|
[QUOTE=Christenson;261728]Or put it into social changes that make less energy use possible...including mass transport and getting freight and possibly even people on rails.[/QUOTE]
These policies should all be independent. I agree with Ernst oil should be taxed heavily to encourage less consumption. The proceeds go to the general treasury. A rational approach then forms a budget based on money available and national priorities. There is no reason to waste all this revenue on dubious alternative energy projects. In case no one has noticed, the U.S. has a rather large deficit that needs to be reduced. A pet peeve of mine is mindless insistence that tax revenues raised from some source must be spent in a certain way. |
Hey, yeah, a big piece of that deficit comes by and large from sending troops to the mideast to secure our oil supplies....and I know a bridge that needs repairs pretty badly, so I'm not too concerned if the money is earmarked, just think that funding Wall Street Tycoons is my *last* priority....
|
[QUOTE=Prime95;261695]A poor analogy. Excessive oil prices and oil price volatility has a pervasive [I]daily[/I] negative impact on the entire economy. Generally, stock market speculation only has a negative impact if and when the bubble bursts.[/quote]My point was to analogize your proposed solution, not to claim that the effects of speculation matched.
[quote]The common good suggests we adopt effective regulations in curbing this daily negative impact. I'm not saying this is the only possible solution, I am saying it would be effective.[/quote]... and I was pointing out the faults of the solution you had proposed. You hadn't proposed any other. [quote]There are already regulations in place to reduce stock market speculation, such as margin requirements, short sale rules, stopping trading in individual stocks and the entire market.[/quote]So, why didn't you simply propose the same sorts of things for commodities contracts? [quote]Legitimate business has many more options than you spell out.[/quote]I merely gave an [i]example[/i], for illustrating a point. I never claimed anything about other options. I was simply showing why _the solution you had proposed_ was obviously bad. [quote]Which is better for the country: a few businesses forced to take delivery of oil they no longer need and then must resell or a 30% speculation premium on the price of oil for everyone?[/quote]False dichotomy. Neither is necessary. There are many possibilities besides those. [quote]You have grossly misrepresented my beliefs by striking out the word "unnecessary".[/QUOTE]Okay. I apologize for that. :redface: |
[QUOTE=cheesehead;261758]I was simply showing why _the solution you had proposed_ was obviously bad.[/QUOTE]
We'll just have to disagree on that point. |
When composing this:
[QUOTE=cheesehead;261672](I'm rather surprised that this comes from someone who previously expressed distaste for [strike]unnecessary[/strike] government regulation. :-)[/QUOTE]I had in mind this, from a year-ago discussion that split off from the BP oil spill thread: [QUOTE=Prime95;218406]. . . Let's see. Thousands of criminal laws are on the books detailing what I can and can't do. I'm in compliance with every one of them and haven't filed one shred of government paperwork. Magic! . . .[/QUOTE]I later asked about tax returns and licenses for vehicles and driving privilege, but the thread ended. I left with the impression that you did not think you had any government paperwork in your life only because you weren't considering the paperwork involved in regulation of all the businesses with which you routinely directly deal. Grocers, restaurants, gas stations, department stores, banks, vehicle dealers -- each files government paperwork that is indirectly on your behalf, and many undergo inspections to ensure that they comply with health and safety laws. Your state weights and measures department periodically inspects and certifies the accuracy of grocers' scales and gas station pumps. Doctors, dentists and lawyers are licensed only when they show that their training satisfies state standards. Then there are all the businesses, such as manufacturers and distributors, with which you interact only through the intermediaries of retailers. For your own protection, there are regulations and paperwork with which those entities comply. Your "Magic!" gave me the impression that you think you (and, by extension, oil drillers) can do without paperwork and regulation ... just because you don't think about the ways in which others handle paperwork and regulation once- or twice-removed from your direct actions, but on your behalf. Yet you proposed severe restrictions on commodities contracts which were far beyond what would be necessary to accomplish your intended purpose (curbing unwarranted speculation). I was struck by the apparent contrast between those views, and that spurred my comment. It seemed to me that you were proposing that those second- and third-hand regulations, inspections and paperwork (as in the case of oil drillers) be abolished simply because you didn't stop to think what your life would be like without those regulations for ensuring that food establishments are clean, that measuring devices are accurate, that packaged foods are sanitary, that machines are reasonably safe to operate, that medicines are sanitary and effective, that oil spills do not occur more commonly and so on and so on ... Thus, my strike-through. What is your view of the regulations, inspections and paperwork that you never see directly in your everyday life, but which are conducted for reasons that very much affect your health, safety, and other qualities of life, which you never acknowledged in your arguments against drilling regulation, inspection and paperwork? How does that relate to your opinions about regulations, inspections and paperwork for oil drillers? (BTW, throughout this I am referring only to regulations, inspections and paperwork that we would both agree are reasonable for the purposes for which they are intended.) |
[QUOTE=cheesehead;261909]What is your view of the regulations, inspections and paperwork [/QUOTE]
There is a need for necessary regulations. We probably don't have a great deal of difference in what we view as necessary. Where we have some difference may be in the enforcement of regulations. Your view appears to be government regulators and inspections and paperwork are the only possible (or at least the preferred) enforcement mechanism. We've seen over and over again cases where this mechanism fails. The oil spill is one, the SEC and Fed failures Ernst has documented are another. More inspectors and more paperwork will not solve these problems. I contend we might get better enforcement by adding [B]hefty[/B] penalties for infractions. This will encourage businesses to self-police. It might allow us to get better enforcement with fewer inspectors. |
I don't think regulators being circumvented, and allowing themselves to be circumvented, is a new problem. It's not a function of the paperwork, it's a function of the incentives -- start with that revolving door between the regulators and the regulated, our FCC chairman being an excellent example.
In an situation where industry can always pay off an individual regulator with five times his government salary and a cushy job, and it being next to impossible to fire a civil servant, you need to do some serious thinking as to how to turn the incentives of the individuals involved around and in the direction of the public interest. The SEC got started after 1929 specifically because it was recognized that the great depression was in noone's (including the rich people's) interest, and nor was the boom/bust cycle which had characterised the stock market before that. For the environment, I'll start with requiring the top personnel in an industrial enterprise to live adjacent to the plant, and to raise their children there. I don't know what to do for the securities markets. Ideas? Analysis of the half-baked idea above? |
[QUOTE=Prime95;261927]Where we have some difference may be in the enforcement of regulations. Your view appears to be government regulators and inspections and paperwork are the only possible (or at least the preferred) enforcement mechanism.[/QUOTE]No, government regulators/inspectors/paperwork are not the only possible way, and not the preferred way if something better can be demonstrated.
But no one demonstrates a better way! What happens is that those not in favor of government regulation/inspection propose that we trust the goodness-of-heart and Christian morality of businessfolks, despite the long history showing that a certain fraction of business folks lack that goodness and/or fail to practice that morality. As long as those who object to regulations fail to set forth a likely-to-be-more-effective, realistic (e.g., not dependent on the goodness-of-heart and Christian morality of prospective regulees) alternative, I'll view their objections simply as evidence of their naivete. [quote]We've seen over and over again cases where this mechanism fails. The oil spill is one, the SEC and Fed failures Ernst has documented are another.[/quote]So, we analyze the weaknesses and take steps to correct them. We've seen [I]that[/I] over and over, too. Show us what's better, please -- and you don't do that by making faulty generalizations such as your next sentence: [quote]More inspectors and more paperwork will not solve these problems.[/quote]Actually, in some cases, more inspectors is [I]exactly[/I] what's required! Republicans tend to cut back and defund inspectors, which all too often is followed by problems that could have been headed off with adequate inspections. As for paperwork, it's not a matter of "more" _if_ what's really needed is taking seriously what's already there. BP filed "safety plans" for its deepwater drilling operations that consisted of mere lists of names and phone numbers of service companies that might have something to do with cleanups. If instead it had been required to document a realistic, [I]rehearsed[/I] plan -- [I]that[/I] would be taking it more seriously. [quote]I contend we might get better enforcement by adding [B]hefty[/B] penalties for infractions.[/quote]Like for the Exxon Valdez? Yep, the prospect of hefty penalties sure did prevent the captain from drinking, and prevent the ship from running aground, and prevent the oil from leaking. Sure did, didn't it? Um hmm. How many years did Exxon manage to drag that through the courts as they attempted to get the fines reduced? Promptness and certainty beats delayed severity for deterrence. Yours is not an alternative that has been historically shown to be most effective for preventing problems. I contend that we get better [I]prevention[/I] of problems by making folks go through more realistic steps for doing just that. Compare posting a diagram for where to go if the fire alarm sounds to actually holding fire drills witnessed by local firemen. Where I used to work, in a building holding hundreds of people, there were serious flaws in the fire evacuation plans and drills ... and in the inspection thereof. Because folks were told to group together in the front parking lots, by department, once they got out, when the fire alarms sounded everyone would head for the crowded front exits while three rear exit doors were completely unused. On one occasion, I opened one rear door and shouted at people 20 feet away who were mindlessly front-to-back shuffling their way _into the middle of the building_ simply because that was the way to get to the front doors. No one heeded me. They were putting perceived convenience ahead of best survival actions. If no actual fire drill had been held, the arrows on the plan that directed people out the back doors would've continued to be assumed to represent reality. If a real fire had occurred, too many people would've let their habits take them in the wrong direction. I went to HR and detailed my observations. They told me they had plans to make the next fire drills more realistic by using poster drawings of flames to block certain hallways. But when the next drill occurred, there was no sign of any such realism attempt. In that case, we had failures of both the plan _and_ the inspection. I was astonished to find that the fire department's witnesses stood only out in front of the building. A serious inspection would've sent someone to watch what happened at the back of the building, but this one didn't. That's not adequate inspection. I hope you'd not be in favor of considering that company's official fire evacuation plan adequate without any actual witnessed demonstration, or that the inspection was adequate without anyone watching what happened in back of the building. -- or that somehow, magically, some threat of hefty penalties in case of an actual fire would've spurred more effective prevention. History shows that almost all folks have to be required to go through preventive steps in order to put them into practice, and inspections are the only way to detect cases of noncompliance. In the Triangle Building fire, there were the required number of fire door exits -- but they were [U]locked[/U] by the owners. Regulation without inspection lets folks get away with that sort of thing, until there's a tragedy. On the Titanic, they never held a lifeboat drill. Now (I hear), ships always have them. Why wasn't that obviously necessary _before_ the tragedy? [quote]This will encourage businesses to self-police.[/quote]Too naive. Too many businessfolks lack enough conscience to do such self-policing. Show us how you'd handle those cases -- after you show us how to distinguish them from the others before a tragedy occurs. [quote]It might allow us to get better enforcement with fewer inspectors.[/quote]... if it would work in some ideal Neverneverland with no sociopaths. |
*GOOD* regulation sets forth requirements, which are then inspected for....and preferably not on paper alone; all the paper fire evacuation plans are worth no more than the bonfire they would make if they aren't in the minds of those that must evacuate the building. I would argue that the most important thing to do on hearing the fire alarm is to stop a moment and think about how to get out and what to do if the first exit is blocked.
I see this as a problem of incentives...and even with fire regulations, there are still periodic tragedies, including rather memorable ones involving gathering places for the members of the owning classes, as happened in the mid 1970s at a nightclub in Cincinnati (at southgate, DrH might remember), as happened to the Titanic, as I believe has happened to a famous hotel in Galveston. The regs were there on paper, but short-term incentives lead to violations, and the owners had lots of rather powerful friends capable of overruling anyone complaining about the emporer's new clothes. If you want me to believe that businesses will self-police, you need to demonstrate how the short-term incentives for businesses involved align with that policing, that is, (as was shown much more recently in a chicken plant fire with locked doors), how following the regulations for the greater good will not harm this quarter's profits. You can't fault the business people for maximising profits, or for failing to have sufficient imagination to imagine all of the consequences of their actions, something my Boss's boss admitted to the entire plant last week in respect to even the costs of opening up a new building 2 miles down the road....after all, they are human, and most of them aren't even as good as crank mathematicians. I really think that imagination is the hardest part. Imagine if X.... just ask any smoker, or any of us who aren't exercising this week like we should....or eating properly...or treating our workers properly...or lots of other "properlies" and "shoulds" that are difficult in practice. |
[QUOTE=Prime95;261927]There is a need for necessary regulations. We probably don't have a great deal of difference in what we view as necessary.
Where we have some difference may be in the enforcement of regulations. Your view appears to be government regulators and inspections and paperwork are the only possible (or at least the preferred) enforcement mechanism. We've seen over and over again cases where this mechanism fails. The oil spill is one, the SEC and Fed failures Ernst has documented are another. More inspectors and more paperwork will not solve these problems. I contend we might get better enforcement by adding [B]hefty[/B] penalties for infractions. This will encourage businesses to self-police. It might allow us to get better enforcement with fewer inspectors.[/QUOTE] Make the senior executives at the company CRIMINALLY responsible. Impose heft sentences. How to determine who is responsible? By fiat. Make everyone at the VP level and higher responsible (including the board). |
[QUOTE=cheesehead;261948]No, government regulators/inspectors/paperwork are not the only possible way, and not the preferred way if something better can be demonstrated.
But no one demonstrates a better way![/QUOTE]1) Note that there I'm discussing matters of health and safety. I'm not insisting that the same applies to other regulation contexts, such as commodity markets or public transportation. Perhaps, on further thought, I'd better understand George's opinions about speculation once I'd sufficiently contemplated the differences in context. 2) I apologize for not having taken my further comments about oil drilling back to the oil-drilling-related thread. [QUOTE=Prime95;261927]I contend we might get better enforcement by adding [B]hefty[/B] penalties for infractions. This will encourage businesses to self-police. It might allow us to get better enforcement with fewer inspectors.[/QUOTE]I could have more agreement about that in regard to different subject areas (e.g., commodity speculation vs. health/safety). When I was first astonished by your suggestion, it didn't occur to me to evaluate it differently in different contexts. |
[QUOTE=R.D. Silverman;261965]Make the senior executives at the company CRIMINALLY responsible.
Impose heft sentences. How to determine who is responsible? By fiat. Make everyone at the VP level and higher responsible (including the board).[/QUOTE] Do you think that would have worked for Arthur Anderson? Or Enron? Do you think that the suicide of TEPCO's president (now probable) will be enough for the Fukishima meltdown? Chrysler had to be nearly destroyed before Lee Iaccoca was able to exert enough leadership to turn it around. I've been around a number of non-functioning organizations...and someone recently told me that the dysfunctions are, in fact, inescapable unless I want to be a hermit. It has taken a decade and a half for the dysfunctions that were obvious to me, those around me, and many others to lead to major layoffs at my former employer, GE Fanuc. From this, I conclude that most companies (and governments, too) are full of screw-ups, leading to rather long feedback loops with major delays causing instability. I have also seen this at my present employer, who took, by a reasonable opinion, far too long to get rid of certain non-functioning, unproductive employees. One, in particular, had to screw up in front of the company president before finally being let go. He had previous letters from customers requesting he not be sent on their sites to work, but this was not enough. It simply takes too long for the world to catch up with the cheaters and the dysfunctional in both the companies and the agencies that supposedly monitor them to place our trust in government regulations. If you want things to work, you *must* align the short term incentives of the leaders with the greater good, which is usually a long-term proposition. I'd start with requiring company stock to be held for a minimum of a year, possibly a futures contract to be held for a minimum of 1/3 its life. They all complain about the day traders, but that's exactly what the pros do... |
[QUOTE=cheesehead;261948]Yours is not an alternative that has been historically shown to be most effective for preventing problems.[/QUOTE]
Au contraire. In old Japan, company leaders would commit suicide for gigantic failures such as the BP oil spill or the Lehman collapse. I'll wager monumental screw-ups were much less common there. You take a rather odd position that my ideas (or anyone else's) won't work because they aren't proven to work. Yet any idea you could come up with will suffer the same problem. Pray tell, how many more SEC regulators do we need to hire before we get just one significant prosecution? How many more oil rig inspectors were needed to avoid the BP oil spill? How many more pages are required in an oil rig safety plan? Prove that each of your answers to the above question are true. Obviously, you can't prove it. Does that mean any idea you propose is without merit??? Aside #1: Do not confuse my beliefs with Republican's. They seem to think that taking a regulation/inspection system that isn't working and reducing regulations and inspectors will somehow result in a great outcome. I agree with you that this idea is ludicrous. Obviously, you will not get a better result unless you do at least one of the following: 1) have more effective regulations, 2) more inspectors, 3) better incentives to keep inspectors on the ball, or 4) different incentives to make businesses comply. Aside #2: R.D. Silverman's idea is interesting. People decry the pay for senior executives. Making them criminally responsible would at least make their job risks commensurate with their pay. Aside #3: Thanks to your input, I'll modify my oil futures proposal to allow selling a contract to someone else who must take delivery when the contract ends. This should make futures contracts a better reflection of supply and demand. I am not against oil speculation. I'm sure Wall St. (or Las Vegas) wizards can create iShares or SPDRs or ETFs or options or whatever based on oil prices that allow speculators to gamble to their hearts content. Ugh: I composed the above before your latest post. [quote]Note that there I'm discussing matters of health and safety.[/quote] By and large, I think the government's current health and safety inspections are working rather well. |
[QUOTE=Prime95;261979][QUOTE=cheesehead;261948]Yours is not an alternative that has been historically shown to be most effective for preventing problems.[/QUOTE]Au contraire. In old Japan, company leaders would commit suicide for gigantic failures such as the BP oil spill or the Lehman collapse. I'll wager monumental screw-ups were much less common there.[/QUOTE]Let's look at the context for my statement.
I wrote "Yours is not an alternative that ..." in reference to what I had quoted above it in the post where I wrote that:[QUOTE=Prime95;261927]I contend we might get better enforcement by adding [B]hefty[/B] penalties for infractions.[/QUOTE]That is, I was responding to the specific suggestion for "[B]hefty[/B] penalties" (which I took to be financial: fines). Are you now saying that your "[B]hefty[/B] penalties" included suicides by Japanese company leaders? 1) Those suicides may have been cultural norms, but they were not imposed by the government, so I don't see how they're relevant to discussion of government regulation. 2) Your statement was about "enforcement", and that that led to deterrence. My concern was about prevention. Deterrence can lead to prevention, but I think a more effective approach than saying to someone only, "we'll punish you if you do the wrong thing" is to say, "here's how to do the right thing." Now, I don't mean to imply that regulations always perfectly specify the best approach to health and safety, but instead that regulations can incorporate best known practices and, if they're constructed properly, still allow for even better practices. The key is to specify goals of prevention and punish failures of those rather than insistence on strict adherence to specified practices that can be shown not to be optimal. [quote=Prime95]You take a rather odd position that my ideas (or anyone else's) won't work because they aren't proven to work.[/quote]Exaggeration. I said only that the particular idea you proposed ("[B]hefty[/B] penalties for infractions") had been shown not to work. I made no claim about your ideas in general. I made no claim about anyone else's ideas. Your inclusion of those exaggerations suggests that you can't refute my argument by sticking to only what I was talking about, but instead must try to slip in an unwarranted expansion of scope so that you can pretend my statement is false. (Note that I did not use the two-syllable "s" word in that response, though that rhetorical term would have been more concise.) [quote]Pray tell, how many more SEC regulators do we need to hire before we get just one significant prosecution?[/quote]Well, we could start by rehiring the ones the GOP Congress forced out before the succeeding rise in violations. Once it's shown that the same number of regulators we had in the past leads to lowering the rate of violations back to what it was before they were laid off, then we'll know it was effective. [quote]How many more oil rig inspectors were needed to avoid the BP oil spill?[/quote]Enough to carry out an effective inspection program, of course. What a silly question. [quote]How many more pages are required in an oil rig safety plan?[/quote]Perhaps all that's needed is to make the pages that are already there more meaningful by requiring entries that reflect a reality of preparation (a demonstrated plan) rather than mere listings of names and phone numbers. [quote]Prove that each of your answers to the above question are true. Obviously, you can't prove it.[/quote]It can't be proven that restoring the numbers of inspectors that were sufficient before their reduction will lead to a restoring of the previous safety record? Sorry, but it can -- restore the inspectors and watch what happens to the safety record. QED Obviously you aren't trying to make a fair objection to my idea, but are relying on exaggeration to pretend to criticize it. [quote]Does that mean any idea you propose is without merit???[/quote]What we've just shown is that your particular attempt to substitute exaggeration for fair refutation is without merit. [quote]Aside #1: Do not confuse my beliefs with Republican's.[/quote]I'm not doing that. I'm mentioning Republican events and ideas only when they seem sufficiently parallel to your suggestions for a comparison of their results to be relevant to this discussion. If you don't like such comparison, don't suggest parallels to Republican ideas, or at least make it clear how your ideas differ from theirs. [quote]They seem to think that taking a regulation/inspection system that isn't working and reducing regulations and inspectors will somehow result in a great outcome. I agree with you that this idea is ludicrous.[/quote]But you seem to suggest doing away with the regulation/inspection system entirely, to get a better result. That's not parallel???? [quote]Obviously, you will not get a better result unless you do at least one of the following: 1) have more effective regulations, 2) more inspectors, 3) better incentives to keep inspectors on the ball, or 4) different incentives to make businesses comply.[/quote]Okay, I agree with that. But it doesn't seem to be what you were proposing earlier where I objected. Why did you object when I proposed better regulations (of oil drilling) earlier? [quote]By and large, I think the government's current health and safety inspections are working rather well.[/quote]Then, perhaps I did not understand what you were proposing, which seemed incompatible with that sentiment. |
Cheesehead, as is often the case, an argument with you makes little forward progress and ends in mindless debates of minutiae. This will be my last post on the subject of regulations and enforcement so that this thread can start the new week covering the financial news of the day.
[QUOTE=cheesehead;262015]Are you now saying that your "[B]hefty[/B] penalties" included suicides by Japanese company leaders?[/quote] No, but now that you mention it, I'm not against the death penalty for particularly egregious crimes. I was stating that hefty penalties (and I can't imagine any more hefty than the cultural norm of suicide), [I]in general[/I], can led to effective deterrence. This does not seem to be too hard a concept to grasp. [quote]Deterrence can lead to prevention, but I think a more effective approach than saying to someone only, "we'll punish you if you do the wrong thing" is to say, "here's how to do the right thing." Now, I don't mean to imply that regulations always perfectly specify the best approach to health and safety, but instead that regulations can incorporate best known practices and, if they're constructed properly, still allow for even better practices. The key is to specify goals of prevention and punish failures of those rather than insistence on strict adherence to specified practices that can be shown not to be optimal.[/quote] Ah, so we do agree with "deterrence can lead to prevention". So that means you do agree that my proposal to add hefty penalties can lead to prevention? To summarize your beliefs, you think the pro-active "here's how things should be done" approach is best. I have no problems with that at all, nor do I have any disagreements with your comments on best practices and strict adherence to non-optimal or outdated practices. You then believe that inspections and paperwork and fines should be used to keep businesses in compliance. We seem to only be in disagreement as to how to fix cases where the inspections/paperwork/fines system isn't working. The SEC is in bed with Wall Street. You can hire 1000 times as many regulators and you will get a thousand fold increase in prosecutions, that's still zero. The oil rig inspectors were asleep on the job or in bed with the oil companies. Hiring more ineffective inspectors will not make a broken system work. If I'm not mistaken, your past answer has always been, well let's hire effective inspectors or make the current ones effective. That is a great idea in theory, but you've never addressed how to keep Big Oil and Big Finance's money from corrupting the whole enforcement process. [quote]Sorry, but it can [be proven] -- restore the inspectors and watch what happens to the safety record. QED[/quote] So, your ideas are provable because we can try them to see if they work. But my ideas are unprovable?? Why not try them and see if they work?? Dismissing ideas because they are not yet proven is somewhat lame. [quote]But you seem to suggest doing away with the regulation/inspection system entirely, to get a better result. That's not parallel????[/quote] No, it's not. Republicans are in favor of fewer regulations/inspections with nothing to replace it. I am in favor of increasing penalties significantly, which if they provide enough deterrence may allow us to reduce the inspections and paperwork kind of enforcement. [quote]Then, perhaps I did not understand what you were proposing, which seemed incompatible with that sentiment.[/QUOTE] Food inspections, restaurant inspections, the CDC, and numerous other examples are, to the best of my limited knowledge, working well. The regulations/inspections regime seems to fall down badly when dealing with industries with too much clout. The problem starts in Congress where the clout is used by industry to write their own regulations. The problem continues in the enforcement arena with revolving door jobs and other forms of corruption. I am under no illusion that my modest proposal for stiffer penalties alone will solve the problem. The SEC is unwilling to enforce existing rules on the big players (other than token slaps on the wrist). The companies/executives must have a reasonable fear of being caught. Take Goldman Sach's evil plan to take to take its worst toxic crap that it knew would fail and sell it to its own customers. What if the penalty were 100x damages enforceable both on the company and personally, and lawsuits would be fast-tracked, and could be filed by any hungry trial lawyer (not just the SEC) on behalf of the damaged party? Under such a scenario, GS may well have decided to eat the toxic crap rather than risk a hundred fold worse situation down the line. |
Gentlemen:
Any NEW proposals? The only one I can think of is much more public disclosure....that is, a stock/futures transaction is a PUBLIC contract, one which can be looked up by anyone who cares to, with both parties listed, both corporate and personal. And maybe all SEC inspections become PUBLIC. Or maybe we just need to become more like Vermont and reform the elections, so it is harder to buy Congress???? |
The False Promise of Natural Gas
Returning to the subject of dependence on foreign oil, many U.S. analysts and influential people with vested interests like oil magnate T. Boone Pickens are advocating natural gas as a kind of magic solution for much of America's energy needs. While it is undeniable that the U.S. has large domestic supplies of NatGas and that prices for the stuff are currently relatively low, I question whether this is truly a scalable energy supply that could really make a dent in our oil consumption on any kind of a long-term basis, without serious environmental impacts. On the latter front, consider this piece from the Dallas Morning News:
[URL="http://www.thenewstribune.com/2011/05/22/v-printerfriendly/1674951/movement-to-stop-natural-gas-drilling.html"]Movement to stop natural gas drilling gains ground[/URL] [quote]DALLAS – Until last spring, the Knoll family of Bartonville, Texas, was living the sort of life that most people would have gladly swapped them for. They owned a million-dollar home on a wooded two-acre lot in a neighborhood of million-dollar homes with swimming pools, perfect lawns and imported sedans in the driveways. Then something happened that the Knolls had never anticipated when they bought their immaculate corner of the American dream. Starting in April 2010, the land immediately behind their house was transformed, overnight, into a heavy industrial site. A seemingly endless stream of trucks rattled through the neighborhood just north of Flower Mound, carrying tons of steel and piping. As diesel fumes, chemical odors and dust wafted through the Knolls’ backyard, a towering, 14-story natural gas-drilling rig went up. After the well was drilled, more diesel-driven equipment was brought in to fracture or “frack” the well – pumping several million gallons of highly pressurized, chemical-laden water into it to help release the natural gas. The Knolls, whose house was roughly 600 feet from the Gulftex-operated rig – and a mere 800 feet away from a “smelly, noisy” compressor station – were horrified. They complained to state environmental officials of odors, contaminated water in their well, numbing headaches, nosebleeds, and even grasshoppers falling dead from the sky into their backyard. Their experience was not unique, and not unfamiliar to many people who have been living in North Texas for the past decade. The Knolls’ house is situated squarely over the Barnett Shale, a massive rock formation more than a mile below the surface that has spawned one of the biggest bonanzas in the history of the oil and natural gas business. Since 2003, 15,675 natural gas wells have been drilled and fracked all across North Texas – some 2,000 in Fort Worth alone, in the process helping to drive down the price of natural gas from roughly $13 per million cubic feet in 2005 to a steady $4 today. But the Barnett Shale boom was not – like all other Texas oil booms that went before it – simply about prodigious energy production. It also was about a collision, for the first time on this scale, between well-drilling and gas pipelines and dense urban and suburban settlement. Instead of such remote places as the Permian Basin in west-central Texas covering most of the Panhandle, drilling is now proliferating in Fort Worth, Flower Mound, Grapevine, Arlington and other cities. In the past 18 months, complaints by thousands of property owners in Texas and other shale-gas states have given rise to a powerful anti-drilling movement whose main issues involve water and air pollution and whose primary target is the technique of hydraulic fracturing. That, in turn, has spawned a larger debate about the trade-off between an obvious benefit – lots of cheap gas, which powers electric generators and provides feedstock for the petrochemical industry – and the comfort and welfare of Americans who live in proximity to its production. That debate has landed, for the first time, in Dallas, which has so far allowed no drilling at all. In 2007, the city began leasing public land for drilling. Dallas signed agreements with drillers worth some $33 million. For a while, it all seemed like the sort of win-win situation that has earned Fort Worth $138 million since 2004. Then the environmental climate changed, not just in Texas but in other shale gas states, such as Pennsylvania and New York. In response to lobbying by neighborhood groups, Dallas last year suspended issuing drilling permits to companies such as XTO Energy and Trinity East. Though only a slice of the city – its far western section – overlies the Barnett Shale, there is still the potential for hundreds of wells to be drilled in proximity to neighborhoods. This month Dallas began soliciting applications for a task force whose goal will be to rewrite the city’s drilling ordinances. By suspending natural gas drilling, Dallas has done what a growing list of other cities and states, mostly in the huge Marcellus Shale that underlies New York, Pennsylvania and Maryland, have done within the past 18 months. In November, the state of New York placed an official moratorium on most gas drilling. Maryland has issued no new drilling permits since 2009. Pittsburgh and Philadelphia have banned the practice, as have several smaller towns in Pennsylvania. In the Barnett Shale, the movement is finally starting to take hold, too. Both Bartonville – where the Knolls live – and Southlake have suspended issuing drilling permits. Why, after drilling so many shale-gas wells, is everyone suddenly so spooked by natural gas drilling? The simple answer is that in the past two years there have been a series of highly publicized spills and well contaminations around natural gas drilling operations. These in turn have led to both academic and congressional studies of the practice of hydraulic fracturing that have received wide attention in the press. Last year the Oscar-nominated documentary “Gasland,” which purported to be an exposé of fracking, showed residents of a Colorado shale-gas town lighting their drinking water on fire. Though the oil and natural gas industry strenuously denied any connection between fracking and such contaminations, “Gasland” became a rallying point for the anti-drilling movement. Fracking involves pumping millions of gallons of water, sand and chemicals (many of them hazardous to human health) under extremely high pressure into shale rock between 6,500 and 8,500 feet below the surface (in the Barnett), creating fissures in the shale to allow the gas to escape. Each well uses up to 2 million gallons of this chemical slurry. Gas wells also employ the technique of horizontal drilling, by which operators can drill up to a mile away from the drill site. Most of that chemical soup returns to the surface, where it is put in pits or stored in tanks until it can be hauled away. In Texas, fracking fluids are disposed of underground in deep “injection” wells. Critics charge that these fluids can migrate under high pressure and pollute aquifers. The industry argues that because fracking occurs at such extreme depths – in general a mile or more below the water table – there is no way that the chemicals can enter the water table, which lies a few hundred feet underground. Indeed, no fracking fluids have ever been detected in aquifers and wells, though a surface spill in April on a Chesapeake drilling site near Canton, Pa., spewed thousands of gallons of fracking water onto the ground, some of which reached a creek. [U] But the main public relations problems for the natural gas industry actually involve the gas itself, which flows strongly – invisible and odorless – up the well bore after the fluids are removed, and the air pollution that accompanies the drilling process. Here, too, the industry has denied that there is any way for methane gas to contaminate water wells.[/U][/quote][I]My comment:[/I] The [URL="http://www.naturalgas.org/environment/naturalgas.asp"]common argument by its advocates[/URL] that NatGas (mostly methane, which combusts stoiciometrically as CH4 + 2 O2 --> CO2 + 2 H2O) has less global-warming potential than oil and coal is interesting, in that it seems to only consider fuel that is combusted. Indeed, with perfect combustion, NatGas emits less CO2 per unit of heat produced than oil and coal. But given the immense greenhouse potential of methane, it takes methane leakage of less than 1% to negate the above greenhouse-potential advantage. ----------------------------- Couldn't resist appending a lighter note about "interesting things happening in Texas": [URL="http://www.nytimes.com/2011/05/22/world/europe/22russia.html?src=me&ref=world"]Texas Blogger’s ‘Man Crush’ on Putin Leads to Lengthy Heart to Heart[/URL] |
[QUOTE=ewmayer;262044]
<snip> Starting in April 2010, the land immediately behind their house was transformed, overnight, into a heavy industrial site. A seemingly endless stream of trucks rattled through the neighborhood just north of Flower Mound, carrying tons of steel and piping. As diesel fumes, chemical odors and dust wafted through the Knolls’ backyard, a towering, 14-story natural gas-drilling rig went up. After the well was drilled, more diesel-driven equipment was brought in to fracture or “frack” the well – pumping several million gallons of highly pressurized, chemical-laden water into it to help release the natural gas. The Knolls, whose house was roughly 600 feet from the Gulftex-operated rig – and a mere 800 feet away from a “smelly, noisy” compressor station – were horrified. They complained to state environmental officials of odors, contaminated water in their well, numbing headaches, nosebleeds, and even grasshoppers falling dead from the sky into their backyard. [/QUOTE] Didn't the town/city in which they lived have zoning laws? My town certainly does. If they were knowlingly living inside an industrial zone, then they have nothing to complain about. If they were living in a residential zone, then they have a valid legal claim against this nuisance. |
The NYT has an interesting piece on one of the ways in which high commodities prices are interfering with China Inc`s "double-digit economic growth 4ever" plans. The irony of course being that one of the main drivers of high prices - the others being deliberately weakened currencies and rampant market speculation - is none other than China continuing to gobble up commodities, in many cases to fulfill growth targets of its central planners rather than to meet any legitimate market needs. That drives prices higher until they get so high that they *do* actually start to crimp legitimate needs, including those of the many millions of rural Chinese who were induced to "modernize" and buy lots of energy-intensive appliances by generous "cash for fridges" subsidies from Beijing in recent years. I found the "high price of coal" angle here especially interesting because China has massive domestic coal reserves and has few qualms about exploiting those as fast as possible, environmental concerns be damned:
[url=http://www.nytimes.com/2011/05/25/business/energy-environment/25coal.html?ref=world]China’s Utilities Cut Energy Production, Defying Beijing[/url]: [i]YIYANG, China — It is a power struggle that is causing a power shortage — one that has begun to slow China’s mighty economic growth engine.[/i] [quote]Balking at the high price of coal that fuels much of China’s electricity grid, the nation’s state-owned utility companies are defying government economic planners by deliberately holding back the amount of electricity they produce. The power companies say they face financial ruin if the government continues to tightly limit the prices they can charge customers, even as strong demand is sending coal prices to record levels. The chairwoman of one giant utility, China Power International, recently warned that one-fifth of China’s 436 coal-fired power plants could face bankruptcy if the utilities cannot raise rates. The utilities’ go-slow tactics include curtailing the planned expansion and construction of power plants, and running plants for fewer hours a day. And in a notable act of passive defiance, the power companies have scheduled an unusually large number of plants to close for maintenance this summer — right when air-conditioning season will reach its peak. ... The official Xinhua news agency reported late Monday that the country’s main electricity distribution company, the State Grid, had warned that power shortages this year could be worse than in 2004, when China had its worst blackouts in decades. That year, the problem involved railroad bottlenecks in getting coal to power plants — an issue largely resolved with the subsequent investments in more rail lines. This time, the impasse between government and industry is not the only cause of China’s electricity shortages. Surging electricity demand is also a factor. China’s 700 million rural residents have been on a two-year buying spree of electric devices, purchasing hundreds of millions of air-conditioners and other energy-hungry appliances with government subsidies aimed at narrowing the gap in living standards between cities and rural areas. In a little-noticed milestone, the latest data from Beijing and Washington shows that China passed the United States last year as the world’s largest consumer of electricity. Since March, responding to the power shortages, government officials in six provinces have begun rationing electricity, including here in Hunan province. At least five more provinces are preparing to do so, according to official reports. In Yiyang, a town of 360,000 in south-central China, electricity shortages are so severe this spring that many homes and businesses receive power only one day in three. Even gasoline stations in this region are silent more days than not, because the pumps lack electricity. Meanwhile, blackouts are starting to slow the nation’s torrid growth of energy-intensive industries like steel, cement and chemicals. Unlike garment makers and other small manufacturers, the big factories cannot easily switch to backyard diesel generators. [/quote] [i]My Comment:[/i] Mish has a review article about similar phenomena around the globe here: [url=http://globaleconomicanalysis.blogspot.com/2011/05/energy-shortages-spreading-rationing-in.html]Energy Shortages Spreading: Rationing in China, Pakistan, Venezuela, Japan, Argentina; China Resorts to Punitive Prices to Curb Demand[/url] |
[QUOTE=ewmayer;262194][I]My Comment:[/I] Mish has a review article about similar phenomena around the globe here:
[URL="http://globaleconomicanalysis.blogspot.com/2011/05/energy-shortages-spreading-rationing-in.html"]Energy Shortages Spreading: Rationing in China, Pakistan, Venezuela, Japan, Argentina; China Resorts to Punitive Prices to Curb Demand[/URL][/QUOTE]One way to cope with rising prices of coal and other fuels is to construct power generators that don't require fuel for operation, but instead harvest naturally-occurring non-fossil sources of energy (solar, wind, tidal, geothermal). :-) Mish's final paragraph: [quote]Long-term, those who assume the Chinese economy can grow at 10 percent a year for another decade are in Fantasyland. Energy constraints will not permit it.[/quote]Psst, Mish -- it's not actually energy constraints in general (there's oodles of solar energy available); it's constraints on using fossil-fuel energy in particular. Why no mention of non-fossil-fuel energy-harvesting? China's doing more on that than the US is. Perhaps China can't grow its economy at 10 percent annually because their fossil-fuel plants have financial troubles, but they could grow it at a substantial rate if they'd been more aggressive about constructing renewable energy harvesters instead of those coal plants. What if they start constructing renewable energy harvesters faster than they have so far? |
As a builder using power electronics, that is, the kinds of transistors needed to operate small- and medium- scale energy harvesters efficiently, 1) the devices aren't cheap, $50 to $100 for a 400A transistor/IGBT 2) You have to know what you are doing to design with them (otherwise they turn into smoke bombs), and 3) There's a little bit of a shortage of those things at the moment.
But stay tuned, the prices of solar cells are coming down, with the target at about $1 per peak watt, same as utility power, the current level is about $2 per peak watt. Gets very attractive if you want to run your petrol station 5 days out of 7, the main issue being how to store some of the energy and recover it effectively. |
The cost vs price issue with non-fossil energy sources limits deployment. When you are forced to sell electricity at roughly 4 cents per kilowatt, it is not economically feasible to develop alternative energy sources. Just the interest on a major power project would exceed the potential income on anything less than 30 year time scales.
There is also a consideration that a major input (coal) is on a floating - and rising - price scale where the output (electricity) is at a fixed rate. Simple math says that is a recipe for bankruptcy. DarJones |
[QUOTE=Fusion_power;262332]The cost vs price issue with non-fossil energy sources limits deployment. When you are forced to sell electricity at roughly 4 cents per kilowatt, it is not economically feasible to develop alternative energy sources. Just the interest on a major power project would exceed the potential income on anything less than 30 year time scales.
There is also a consideration that a major input (coal) is on a floating - and rising - price scale where the output (electricity) is at a fixed rate. Simple math says that is a recipe for bankruptcy. DarJones[/QUOTE] There is something important to keep in mind here, though: the *value* of electricity far exceeds its cost. Same for petrol to operate transportation, notice that we drive almost as much with $4 per gallon gas as $3 per gallon. Solar cell prices *are* coming down, not quite to the point where lots of roofs will have them, but getting close. The practicality of using the family car as a generator is quite evident with hybrid vehicles, too, and one vision for 30 years in the future is that poor people will get home and plug the house into the car for electricity at night. This would be attractive for those electricity-starved chinese petrol station owners right now. It would work for the same reasons prepaid phone cards do...the purchaser is afforded control over costs, when the gasoline is gone, service is cut off, without increasing the difficulty of getting further service. |
Courtesy of ZeroHedge, Phil of [i]Phil`s Stock World[/i] rants about oil-price manipulation and the rampant speculation going on oil futures:
[url=http://www.zerohedge.com/article/thrill-ride-thursday-fake-fake-fake]Thrill-Ride Thursday - Fake, Fake, Fake[/url] [quote]Even as I write this, I just put up a trade idea in Member Chat to short oil futures at the $101.45 line with a stop if they break over $101.50. As I said in yesterday's post - if the manipulators want to pretend they want to buy barrels for $101.45, we are very happy to agree to sell them for that price because WE KNOW THEY ARE LYING! How do we know, because last month, the June NYMEX contract finished with 20,000 contracts (20M barrels) open for delivery and that makes sense because Cushing, OK, where the barrels are delivered, can only handle about 40M barrels and they are pretty full. Oil finished out that contract down near $96 a barrel. How did they get it back to $101.50 in a week (the pre-holiday week, where that $5 a barrel translates to $2 a tank from every driver in America)? By PRETENDING that they are interest in buying - get this - 406 MILLION barrels for July delivery: [table snipped] Aside from the fact that it is simply not physically possible for 400M, or even 40M barrels of oil to actually be delivered to Cushing, I can tell you FOR A FACT that over 90% of those contracts will not only be cancelled before the expiration date in late June but that they will then be rolled over to August, where the CRIMINALS (alleged by the CTFC) at the NYMEX will then FAKE demand for another 400M barrels of oil. That is TEN (10) TIMES the actual demand. Do you think that affects prices? Of course it does, it's a [url=http://www.philstockworld.com/2011/05/19/thursday-thought-dont-tax-oil-companies-nationalize-them/]$2.5 TRILLION Dollar Global Oil Scam[/url] and shame on you if you read this and just think someone else should do something about it. [url=http://www.contactingthecongress.org/]WRITE TO CONGRESS[/url] - STOP THIS CRIME!!! [/quote] Chris Martenson has a nice piece about "economic prosperity dependent on exponential credit growth" - here is a snip, I linked to the chart which was inlined in the actual piece: [url=http://www.chrismartenson.com/blog/why-growth-dead/57764]Why Growth Is Dead[/url]: [i]The end of the second round of quantitative easing (QE II) is going to be a complete disaster for the paper markets -- specifically commodities, stocks, and then finally bonds, in that order, with losses of 20% to 50% by the end of October.[/i] [quote]While money printing can so some wondrous things in the short term - (Hey, give me $2 trillion to spend and I'll throw a nice party, too!) - it cannot fix the predicament of fundamental insolvency. The United States has lived beyond its means for a couple of decades and promised itself a future that it forgot to adequately fund. The choice that remains is between accepting an unpleasant but relatively steady period of austerity leading to a new lower standard of living -- and a final catastrophe for the dollar. The former is akin to walking down around the side of a cliff, and the latter is jumping off. [b] Too Little Debt! (or, One Chart That Explains Everything) [/b] If I were to be given just one chart, by which I had to explain everything about why Bernanke's printed efforts have so far failed to really cure anything and why I am pessimistic that further efforts will fall short, it [url=http://www.chrismartenson.com/files/u132/Credit_MArket_Doublings_5-11-2011_6-55-45_AM.jpg]is this one[/url] There's a lot going on in this deceptively simple chart so let's take it one step at a time. First, "Total Credit Market Debt" covers everything - financial sector debt, government debt (fed, state, local), household debt, and corporate debt - and is represented by the bold red line (data from the Federal Reserve). Next, if we start in January 1970 and ask the question, "How long before that debt doubled and then doubled again?" we find that debt has doubled five times in four decades (blue triangles). Then if we perform an exponential curve fit (blue line), we find a nearly perfect fit with an R2 of 0.99 when we round up. That means that debt has been growing in a nearly perfect exponential fashion through the 1970's, the 1980's, the 1990's and the 2000's. In order for the 2010 decade to mirror, match, or in any way resemble the prior four decades, credit market debt will need to double again from $52 trillion to $104 trillion. Finally, note that the most serious departure between the idealized exponential curve fit and the data occurred beginning in 2008 -- and it has not yet even remotely begun to return to its former trajectory. [b] This explains everything. [/b] It explains why Bernanke's $2 trillion has not created a spectacular party in anything other than a few select areas (banking, corporate profits) which were positioned to directly benefit from the money. It explains why things don't feel right, or the same, and why most people are still feeling quite queasy about the state of the economy. It explains why the massive disconnect between government pensions and promises, all developed and doled out during the prior four decades, cannot be met by current budget realities. Our entire system of money, and by extension our sense of entitlement and expectations of future growth, were formed in response to and are utterly dependent on exponential credit growth. Of course, as you know, money is loaned into existence and is therefore really just the other side of the credit coin. This is why Bernanke can print a few trillion and not really accomplish all that much. It's because the main engine of growth is expecting, requiring, and otherwise dependent on credit doubling over the next decade. To put that into perspective, a doubling will take us from $52 to $104 trillion, requiring close to $5 trillion in new credit creation during each year of that decade. Nearly three years have passed without any appreciable increase in total credit market debt, which puts us roughly $15 trillion behind the curve. What will happen when credit cannot grow exponentially? We already have our answer, because that's been the reality for the past three years. Debts cannot be serviced, the weaker and more highly leveraged participants get clobbered first (Lehman, Greece, Las Vegas housing, etc.) and the dominoes topple from the outside in towards the center. Money is piled on, but traction is weak. What begins as a temporary program of providing liquidity becomes a permanent program of printing money, which the system becomes dependent on in order to even function.[/quote] |
NYT financial columnist Joe Nocera has an Op-Ed today about the gulf in business models and incentive practices separating the TBTF banks from their smaller regional counterparts:
[URL="http://www.nytimes.com/2011/05/31/opinion/31nocera.html?ref=opinion"]The Good Banker[/URL]: [I]Not long ago, as I was leaving a business lunch, my luncheon companion handed me a thin manila envelope. He didn’t tell me what was in it or why he had given it to me, but as soon as I opened it up, I immediately understood.[/I] [quote]It contained a copy of the 2010 annual report to shareholders by a bank executive I’d never met: Robert G. Wilmers. For nearly 30 years, Wilmers has run the M&T Bank, based in Buffalo. When he took it over, M&T had $2 billion in assets; today, its assets exceed $68 billion, and it’s one of the most highly regarded regional bank holding companies. It has also been one of the best performing stocks in the Standard & Poor’s 500-stock index; indeed, M&T was one of only two banks in the S.& P. 500 that didn’t cut its dividend during the financial crisis. Wilmers’s report, however, was less about the company’s numbers than about the dismal state of his beloved profession. Wilmers, it turns out, is that rarest of birds: a banker willing to tell harsh truths about banking. That, for instance, much of the money the big banks earn comes from trading profits “rather than the prudent extension of credit that furthers commerce.” That derivatives had helped bring about the crisis and needed to be regulated. That bank executives were wildly overpaid. That the biggest banks — the Too Big to Fail Banks — were operating, as he put it, an “unsafe business model.” My first thought upon finishing the report was: I need to meet this guy. So, a few weeks ago, I did. In person, Wilmers does not immediately strike one as a rabble-rouser. At 77, he is soft-spoken, a bit reticent, and almost excessively polite. “I personally believe that there isn’t a more honorable profession than the banking industry,” he began. “Most bankers are very involved in their communities, and they can stand up and be counted. I saw a poll recently,” he continued, “that showed we are now considered the third worst profession. That bothers me.” On the other hand, it didn’t exactly surprise him. In the run-up to the financial crisis, the giant national banks — which he viewed as a distinct species from the typical American bank — had done things that deserved condemnation. And, he added, “They are still doing things that I don’t think are very good.” [B] Such as? “It has become a virtual casino,” he replied. “To me, banks exist for people to keep their liquid income, and also to finance trade and commerce.” Yet the six largest holding companies, which made a combined $75 billion last year, had $56 billion in trading revenues. “If you assume, as I do, that trading revenues go straight to the bottom line, that means that trading, not lending, is how they make most of their money,” he said. [/B] This was a problem for several reasons. First, it meant that banks were taking excessive risks that were never really envisioned when the government began insuring deposits — and became, in effect, the backstop for the banking industry. Second, bank C.E.O.’s were being compensated in no small part on their trading profits — which gave them every incentive to keep taking those excessive risks. Indeed, in 2007, the chief executives of the Too Big to Fail Banks made, on average, $26 million, according to Wilmers — more than double the compensation of the top nonbank Fortune 500 executives. (Wilmers made around $2 million last year.) Finally — and this is what particularly galled him — trading derivatives and other securities really had nothing to do with the underlying purpose of banking. He told me that he thought the Glass-Steagall Act — the Depression-era law that separated commercial and investment banks — should never have been abolished and that derivates need to be brought under government control. “It doesn’t need to be studied for two years,” he said. “I would put derivative trading in a subsidiary and tax it at a higher rate. If they fail, they fail.” As Wilmers continued on in this vein, I found myself nodding in agreement. I also couldn’t help thinking back on remarks I’d heard Jamie Dimon give at a recent Chamber of Commerce event. Dimon, who made more than $20 million last year at JPMorgan Chase, is widely viewed as the best of the big bank chief executives. But he’s also become the most vocal defender of the status quo. “To people who say the system would be safer with smaller banks doing traditional banking, well, the system would be safer if we also went back to horse and buggies,” he told the Chamber audience. “That is a quaint notion that won’t work in the real world.” At the M&T annual meeting earlier this year, Wilmers told the company’s shareholders that the bank’s mission was to “find ways to continue to attract deposits, make sound loans and grow in accordance with our historic credit quality standards.” How quaint, indeed. And how refreshing. [/quote] |
News today that moody's lowered the debt rating for Greece effectively to the status of Dead Cat.
[url]http://www.bbc.co.uk/news/business-13625084[/url] Now we all know that dead cat's stay dead. [QUOTE]The new rating means Greece is 50% likely to default on or restructure its debts in the next five years, according to Moody's methodology. Meanwhile, Athens is completing the negotiations for drawing down the fifth tranche of its 110bn euro bail-out from the EU and International Monetary Fund. Last week, the chairman of the group of eurozone finance ministers, Jean-Claude Juncker, said that the IMF may not approve the latest cash advance unless Greece could convince them it will remain solvent over the next 12 months.[/QUOTE] There is a loud sound of OIINKING coming over the waves. Could it be the PIIGS are on the move? IMO, Greece is no longer a matter of avoiding default. The only question now is when and how much and what spin will they use to make it sound palatable. On a related note, there is silence re Italy and Spain. Every time Greece makes the news, it has to turn stomachs upside down for folks holding debt in either of them. Is the USA in better shape? Realistically, no, we just have further to fall when the day of accounting finally gets here. DarJones |
The mood here just might be turning:
[url]http://www.bbc.co.uk/news/business-13637004[/url] entitled "Goldman must explain behavior" |
Couple of recent top headlines: I deliberately left out noise involving the congressional debt-ceiling Kabuki theater, articles with vaguely hopeful headlines like "Greece says talks with IMF proceeding hopefully", or the obligatory "Stocks set to rebound on optimism about Greece saying talks with IMF proceeding hopefully" kind of stock-casino-as-proxy-fdor-economy-throwaway-headline. These seemed to reflect most of the noteworthy actual *happenings* this past week:
[url=http://links.reuters.com/r/2XRTM/DLAMI/R39YCN/GZG2B/DWFT7R/YT/h?a=http://links.reuters.com/r/2XRTM/DLAMI/R39YCN/GZG2B/FK3B2R/YT/h]Greece to present new austerity plan[/url]: [i]Greece intends to present a fresh austerity plan on Friday, a government official said, after Moody's cut its credit rating deep into junk territory and said there was an even chance of eventual default[/i] [url=http://links.reuters.com/r/DFGA9/GBM13/PFEKOR/VJXEQ/AMSPWF/YT/h?a=http://links.reuters.com/r/DFGA9/GBM13/PFEKOR/VJXEQ/VLAWTO/YT/h]Private sector job growth slumps in May[/url]: [i]Private-sector payroll growth slowed sharply in May, coming in far below expectations and falling to the lowest level in eight months, a report by a payrolls processor showed on Wednesday[/i] [url=http://links.reuters.com/r/NG7YL/GBMHN/II4ZLY/0PE4N/VLA52O/YT/h?a=http://links.reuters.com/r/NG7YL/GBMHN/II4ZLY/0PE4N/TUV704/YT/h]Japan recovery takes hold, but debt downgrade looms[/url]: [i]Japan's economy offered more signs of recovery from the deadly March earthquake on Tuesday, but Moody's ratings agency warned both growth and government action may fall short of what is necessary to bring Tokyo's ballooning debt back under control.[/i] [url=http://links.reuters.com/r/NG7YL/GBMHN/II4ZLY/0PE4N/HYUHP8/YT/h?a=http://links.reuters.com/r/NG7YL/GBMHN/II4ZLY/0PE4N/EXN1RC/YT/h]March home prices suffer double-dip setback[/url]: [i]U.S. single-family home prices dropped in March, dipping below their 2009 low, as the housing market remained bogged down by inventory and weak demand, a closely watched survey said on Tuesday[/i] [b]On a Lighter Note[/b] The mainstream media - especially highly-respected outlets like the NY Times - are sometime annoyingly un-creative in their choice of headlines. Consider the following story about NY representative Anthony Weiner, who claims his Twitter account was hacked to send a lewd photo of a man's bulging underpants to his Twitter "friends": [url=http://www.nytimes.com/2011/06/02/nyregion/weiner-denies-sending-photo-over-twitter-but-is-less-sure-of-its-origin.html?_r=1&ref=nyregion]Lawmaker Denies Sending Suggestive Photo but Doesn’t Rule Out It’s of Him[/url]: [i]Representative Anthony D. Weiner denied sending a suggestive image but said he could not be sure he was not the person in it.[/i] [quote]WASHINGTON — Representative Anthony D. Weiner, trying to put to rest a bizarre episode that is overshadowing his role as liberal pugilist and threatening his dream of becoming New York’s mayor, emphatically denied on Wednesday that he had sent a suggestive photograph to a woman in Washington State but said he could not be sure that he is not the person in the image. “This was essentially a hacked account that had a gag photo sent out on it,” Mr. Weiner, a Democrat, said during an interview in his office here. “I can’t say with certainty very much about where the photograph came from.” [/quote] [i]My Comment:[/i] How about simply [u]"Weiner: Not My Wiener[/u] (Though I can`t be 100% sure)" ? And in the interesting-word-choice, um, vein, the article continues: [quote]On Tuesday, Mr. Weiner presided over two testy news briefings...[/quote] |
Another interesting story over the weekend was the story of Goldman Sachs losing 98% of a 1.3 billion dollar Libyan investment in 2008. I think the WSJ broke the story. There was something about some executives making a panicked call for bodyguard protection after breaking this particular loss news. Eight months later the remaining 25.1 million dollars ended up being frozen when a lot of Libyan assets were [I]again [/I]frozen.
|
[QUOTE=Fusion_power;262865]IMO, Greece is no longer a matter of avoiding default. The only question now is when and how much and what spin will they use to make it sound palatable.[/QUOTE]A hint of how it may be made palatable is given in the article to which you link:
[quote] European policymakers, led by Mr Juncker, have been pushing the idea of a voluntary postponement of repayments on Greece's shorter-term debts, to be agreed with lenders. The hope is that because such a "soft restructuring" or "debt reprofiling" would be voluntary, it would not qualify as a default in the opinion of the rating agencies. The European Central Bank (ECB) has previously opposed any kind of debt restructuring for Greece, but on Wednesday an ECB member was cited by the Reuters news agency as saying a voluntary arrangement might be acceptable.[/quote] Paul |
Ewmayer, we could title it:
The Woeful tale of Weiner's Pickled Weiner Pic. or How a Weiner Pic got Weiner in a Pickle DarJones |
Greece again, and this time a bit more open stating just how bad the situation is. Greece can NOT borrow money anywhere else except from ECB/IMF. 25% interest rates are the best they can find elsewhere.
[url]http://www.bbc.co.uk/news/business-13637902[/url] [QUOTE]Many European banks have not yet recorded any losses on most of their lending to Greece, and could find their own solvency is put at risk if they are forced to do so. It is likely that the restructuring would involve the postponement of debt repayments due in the next two years. It would also have to be done with the agreement of Greece's private sector creditors. But according to a former director of the IMF, Greece will eventually have to impose losses, or "haircuts", on its lenders - something that would definitely constitute a default. Claudio Loser, who negotiated past IMF rescue loans for Argentina and Uruguay, said Greece's only other option was to abandon the euro, although he conceded this would be "more complicated".[/QUOTE] DarJones |
An interesting read- An Op-Ed piece by a Nobel prize winner in economics (primarily studied unemployment) whose nomination to be on the Federal Reserve Board is being blocked by politics.
[URL="http://www.nytimes.com/2011/06/06/opinion/06diamond.html?_r=1"]http://www.nytimes.com/2011/06/06/opinion/06diamond.html?_r=1[/URL] Norm |
[QUOTE=Spherical Cow;263098]An interesting read- An Op-Ed piece by a Nobel prize winner in economics (primarily studied unemployment) whose nomination to be on the Federal Reserve Board is being blocked by politics.
[URL="http://www.nytimes.com/2011/06/06/opinion/06diamond.html?_r=1"]http://www.nytimes.com/2011/06/06/opinion/06diamond.html?_r=1[/URL] Norm[/QUOTE] Regarding Nobel economists, think "Long Term Capital Management"..... 3 of its founders were Nobel economists. Look at what a failure it was..... |
IMF: no changes are needed to UK Policy
According to the IMF, the UK economic policy isn't too bad, though "there are significant risks to inflation, growth and unemployment", which may need a policy response.
More details at [url]http://www.bbc.co.uk/news/business-13668574[/url] Paul |
[QUOTE=R.D. Silverman;263103]Regarding Nobel economists, think "Long Term Capital Management".....
3 of its founders were Nobel economists. Look at what a failure it was.....[/QUOTE] Yep- completely agree with you on that one. But I can't help but think an academic background on unemployment/employment wouldn't be useful on the Fed board. The Long Term Capital Managment people were mostly Salomon Brothers professionals, I think. Norm |
[QUOTE=Spherical Cow;263112]Yep- completely agree with you on that one. But I can't help but think an academic background on unemployment/employment wouldn't be useful on the Fed board. The Long Term Capital Managment people were mostly Salomon Brothers professionals, I think.
Norm[/QUOTE] My first job out of grad school was working for a company (now absorbed by McGraw Hill into almost nothingness) named Data Resources. It was founded/owned/run by Otto Eckstein. Otto was sharp. The company provided on-line access to economic data (almost every time-series imaginable) as well as analytical tools (EPS == Econometric Programming System) for doing risk analysis, decision analysis, time series analysis/forcasting etc. We had a global macro model of the economy which we would run every month. The company provided newsletters and other analytic reports. We were not an investment company. We provided econometric services. EPS was an amazing piece of software. It had symbolic capabilities similar to that of Maple/Mathematica, as well as customized tools for doing econometrics. 2+ million lines of Burroughs Algol. The programmers used to tell jokes about the economists. One of the favorites was "If you laid all of the economists in the world end-to-end, they still wouldn't reach a conclusion". Another was: What do you have with a room full of 10 economists? Ans: 20 different opinions about how the economy will behave in the next 6 months. |
[QUOTE=Spherical Cow;263112]Yep- completely agree with you on that one. But I can't help but think an academic background on unemployment/employment wouldn't be useful on the Fed board. The Long Term Capital Managment people were mostly Salomon Brothers professionals, I think.
Norm[/QUOTE] The failure was because of one thing: they failed to include any kind of catastrophe theory into their risk models; They ignored tails of distributions. In Bayesian terms: the penalty functions that they used in their models to estimate the cost of being wrong grossly underestimated those costs within the tails of their distributions. Instead, they buried their heads in the sand and took the attitude that the extreme cases would not happen. In their instance, the extreme event was the collapse of the Russian economy. |
[QUOTE=R.D. Silverman;263119]The programmers used to tell jokes about the economists.
One of the favorites was "If you laid all of the economists in the world end-to-end, they still wouldn't reach a conclusion". Another was: What do you have with a room full of 10 economists? Ans: 20 different opinions about how the economy will behave in the next 6 months.[/QUOTE] Excellent- especially the economists "end-to-end"! Below is the equivalent of your second joke from the geosciences world. In a groundwater rights court case in Nevada, in which I was an expert witness, the other side was trying to justify some pretty creative contouring of groundwater levels and flows. The State Engineer and Hearing Officer were questioning a panel of the other sides's experts- All of this is under oath, remember. I kept a copy of the transcript because this part was so entertaining. STATE ENGINEER: So I guess we go back to this very same question is, you could have a hundred hydrogeologists draw these lines and they could have a hundred different comments. WITNESS X: Actually, you could have a hundred different hydrogeologists and you could probably get two to 300 interpretations. The reason why the 2,200 contour wasn’t extended over, (…). HEARING OFFICER: So let me ask you this, Mr. X. If I had a hundred geologists who are going to give me 300 diagrams, how do I rely on any of this evidence? WITNESS Y: Take the one with two left hands. HEARING OFFICER: It’s a serious question. (The courtroom became embarrassingly quiet at that point...) Norm |
Portugal: Socialists Ousted | Wienergate Newsflash
[url=http://www.nytimes.com/2011/06/07/world/europe/07iht-portugal07.html?_r=1&ref=world]A New Leader in Lisbon, but Little Triumphalism[/url]: [i]As jubilant supporters filled Lisbon’s Marquês de Pombal square, Pedro Passos Coelho, the Social Democrats party leader and the country’s next prime minister, had a more sobering reaction to victory.[/i]
[quote]“We have absolutely no reason to fuel triumphalism,” he said late Sunday night after the Social Democrats defeated the governing Socialists in a general election. “The years that await us will require a lot of courage from all of us and from Portugal.” Indeed, Mr. Passos Coelho’s new center-right coalition government faces the daunting task of making painful spending cuts and other changes agreed last month with international lenders in return for a bailout worth €78 billion, or about $114 billion, at a time when Portugal’s economy is forecast to contract 2 percent this year and next. In effect, Mr. Passos Coelho is taking charge of “an executive that will be mostly an executor of the austerity measures and reforms agreed with the European Union and the International Monetary Fund,” said Cristina Casalinho, chief economist of BPI, a Portuguese bank. His ability to steer Portugal’s economy out of recession could also be limited by continued turmoil within the euro zone. While Portuguese government bonds rose on Monday amid relief that the election had yielded a clear-cut outcome, yields on Portuguese sovereign debt have remained close to record highs since the bailout agreement, reflecting in part investors’ concerns about Greece. The government in Athens is discussing further financial assistance after already requiring an E.U.-led bailout last year. “Regardless of what this new government manages to do, we are unfortunately in a context where what happens to Portugal is not entirely within its control and where, if Greece collapses completely, that will mean serious contagion for us,” said Pedro C. Magalhães, a professor of politics at the University of Lisbon. Despite his limited room to maneuver, Mr. Passos Coelho pledged during his electoral campaign to oversee an overhaul of Portugal’s economy that would go beyond the terms dictated by international lenders. The response from voters was to unseat the Socialists, led by José Sócrates, the caretaker prime minister, by a larger voting margin than anticipated. The Social Democrats won 39 percent of the vote against 28 percent for the Socialists. The conservative Popular Party, which is expected to join the Social Democrats in government as its coalition partner, won almost 12 percent of the vote. The center-right coalition is set to have at least 129 of the 230 seats in the national Parliament. “My feeling is that lots of young people voted for the right on Sunday because they have understood that left-wing resistance to change was no longer an option given the disastrous state of the Portuguese economy,” said André Marquet, 30, co-founder of Beta-i, a Lisbon-based association that promotes start-up companies. “This new government has promised to take a much more liberal approach, including making labor laws more flexible so that it is easier to hire young people, as well as fire those who had complete job protection whatever their actual work performance.” Overhauling labor legislation is a challenging task, as underlined in neighboring Spain, where negotiations over changing the system of collective bargaining recently faltered. Some economists also question the ability of any government to enact reforms in other areas in the face of vested interests, like a pledge to streamline local layers of government or overhaul Portugal’s cumbersome judiciary. Mr. Passos Coelho is also taking charge as Portugal’s jobless rate has climbed above 12 percent, with unions threatening to intensify labor unrest should the new government carry out steeper spending cuts and privatize more state-owned companies.[/quote] [i]My Comment:[/i] But enough about "the trials of Sócrates" - the really exciting news today is this shocking confession in the "Wienergate" scandal: [url=http://cityroom.blogs.nytimes.com/2011/06/06/live-blog-anthony-weiner-news-conference/?ref=nyregion]Weiner Says He Sent Photos and Lied; Won’t Resign[/url]: [i]In a news conference, Representative Anthony D. Weiner said he had communicated with women online and sent them explicit photos. He said he would not resign. [/i] [quote]At a news conference in Midtown Monday afternoon, Representative Anthony D. Weiner tearfully confessed to sending a photo of himself in his underwear to a woman over Twitter, then lying about it. Mr. Weiner said the indiscretion was part of a pattern of sending inappropriate photos and messages to women he met over the Internet. Mr. Weiner apologized repeatedly. He said he had no intention of resigning, that he had broken no laws and that while his wife was upset with him, his marriage was not ending.[/quote] [i]My Comment:[/i] One could have some fun with the grammatical ambiguity in the above snip: "Who cares if he was in his undies when he sent the photo? What was he wearing in the photo is what I want to know". |
I follow many of the scandals like Wienergate with considerable fascination -- these are [I]teh [/I]masters of the universe.
= = = Regarding usefulness or reliability of employment or other economic indicators, I like [URL="http://en.wikipedia.org/wiki/Goodhart's_law"]Goodhart's Law [Wikipedia][/URL] [QUOTE]Goodhart's law, although it can be expressed in a variety of formulations, states that once a social or economic indicator or other surrogate measure is made a target for the purpose of conducting social or economic policy, then it will lose the information content that would qualify it to play such a role.[/QUOTE] I'd first heard of this expression last March in a brief blog mention by Terence Tao: [QUOTE]Goodhart's law at work, in the citation indices of applied mathematics journals. (This article was co-published at the Australian Mathematical Society Gazette and the Notices of the AMS, and also is on the arXiv.) [url]http://www.austms.org.au/Publ/Gazette/2011/Mar11/MathsMatters.pdf[/url][/QUOTE]This quoted link is to a journal article, not Terence's blog. |
Chaos theory at work?
No, I'm not referring to weiner's weiner pickle. He is more of a rear end than a weiner anyway. On a more serious note, sideways motion in the market indicates extreme instability. This suggests a major downward move later this summer. September and October should be "interesting". It will be interesting to follow the price of gold and silver over the next few months. DarJones |
Triumph of the Debt Pushers
Check out how successful decades of marketing and pushing-their-way-into-every-aspect-of-people`s-financial-lives have been for the debt merchants - That is a very sick, twisted [i]Lebenssanschauung[/i] they have promoted, reminds me very much of the "smoking is sexy and cool" marketing used so successfully for decades by Big Tobacco (whose methods the debt-promters likely studied very closely):
[url=http://researchnews.osu.edu/archive/youngdebt.htm]WHAT, ME WORRY? YOUNG ADULTS GET SELF-ESTEEM BOOST FROM DEBT[/url] [quote][b]Instead of feeling stressed by the money they owe, many young adults actually feel empowered by their credit card and education debts, according to a new nationwide study. Researchers found that the more credit card and college loan debt held by young adults aged 18 to 27, the higher their self-esteem and the more they felt like they were in control of their lives. The effect was strongest among those in the lowest economic class. [/b] Only the oldest of those studied – those aged 28 to 34 – began showing signs of stress about the money they owed. “Debt can be a good thing for young people – it can help them achieve goals that they couldn’t otherwise, like a college education,” said Rachel Dwyer, lead author of the study and assistant professor of sociology at Ohio State University. But the results offer some worrying signs about how many young people view debt, she added. “Debt can be a positive resource for young adults, but it comes with some significant dangers,” Dwyer said. “Young people seem to view debt mostly in just positive terms rather than as a potential burden.”[/quote] What do you mean, "potential burden"? It`s a guaranteed burden, the only question is how onerous it is. and the "positive terms" view of debt is precisely what its peddlers work relentlessly to promulgate. [quote]For this study, the researchers examined data on two types of debt: loans taken out to pay for college, and total credit-card debt. They looked at how both forms of debt were related to people’s self-esteem and sense of mastery – their belief that they were in control of their life, and that they had the ability to achieve their goals. “Debt can be a good thing for young people – it can help them achieve goals that they couldn’t otherwise, like a college education,” said Rachel Dwyer. But the results offer some worrying signs about how many young people view debt, she added. Researchers have had two competing views of how debt might affect people’s self-concept, Dwyer said. Some have said debt should have positive effects because it helps people invest in their future. Others have said credit should have negative effects because it allows people to spend more money than they make, thereby risking their future. “We thought educational debt might be seen as a positive because it is an investment in their future, while credit card debt could be viewed more negatively,” Dwyer said.[/quote] Why am not surprised that a professional educator would unquestioningly view educational debt as a positive "investment in one`s future"? No mention of "will that degree funded by debt actually pay off in any meaningful way?" or "What is the expected return on investment for various kinds of degrees, schools and debt profiles?" [quote]“Surprisingly, though, we found that both kinds of debt had positive effects for young people. It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.” Some young people may be using credit card debt to help finance their college education – for items like textbooks -- which is why they may see it as a positive, she said. But there is no way to know that from the data. “Obviously, they are probably using credit cards for multiple purposes. Along with education spending, they could be using credit cards to pay for non-essential items. They may feel good about their debt only because it allows them to buy the things they want without having to delay gratification.” But how debt affected young people depended on what other financial resources they had available, the study found. [b] Results showed that those in the bottom 25 percent in total family income got the largest boost from holding debt – the more debt they held, both education and credit card, the bigger the positive impact on their self-esteem and mastery[/b].[/quote] ...Until they get to the "you have to pay this back, you know that, right?" stage of their self-awareness ... probably happens for most once the debt burden gets sufficiently large, say between the ages of 28-34. (See above) The actual research paper (hat tip [url=http://market-ticker.org/akcs-www?post=187671]Karl D.[/url]) has a more sobering conclusion than the above popular-media description of it: [quote]More broadly, the sociological implications of the new debt society extend beyond the travails of the individuals caught up in this transition and their behaviors, stresses, and adjustments. The debt society also has important implications for the broader political economy of contemporary society. [b]State and Federal policies that reduce tuition supports and substitute college loans for affordable tuition all but guarantee that current generations of college graduates will enter the labor force with significant, sometimes grinding, debt (Jacoby, 2002). Spiraling debt is thus not accidental or the result of a failure of character by the current generation. The privatization of college loans and the windfall profits accruing to lenders charging relatively high interest rates on loans that are guaranteed by the government and thus have limited risk is not an accident either. It is a result that has been directly engineered by political appointees to Sallie Mae and other government lending agencies that represented the interests of lenders over those of borrowers – including students (Schemo, 2007)[/b]. These actions have implications for our nation as a whole, not just for young people, not the least of which is the privatization of what are in fact societal-level problems and shortfalls and the furthering of a society that mortgages the future rather than pays forward.[/quote] |
In the news today is a snippet that the EU/ECB and IMF do NOT know what to do about Greece.
Let me give you a hint folks. You have a choice between sinking the entire ship or tossing Greece overboard. [url]http://moneywatch.bnet.com/economic-news/news/dow-falls-below-12k-stocks-drop-6-weeks-straight/6245500/[/url] DarJones |
Mish also has a post today about the escalating cat-fight over Greece:
[url=http://globaleconomicanalysis.blogspot.com/2011/06/open-revolt-against-trichet-german.html] Open Revolt Against Trichet: German Politicians Demand "Private Creditor Involvement"; Finland Support for Bailout Vanishes[/url] [quote]The feud between ECB president Jean-Claude Trichet and German finance Minister Wolfgang Schaeuble escalated in a major way today with members of German Parliament siding with Schaeuble and against the wishes of the ECB. As expected ... Trichet went into another hissy-fit, insisting that he, not the markets, not voters, not the German parliament knows what's best for the EU.[/quote] |
Greece has a credit problem. They have borrowed beyond their ability to repay. Now the debt is cascading with ever higher interest rates demanded by lenders.
Greece turned to the ECB and IMF for funding because that was the only way they could avoid the debt squeeze coming from the bond market. A bailout package worth about $158 billion was put together last May to give them roughly 2 years of breathing room. Austerity measures were implemented with typical Greek enthusiasm.... meaning that they were ineffective at best. The austerity measures were supposed to get Greece on firm footing to borrow from the bond market with reasonable interest rates. They were too little too late so now ECB/IMF funding is the only way Greece can borrow at a rate that might be sustainable. Now we have squabbling breaking out among EU member nations over further funding. You can compare this to borrowing $150 billion from your rich uncle Joe. The reason you had to borrow from uncle Joe is that you lived a riotous life and spent more than you made and by the way, ruined your credit in the process. Now the only way you can borrow money to sustain your riotous lifestyle is to borrow from Uncle Joe who lives within his means and has excellent credit. There is only one problem. Uncle Joe insists you give up the riotous lifestyle and buckle down to paying him back. This highlights the risks associated with the European Common Market. One failing economy can put the entire zone in a near default situation. While I would like to say there is hope for Greece, realistically, the only way this can be resolved is to suspend Greece from the EU, let them spend as long as needed to get their financial house in order, then re-admit them. This would take a minimum of 10 years and would involve major blood letting when Greek bonds are devalued. Sadly, I don't think the EU has the gumption to take this hard line approach. DarJones |
[QUOTE=Fusion_power;263530]Greece has a credit problem.[/QUOTE]The Beeb has a good coverage of the latest Geek situation. See [url]http://www.bbc.co.uk/news/world-europe-13783224[/url] and links therein.
Executive summary: no-one can see any way out other than a default of some kind, even if it's not called that in order not to frighten the neighbours. Paul |
[QUOTE=xilman;263859]The Beeb has a good coverage of the latest Geek situation. See [url]http://www.bbc.co.uk/news/world-europe-13783224[/url] and links therein.
Executive summary: no-one can see any way out other than a default of some kind, even if it's not called that in order not to frighten the neighbours.[/QUOTE] The problem for Greece, the entities holding wads of its IOUs and most especially the ECB is the major ratings agencies - shocking as it is to see them actually doing some semblance of 'their job' after so many years of ratings-whoring-for-pay - have put the interested parties on notice that any kind of significant debt restructuring (such as is in fact needed), no matter how it is weasel-worded, will be treated as a default in terms of counting as a 'triggering event' for manifold billions in credit-default swaps outstanding on Greek debt. No one really knows how much, since the iBanks which write most of these have purposefully ensured that the CDS markets remain as murky as possible. Here is an excellent recent post from Mish with links to articles about the latest twists in the "Greek Tragedy" - the last section of the post has some very interesting commentary on the CDS angle here: [url=http://globaleconomicanalysis.blogspot.com/2011/06/emergency-session-fails-market-calls.html]Emergency Session Fails; Market Calls Trichet's Bluff; French Banks Under Downgrade Review; ECB Divorced From Reality; What is US Exposure to EU Mess?[/url] To me it appears that the rift between the "banks must be protected from the consequences of the own folly at all costs" attitude of the ECB leadership and an ever-more-skeptical Germany appears to be unbreachable at this point. The ECB of course has bought boatloads of Greek debt and knows that a default would trash its balance sheet and probably destroy what little it has left of its dwindling credibility. But ECB head Trichet is one of the ur-EMU backers and is committed to going down with the ship, even if it means dragging most of the still-viable Eurozone economies down with it. For a refreshing contrast to the situation in Greece and Ireland (and Portugal, and Belgium, and soon Spain and Italy, and not too long from now, France, Japan, and the U.S.), note that a scant 2 years after resolving its own banking crisis by nationalizing the blown-up banks, firing their management (and even pursuing criminal prosecutions of some of same), telling bondholders to get stuffed and suffering dire warnings about currency collapse and "being shut out of the international bond markets forever", Iceland is well on the way to recovery: [url=http://www.theglobeandmail.com/report-on-business/international-news/global-exchange/icelands-no-bailout-stance-hasnt-chilled-investors/article2060163/]Iceland’s ‘no bailout’ stance hasn’t chilled investors[/url] [quote]Iceland’s method of coping with the financial crisis had a brutal charm about it. In essence, the country hoisted its middle finger to the owners of bank bonds, and a few other people it owed money to, and walked away. It worked. For evidence, note that Iceland made a triumphant return to the international bond markets late last week, and that its tiny economy is growing at a fair clip, both remarkable achievements when you consider its punishing economic and banking collapse in late 2008. And therein lies a lesson. Make that two. The first is that bond holders of clapped out banks can, and should, take losses for the greater good of the recovery. The second is that keeping your own currency is a terrific idea when you’re going through economic hell -- it gave Iceland the fiscal freedom that Greece, Ireland and Portugal entirely lack. Iceland’s sale of 5-year bonds raised $1-billion (U.S.) at 5 per cent, not cheap but a bargain compared to the outrageous yields of comparable Irish and Greek bonds (though neither is able to borrow and is relying on emergency European Union and International Monetary Fund loans stay afloat). Given the way Iceland treated bondholders, it seems a miracle that the government was able to push the new bonds out the door. Three of Iceland’s banks collapsed in October, 2008, shortly after the Lehman Bros. implosion tore the global financial system apart. Iceland refused to bail out the bank bond holders -- they took “haircuts,” to use the argot of the debt markets. Iceland determined that it was under no legal or moral obligation to underwrite the reckless behaviour of its commercial banks, whose assets soared to 10 times gross domestic product, making them grenades ready to explode. Ireland took the opposite view and guaranteed its banks, much to the rage of the taxpayers. As a result, Ireland’s debt-to-GDP has climbed four-fold since the financial crisis. Iceland also refused to compensate Britain and the Netherlands for reimbursing the more than 300,000 depositors of Icesave, one of Iceland’s dud banks. The depositors should have received the money from the Icelandic government’s depositor protection scheme, but the country did not have a kronor to spare (proceeds from the liquidation of Landsbanki are expected to meet much of the liability, which explains why Britain and the Netherlands, though angry, have not gone berserk).[/quote] [i]My Comment:[/i] When it comes to dealing with bankers and big finance, the rest of the world should endeavor to "think Viking". |
And the U.S. should learn to look over their northern border to see how a banking system can be kept healthy.
I have to point out that France is in line to become a major casualty of the Greek problem. France's banks happen to hold a boat load of Greek debt. Sad to say, it looks like they took out credit default swaps with some friends in other parts of Europe.... England for example. For this reason, I foresee a huge amount of wrangling as the Banksters and Actuarysters attempt to manipulate public sentiment into propping up Greece at any cost. Unfortunately, the problems in the EU will also weigh on the rest of the world economy. This is a good time to have a weak currency. The U.S. dollar is weak at present but ongoing difficulties should drive down the Euro against the dollar. The end result will move pain from Europe into the U.S. in a domino effect. DarJones |
1 Attachment(s)
In Dotcom Bubble 2.0 news, another much-hyped IPO today, of Pandora Media (P): IPO priced at $16 (up from the originally announced $12), stock opened at $20, briefly spiked as high as $26, and then...well, we`ll let the daily price chart below speak for itself. But before you look at the price chart, enjoy this bullish sell-side spin, which twists "closed barely above IPO price and anyone who bought at open and didn't immediately sell is now down a nice chunk of change" into "Pandora stock climbed today" (I guess that is in fact true, at least for the roughly 5 minutes between the opening bell at 9:30 am and the "oh, crap, I think I bought at the top" phase which set in at 9:35 a.m.):
[url=http://www.mercurynews.com/breaking-news/ci_18279981?nclick_check=1]Biz Break: IPO 'explosion' for Silicon Valley home sales? Plus: Pandora's debut[/url] [quote]Speaking of big IPOs, Pandora stock climbed today in its New York Stock Exchange debut after the shares priced late Tuesday at $16 a share. That was up from last week's expected range of $10 to $12 a share, which itself was bumped up from an earlier expected range of $7 to $9. [b] "There's pent-up demand for high-growth, exciting business models," money manager Scott Billeadeau of Fifth Third Asset Management in Minneapolis told Bloomberg News. [/b] Pandora's stock is trading under a coveted single-letter ticker symbol -- "P" -- on the NYSE. The stock climbed as high as $26 soon after trading began, but pulled lower to close at $17.42, up $1.42, or 8.9 percent, from the IPO price. Pandora sold 6 million shares to the public, and selling investors sold 8.7 million shares. According to a Bay Area News Group report, the IPO raised nearly $235 million for Pandora and its investors. The IPO underwriters have the option of selling an additional 2.2 million shares from the company within 30 days. The Oakland Internet radio service streams music to computers, smartphones and other devices. Its technology sends music based on subscribers' favorite songs, artists or genres.[/quote] And of course the grand-daddy of DB 2.0 IPOs just was announced, Facebook, hyped to have an initial valuation as high as $100 Bln, which puts it in the category of TJS, short for "that's just silly". Some MSFM taking head made the point a few nights ago - in classic "this time is different" fashion - that the current crop of dotBubble IPOs differ from the v1.0 ones in that v2.0 have lots of private venture funding, which makes their valuations "more reliable" or some such nonsense. Sounds to me more like the big VC and hedge-fund money is furiously trying to cash out ahead of phase 2 of the global financial crisis. And to round things out in our review of DB 2.0 news, SJ Mercury News tech columnist Chris O'Brien has some rather skeptical notes about the also-coming Groupon IPO. His piece in fact describes the "large amounts of private funding" as a warning signal, especially if much of that funding has allowed insiders to cash out early via "private placements" of their shares of the company: [url=http://www.mercurynews.com/chris-obrien/ci_18242843] O`Brien: Groupon`s insider stock sales raise a red flag about IPO[/url] [quote]Groupon`s IPO remains one of the hottest topics in Silicon Valley startup circles more than a week after the company filed its papers. What`s amazing to me is how negative the buzz has been. The Chicago-based company basically invented -- or at least perfected -- the white-hot daily deal concept and has enjoyed a meteoric rise. But its filing revealed a number of troubling weaknesses, most glaringly its lack of profits. [b] There was one aspect of the IPO filing that I found especially disturbing: The large amounts of stock that executives and investors have already cashed out. Insiders have pocketed hundreds of millions of dollars that Groupon desperately needs to keep operating. [/b] This represents a bright red flag. "This whole deal smells," said Vivek Wadhwa, a visiting scholar at the UC Berkeley School of Information and director of research at the Center for Entrepreneurship and Research Commercialization at Duke University. "The company does not have a proven business model that will take them to long-term profitability, insiders are already reaping millions, and the price is out of proportion with reality. My concern is that this blows up and kills the opportunities for many, more worthy, companies in Silicon Valley that want to go public." Groupon is in a quiet period after filing for the IPO, and so can`t discuss these issues. However, in the filing the company notes that its lack of profits is due in part to investments it`s making to expand the company. In addition, co-founder Eric Lefkofsky responded to this criticism a day after the IPO filing in an interview with Bloomberg News in which he boasted, "Groupon is going to be wildly profitable." That, however, has raised another controversy over whether Lefkofsky violated the quiet period rules and whether Groupon will have to refile its IPO papers. To be sure, Groupon is certainly not the only tech startup in which insiders have sold private stock before the company goes public. This trend began as many of the hottest startups -- Facebook, Zynga, Twitter, Yelp -- delayed their IPOs as long as possible. The founders are clearly focused on building their companies for the long term. And they want to avoid the short-term pressures of being a public company. Good for them, although this has created a great deal of frustration for some in the valley who want these companies to rev up the IPO market. But this creates grumbling among hardworking founders and employees who are eager to see their stock options turned into cash. So, many of these companies have struck deals with private investors to allow employees and executives to sell stock to reduce the internal pressure to go public. Again, the instinct is good. Last week while moderating a panel on startups, I asked Glenn Solomon of GGV Capital about the impact of these sales. He said venture capitalists increasingly like them because it reduces some of the emotional pressure, especially on founders, surrounding high-stakes decisions like whether to sell a company or raise more money. By cashing out some stock and having a little money for a down payment on a house, or to buy a car, founders don`t have to worry that they might lose everything should they make the wrong decision. That makes sense, but only if those sales are kept to reasonable levels. In the case of Groupon, I don`t think that`s the case. For one thing, Groupon is less than 2 years old. So while employees and founders have no doubt been working hard to build the company, they haven`t been at it nearly as long as say, LinkedIn, which recently went public after waiting more than eight years. Worse, unlike many other high-flying Web companies, Groupon turns out to be very unprofitable, and growing more so. In the most recent quarter, the company lost $117 million on $644 million in revenue. With only $208 million in cash on hand, the company urgently needs the $750 million it hopes to raise in the IPO. The company shouldn`t be so desperate. In January, Groupon announced that it had raised $950 million in venture capital. But of that money, $810 million went into the pockets of insiders such as CEO Andrew Mason ($10 million), Lefkofsky ($60 million) and early-stage venture backer NEA ($70 million) and Accel Partners ($19 million). As with Groupon, the venture firms also are subject to the restrictions of the quiet period and thus cannot comment. Again, no one would begrudge the founders taking a little money off the table, as Solomon suggests. But using the company`s momentum to raise and then pocket such large amounts of money -- money the company itself needs -- looks reckless. And a problematical Groupon IPO could result in a backlash from investors that would kill the momentum finally building around tech IPOs.[/quote] And now back to the promised pictorial illustration of that whole "Pandora stock climbed today" thing - see if you can spot the climb, and no cheating by running time backwards and parsing the chart the wrong way: |
Greecefire: Athens Riots, Papandreou Likely Done
[Last spam of the day, I promise - We've been furiously busy @work the past week up through yesterday's code checkin deadline, so I'm doing a bit of econ-catchup]
Mish has an update on the deteriorating situation in Greece: [url=http://globaleconomicanalysis.blogspot.com/2011/06/riots-images-from-greece-prime-minister.html ] Riots Images from Greece; Prime Minister to Reshuffle Greek Cabinet, Seek Vote of Confidence on New Government; Papandreou's Days Numbered[/url] When I viewed the above post's subheading "Papandreou to reshuffle the Deck", the first phrase that popped into my head was “Reshuffling the Deck Chairs On the Titanic”. It seems rather apt, actually. |
[QUOTE=ewmayer;263874][Last spam of the day, I promise - We've been furiously busy @work the past week up through yesterday's code checkin deadline, so I'm doing a bit of econ-catchup]
<snip> [/QUOTE] I look forward to your posts, and have been wondering what happened to them..... |
[QUOTE=ewmayer;263874][Last spam of the day, I promise - We've been furiously busy @work the past week up through yesterday's code checkin deadline, so I'm doing a bit of econ-catchup]
Mish has an update on the deteriorating situation in Greece: [url=http://globaleconomicanalysis.blogspot.com/2011/06/riots-images-from-greece-prime-minister.html ] Riots Images from Greece; Prime Minister to Reshuffle Greek Cabinet, Seek Vote of Confidence on New Government; Papandreou's Days Numbered[/url] When I viewed the above post's subheading "Papandreou to reshuffle the Deck", the first phrase that popped into my head was “Reshuffling the Deck Chairs On the Titanic”. It seems rather apt, actually.[/QUOTE] [url]http://www.cnbc.com/id/43378973?__source=otbrn%7Coutbrainext%7C&par=otbrn&__source=otbrn%7Coutbrainext20110616092515%7C&par=otbrn[/url] |
1 Attachment(s)
[Reply to Bob`s post about Bond Guru Bill Miller saying "U.S. worse off fiscally than Greece]:
Well, the comparison is not completely fair, because if one adds future promises to the other countries` liabilities they similalrly balloon ... but yeah, we are just as fooked long-term, only have a little more time-until-TSHTF due to having our own currency we can debase, and none of the large holders of U.S. debt wanting to admit reality because that would "spook the bond markets" and render their holdings of said debt instantly worth a lot less. (Those writedowns are inevitable, but no one involved in managing such assets wants it to happen on their watch.) ------------------------------ Mish has the latest on Greece: [url]http://globaleconomicanalysis.blogspot.com/2011/06/imf-ready-and-willing-to-throw-away.html[/url] And another rough day for the much-ballyhooed Pandora IPO - Like the mythical Pandora, buyers of P shares are left only with hope that their investment will someday pay off. Looks like the life of the "Pandora IPO craze" was all of 5 minutes (open of trading yesterday), and I suspect most of that trading was all strictly HFT-algo-vs-HFT-algo anyway: |
[QUOTE=ewmayer;263953]And another rough day for the much-ballyhooed Pandora IPO - Like the mythical Pandora, buyers of P shares are left only with hope that their investment will someday pay off. Looks like the life of the "Pandora IPO craze" was all of 5 minutes (open of trading yesterday), and I suspect most of that trading was all strictly HFT-algo-vs-HFT-algo anyway:[/QUOTE]Is it possible that some P-buyers thought they were investing in, or purchasing tickets for, the sequel to [i]Avatar[/i]?
|
This post will be more in the realm of speculation than I would normally delve.
Greece is a socialist economy with a huge problem. It is needs to borrow roughly $300 Billion over the next 2 years to pay off old debts and cover an ongoing deficit running in the tens of billions per year. The problem is that an entitlement population does not want to give up any of the perks they have enjoyed over the last several years. The inherent risk is that Greece will default on debts that by one count total about $400 Billion ([I]I think this number is a bit high[/I]). Now lets try to figure out the impact of a default of say $100 Billion dollars. The first and foremost impact will be to the banks in Greece. They will effectively be shut down because their money supply will dry up. That would be bad, but would primarily impact Greece. The EU would have to kick Greece out to avoid destabilizing the Euro and throwing the entire EU economy off the tracks. The impact outside of Greece would be to France and England (and several other EU nations) because France holds roughly $65 billion in Greek bonds and England has debt swaps in place that assume roughly half of that debt. The U.S. holds roughly $40 billion in Greek debt. Presuming a loss of 1/4 on the above ($400B total debt, $100B write down) means France would be on the hook for about $17B of which roughly half would be absorbed by England. U.S. financial entities would be on the hook for about $10 Billion. Now the question is "Would this be enough to topple the world economy?" I take the position that it is NOT though there would be significant bankruptcies of financial entities and there would be a major disruption in overal economic activity. Why is this significant? Because as noted a few posts above, financial interests are putting on a full court press to push for an IMF/ECB bailout of Greece so they can avoid a major haircut. The Germans have recognized that Greece needs to take the medicine and get it over with. The sooner done, the sooner the world economy can get to recovery. In the final analysis, this breaks down to transferring private debt losses to the public as a whole. Bail out the banks at the expense of the people a' la Ireland. DarJones |
Osborne to "Ring-Fence" UK Banks
[url=http://news.yahoo.com/s/afp/20110615/wl_uk_afp/britainfinanceeconomybankingosborne_20110615012605]UK To Return to Glass-Steagall-Style Banking Separation[/url]: [i]The practice of banks using money from their retail arms to fund investment operations has been widely blamed as a major factor behind the global banking crisis.[/i]
[quote]LONDON (AFP) – The Chancellor of the Exchequer George Osborne is on Wednesday likely to back plans for banks to ring-fence their retail operations to prevent a rerun of the 2008 financial crash, a treasury source said. Osborne was likely to approve the Independent Commission on Banking's (ICB) recommendations that banks keep their high street and investment arms separate in a speech to the leaders of the financial sector. "This is a far reaching shake up to make high street banks safer and protect taxpayers," said the treasury source. The practice of banks using money from their retail arms to fund investment operations was widely highlighted as a major factor behind the global banking crisis. The ICB was set up to examine how banks can be made more secure and made the recommendation in April's interim report. It also suggested that banks raise raise their reserve levels above the international minimum of seven percent, to provide a greater cushion against the risk of failure. The measure would mean that they would only be able to lend around 10 times what they hold rather than the 14 times allowed by the international minimum. Osborne was expected back this proposal, as well as a proposal to privatise Northern Rock. It was nationalised by the previous Labour government as it foundered in early 2008 when the financial crisis took hold.[/quote] [i]My Comment:[/i] Consider that snip above: "...*only* be able to lend around 10 times what they hold"...And of course here in the U.S., the 2004 relaxation of the net capital rules for the 5 biggest U.S. iBanks (technically, "broker-dealers"...then-head-of-Goldman and future Treasury secretary Hank Paulson played a key role in lobbying for the leverage-limit relaxation), the so-called [url=http://en.wikipedia.org/wiki/Net_capital_rule]"Bear Stearns exemption"[/url], [b]remains in effect[/b]. Consider the names of the 5 iBanks which were allowed to lever up 30 and 40:1 as a result: Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley. Of those five, two (Bear and Lehman) blew themselves (and much of the global financial system) up utterly, Merrill only survived by way of a shotgun wedding to not-quite-as-blown-up BofA, and the survivors are only still around (and raking in huge profits and bonuses form a fresh spate of market-rigging and speculating) thanks to unprecedented government (that is, ultimately borne by taxpayers) bailouts. And yet the hyperleveraged insanity is allowed to continue. [url=http://globaleconomicanalysis.blogspot.com/2011/06/merkel-wimps-out-sarkozy-merkel-ecb.html ]Merkel Wimps Out, Agrees to Laughable "Voluntary" Solution to Mess in Greece; Four Things to Expect Shortly[/url] [quote]The Euro is up sharply today on news of a "solution" that allegedly involves "voluntary" rollover of Greek bonds by private investors. The whole world knows there is nothing voluntary about it. Moody's has even stated it will not be considered voluntary. However, such details do not stop stubborn fools like ECB president Jean-Claude Trichet and French president Nicolas Sarkozy from insisting they can dictate solutions to the market. On the "news" which everyone knew was coming, 2-year Greek bonds fell to 27.52% from 29.69% but are now trading at 28.03%. [EWM: Mish posts later that 2-year Greek bonds closed at 28.79%, i.e. the yield demanded by investors ended up falling by less than 1%, not exactly a vote of confidence from the bond markets.] [b] Merkel Wimps Out [/b] As we all knew she would Merkel caved in to demands from Sarkozy and the ECB. Whether or not the German parliament will go along remains to be seen. Bets are also off if Greek Prime minister George Papandreou does not survive an upcoming "vote of confidence". If Papandreou hangs on, it will be by 1-3 votes out of 300, hardly confidence inspiring. One way or another, Papandreou will not survive this fiasco. The only question is whether he is booted out sooner rather than later. Please consider [url=http://www.bloomberg.com/news/2011-06-17/merkel-says-she-s-prepared-to-work-with-ecb-on-investor-role-in-greece.html]Merkel Agrees to Voluntary Greece Bondholder Role[/url] ...[b] Four Things to Expect [/b] o Expect the market to call another can-kicking bluff as early as next week. o Expect more pompous foolery from Trichet and Sarkozy. o Expect Merkel to take another well-deserved election pounding in September. o The main thing to expect is for the market to start demanding involuntary haircuts on the debt of Portugal, Ireland, then Spain and Italy. Nothing Solved by Pompous Foolery It is amazing to watch German chancellor Merkel wimp out time and time again to French president Sarkozy. Not a damn thing has been solved by this exercise in pompous foolery by Trichet and Sarkozy. The structural problems all remain.[/quote] |
Surplus/Deficit as a % of GNP/GDP
Barry Ritholtz has a timely post which charts [url=http://www.ritholtz.com/blog/2011/06/surplusdeficit-as-a-of-gnpgdp/]Surplus/Deficit as a % of GNP/GDP[/url]
But, the chart omits the oh-so-inconvenient "intragovernmental borrowings", which left some of Barry's readers confused. I clarified, but my reply got garbled by the web forum-comment software, so I pointed interested back to this post. @nilsonb: "According to UST historical data on their website, the national debt has increased every year, in fact every Q, since about 1954. So how was there a surplus around 1999-2000 if the national debt increased every Q and never went down? What am I missing?" You are missing "intragovernmental borrowings", which is the government's benign-sounding euphemism for "raiding the social security and medicare trust funds in order to make the yearly budget hole look better than it is." Treasury types like to justify the benign name via the definition "It is federal debt that the government owes to itself." I would argue that no, it is federal debt that the government owes to to those who paid into said trust funds and expect the money to be used for its promised purpose. Wikipedia explains it nicely [[url]http://en.wikipedia.org/wiki/United_States_federal_budget][/url] - Interestingly, the quote below is from the snapshot of the page I viewed last year, it has since been sanitized, no more mention of 'gimmick' and such: "These on-budget and off-budget items essentially amount to accounting gimmicks and schemes. In reality, what really matters is how much money comes in and how much money goes out. The federal government publishes the total debt owed (public and intragovernmental holdings) at the end of each fiscal year [50] and since FY1957, the amount of debt held by the federal government has increased every single year." The total amount of these Treasury IOUs currently stands at around $4.5 Trillion, or roughly 30% of GDP. Here is the link in the above reference [50]: [url]http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm[/url] That covers 1950-1999; for 2000-2010 go to the ...histo5.htm page. The above Treaury pages give just the absolute total of IGHs as of 9/30 of every year (6/30 before 1977), so I crunched the numbers, here is the resulting table, in which each line starts with a year and follows with a dollar amount representing "Year-over-year increase in intragovernmental borrowings as of 9/30 of the current year". Negative right-column numbers represent surpluses, and indeed 1957 is the last time we had one of those, although Clinton did come close in his last year in office (though some of that budget goodness was admittedly unsustainable windfall revenues from the about-to-pop dotcom bubble): [* = rounded to nearest million] [code] Date Debt Oustanding YoY Change ---------- ------------------ ----------------- 09/30/2010 13,561,623,030,891 1,651,794,027,380 09/30/2009 11,909,829,003,511 1,885,104,106,599 09/30/2008 10,024,724,896,912 1,017,071,524,650 09/30/2007 9,007,653,372,262 500,679,473,047 09/30/2006 8,506,973,899,215 574,264,237,492 09/30/2005 7,932,709,661,723 553,656,965,393 09/30/2004 7,379,052,696,330 595,821,633,587 09/30/2003 6,783,231,062,743 554,995,097,146 09/30/2002 6,228,235,965,597 420,772,553,397 09/30/2001 5,807,463,412,200 133,285,202,314 09/30/2000 5,674,178,209,886 17,907,308,271 09/30/1999 5,656,270,901,615 130,077,892,718 09/30/1998 5,526,193,008,897 113,046,997,500 09/30/1997 5,413,146,011,397 188,335,072,262 09/30/1996 5,224,810,939,135 250,828,038,426 09/29/1995 4,973,982,900,709 281,232,990,696 09/30/1994 4,692,749,910,013 281,261,026,874 09/30/1993 4,411,488,883,139 346,868,227,618 09/30/1992 4,064,620,655,521 399,317,303,824 09/30/1991 3,665,303,351,697 431,989,899,920 09/28/1990 3,233,313,451,777 375,882,491,590 09/29/1989 2,857,430,960,187 255,093,248,146 09/30/1988 2,602,337,712,041 252,060,821,088 09/30/1987 2,350,276,890,953 224,974,274,295 09/30/1986 2,125,302,616,658 302,199,616,658 09/30/1985 1,823,103,000,000* 250,837,000,000 09/30/1984 1,572,266,000,000* 195,056,000,000 09/30/1983 1,377,210,000,000* 235,176,000,000 09/30/1982 1,142,034,000,000* 144,179,000,000 09/30/1981 997,855,000,000* 90,154,000,000 09/30/1980 907,701,000,000* 81,182,000,000 09/30/1979 826,519,000,000* 54,975,000,000 09/30/1978 771,544,000,000* 72,704,000,000 09/30/1977 698,840,000,000* 78,407,000,000 06/30/1976 620,433,000,000* 87,244,000,000 06/30/1975 533,189,000,000* 58,129,184,269 06/30/1974 475,059,815,731 16,918,210,419 06/30/1973 458,141,605,312 30,881,144,372 06/30/1972 427,260,460,940 29,130,716,485 06/30/1971 398,129,744,455 27,211,037,506 06/30/1970 370,918,706,949 17,198,453,108 06/30/1969 353,720,253,841 6,141,847,416 06/30/1968 347,578,406,425 21,357,468,631 06/30/1967 326,220,937,794 6,313,849,999 06/30/1966 319,907,087,795 2,633,188,812 06/30/1965 317,273,898,983 5,560,999,726 06/30/1964 311,712,899,257 5,853,266,261 06/30/1963 305,859,632,996 7,658,810,276 06/30/1962 298,200,822,720 9,229,884,110 06/30/1961 288,970,938,610 2,640,177,762 06/30/1960 286,330,760,848 1,624,853,770 06/30/1959 284,705,907,078 8,362,689,333 06/30/1958 276,343,217,745 5,816,045,849 06/30/1957 270,527,171,896 -2,223,641,753 06/30/1956 272,750,813,649 -1,623,409,153 06/30/1955 274,374,222,802 3,114,623,694 06/30/1954 271,259,599,108 5,188,537,470 06/30/1953 266,071,061,638 6,965,882,853 06/30/1952 259,105,178,785 3,883,201,971 06/29/1951 255,221,976,814 -2,135,375,537 06/30/1950 257,357,352,351[/code] So, roughly speaking, total debt really got out of hand starting under Reagan, during whose 2 terms it nearly tripled. Under Bush Sr. it increased 50% in 4 years, under Clinton added another 40% in his 8 years, Bush Jr. nearly doubled it in his 8 years, and Obama is on a pace to outdo even his predecessor. |
Collapse of the Eurozone
Yes the title is exaggerated, yes it is inflamatory, yes it is intended to induce serious thinking. This is not some long term possibility, it is something that could happen within 2 to 4 years.
The ongoing dog and pony show in Greece is a harbinger of things to come. Greece will require propping up to the tune of an additional $450 Billion over the next 5 years. The Eurozone can't afford to continue forking out this level of cash to stabilize one country. The given conclusion is that at some point the Eurozone has to collapse, hopefully in an orderly fashion by kicking Greece and possibly other member nations out. The trigger event would be a default by Greece. Trickle effects would push writeoff of Greek debt into other member nations such as France, Germany, and Britain which would induce confidence problems for Portugal, Spain, Ireland, and Italy causing their ability to borrow on the market to erode causing another round of nations to have to exit the EU. I can only see two ways for this to be resolved. The first path is to kick out the weakest member nations. The second is to abandon the Euro common currency. Either will have drastic consequences. You might get the impression that Uncle Joe has schizo-multipersonality-disorder which is the reason the finance ministers are racking their brain to figure out a way to hold things together. If they abandon the Euro, member nations would have to go back to unique currencies. This would allow Greece to print money to pay the debts in effect inducing runaway inflation and transferring the burden of the financial holocost onto the Greek people. The alternative of kicking Greece out of the EU would likely involve having to kick out Portugal, Spain, and Ireland before the convulsion is over. Either path will leave the Greek people in a dire financial position. Where does this leave Uncle Sam? At a guess, the U.S. will at some point have to print trillions more $ which will cause inflation that will remind us all of Zimbabwe. DarJones |
But I'm not dead yet!
[quote]Greek debt crisis: Straw says euro facing 'slow death'
Former Foreign Secretary Jack Straw has said the euro is facing a "slow death" as the Greek debt crisis worsens. The Labour MP said the eurozone "cannot last" in its current form and the UK government should prepare for its potential collapse. He was speaking as MPs discussed the prospect of a fresh bailout of the Greek economy. Treasury Minister Mark Hoban said it was in the UK's interest to "ensure the continuing stability" of the eurozone. However, he insisted the UK would not be participating directly in any bailout and UK exposure to the Greek economy was "relatively small". ... "What the government should do instead of sheltering behind the complacent language, weasel words that 'it is not appropriate, we should not speculate' is recognise that this eurozone cannot last," he said. "And it is the responsibility of the British government to be open with the British people now about the alternative prospects. And since the euro, in its current form, is going to collapse is it not better that this happens quickly rather than a slow death." ... Treasury minister Mark Hoban said Greece needed to get its economy "back on track" and that its inability to raise funding from financial markets meant that a further bailout might be required. However, he stressed that the UK would not be participating "directly" in any rescue - although it could be liable for any further support via the International Monetary Fund. Asked about the wider impact of Greece defaulting on its debts, he said the Treasury, Bank of England and Financial Services Authority was closely monitoring the financial system but that UK banks had an exposure of just $4bn to Greece - much smaller than either France or Germany. He said that the UK had a "big interest in ensuring the continuing stability of the eurozone." But he added: "Clearly this crisis demonstrates the huge strain the eurozone is under - that is why it was right for us to stay out of the eurozone."[/quote]Full story at [URL]http://www.bbc.co.uk/news/uk-politics-13839381[/URL] Looks like the vultures are circling rather higher up than had previously been notices. Note for our US readers, "Foreign Secretary" is the officer which you call "Secretary of State" so Jack Straw is in some sense the analog of Condoleeza Rice. Paul |
[QUOTE=xilman;264226]Full story at [URL]http://www.bbc.co.uk/news/uk-politics-13839381[/URL]
Looks like the vultures are circling rather higher up than had previously been notices.[/QUOTE] Not sure I take your meaning. You mean in the sense of an increasing number of high-ranking European officials coming out and saying that the EMU - at least as presently constituted - is finished? [QUOTE]Note for our US readers, "Foreign Secretary" is the officer which you call "Secretary of State" so Jack Straw is in some sense the analog of Condoleeza Rice.[/QUOTE] Hillary Clinton will be surely quite interested to hear that. :) |
Jack Straw is the "former" foreign secretary just as Codolezza Rice is the "former" secretary of state. The inference is that Britain is pretty much thankful that they are not a single currency Euro nation.
I would point out one significant omission in the above article. Credit default swaps taken out by France would transfer liability for about $8 billion to British entities. A similar liability would be transferred to the U.S. The market reactions from today were more of a holding pattern than anything substantial to latch onto. Indications over the last 3 months point to an especially vulnerable period in the third quarter of this year. DarJones |
[QUOTE=ewmayer;264260]Not sure I take your meaning. You mean in the sense of an increasing number of high-ranking European officials coming out and saying that the EMU - at least as presently constituted - is finished?
Hillary Clinton will be surely quite interested to hear that. :)[/QUOTE]Yes, higher in the sense of high-flyers. Straw's intervention is the first time I've ever seen anyone at that rank break ranks with the "it will all turn out fine in the end" party line. Fusion_power has already addressed what is actually the latter issue, despite it concerning "the former". Paul |
[QUOTE=xilman;264277]Yes, higher in the sense of high-flyers. Straw's intervention is the first time I've ever seen anyone at that rank break ranks with the "it will all turn out fine in the end" party line.[/quote]
One sees this so often - in the U.S. we now see former Fed chair Greenspan correctly diagnosing (in hindsight) the housing bubble and assorted maladies related to our national decades-long credit binge - although he denies being in any way complicit in any of the madness. What we need is more folks like these to have the courage to speak up and listen to other voices than those in their coteries of paid-to-groupthink subordinates, while they are still in power and best-positioned to effect change. That so few do apparently speaks to the dire career-limiting potential of such heterodoxy. [quote]Fusion_power has already addressed what is actually the latter issue, despite it concerning "the former". Paul[/QUOTE] Aha - my eyes must have conflated 'former' and 'foreign' when I glanced at the article excerpt. Although if one wanted to be truly precise in terms of (backward-looking) positioning, Straw's counterpart would be Madeleine Albright. But who's counting counterparts (or counterpanes, or counterparties)? Looks like "markets rally on hopes for a Greek solution" is an apt blurb-o-matic bullish headline of the day. |
The Greek Illusion | Banking’s Moment of Truth
Couple of NYT Op-Eds for your reading pleasure today:
[url=http://www.nytimes.com/2011/06/21/opinion/21iht-edcohen21.html?ref=opinion]Roger Cohen | The Great Greek Illusion[/url]: [i]Greece was never ready to join the euro zone. But Europe’s union required an Athenian imprimatur, so everyone turned a blind eye.[/i] [quote]LONDON — Greece has long held emotional sway over Europe. All the cradle-of-Western-civilization talk earned it leniency, even indulgence. The European Union was not ready to go mano-a-mano with the birthplace of democracy. Past glory is a wonderful thing — and a lousy guide for present policy. That’s true in the Holy Land, in Kosovo and in Athens. Greece should not have been allowed into the euro. It failed to join in 1999 because it did not meet fiscal criteria. When it did meet them in 2001, the fix came through phony budget numbers. But Europe’s bold monetary union required an Athenian imprimatur to be fully European. So everyone turned a blind eye....[/quote] [url=http://www.nytimes.com/2011/06/21/opinion/21nocera.html?ref=opinion]Joe Nocera | Banking’s Moment of Truth[/url]: [i]Why banks shouldn’t win the fight over capital requirements[/i] [quote]Capital matters. Let me put that another way. The current fight over additional capital requirements for the banking industry, eye-glazing though it is, also happens to be the most important reform moment since the financial crisis broke out three years ago. More important than the wrangling over Dodd-Frank. More important than the ongoing effort to regulate derivatives. More important even than the jousting over the new [url=http://www.consumerfinance.gov/]Consumer Financial Protection Bureau[/url]. If investment banks like Merrill Lynch had had adequate capital requirements, they would not have been able to pile on so much disastrous debt. If A.I.G. had been required to put up enough capital against its credit default swaps, it’s quite likely that the government would not have had to take over the company. If the big banks had not been able to so easily game their capital requirements, they might not have needed taxpayer bailouts. A real capital cushion would have allowed the banks to absorb the losses instead of the taxpayers. That’s the role capital serves. Adequate capital hides a plethora of sins. And because, by definition, it forces banks to use less debt, it can also prevent sins from being committed in the first place. “There is no credible way to get rid of bailouts except with capital,” says Anat Admati, a finance professor at Stanford Business School and a leading voice for higher capital requirements. “The only cure is capital,” says Daniel Alpert, a founding managing partner of Westwood Capital. A few days ago, The Wall Street Journal wrote an editorial applauding the recent suggestion by Daniel Tarullo, a Federal Reserve governor, that the biggest banks hold as much as 14 percent of assets in capital. I couldn’t agree more. Which is why [url=http://www.reuters.com/article/2011/06/16/us-financial-regulation-idUSTRE75F4MR20110616]a hearing held last week[/url] by the House Financial Services Committee was such a sorry sight. Under the guise of examining whether the new financial regulations — including proposed capital requirements — were making American banks less competitive, the Republican majority peppered U.S. regulators, including Tarullo, with skeptical questions about the need for increased capital requirements. It was pathetic. [/quote] |
The few, the rotten, the Fraudsters!
There have been very few convictions in mortgagegate so far. Here is one that is long overdue. [url]http://www.abc3340.com/story/14972026/feds-seek-life-term-for-mortgage-fraud-mastermind[/url] [QUOTE]ALEXANDRIA, Va. (AP) - Federal prosecutors are seeking a life sentence for the man convicted of orchestrating a $3 billion fraud while running what had been one of the nation's largest private mortgage companies. Fifty-eight-year-old Lee Farkas of Ocala, Fla., was majority owner of Florida-based Taylor Bean & Whitaker, which collapsed in 2009 when the scheme unraveled. The fraud also contributed to the failure of Alabama-based Colonial bank, which had been one of the country's 25 largest banks. Sentencing guidelines call for a term of 385 years. In court papers filed Thursday, prosecutors say Farkas should receive the maximum sentence when he is sentenced next week. They say he lived a life of opulence while running one of the largest fraud schemes in U.S. history. Farkas' lawyer, Bill Cummings, called the government's recommendation excessive.[/QUOTE] For every conviction, there are thousands who walk free after skirting the edges and dipping toes into illegality. DarJones |
Re: beginning to hold the miscreants responsible
"Federal Agency Sues Banks For Credit Union Failures"
[url]http://moneyland.time.com/2011/06/22/federal-agency-sues-banks-for-credit-union-failures/[/url] [quote]One of the most frustrating things about the 2008 financial crisis was the sense that the people who got us into this mess weren’t going to face any kind of repercussions. For ordinary Americans watching their nest eggs tank while reading about bailouts and golden parachutes, there was a widespread feeling that somebody needed to be held accountable. Now, David’s winding up his slingshot. The National Credit Union Administration — it basically does for credit unions what the FDIC does for banks — filed a lawsuit against J.P. Morgan Chase & Co., and Royal Bank of Scotland PLC in a bid to claim $800 million in compensation. The suits allege that the respective banks took terrible mortgages, bundled them into securities and then sold them to five credit unions, omitting pertinent information or flat-out lying about the poor quality of the underlying assets. When the credit unions failed, NCUA had to take custody of these bonds and pay hundreds of millions of dollars to make the credit unions’ customers whole. The agency has indicated that this is only the first in a string of lawsuits it intends to bring against financial firms that sold what was essentially fool’s gold to credit unions that then collapsed as a result. “We expect to file additional actions and seek a total amount of damages in the billions of dollars. Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions,” NCUA’s board chairman said in a statement. . . .[/quote] |
[url=http://www.bloomberg.com/news/2011-06-27/ron-paul-s-anti-fed-message-drives-2012-white-house-bid-gaining-respect.html]Ron Paul’s Anti-Fed Message Gains Respect for White House Bid[/url]
[quote]When Ron Paul announced four years ago that he was running for president, the congressman from Texas had a tough time attracting attention. Paul -- known for his calls for a significantly limited government, opposition to the Iraq, Afghan and Libyan conflicts and his drive to get rid of the Federal Reserve -- stayed in Washington to declare his candidacy for the 2008 Republican nomination on C-Span, the cable television station devoted to government proceedings. His entry earned a one-sentence mention near the end of a Washington Post political story, and little notice elsewhere. Last month, his venue for announcing another presidential bid was an appearance on ABC’s “Good Morning America” -- a program with more than 4.5 million viewers. He spoke from a rally in New Hampshire, where hundreds of backers drawn to Paul’s message of shrinking government and limiting its reach cheered the 75-year-old great-grandfather. [/quote] [i]My Comment:[/i] Saw a long, thoughtful interview with Rep. Paul last night on C-SPAN. I find his string support among college students to be especially interesting. Back in 2008 one could dismiss it as a "Berkeley hippie" effect - college kids` knee-jerk support for whichever candidate wanted to legalized drugs - but I think it runs deeper. Paul mentioned last night that many of the college kids he speaks with have a keen sense of to what extent the baby-boomer "entitlement generation" has bankrupted the country and that the nation desperately needs to be steered onto a new course. I`m a bit concerned about the "keep the Federal government out of education" angle as possibly concealing a creationist agenda, but OTOH, a dyed-in-the-wool libertarian like Paul might simply be thinking along similar lines as he [url=http://en.wikipedia.org/wiki/Ron_Paul#Political_positions]expresses about abortion[/url], namely that such decisions should be made by the voters, legislators and judiciary of each state: [quote]Paul advocates states' rights to decide how to regulate social matters not directly found in the Constitution. Paul calls himself "strongly pro-life",[188] "an unshakable foe of abortion",[189] and believes regulation or ban[190] on medical decisions about maternal or fetal health is "best handled at the state level".[191][192] He says his years as an obstetrician led him to believe life begins at conception;[193] his abortion-related legislation, like the Sanctity of Life Act, is intended to negate Roe v. Wade and to get "the federal government completely out of the business of regulating state matters."[/quote] Again, normally being a staunch anti-abortionist would be a buzz-killer among age groups like the college set, but Paul is not as easy to pigeonhole here, because such positions are consistent with his longstanding libertarianism and states-rights advocacy: He himself may be pro-life, but his fundamental position is that neither he nor any federal bureaucrat or agency should be interfering with states` rights to decide such issues for themselves. He argues that his agenda only seems radical because it`s been so long since the federal government usurped those rights. Another unusual thing I've noted before about RP: Normally when the paterfamilias is such a free-thinker, it's his kids who manage to tone down the message enough to make it palatable to get elected. In the Paul family, the elder Paul is the thoughtful, "OK, I may disagree with his stance here but I can see how he arrived at it" one, whereas the son, Rand, a.k.a. senator Paul, strikes me as a bit of a nut. |
1 Attachment(s)
Big news of the past 24 hours is a multibillion-dollar settlement by BofA of a mortgage-securitization-fraud suit by some big-name investment funds:
[url=http://www.nytimes.com/2011/06/30/business/30mortgage.html?_r=1&ref=business]Bank of America Settles Claims Stemming From Mortgage Crisis[/url]: [i]The charge, which will drive the company to a multibillion-dollar loss in the second quarter, is the biggest single settlement tied to the subprime mortgage boom.[/i] [quote]Bank of America announced Wednesday that it would take a whopping $20 billion hit to put the fallout from the subprime bust behind it and satisfy claims from angry investors. But for its peers, the settlements may just be starting. Heavyweight investors that forced Bank of America to hand over billions to cover the cost of home loans that later defaulted are now setting their sights on companies like JPMorgan Chase, Citigroup and Wells Fargo, raising the prospect of more multibillion-dollar deals. “Bank of America has charted a path that our clients expect other banks will follow,” said Kathy D. Patrick, the lawyer who represented BlackRock, Pimco, the Federal Reserve Bank of New York and 19 other investors who hold the soured mortgage securities assembled by the Bank of America. Ms. Patrick’s clients are seeking $8.5 billion from Bank of America — a settlement that needs a judge’s approval and could still face objections from investors seeking a better deal. A date to review the blueprint has been set for Nov. 17 with Justice Barbara R. Kapnick in New York Supreme Court. All told, analysts say the financial services industry faces potential losses of tens of billions from future claims — real money even by the eye-popping standards of the nation’s biggest banks. Indeed, even that $20 billion announced Wednesday will not be enough to completely stanch the bleeding at Bank of America — it says litigation over troubled mortgages could cost it another $5 billion in the future.[/quote] [i]My Comment:[/i] Given that BofA set aside a paltry $1 Billion at the start of this year as reserves for such losses, I would its "another $5 billion in the future" claim with a grain of salt the size of a binocular-visible asteroid. But perhaps this is good in the sense that even if the government continues to "aggressively non-pursue" criminal charges in the great mortgage fraud epidemic of the past decade, there is still some monetary-damages recourse for victims to pursue in the civil courts. And, markets enjoying a nice week-long rally first on expectations and now on news that "The Greek Debt Crisis Is Solved!", meaning Greece did just enough to get itself another bailout cheque and avoid immediate default. Yeah, this 'strategy' by EMU members to can-kick the problem is gonna continue to work really well when Spain and Italy`s debt issues get to the blow-up phase: [url=http://www.nytimes.com/2011/07/01/business/global/01iht-euro01.html?ref=business]German Banks and Government Agree to Roll Over Greek Debt[/url]: [i]The agreement is based on a similar agreement between France and its banks, and is seen as crucial to securing more aid for Greece.[/i] [quote]The banks and insurance companies will commit to providing financing for a Greek aid package, Mr. Schäuble told a news conference in Berlin, according to Reuters. The agency quoted him saying that as a minimum, the Greek debt held by German groups that matures by 2014 would be rolled over, or extended. He also said that 55 percent of Greek bonds held by German institutions would mature after 2020. At the same event, the Deutsche Bank chief executive, Josef Ackermann, said a French proposal was being used as a basis for the German agreement, although modifications would be built into that plan. German and French lenders are the biggest foreign holders of Greek debt. And the involvement of private creditors is seen as crucial in international agreement on a second bailout for the crippled Greek economy. A separate hurdle was passed Wednesday after Prime Minister George A. Papandreou of Greece won the passage of a bill setting new government spending cuts and revenue-raising steps. [/quote] [i]My Comment:[/i] Now let`s see what the ratings agencies think of the rollover ploy. ------------------------- Obama and the IEA (Intl Energy Agency) made a [url=http://www.nytimes.com/2011/06/24/business/24oil.html]big show late last week[/url] of releasing perhaps 1 U.S.-consumption-day's worth of oil of their respective strategic reserves in order to 'counteract the effects of the recent rise in oil prices on the economic recovery' or some such nonsense attempting to justify such 'emergency measures'. The NY Times editorial board, um, [url=http://www.nytimes.com/2011/06/26/opinion/sunday/26sun3.html]gushed at this stroke of genius[/url]: [quote]We have never been enthusiastic about quick fixes. But the Obama administration’s decision to release 30 million barrels of oil from the Strategic Petroleum Reserve — the nation’s emergency stockpiles — makes sense. It should provide a modest boost to the American economy. It will help consumers at the pump as they head into the summer vacation season. And it sends an important message to the Organization of the Petroleum Exporting Countries that the United States is capable of protecting its domestic market, at least in the short term, even when those countries refuse to increase production. The initiative is part of a joint effort with the International Energy Agency, whose other members will release an additional 30 million barrels. The total amount, 60 million barrels over 30 days, is aimed at making up the loss of nearly two million barrels a day in exports caused by unrest in Libya and, to a lesser extent, Yemen. The two million barrels is a tiny fraction of the 89 million barrels consumed daily around the globe. Even so, there should be some relief for consumers. According to the Center for American Progress, a research and advocacy group, past oil sales from the reserve — most recently President George W. Bush’s release of 21 million barrels after Hurricane Katrina — reduced prices by 10 to 15 percent within a month. That would translate today into savings of 25 to 35 cents per gallon of gas at the pump.[/quote] [i]My Comment:[/i] Interestingly, gas prices had already been dropping steadily for most of June - At the local station whose self-serve-regular price I check every day on my way to work, the price is down about 35 cents (nearly 10%) from its early-May highs - but are still roughly 20% higher than a year ago. Anyway, the release from the strategic reserve was [url=http://www.zerohedge.com/sites/default/files/images/user5/imageroot/draghi/Gas%20Price.jpg]wildly successful[/url] at effecting a durable drop in oil and gasoline prices (this chart is gasoline futures), clearly those "evil global oil speculators" have learnt their lesson and gone back to looking for honest work. A popular US editorial cartoonist, Lisa Benson, more aptly describes [url=http://www.gocomics.com/lisabenson/2011/06/24]the real emergency[/url]: |
[QUOTE=ewmayer;265037]Big news of the past 24 hours is a multibillion-dollar settlement by BofA of a mortgage-securitization-fraud suit by some big-name investment funds:
<snip> [/QUOTE] [url]http://www.huffingtonpost.com/2011/06/30/us-economy-decline-permanent_n_887717.html[/url] |
Couple of small addenda to my lengthier missive above:
[url=http://www.zerohedge.com/article/rating-agencies-have-now-been-silenced-balance-sheet-mlec-style-debt-rollover-plan-will-not-]ZeroHedge (citing a Reuters piece) reports[/url] that the reason the EuroPonzi-overseers chose "The French Model" for Greek debt rollover is that it exploits a kind of "preapproved loophole" in the ratings agencies' criteria for CDS-triggering-event defaults. And despite gasoline futures rapidly climbing back to their pre-SPR-oil-release levels in the past week, there may be some good news on the U.S. midwest-crop front, where flooding worries had caused prices of corn, soybean and such to spike to rather scary levels in the past few months: [url=http://globaleconomicanalysis.blogspot.com/2011/06/corn-soybean-wheat-futures-plunge-on.html] Corn, Soybean, Wheat Futures Plunge on Crop Report; Inflation, Interest Rate Outlook[/url] |
As a continuation of my post above, this hit the news today.
[url]http://www.bizjournals.com/birmingham/morning_call/2011/07/farkas-gets-30-years-for-taylor-bean.html[/url] [QUOTE]Lee B. Farkas, former chairman of Florida-based Taylor Bean & WhitakerbizWatch , received a prison sentence of 30 years on Thursday for his role in orchestrating a $3 billion fraud that helped bring down Alabama's Colonial Bank. (bizWatch) According to the Associated Press, Federal prosecutors in northern Virginia had hoped for a life sentence, citing the case against Farkas as one of the most significant to arise from the financial meltdown in the United States. Farkas was convicted in April by a federal jury on 14 counts that included securities fraud and conspiracy.[/QUOTE] DarJones |
I still don't understand how this "French Model" will fix this problem.
[URL="http://www.theaustralian.com.au/business/economics/sp-puts-spanner-in-greek-debt-plan/story-e6frg926-1226087694819"]http://www.theaustralian.com.au/business/economics/sp-puts-spanner-in-greek-debt-plan/story-e6frg926-1226087694819[/URL] On the Greek side, although austerity measures have been agreed upon and passed by the Greek government (although the public may blunt some of the outcome), they are far from taking effect. Capital proceeds from the privatization of assets are required as part of the solution and that has yet to begin. The French and the German banks have got their ties tangled in a slow rotating lathe and the ECB will not jump in to break the tie (so to speak) as their policy is not to accept Greek's bonds given their current rating as collateral. There seems not to be sufficient time to fix these problems or else it'll be a photo finish. Calmly we walk through this July day ... |
Portugal is in the news today with a debt downgrade to junk status. Why is it that the ratings agencies take so long to decide this? Technically, Greece, Ireland, and Portugal have already had to be bailed out. How much longer can Spain hang on? And if (when) Spain goes down, how long before Italy is on the ropes?
DarJones |
[QUOTE=imwithid;265481]I still don't understand how this "French Model" will fix this problem.[/quote]
It would seem the ratings agencies share your skepticism: [url=http://www.nytimes.com/2011/07/05/business/global/05iht-euro05.html?_r=1&hp]S.&P. Warns Bank Plan Would Cause Greek Default[/url] [quote] Greece risks being judged in default on its debt obligations if banks are forced to bear part of the pain, Standard & Poor’s said Monday, suggesting that current proposals for rescuing the euro zone’s weakest member may have to be reconsidered. In particular, a plan proposed by the French government and banks “could require private sector debt restructuring in a form that we would view as an effective default,” S.&P. said in a statement. The rating agency also said it was cutting its long-term rating on Greece three notches deeper into junk territory, to CCC from B. A finding by the credit ratings agencies of default would also require the E.C.B. to impose discounts, known as haircuts, on the Greek debt it has accepted as collateral. That would inflict more financial pain on banks holding that debt.[/quote] Much more in the above article, and a related Mish post [url=http://globaleconomicanalysis.blogspot.com/2011/07/s-warns-greek-bailout-plan-constitutes.html]here[/url]. Denninger later posted this amusing snip hot off the financial newswires: [quote]EU FINANCIAL REGULATION CHIEF: EU COULD LOOK INTO POSSIBILITY OF SUSPENDING RATINGS ON EU COUNTRIES RECEIVING BAILOUTS[/quote] In effect, "If the ratingshouses refuse to play ball by our rules, we just take the ball and go home." Ooh yeah, I'm sure the bond and CDS markets will treat such a unilateral action as a giant "problem solved" signal and all will be well. [b] [i][Added a bit later:][/i] [/b] And Matt Taibbi notes the questioning of "Why has the Obama Administration so utterly failed to clean up Wall Street?" is getting louder and more mainstream in terms of major media coverage: [url=http://www.rollingstone.com/politics/blogs/taibblog/frank-rich-blasts-obama-20110706]Frank Rich Blasts Obama For Letting Wall Street Off the Hook[/url] [quote]A lot of people are talking about Frank Rich’s [url=http://nymag.com/news/frank-rich/obama-economy/presidents-failure/]explosive new article in New York magazine[/url]. I think it is a remarkable thing, the latest and maybe the most comprehensive in an increasingly lengthy series of articles and investigations into the Obama administration’s failure to properly investigate the causes of the financial crisis. By now this is not quite a mainstream media drumbeat, but it’s coming close: between the reporting of Louise Story and Gretchen Morgenson at the New York Times to the recent not-terribly-laudatory piece on New York Southern District U.S. Attorney Preet Bharara by the New Yorker’s George Packer, to Eliot Spitzer’s bitter commentary on the subject on CNN, to my own bleatings, and now this Rich broadside, it seems quite clear that the Obama administration’s failure to clean up Wall Street is becoming a matter of some fascination with the few investigative journalists who are not covering the Casey Anthony case.[/quote] |
Pair of NYT articles:
Article #1 is on today's dismal U.S. jobs report: [url=http://www.nytimes.com/2011/07/09/business/economy/job-growth-falters-badly-clouding-hope-for-recovery.html?ref=business]Job Growth Falters Badly, Clouding Hope for Recovery[/url]: [i]For the second month in a row, employers added a dismally small number of jobs, showing that the United States economy is barely creaking along.[/i] Two amusing tropes in the above piece need a bit of translation: [i]"Economists were stunned since they had been expecting June to show stronger job creation as oil prices eased and supply disruptions receded in the aftermath of the Japanese tsunami and earthquake."[/i] Translation: Economists once again prove themselves to be permanent wild-eyed optimists. Anyone following trends in the actual employment-market data over the past year knows that $100-per-barrel oil is simply an add-insult-to-injury-kind of icing on the double-dip-recession cake which was baked when governments round the world agreed to bail out the TBTF banks, rather than forcing all the bad debt clogging the arteries of the global economy out into the open and instead of throwing wads of new-printed bailout cash at the banks, focusing on sustainable productive jobs-creation. [i]Most analysts are not yet forecasting an outright slide back into recession.[/i] Translation: An outright slide back into recession is clearly well-underway. And check out the obligatory desperate-search-for-a-silver-lining: [i]"Janette Marx, senior vice president at Ajilon Professional Staffing, a unit of Adecco, said that while companies in the accounting and finance sector had ratcheted down their requests for temporary workers, they were slowly recruiting permanent hires. Some economists pointed to more recent data showing a pickup in retail sales at chain stores and a rise in an index of business hiring intentions as an indication of future job growth. In manufacturing, some analysts said that a pickup in auto production in the fall after the Japan-related slowdown, as well as steady growth in business equipment sales, could fuel job creation in the coming months. Daniel J. Meckstroth, chief economist of the Manufacturers Alliance, a trade group, said that consumers who had been delaying purchases of cars, washing machines, refrigerators and other big equipment that breaks down over time would eventually start buying again as they paid down debts accumulated before the recession."[/i] The only thing missing - due to the unfortunate fact of it being July - was "many economists blamed heavy snowstorms in the northeastern U.S."-style nonsense. Article #2 is on a rapidly-weakening IPO market, due to a combination of numerous recent [url=http://www.bloomberg.com/news/2011-06-21/paulson-dumping-sino-forest-may-deal-clients-720-million-loss.html]Chinese-fraud-company scandals[/url], concerns about credit bubbles in [url=http://globaleconomicanalysis.blogspot.com/2011/07/credit-crisis-in-brazil-consumer-loan.html]emerging markets[/url], and concerns about the recent wave of much-hyped U.S. tech IPOs being a social-media-centric second coming of the dotcom bubble a decade ago: [url=http://www.nytimes.com/2011/07/09/business/the-boom-and-crash-cycle-of-ipos.html?ref=business]The Boom and Crash Cycle of I.P.O.’s[/url]: [i]The 98 canceled offerings in 2011’s second quarter hark back to the dot-com crash in 2000.[/i] |
It seems to me that the economic cycle is directly correllated to the ease of making money with accounting games over the ease of making money with real economic activity, by hiring people to do real things.
|
Europe on the Brink
I think the titles of Mish`s latest half-dozen Europe-related posts serve as an adequate summary of goings-on in the Eurozone financial Ponzi. (I`ve decided to describe most of the world`s "developed" economies, all of which have central banks run by Keynesian nitwits - simply as "[geographic/economic region] financial Ponzi", since they are engaged in large-scale Ponzi schemes with respect to sovereign debt and economic 'growth', which have all now reached or surpassed their limits of viability under the crushing weight of the accumulated debt load, and are all in various stages of blowing up):
[url=http://globaleconomicanalysis.blogspot.com/2011/07/cardiac-arrest-italy-and-spain-close-to.html]Cardiac Arrest; Italy and Spain Close to the Abyss; EU Commissioner Seeks to Prohibit Agencies from Rating Debt of Countries in Rescue Programs[/url] [url=http://globaleconomicanalysis.blogspot.com/2011/07/sheer-panic-eu-revives-default-buyback.html]Sheer Panic; EU Revives Default, Buyback Ideas; New Strategy Coming "Shortly", No Timeline Set; Here's a clue: They are Clueless[/url] [url=http://globaleconomicanalysis.blogspot.com/2011/07/bond-vigalantes-stike-crisis-in-italy.html]Bond Vigilantes Strike; Crisis in Italy Escalates; Portugal 2-Year Debt Hits 18.36%, Greece 31.34%, Ireland 17.83%; New Record High Spreads[/url] [url=http://globaleconomicanalysis.blogspot.com/2011/07/european-government-bond-spreads-at.html]European Government Bond Spreads at Record Highs vs. Germany; 2-Year Spreads: Greece 30.09, Portugal 17.11, Ireland 16.58[/url] [url=http://globaleconomicanalysis.blogspot.com/2011/07/invisible-elephant-now-visible-eu-ready.html]Invisible Elephant Now Visible; EU Ready to Tell Trichet to "Stuff It"; Help for Italy?[/url] OK, that was just 5 posts, not the half-dozen I promised...by way of a 6th, here is a headline from today`s online edition of the German [i]Die Welt[/i]: [url=http://www.welt.de/finanzen/article13482959/An-den-Finanzmaerkten-ist-die-Panik-zurueck.html]An den Finanzmärkten ist die Panik zurück[/url]: [i]Die Sorge der EU um Italien schürt die Nervosität an den Märkten. Die Banken stehen stark unter Druck, sie halten 90 Prozent des Risikos.[/i] Translation: [i]Panic Returns to Financial Markets: Worries about Italy stokes nervousness in the markets. The banks are under strong pressure, they hold 90% of the risks[/i] [quote]The panic must be stemmed - that was the clear goal of the EU finance ministers. They announced that banks which fail the proposed stress tests could count on emergency rescues from EU governments. The signal to the markets was direly needed, since panic had already returned to the financial markets. On the German exchanges trading was halted multiple times after financial shares plunged. This "circuit breaker" is triggered automatically when a given equity price exceeds daily trading-range limits. The nervousness began in Italy. Already since Friday, shares of the banks there had been halted in trading multiple times. Within a few days shares of the large Unicredit bank lost more than 20 percent of their value. Only as of the afternoon did shares once again turn positive. [i][EWM: Aside - I just love how so many MSM finance writers simply assume that the natural state of the markets is permanently rising, and here that the real problem is not the fact that Unicredit is likely teetering on the vege of insolvency, but rather that the share price is falling.][/i] "There is no explanation in terms if fundamental data for the market panic", said Renato Panichi, Banking expert for the ratings agency Standard and Poors. "The large Italian banks are comparatively well-capitalized."[/quote] [i]My Comment:[/i] "Comparatively well-capitalized?" In comparison to what? Lehman brothers just before it went belly-up? Suuuuuuuure they are ... With gobs and gobs of Eurozone debt, with the balance of such holdins probably tilted toward their own nation`s. |
[QUOTE=ewmayer;266208]I think the titles of Mish`s latest half-dozen Europe-related posts serve as an adequate summary of goings-on in the Eurozone financial Ponzi. (I`ve decided to describe most of the world`s "developed" economies, all of which have central banks run by Keynesian nitwits [/QUOTE]
"Keynesian nitwits " is too soft a description. Gordon Gekko, willing to do whatever it takes to line his own pockets while screwing others is perhaps more apt. It is greed on the part of the bankers themselves. |
USA on the brink
(With acknowledgement to EWM for the title)
[quote=bbc] [SIZE=3][B]Moody's to review US triple-A debt rating[/B][/SIZE] [B]Ratings agency Moody's has said it may cut the US AAA debt rating, citing the "rising possibility" the US will default on its debt obligations.[/B] The agency warned the likelihood the US would fail to raise its statutory debt limit in time to avert default was low but not insignificant. It came as a fourth day of cross-party talks in Washington on the debt limit were said to have ended stormily. US Fed chief Ben Bernanke said a default would cause a "major crisis". Speaking before Congress on Wednesday, the Federal Reserve chairman warned it "would send shockwaves through the entire financial system".[/quote] Full article at [URL]http://www.bbc.co.uk/news/business-14142621[/URL] Paul |
[QUOTE=R.D. Silverman;266210]"Keynesian nitwits " is too soft a description. Gordon Gekko, willing to
do whatever it takes to line his own pockets while screwing others is perhaps more apt. It is greed on the part of the bankers themselves.[/QUOTE] That's the accusation levelled at [b]investment[/b] bankers - Goldman Sachs and the like; central bankers are a rather different group - they're Treasury bureaucrats, not particularly heavily paid. The problem is that central bankers are currently finding it politically difficult to do what would be economically sensible, because the financial industry represents quite a large portion of the economy in their countries, and they don't know who's gambling with whose money as to whether a default will occur. So they are desperate to do something which has the same effect as defaulting without triggering CDS-like objects which are written to trigger on default. |
[QUOTE=xilman;266359]Full article at [URL]http://www.bbc.co.uk/news/business-14142621[/URL][/QUOTE]
Standard & Poor jumps on the bandwagon. [URL]http://online.wsj.com/article/SB10001424052702303406104576444003129534580.html?mod=WSJ_hp_us_mostpop_read[/URL] Paul |
[QUOTE=xilman;266467]Standard & Poor jumps on the bandwagon.
[URL]http://online.wsj.com/article/SB10001424052702303406104576444003129534580.html?mod=WSJ_hp_us_mostpop_read[/URL] Paul[/QUOTE] Given that both parties are at a brinkmanship stance, it seems appropriate that the ratings agencies jump in (despite their tarnished reputations) in order to prod either side to form an agreement. Much of the public seem ignorant to the economics or gravity of the situation, many politicians don't seem to accept the economics or gravity of the situation, and the media seem to passively report progress with sparse analysis as they fail to convey the function and importance of fiscal policy in an open economy (whether it be The WSJ or The Economist -- if they won't, who will?). Fiscal policy permits government the use of two primary tools: Taxes and Consumption (i.e. Spending). To discard the use of either one, given the uncertain, fragile climate we're in, is irresponsible. I'm baffled by Eric Cantor's, and by extension, the Republicans', obstinate stance on taxes. This "Plan B" is a temporary fix to a larger problem, which like the problems in Europe are continually postponed until they reach emergency levels. Me before we except after emergency. |
8 EU banks failed stress tests.
Guess which nations had problem banks? 5 in Spain 2 in Greece 1 in Austria And as we already know, France and Germany have huge exposure to Greek debt. Care to bet they also have a big exposure to Spain? DarJones |
[QUOTE=imwithid;266524]Fiscal policy permits government the use of two primary tools: Taxes and Consumption (i.e. Spending). To discard the use of either one, given the uncertain, fragile climate we're in, is irresponsible. I'm baffled by Eric Cantor's, and by extension, the Republicans', obstinate stance on taxes.[/QUOTE]The GOP decided a few decades ago that ideology is more important than reality, for political purposes. Their goal of eliminating all liberal aspects of government require strict adherence to the "Starve the Beast" tax strategy.
Of course, in accordance with one of Karl Rove's dictums, they accuse liberals of doing what they're doing. For a spectacular example, see their absurd myth that the world's climatologists have conspired to foist a hoax (anthropogenic global warming) upon the world for the purpose of gaining political power, rather than admitting that there is a thoroughly documented right-wing anti-science campaign spreading disinformation about AGW and other scientific issues (e.g., acid rain, evolution, DDT effects on wildlife, link between tobacco use and cancer) whose reality conflicts with right-wing ideology. |
Mr Cheesehead, I want my cheese curds from sauk city!
The decision came in 1968 when the liberal half of the democratic party alienated the dixiecrats with civil rights.... |
[QUOTE=cheesehead;266756]The GOP decided a few decades ago that ideology is more important than reality, for political purposes. Their goal of eliminating all liberal aspects of government require strict adherence to the "Starve the Beast" spending strategy.
Of course, in accordance with one of Karl Rove's dictums, they accuse liberals of doing what they're doing. For a spectacular example, see their absurd myth that the world's climatologists have conspired to foist a hoax (anthropogenic global warming) upon the world for the purpose of gaining political power, rather than admitting that there is a thoroughly documented right-wing anti-science campaign spreading disinformation about AGW and other scientific issues (e.g., acid rain, evolution, DDT effects on wildlife, link between tobacco use and cancer) whose reality conflicts with right-wing ideology.[/QUOTE] The Democratic Party decided a few decades ago that ideology is more important than reality, for political purposes. Their goal of eliminating all conservative aspects of government require strict adherence to the "Feed the Beast" spending strategy. Of course, in accordance with one of Nanci Pelosi's dictums, they accuse conservatives of doing what they're doing. For a spectacular example, see their absurd myth that the conservatives want to throw granny over the cliff, rather than admitting that there is a thoroughly documented pressing need for reform. ----- Come on cheesehead. This thread is not about anti-science rhetoric (which is not limited to the GOP, nor heartily endorsed by the GOP as you seem to imply--the current front-running presidential candidate [among many many others] readily admits to the reality of climate change [url]http://www.politico.com/news/stories/0611/56580.html[/url]). It is about the current economic crisis. Claiming that the GOP is acting out of ideological purity rather than reality (and by implication, without concern for the country) is just poison to the conversation (and untrue). |
[QUOTE=Fusion_power;266691]8 EU banks failed stress tests.
Guess which nations had problem banks? 5 in Spain 2 in Greece 1 in Austria And as we already know, France and Germany have huge exposure to Greek debt. Care to bet they also have a big exposure to Spain? DarJones[/QUOTE] Mish (citing a WSJ article) has commentary on the latest round of Eurozone bank "stress tests" which, among other hilarities, don`t include defaults on sovereign debt as part of their set of "stress scenarios". There was apparently some provision for haircuts on such debt, but I doubt the haircut scenario was adequately stressful: For example, what if haircuts trigger a CDS-default event, which ripples through the banking system? And as the WSJ piece notes, the banks which failed (and dozens of others) also revealed that they have to residential and commercial RE-loan exposure in places like Spain which in many cases dwarfs their sovereign-debt exposure. There are some huge haircuts coming on those loan portfolios, which were not considered with anything approaching realism in the stress tests: [url=http://globaleconomicanalysis.blogspot.com/2011/07/details-cast-more-suspicion-on-latest.html] Details Cast More Suspicion on Latest European Bank "Stress Tests"[/url] On the U.S. debt-ceiling-Kabuki front, one of the more outrageous lies - which not a single mainstream media organization I am aware of seems to have caught - was Obama threatening that "I can`t guarantee those [social Security] checks will go out" if the ceiling was not raised. A dire threat, obviously an attempt to arm-twist: Get SS and Medicare recipients - especially those in Republican districts - up in arms and on the phone to their congressional representatives, telling them they have to raise the debt ceiling in order to keep the checks coming. alas, the threat is based on a factual untruth: In fact, Social Security / Medicare and the debt ceiling are completely separate issues, though the very fact that the government has spent the past 30 years busily raiding both trust funds in order to support ever-increasing deficit spending and make its yearly budget numbers look less dire makes the 2 issues easy to conflate, as the President has done. [url=http://market-ticker.org/akcs-www?post=189943]Karl Denninger explains[/url]: [quote]To the peanut gallery that don't "get it": There is zero risk of Social Security and Medicare checks not going out if the debt ceiling is not raised for the next three years. Got it? Zero. How? [url=http://www.treasurydirect.gov/NP/BPDLogin?application=np]Here's how:[/url] That total debt number is the amount subject to the limit, more or less. But the "Intragovernmental Holdings" is the amount that the Social Security and Medicare trust funds are "owed" by the general fund. The Treasury can redeem those by selling new bonds into the market in a 1:1 ratio and if they do so they now have dollars in an exactly equal amount. That's $4.6 trillion dollars.[/quote] [i]My Comment:[/i] Actually, there are two possibilities as to why the President made his outrageous claim: [1] He is so ignorant as to how these "trust funds" are being run that he fails to understand that Treasury can at any time sell debt obligations in the open market in order to redeem an equal-sized portion of borrowings from the 2 trust funds (in effect take the off-the-books "Intragovernmental Holdings" debt back onto its books), or [2] This is a cynical ploy designed to get the public up in arms and influence the debate. Either possibility is worrisome. The caveat to scenario [2] is that perhaps Treasury is - justifiably - worried how the bond markets would react to such trust-fund-redemption debt issuance. The Fed has been buying nearly all new government debt for the past year in an attempt to keep interest rates as low as possible, perhaps the last thing they want to do is to let the global bond markets actually have a chance to let them know what they think of this giant debt-Ponzi scheme. Now, the Republicans are far, far from blameless in the current debt-ceiling stalemate themselves - Even when the President and key democratic leaders recently offered to give way on one of their sacred cows and consider raising the age limits for the trust funds in order to restore them toward long-term solvency, the Reps. stubbornly refused to yield one inch on their holy of holies, the perpetuation of the Bush-era tax cuts for the rich, and the closing of loopholes which allow huge multinationals like GE, Google and the TBTF banks to escape paying nearly all of their federal corporate taxes. (GE routinely gets multibillion-dollars *refunds* at the same time it makes massive profts). So, plenty of scumbaggery to go around on both sides. |
I apologize for inserting a off-topic, non-economic, comment (my third paragraph above) in this thread, and will endeavor to keep other topics in other threads.
|
[url=http://www.bloomberg.com/news/2011-07-19/u-s-house-set-to-pass-doomed-spending-cut-bill-with-no-debt-deal-imminent.html]Obama Embraces Deficit-Cutting Plan of Gang-of-Six Senators[/url]
[quote]President Barack Obama embraced a $3.7 trillion debt-cutting plan by a bipartisan group of senators that would combine tax increases and spending cuts, saying it could offer a way out of the congressional deadlock over raising the U.S. borrowing limit. “We now are seeing the potential for a bipartisan consensus,” Obama said today at the White House. He called the proposal by the so-called Gang of Six “broadly consistent” with what he has sought and “a very significant step” in so far fruitless negotiations between Republicans and Democrats over boosting the nation’s $14.3 trillion borrowing authority before a threatened default on Aug 2. At the Capitol, the bipartisan group led by Republican Senator Saxby Chambliss of Georgia and Senator Mark Warner of Virginia pitched its plan for an immediate $500 billion in spending cuts followed by a longer-term effort to force bigger reductions and $1 trillion in tax increases. The plan calls for lowering tax rates and limiting the growth of entitlement programs such as Medicare and Social Security.[/quote] [i]My Comment:[/i] [strike]Gamblers` Anonymous[/strike]The equity markets had multiple risk-asset-chasing orgasms yesterday over the early reports about this. I agree with [url=http://globaleconomicanalysis.blogspot.com/2011/07/obama-embraces-deficit-cutting-plan-of.html]Mish[/url] and [url=http://market-ticker.org/akcs-www?post=190351]Denninger[/url] that any "plan" that may results from this is highly likely to be the usual smoke-and-mirrors, watered-down-and-backloaded-into-meaninglessness exercise in fig-leaf-to-give-ourselves-an-excuse-to-go-deeper-into-debt-ology. Think of it this way: Even if our corrupt, feckless DC pols actually managed to come up with a plan that cuts $400Bln per year starting right now (both of those propositions are laughable, but just for shits and grins here), that would cut the actual (not the phony "claimed by Treasury") run rate of U.S. debt increase, which is currently on track to hit somewhere between $1.6-2 Trillion year-over-year, by around 20%. So even under this wild-eyed optimistic scenario, we would be digging ourselves deeper into debt at a rate of "only" around $1.2-1.6 Trillion per year. Based on longstanding experience with these kinds of "budget reform efforts", the real reductions in debt-issuance are much more likely to be in the 0-5%-of-current-yearly-shortfall range. Madness. The key question is, will the ratings agencies roll over as they have done forever and anon? After thoroughly disgracing themselves during the late, great housing bubble, S&P and Moody's have shown recent signs of actually doing their jobs, and both have stated that without real, credible, deep budget-balancing steps, they will downgrade U.s. debt even if the debt ceiling is raised. Let`s see if they have the stones to do so. (I seriously doubt it, but it would be exceedingly interesting to be proved wrong on this point). |
[QUOTE=ewmayer;267037]After thoroughly disgracing themselves during the late, great housing bubble, S&P and Moody's have shown recent signs of actually doing their jobs, and both have stated that without real, credible, deep budget-balancing steps, they will downgrade U.s. debt even if the debt ceiling is raised. Let`s see if they have the stones to do so.[/QUOTE]Why not? They'd love to regain some credibility. Triggering an historic quake in the bond market would do a lot for that.
To what sort of future revenge might S&P or Moody's be vulnerable after issuing such a downgrade? |
[QUOTE=cheesehead;267056]Why not? They'd love to regain some credibility. Triggering an historic quake in the bond market would do a lot for that.
To what sort of future revenge might S&P or Moody's be vulnerable after issuing such a downgrade?[/QUOTE] Several possibilities occur to me: [1] Government strips them of their [url=http://en.wikipedia.org/wiki/Nationally_Recognized_Statistical_Rating_Organization]NRSRO[/url] status, costing them business in a big way; [2] Justice Dept starts doing (its* job and going after the Big 3 ratingshouses (especially the big 2, Moody's and S&P) for their racketeering-style securitization-fraud in the housing bubble; [3] Congress introduces legislation which mandates that ratings agencies revert to the pre-bubble practice of being paid by prospective buyers of structured-debt, rather than by the issuers. (A.k.a. no more ratings-whoring-for-pay.) Again, big hit to the bottom line. [4] U.S. joins European politicians in supporting a moratorium on ratings agencies ratings of sovereign debt. (How they would 'enforce' this unilaterally being the riddle here, since prospective buyers of sov-debt would still be quite interested in such ratings.) |
That sort of like UL being paid for by those producing the underwritten product, instead of the underwriters?
|
[QUOTE=Zeta-Flux;266857]For a spectacular example, see their absurd myth that the conservatives want to throw granny over the cliff, rather than admitting that there is a thoroughly documented pressing need for reform.[/QUOTE]In your desperation to mimic my words, you can't cite anything comparable to deciding that government should abandon using part of its fiscal powers or to mythologizing that the world's climatologists engaged in a conspiracy, so instead you weakly cite a mere temporary political slogan, rather than some persistent denial of objective reality.
[quote]Claiming that the GOP is acting out of ideological purity rather than reality (and by implication, without concern for the country) is just poison to the conversation (and untrue).[/quote]How is it untrue that, as imwithid posted, "Fiscal policy permits government the use of two primary tools: Taxes and Consumption (i.e. Spending)"? How is it untrue that the GOP, by declaring that it will not agree to letting the Bush tax cuts expire, so that we simply restore tax rates to the level at which they where while this country had its longest post-WW2 economic boom, is acting out of ideological purity rather than reality? |
[QUOTE=Zeta-Flux;266857]Claiming that the GOP is acting out of ideological purity rather than reality (and by implication, without concern for the country) is just poison to the conversation (and untrue).[/QUOTE]For over 30 years the constant refrain from the GOP has been, "Cut taxes on the wealthy. Never, ever, under any circumstances, allow tax rates to be restored to former levcels after a cut, regardless of the state of the economy."
That's not some reaction to reality. That's just a flat-out ideological position, without concern for the country except for the extremist desire to remold this country in the conservative worldview. That extremist view has no room for acknowledging that anyone elsewhere on the political spectrum has any right to hold a valid worldview that differs in any way from the conservative worldview. Telling the truth about Republican strategy is not poisoning any conversation, though you may not want to see it told. |
[QUOTE=Zeta-Flux;266857]Claiming that the GOP is acting out of ideological purity rather than reality (and by implication, without concern for the country) is just poison to the conversation (and untrue).[/QUOTE]Oh, there's also the no-compromise aspect of the position adopted by Republicans in regard to taxes. Refusal to compromise is a mark of ideological action, not realistic action. Realists compromise; Republicans used to do that routinely, before they decided that ideology trumped reality.
|
Big "Greek Rescue, v N.x" Eurozone financial summit today ... bottom line, seems there is going to be some kind of restructuring of Greek debt which will involve bondholders haircuts, and everyone is trying to find the nicest-sounding words possible to describe that, including such creative constructions as "partial" and even "temporary default". The ECB will of course have to find some way to either justify continuing to hold the resulting "temporarily partially-defaulted-on" 100-Bln-or-so-Eros-worth of Greek bonds it has overpaid for on its balance sheet, or perhaps it'll just offload them to the new, improved EFSF. Knock-on effects (e.g. due to CDS default triggers being hit) will be of interest. And throughout it all, Greece's finances will continue to deteriorate...
On this side of the puddle, In case anyone was wondering why bank shares are rallying hugely today, here ya go ... I predicted there was going to be a concerted effort to sweep this whole thing under the rug: [url=http://www.reuters.com/article/2011/07/20/us-foreclosure-banks-immunity-idUSTRE76J7J820110720]States negotiating immunity for banks over foreclosures[/url] [quote](Reuters) - State attorneys general are negotiating to give major banks wide immunity over irregularities in handling foreclosures, even as evidence has emerged that banks are continuing to file questionable documents. A coalition of all 50 states' attorneys general has been negotiating settlements with five of the biggest U.S. banks that would include payment of up to $25 billion in penalties and commitments to follow new rules. In exchange, the banks would get immunity from civil lawsuits by the states, as well as similar guarantees by the Justice Department and Department of Housing and Urban Development, which have participated in the talks. Reuters reported Monday that major banks and other loan servicers have continued to file questionable documents in foreclosure cases. These include false mortgage assignments, and promissory notes with suspect or missing "endorsements," which prove ownership. The Reuters report also showed continued "robo-signing," in which lenders' employees or outside contractors churn out reams of documents without fully understanding their content. The report turned up several cases involving individuals who were publicly identified as robo-signers months ago. Reuters found that such activity has continued even after 14 major mortgage lenders signed settlements with federal bank regulators promising to halt such practices and give remediation to some homeowners who were harmed.[/quote] [i]My Comment:[/i] Especially hilarious given the recent reporting (also by Reuters, as noted above) that fraudulent, abusive practices like robo-signing are ongoing and remain widespread. Guess that`s gonna be OK from here on out. |
| All times are UTC. The time now is 05:59. |
Powered by vBulletin® Version 3.8.11
Copyright ©2000 - 2021, Jelsoft Enterprises Ltd.