Misery Economic Theater 2011

[only_human]

I've been following the MF Global bankruptcy for the last couple of weeks. I am fascinated with masters of the universe, their braggadocio and the bonfire of their vanities.

The Wikipedia entry doesn't mention enough of it; no one article does really.

Today I learned that Appaloosa raised its state in MF Global stock to 8.64% after MF Global's bankruptcy. Appaloosa makes distressed investments but this is still interesting.:

MF Global had been led by former Goldman Sachs CEO Jon Corzine, with whom Appaloosa chief David Tepper has had a difficult relationship. Corzine, who would go on to become a U.S. senator and governor of New Jersey, passed Tepper over for a partnership at Goldman; Tepper later bought Corzine's former home in the Hamptons and demolished it, commenting that there was "a little justice in the world."

Appaloosa Loaded Up On MF Global After Bankruptcy
Strange stuff all around.

[Christenson]

Originally Posted by only_human

I've been following the MF Global bankruptcy for the last couple of weeks. I am fascinated with masters of the universe, their braggadocio and the bonfire of their vanities.

The Wikipedia entry doesn't mention enough of it; no one article does really.

Today I learned that Appaloosa raised its state in MF Global stock to 8.64% after MF Global's bankruptcy. Appaloosa makes distressed investments but this is still interesting.:
Appaloosa Loaded Up On MF Global After Bankruptcy
Strange stuff all around.

Well, that looks like revenge in the air...or, as we might say, "Bad Blood". See discussion above about "dirty money", with tempers high. Don't forget, RDS is in a country that is itself nearly bankrupt, and also voted for "bread and circuses"...whether he joined said voting or not.

I'm a bit in the middle: First, "predatory lending" is an acknowledged problem in the US -- there are SUPPOSED to be controls in place to prevent practices where a relatively sophisticated lender lends money to someone they know they will have to repossess on for whatever ulterior purposes. So there is general acknowledgement that making loans to someone with no ability to repay them is at least in part the responsibility of the banker -- at least, until Mr Bush took office....and started an expensive war abroad.

Greece, as an entity is bankrupt....the problem is, as noted, that the economy is producing relatively little of value, the government can't print money (euros), and it can't effectively tax its way out of the situation with direct taxes, either. And if the government of Greece can't spend money, some people are going to begin to starve, get sick, and die. Others will leave the country, whence all those greek diners in the US, further damaging the ability of the greek economy to produce.

Something is going to change, violently, soon, and the theater is going to get really ugly. I'll venture a prediction of next March or so when things get really serious since we've gone a year or three as it is. Any other bets?

[R.D. Silverman]

Originally Posted by Christenson

I'm a bit in the middle: First, "predatory lending" is an acknowledged problem in the US -- there are SUPPOSED to be controls in place to prevent practices where a relatively sophisticated lender lends money to someone they know they will have to repossess on for whatever ulterior purposes. So there is general acknowledgement that making loans to someone with no ability to repay them is at least in part the responsibility of the banker -- at least, until Mr Bush took office....and started an expensive war abroad.

One can't argue that the recipient of the loan here is being preyed upon.
The Greek govenment has plenty of access to plenty of people with
degrees/PhD's in economics and business. It is quite different from a bank
giving a loan to some uneducated schlemiel off the street here in the U.S.

Greece, as an entity is bankrupt....the problem is, as noted, that the economy is producing relatively little of value, the government can't print money (euros), and it can't effectively tax its way out of the situation with direct taxes, either.

Yep! So you do what i proposed. Greece effectively sells assets to pay
its debts. (i.e. the banks call the repo man)

Something is going to change, violently, soon, and the theater is going to get really ugly.

AMEN!! Which is a major reason that I am not invested in equities for the
time being.

I'm also waiting to see what the 'GANG of 12' does here in the U.S. about
our debt.

[Christenson]

There is a third alternative: If you haven't noticed, there's a massive distortion in allocation of physical resources compared to the financial. That is, Greece has spent more MONEY than it has, but somehow, everyone in Greece has managed to eat and get healthcare and other resources anyway. That could continue, with the value of everyone's investments going down.

In the end, I think the problem is actually one of the scale of the society. That is, there's a gal that works for us, and says she is only doing it for the health insurance for her husband. She does a very poor quality job. Somehow, in a company of only 40 employees, although one of those bad solder joints could cost us about $5000 in directly calculable costs, and has about $500 in direct costs against it as of tonight, she is allowed to continue to do this. It might finally reach the company president in a way he understands tomorrow.

Larger ompanies, the connection between individual action and the collective fate gets more and more distant. At the scale of both the EU and the US, it's gotten to the point where the leadership simply has no direct responsiveness -- and big problems, like predatory lending and retirement programs that have to cover 1/3 to 1/2 of a persons working life are starting to happen as a consequence. On a global, historic scale, the US empire has held together for a remarkably long time, Productivity gains have covered up a lot of the distortions, but I promise you they are nonetheless real.

[Christenson]

Originally Posted by R.D. Silverman

The ability to pay back the loan has nothing to do with the responsibility.

Making the leap from a discusion of responsibility
to one of ability defies all logic. It is a total nonsequitur.



And of course, you find it necessary to resort to insults in the process.

I'd say more but there is a clear double standard posed by the mods.

Bob:
I think the mods *do* pose a double standard. You get the long end of the stick, with a pass for stuff that would get me tossed, on account of having some math in the literature relevant to GIMPS.

The long post from akruppa tonight on the OPN hunt thread is a case in point....the last person I saw get himself tossed from here (crying Mediocrite!) didn't get anywhere near that much effort from the mods.

[R.D. Silverman]

Originally Posted by Christenson

There is a third alternative: If you haven't noticed, there's a massive distortion in allocation of physical resources compared to the financial. That is, Greece has spent more MONEY than it has, but somehow, everyone in Greece has managed to eat and get healthcare and other resources anyway. That could continue, with the value of everyone's investments going down.

In the end, I think the problem is actually one of the scale of the society. That is, there's a gal that works for us, and says she is only doing it for the health insurance for her husband. She does a very poor quality job. Somehow, in a company of only 40 employees, although one of those bad solder joints could cost us about $5000 in directly calculable costs, and has about $500 in direct costs against it as of tonight, she is allowed to continue to do this. It might finally reach the company president in a way he understands tomorrow.

Larger ompanies, the connection between individual action and the collective fate gets more and more distant. At the scale of both the EU and the US, it's gotten to the point where the leadership simply has no direct responsiveness -- and big problems, like predatory lending and retirement programs that have to cover 1/3 to 1/2 of a persons working life are starting to happen as a consequence. On a global, historic scale, the US empire has held together for a remarkably long time, Productivity gains have covered up a lot of the distortions, but I promise you they are nonetheless real.

No argument from me.

[Fusion_power]

If it walks like a volcano, talks like a volcano, and dresses like a volcano, it is probably a volcano.

Today there is open speculation about Greece exiting the Eurozone. It is about time. The problem is simple, either toss Greece down the shitter or else let the whole Eurozone go down.

A growing number of analysts believes those efforts will fail, and that Greece's days in the euro are numbered.

They say Greece would do better to cut and run, avoiding the straitjacket of a decade's worth of austerity.

http://www.cbsnews.com/8301-202_162-...xit-from-euro/

Just want to point out that if this happens, the best thing any Greek can do is to immediately withdraw all of his money from the bank and convert it to something more stable.

DarJones

[R.D. Silverman]

Originally Posted by Fusion_power

If it walks like a volcano, talks like a volcano, and dresses like a volcano, it is probably a volcano.

Today there is open speculation about Greece exiting the Eurozone. It is about time. The problem is simple, either toss Greece down the shitter or else let the whole Eurozone go down.

Just want to point out that if this happens, the best thing any Greek can do is to immediately withdraw all of his money from the bank and convert it to something more stable.

DarJones

A run on the banks! And when the banks run out of currency because there
isn't enough for everyone then............

[R.D. Silverman]

Originally Posted by R.D. Silverman

A run on the banks! And when the banks run out of currency because there
isn't enough for everyone then............

The really smart will pull out before the exit......

But of course pulling out isn't a manly thing to do.

It's as George Carlin said: "Out doesn't sound manly to me; let's
leave it there a while longer and get the job done" [of course this
was in reference to the U.S. pulling out of Vietnam]

[Christenson]

The handwriting has been on the wall...the really smart already figured out where to put their investments.

[Fusion_power]

Just wanted to point out that with the magic of fractional reserve lending, the Greek banks technically have only $20 for every $100 in deposits. That means the most they can pay out as Euros is 1/5 of the potential demands.

In the event of a disorderly exit from the Euro:
In an effort to stabilize the economy, the Greek Govt will have to freeze bank deposits and force conversion of Euro's to Drachma's. The Greek people will suddenly be paid in Drachma's and there won't be a standard to establish their real world value. Since Greece is an overall importer of 100% of the oil it consumes, the oil producers will shut down sales to Greece. This will freeze the economy so effectively that it will take 10 years to sort out the mess. Obviously the govt will want to avoid this sequence of events.

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

The Wiki article really glosses over the impact of fractional lending. You have to get half way down through the article before you get the gist of the artificial money creation involved.

DarJones