HRB__;163758]This doesn't work because of 'moral hazzard' phenomena.[/quote][quote=Fusion_power;163767]Gaming the system is a well entrenched American tradition.
< snip > Now apply this scenario to your 'vouchers' that banks could use to make loans with.[/quote] I gave the readers of this thread credit for being able to figure out that there would be legal terms that would restrict voucher use to legitimate loans of the sort intended, such as mortgages. My bad. Have either of you ever actually seen any government vouchers? I have. The ones I saw had very specific restrictions and requirements printed right on them, even though they weren't about anything nearly as significant as a bank loan. [quote=__HRB__;163758]For instance, the bank can give someone, who is deep in debt a loan at 50% interest per day.[/quote]Why do you assume that vouchers would be so simplist... oh, never mind. [quote]This someone then goes to a casino (i.e. invests into something with negative expected payoff with a large variance), places everything on black:[/quote]... which could be done with any cash loan, vouchers or not, so what's your point? Ever heard of cash advances on a credit card? [quote]If he loses, no problem: he and the bank would have gone bankrupt anyway and the taxpayer is left with the loss.[/quote]But that's no worse than in the case of giving cash to the bank instead of vouchers -- [I]if[/I] the vouchers could be used for such loans ... but they wouldn't be because of the obvious (I thought, but what do I know?) legal restrictions. [quote]Funding investments that have negative payoffs, is a bad allocation of capital.[/quote]So, don't do it. - - Does anyone have a thoughtful, realistic criticism of the voucher idea? |
[QUOTE=cheesehead;163772]
Does anyone have a thoughtful, realistic criticism of the voucher idea?[/QUOTE] Scenario: I approach bank with can't miss need for a $1M loan. Withou vouchers, bank says: "can't miss - let's do it". In voucher world bank says: "Can't miss - let's do it - but we can use this new voucher money to do it and use the $1M we 'saved' for bonuses, gold toilets, whatever. In short: you can't write enough regulatory restrictions to make vouchers work (or at least work any better than the less paperwork option of just giving the banks cash) |
[quote=Prime95;163776]In short: you can't write enough regulatory restrictions to make vouchers work[/quote]I think you haven't tried hard enough with motivation to make it work instead of motivation to find fault.
|
[QUOTE=AES;163770]Thanks. Where has this model worked best, without evolving into something else?[/QUOTE]
That is an interesting subject. Just because Minarchism is a [URL="http://en.wikipedia.org/wiki/Pareto_efficiency"]pareto-optimal[/URL] solution, doesn't necessarily mean it's a stable strategy. Free markets work by wiping out the unfit, and become more and more efficient over time. Unfortunately, this means that given a rational choice between 'make it' or 'take it', it becomes more attractive to try to 'take it' and not make it: Companies will start to eliminate the competition by law and not by making better products. Individuals will chose to become unpoductive, e.g. by forming political majorities and re-distributing the weath of the more productive minorities by threat of force. Don't forget: we *are* a bunch of apes, fighting for the best spot in the troop. I believe that qualitativ the most accurate model is that of parasitoid-host interaction, because cultures tend to self-destruct, i.e. the parasitoid exterminates the host and perishes with him. Predator-prey models are stable, which would mean that we should see changes in productive/unproductive behavior pi/4 out of phase in with fairly regular amplitudes. |
[QUOTE=cheesehead;163772]I gave the readers of this thread credit for being able to figure out that there would be legal terms that would restrict voucher use to legitimate loans of the sort intended, such as mortgages. My bad.[/QUOTE]
[URL="http://en.wikipedia.org/wiki/Moral_hazard"]Moral Hazard[/URL] is a direct consequence of information asymmetry: the bank knows more about itself than the regulator. You cannot eliminate it by law, in the same way you cannot eliminate gravity by law. You can try to find an optimal point at which the cost of Moral Hazard is lower than the reward, but this is a highly quantitative problem. Your belief that 'we only got to put it in proper words' shows that this will definitely end up being a fiasco. The end is near. Repent your sins. |
[QUOTE=cheesehead;163778]I think you haven't tried hard enough with motivation to make it work instead of motivation to find fault.[/QUOTE]
You are an idealist :) Let me turn your statement around. You and 100 of your favorite Senators come up with the verbiage that an army of a million bankers, lawyers, and accountants won't find a hole in large enough to drive big truckloads of money through. Not to mention that most of the 100 Senators "helping" you write the verbiage will be getting "help" from the banking community. Put some meat on your voucher proposal before asking for us to shoot it down - especially if you respond to every critique with some vague "we could find some way to make that impossible". |
| All times are UTC. The time now is 01:35. |
Powered by vBulletin® Version 3.8.11
Copyright ©2000 - 2021, Jelsoft Enterprises Ltd.