Econ 2009

[xilman]

Originally Posted by S485122

Am I the only who is chocked by the continuing insulting and bashing of another forum member ?

HRB : could you please stop this ? I really think you go to far.

Thanks,

Jacob

I also suggest that the insults be stopped.

If he can't stop insulting people, at least he could make an attempt to produce insults that contain correct grammar, spelling and vocabulary. "cheesheadi est stupido" indeed. Now that I find offensive. What are they teaching people in schools these days?

Paul

__HRB__ stultus et inscitus est.

[Fusion_power]

It is about time that HRB got his very own personal avatar. My suggestion is mephitis mephitis.

This thread is about the economy. Please don't turn it into a trash others thread.

DarJones

[xilman]

Originally Posted by Fusion_power

This thread is about the economy. Please don't turn it into a trash others thread.

DarJones

Mea culpa, sed non maxima culpa.

[__HRB__]

This thread is for entertainment. 'The Economy' doesn't care what anybody here does, and nobody is going to learn anything worthwhile knowing about 'The Economy' without a textbook.

@Fusion Power
I like my new avatar. This should be yours, you sublime corporate shill:
http://img.diytrade.com/cdimg/339763...sion_Power.jpg

Btw, your contribution to this thread on 'The Economy' was missing submarines firing torpedoes at the balsa-wood rafts.

@Dr. Jacob Goebbels:
Where is the point in having a "soap-box", if it's not a place to publicly vent frustration about the stupidity of mankind in general and some people in particular? Go grass-mud horse.

@xilman:
Non stultus et inscitus sed inscius et desidiosus sum. Kai den mai endiaferei ti einai i sosta lexia kai orthografia na sou po sta arxei ellenika: "i mitera sou einai kalamari". Alla boro na sou po sta kathareuousa, "ai gamisou, malaka!". Thelis to na po;

[ewmayer]

IMF poised to print billions of dollars in 'global quantitative easing': The International Monetary Fund is poised to embark on what analysts have described as "global quantitative easing" by printing billions of dollars worth of a global "super-currency" in an unprecedented new effort to address the economic crisis.

[UK finance Minister] Alistair Darling and senior figures in the US Treasury have been encouraging the Fund to issue hundreds of billions of dollars worth of so-called Special Drawing Rights in the coming months as part of its campaign to prevent the recession from turning into a global depression.

Should the move, which is up for discussion by the summit of G20 finance ministers this weekend, be adopted, it will represent a global equivalent of the Bank of England's plan to pump extra cash into the UK economy.

However, economists warned that the scheme could cause a major swell of inflation around the world as the newly-created money filters through the system. The idea has been suggested by a number of key figures, including billionaire investor George Soros and US Treasury adviser Ted Truman.

Simon Johnson, former chief economist at the IMF, said: "The principle behind it is that everyone would get bonus dollars and instead of the Federal Reserve having to print them, everyone gets them."

"The objective is to create a windfall of cash. However if everybody goes out and spends the money it could be very inflationary."

My Comment: Even if "they" don`t spend the money on cheap ready-made goods from Asia, this could be inflationary in terms of artificially inflating the prices of assets (e.g. equity markets) the recipients of the "free money" will use to park it. But hey, blowing asset bubble is the U.S. Fed`s prime role these days. And once again, this amounts to yet another way to punish the prudent: If the result is inflation, savers will see the purchasing power of their money reduced, and debtors will see their relative debt load similalrly reduced. If the money-printing binge fails to halt the ongoing global deleveraging and resulting deflation, the profligate (e.g. insovent too-large-to-fail banks) will get an endless supply of bailout money until the deflation either stops due to the money-printing deluge or of its own accord.


]House passes Wall Street bonus tax: Most Democrats supported the bill; Republicans sharply divided.

WASHINGTON (CNN) -- The House of Representatives passed legislation Thursday to try to recoup bonuses paid to Wall Street executives with taxpayer money.

The measure passed, 328-93; with most Democrats supporting it while Republicans were sharply divided.

A two-thirds majority among all members voting was required for passage.

The measure would tax individuals on any bonuses received in 2009 from companies getting $5 billion or more in money from the Troubled Asset Relief Program, or TARP. Bonuses for people with incomes over $250,000 would be taxed at a 90% rate.

My Comment: Of course it is not in Congress` power to make it retroactive... I gotta say, that last-minute smoky-backroom deal that was cut during the negotiations over the recent stimulus package and which allowed the bonuses to go unchallenged has turned into a real black eye for the Obama administration. I originally had some hopes that Geithner might prove to be slightly less a (willing) pawn of the Wall Street mafia than his predecessor Paulson was, but those have been thoroughly dashed in the past month. Some of the same congressional blowhards who`ve been railing most loudly against the "greed and corruption" of the Big Finance firms signed off on the golden parachutes - for example Chris Dodd, who is rivaled in "blowhardiness" only by fellow-Friend-of-Angelo-Mozilo Barney Frank.

House Minority Leader John Boehner, R-Ohio, dismissed the bill as a "political charade" designed to protect the Obama administration and the Democratic majority in Congress.

"This bill is nothing more than an attempt for everybody to cover their butt up here on Capitol Hill," Boehner argued earlier Thursday. "It's full of loopholes. A lot of these people who are getting these bonuses likely live in London and it's not clear how raising this tax is going to recover that money."

Boehner later questioned why the bill didn't seek to recover all of the bonus money.

"The bill before us attempts to recoup 90% of these bonuses," he said. "Why 90%? ... The administration has the ability to get it all back ... This is a bad bill with bad consequences. We didn't see the bill until last night (and) nobody understands the consequences of what we're about to do. How can we possibly vote yes on a bill like this?"

A similar proposal in the Senate - which has not yet taken up the House bill - would attempt to recoup bonuses by taxing both individuals and companies.

Rangel said Wednesday that House leaders decided against penalizing companies because they could simply ask for more taxpayer money.

My Comment: Oh, the delicious irony of that last bit.


Citigroup Said to Commit About $10 Million for Park Avenue Executive Suite: Citigroup Inc. plans to spend about $10 million on new offices for Chief Executive Officer Vikram Pandit and his lieutenants, after the U.S. government injected $45 billion of cash into the bank.

American International Group Inc. CEO Edward Liddy was lambasted by lawmakers at a hearing in Washington yesterday for allowing the insurer to allocate $165 million for bonuses to employees after taking government loans.

President Barack Obama spoke out against inappropriate spending at banks on Jan. 23, following reports that former Merrill Lynch & Co. CEO John Thain incurred more than $1 million of expenses to redecorate his personal office at the New York- based securities firm. Thain was ousted the same month, after Bank of America Corp. completed its takeover of Merrill.

My Comment: Pandit the Bandit might be able to pick up some of Thain`s sweet office furnishings on the cheap here...

[AES]

Originally Posted by ewmayer

My Comment: Oh, the delicious irony of that last bit.

I agree.

13 companies getting bailout money owe back taxes
http://news.yahoo.com/s/ap/20090319/...linquent_taxes

[masser]

Originally Posted by ewmayer

Fed Interest-Rate Policy Didn't Cause U.S. Housing Bubble, Greenspan Says: The U.S. Federal Reserve’s “easy money” policies during the first part of this decade didn’t cause the housing bubble, former Chairman Alan Greenspan wrote in the Wall Street Journal.

My Comment: Poor "maestro", trying desperately to shore up his shot credibility, by peddling his only-half-the-story "savings glut" hypothesis. Of course the Fed couldn`t have prevented the housing bubble (which Greenspan refused to acknowledge even existed until very recently) in 2004-2005, because by then the cows had long left the barn. But the Fed certainly could have prevented the housing bubble by not ratcheting interest rates near 0 in 2002-2002, in a desperate, misguided attempt to bail the economy out from the effects of the previous Fed-fueled bubble, the DotCom one, made worse by the aftereffects of 9/11. In order to avoid paying the piper for the earlier bubble, Greenspan et al blew an even bigger, much-nastier one. And Greenspan is on record touting the wonderful benefits of "alternative mortgage products" which allow many more Americans (especially the ones lacking the wherewithal to buy a house) to "experience the joys of home ownership", "home ownership" of course being a euphemism for "debt slavery". Lastly, the Greenspan-led Fed studiously ignored the explosion in predatory and subprime lending accompanying all the "financially innovative" new mortgage products. I repeat: What a complete and utter douchebag is our Mr. Greenspan.

I recently found the quote below; thought some of this thread's readers might appreciate it. The quote makes me wonder when we will finally get an economist in power that will make us take our collective medicine...

"It's easy for a central banker to be popular during euphoric financial times. But the political perils are severe when tough measures are needed - measures that extract a high short-term toll in the interest of longer-term economic health - as they were in the late 1970s."
--Economist Henry Kaufman

[Fusion_power]

I've been waiting for this shoe to fall. We now have an extra trillion dollars in the economy. Simple math says this will cause inflation between 5 and 7 percent next year and who knows how high after that. This is composed of a base 3% rate of inflation with an extra 2 to 4 percent because the money supply increased from @$35 Trillion to $39 trillion. I arrive at these figures by starting with the $72 trillion worldwide effective supply. Half of that total is U.S. dollars. Please note that this is NOT the total amount of money in circulation, which is a much lower figure. It takes into consideration the effect of a saver putting money into a bank to draw interest, the bank then lends the money to a business that spends it for supplies, the supply seller uses part of it to purchase more raw material and saves part of it, etc. A constant cycle in other words that yields an effective $72 trillion worldwide. I would welcome critique of these calculations, there must be more accurate figures available.

http://www.cbsnews.com/blogs/2009/03...y4877724.shtml

The Federal Reserve's remarkable announcement on Wednesday that it would print $1.2 trillion to buy bonds and mortgage-backed securities will yield some short-term benefits, namely lowering rates on mortgages, credit cards, and other loans.

As justification for the move, the Fed said in a statement that: "Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment."

What the Fed didn't say is that the long-term risks of its actions, known as quantitative easing, are substantial. Printing money often leads to inflation, and printing large amounts of money often leads to significant inflation. (There's also the question of whether it's desirable or feasible to attempt to prop up asset prices, namely real estate.)

Fretting about higher prices -- more precisely, devaluation of the dollar -- might seem odd when stock prices, housing prices, commodity prices, and other prices have been sliding. But inflation remains a possibility in the not-so-distant future. "The question is at what price?" wrote analysts from Germany's Landesbank Baden-Wurttemberg. "Bottom line is the Fed is adding a trillion dollars to their balance sheet. In the long run, the price for these massive rescue measures might be inflation as once the economy recovers the Fed might be not able to raise interest rates quickly enough."

Now pay particular attention to that last sentence. The only tool the fed has to fight inflation is to raise the interest rate. This translates to a boomerang economy for the next several years. We went way down the scale into a severe downturn, the fed lowers interest rates to 0 to .25 percent, the economy continues downward, the fed reacts by printing 1.2 trillion dollars, this pushes us into inflation, the fed responds by increasing interest rates. Get your loans now folks, I can foresee a time of 10% and above interest rates just down the road. If they are printing $1.2 trillion, how much more money have they printed in the last year and how much will they print in the coming months?

Short term, this will raise the price of oil back into the $70 range. Basic goods such as food will go up rapidly. Your wonderful congressmen have this thing called an automatic inflation adjusted cost of living pay increase. They get a big raise. You and I get to tighten our belts until our eyes pop.

Inflation is a stealthy thief hidden from all eyes. He comes on little pig feet to snatch money from your wallet, unseen. You, like a frog put into a pan of water and gradualy heated, don't even realize he has his greedy paws in your pocket until he is already gorged and gone.

DarJones

[__HRB__]

Originally Posted by Fusion_power

I've been waiting for this shoe to fall. We now have an extra trillion dollars in the economy. Simple math says this [...]

See: http://en.wikipedia.org/wiki/Inflation_tax

[ewmayer]

So apparently the legislation as written would be retroactive to the beginning of 2009 ... but it`s simply outrageous that the flip-flop with respect to bonuses made it into the stimulus bill to begin with. As many probably watched, Obama was on The Tonight Show With Jay Leno last night - as has now become almost de rigeur (ever since Bill Clinton did his "live with Saxophone" gig as a candidate), Obama also paid a visit during the presidential race, but is the first sitting president to appear on the show - a modern updating of the Rooseveltian fireside chat, perhaps. Leno - especially for a comedian - asked some surprisingly forthright, pointed questions, including why e.g. Merrill Lynch got away with paying over $3 billion in bonuses last Fall (shortly before getting bought out by Bank of America and the whole resulting omelet getting huge amounts of bailout money) without anyone going to jail as a result. Obama expressed regret for the way some of this has gone down, but still has "complete confidence in Timmay" (Geithner), blah, blah. We shall see - watching the noisy debate about the AIG-inspired bill of attainder (not its official name, but if the shoe fits...) on C-SPAN last night was like watching an episode of a new game show, Dysfunctional Family Feud.


This week`s issue of Nouriel Roubini`s RGE Monitor newsletter has an interesting bit about postrecession employment trends:

M. Melinda Pitts examines labor market performance during and after previous recessions and concludes that if the current recession ended today with a 2.7% job decline, and post-recession employment growth resembled the recovery from the 1981-82 recession, then employment would return to pre-recessionary levels in approximately 14 months. But if the employment growth path is more similar to the two most recent recessions, then it would take well over eight years for employment to return to prerecession levels.

My Comment: The decade-length recovery scenario strikes me as by far the more plausible one at this point, due not only to the continuing steep job losses, but simply that the fundamentals of the U.S. economy became so massively distorted in the past 20 years thanks to the workings of the Greenspan School of Bubble Economics. Most of the "Economic Growth" of the past decade (if not longer) was a sham, driven by paper asset-price appreciation in the non-productive FIRE (finance, insurance, real estate) component of the economy. Without a healthy productive economy to underpin it, the whole thing became increasingly hollow, and while Obama clearly understands this, his cabal of neo-Keynesian Greenspan acolytes is busily trying to paper over the rot. That ain`t going to repair itself in a mere one or two years, and many of the fiscal policies being used to try to force-fix it are only going to draw out the painful healing process. The recovery, when it does occur, may well happen in spite of current quick-fixit efforts, rather than because of them. Given the woefully inadequate U.S. savings rate and massive job losses in many other countries as well, any hopes for a consumer-led recovery are null and void:

A MetLife study released last week found that 50% of Americans said they have only a one-month cushion -- roughly two paychecks -- or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs.

California unemployment jumps to 10.5%: February jobless rate in the most populous state far exceeds national 8.1% unemployment rate.


GM, Chrysler May Need `Considerably' More Than $21.6 Billion, Rattner Says: General Motors Corp. and Chrysler LLC may need “considerably” more government aid than their request for as much as $21.6 billion, said Steven Rattner, the U.S. Treasury’s chief auto adviser.

Rattner said any decision about GM and Chrysler management would be tied to the ultimate configuration of the companies “and I’m not in a position to comment on that today.”

GM Chief Executive Officer Rick Wagoner and Chrysler’s Robert Nardelli have been “exceptionally cooperative,” “thoughtful,” and “energetic,” Rattner said.

“They’re good guys really trying hard to run those companies,” Rattner said. “I have nothing bad to say about them.”

My Comment: Then allow me to say something bad about them ... they are both grossly incompetent, short-term-gain-fixated buffoons who profited handsomely while their companies slid to the edge of bankruptcy. Even then, they had not even the vaguest outlines of a plan to alter their business model to something that at least might stop the bleeding and lay the groundwork for a viable 21st-century auto company, and now that the government has forced them to come up with one, they are simply making it up as they go along, and telling their new masters what they want to hear, while the bailout amounts continue to skyrocket. These so-clearly-incompetent CEOs should have been ousted as soon as their companies started feeding from the federal bailout teat.


Madoff's 19th Century Forerunner Sadleir Shows Rules Can't Stop a Swindler

Madoff's 19th Century Forerunner Sadleir Shows Rules Can't Stop a Swindler: John Sadleir, a British member of parliament, newspaper publisher, bank and railroad chairman, lay down under a bush on London’s Hampstead Heath and sipped poison prussic acid from a silver jug.

His suicide on Feb. 16, 1856, exposed a fraud that would wipe out at least three companies and cause “ruin and misery and disgrace to thousands -- aye to tens of thousands,” as Sadleir correctly predicted in a final letter to a friend.

Charles Dickens, Anthony Trollope and at least three other Victorian novelists used Sadleir as the inspiration for fictional villains. And in a note that foreshadowed the response to Bernard Madoff, who last week pleaded guilty to defrauding investors of as much as $65 billion, politicians found him an inspiration for increased regulation.

“Whenever frauds like Sadleir’s or Madoff’s are exposed, people clamor for government regulation,” said George Robb, a professor at William Patterson University in Wayne, New Jersey, and author of “White-Collar Crime in Modern England: Financial Fraud and Business Morality 1845-1929” (Cambridge University Press, 1992). “The problem with regulation is it’s always reactive, they solve the last scandal. In 10 years people forget and crooks figure out a way to circumvent it.”

Less than a year after Sadleir’s death, two more bank frauds came to light, one of which also ended in suicide, according to Robb. The scams helped accelerate the Banking Crisis of 1857, a panic that started in the U.S. and spread to the U.K., prompting one of the last bank runs in Britain until Northern Rock Plc, the U.K. bank nationalized in 2008.

Jolly Nervous

Adair Turner, chairman of the Financial Services Authority, this week called for “profound” regulatory change to prevent future financial crises.

Parliament went through a similar exercise after Sadleir’s fraud in 1856, including Treasury select committee hearings. Among the results was the introduction of limited liability banks in which each investor was liable only for the amount of money he put into the company, a change designed to protect shareholders from the misdeeds of others.

Within a decade, the U.K. had another panic, the commercial crisis of 1866, blamed in part on the limited liability rules.

C. Hoare & Co., a family-owned bank that’s operated on London’s Fleet Street since 1672, credits its status as the sole U.K. bank to reject limited liability for its success in navigating the credit crisis unscathed.

“Unlimited liability, the joy of it is it keeps you jolly nervous,” Chief Executive Officer Alexander Hoare said in an interview. “Everything apart from the shirt on our back is at risk.”

‘Same Sad Story’

Sadleir, an Irish solicitor who was 42 when he took his own life, started building his business empire with Tipperary Joint- Stock Bank. Within a year of moving to London, he became chairman of the London and County Joint Stock Banking Co., which eventually became part of National Westminster Bank, acquired by Royal Bank of Scotland Group Plc in 2000.

He became a junior lord of the U.K. Treasury, a railroad promoter who served as chairman of the Royal Swedish Railway Co., the Rome & Frascati Railway and France’s Grand Junction Railway, and led the Carson’s Creek Consolidated Mining Co. in California, according to “Prince of Swindlers, John Sadleir M.P.” by James O’Shea (Geography Publications, 1999).

“He was well-liked and well-trusted and robbed everybody that he could lay his hands on,” O’Shea said in a telephone interview. “It’s exactly the same sad story.”

Mr. Merdle

Dickens, a regular at Jack Straw’s Castle, a pub next to Sadleir’s suicide spot on Hampstead Heath in North London, used him as the basis for Mr. Merdle, a financier whose fraud and suicide is the central action of his 1857 novel “Little Dorrit.”

“He was Chairman of this, Trustee of that, President of the other,” Dickens wrote of Merdle, presaging justifications used by Madoff investors a century and half later.

My Comment: And speaking of death by poisoning, we close this week`s Econo-blogging with a witty exchange between Churchill & Lady Astor: She said, "If you were my husband I'd poison your coffee." Churchill replied, "If I were your husband, madam, I would drink it."

[R.D. Silverman]

Originally Posted by ewmayer

My Comment: Then allow me to say something bad about them ... they are both grossly incompetent, short-term-gain-fixated buffoons who profited handsomely while their companies slid to the edge of bankruptcy.

I have been saying this for a long time now; well before the bubble burst.

Senior corporate executives act as if they are the owners of a
corporation, rather than the stockholders. They, and the boards of
directors set up salary and bonus plans that depend on
short-term gains. These salary plans allow the executives to reap
huge bonuses for themselves in the short term, at the expense of the
long-term viability of the companies. The wall street bonus plans
rewarded extremely risky short-term behavior that yielded our
current long-term disaster.......And people like that idiot Carly Fiorino
got rewarded with huge golden parachutes for being complete f*ck-ups.