Mystery Economic Theater 2012

[cheesehead]

"China: ‘We have indeed underestimated the severity of the external economic situation.’"

http://qz.com/8637/china-under-fire/

How hard will China land? So far, the government has tried to assuage investors with strong steps to ease the effects of slowing growth. It passed a $585 billion stimulus plan four years ago and the People’s Bank of China (PBOC) has cut interest rates three times since the end of 2012. It has also offered bank refinancing operations to inject billions of yuan in liquidity into the banking system and keep banks lending money.

Despite this activism, an advisor to China’s central bank believes that officials have underestimated the severity of the slowdown. “We have indeed underestimated the severity of the external economic situation,” says Chen Yulu, an advisor to the monetary policy committee at PBOC and a professor at Renmin University in China. He added that the bank would make its future decisions based on external economic indicators. In particular, the Chinese have taken a hit from the European slowdown, as exports to the troubled region accounted for nearly 6% of GDP in 2011.

. . .

[ewmayer]

From Matt Taibbi's latest Rolling Stone blog piece - the excerpt skips the opening "How is Mitt a douchebag? Let me count the ways..." stuff, and gets to the real stuff alluded to into the article title:

This Presidential Race Should Never Have Been This Close

The fact that Barack Obama needed a Himalayan mountain range of cash and some rather extreme last-minute incompetence on Romney's part to pull safely ahead in this race is what really speaks to the brokenness of this system. [Frank] Bruni of the [New York] Times is right that the process scares away qualified candidates who could have given Obama a better run for all that money. But what he misses is that the brutal campaign process, with its two years of nearly constant media abuse and "gotcha" watch-dogging, serves mainly to select out any candidate who is considered anything like a threat to the corrupt political establishment – and that selection process is the only thing that has kept this race close.

Barack Obama is hardly a complete Wall Street stooge. The country's most powerful bankers seem genuinely to hate his guts, mainly because they're delusional and are sincerely offended by anyone who dares to even generally criticize them for being greedy or ethically suspect, as Obama has with his occasional broadsides against "fat cat bankers" and so on.

On the other hand, Obama's policy choices in the last four years have made it impossible for him to run aggressively against the corruption and greed and generally self-obsessed, almost cinematic douchiness that Romney represents.

With 300 million possible entrants in the race, how did we end up with two guys who would both refuse to bring a single case against a Wall Street bank during a period of epic corruption? How did we end up with two guys who refuse to repeal the carried-interest tax break? How did we end with two guys who supported a vast program of bailouts with virtually no conditions attached to them? Citigroup has had so many people running policy in the Obama White House, they should open a branch in the Roosevelt Room. It's not as bad as it would be in a Romney presidency, but it comes close.

If this race had even one guy running in it who didn't take money from all the usual quarters and actually represented the economic interests of ordinary people, it wouldn't be close. It shouldn't be close. If one percent of the country controls forty percent of the country's wealth – and that trend is moving rapidly in the direction of more inequality with each successive year – what kind of split should we have, given that at least one of the candidates enthusiastically and unapologetically represents the interests of that one percent?

But...

"Obama is hardly a complete Wall Street stooge."

So occasional 'verbal broadsides against "fat cat bankers"' unaccompanied by any action whatsoever is enough to make one a non-stooge? Really low bar there.

[Dubslow]

Originally Posted by ewmayer

Gary Johnson...

[ewmayer]

Originally Posted by Dubslow

Gary Johnson...

Just because he re-branded himself a libertarian doesn't make him one. Guy is a complete fraud, as Denninger over at the Market Ticker blog has been documenting for months. Here's a handful of KD's most-recent posts on Johnson:

http://market-ticker.org/akcs-www?post=212066
http://market-ticker.org/akcs-www?post=212060
http://market-ticker.org/akcs-www?post=211859
http://market-ticker.org/akcs-www?post=211818
http://market-ticker.org/akcs-www?post=211528

--------------------------------------

Mish has an interesting piece today on one of the issues which has long concerned me: With the relentless march of automation, what are the people who are not computer science PhDs going to do for a living? (And even if automation led to them being provided for without having to work, would that be a good thing for humankind?)

Managing the Transition to a Workerless Society

"There are 3 and a half million truck drivers and they will be impacted by this technology. .... We are going to transition into an economy that is very productive and just does not need a lot of human workers. Managing that transition is going to be the greatest challenge that our society faces" says McAfee.

In spite of that gloom for 13 minutes, McAfee concludes on a positive note, quoting Freeman Dyson: "Technology is a gift of God. After the gift of life, it is perhaps the greatest of God's gifts. It is the mother of civilizations, of arts, and of sciences."

--------------------------------------

Friday Financial News of the Weird:

40 Deutsche Bank Employees Injured After Inhaling "Dangerous" Substance In Schkeuditz, Germany

It appears banker popularity is low to quite low not only in the US but virtually everywhere. According to Lepizig-Fernsehen, a toxin alert has been issued at a Deutsche Bank branch in Schkeuditz, a suburb town of Leipzig, where 40 people have been "injured" after inhaling a white powdery substance delivered hours before, and which spread via the building's air conditioning system.

You know, back in Gordon Gekko's heyday they at least had the humility to just snort the stuff off of mirrors and glass tables...

Friday Funnies:

The Real Reason for the High Price of Oil

[Dubslow]

Originally Posted by ewmayer

Just because he re-branded himself a libertarian doesn't make him one. Guy is a complete fraud, as Denninger over at the Market Ticker blog has been documenting for months. Here's a handful of KD's most-recent posts on Johnson:

http://market-ticker.org/akcs-www?post=212066
http://market-ticker.org/akcs-www?post=212060
http://market-ticker.org/akcs-www?post=211859
http://market-ticker.org/akcs-www?post=211818
http://market-ticker.org/akcs-www?post=211528

Interesting. Who's he going to vote for then? Even a write-in is better than not voting, IMO.

[chappy]

Originally Posted by ewmayer

Friday Funnies:

The Real Reason for the High Price of Oil

Sadly, while funny, this makes no less sense to me than when "something bad happens in the Middle-east" happens and there is a possibility that a two year long supply chain may still be interupted two years from now my price per gallon must go up 50 cents a gallon today.

[wblipp]

Originally Posted by xilman

Back in the good old days it was rye or barley rather than maize.

Old by American standards, it meant maize. Old by English standards, maize (and its native habitat) hadn't been discovered (well, exploited) yet.

[kladner]

Originally Posted by chappy

Sadly, while funny, this makes no less sense to me than when "something bad happens in the Middle-east" happens and there is a possibility that a two year long supply chain may still be interupted two years from now my price per gallon must go up 50 cents a gallon today.

The "vagaries" of markets have several drivers. My partner used to work for a futures company. An ancient joke in that industry was that rain on LaSalle Street (Chicago) could make corn go up or down depending on the season and whether the crops needed wet or dry conditions. The point is that irrelevant perceptions make prices change. Rain in downtown Chicago does not necessarily relate to what happens in the fields.

Another reason is that those perceptions can be used in the service of greed. Like the oil supply chain mentioned, orange juice has many months of delay between the orchard and the grocery shelf. Nevertheless, a freak frost in Brazilian citrus regions can cause an almost instant price increase at the retail level.

A related cause is that many commodities are traded in markets which are dominated by huge interests which share interests, effectively controlling the market.

[AES]

Originally Posted by Dubslow

Interesting. Who's he going to vote for then? Even a write-in is better than not voting, IMO.

I didn't see an answer to that question within the blog posts. However, I did see an attempt to define the Libertarian base and some polling data regarding such.

[ewmayer]

Quick hits:

o In the U.S., today's monthly ISM manufacturing data came in better than expected, triggering the automatic release of finely dispersed celebratory cocaine into the ventilation systems of all the Wall Street iBanks. You didn't think the DEA and the Mexican government actually burn all those tons of seized product like they make a show of doing on TV, did you? Hell no - free coke for Wall Street is in fact a key part of U.S. economic stimulus policy.


o Lies, damed Lies, and Spanish-Bank Stress Test Results


o ZH's Bruce Krasting writes about the impact of demographic trends and the Bernanke Fed's perma-ZIRP regime on the solvency of the Social Security pile of Treasury IOUs Trust Fund - Our Irish (or more generally, linguistically oriented) readership may enjoy the impromptu discussion of Cork-dialect etymology amongst the readers there:


o Bank of America to Pay $2.43 Billion to Settle Suit Over Merrill Deal: Bank of America announced on Friday that it would pay $2.43 billion to settle a class-action lawsuit related to its acquisition of Merrill Lynch.

LOL, "missteps" ... the NYT's kid-gloves approach to its hometown's major industry continues. The Dukes of Moral Hazard are probably loadin' up the General Lee-mobile out back of Uncle Bennie B's printing house as we speak, in order to cover the settlement without having to cut into all those executive comp. packages needed for BofA to retain "top talent".


In longer-hit news, Mish today features a well-written op-ed in today's Telegraph which addresses the European devolvement into a bailout union:

Can Politics Triumph Over Math and History?

What if the eurozone in spite of all obstacles stays intact? Daniel Hannan is a writer and journalist, and Conservative MEP for South East England since 1999 offers an interesting viewpoint for The Telegraph in Spain teeters on the brink:

All of a sudden, the talk is of the breakdown, not just of the single currency, but of the parliamentary system on which it rests. Commentators across Europe fret that Spain, which emerged from dictatorship less than 40 years ago, might give up on multi-party politics.

Every round of economic figures is worse than the last. The deficit is massively larger than forecast. A bailout of unprecedented size is becoming inevitable, even as the prime minister gives his countrymen a ‘one hundred per cent assurance’ that he won’t apply for one. (He said much the same thing a few days before applying for the last one.)

Hundreds of thousands of people are protesting, some violently. ....

The real tragedy of the euro is not that it will come crashing down upon the financial system, as Smaug upon Esgaroth, splintering it to sparks and gledes. The tragedy, rather, is that the monetary union will limp on, condemning hundreds of millions to gradual immiseration.

I am still trying, as gently as I can, to suggest that there is an alternative to the euro-imposed bailout racket. I did so again in our most recent parliamentary session, as you can hear in the clip above.

The trouble is that, while Spaniards recognise the folly of imposing cuts while at the same time bailing out banks, they shy away from the logical conclusion: that leaving the euro is now the least bad option.

The real threat to Spanish democracy is not internal but external; not a pronunciamiento but a Brussels-imposed civilian junta, as happened in Italy. Mario Monti, the EU’s proconsul in Rome, indicated yesterday that he ‘might seek a second term’. Oddly, I don’t remember him seeking the first.

[Fusion_power]

Well whaddya know? JP Morgan got sued by NYAG for the MBS/CDO's issued by Bear Stearns in the heyday years from 2005 to 2007. Now we get to wait and see if this winds up with some huge slap on the hand or some meaningful change in the industry.

http://www.bbc.co.uk/news/business-19795646

This is the first action to come out of a working group created by US President Barack Obama looking into the causes of the 2008 financial crash.

The civil suit, filed by New York Attorney General (NYAG) Eric Schneiderman, accuses Bear Stearns of failing to ensure the quality of loans underlying residential mortgage-backed securities.

It claims the bank, "systematically failed to fully evaluate the loans, largely ignored the defects that their limited review did uncover, and kept investors in the dark about both the inadequacy of their review procedures and the defects in the underlying loans".

I can already tell you where this will wind up. Bear Stearns had both hands in the cookie jar. Needless to say, JPMorgan rapidly backpedaled to establish a "we are ethical" argument, it was all Bear Stearns doing.

However, in a statement, JPMorgan said the allegations concern actions by Bear Stearns before it bought the investment bank: "The NYAG civil action relates to Bear Stearns, which we acquired over the course of a weekend at the behest of the US Government. This complaint is entirely about historic conduct by that entity".

They were not as egregious as Lehman Brothers, but Bear Stearns had a huge exposure in the MBS/CDO market.

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

DarJones