Financial Skeptic Bulletin, July 2010
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One of the important functions of fascism, as typified by the Nazi system,
was to remove capitalist objections to full employment.
Via email, everything old is new again. This is from 1943:
Political Aspects of
Full Employment, by Political Quarterly, 1943: ... Section
IV ... 3. ...In the slump, either under the pressure of
the masses, or even without it, public investment financed by borrowing
will be undertaken to prevent large-scale unemployment. But if attempts
are made to apply this method in order to maintain the high level
of employment reached in the subsequent boom, strong opposition
by business leaders is likely to be encountered. ...
In this situation a powerful alliance is likely to be formed between
big business and rentier interests, and they would probably find
more than one economist to declare that the situation was manifestly
unsound. The pressure of all these forces, and in particular of
big business—as a rule influential in government departments—would
most probably induce the government to return to the orthodox policy
of cutting down the budget deficit. A slump would follow...
This pattern of a political business cycle is not entirely conjectural;
something very similar happened in the USA in 1937-8. The breakdown
of the boom in the second half of 1937 was actually due to the drastic
reduction of the budget deficit. ... [full
text]
Another quote:
The fact that armaments are the backbone
of the policy of fascist full employment has a profound
influence upon that policy's economic character.
Large-scale armaments
are inseparable from the expansion of the armed forces and the preparation
of plans for a war of conquest. They also induce competitive rearmament
of other countries.
This causes the main aim of spending to shift gradually from
full employment to securing the maximum effect of rearmament. As
a result, employment becomes 'overfull'; not only is unemployment
abolished, but an acute scarcity of labour prevails. Bottlenecks
arise in every sphere, and these must be dealt with by the creation
of a number of controls. Such an economy
has many features of a planned economy, and is sometimes compared,
rather ignorantly, with socialism.
How ever, this type of planning is bound to appear whenever an
economy sets itself a certain high target of production in a particular
sphere, when it becomes a target economy of which the armament economy
is a special case. An armament economy
involves in particular the curtailment of consumption as compared
with that which it could have been under full employment.[4]
The fascist system starts from the overcoming of unemployment,
develops into an armament economy of scarcity, and ends inevitably
in war.
Selected Comments
Lawrence:
So it's admitted in the article that Hitler starting war in Poland
was the reason we got out of the persistent economic slump, primarily
because reducing the budget deficit was no longer a priority among
business leaders. And these were the FDR years.
As Rosenberg noted: "with the monetary and fiscal policy stimulus behind
us, we can see what the economy looks like – back-to-back declines in retail
sales, durable goods orders and shipments, and household employment. Not
to mention consumer and producer prices. "
Fourth, while revenues have been above expected, they are running
at about one-fifth the pace of profit growth and as a result margins
are hitting new highs. What happens when they begin to compress (especially
with 80% of the incoming economic data disappointing over the past month)?
Fifth, with the monetary and fiscal policy stimulus behind us, we can
see what the economy looks like – back-to-back declines in retail sales,
durable goods orders and shipments, and household employment. Not to
mention consumer and producer prices
The quote of the week comes from Bob Costello, Chief Economist of
the American Trucking Association who is warning of an economic slowdown:
ATA Chief Economist Bob Costello said that the two sequential decreases
reflect an economy that is slowing. Furthermore, growth in truck
tonnage is likely to moderate in the months ahead as the economy decelerates
and year-over-year comparisons become more difficult. Nevertheless,
Costello believes that tonnage doesn’t have to grow very quickly at
this point since industry capacity has declined so much. “Due
to supply tightness in the market, any tonnage growth feels significantly
better for fleets than one might expect.”
This came on the back of yesterday’s data release showing the second
consecutive month of declines in truck tonnage:
The American Trucking Associations’ advance seasonally adjusted (SA)
For-Hire Truck Tonnage Index decreased 1.4 percent in June, although
May’s reduction was revised from 0.6 percent to just 0.1 percent.
May and June marked the first back-to-back contractions since March
and April 2009. The latest reduction lowered the SA index from
110.1 (2000=100) in May to 108.5 in June.
viator:
Drip after drip of deflation data
Today’s release on manufacturing activity by the Richmond Fed
is pretty ghastly, as you would expect given that the effects of
fiscal stimulus are now wearing off at accelerating pace – before
the happy handover to the private sector is safely consummated –
and given that the structural East-West imbalances that lay behind
the global crisis are getting worse again.
The expectations index for the US 5th District is crumbling:
This follows yesterday’s horrendous fall in the Texas business
activity index from the Dallas Fed, which fell from -4 in June to
-21 in July. “Thirty-one percent of firms reported a worsening of
activity, up from 22 percent in June,” said the bank.
Texas New Orders were -9.6 in July, -8.2 in June, and +15.8 in
May.
Capacity Utilization was -0.6 in July, +2.7 in June, and +18.7
in May.
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007034/dr...
In the
latest two-part interview with Jim Rickards
by Eric King, the former LTCM General
Counsel goes on a lengthy compare and
contrast between the Roman Empire (and
especially the critical part where it
collapses) and the U.S. in it current
form. And while we say contrast, there
are few actual contrasts to observe:
alas, the similarities are just far
too many, starting with the debasement
of the currencies, whereby Rome's silver
dinarius started out pure and eventually
barely had a 5% content, and the ever
increasing taxation of the population,
and especially the most productive segment
- the farmers, by the emperors, to the
point where the downfall of empire was
actually greeted by the bulk of the
people as the barbarians were welcomed
at the gate with open arms.
The one
key difference highlighted by Rickards:
that Rome was not as indebted to the
gills as is the US. Accordingly,
the US is in fact in a far worse shape
than Rome, as the ever increasing cost
of funding the debt can only come from
further currency debasement, which in
turn merely stimulates greater taxation,
and more printing of debt, accelerating
the downward loop of social disintegration.
Furthermore, Rickards points out that
unlike the Romans, we are way beyond
the point of diminishing marginal utility,
and the amount of money that must be
printed, borrowed, taxed and spent for
marginal improvements in the way of
life, from a sociological standpoint,
is exponentially greater than those
during Roman times. As such, once the
collapse begins it will feed on itself
until America is no more. Rickards believes
that this particular moment may not
be too far off...
In this context,
Rickards presumes, it is not at all
surprising that both individual Americans
and domestic corporations have set off
on a massive deleveraging and cash conservation
wave: the subliminal sense that something
very bad is coming, is becoming more
palpable with each passing day. The
bottom line is that the Fed, just as
our founding fathers had warned, could
very well end up being the catalyst
to the downfall of American society
as it cannibalizes all productive output
and transfers the wealth to the oligarchy,
while paying for this transfer in the
form of unrepayable indebtedness.
Ostensibly,
had the army of Ancient Rome agreed
to be paid in paper instead of (even
diluted) precious metals, thus creating
the first central bank in history, the
collapse of that particular overstretched
empire would have been far quicker.
On the other hand, it would have prevented
the disaster of Central banking in its
current form, as civilization would
have learned about its evils far sooner.
Alas, that did not happened, and it
now befalls upon the current generation
to realize just how much of a destructive
influence central banking truly is.
If Jim Rickards is correct, however,
the realization will be America's last,
just before US society disintegrates.
Must hear two part interview can
be found here:
Ironically, investors have learned their lessons: after a nearly
60% ramp from the all time lows, investors continue to refuse to buy
when everyone else is buying, contrary to the pleading by Obama, and
all the conflicted fly by night permabullish mutual fund managers which
CNBC appears to have an infinite collection of to recycle and fill content
inbetween all those incontinence ads 24/7.
Jason T :
Question should be:
What's the less immoral way to make money today: inside
information or using your banks deposits to front run your brokerage
client's orders?
As usual, some terrific points from the man who was far too smart
for Merrill Lynch. We are also glad that Rosie caught our observation
over the weekend that
securitized loans have plummeted by trillions recently: easily the
single biggest argument for QE2.
From Breakfast with David:
YOU KNOW YOU ARE IN A DEPRESSION WHEN ...
Congress moved to extend jobless benefits seven times, as has been
the case over the past two years, at a time when almost half of the
ranks of the unemployed have been looking for at least a half year.
The unemployment rate for adult males (25-54 years) hit a post-WWII
this cycle and is still above the 1982 recession peak, and the youth
unemployment rate is stuck near 25%. These developments will have profound
long-term consequences – social, economic and political.
The fiscal costs of the depression continue to mount, with the White
House on Friday raising its deficit projection for 2011 to $1.4 trillion
from $1.267 trillion. That gap in the forecast – $133 billion – was
close to the size of the entire budget deficit back in 2002. Amazing.
You also know it is a depression when you find out on the weekend
that the FDIC seized and shuttered another seven banks, making it 103
closures for the year. What a recovery!
Meanwhile, how are the surviving banks making money? By cutting their
provisions for bad debts (at a time when the household debt/income ratio
is still near record highs of 120% and at a time when one-quarter of
the consumer universe has a sub-600 FICO score – which means they are
also ineligible for Fannie or Freddie mortgage financing. The banks
thus far have reduced their loan loss reserves between 23% (Cap One)
and 73% (First Horizon) – as Jamie Dimon said last week, these are not
real earnings.
You also know it's a depression when a year into a statistical recovery,
the central bank is still openly contemplating ways to stimulate growth.
The Fed was supposed to have already started the process of shrinking
its pregnant balance sheet four months ago and is now instead thinking
of restarting Quantitative Easing. Of course, we are in this bizarre
environment where bank credit continues to contract – last week alone,
bank wide consumer credit outstanding fell $2.2 billion; real estate
lending contracted $9.2 billion; and commercial & industrial loans slid
$5.1 billion.
What did the banks do this past week? They replaced cash with government
securities – the $47.5 billion net buying was the second largest in
the past three years. As the banks find few opportunities to lend –
households are either not creditworthy enough to lend to or are busy
paying off debts and companies that do have any expansion plans have
enough cash on their balance sheet to finance their initiatives – they
are likely to use their $1 trillion in excess reserves buying government
and related securities, especially with the yield curve so steep and
the Fed ensuring that it has no intention of taking the 'carry' away
for a long, long time.
Did we mention that you also know you are in some sort of depression
when after two years of record $1+ trillion deficit financing to kick-start
the economy, the yield on the 5-year note is sitting at 1.8%? What do
you think that tells you? It tells you that the private credit market
is basically defunct, especially when it comes to the securitized loans,
which played such a critical role in promoting leveraged economic growth
from 2001 to 2007 – the amount of securitized credit that has vanished
since the credit bubble burst two years ago is $1.4 trillion – 40% of
this market is gone. And what replaced it was this rampant government
intervention into the economy – aimed at putting a floor under the economy.
But insofar as the government stimulus fades and the contraction in
credit persists, it will be interesting to see what sort of spending,
output and income growth we are going to see in the near- and intermediate-term.
And as a must read tangent, here is Rosie on the market's most
recent addiction to barbiturates, lithium, xanax and geodon all at the
same time (not to mention the Fed's daily bouts of monetary heroin withdrawal,
coupled with the market regulator's taxpayer funded pornography addiction
bills). That probably explains it - to trade one really has to be stoned
24/7, or to at least do the 180 degree opposite of what makes sense.
MARKET THOUGHTS
Everyone seems to be basing their view on the economic outlook from
what the stock market is telling them – so one week it is a return to
recession, and now that the market is surging, we must be in some sort
of boom. Coincident indicators out of Europe has everyone convinced
that the backdrop is solid and yet the massive fiscal tourniquet has
to be applied. Investors are caught in bouts
of monthly euphoria and depression – it is amazing that we have all
this joy for a market that has made its way back to the middle of the
range and a market that is basically flat for the year.
Program trading, algorithms, momentum
trading, technicals – all are at play. Meanwhile, the
Treasury market has steadfastly refused to budge from a double-dip view,
with real rates still under downward pressure, and while the breadth
of the market has been decent, this rally has continued to lack volume
– down a further 2% on Friday on the NYSE. Meanwhile, we are at another
key technical juncture – the Dow and Nasdaq have retaken their 200-day
moving averages while the S&P 500 and the Nasdaq are caught between
the 50-day and 200-day m.a.'s.
It is amazing that Mr. Market has been able to look through some
of the blemishes of the Q2 earnings season, the recent spike in jobless
claims, the latest hot spot for sovereign default risk (Hungary), and
the ECRI hitting a level that is more negative now than in the worst
point of the 1990-91 recession. Even with the recent recoveries, the
downdraft in most industrial metal prices since mid-April has been breathtaking
– down 18% for aluminum, down 13% for copper, down 27% for nickel, and
down 15% for steel. Since China has accounted for 40% of global consumption
of base metals over the past year, these price moves would seem to suggest
that the economic landing there might be
less soft and harder than is generally perceived.
The Dow Jones Industrial Average last week ended up pretty much where
it had been a little more than a week earlier. A rousing 200-point rally
on Wednesday mostly made up for the distressing 200-point selloff of
the previous Friday.
The Dow plummeted nearly 800 points a few weeks ago -- and then just
as dramatically rocketed back up again. The widely watched market indicator
is down 7% from where it stood in April and up 59% from where it was
at its 2009 nadir.
These kinds of stomach-churning swings are testing investors' nerves
once again. You may already feel shattered from the events of 2008-2009.
Since the Greek debt crisis in the spring, turmoil has been back in
the markets.
At times like this, your broker or financial adviser may offer words
of wisdom or advice. There are standard calming phrases you will hear
over and over again. But how true are they? Here are 10 that need extra
scrutiny.
1 "This is a good time to invest in the stock market."
Really? Ask your broker when he warned clients that it was a bad
time to invest. October 2007? February 2000? A broken watch tells the
right time twice a day, but that's no reason to wear one. Or as someone
once said, asking a broker if this is a good time to invest in the stock
market is like asking a barber if you need a haircut. "Certainly, sir
-- step this way!"
2 "Stocks on average make you about 10% a year."
Stop right there. This is based on some past history -- stretching
back to the 1800s -- and it's full of holes.
About three of those percentage points were only from inflation.
The other 7% may not be reliable either. The data from the 19th century
are suspect; the global picture from the 20th century is complex. Experts
suggest 5% may be more typical. And stocks only produce average returns
if you buy them at average valuations. If you buy them when they're
expensive, you do a lot worse.
3 "Our economists are forecasting..."
Hold it. Ask your broker if the firm's economist predicted the most
recent recession -- and if so, when.
The record for economic forecasts is not impressive. Even into 2008
many economists were still denying that a recession was on the way.
The usual shtick is to predict "a slowdown, but not a recession." That
way they have an escape clause, no matter what happens. Warren Buffett
once said forecasters made fortune tellers look good.
4 "Investing in the stock market lets you participate in the growth
of the economy."
Tell that to the Japanese. Since 1989 their economy has grown by
more than a quarter, but the stock market is down more than three quarters.
Or tell that to anyone who invested in Wall Street a decade ago. And
such instances aren't as rare as you've been told. In 1969, the U.S.
gross domestic product was about $1 trillion, and the Dow Jones Industrial
Average was at about 1000. Thirteen years later, the U.S. economy had
grown to $3.3 trillion. The Dow? About 1000.
5 "If you want to earn higher returns, you have to take more risk."
This must come as a surprise to Mr. Buffett, who prefers investing
in boring companies and boring industries. Over the last quarter century,
the FactSet Research utilities index has even outperformed the exciting,
"risky" Nasdaq Composite index. The only way to earn higher returns
is to buy stocks cheap in relation to their future cash flows. As for
"risk," your broker probably thinks that's "volatility," which typically
just means price ups and downs. But you and your Aunt Sally know that
risk is really the possibility of losing principal.
6 "The market's really cheap right now. The P/E is only about 13."
The widely quoted price/earnings (PE) ratio, which compares share
prices to annual after-tax earnings, can be misleading. That's because
earnings are so volatile -- they're elevated in a boom, and depressed
in a bust.
Ask your broker about other valuation metrics, like the dividend
yield, which looks at the dividends you get for each dollar of investment;
or the cyclically adjusted PE ratio, which compares share prices to
earnings over the past 10 years; or "Tobin's q," which compares share
prices to the actual replacement cost of company assets. No metric is
perfect, but these three have good track records. Right now all three
say the stock market's pretty expensive, not cheap.
7 "You can't time the market."
This hoary old chestnut keeps the clients fully invested. Certainly
it's a fool's errand to try to catch the market's twists and turns.
But that doesn't mean you have to suspend judgment about overall valuations.
If you invest in shares when they're cheap compared to cash flows
and assets -- typically this happens when everyone else is gloomy --
you will usually do very well.
If you invest when shares are very expensive
-- such as when everyone else is absurdly bullish -- you will probably
do badly.
8 "We recommend a diversified portfolio of mutual funds."
If your broker means you should diversify across things like cash,
bonds, stocks, alternative strategies, commodities and precious metals,
then that's good advice.
But too many brokers mean mutual funds
with different names and "styles" like large-cap value, small-cap growth,
midcap blend, international small-cap value, and so on. These are marketing
gimmicks. There is, for example, no such thing as "midcap
blend." These funds are typically 100% invested all the time, and all
in stocks. In this global economy even "international" offers less diversification
than it did, because everything's getting tied together.
9 "This is a stock picker's market."
What? Every market seems to be defined as a "stock picker's market,"
yet for most people the lion's share of investment returns -- for good
or ill -- has typically come from the asset classes (see No. 8, above)
they've chosen rather than the individual investments. And even if this
does turn out to be a stock picker's market, what makes you think your
broker is the stock picker in question?
10 "Stocks outperform over the long term."
Define the long term? If you can be down for 10 or more years, exactly
how much help is that? As John Maynard Keynes, the economist, once said:
"In the long run we are all dead."
Note: This is a composite index based on a number of economic releases.
From the Chicago Fed:
Index shows economic activity declined in June
Led by deterioration in production- and employment-related indicators,
the Chicago Fed National Activity Index declined to –0.63
in June, down from +0.31 in May. Three of the four broad
categories of indicators that make up the index made negative contributions
in June, while the sales, orders, and inventories category made
the lone positive contribution.
Cinco-X:
Hell To Pay wrote:
There is no expansion without fresh debt fuel. Our collective
ability to process additional debt fuel has reached full saturation
point. We are living in both an interesting conundrum and on
borrowed time.
"No expansion without fresh debt fuel?" That IS a conundrum,
and it implies that any fiat currency regime has what is essentially
a finite life, though what defines that lifespan is less apparent....
His analogy with 1990-1993 recession is questionable: the recovery in
this case was pretty certain because of huge boost caused by the dissolution
of the USSR.
For various reasons that will be discussed below, we are lowering
our 2010 real gross domestic product (GDP) forecast. At the same time,
we are publicly unveiling our 2011 forecast - admittedly not nearly
as anxiously awaited as LeBron's revelation. For the second half of
2010, we now are projecting annualized real GDP growth of 1.8% versus
our May forecast of 2.5%. This lower second-half projection and the
Commerce Department's revised lower first quarter growth reduces our
Q4/Q4 2010 real GDP growth forecast to 2.2% versus May's forecast of
2.7%. As a result of our reduced 2010 real GDP growth projection,
the forecast for the unemployment rate has been increased.
For Q4:2010, we now place the average unemployment rate at 10.3% versus
the May forecast of 10.0%. Our Q4/Q4 2011 forecast for real GDP growth
is 3.2%.
Before getting into the reasons for downgrading the 2010 GDP forecast,
we think it is important for investors to realize that this past recession
and current recovery are of a different nature than most others in the
post-war era - an exception being the recession/recovery/expansion of
1990-93. Most postwar recessions were brought on by the Federal Reserve
intentionally tightening monetary conditions in order to extinguish
undesired increases in the prices of goods and services. In this event,
the nonfinancial sectors of the economy bear the brunt of monetary policy
tightening. However, the financial sector, although also adversely affected,
remains able to resume credit creation when the Fed adopts an accommodative
policy after goods/services price increases moderate. The Fed lowers
its policy interest rate, in effect providing cheaper credit to the
financial sector, which, in turn, provides cheaper credit to the private
nonfinancial sector. Credit growth created by the private financial
sector picks up, growth in private sector spending picks up, and a robust
recovery ensues.
Although the onset of the recent recession unfolded in a similar
fashion as described above - the Fed intentionally tightening monetary
conditions to restrain undesired increases in the prices of goods and
services - the financial sector was more adversely affected in the recent
recession than in prior ones. Of course, the reason for this was the
post-war unprecedented decline in residential real estate prices. With
home mortgages outstanding rising to both absolute and relative record
highs in this past cycle (see Chart 1) and with the value of the collateral
backing this debt falling precipitously, the financial sector experienced
its biggest losses in the post-war era. These losses, which resulted
in the massive "evaporation" of capital, rendered the financial sector
unable to create net new credit for the private nonfinancial sector
when the Fed slashed the cost of its credit.
Chart 2 shows that starting in Q1:2009 and continuing through Q1:2010
(the latest data point available) outstanding loans and investments
on the books of private financial institutions contracted. In
prior post-war recessions, loans and investments slowed in their rate
of growth. But this is the first instance of an outright
contraction in private financial sector issued credit. Judging
from the annualized rate of contraction in bank loans and investments
of 4.9% in April and 8.0% in May (see Chart 3), private financial sector
credit creation likely contracted again in the second quarter of this
year.
What all this means is that the transmission
mechanism between the Federal Reserve and the nonfinancial sector of
the economy is malfunctioning. The Fed is revving up the monetary engine,
but these high rpms are not being transferred to the wheels of the economy.
With regard to the revving up of the monetary engine,
the Fed has reduced its effective policy rate to a level below 0.25%
and has increased the amount of assets on its balance sheet from $877
billion at the end of 2007 to over $2.3 trillion today. Under
normal circumstances, if the private financial system were functioning
properly, this cheap and abundant Fed credit would have been transformed
into cheap and abundant credit for the private nonfinancial sector.
But this is not happening because the private financial sector monetary
transmission mechanism is malfunctioning.
Qualitatively, but not of the same magnitude, the private
financial sector transmission mechanism also was malfunctioning in the
early 1990s. The commercial banking system incurred relatively large
losses associated with falling commercial real estate values in the
late 1980s. Because of capital constraints resulting from these losses,
banks could create relatively little credit for the private sector.
(An increase in private sector loans and investments incurs a charge
against risk-based capital.) As shown in Chart 4, quarter-to-quarter
growth in real final sales was very weak in the three quarters of the
recovery. Subsequently, growth in real final sales accelerated, only
to contract again in Q1:1993. The unemployment rate did not peak until
the Q2:1992 and declined rather slowly in 1993. The Fed continued to
reduce its federal funds target through September 1992, a full 18 months
after the trough of the prior recession (March 1991). First associated
with the weak and uneven recovery following the 1990-91 were terms such
as "jobless recovery," "double-dip," and who could forget the Maestro's
phrase, "financial market headwinds." Sound familiar?
The problem with minimal bond yield is that temptation to get higher
yield is too strong to resists and that lead to disappointments down the
road... Like Mark Twain used to say "A
thing long expected takes the form of the unexpected when at last it comes."
Jul 22, 2010 | gluskinsheff
"UNUSUALLY UNCERTAIN"
Those were the words Ben Bernanke used to describe the macro outlook.
He refrained from discussing double-dip risks, but in contrast to the
market's desire for more policy juice, he actually spent more time talking
about the how, " at some point, the Committee will need to begin
to remove monetary policy accommodation to prevent the buildup of inflationary
pressures".
Amazing – the Fed is still pre-occupied with inflation at this juncture
BONDS LEAD
The big news yesterday was the continued
decline in bond yields – with the 10-year note closing
down at 2.88%, which is the lowest since April 2009.
This is critical because the Treasury market
is telling a different story than equities are...but remember which
asset class really leads.
Treasury yields peaked three months before
equities peaked in 2007 (June vs. October) and bottomed
three months before equities in 2008-09 (December '08 vs. March '09).
When did Treasury yields peak this year? Try early April at 4.01%
– while "hope" persists in equities we doubt that this condition will
be sustained as the weakening in the economic
data points spill over into the earnings landscape.
A very apt quote (everybody and his brother were shouting that bond
yield will go up in 2010): "Ask the bullish community if by this time of
the year
we were supposed to see bonds outperforming
stocks – folks like our friends Byron Wien at Blackstone and
Jim Caron at Morgan Stanley thought
we were on our way to a 5.5% yield on the
10-year T-note. So let’s keep the whippy, albeit positive,
action in the equity market into perspective. This is the sixth (!) multi-week
bounce in the equity market so far in 2010 and the year is barely seven
months old."
Count ‘em! We’d better capture
these bullish talking-points from Gluskin Sheff’s David Rosenberg,
just in case they disappear…
– Congress extending jobless benefits (yet again).
– Polls showing the GoP can take the House and the Senate in
November.
– Some Democrats now want the tax hikes for 2011 to be delayed.
– Cap and trade is dead.
– Cameron’s popularity in the U.K. and market reaction there
is setting an example for others regarding budgetary reform.
– China’s success in curbing its property bubble without bursting
it.
– Growing confidence that the emerging markets, especially in
Asia and Latin America, will be able to ‘decouple’ this time around.
We heard this from more than just one CEO on our recent trip to
NYC and Asian thumbprints were all over the positive news these
past few weeks out of the likes of FedEx and UPS.
– Renewed stability in Eurozone debt and money markets – including
successful bond auctions amongst the Club Med members.
– Clarity with respect to European bank vulnerability.
– Signs that consumer credit delinquency rates in the U.S. are
rolling over.
– Mortgage delinquencies down five quarters in a row in California
to a three-year low.
– The BP oil spill moving off the front pages.
– The financial regulation bill behind us and Goldman deciding
to settle –more uncertainty out of the way.
– Widespread refutation of the ECRI as a leading indicator …
even among the architects of the index! There is tremendous conviction
now that a double-dip will be averted, even though 85% of the data
releases in the past month have come in below expectations.
– Earnings season living up to expectations, especially among
some key large-caps in the tech/industrial space – Microsoft, AT&T,
CAT, and 3M are being viewed as game changers (especially 3M’s upped
guidance). Even the airlines are reporting ripping results.
– Bernanke indicating that he can and will become more aggressive
at stimulating monetary policy if he feels the need and yesterday
urging the government to refrain from tightening fiscal policy (including
tax hikes).
– Practically every street economist took a knife to Q2 and Q3
GDP growth, which has left PM’s believing we are into some sort
of capitulation period where all the bad news is now “out there”.
Of course none of these factors have come near to turning Dave into
a bull. As if.
This is a secular bear market, remember,
where rallies are there to be rented not bought:
From our lens, this is still a meat-grinder of a market. The
bulls have the upper hand, but only until the next shoe drops in
this modern-day depression and post-bubble credit collapse. The
S&P 500 is still down 2% for the year, the Dow by 1%, the FT-SE
and Nikkei by 11%, the Hang Seng by 5% and China by over 20%.
Ask the bullish community if by this time of the year we were
supposed to see bonds outperforming stocks – folks like our friends
Byron Wien at Blackstone and Jim Caron at Morgan Stanley thought
we were on our way to a 5.5% yield on the 10-year T-note. So let’s
keep the whippy, albeit positive, action in the equity market into
perspective. This is the sixth (!) multi-week bounce in the equity
market so far in 2010 and the year is barely seven months old.
"turn the other cheek" policy
July 23 2010 |
FT.com
Citigroup,
Bank of America and 15 other bailed-out financial services companies
overpaid their top executives by $1.6bn during the height of the financial
crisis, according to a review by the White House’s special master
on Wall Street compensation.
Kenneth Feinberg, who was appointed last year by Barack Obama, president,
to oversee the pay policies at the companies that received the greatest
government support, began in March his latest inquiry into top executives’
compensation from late 2008 to early 2009.
While the payments were legal at the time, Mr Feinberg said on Friday,
they would have fallen foul of restrictions the government set for participants
in its troubled asset relief programme (Tarp).
Citi topped the list on excessive pay, thanks in large part to the
compensation of several star employees at the bank’s Phibro commodities
trading unit, people familiar with the matter said. Citi sold the business
to Occidental Petroleum last year.
“Getting our compensation structure right is a priority for us,”
a Citi spokeswoman said. “Since the crisis, we have done a lot of work
to make sure it is performance-based and we look forward to reviewing
the special master’s recommendations.”
The other companies cited by the special master were:
American Express,
American International Group,
Boston Private Financial Holdings,
Capital One Financial,
CIT Group,
JPMorgan Chase.
M&T Bank,
Morgan Stanley,
Regions Financial,
SunTrust Banks,
Bank of New York Mellon,
Goldman Sachs,
PNC Financial Services Group,
US Bancorp and
Wells Fargo.
While Mr Feinberg no longer had the authority to police compensation
at those that had paid back the government’s investment, he used a “look
back” provision in the statute to ask for more information about their
pay during a window between the start of the Tarp and when new restrictions
on executive pay took effect.
Mr Feinberg reviewed what the 419 companies that received government
assistance before February 2009 had paid their top 25 executives. The
institutions were required to submit details on employees who earned
more than $500,000.
Eleven of the 17 companies cited by the special master have repaid
the government for its assistance during the crisis. And, while Mr Feinberg
conceded that none of the retention awards, bonuses, golden parachutes
and other payments that appear excessive today was “contrary to the
public interest”, he proposed the companies adopt a new policy that
would supersede pay guarantees granted to executives.
Usage Note: The meaning of disingenuous has been shifting about
lately, as if people were unsure of its proper meaning. Generally,
it means “insincere” and often seems to be a synonym of cynical
or calculating. Not surprisingly, the word is used often in political
contexts, as in It is both insensitive and disingenuous for the
White House to describe its aid package and the proposal to eliminate
the federal payment as “tough love.” This use of the word is accepted
by 94 percent of the Usage Panel. Most Panelists also accept the
extended meaning relating to less reproachable behavior. Fully 88
percent accept disingenuous with the meaning “playfully insincere,
faux-naïf,” as in the example “I don’t have a clue about late Beethoven!”
he said. The remark seemed disingenuous, coming from one of the
world’s foremost concert pianists. Sometimes disingenuous is used
as a synonym for naive, as if the dis- prefix functioned as an intensive
(as it does in certain words like disannul) rather than as a negative
element. This usage does not find much admiration among Panelists,
however. Seventy-five percent do not accept it in the phrase a disingenuous
tourist who falls prey to stereotypical con artists.
The American Heritage® Dictionary of the English Language, Fourth
Edition copyright ©2000 by Houghton Mifflin Company. Updated in
2009. Published by Houghton Mifflin Company. All rights reserved.
http://www.thefreedictionary.com/disingenuous
disingenuous adjective artful, artificial, counterfeit, crafty,
cunning, deceitful, deceiving, delusive, delusory, designing, devious,
dishonest, dodging, evasive, false, false hearted, feigned, fraudulent,
hypocritical, insidious, insincere, lacking frankness, lying, mendacious,
misdealing, misleading, parum candidus, prevaricating, scheming,
shifty, sly, spurious, tricky, truthless, uncandid, underhanded,
unethical, ungenuine, unprincipled, unscrupulous, unstraightforward,
untrustworthy, untruthful, wanting in candor, wily, without truth
——————————————————————————–
See also: corrupt, deceptive, dishonest, evasive, fraudulent, lying,
machiavellian, oblique, sinister, tortuous, unconscionable, unscrupulous,
untrue
Burton’s Legal Thesaurus, 4E. Copyright © 2007 by William C. Burton.
Used with permission of The McGraw-Hill Companies, Inc.
http://legal-dictionary.thefreedictionary.com/disingenuous
Could We deign to believe that Sheila may be so forthcoming as
to clarify her ’statement’?
http://legal-dictionary.thefreedictionary.com/deign ( be so
good as to )
obsvr-1
I think “intellectually dishonest” is better than disingenuous
if one wants to be more forceful in the diplomatic approach to describing:
artful, artificial, counterfeit, crafty, cunning, deceitful,
deceiving, delusive, delusory, designing, devious, dishonest, dodging,
evasive, false, false hearted, feigned, fraudulent, hypocritical,
insidious, insincere, lacking frankness, lying, mendacious, misdealing,
misleading, parum candidus, prevaricating, scheming, shifty, sly,
spurious, tricky, truthless, uncandid, underhanded, unethical, ungenuine,
unprincipled, unscrupulous, unstraightforward, untrustworthy, untruthful,
wanting in candor, wily, without truth
The defense budget seems to be off the table when it comes to budget
discussions, but it shouldn't be:
America's Unquenchable Defense Spending, by Michael Cohen:
If there's one issue that seems to unite an increasingly divided
and fractured capital, it is the ever-expanding federal budget
deficit. ... Except one area of the federal budget is seemingly
off limits: the $692 billion elephant in the room -- America's
defense budget.
The calls from Republicans and Democrats for belt-tightening
rarely, if ever, seem to extend to the military. Deficit hawks
in the House have even demanded that an amendment to the $37
billion Afghanistan spending bill that would allocate $10 billion
to prevent teacher layoffs ... be paid for with offsetting spending
cuts. No such demands have been made about war spending, which
since 9/11 tops more than $1 trillion. ...
Yet, outside ... Social Security, Medicare and Medicaid, the
defense budget is by far the biggest chunk of the nation's fiscal
pie. Aside from money allocated for the Pentagon there is another
more than $300 billion in additional outlays for costs like
homeland security, military aid, veteran's benefits and military-related
interest on the national debt. That's more than $1 trillion
in taxpayer money -- or about $3 out of every $10 in tax revenue.
And while the defense budget has been growing for decades, since
9/11 the numbers have jumped significantly. ... [T]he money
is not just going to pay for wars in Iraq and Afghanistan. Nonwar
defense spending makes up more than a third of the increase.
All of this is happening at a time when the U.S. faces no major
foreign rival and al-Qaida, according to the nation's intelligence
chiefs, has been reduced to a mere 400 to 500 key operatives
in Pakistan and Afghanistan. In Afghanistan alone, the U.S.
is spending $100 billion and deploying 100,000 troops to face
an enemy that has only about 50 to 100 operatives in the entire
country.
Trimming the defense budget will not solve the country's deficit
woes, but it would certainly help. Moreover, smart spending
cuts would allow lawmakers to divert money toward creating jobs
and growing the economy -- steps that would, over time, do far
more to reduce the deficit. A recent
report by the Sustainable Defense Task Force ... found nearly
$1 trillion in possible savings over 10 years. ...
[I]f Congress is willing to consider cuts to Social Security
and Medicare, or won't even fund money for teachers and benefits
for the unemployed out of deficit fears, why should the defense
budget be off the table?
Of course, as the report also suggests, the surest way to truly
reduce U.S. military spending would be to adopt a policy of
greater "restraint" that makes the deployment of U.S. forces
a true last resort, minimizes overseas commitments and stops
subsidizing the defense responsibilities of our allies in Europe
and Asia. ...
In the short-run, cuts in defense spending (or more "restraint")
could be used to temporarily fund recession fighting and job creating
programs. In the longer run, as those expenditures expire, the reductions
in defense spending would help with the debt problem.
"Can GEICO really save you 15% or more on car insurance? Is Tim
Geithner a lying dirt bag?"
Lavrenti Beria
Some poetic justice here I suspect. Big Sis Elizabeth Warren,
the darling of the non-profit brie and Chardonnay set, rolled
at the hearings, supportive of the hideous compromise that will
put the CFPB under the auspices of the Fed, and vomiting on
the rug with enthusiasm for the toothless “financial reform”
legislation about to be signed into law, just may have been
taught a lesson: You don’t compromise
with filth so that you can secure a Federal job you covet, you
go down with your ship.
Its here that one sees the pitiable Warren eviscerated, and
by the Mephistophelean Timmy! Its
something like having served in the Red Army during WWII, having
been captured and upon repatriation having been shot for cowardice.
Bye-bye, Liz.
ask Chomsky
QUESTION: You wrote that Henry Kissinger’s memoirs “give
the impression of a middle-level manager who has learned to
conceal vacuity with pretentious verbiage.” You doubt that he
has any subtle “conceptual framework” or global design. Why
do such individuals gain such extraordinary reputations, given
what you say about his actual abilities? What does this say
about how our society operates?
CHOMSKY: Our society is not really based on public participation
in decision-making in any significant sense. Rather, it is a
system of elite decision and periodic public ratification. Certainly
people would like to think there’s somebody up there who knows
what he’s doing. Since we don’t participate, we don’t control
and we don’t even think about the questions of crucial importance,
we hope somebody is paying attention who has some competence.
Let’s hope the ship has a captain, in other words, since we’re
not taking in deciding what’s going on. I think that’s a factor.
But also, it is an important feature of the ideological system
to impose on people the feeling that they are incompetent to
deal with these complex and important issues; they’d better
leave it to the captain. One device is to develop a star system,
an array of figures who are often media creations or creations
of the academic propaganda establishment, whose deep insights
we are supposed to admire and to whom we must happily and confidently
assign the right to control our lives and control international
affairs. In fact, power is very highly concentrated, decision-making
is highly concentrated in small interpenetrating elites, ultimately
based on ownership of the private economy in large measure,
but also in related ideological and political and managerial
elites. Since that’s the way the society effectively functions,
it has to have political theology that explains that that’s
the way it ought to function, which means that you have to establish
the pretense that the participants of that elite know what they
are doing, in our interest, and have the kind of understanding
and access to information that is denied the rest of us, so
that we poor slobs ought to just watch, not interfere. Maybe
we can choose one or another of them every few years, but it’s
their job to manage things, not ours. It’s in this context that
we can understand the Kissinger phenomenon. His ignorance and
foolishness really are a phenomenon. I’ve written about this
in some detail. But he did have a marvelous talent, namely,
of playing the role of the philosopher who understands profound
things in ways that are beyond the capacity of the ordinary
person. He played that role quite elegantly. That’s one reason
why I think he was so attractive to the people who actually
have power. That’s just the kind of person they need.
http://www.chomsky.info/books/reader02.htm
jake chase
This also explains Alan Greenspan perfectly.
ask Huxley:
We see, then, that modern technology has led to the concentration
of economic and political power, and to the development of a
society controlled (ruthlessly in the totalitarian states, politely
and inconspicuously in the democracies) by Big Business and
Big Government. But societies are composed of individuals and
are good only insofar as they help individuals to realize their
potentialities and to lead a happy and creative life. How have
individuals been affected by the technological advances of
recent years? Here is the answer to this question given by a
philosopher-psychiatrist, Dr. Erich Fromm:
Our contemporary Western society, in spite of its material,
intellectual and political progress, is increasingly less conducive
to mental health, and tends to undermine the inner security,
happiness, reason and the capacity for love in the individual;
it tends to turn him into an automaton who pays for his human
failure with increasing mental sickness, and with despair hidden
under a frantic drive for work and so-called pleasure.
Our “increasing mental sickness” may find expression in neurotic
symptoms. These symptoms are conspicuous and extremely distressing.
But “let us beware,” says Dr. Fromm, “of defining mental hygiene
as the prevention of symptoms. Symptoms as such are not our
enemy, but our friend; where there are symptoms there is conflict,
and conflict always indicates that the forces of life which
strive for integration and happiness are still fighting.” The
really hopeless victims of mental illness are to be found among
those who appear to be most normal. “Many of them are normal
because they are so well adjusted to our mode of existence,
because their human voice has been silenced so early in their
lives, that they do not even struggle or suffer or develop symptoms
as the neurotic does.” They are normal not in what may be called
the absolute sense of the word; they are normal only in relation
to a profoundly abnormal society. Their perfect adjustment to
that abnormal society is a measure of their mental sickness.
These millions of abnormally normal people, living without fuss
in a society to which, if they were fully human beings, they
ought not to be adjusted, still cherish “the illusion of individuality,”
but in fact they have been to a great extent deindividualized.
Their conformity is developing into something like uniformity.
But “uniformity and freedom are incompatible. Uniformity and
mental health are incompatible too. . . . Man is not made to
be an automaton, and if he becomes one, the basis for mental
health is destroyed.”
In the course of evolution nature has gone to endless trouble
to see that every individual is unlike every other individual.
We reproduce our kind by bringing the father’s genes into contact
with the mother’s. These hereditary factors may be combined
in an almost infinite number of ways. Physically and mentally,
each one of us is unique. Any culture which, in the interests
of efficiency or in the name of some political or religious
dogma, seeks to standardize the human individual, commits an
outrage against man’s biological nature.
III.
Over-Organization
http://www.huxley.net/bnw-revisited/index.html#overorg
Forward S&P 500 earnings estimates are outrageously optimistic
as noted in
Hussman on Misallocating Resources, Market Valuations, Earnings
Estimates, and Public Policy.
The above link addresses what is happening. This post will address
the reasons why.
Reasons for Nonsensical Earnings Estimates
- Analysts do not do their homework on what is really happening
and why. Instead they see rising earnings and take them at face
value, nearly always figuring following quarters will be better
yet.
- Analysts do not understand the dynamics of debt deflation,
peak credit, the baby boomer retirement dynamics, etc. In short,
Analysts do not understand the global macro picture is bleak.
- Analysts look at a steep yield curve and think the Fed can
lift the economy.
- Analysts have not yet caught on to the fact that consumer
spending and bank lending attitudes have changed for good.
- Analysts in general have a vested interest in getting the
public to buy stocks, annuities, etc. because that is how they
make money.
US Banking Earnings are a ShamDavid Stevenson
at MoneyWeek addresses the first bullet point above quite nicely.
Please consider The
US banking recovery is a sham.
Selected Comments
The Sim:
I think point #5 (most analysts are shills) is the most important
fedwatcher:
I think it should be restated as "almost all analysts are
shills".
kimo:
Washington primes the Wall Street Pump Machine with FASB
157. These two are tag teaming the small investor, beating them
to a pulp. Must make the penny stock pump & dumpers jealous.
fedwatcher:
If you do it, you go to jail. If they do it, they get a bonus.
The world is so simple if you think about it.
fedwatcher:
The rules of bank accounting are at best "hope for the best
outcome". Only bank examiners have an idea of the true financial
health of a bank. Thus, while your bank's annual report looks
great, the bank examiner may have come to the conclusion that
your bank will fail in two years. Thus trading bank stocks is
flying blind, and Wall Street is clueless! Back in the early
1990's there was a large (1100 branches) bank in California
called Security Pacific National Bank. It was headquartered
in Los Angeles, California and generally considered a very strong
institution. However, Security Pacific had some very iffy commercial
loans on its books. So the regulators went to Bank of America,
which had survived a similar problem and thus had very few dodgy
commercial loans on its books and said "We want you to buy Security
Pacific". Now after the announcement Wall Street was doubtful
that the 'regulators' would approve of this merger on anti-trust
basis (as Wall Street did not know that it was a shotgun marriage,
while everyone I knew on the hill {Bunker Hill, L.A. and not
Capitol Hill in D.C.} knew it was.).
The approval was granted and the stock prices spiked and
we all learned that not all information was priced into the
stock (how could so many of us know and Wall Street not know?).
The bigger lessons from that are:
1.) Ignore a bank's official reports, you cannot trust them.
2.) Regulators do not like bank failures and will break any
rule to prevent them.
3.) Financials, which are the biggest part of many mutual funds
are volatile and no one knows what they are really worth.
In Fractal Finance, Part I we saw that fractals can be useful
in describing complex, seemingly chaotic patterns in nature.
We also saw how Wall Street took advantage of the same advances
in information technology that made the study of fractals possible
starting in the 1980s, to come up with computer-driven black-box
trading schemes. For example, index arbitrage strategies were
widely blamed for the Black Monday crash of October 1987.
Wall Street is always on the look-out for new "angles", opportunities
to better skin a cat in a place already full of very sharp razors.
The sheer quantity of money moving around attracts very bright individuals,
at least the variety who get high on making as much money as possible
with the seat of their pants and the money of others. Wall Street
is also home to some of the hugest and most ruthless egos to be
found anywhere, resulting in a kind of kindergarten for genius gunslingers,
but that's material for a subsequent post.
Unlike what most people may think, professional traders
don't usually make huge "straight" up-and-down bets;
there's simply too much risk involved. They leave this type
of activity to end-user speculators and investors (e.g. hedge or
pension funds), and mostly involve themselves in market-making and
arbitrage.
Market-making is the workaday, mundane function of providing
secondary market liquidity in return for a thin "spread" profit
between bid and offer prices. This is the foundation upon which
rests most trading revenue and is the training ground for all junior
traders. The real action, however, where whiz-kids can and do make
a difference playing with the firm's own money, is in arbitrage
and arbitrage-related activities, where profit margins are modest
but risk is usually well-defined, small and manageable. The
trick there is to identify new "angles" and take advantage
of them early on, when profit margins are still fat, i.e. before
other players get a whiff of the action and pile in too.
(If you are not familiar with arbitrage and risk, Richard Bookstaber's
A Demon of Our Own Design is an excellent and enjoyable
book, written by a true insider. Also, see the personal note at
the end of this post.)
The basic principle of arbitrage is simple: if A=B and B=C,
then by definition A=C. Financial arbitrage is,
of course, more complicated than simple math since it involves a
variety of different risks, ranging from simple execution risk (the
ability to complete a trade as planned), all the way to counterparty
risk (an entity on the other side of the trade fails).
The basic elements common to all arbitrage operations are: The
amounts of money involved are very large. Since profit margins
are small a lot of capital must be applied in order to make a decent
return, in dollar terms. Trading is very active. Again, because
of such small margins, which can appear and disappear within minutes,
if not seconds, traders have to pounce on them fast and often. Heavy
leverage is always used to boost returns. Twenty-to-one is
considered conservative, fifty-to-one is standard and 200-to-one
is not unheard. (Or was, we now live in the Age of De-leverage).
And where do fractals fit in? Where is self-similarity
in markets?
One does not need to study price charts in major, liquid markets
for long to realize that they look very similar in all time frames.
Do this: take the daily chart of any reasonably active stock or
commodity and start narrowing the time frame, i.e. reduce the time
unit to hourly, 30-minute intervals, 10-minutes and so on.
You will see that fluctuation patterns are, more or less, similar.
Now, expand the time frame by looking at weekly, monthly, etc.
charts. Again, similar patterns.
[Image] S&P 500 - One Day Chart (Friday,
June 26 2010)
[Image] S&P 500 - One Year Chart
The study of patterns is not new in markets, of course. It has been
going on for ages as technical analysis, wave theory, Fibonacci
trading, etc. What is new, however, is the massive size of computing,
communications and network capacity now being applied to markets,
causing trading to become unrecognizable when compared to even ten
years ago. It is estimated that an astonishing 70% of
all volume in U.S. stockmarkets is now driven by so-called "high
frequency" trading, where buy and sell orders are generated by algorithms
residing in black-box computers, taking advantage of arbitrage
opportunities between the prices of shares, indexes, trackers, futures
and other derivative instruments.
In Part III I shall present my conviction
that such developments are detrimental to the overall health of
financial markets and, indeed, the entire real economy.
________________________________________________________
I first heard of the words arbitrage and arbitrageur in 1981
during the Mobil - Marathon - U.S. Steel takeover battle. At the
time, I was in grad school getting my Master's degree in ChE - and
mentally a million miles from Wall Street though a stone's throw
away.
I was introduced to David P., a major-league arbitrageur at
the time, who tried to explain what he did. I found it all
extremely boring in those, my early Joe Engineer days: oil
prices were setting new records and Wall Street was flat on its
back. It wasn't until several years later that I realized
who David really was. Or, for that matter, who one Carl Icahn was,
whom I had met at one of David's parties and, having never heard
of him until then, cheekily asked: "And what do you
do for a living?" I still blush at my ignorance.
OkieLawyer:
The reason I say that we need to use more government spending
is because private industry does have the capital -- or is unwilling
to deploy it -- to build renewable energy systems. Only the
government has the capital base from which to draw on to build
a new energy infrastructure.
We have 10% unemployment and adequate financial resources
to put into place; it just isn't being utilized.
Private corporate interests in
the U.S. only look to the next quarter to show immediate profit
rather than accept that in the short term there will be capital
expenditures to develop profits in 10 years, which is the turn-around
time for most renewable energy projects.
I can also tell you that the "common wisdom" of the people
I have talked to over the years (the ones that watch Fox News)
are being told that renewable energy cannot be built due to
"environmental" and "animal rights" concerns. In other words,
the meme is being spread that wind and solar farms cannot be
built due to environmental regulations to save some animal from
extinction kind of thing. (In reality, I suspect that said projects
were tanked due to astroturf "environmental groups" fighting
it. I also would not be surprised if some of the environmental
studies didn't have a predetermined outcome to make the case
that "darn, we just can't switch to renewable energy."
I think we make a grave mistake when we insist that any development
must come from private industry.
The policy of switching to renewable
energy is a societal good and we have millions of unemployed
workers who could be deployed rather quickly to begin working
on said project. (I actually think we need to
reactivate the old Civilian Conservation Corps and Works Progress
Administration to employ the millions of workers already counted
as "long term unemployed" and the millions who are about to
follow them soon.)
Hellasious:
I see what you mean Okie..Still, I very much doubt that focusing
on Roosevelt-era remedies will do anything for today's situation.
Let's see..
1. In 1930 the federal government was tiny, by comparison
to now, and could be expanded greatly - and was.
2. Ditto, government debt was tiny and was ballooned to enact
Keynesian policies.
3. There were no serious environmental/resource constraints.
Quite the reverse, actually, as the Age of Oil was just gaining
momentum.
4. The concept of socialism/communism was quite new and untarnished
then, thus making massive government intervention more acceptable
to the voting public. Obviously, this is not the case now.
I believe we must create a combination of market-based and
tax incentives to "force" private industry towards renewable
energy and sustainability.
...and, of course, The Greenback as monetary policy (smile).
Best,
H.
Debra:
One of our current problems, I think, is the confusion in
many people's minds over the difference between socialism and
social cohesion.
My impression of the mother country is that social cohesion
is at zero level. Bye bye the social contract when social cohesion
gets to zero level.
Rampant, uncontrolled individualism and social cohesion are
incompatible.
And I think that our language works in such a way that the
opposite pole of the atomic, unfederated, unbelieving individual
is... the totalitarian mass.
The one implies the other. You can't have the atomized individual
without creating at the same time the totalitarian mass to which
the idea "individual" is opposed.
I think that the government needs to get taxation going again.
To reinvest it as an idea. (yeah, and not having our taxes pay
for empire's little wars would be a good idea too).
I also think that... belief follows practice, and that practice
does not necessarily follow belief.
So... that means that I see NO VALID REASON why private corporations
can determine any collective course on these issues WITHOUT
wholesale handing over POLITICAL LEGITIMACY to the PRIVATE corporations.
Are you sure that's the world you want to live in ?
Not me. The semantic opposition private/public is vital to
maintaining the meaning of BOTH "private" and "public".
OkieLawyer:
Hellasious and mon:
Here is my problem with your proposal(s):
During the Wall Street meltdown in 2008, we saw the taxpayers
provide working capital to the Wall Street financiers, while
they paid themselves bonuses from the taxpayer's largesse.
We called it "the privatization
of profit and the socialization of losses."
I would rather it be that we provide the direct working capital
and the taxpayers get a share of the company equal to the capital
that was put into the project / company. Then, if the private
company wants to buy out the taxpayer's (government's) interest,
they should be allowed to do so at market rates.
For the last three years, I have been working in the private
industry that would be affected by a lot of the necessary building
brought on by government spending. We have talked among ourselves
about how there is ten years worth of critically needed
infrastructure installment, repair or replacement from bridges,
to dams, to railroads to energy grids and pipelines. No amount
of "tax incentives" will provide the needed capital to complete
all of these projects (and private industry doesn't want to
pay for it, anyway).
On some of these, perhaps, there could be a private-public
partnership. But, I, as for one, don't want to simply give them
the components of profits without something in return.
We have become accustomed to this: as in the case wherein
some sports stadium is built by taxpayers in order to draw in
some sports team, other tax breaks are given and the owners
leave for another town as soon as the tax credit ends. The team
owners profit handsomely with no risk. We used to have this
archaic notion that any successful enterprise should entail
risk on behalf of those who seek to profit from the venture.
I guess that has gone by the wayside.
moneymutt:
nice interview with Elizabeth Warren...she talks about commercial
real estate and local/regional banks precarious situation starting
at 11:46
http://www.pbs.org/wnet/need-to-know/economy/the-next-foreclosure-crisis/2303/
Like this:
"The longer you pretend, the longer it takes to get the
market back to where supply and demand match each other,
the longer it takes to get the right price back on commercial
real estate, attract in the businesses, get the rents back
in the right place, and get this economy back up and moving.
Everyone would like the world
to be always in bubble times but that doesn't happen, what
we have to do to have a secure financial system, and frankly
an economy that functions well, we've got to be right back
down where supply meets demand...that means that are there
are a lot of losses in commercial real estate....that just
have to be acknowledged..."
One of the important functions of fascism, as typified by the Nazi system,
was to remove capitalist objections to full employment.
Via email, everything old is new again. This is from 1943:
Political Aspects of
Full Employment, by Political Quarterly, 1943: ... Section
IV ... 3. ...In the slump, either under the pressure of
the masses, or even without it, public investment financed by borrowing
will be undertaken to prevent large-scale unemployment. But if attempts
are made to apply this method in order to maintain the high level
of employment reached in the subsequent boom, strong opposition
by business leaders is likely to be encountered. ...
In this situation a powerful alliance is likely to be formed between
big business and rentier interests, and they would probably find
more than one economist to declare that the situation was manifestly
unsound. The pressure of all these forces, and in particular of
big business—as a rule influential in government departments—would
most probably induce the government to return to the orthodox policy
of cutting down the budget deficit. A slump would follow...
This pattern of a political business cycle is not entirely conjectural;
something very similar happened in the USA in 1937-8. The breakdown
of the boom in the second half of 1937 was actually due to the drastic
reduction of the budget deficit. ... [full
text]
Another quote:
The fact that armaments are the backbone
of the policy of fascist full employment has a profound
influence upon that policy's economic character. Large-scale armaments
are inseparable from the expansion of the armed forces and the preparation
of plans for a war of conquest. They also induce competitive rearmament
of other countries.
This causes the main aim of spending to shift gradually from
full employment to securing the maximum effect of rearmament. As
a result, employment becomes 'overfull'; not only is unemployment
abolished, but an acute scarcity of labour prevails. Bottlenecks
arise in every sphere, and these must be dealt with by the creation
of a number of controls. Such an economy
has many features of a planned economy, and is sometimes compared,
rather ignorantly, with socialism.
How ever, this type of planning is bound to appear whenever an
economy sets itself a certain high target of production in a particular
sphere, when it becomes a target economy of which the armament economy
is a special case. An armament economy
involves in particular the curtailment of consumption as compared
with that which it could have been under full employment.[4]
The fascist system starts from the overcoming of unemployment,
develops into an armament economy of scarcity, and ends inevitably
in war.
Selected Comments
Lawrence:
So it's admitted in the article that Hitler starting war in Poland
was the reason we got out of the persistent economic slump, primarily
because reducing the budget deficit was no longer a priority among
business leaders. And these were the FDR years.
I would recommend the just released "The future of finance" a book free
to download with entires by Adair Turner, Peter Boone and Simon Johnson
among others: http://www.futureoffinance.org.uk/
One more before I hit the road to my
high school class reunion (35 years):
In Finance We Distrust, by Michael Spence, Commentary, Project Syndicate:
Around the world,, the debate about financial regulation is coming
to a head. ...
It now seems universally accepted (often implicitly) that government
should establish the structure and rules for the financial system,
with participants then pursuing their self-interest within that
framework. If the framework is right, the system will perform well.
The rules bear the burden of ensuring the collective social interest
in the system’s stability, efficiency, and fairness
Lawrence:
Let me fill you in on something interesting about my take on
Merck & Co and their pain killer Vioxx. I really thought the best
of Merck. I never thought the managers would ever do anything to
harm the reputation they built for themselves. So, as a stockbroker,
I built a rather large position in their common stock. Then one
day in late 2000, another broker who knew I had built that position
in Merck approached me to fill me in on a paper he found about Vioxx.
I'll never forget what he fisrt said, "Do you really know what a
Cox-2 inhibitor is?" I checked out the article he was referring
to, and I began offing that position immediately when I realized
people were going to die from Vioxx. As a matter of record, the
highest price Merck traded at was from part of a 1500 share position
I whacked for a customer in Jackson Hole, WY. I never looked back
at Merck again. They knew damned well what they put on the market.
Enron's common stock was another company I traded in heavily,
but was completely out of it before April 2001.
My feelings about corproate America changed while I was a trader,
and I can't say I miss those days at all. Something happened to
upper corporate management during the Reagan and Bush years. Accountability
for their nefarious deeds was being overlooked by the DOJ, (unless
of course you're Michael Milken, and not sharing your deals by opening
a syndicate with the rest of the Street), so management began having
no fear to hold more of their own stock, (to manipulate it), than
ever before. The DOJ has developed a culture of looking the other
way, and old Rudy Giuliani was the one who started it.
What surprises me is that I knew what was going on as far as
the DOJ was concerned since the mid 1980's. Why I chose not care
was because I wanted my piece of the pie first before I turned to
walk away from it all.
albrt:
I don't think it is possible to have effective cultural norms
for the financial system when the distribution of income in this
country is so skewed. The wealthy have always lived by somewhat
different rules than the rest of us, but today in America the wealthy
live in a completely different world. The point of cheating in finance
is not just the money, it's to get yourself into the world where
rules don't apply.
Goldilocksisableachblonde:
I agree with MT. Rules are paramount , and precede the widespread
adoption and practice of the ethic.
We all have an innate sense of guilt , but a firm rule like "Thou
shalt not covet thy neighbor's wife" , associated with the prospect
of a vengeful God who might fuse your bare butt cheeks together
with a lightning bolt , transformed that innate sense of guilt into
a cultural ethic.
Write down the rules in stone , so to speak , then enforce them
consistently , and the ethic will take hold , reducing both the
frequency of offenses and the necessary enforcement costs.
The mistake we ( especially you , Bush and Greenspan ) made was
in thinking that the ethic , once established , made rules and their
enforcement unnecessary.
Jimi:
The H.R. 4173 Bill has been passed, is it not? Screw what we
all think needs to be done, somebody needs to figure out exactly
what this Bill does.
Nobody read it agian, and it's 2000 pages long.
Regulation that makes sense, works for the masses = Good
Over Regulation that works for Politicians and Elites = Bad
Does anybody really know where the masses stand with this Bill?
Probably not, but we gonna find out aren't we? With the geniuses
we have selected for our leadership over the past thirty years...everybody
better cross your fingers.
Bruce Wilder:
It's not your fingers you need to cross, not that it will do
you any good.
charlie:
I would recommend the just released
"The future of finance" a book free to download with entires by
Adair Turner, Peter Boone and Simon Johnson among others:
http://www.futureoffinance.org.uk/
JasRas:
Are stocks really cheap? Relative
to when? Once all the leverage and stimulus has seeped
from the system, will it look cheap?
When more stocks look like Wellpoint (8p/e trail, 4 p/e forward)
perhaps we will be cheap, but too many stocks are priced for recovery
and a return to normalcy and it just isn’t that way.
Earnings don’t matter, it’s how you
got the earnings that is being scrutinized. Forward
P/E should be lower as the market is discounting a slow to no growth
environment for many sectors. Top line growth will be rewarded as
it will be a rare feat.
Technical analysis is not alchemy,
it is your only window to see what the big money is truly doing,
because they often contradict what they say with their actions.
Without technicals you are blind to the truth of the money that
moves the markets.
Rosenberg’s best analysis is economic,
not stock market. He tries to translate econ into
market but either gets time or price
wrong. His economic analysis is impressive though.
Times like these will make legends,
but legends rarely get to make another great call despite having
their career defined by a great call. Look at the
greats of the ‘87 crash–one great call made their career, made them
celebrity, but rarely did any of them hit another critical tipping
point with such accuracy. This isn’t a slam on them, but a cautionary
observation to be wary of those who guided you through 2008-2009
because they will likely fail in further meaningful market calls.
The market is cruel like this. So thanks to Fleckenstein, Kass,
Whitney, Roubini, Harrison, Ritholtz, Rosenberg, Bernstein, and
many others, but in all likelihood they won’t be able to call “the
bottom” or future tops. Except for Barry, perhaps with his Fusion
IQ methods he may get it right, but I’m sure you’ll have to pay
up as a client to know for sure…
Just remember the market is never
satisfied until all are shown to be fools…s…
ThreeFold Commonwealth:
This is a market that is driven by the consensus. Look at Euro
crash when Euro touted as dollar substitute. Likewise 30 yr treasury
rates took out 1982 trendline with 4.75% only to be smashed the
opposite way. Today a substantial pullback in lackluster volume.
Smells lower but plenty of cash and bond money to punish. We’re
above the trendline on the lower highs. Friday move on options trading
meaningless. Monday and tuesday tell the story. Wednesday the book
is printed.
Want to know if you are a market
professional? Are you up this week? Are you up this year?
This is a wicked market.
The wolves are prowling. They are hungry.
Pimco is right: Survive first. Get out
of debt. Build cash. Be opportunistic. Watch volume
not Cramer.
Main Street investors continue to ignore Wall Street strategists
by shunning the ever-volatile equity market for safety and income at
a reasonable price. The ICI data just came out for the July 7th week
and it showed a net outflow of $4.2 billion
from equity funds while bond funds attracted $6 billion of fresh money
on top of $3.5 billion the week before.
This demographic drive for income is
increasingly emerging as a secular theme.
The focus on boosting savings in a prudent way is also going to become
extremely pronounced too because a study published by the Employee Benefit
Research Institute found that the "early baby boomers" in particular,
those between 56 and 62, have a 47% chance of not having enough money
to fund their basic expenses in retirement.
Fully 1 in 3 middle-class workers will have run out of money altogether
after 20 years of retirement — the comparable share for low-income earners
is 10 years.
The Future of Finance:
The LSE Report
Download by chapter
Preface Richard Layard
Chapter 1: What do banks do? Why do credit booms and
busts occur and what can public policy do about it?
Adair Turner
Chapter 5: How should we regulate the financial sector?
Charles Goodhart
Chapter 6: Can we identify bubbles and stabilise the
system?
Andrew Smithers
Chapter 7: What framework is best for systemic (macroprudential)
policy?
Andrew Large
Chapter 8: Should we have “narrow banking”?
John Kay
Chapter 9: Why and how should we regulate pay in the
financial sector?
Martin Wolf
Chapter 10: Will the politics of global moral hazard
sink us again?
Peter Boone and Simon Johnson
curbyourrisk
Sorry but $550 million is not enough as far as I am concerned.
Hell…Tiger Woods has to pay $750 million settle his problems and
he only slept around, not brought an entire financial system to
their knees (maybe a few ex-pornstars to their knees, but not the
entire financial system).
philipat:
...Sadly, this is probably not Blanfein’s last erection?
inessence:
I was on the trading desk when watching the live coverage when
senior officers from Kidder Peabody were led out of their Manhattan
offices in handcuffs. Same with Drexel et.al. This was in addition
to large financial penalties. From mine and our firms perspective
it gave us pause to understand that breaking the securities laws
had sever consequences. Comparing Goldies transgressions, the (lack
of) impact on its management and its business going forward, I view
this incident and the SEC as toothless aggression. Fraud was committed
but who is responsible? Lets see some individual culpability!
The Window Washer:
@b_thunder
fraud: 1. crime of cheating somebody: the crime of obtaining
money or some other benefit by deliberate deception
Buffet isn’t a lawyer, though he tries to play one on TV, so
you can presume he was using this definition in his PR work. He
needs to be taken to task for his GS statements he either lied or
was thoughtlessly using his image to manipulate public perception
of GS.
I started getting uncomfortable with Buffet in late 06 and sold
my BRK in mid 08. He has a cult of personality now so I stay far
away.
On double dip: Weak recovery don't have a cushion and can be down
again on external shock.
..the dirty little secret on Wall Street
was that all too often, due diligence was a sham. People
went through the motions without a thorough understanding of what they
were doing, like kids who write a report by plagiarizing the encyclopedia.
Investors saw triple-A ratings and stopped thinking. Goldman didn’t
need to lie in order to sell “shitty deals.” It only needed to find
a greater fool with an impressive resume at a multibillion-dollar institution
who didn’t ask too many questions. And it was able to keep the scam
going because all CDOs remain shrouded in secrecy to this day.
The only people who can buy access to CDO performance data on
ABSNet are actual
investors, who are subject to nondisclosure agreements.
NOTW777:
anyone wonder why the SEC picked this "weak" case to publicly
pursue?
over the years they could have brought many cases. this
isnt about justice, this isnt about the SEC doing its job.
this is all about political theatre.
obamas already planning campaign commercials about fighting the
big evil banks. SEC could do the commercial for him.
Voodoo Economics :
If you were a sophisticated investor who had done his due
diligence, you didn’t need to be told that the deal was designed
to fail. You would have figured it out for yourself!
What BS!
O.K. Let's say that GM (GMAC and whatever other financing arm
sold some ABS to the market with significant knowledge that the
15 - 30 % of the damn cars coming from certain plants and that were
the security interest for future ABS paper had a freaking defect
that caused the car to be destroyed. To be conservative, let's also
say that no person was physically injured from the defect.
Now, what if GM hired "independent engineers" (Let's call them
Moody's Or S&P engineer consulting for finacial products) attested
to the veracity of the engineering of the cars and said that the
probability of defects was significantly less to almost no risk
that these cars had such a defect.
To keep it simple, let's say GM & GMAC create Ford Pinto LLC
to sell the paper that is backed by these cars. And, a very good
client of GM with a great financing arm (let's call them Paulsen
Auto Engineers & Associates) is brought in to "help decide" which
cars and which plants they come from would be the specific assets
to back the different tranches and securities in the markets. Oh,
and as you might guess, Ford Pinto LLC and Paulsen Auto Engineers
are able to short sell the securities to the markets that they know
are backed by the cars with the probable defects.
Amazingly, after 2 years, the cars that back the paper start
breaking down. Suddenly, the ABS paper with this crap in it drops.
Guess what? GM and GMAC and Paulsen make huge returns from shorting
the crap.
What would happen to these folks? They would go to jail.
Caveat emptor - BS. There is a fraudulent
element in GS, too.
Don't give me this shit that "If you were a sophisticated investor
who had done his due diligence, you didn’t need to be told that
the deal was designed to fail. You would have figured it out for
yourself."
I guess I could have hired my own independent engineers in the
GM scenario, too.
Are you really arguing that it is my affirmative duty to uncover
fraud? How inefficient is that to the system.
Oh, that's right, I just forgot that we at GS own the system.
Don't get me wrong, these stupid pension funds and other institutional
investors that are manipulated by GS and the likes need to feel
some pain, BUT
This scandal is fraud. Nothing less.
Restcase:
I disagree that the case was weak - look at the statement Goldman
issued and its admission. That admission probably represents "the
case" or a subset thereof and it seems there is enough there for
a successful prosecution.
http://www.zerohedge.com/article/goldman-statement-sec-settlement
They could, with political will, have been prosecuted for what
they admitted.
If you look at the pattern of political donations and friendships,
Goldman bought this break and paid well for it. As long
ago as the 1990s when I worked on Wall St. (Water St. and later
Broad St., actually), Goldman seemed to me intensely Democratic.
Just the impression of a financial software outsider, but a striking
one.
Given the amount of money poured into Democratic congressional
races, GS earned a somewhat better break than they actually got
in this settlement. On the other hand, they were lucky that in today's
atmosphere of declining morality and opportunism, the Congressional
Democrats remain honest politicians:
An honest politician is one who, when he
is bought, will stay bought
- Simon Cameron
As Bove is the quintessential contrarian indicator, we are preparing
for a month long sabbatical to a Buddhist monastery in Tibet to thoroughly
reevaluate our perspectives on the universe.
gs_runsthiscountry:
You are wasting ink, or pixels as it were, on Bove? Seriously?
The same guy that was telling the sheeple to buy GS 5 mins after
charges were announced? He is a shrill covering his arse after having
been wrong. If anyone in this market is talking their book or a
"tool" it is Bove.
Boilermaker:
I'm guessing that he also reserves the right to change him mind...tomorrow...or
by the closing bell...or by lunchtime.
Oso:
absolutely audacious that they have the gall to release reserves.
think about how bad everyone else is if JPM needs to do this to
meet numbers.
market feels like its being supported unnaturally again, the
empire and philly fed numbers should be causing a lot larger down
move.
Commander Cody:
Its called levitation. Any decent magician can do it!
Cognitive Dissonance
"Its called levitation."
I always get a chuckle when I hear or see the commercial for
"Levitra" which immediately brings to mind levitation. You just
know the marketing guys, who are the people who actually give any
new drug it's commercial street name, were laughing when they came
"up" with this name.
http://www.levitra.com/?banner_s=208383156&rotation_s=30493572&kw=p71663811
John McCloy:
Well they are nearly out of suckers to participate in the markets
Oso so they release the reserves. I cannot believe the "premier
minds in finance" are follish enough not to see how terrible the
fundamentals are becoming even with mark to unicorns. HELOCs and
Prime mortgages are just beginning their taint and this is a last
push to keep the eps up as in order to pay quarterly bonuses.
Meanwhile they deleverage into quarter close..repo it up to make
it look they are not leveraged a trillion to 1 so they can squeeze
every ounce of profits out of their trading and then resume to ramps
after the earnings report which is why we saw the ramps right after
quarter close. The efforts are yielding less profits and becoming
more risky as the data really heads off a cliff so I take solace
in that.
They are however exposing how weak they are to a market pullback
since their trading revenues were down about 44% since past quarter.
I am sure Ben feels is not liking them just holding onto this money
for reserve and paying it out to themselves while lending since
it is killing his credibility of any recovery
jesusonline:
Bove is never gonna recover from his Lehman legacy. That's why
you take him with a ton of salt everytime he opens his mouth.
NotApplicable :
You're kidding, right?
I keep waiting for the so-called bond "market" to rise up and
bitch-slap fedgov for its transgressions, but what do I see but
the fabled "flight to safety," and its near record low yields.
At this point, the Fed IS the bond market, the stock market,
the repo market, the Forex market, the MBS market, ad infinitum.
The only shots being called by pissed off "citizens" are along
the lines of "Don't Taze me bro!"
Rainman :
The mark-to-myth carnage has long legs. Forget about organic
revenue. The banksters believe they can hold off a FASB fair value
challenge forever. They will pay off all necessary parties to keep
their own bonus party going as long as possible.
No one should underestimate their ability to continue the game.
Bam_Man :
And these f**king criminals at JPM have the nerve to be talking
about a "stock buyback".
Share re-purchases by too-big-to-fail banks should be illegal.
It is an obvious racket.
Although it may produce a higher stock price over the short-run
(the whole idea) share re-purchases DECAPITALIZE the f**king bank.
Oh, but wait, we can just GO TO THE F**KING TAXPAYER the next
time we need to be re-capitalized.
UNF**KING BELIEVABLE.
See also Mish interview on Yahoo TechTicker: "Without driver for jobs
I don't understand how one can be bullish on stock market".
dreadlord76:
Seriously, good paying jobs to China?
How about: All the low skill, repetitive manufacturing jobs has
been sent to lower cost countries that has less environmental and
workplace laws, which allows us to buy things for less, export our
pollution; but also took away the low level blue collar jobs that
we need.
Since production is there, we might as well start transferring
more creative and higher paying jobs, such as design, since it's
probably better that designers sit in the same timezone as the factories.
Besides, even the higher paying jobs is cheaper there.
Many of the jobs created in China is not really what I would
consider to be good jobs. The electronics assembly jobs have been
done outside of this country since the days of transistor radios.
Much easier to get young people with the dexterity and good eye
sight to plug the components together for 12 hours a day. Steel
work? Environmental laws + union rules basically forced that stuff
out. The list goes on and on.
I find it ironic sometime when I see people complaining about
weapon system costs. That is one area where most of the work is
still done in the US, with it's associated price tag.
dreadlord76:
What we are doing, is keeping 50 million people fed through the
unemployment program. We are keeping Walmart shelves stocked with
cheap stuff so people can think they have a good standard of living.
We are borrowing money we can't payback as that is needed for all
sort of important, social programs. We are also exporting our pollutions
to places like China.
What we need, is a reality check, or shall we say, a "Come to
Jesus" moment. We need to realize that we don't need 500-750 sq
ft of housing for each family member. We don't need a SUV and 2
Jet Skis in the driveway, and a Flat Panel in every room.
We need
to realize that housing prices needs to be 2-3 times median income.
We need to realize that having things doesn't make you rich or successful,
especially if you borrowed the money.
We need to realize that we need to be energy independent, and
that means building Nuclear power plants. We need to face up the
fact that our pollutions haven't been reduced, just moved to somewhere
we don't see.
Just like low end jobs are now moving out of China because China
is getting expensive, we have to face the fact that we will need
to compete on price. The way to make that work, is to make sure
everything is cheaper here, and making sure we need less "Things".
Just complaining about us vs them don't help. We are all human
beings with similar motivations.
VegasBob:
The only defined benefit programs that still exist in the private
sector are for unionized workers and top executives. Unionized workers
receive benefits according to their union contract; top executives
(VP-level and above) usually receive something called a SERP (Supplemental
Executive Retirement Plan), or participation in a Rabbi Trust. The
Rabbi Trusts have elements of both defined benefit and defined contribution
plans. In some companies, upper-level middle managers (Director-level)
are also able to participate in Rabbi Trusts, but the package is
less generous than the packages VPs receive.
Few people know about SERPs or Rabbi Trusts. Corporations do
not advertise them as they are just another way for executives to
pay themselves special hidden benefits that are not available to
rank and file or lower level middle management workers.
Chet21:
Mish, I occasionally make specific comments and they range from
95% to 100% support of your pieces and positions.
I'd now like to be just a general comment about your pieces and
positions: thank you.
Rome was not built in a day, but the combination of yourself,
the internet, Pension Tsunami, etc. have slowly been able to educate
portions of the general public as to the gargantuan "whale" that
has been crippling the private sector for a long, long time: municipal
employee unions and their leadership.
I live in a suburb of Chicago (Cook County) and I've had some
success questioning the rhetoric of teacher unions and "it's for
the children" garbage, etc - but I can only reach a few people at
a time.
I have many friends who are teachers (and my son is now in college
to obtain his degree to teach physics in high school) - and the
vast majority are genuinely motivated by their love of their profession
and KNOW that they're are big problems in their means and method
of compensation.
If dramatic reform does not arrive soon - we'll have deep societal
problems. The economic decline only shortened the time when "doom"
was going to arrive due to pension, wage, work rules and benefit
promises made during the boom years since around 1993.
Again, Mish, thanks!!!
bgamall1:
Wall Street shares while mainstreeet sacrifices. Isn't that always
the way it workks? Stop the casino, cut the military, spend on infrastructure
and tech.
used:
The Submarine Deals That Helped Sink Greece
As Greece slashes spending to avoid default, it hasn't moved
to skimp on one area: defense. The deeply indebted Mediterranean
nation, whose financial crisis roiled the global financial system
this year, is spending more than a billion euros on two submarines
from Germany. It's also looking to spend big on six frigates and
15 search-and-rescue helicopters from France. In recent years, Greece
has bought more than two dozen F16 fighter jets from the U.S. at
a cost of more than €1.5 billion.
Greece, with a population of just 11 million, is the largest
importer of conventional weapons in Europe—and ranks fifth in the
world behind China, India, the United Arab Emirates and South Korea.
http://online.wsj.com/article/SB10001424052748703636404575352991108208712.html?mod=WSJ_business_LeftSecondHighlights
dreadlord76:
From my own post:
>>>
Since production is there, we might as well start transferring more
creative and higher paying jobs, such as design, since it's probably
better that designers sit in the same timezone as the factories.
Besides, even the higher paying jobs is cheaper there.
<<<
This is an evolution that we can't stop. Once you start on the
initial low cost track, the rest of the world realize there is nothing
magical about building it in the US. The know how is transferable,
and once it evolves more, we become dated. I believe in the fields
such as LED and other semi-conductor fields, there are now more
production expertise and knowledge outside this country.
A lot of the jobs people complain about are the low skill manufacturing
jobs, which back in the old days, allowed someone to raise a family
here. Those jobs are gone, due to our own choice for lower cost
goods, and higher wages, and clean environmental laws. What might
be a good paying job here is still a good paying job, just put into
a different economic scale.
This isn't even just a US issue. The fact that Toyota and Honda
production were impacted when their Chinese factories went on strike
shows that the same behavior is the same in Japan.
The only safe jobs are the jobs that can only be done here, or
that we maintain a competitive edge. Healthcare workers (not necessarily
Doctors) and software comes to mind, but software is a field that
the border is mighty thin...
Read the Maglite story, very illuminating.
http://www.msnbc.msn.com/id/38025260/ns/business-us_business/
Good luck!
btraven:
OT:
Fed chief to banks: Find a way to lend to small business
What a frickin' disingenous sack of horse manure!
Or is he mentally ill? You have to wonder.
fedwatcher:
Ben Bernanke is a tool of the large banking elite. The reason
small business is not getting its fair share is that the large banks
have the bucks but in the 1990's got rid of all the people who know
how to lend to small business. They know how to make big loans but
not how to make small loans. What is missing from our debate is
how politics and banking have shifted to favor the Large over the
Small. Yet it is the Small who create the jobs!
July 8, 2010
The con of the decade (Part I) involves the transfer of private
debt to the public (the marks), who then pays interest forever to the
con artists.
I've laid out the Con of the Decade (Part I) in outline form:
1. Enable trillions of dollars in mortgages guaranteed to default
by packaging unlimited quantities of them into mortgage-backed securities
(MBS), creating umlimited demand for fraudulently originated loans.
2. Sell these MBS as "safe" to credulous investors, institutions,
town councils in Norway, etc., i.e. "the bezzle" on a global scale.
3. Make huge "side bets" against these doomed mortgages so when they
default then the short-side bets generate billions in profits.
4. Leverage each $1 of actual capital into $100 of high-risk bets.
5. Hide the utterly fraudulent bets offshore and/or off-balance sheet
(not that the regulators you had muzzled would have noticed anyway).
6. When the longside bets go bad, transfer hundreds of billions of
dollars in Federal guarantees, bailouts and backstops into the private
hands which made the risky bets, either via direct payments or via proxies
like AIG. Enable these private Power Elites to borrow hundreds of billions
more from the Treasury/Fed at zero interest.
7. Deposit these funds at the Federal Reserve, where they earn 3-4%.
Reap billions in guaranteed income by borrowing Federal money for free
and getting paid interest by the Fed.
8. As profits pile up, start buying boatloads of short-term U.S.
Treasuries. Now the taxpayers who absorbed the trillions in private
losses and who transferred trillions in subsidies, backstops, guarantees,
bailouts and loans to private banks and corporations, are now paying
interest on the Treasuries their own money purchased for the banks/corporations.
9. Slowly acquire trillions of dollars in Treasuries--not difficult
to do as the Federal government is borrowing $1.5 trillion a year.
10. Stop buying Treasuries and dump a boatload onto the market, forcing
interest rates to rise as supply of new T-Bills exceeds demand (at least
temporarily). Repeat as necessary to double and then triple interest
rates paid on Treasuries.
11. Buy hundreds of billions in long-term Treasuries at high rates
of interest. As interest rates rise, interest payments dwarf all other
Federal spending, forcing extreme cuts in all other government spending.
12. Enjoy the hundreds of billions of dollars in interest payments
being paid by taxpayers on Treasuries that were purchased with their
money but which are safely in private hands.
Since the Federal government could potentially inflate away these
trillions in Treasuries, buy enough elected officials to force austerity
so inflation remains tame. In essence, these private banks and corporations
now own the revenue stream of the Federal government and its taxpayers.
Neat con, and the marks will never understand how "saving our financial
system" led to their servitude to the very interests they bailed out.
The circle is now complete: in "saving our financial system,"
the public borrowed trillions and transferred the money to private Power
Elites, who then buy the public debt with the money swindled out of
the taxpayer. Then the taxpayers transfer more wealth every year to
the Power Elites/Plutocracy in the form of interest on the Treasury
debt. The Power Elites will own the debt that was taken on to bail them
out of bad private bets: this is the culmination of privatized gains,
socialized risk.
In effect, it's a Third World/colonial scam on a gigantic scale:
plunder the public treasury, then buy the debt which was borrowed and
transferred to your pockets. You are buying the country with money you
borrowed from its taxpayers. No despot could do better.
Either rails have become a lagging indicator or there is no recession
in rail traffic. This week’s data is VERY strong (via
AAR):
The Association of American Railroads today reported that rail
traffic for the week ending July 3, 2010 topped comparison weeks
from both 2008 and 2009. Carloads were up 18.8 percent, at 286,777
cars, from the comparable week in 2009 and up 0.4 percent from the
same week in 2008. Comparison weeks in both 2009 and 2008 included
the July 4th holiday. In order to offer a complete picture
of the progress in rail traffic, AAR reports 2010 weekly rail traffic
with comparison weeks in both 2009 and 2008.Intermodal traffic totaled
231,286 trailers and containers, the highest since week 42 of 2008.
Volume was up 36.6 percent from a year ago and 19.1 percent from
2008. Container volume of 197,134 was the sixth highest week ever
and the highest since week 39 of 2007. Compared with the same week
in 2009, container volume gained 39.8 percent and trailer volume
rose 20.9 percent. Compared with the same week in 2008, container
volume increased 30.8 percent and trailer volume fell 21.3 percent.
Eighteen of the 19 carload commodity groups increased from the
comparable week in 2009, with metallic ores up 205.5 percent; motor
vehicles and equipment up 122 percent; metals and metal products
up 80.3 percent; and crushed stone, sand and gravel up 50.6 percent.
Seven of the commodity groups also posted gains over 2008 levels.
Carload volume on Eastern railroads was up 36.8 percent from
last year and 5.5 percent from 2008. In the West, carload volume
was up 9.5 percent from last year but down 2.7 percent from two
years ago.
For the first 26 weeks of 2010, U.S. railroads reported cumulative
volume of 7,338,963 carloads, up 7.8 percent from 2009, but down
12.9 percent from 2008, and 5,434,892 trailers or containers, up
12.9 percent from 2009, but down 6.2 percent from 2008.
The sad thing is that those scumbags forced everybody to bet on
a roulette-like game. 401K investors are forced to put their chips either
of black (inflation) or on red (deflation).
DownSouth:
In the never-ending conflict of individual interest vs. general
interest (or what Yves calls “social purpose”), I believe there
is an underestimation of just how thoroughly individual interest
has triumphed. This is not something that is unique to orthodox
economic theory. The sacrificing of group interest on the altar
of individual interest has been almost ubiquitous throughout the
behavioral and biological “sciences” over the last 40 or 50 years.
In the individual interest vs. general interest debate, there
are three types of ideologies to be on the watch out for:
1) Ideologies that claim to promote the general interest and
do indeed promote the general interest.
2) Ideologies that claim to promote the general interest but
in reality promote individual interest.
3) Ideologies that overtly promote individual interest.
From some of the comments I’ve seen here on Naked Capitalism,
there are some (Reinhold Niebuhr dubs them “moral pessimists” or
“the children of darkness”) who believe that human beings are not
sufficiently intelligent or adaptive to be able to sort out number
1 from numbers 2 & 3. The long sweep of history, however, I would
argue belies this assertion.
NOTaREALmerican:
Re: Reinhold Niebuhr dubs them “moral pessimists” or “the children
of darkness”
Or perhaps realists?…
I see no reason to expect that the smartest amoral scumbag (sociopath)
in ANY group of people wouldn’t win.
Perhaps the question is why do some societies appear to control
their sociopaths “better”. I would suspect that one reason would
be the fear of other nations (tribes). A Canadian sociopath leader
would still have a “fear” of the US that might make him less likely
to sell the entire country down-the-tubes. The US has no such fear
as our dumbass peasants have been condition for 50+ years to assume
American is the greatest country in the entire universe. And who
better to lead a group of peasants – that believe a fantasy – than
sociopaths.
Perhaps “the greatest nations” always fall when the peasants
believe in the fantasy too much.
Bates:
“There was one last capital reserve to tap, U.S. taxpayers, to
revive the financial system and make the innovators whole. Widespread
anger turned into sullen resignation as the public realized its
opposition to the looting was futile.”
In defense of the taxpayers…they overwhelmingly were against
TARP…Twice!
Let’s take a look at who comprises ‘the public’ and maybe we
can come a bit closer to understanding the ‘public’s sullen resignation’.
For simplicity let’s break it down to 2 groups…though there is much
overlap.
About 50% of the public is dependent on a government sector job
or are recipients of government redistribution of wealth schemes
of some sort (everything from SS to food stamps to ag subsidies).
If this portion of ‘the public’ were to complain too loudly they
would be ‘breaking their own rice bowl’…as the Chinese say.
Then there are the debtors, that huge swath of Americans that
are up to their eyeballs in debt either in revolving or non revolving
debt. They have allowed themselves to become debt slaves and are
now waking up to that reality. Some are angry and some are sheepish
and some are a bit of both…and many of this group are in varying
states of shock. Eventually most of this group will realize that,
because of their eagerness to take on more debt, they are the enablers
of the TBTF banks. Eventually most of this group will realize that
without their debt contributions the TBTF banks could not have grown
into the monstrosities that bought the public’s/debtors representatives.
When viewed from this perspective does anyone believe that more
debt (more Fed printing of all duration debt from dollars to notes
to bonds) will fix the current US deficits that are growing ever
larger? The more debt that is paid down by the private sector (individual
citizens), the more debt the public sector (all citizens as taxpayers)
is encumbered with by Fed Gov spending. The current Fed Gov spending
will be manifest in the form of coming higher taxes and fees by
state, local and federal govs. Debt is simply a claim on future
earnings. The enormous debts that have been rung up by the US Government
could have been avoided at many turning points in the past…but it
was not. Bad businesses and financial institutions were not allowed
to fail in most cases if they were deemed too big to fail…or, friends
of the Fed, Treasury, or whatever administration was in office.
The two groups mentioned above will muddle along, doing little,
until one of the folling happen…
US declares soverign default on all or some debt obligations…foreign
and/or domestic.
Fed prints enormous sums of dollars (yes, much much more than
has already been printed) in an attempt to cause a controlled amount
of inflation to reduce US debt in real terms. Note: If the Fed pursues
this course they run the risk of destroying the public’s confidence
in the currency and causing hyperinflation. Another problem with
super printing is that the debt purchasers (US notes and bonds)will
demand much higher interest rates on the perceived riskier debt…they
will smell inflation in the air.
US finds or invents a reason to start a war because of it’s untenable
economic situation.
A Black Swan occurs; ie, some event that none of us anticipate.
readerOfTeaLeaves:
Yves wrote: We’ve pointed out from time to time that the
financial services industry has lost sight of its role. While helping
companies borrow and raise money, providing investment and saving
vehicles and payment services are all useful activities, the cost
of financial intermediation is ultimately a tax on commerce.
First, I wholeheartedly concur with Yves’ thesis.
Second, you fail to address the problems that our
outsized, predatory ‘financial services’
sector now poses to viable businesses, to business expansion, and
to general economic productivity.
Third, you appear to be unaware that by summer 2008, commodities
speculation — hidden within the economic sector defined as ‘financial
services’ – had destabilized markets. By Sept 2008, the banksters
– many of whom had participated speculation through special “financial
services vehicles” specifically designed to speculate and leverage
– were telling large, mid, and small businesses that the banksters
could not provide short term loans for payroll, etc, etc.
In other words, the banksters threatened to shut down commerce
unless they got their TARP money.
Why didn’t the banksters have money to lend?
Because they’d leveraged – and lost – one too many speculative bets,
so their next option was to tell the Fed, “Bail us out, or we’ll
shut down commerce.”
In my view, that is ‘economic hostage
taking’. It is a brazen, desperate threat: do what
I want, or I’ll kill your darling. It is a power-play designed to
show who ‘really’ runs the show. There is no real negotiation: it’s
all or nothing. And the Bush Administration caved.
So it’s worth revisiting what I believe is the thesis of this
post: the ‘financial services sector’ has lost sight of its
role. The ‘tax’ it takes off productive businesses has
outgrown the usefulness of this sector as it is currently comprised
– both for individuals, but also for businesses. The issue of personal
credit card debt, which you seem to focus on, is only one piece
of a much larger puzzle; it’s the larger economic role of servicing
business that makes quite clear the ‘financial services sector’
has lost sight of its role.
Ask yourself: is political extortion (via TARP) an economically
productive activity? I believe that it is deeply antisocial, and
therefore dangerous to everyone in a society. It is very economically
destabilizing.
Ask yourself: is it the role of ‘financial services’ to construct
investment vehicles to leverage, and then speculate about, commodities
futures?
When did leverage and speculation become primary features of ‘financial
services’?!
Because IMVHO, building complex ‘financial vehicles’ in order
to speculate is a very far cry from servicing businesses who need
short term loans, long term loans, and other banking services.
Those two activities: speculation vs what might be better termed
‘economic husbandry’ (the traditional servicing business loans)
are two extremely different things.
Servicing loans to grow businesses is economically critical.
Speculation and gambling, not so much.
This is not about ‘individuals’ who get in debt. This is about
why one economic sector can hold governments, small businesses,
and even Fortune 500 companies over an economic barrel.
What did we get in return?
The topic of how financial services have lost sight of their
economic role is extremely important and needs far more attention
and discussion.
Yves, I really tip my cap to you for this post. I hope it generates
a similar discussion on other econ blogs and forums, because it
seems to me that this is a key issue of the present historical moment.
Thank you.
NOTaREALmerican:
Re: I believe that it is deeply antisocial, and therefore
dangerous to everyone in a society.
Unfortunately, a society run by sociopaths won’t be self correcting.
Let’s assume for a moment that the US Party system is actually (and
very simply) a sociopath vetting system. The Party vets local sociopaths
judging their ability to manipulate the Party dumbasses with the
approved stories (lies: ie, “those people”, “global warming”, “Sarah’s
gonna git ya”, “peace n justice”, “Freedom n Democracy”, “Eeee-vil-doers”).
The best sociopaths are granted access to the State Party level,
and finally the Federal level.
Perhaps the US peasants are truly unable to differentiate between
sociopaths and non-sociopaths. As Party campaigns are nothing but
marketing campaigns (a political sociopath is interchangeable with
a F-150 truck) then how WOULD the average dumbass tell the difference?
Bates:
“I’m not sure I get the whole “social purpose” argument. Surely
the only question is whether the state funds an activity and that
can be decided without appeal to such a nebulous concept.”
There is nothing ‘nebulous’ about how a financial system should
function. Here is a very simple explanation from Wiki that anyone
can understand.
‘In finance, the financial system is the system that allows the
transfer of money between savers and borrowers.[1] It comprises
a set of complex and closely interconnected financial institutions,
markets, instruments, services, practices, and transactions.
‘Financial systems are crucial to the allocation of resources
in a modern economy. They channel household savings to the corporate
sector and allocate investment funds among firms; they allow intertemporal
smoothing of consumption by households and expenditures by firms;
and they enable households and firms to share risks. These functions
are common to the financial systems of most developed economies.’
HFT, government intervention to pick winners and losers, Fed
intervention in FX, commodities, securities, treasury debt issues,
et al, do nothing to help the main st economy. As the US financial
system is misfunctioning right now there is no price discovery that
anyone can believe. Without the main st economy there is no reason
for for a financial system…Hell, we could do as well with a barter
system…at least the financial vampire squid would not get a percentage
of all transactions.
i on the ball patriot :
“And by the way, the cost of entry to HFT is really pretty
low – just a few $K per month. That’s something a small independent
professional investor *can* do. Is the argument that the markets
shouldn’t permit trading activity that can’t be performed by a mom-and-pop-type
investor in a mutual fund? That seems bizarre to say the least.”
Nice to see the Horatio Alger myth being kept alive.
Deception is the strongest political force on the planet.
Tom
Crowl:
Such an important post! Keep at it! The message has got to get
through to anybody with a brain left…
But the MSM is nowhere close…
Just heard Jim Kramer on the Today Show suggest that recent increased
hiring on Wall Street was a GOOD thing!
(I know the Today Show is nonsense but I usually try to catch
the first 20 minutes. It’s a great daily indicator for just how
far astray the general public has been led… and is willing to go!)
Somehow Mr. Kramer is convinced that
feeding the tumor is supposed to be good for the patient.
Gee, I wonder why the same ‘experts’ just keep coming back? BOOYAH
Indeed!
RichFam:
Silly Bands – they serve no socially useful purpose, they’re
rubber so bad for the environment, some child might swallow one
and choke on it, they’re rent seeking at 2.99 for a pack of ten…I
say ban or regulate them out of existence. HFT and silly bands –
bad for America!
NOTaREALmerican:
Re: The public understands that intuitively; it’s time the
media and government officials have the nerve to state the obvious.
I’m not sure the public does understand. Perhaps “the public”
you hang-wit is more intelligent than “the public” I hang-wit.
My homey’s still have faith in our hard working financial institutions
of this great nation. Most of them are starting to suspect this
was all “those people’s” fault, and the government. We really just
need to get government out of the way and everything will be fine.
“The public” is large – unfortunately their brains are tiny.
AND, their tiny brains are filled with information from “the media”
– the same media you want to have “the nerve” to tell the truth.
Nope, ain’t gonna happen.
PQS:
“This says that critics need to keep hammering on the observation
that financial services is only a support function to commerce,
that when it is too big and profitable, that means it has become
parasitic and extractive.”
Can we put this on a bumpersticker somehow so it will seep into
American consciousness?
How about:
TBTF = Parasites Killing The Host (PKTH)
And i on the ball, I love your phrase as well.
NOTaREALmerican:
Good idea about the bumper sticks but unfortunately the word
“parasite” would be misinterpreted (from your intended meaning)
into “those people” by about 40% of the peasant dumbasses.
The problem with manipulating dumbasses is that you’ve GOT to
put yourself INTO their tiny brains and understand the semi-psychotic
stories that already exist; AND THEN understand how your own words
will be twisted by their brains hard-working bullshit machine. The
human brain is simply a bullshit generation machine (stories) and
rationalization machine (duplicity).
So, you’ve got the right idea (a simplistic story the dumbasses
can remember) but your words are already used. Keep trying…
zero hedge
Each time the market looked like it was about to fall off a cliff,
it had some outside force help it rally." Well, that big rally is happening
now because once again a powerful “outside force” intervened to stop
prices from collapsing. Folks, these aren't natural, free-flowing markets
we're dealing with here. If they were, then the market would more than
likely have crashed to the July 2009 lows by now."
As members of opposing political parties, we disagree on a number
of important issues. But we must not allow honest disagreement over
some issues to interfere with our ability to work together when we do
agree.
By far the single most important of these is our current initiative
to include substantial reductions in the projected level of American
military spending as part of future deficit reduction efforts. For decades,
the subject of military expenditures has been glaringly absent from
public debate. Yet the Pentagon budget for 2010 is $693 billion --
more than all other discretionary spending programs combined. Even
subtracting the cost of the wars in Iraq and Afghanistan, military spending
still amounts to over 42% of total spending.
It is irrefutably clear to us that if we do not make substantial
cuts in the projected levels of Pentagon spending, we will do substantial
damage to our economy and dramatically reduce our quality of life.
We are not talking about cutting the money needed to supply American
troops in the field. Once we send our men and women into battle, even
in cases where we may have opposed going to war, we have an obligation
to make sure that our servicemembers have everything they need. And
we are not talking about cutting essential funds for combating terrorism;
we must do everything possible to prevent any recurrence of the mass
murder of Americans that took place on September 11, 2001.
KCFreedom :
I think Ron and Barney are absolutely right but the banksters, weaponers,
and neos will never allow the defense budget to go down.As soon
as they start seeing cuts, watch as some sort of "attack" or "threat"
occurs to stick it right back up there again.
John Hay :
I find it quite astonishing that American politicians are only now
beginning to realize that they need to cut military spending. Their
financial epiphany has arrived 10 years too late.
I would have thought it was patently obvious that fighting two
wars simultaneously with borrowed money isn't very smart. And what
for? America needs to end this arrogant military nonsense and start
putting its own house in order.
John Hay
Australia
http://www.tellingthoughts.com
Millers Boy:
I don't know how you conclude that from reading this. Barney
Frank has been anti-pentagon for his entire career... and Ron Paul's
libertarian tendencies leave no room for any compromise - if he
had his way, every overseas military base would be shut down immediately.
He's been telling this to anyone who would listen for 40 years at
least.
So there's nothing new in these two guys wanting to reduce pentagon
spending. And the existence of this
article doesn't mean a single thing about the feelings of the rest
of the senate and congress. I'm sure they will be
able to get a few names to sign on, but we are still a long, long
way from the kind of domestic economic collapse that would force
the hawks to go along with deep defense cuts.
90% of the GOP would rather see 30%
unemployment than cut military spending. There's two main reasons
for this - First, ideologically the GOP and many Democrats are simply
devoted to the idea of American military supremacy. Cutting military
spending significantly would feel like being castrated to a large
part of the voting public.
Second, every single state in the USA has thousands of citizens
employed by the Military or their suppliers. One truism of American
politics is that a politician will *NEVER* vote for a spending cut
that affects jobs in his home state. For military spending that
goes double.
Real defense spending cuts are a long way off yet.
jhoughton:
Creating jobs? The military creates a ton of jobs, both through
the employment of service members and the corporations that support
them and build the weapons of war. If the government proposed an
equivalent number of jobs for building infrastructure it would be
called Socialism, but because Americans are such chicken s h i t
e s, we're only too glad to spend ourselves into the poor house
for "security." Wake up, people!!
Amock:
I hope YOU do win and I hope that YOU indeed cut every conceivable
program that you can possible cut that any way benefits less fortunate
Americans. At the same time I hope YOU continue to increase your
military spending (already over 1 TRILLION), that you keep your
troops deployed FOREVER (already >5400 US Soldiers DEAD and counting)
and that YOU even expand your efforts into Pakistan and Yemen and
where ever else YOU deem a threat might exist (you currently lack
the numbers to maintain the 2 Wars plus face threats from Iran,
N Korea, etc).
While you continue to spend money that you don't have on your War
efforts your Country men/women will go without. Your infrastructure
will suffer, your people will continue to remain unemployed, your
poor will only only become poorer, more hopeless, and more disgruntled
and then you will face a different problem from within your borders(
as if the Gangs in you in the meantime China, India, Russia will
continue to create or even to led the World in Green energy jobs
and development, etc.
I pray that YOU get everything YOU wish for and that you continue
to drain your conifers on the War effort while your Middle Class
(what is left of them) go without. Please I hope YOU indeed cut
every program for
Chaotician101:
With Obama's handpicked panel who have pre decided that only
the fully funded program, Social Security system, is the place to
cut; after Congress with the active collusion of all administrations
have systematically looted the "trust" funds paid into Social Security
from PAYROLL taxes for the Social Security bubble of baby-boomers
(remember Georgie waving the IOUs)!
These stolen monies were used to give the top 1% tax breaks and
you sure do not expect their lackeys in Congress to actually tax
it back to pay off those IOUs, or to tax those robber barons of
wall street with "capital gains" from unearned activities who sure
don't expect their purchased Congress to treat them as if they actually
worked to "earn" their income!!
Nor should our poor volunteer mercenaries in training have to
do such menial jobs as KP, cooking, making their own beds, or managing
supplies when our viperous contractors are happy to take 10times
their pay to do it for them! Stopping ALL contracting activities
for the "volunteer" military would bring a screeching halt to all
our foreign adventurism and if we forbid selling any American arms
or munitions to ANY foreign county it just might stop completely!!
SilentSolidarity:
We need a coalition in Congress that finally puts an end to extreme
military spending. Under Clinton, we spent "only" $200 billion/year.
10 years later we end up spending $700 billion plus some additional
funding here and there. $500 billion that could be spent in so many
other, DOMESTIC issues. Just to list a few: Health Care, Education,
Research & Development, Infrastructure, Border Security, Environment,
and Cities.
There are a lot of great projects in this country that lack the
funding. To name one: California High-Speed Rail. While other foreign
governments invest tens of billions of dollars in high-speed rail,
Congress decides to invest a ridiculous sum of $1.4 billion in high-speed
rail for the Fiscal year 2011.
TheBurdicks:
I agree with you point by point. I would make one change in your
comment. We are not frittering away our national treasure on DEFENSE.
Our military expenditure is arguably somewhere around 90% wasted
on OFFENSE.
In the 21st Century, there can be little or no justification for
an offensive military capacity. The maintenance of a small reactive
and defensive military, consisting mostly of Special Forces - Seals,
Rangers, Marine Recon, etc - is all that is indicated for response
to the "asymmetrical" conflicts we face.
jimpager:
When the Soviets forward deploy, we call that "Expansion of the
Soviet Empire." When the British forward deploy, we say "The Sun
Never Sets over the British Empire." When America forward deploys
we call that "Containment." America leads the World in public relations
bullshit. America has what, 700 bases outside the United States?
The British Empire, the Russian Empire, and the Roman Empire all
pale in comparison to the American Empire. Barney Frank is correct.
Tell the Pentagon they got 100 bases tops and the rest are shut
down. Bring the troops home and at least spend all that money in
America. We spend more than the rest of the world combined and then
we pump up everyone else's economy with the spending. Bring it home.
hu.man:
The American military has been cast in the mold of the post WWII
era of a raging Cold War. Now that the Cold War is no longer a concern,
the military needs to reassess its posture and reconstruct according
to a new and an updated paradigm.
The problem arises from the vested interests in the military
industrial complex that resist the imminent change. Drastic cuts
in military spending, if implemented rapidly, may have a negative
impact on the economy in general and be of catastrophic consequence
for regions of impact.
Our recent experiences in the Middle East have adequately demonstrated
how unprepared the military has been to effectively perform in non-conventional
and asymmetrical conflicts. Rather than focusing on cutting military
spending for the sake of saving the national budget, we would be
far better off to direct attention toward performing a major overhaul
in the military and let the spending chips fall where they may.
Jaczar:
I don't want the military to 'reassess itself". That's the problem.
The "civilian " government is supposed to be in charge of the military,
but it just ain't so. The military manipulates congress through
the weapons lobbyists who spend millions to elect congressmen that
will support them. The only way it will stop is when the middle
class is so small it can no longer support the military - industrial
complex.
cyberfringe:
Basically, you are right. But I agree with Jaczar that it is
not the military that needs to do the assessing. Policy is made
by our civilian government -- which receives a lot of campaign contributions
from the military industry. Campaign finance reform - including
blocking all corporate contributions - is the only thing that will
cut that dependency and enable tough decisions. Neither can the
military leadership provide independent advice since many officers
who retire go on to lucrative jobs in the defense industry. Nobody
will bite the hand that feeds them. That is the essence of the problem.
Bundenthal :
A few months ago the projected TOTAL SHORTFALL for the 48 state
budgets predicted to be in the red for 2010/2011 was approx. 120
Billion. We have a real SIMPLE lesson in opportunity costs here.
Afghanistan/Iraq or the US? Which is more important to us?
jomamas:
It's not 42% of 'federal budget' it's of 'discretionary spending'.
Most of the budget is made up of Social Security, Welfare, Mediare/Medicaid
- which are 'entitlements'. I think only Education and Military
are the big discretionary ones, and not even sure about education.
ADVOCATE4ZPG :
Despite what the U.S. military declares, manpower costs could
be reduced with a return to conscription--with no exclusions for
class; however, the "elites" you speak of would instantly change
from an aggressive, militarily-labiled, foreign policy.....to ANYTHING
else. Especially, is this true of MANY Republicans who are long
on aggressive fustian but shamefully short on experiencing what
they prescribe....
There was, of course, never ANY threat to the U.S. from Hussein's
regime in Iraq; moreover, even allowing for a vengeful foray into
Afghanistan, U.S. military "planners" made a fatal mistake with
a commitment at the present level.
The West has NEVER won a guerilla war--and certainly not one
in a theatre wherein the populace is unenthusiastic about prosecution
and the racial/cultural/ethnic differences are so apparent.
DingoDave:
"Chalmers Johnson"
Author of 'Blowback', 'The Sorrows Of Empire' and 'Nemesis: The
Last Days Of The American Empire', Chalmers Johnson has literally
written the book on the concept of American Hegemony. A former naval
officer and consultant of the C.I.A., he now serves as professor
Emeritus at UC San Diego. As co-founder and President of the Japan
Policy Research Institute, Mr. Johnson also continues to promote
public education about Asia's role in the international community.
In this exclusive interview, you will find out why the practice
of empire building is, by no means, a thing of the past. As the
United States continues to expand its military forces around the
globe, the consequences are being suffered by each and every one
of us.
http://www.youtube.com/watch?v=VPr_T7btVgA
It’s one thing to recognize that we are working through a painful
hangover after a private sector borrowing binge that produced a global
financial crisis. It’s quite another to be complacent about bad conditions
and steer clear of possible remedies.
DownSouth:
killben,
You bemoan the fact that, as we speak, we don’t have free markets
in the United States. The government steps in to subsidize TBTF
bankers. Working people are left to languish. In this I don’t think
there’s much disagreement. The disagreement comes on solutions.
Your prescription seems to be: “If we don’t have free markets, get
them!”
Yours is the illusion of classical economics.
This mythology holds that markets somehow
can operate independent of the state and its power. The problem
with this is that this has never happened. It never will.
If working people want a say in the economic life of the nation—-in
how economic resources are created and distributed—-they must take
an active role in politics, become involved in the public realm.
The belief that some supernatural “invisible hand” can achieve economic
harmony and efficiency is a a throwback to an earlier era when those
same powers were attributed to God.
Skippy:
The ones with good jobs will see themselves as validated by the
FREE MARKETS invisible hand where those with out are unclean, sore
losers, heretics. Austerity is just another Crucifixion exercise
me thinks.
Siggy:
Skippy,
I don’t believe in ‘free markets’; however, fair markets would
be very nice indeed!
Francois T:
Are they happy with high unemployment?
Why should they give any thought to people they never meet (save
to get their plumbing/electricity fixed, or their pool cleaned up),
never meaningfully interact with?
Plus, the unemployed never go collect their checks at the office
like it used to be. So, they are invisible to the media, the politicians
(38th day of stand off on the UE benefits extension in the Senate,
remember?) and the Fed people.
I would surmise that they just cannot possibly give a shit. After
all, the Fed people frequent Wall Streeters, bankers, money managers
and other respectable people who have means and wealth.
Life is honky-dory in their circle: ain’t got a recession here,
right?
As I've previously
pointed out, America's military-industrial complex is ruining our
economy.
And U.S. military and intelligence leaders say that the economic
crisis is the biggest national security threat to the United States.
See
this,
this and
this.
As RT points out, it is ironic that America's huge military spending
is what made us an empire ... but our huge military is what is bankrupting
us ... No wonder people from opposite ends of the political spectrum
like
Barney Frank and Ron Paul are calling for a reduction in military
spending.
Seer:
And just why might that be?
Hint: read Smedley Butler's War Is A Racket! (http://www.lexrex.com/enlightened/articles/warisaracket.htm)
WAR is a racket. It always has been.
It is possibly the oldest, easily the most profitable, surely
the most vicious. It is the only one international in scope. It
is the only one in which the profits are reckoned in dollars and
the losses in lives.
A racket is best described, I believe, as something that
is not what it seems to the majority of the people. Only a small
"inside" group knows what it is about. It is conducted for the benefit
of the very few, at the expense of the very many. Out of war a few
people make huge fortunes.
That's does not mean that he is right; but that does suggest that 401K
investors might be better off enduing lower yield in bonds: 3% gain for
a yield is much better than 3% loss.
The bulls have pushed aside the bears on Wall Street -- for now.
Signs of optimism following three consecutive winning days in the stock
market have replaced the doom and gloom mood so prevalent in the two
prior weeks.
Having already heard the bullish case from
Doug Kass and
James Paulsen earlier this week, Tech Ticker decided to invite Mike
"Mish" Shedlock, author of
Mish's Global
Economic Trend Analysis, back on the show to hear the other side
of the argument.
Is he bearish? You bet!
"The optimism out there is rather insane," he says. There’s only
a 15-20% chance of the market rallying, Mish tells guest host and Business
Insider deputy editor Joseph Weisenthal. "It's more likely we go down
there and test the March lows, and there's a decent chance actually
that we break those lows," he says.
Mish says "it is nuts to be net long" stocks right now in the face
of all these headwinds:
-- Slowdown in Europe as austerity measures take hold.
-- Slowdown in U.S. as stimulus fades, housing remains weak, state
and local governments cutback
-- China looks to cool its economy in the face of growing housing
bubble
Until Mish sees signs of sustainable job growth, he'll be firm in
his bearish stance. "Without a driver for jobs I don't know how someone
could be bullish on the stock market."
If not stocks, then what?
Mish is sticking with what's worked this year: Treasuries and gold.
Treasury yields are still near record lows, but he think with the macroeconomy
the way it is, it's very possible, "the bull market in Treasuries is
not over." As for gold, he'd buy on the dips.
Yahoo! Finance User :
Nothing has been fixed. Stimulus was borrowed from the future.
Debt was the problem to begin with and we have more of it now. Borrowing
and spending does not make a recovery. Soon interest payments on
debt will be enough to kill any recovery as you know it. Deflationary
crash is coming. Individuals, state, local, federal governmers will
not have disposable income left to spend. This is the mother of
all crashes. 2008 was just the warmup. Stocks are at bubble prices.
Yet everybody wants to own them! Back in March 2009 nobody wanted
stocks. At that time only 3% of traders were bullish. That is how
the crowd gets it wrong! That meant a fuel of 97% of traders to
turn to the bullish side and drive the stocks higher. Fast forward
to April 2010, 92%+ of traders were bullish and thought stocks would
go ever higher and they would sell to the greater fool. Only the
contrarians will sell at the top and buy at the bottom! http://www.tradingstocks.net/html/latest_opinion.html
The housing bust that began among the working class in remote subdivisions
and quickly progressed to the suburban middle class is striking the
upper class in privileged enclaves like this one in Silicon Valley.
Whether it is their residence, a second home or a house bought as
an investment, the rich have stopped paying
the mortgage at a rate that greatly exceeds the rest of the population.
More than one in seven homeowners with loans in excess of a million
dollars are seriously delinquent, according to data compiled for The
New York Times by the real estate analytics firm CoreLogic.
By contrast, homeowners with less lavish housing are much more likely
to keep writing checks to their lender. About one in 12 mortgages below
the million-dollar mark is delinquent.
Though it is hard to prove, the CoreLogic data suggest that many
of the well-to-do are purposely dumping their financially draining properties,
just as they would any sour investment.
“The rich are different: they are more ruthless,” said Sam Khater,
CoreLogic’s senior economist.
... ... ...
Lenders are fearful that many of the 11 million or so homeowners
who owe more than their house is worth will walk away from them, especially
if the real estate market begins to weaken again. The so-called strategic
defaults have become a matter of intense debate in recent months.
Fannie Mae and
Freddie Mac, the two quasi-governmental mortgage finance companies
that own most of the mortgages in America with a value of less than
$500,000, are alternately pleading with distressed homeowners not to
be bad citizens and brandishing a stick at them.
In
a recent column on Freddie Mac’s Web site, the company’s executive
vice president, Don Bisenius, acknowledged that walking away “might
well be a good decision for certain borrowers” but argues that those
who do it are trashing their communities.
The CoreLogic data suggest that the rich do not seem to have concerns
about the civic good uppermost in their mind, especially when it comes
to investment and second homes. Nor do they appear to be particularly
worried about being sued by their lender or frozen out of future loans
by Fannie Mae, possible consequences of default.
The delinquency rate on investment homes where the original mortgage
was more than $1 million is now 23 percent. For cheaper investment homes,
it is about 10 percent.
With second homes, the delinquency rate for both types of owners
was rising in concert until the stock market crashed in September 2008.
That sent the percentage of troubled million-dollar loans spiraling
up much faster than the smaller loans.
Zero hedge harbors extremists :-)...
Gully Foyle:
B9K9:
"My advice is to just (actually or figuratively) walk-away.
If you can't do it physically, then do it mentally."
Ladies and gentlemen, and posers ( you know who the fuck you
are) we have a WINNER!
You can't win playing a rigged game. You can win by not playing.
walküre:
It never works. The people typically expat with their money when
that happens.
Why should America be any different that way than Russia or Argentinia
for example?
The shit hit the fan but the propaganda is strong and to this
day, people believe it more than they do not. After all, 40 years
of being told that America is the greatest nation on the planet
does something to the collective mindset over time. Got news for
you. America is not all that.
However, the cult of patriotism as executed among the millions
of Americans and supported by a nonstop patriot government propaganda
will turn people against each other. The guy next door who has gold
in his house may be deemed unpatriotic. You may not want to bother
the guy but your kids man, your kids are so patriotic that they
will surely report to the hall super and he reports to the principal
and he reports to the local authorities.
America is already a fascist state. American people are more
paranoid than any other people - for a reason. There is no trust
among people, there is no trust to authorities unless they are on
your ideological side and you can score brownie points.
People with offshore accounts, whoever they are .. know this
and will not wait for the day that the transport trucks come through
the streets and take everyone to a rail station to get herded into
box cars.
Renfield:
One of the commentors on this site - I think it was Apostate
- was talking about the kulaks, the 'rich peasant' class; in the
early 1930s a boy named Pavlik Morozov became a state hero for denouncing
his father for hiding grain from the state. The state encouraged
peasants to spy on one another for hoarding undue wealth.
obewon:
An excellent commentary that includes excellent advice.
While I concur with almost everything you've said, I think there
are many of these "Rats" who will fall off the radar screen, and
be able to evade their eventual "date with destiny" until the end
of their life.
Your commentary should be "required reading" for the masses!
septicshock:
"Bernanke cannot have the S&P500 at 850 and gold at 1,200
and announce QE2. Gold would surge to new highs and it would look
horrible."
nailed it!!!
Bank of America, via economist Ethan Harris, has joined the chorus of
large banks reducing economic forecasts, and as a result has reduced
its GDP projections for 2010 and 2011 to 3.0% and 2.6%, from 3.2% and
3.3% respectively. The inflection in 2011 is notable as now the bank
sees a material slow down in the economy where before it saw growth.
Also, BofA is now expecting that the Fed will leave the Fed Fund language
unchanged unchanged for 18 months, until March 2012. This is not surprising:
with QE2.0 around the corner, it means that the Fed will soon be implicitly
lowering rates. Of course, should the Fed find some naughty pictures
of Barney and Chris, it may soon pass laws that allow negative interest
rates for the first time. Of course, nothing at this point would be
surprising.
buzzsaw99:
Bond crash imminent. LMAO!!
DoctoRx :
buzzsaw may be on to something. Too much consensus for ZIRP4EVA
to make me happy. And usually trouble looms in the bond market
when the 10 and 30 year are so far below their 150 day sma's.
-1Delta :
let it play out... its a break out. The trouble is in equities;
the fed will let the equities slide a bid before the bond market-
housing 8.0
JR:
“The U.S. turned 234 years old yesterday (July 4th), and yet
over half of the nation’s money supply was created since Helicopter
Ben took over the flight controls four years ago.” --David Rosenberg,
Gluskin Sheff,
Breakfast with Dave
The essence of the BofA’s call to move its anticipation of
the first interest rate hike further out into the hinterland—March
2012, is anti sound money. What BofA is really saying
is we need more risk, we need to reward risk, maybe we need to continue
rewarding it forever—maybe even into 2050…because this thing is
working! Well, it’s working for BofA. Everybody had
such tears in their eyes over BofA's troubles, but look at it now.
As far as BofA is concerned, why change something when it’s working!
It’s like a Ponzi scheme where there’s nothing at the end except
a few investment banks at the top continuing to coin the money,
capitalizing on the financial “crisis” using the idea of the “slow
recovery” to justify their moves. Notice how Bernanke mentions it
every time he extends the ZIRP. "Slow recovery" is part of the lie
used to hold the interest rates down for the benefit of the banks.
There is no recovery. The reason for the "improving" lie is so they
can support the political system; the people are taken in with it.
These bankers are huge criminals; look at how
they used the Dow today. It’s nothing more than Bernanke’s thermostat.
He set it today to hit 10,000. That’s why many investors are staying
away.
The Fed’s inflationary and zero interest rate policies punish
savers-- they encourage younger people to over borrow because interest
rates are so low, and they punish the thrifty who saved but now
find their dollars eroded by inflation.
As Gary North of the Mises Institute said, “When savers stop
saving, misery will result. The Establishment economists have never
accepted this universal fact of economic life.
“Central bankers have not yet grasped the implications of the
substitution of fiat money for thrift. They expect savers to roll
over and play dead. They ask rhetorically, ‘Who needs savers when
you have the legal authority to create digits and print pieces of
paper with politicians’ faces on them?’"
North concluded in his article The Central Banks’ War on
Savers: “Anyone who worries about imminent price deflation
has not thought through the Old Boy Network and its solution to
every economic slowdown: more fiat money. In contrast, anyone who
worries about the long-term decline of productivity due to the euthanasia
of savers has indeed thought through the Old Boy Network’s solution.”
There is a simple reason why all hedge funds with "relative value"
or "deep value" in their names will soon be looking to change their
moniker: stock picking no longer works, with the only strategy that
matters, as implied correlation is now at the second highest level in
history, is picking the time to leverage beta exposure and riding the
broader market up or down. Alpha is now dead. as Barclay's head of quantitative
strategies Matt Rothman says, "Indeed, it was hard to be a stock picker
in the market for the last two months as the last two months have seen
historically low levels of dispersion in stock returns. As shown in
Figure 2, the cross-sectional correlation across all stocks in the market
was at its second highest level last month (measured back to July 1950)
and recorded its third highest level this month; there have never been
to two months back-to-back with anything approaching these levels.
To belabor the obvious and put this in perspective, current
levels of correlation are higher than in October 1987, anytime during
the Fall of 2008, either the run-up or the bursting of the Internet
Bubble, or after 9/11. The reason this matters to all
stock pickers — fundamental or quantitative — is because with stock
return dispersions at all-time lows, it is extraordinarily difficult
to be picking stocks." In other words, the danger of yet another
systemic meltdown (or up), now that everyone is on the same side of
the trade (and whoever isn't, is getting steamrolled), is higher than
ever in history, up to and including May 6. And he, who has the greatest
access to (risk free) leverage wins. Therefore look for all the "investment
bank" hedge funds with prop desks and discount window access to once
again post record trading days for the current and all future quarters
until even they blow themselves up eventually and the Fed can do nothing
to prevent it.
RicktheDick:
Correlation always kicks up in a
downward trending market. There's no reason to own
single stocks anymore. If you are going to get long, and God help
you if you do, you are better off owning sector ETF's and at least
mitigating some of the inherent credit risk. Throw mirco-economic
analysis out the window, and form a marco strat.
Oh regional Indian:
Of course Alpha is dead.
Everything is tightly correlated and tightly coupled. Commodities,
currencies, geo-politics. Lack of diversity in manufacturing.
Every one is playing the tail and praying they have a good quarter.
Beta will disappear similarly. Then only the extremely tactical
(algos) and the extremely strategic will make money.
Ripped Chunk :
+ 10,000
"People, not commercial organisations or chains of command, are
what make great civilizations work, every civilization depends upon
the quality of the individuals it produces. If you overorganize
humans, over-legalize them, suppress their urge to greatness — they
cannot work and their civilization collapses."
Awesome post. Thanks for the reference
Reductio ad Absurdum :
From another recent article on the same topic:
According to data provided by Cleve Rueckert of Birinyi & Associates,
78 percent of the S&P 500 is currently moving with the market.
Back in April the correlation was more like 50 percent. And if
you go back further to the good old days of the mid-90s, according
to Rueckert, it was around 30 percent.
http://www.cnbc.com/id/38057120/In_Stock_Picking_It_s_Man_Versus_Machine
colonial :
Hey Tyler, what about a caveat? I agree with the premise and
have said so on this site for months. I called it the commoditization
of the market. I have also argued that on a larger scale, other
linchpins of the investment world as we knew it are gone forever.
For instance, what's a brokerage house today? They are mostly
now universal banks, with a few exceptions, (Brown Brothers, Jeffries,
etc.) What is an exchange? You have written extensively on trading
issues.
Since the fiduciary debate refuses to go away, what's the definition
of an investment professional? If captive license holders no longer
work for the House but must now work on behalf of the investor/client,
why work for a House?
This industry is changing before our eyes and the idiots in Washington
don't have a clue what's going on...which is really scary.
Here's my caveat, I think many mega
cap stocks are in essence ETF's and/or indexes as well.
Therefore, traders and investors can now be long or short an index
and add "alpha" by including a GE, XOM, JNJ, WMT etc. Maybe the
claim should be that the OEX components are also indexes. Adding
mega caps, long or short, provides limited alpha.
As Lenin used to say about middle class: "we will grind them between
the millstones of taxation and inflation".
07/03/2010
The economic mood at 200 West has officially downshifted. In a report
by Jan Hatzius, the Goldman chief economist warns that "the second half
slowdown has begun." Hatzius says: "This is consistent with our long-standing
forecast of materially slower growth of just 1½% (annualized) in the
second half of 2010." And while the contraction has been obvious to
all those without a metric ton of wool in front of their eyes, the two
indicators that have broken Goldman's will were this week's NFP and
ISM reports. And not only that, but Hatzius is now firmly in the Krugman
camp, blaring an even louder warning that should the government cut
off the fiscal subsidy spigot "there is some downside risk to our forecast
of a gradual reacceleration in 2011 (to about 3% on a Q4/Q4 basis)."
In other words, not only will H2 GDP officially suck, but since Goldman
has now officially jumped on the Keynesian gravy train, and as Goldman
has rapidly become the best contrarian indicator in the world (we can't
wait for David Kostin to realize that endless economic stimulus, GDP
and corporate profits are, gasp, related), it likely means that Obama
will not allow for even $1 dollar of extra unemployment subsidies or
state bailouts just to spite Goldman.
HEHEHE :
Does anyone pay any attention to Goldman, Krugman, Bernanke,
Geithner, Paulson, Greenspan or any of the other lying sack of sh*t
douchebags who have destroyed our economy? We are in a Depression
that was papered over with government/Fed spending and bailouts.
That's all that has occured since the Fall of 2008. They know that
and yet they've lied on a daily basis during that period trying
to get as much profit as they can before the artificial pump job
ends and they stick the sorry saps who bought their bullish bs with
a bunch of overpriced shares. These people belong in their own prison
where they are sod*mized on a daily basis with a broken beer bottle
considering what they've been doing to Joe Six Pack the past decade.
Taken as a whole, these interventions constitute a kind of technocratic
revolution in capitalism, and a decisive step toward socialism in the
United States. But it is a curious socialism, concentrated in the labyrinth
of financial engineering, and manifesting itself above all in the socialization
of much of the risk associated with this engineering.
... ... ...
A shadow bank is a financial institution operating outside the heavy
regulation of the traditional banking sector, but basically doing the
same thing that traditional banks do: borrowing short and lending long.
The crucial feature is that it mostly functions off balance sheet, outside
the regulatory apparatus, and out of sight of those not actively working
in it. It is, in Pittman’s words, “a method
of lending without using capital,” which “works by taking anything that
has regular payments — mortgages, car loans, aircraft leases, music
royalties — and channeling the money to a trust that pays bondholders
principal and interest.” The capture of these payments
by advanced probabilistic modeling is known as securitization, and forms
the shadowy or ghostly character of this business. By a wide variety
of complicated artifices, future payments are converted into present
value, with little capital expended in these machinations, and plenty
of fees extracted.
There is some irony in the fact that this wild and unregulated industry
made its best profits by means of facilitating the flow of capital into
U.S. housing, a sector of the economy which has for generations featured
extensive and elaborate — and largely unapologetic — government meddling.
Since at least the New Deal, it has been a sustained policy of both
parties to encourage and subsidize home ownership. In a sense, we might
say that the debacle of 2008 combined the ruin of both a heavily regulated
sector with a history of constant state intervention and a largely unregulated
sector with a history of exuberant inventiveness.
So capital generated from a kind of globalized field of laissez-faire
brashness was plowed into the stolid old housing sector, long the beneficiary
of state support. In addition to the usual players in the housing sector
— the regional banks, the massive financial conglomerates, the government-sponsored
enterprises — this was also accomplished through the shadow banks.
Shadow banking also involves big industrial firms that few would normally
think of as finance giants. These institutions make use of their top
credit rating to carry on a brisk trade in certain classes of debt security,
or derivatives on said securities. By 2008, these corporations had realized
such massive profits on their shadow banking operations that it is not
too much to say that they had become huge unregulated banks, with auxiliary
industrial arms attached to them. According to James Stewart,
writing in The New Yorker, even the Secretary of the Treasury
did not know of the high-tech bank run on one such institution, American
International Group, Inc., only three days before a collapse at that
firm so calamitous as to force the Treasury and the Federal Reserve
to nationalize it at extraordinary cost. A similar high-tech bank run
nearly brought General Electric to grief six months later. Neither A.I.G.
nor G.E. is a bank in the traditional sense of the term. Yet they played
(or, in the case of G.E., still play) an indispensable role in the infrastructure
of world bond markets.
"I believe that globalization has produced
too many leaks in the US economy for stimulus to work the way textbooks
suggest. " Robert Shiller
mark:
I don't believe that yet more stimulus is going to work either
for anything other than a short term boost that might palliate voters
for one election cycle.
I believe that globalization has
produced too many leaks in the US economy for stimulus to work the
way textbooks suggest. Some examples: the government
gives someone food stamps; s/he buys fruits and vegetables; even
if those came from the US, the workers that picked them are likely
immigrant and sending some of their wages out of the US. Suppose
the government stimulates consumer purchases - e.g., someone buys
a consumer electronics product; a chunk of the purchase price attributable
to the manufacturing costs goes to overseas firms. Goods and services
are delivered via trucks and planes that use fuel that, while refined
in the US was likely extracted in Mexico, Canada, Saudi Arabia,
etc., and shipped in a Korean or other ship. Someone buys a pair
of sneakers and the wage component of that in part goes overseas.
There is the amount we spill out in Iraq, Afghanistan etc. And on
and on.
We can't expect US stimulus to work
on the US economy the way it did when the US economy was more self-contained
in terms of its manufacturing, commodities, etc. and we didn't have
so much military expense in foreign countries. US
stimulus may be stimulating the global economy and sure all that
money comes back in the balance of payments but it does so more
in the form of capital flows than purchases of goods and services.
Which is why stimulus leads to asset
price inflation rather than economic growth.
Then there are other sponges that soak up fiscal stimulus --take
a medicare payment to a surgeon for a patient. The surgeon and the
patient both report that as income and pay taxes on it, sucking
it back out of the economy. The surgeon may pay a portion toward
a student loan, a practice buying loan, or for malpractice insurance,
all of which goes back into capital flows, which is fine, but not
stimulus of jobs making and buying goods and services.
Then there are the high relative
wages, high relative business compliance costs and taxes on business
owners in the US that deflect potentially productive activity overseas
and again diminish the effect in the US of any stimulus.
You can think of those as kinks in the hose to extend
the leak metaphor.
So I know it is the dismal science but there is really not going
to be a lot of benefit from pumping more water into a leaky hose.
That is what is misguided to quote the post. It is better to start
thinking about second best alternatives like austerity and balance
sheet repair and structural reforms of the relationship of the employer
to the polity.
Min:
"I believe that globalization has produced too many leaks in
the US economy for stimulus to work the way textbooks suggest."
Perhaps the only stimulus that will
work in both the short and medium term is direct hiring by gov't
(including state and local). Extending unemployment benefits and
food stamps and stuff is better than nothing, but there is nothing
for ending unemployment like putting people to work.
lark:
Eeek, now I'm really scared.
Seriously, I think the American people basically have believed
in a broad conservative consensus of deregulation, globalization,
unions are bad, and so on. If they have disagreed, it wasn't strong
enough to cut through manipulative campaigns and impact final votes.
Same difference.
This consensus is falling apart, along with the global economy.
I think Obama has made a few big mistakes (should have tossed out
the bank ceo's, for example, the way he did with GM) but he has
gotten more progressive legislation through Congress than anyone
has done since Johnson. Not too shabby. BUT. That has been a finger
in a collapsing dike. It hasn't been enough.
Basically, you get the democracy you deserve. We have the social
welfare state and capitalist oligarchy that was roughly in line
with what has been acceptable to most Americans for several decades.
This is the triumph of Reagan. It is incorrect to blame Obama for
this. We could have had McCain, after all. We could still get Palin,
if the economy continues to fall apart.
In history, the collapse of an ideology
can be a difficult, even gruesome, business. That is what we are
experiencing now.
don:
I have been betting on a return of the downturn for some time.
The main questions were how long the government financed respite
would last. There is simply no self-sustaining
driver on the horizon to replace asset-bubble-induced demand and
the only other path (rebalancing of exporters, particularly China)
is not going to happen anytime soon.
devin :
So whatever anybody else wants doesn't matter?
I've been less than impressed by Obama's performance so far (though,
as I did with Bush, I'm trying to reserve judgment until the next
presidential election and try to take in the big picture then),
but I find this meme that wants to pin everything on the President
(Obama, Bush, Clinton, whoever) as being very dangerous. We're supposed
to be something sort of like a democracy.
We're supposed to be governed by a constitution designed to
limit the powers of any one individual or interest group. But if
we're going to blame a President for acting within the bounds of
the Constitution and respecting the will of a democratically elected
Congress, then what do we want as the alternative?
Bush concerned me with his seeming disregard for the checks and
balances of the system. But it seems like this behavior has come
to be the expectation for Presidents. Have we just grown tired of
democracy and all its messy workings in this country? Are we ready
to crown a king? It seems like our short attentions spans and desire
for immediate results are fundamentally at odds with the laborious
workings of a democratic system. I'm very concerned about which
side will ultimately win out.
Fred C. Dobbs :
When Hoover failed to handle the '29 Crash, the mess was
turned over to FDR (who spent the next decade dealing with it).
So, who was 'Hoover' this time around?
Would we really turn over the reins of the federal guv'mint
to Republicans, with some sort of expectation they could
fix what ails us? That would seem most unlikely. Unless...
Maybe we haven't seen 'our Hoover' yet. Or...
Maybe this fall's election forces the Democrats to realize
it's time to shift into a higher gear, bring in a new
economic team, *really* tackle our problems.
sglover:
"Would we really turn over the reins of the federal guv'mint
to Republicans, with some sort of expectation they could fix what
ails us? "
Just why should anyone give a damn any more? Yeah, yeah, the
Repub's are batshit crazy. So what? It's not like the Dems are gonna
do a damn thing to stand in their way about anything meaningful.
Face it, we're in a banana republic. Our role is to stand by
and clap while the looting accelerates.
jeffrey678:
US Republicans are trying to wreck the economy for political
purposes. They want to extend Bush's tax cuts and sabotage Social
Programs
Michael Pettengill:
I see great differences on policy between the parties.
Conservative Republicans want to subsidize environmental pillage
and plunder to shift the costs of their decapitalization to future
generations.
Obama has been pragmatically seeking cap and trade to both create
jobs, create exports, and reduce the rate of environmental pillage
and plunder.
Conservative Republicans want to create jobs by making US health
care even less efficient than it already is, or else make US health
care work like it does in Africa - rich people get care, and the
rest are dependent on charity and witch craft.
Obama wants single payer which is universally far more efficient,
but pragmatically settles for national Romneycare, the Republican
health care alternative to universal coverage.
Conservative Republicans advocate decapitalism - the economic
system of consuming capital without replacing it.
Obama advocates capitalism - the economic system of sacrificing
current consumption to direct surplus labor to increasing productive
capital, especially energy generating capital which will satisfy
part of the increasing annual demand for energy over many decades.
And to Obama, the surplus labor should be employed, not wasted forever.
I see a bit difference between the parties.
Oh, and another difference, conservative Republicans have mastered
the art of making bad policy seem like genious and making Democrats
look like idiots, and too many Democrats play right into the stereotypes
Republicans have defined.
In particular the idea that Democrats are elitists, and when
Obama takes time to explain a subject in detail, the Republicans
say "see, he's an intellectual elitist." But when Obama repeats
the question he is asked in an interview using the language of conservatives,
Republicans call him crude. Obviously Obama should see those attacks
coming, but wait, if he did, then he would be too political.
I have noted the repeated "Obama is blaming Bush" every time
he says "inherited" when Bush was still saying "inherited" at least
as late as August 2002.
Ohm:
"In particular the idea that Democrats are elitists, and when
Obama takes time to explain a subject in detail, the Republicans
say "see, he's an intellectual elitist." But when Obama repeats
the question he is asked in an interview using the language of conservatives,
Republicans call him crude. Obviously Obama should see those attacks
coming, but wait, if he did, then he would be too political."
Not to forget: 'he said he was a different type of politician'
Funny, it reminds me of Joy Behar (on Hillary Clinton),
"She cries, she’s too emotional. She doesn’t cry, she’s a bitch.
No matter what this woman does,.."
sglover:
"Obama wants single payer which is universally far more efficient,
but pragmatically settles for national Romneycare, the Republican
health care alternative to universal coverage."
Heh. That's a good one! Set-up and punchline all in one sentence
-- bravo!
Look -- when Obama chose hacks and
losers like Biden, Summers, Clinton, Geithner, Emmanuel, etc., he
told you everything you needed to know about what he "wanted".
It never had much to do with what you or I wanted.
alex:
“free Market is total fiction … Yes a new direction is needed”
Frankly may people have appreciated, at least since the Great
Depressions, that “free markets” are a myth, or more accurately,
a slogan (no two people will ever agree on what’s free and what’s
not). That understanding has been undermined, at least here in the
US since the Reagan era, by the “free markets uber alles”, “regulation
is bad”, “government is bad” ideology. It’s like something from
Victorian Britain’s plutocracy.
That’s why I prefer the term “competitive markets”. It’s a term
that I suspect would have appealed to Adam Smith, who despised monopolies
(much of what he railed against was government granted monopolies),
talked about the need to foster competition, but was also in favor
of things like progressive taxation and regulated interest rates.
The answer we hit upon then, and that worked so well for so long,
was competitive markets that were regulated to a reasonable degree.
Again, no two people will ever agree on what’s an appropriate level
of regulation, but it’s important to accept the principle that a
reasonable degree of regulation rather than the mythical “free market”
is what’s appropriate.
There’s no need to re-invent the wheel. We had a good system,
but threw well established principles out the window. That’s particularly
true of the latest financial fiasco, which was little more than
a re-play of many past financial panics (as they used to be called)
with nothing more than a few new acronyms like CDO and CDS tossed
in to confuse the historically ignorant.
YankeeFrankee:
If you watch Harvey, his main point is that what we had from
the 40s to the 70s is no longer workable — that 3% compound growth
per year is fundamentally unsustainable — and we need a new way.
alex:
“his main point is that what we had from the 40s to the 70s is
no longer workable”
Right, this time it’s different. This is the magical moment in
time when we’ve finally hit the limits of capitalism due to it’s
inherent contradictions, just as Karl predicted. 1848 and 1917 were
just false alarms.
What gets me is the way he dismisses those who see resource limitations
as the fundamental problem with endless growth as people making
excuses for capitalism’s inherent instabilities. He wants to see
everything through his ideological lens. Resource limits are a very
real issue. The inherent instabilities of capitalism are something
that we’ve muddled along with and fixed willy nilly. Our big mistake
was in forgetting the lessons of the past. He talks about the need
for new thinking, but offers no real suggestions. Big deal.
hm:
Are resource limitations responsible for the current turmoil?
don:
Read Harvey’s very recently published book ‘The Enigma of Capital:
And the Crises of Capitalism’, and you’ll find out that what you have
to say about natural resource limitations is fully addressed by Harvey
in the book.
Best know what it is you say before saying it.
Beard :
Marxism = 100,000,000 dead… Albert
Well, the fascist banking and money system killed 50-86 million
in WWII via the Great Depression. Also, fractional reserve lending
leads to the business cycle which Marx mistakenly blamed on capitalism.
Michael Fiorillo:
While his prescriptions have been discarded, no one has yet surpassed
his descriptions of how capitalism works.
It’s good to see Old Whiskers get the credit he deserves on this
site.
mpinca:
Marx was a dialectical materialist, rather the opposite, metaphysically
speaking, of a Platonist.
S:
“There isn’t much to like about the old boy’s writing or thinking”
I take it, then, that you watched one or both of the above videos
and found them utterly insubstantial and/or dishonest?
One should also keep in mind that while Marx was a single man
who produced a finite body of work in reaction to his times, “Marxist”
thought describes about 150 years of inquiry and many thousands
of individuals. You meant to say “There isn’t much to like about
David Harvey’s writing or thinking,” which is laughable even from
the most principled objection to Marxist critique.
DieKiste:
“Marxism = 100,000,000 dead…”
That is maybe evidence that Marxism as a political ideology might
not be a viable solution to capitalism’s problem.
It does not mean that Marx was wrong with his analysis of the
failures and contradictions of capitalism. In fact, Marx’s analytical
framework looks a whole hell of a lot better than classical economic
theory these days….
Canute:
Nowhereman and Alex are right about “free markets,” but they
need to go a step further. “Free market” is an oxymoron. Markets
are sets of rules – intrinsically un-free. Same with “free trade,”
as in international trade, a border being a necessary restraint.
Same for “free enterprise,” in that commerce requires rules. A competitive
market is a tightly, intelligently, and dynamically regulated market.
What many don’t like about this kind of critique is that it exposes
our present economic system as contrived. Those who run the show
would like you to think that it is inevitable, and that there is
in it some ideal state of equilibrium. They don’t want people even
considering that there might be equally valid alternatives.
Our present dilemma is the end of a three-decade long cycle.
The industrialists/merchants wanted demand without high wages and
government subsidy (including military spending) without high taxes.
The financial sector wanted to make money without paying anybody
for producing actual physical value. It worked (for them) until
the credit card bill couldn’t be pushed back anymore.
alex:
“It worked (for them) until the credit card bill couldn’t be
pushed back anymore.”
Yay verily (whatever that means). Forget Marx and think Minsky.
Jim :
Harvey has given a wonderful thumbnail overview of the major
explanations for this economic/political crisis(i.e human frailty,
institutional failure, false theory failure, cultural explanations
and policy mistakes).
His own narrative might be categorized as a firm belief in the
necessary and utlimately emancipatory role of the state in gaining
social control over the surplus generated by the economy.
I would immediately want to know, in detail, what, I presume,
would be his new theory of the state taken the miserable governing
record of most existing or formally existing Marxist regimes.
My bias has been and still is that an entrprenurial capitalist
can make decisions substantially more rational that any large bureaucratic
apparatus (public or private).
Part of my personal critique of modern capitalism is that because
of the way it has been historically organized (primarily huge private
bureaucracies) only a very limited number of people participate
in its decion-making process which in its more entrepreneural form
engages the entire personality of the indivdual involved–because
of his or her skin in the game.
Most Marxists would dismiss my viewpoint as petty-bourgeoise
provincialism and cultural backwardness.
Inronically, I believe that this type of backwardness is part
of what we need to move forward.
john:
Two points (and I’m not saying you’re wrong or attacking):
1) He makes no mention of the state. Just says we need to think
differently from how we have thought. Did you watch the entire thing?
2) Capital moves to accumulate more capital. If you want to believe
in the power of the entrepreneur, that’s great. But s/he will move
toward becoming the bureaucratic monolith you hate because otherwise
s/he will stop growing and be overrun.
JTFaraday:
“His own narrative might be categorized as a firm belief in the
necessary and utlimately emancipatory role of the state in gaining
social control over the surplus generated by the economy.
I would immediately want to know, in detail, what, I presume,
would be his new theory of the state taken the miserable governing
record of most existing or formally existing Marxist regimes.”
Well, not only that, but, could you imagine what Hank Paulson
and Turbo Timmy would do with it?
So, yes, I would like to know what his new theory of the state
is myself.
CS:
What nonsense. Both the individual entrepreneur and the corporation
(ie GM) were stymied by the freeze of credit caused by the failure
of the banking system. The billionaire hedge fund officers were
enabled by the bailout of the financial system on the backs of the
very people who suffered due to the freeze of credit.
Didn’t uber-capitalist Jamie Dimon explain to his daughter that
a financial crisis was “something that occurs every five to seven
years”? Direct quote from Marx. Sorry, Karl is the only one to provide
a durable explanation for the behavior of the capitalist system.
Republicans like to confuse American workers with the notion that
they are “entrepreneurs”. Booshwah. Labor is a commodity which along
with raw materials and tooling, capitalists use to produce products.
The surplus value is capital, which they use as Harvey explained,
to expand in one way or another.
dv:
Absolutely brilliantly put together. I ha come to the conclusion
through a lot of thinking but never have been able to tie together
the logic and history like was done here. I once worked as an analyst
at a hedge fund after a decade and a half career in engineering
asnd manufacturing. I found my hedge
fund collegues to be extremely narcissisitc and entitled.
They only had negative things to say about the common
working man all the while complaining about half-million dollar
salary+bonus right out of college. There is/was absolutely something
wrong with that.
As I compare the social benefit of my former collegues in engineering
and my most recent former collegues in the hedge fund I would say
my engineering collegues to be better, more grounded, nicer and
more socially beneficial than the most recent hedge fund collegues.
I have since been let go from the hedge fund (blew up) and couldn’t
be happier not to be associated with them (I do miss the $ but fortunatley
never based my lifestyle on it). I am off to do public service work
in finance now at an annual salary that is less than one months
pay as a hedge fund analyst. It will be an interesting contrast.
Progressive Ed:
Public service work? Why not transition to something useful, e.g.
start some sort of company and create some jobs.
ae:
If you want to help people, become a doctor, or anurse. There
is always need.
If you want to create jobs, better make an appointment with a
banker.
MichaelC:
Every time I’m ready to recoil at the mention of Marx, that lyric
from the vapid “American Pie” pops into my head.
While Lennon (john) read a book on Marx..
to remind me it was Lenin, not Marx who was the evil genius.
There’s nothing in this piece that doesn’t ring true. If it’s
author isn’t outed as a ‘radical’ this piece would probably come
off as pretty mainstrean and on point, given most people’s experience
over the last 3 (and 20) years.
Here’s to hoping that this time around the observations will
lead to better policy than they did the last time these ideas got
a hearing. It’d be nice if the good guys got to hijack it this round.
aet :
“Evil genius”? Marx never killed anybody.
Here’s a speech that mentions Marx, very prominently:
http://cryptome.org/0001/jfk-secrecy.htm
You are welcome
Andy:
Harvey is a geographer, actually. Just pointing it out b/c radical
theories and critiques (Marxist, feminist, post-this and -that)
of capitalism are actually mainstream in Anglo-American geography
and that is often overlooked in popular culture, yet alone many
American universities. Harvey is one of the “fathers” and “mothers”
of a robust critical bent to geography. It’s a wonderfully creative
field.
Pat Donnelly:
http://www.abc.net.au/news/stories/2010/07/02/2942981.htm
Banking can be too successful. What happens when they lend to
everyone who wants a loan, even those who are unable to repay?
Stick around we are all finding out …….
Pat Donnelly:
http://www.abc.net.au/news/stories/2010/06/29/2939517.htm
Got big tits? Get an X-Ray and sell to a gullible, ghoulish public!
Pat Donnelly:
http://www.abc.net.au/news/stories/2010/07/02/2943109.htm
How to get rid of a PM! Mining tax OK!
We’re a 2nd world political system with a 1st world standard of living.
The only question is how quickly the standard of living falls and if TPTB
can keep control of the dumbass peasants. This IS a Country that re-elected
Bush2...
The New York Times has unearthed a
damning tidbit about the bailout of AIG:
When the government began rescuing it from collapse in the fall
of 2008 with what has become a $182 billion lifeline, A.I.G. was
required to forfeit its right to sue several banks — including Goldman,
Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities
with most of the mortgage securities it insured in the precrisis
years.
Yves here. How one reacts to this depends in no small measure as
to how one views the salvage operation. For all intents and purposes,
the rescue of AIG was merely a way to save the banks; the credit default
swaps had been too big a source of faux capital (for US firms, via risk-dumping,
and for Eurobanks, as part of a regulatory arbitrage) to let the insurer
go. So any effort by the officialdom to aid the banks, most notably
by paying out 100% on credit default swap exposures (which had already
been written down by counterparties to less than par) was simply an
effort to funnel more cash to the banks. Since we’ve had massive backdoor
bailout mechanisms in addition to the overt ones, this orientation should
come as no surprise.
....
the Fed’s own advisors (Morgan Stanley, Black Rock, and Ernst & Young)
were advocating a tough stand with the banks, including haircuts on
their guarantees with AIG. But Treasury appears to have carried the
day:
For its part, the Treasury appeared to be opposed to any options
that did not involve making the banks whole on their A.I.G. contracts.
At Treasury, a former Goldman executive, Dan H. Jester, was the
agency’s point man on the A.I.G. bailout. Mr. Jester had worked
at Goldman with Henry M. Paulson Jr., the Treasury secretary during
the A.I.G. bailout.
Yves here. And in an astonishing lapse, Jester still
owned Goldman stock. By any standard, he should not have
been involved at all in the process, much less in a crucial role. But
because he was a contractor, and not a government employee, this arrangement
was kosher. Not surprisingly, Jester opposed measures that would require
Goldman and other banks to take any pain.
The Times reminds readers it pays to be a bankster:
All of this was quite different from the tack the government
took in the Chrysler bailout. In that matter, the government told
banks they could take losses on their loans or simply own a bankrupt
company; the banks took the losses.
Yves here. The Audit the Fed investigation will shed even more light
on the AIG rescue, but the seamy dealing of Treasury means that investigations
need to extend into its role as well. But it will take a public hue
and cry for that to come to pass.
Expat:
I know I am horribly cynical at heart, but I don’t understand
why you appear to be even the least surprised by this. Is there
anyone out there who thinks Congress, the Fed, and the White House
are independent or act in the interest of the People?
I don’t think there is a financial Star Chamber or secret handshakes
(well, there might be), but there is a direct connection between
our elected officials, the regulators, and Wall Street. People like
Geithner and Paulson defend their personal interests as well as
their natural affinities. Congress both defends the hands which
feed it and listen attentively to the propaganda about how Wall
Street is essential to the US economy.
The leaders of Wall Street compete fiercely against each other
when necessary, but prefer collusion. Colluding in limiting government
constraints is not illegal, though. The legal standing of Treasury
is not clear, however.
What is clear is that these people, from Geithner to Blankfein
to Obama, are a bunch of scum-sucking, treasonous bastards. That,
though, is just what America wants.
alex:
“I know I am horribly cynical at heart, but I don’t understand
why you appear to be even the least surprised by this.”
Where did Yves say she was surprised? Obviously I can’t speak
for her, but I’d guess that she’s one of the least surprised people.
It’s easy to act “worldly” and cynical, but to the extent that
people say it’s just business as usual, rather than showing the
appropriate outrage, it just ensures that nothing ever changes.
“Is there anyone out there who thinks Congress, the Fed, and
the White House are independent or act in the interest of the People?”
How worldly and cynical! Is there out there who thinks that there’s
ever been a perfect government? It’s a matter of degree.
“What is clear is that these people, from Geithner to Blankfein
to Obama, are a bunch of scum-sucking, treasonous bastards. That,
though, is just what America wants.”
And how do you come to the conclusion that this “is just what
America wants”? Do you have some poll results or something showing
that most Americans want a corrupt plutocratic government?
NOTaREALmerican:
Re: It’s a matter of degree.
Which implies “things” are kinda ok. Nope, it’s not.
We’re a 2nd world political system with
a 1st world standard of living. The only question is how quickly
the standard of living falls and if TPTB can keep control of the
dumbass peasants.
But, it is a matter of perspective. The believers in an “ism”
will always see a hopeful future as their “ism” is surely to take
control and right all the wrongs. (The Cubs will eventually win
the World Series too. But, ya know what, even if they do it doesn’t
matter, because “the game” we’re so enthusiastic about isn’t the
one that really matters).
NOTaREALmerican:
Jeezz. I didn’t register this…
Re: Do you have some poll results or something showing that most
Americans want a corrupt plutocratic government?
Yeah, I do. In fact, I can even make a prediction I’s so sure
of the polling figures.
I predict – and I’m going out on a limb here, but remember, you’ll
be shocked when you think about about how accurate I was –
I predict that 99% of the population
will vote Republicrat this November. Yup, I know, almost sounds
crazy… The there you have it, proof the American dumbasses want
“a corrupt plutocratic government”.
alex:
“No balls! No brains! No freedom!”
Got it. So when does the revolution start? Should we go with
a historical theme and meet on the Lexington common? Do we have
to bring our muskets or will they be issued from the public armory?
i on the ball patriot:
The revolution starts when you stop banging your head against
the wall and realize that change will never come from within the
corrupt system, or constantly reflecting off of its also corrupt
media, but rather from without.
No muskets required.
Simple massive election boycotts as a ‘vote of no confidence’
in this crooked government — with sufficient participation it would
fall like an overripe tomato — with a concurrent rewrite of the
constitution that includes; a more inclusive democratic electoral
process, far greater governmental transparency, and meaningful punishment
for violations of the public trust by public officials, all as a
new basic framework that would be good for starters, what would
you like to see in the newly formed government Alex?
Deception is the strongest political force on the planet.
alex:
“massive election boycotts”
We already have that, in the form of some of the lowest voter
turnouts of any democracy. Half don’t vote now. If 90% didn’t vote,
it would still be called a legitimate election.
“a concurrent rewrite of the constitution …”
Re-written by who? How ratified?
anon:
In times past it was framed as nobility and paupers, royal blood
and commoners. Now it’s rich and poor. There is no difference.
The Pope ascended royal blood via divinity. Today the government
ascends the rich via a legal framework. People believed then the
Pope to be infallible and today they believe we live in a democracy
governed by the rule of law: is there really a difference?
I look back at the arrangement of nobility and commoners and
wonder how the commoners accepted their wretched conditions as providence.
I look at the present and wonder how the poor accept their wretched
state as democracy governed by the rule of law. It was never providence
and it is not democracy governed by the rule of law: It was, and
always will be, the golden rule: those with the gold make the rules!
NOTaREALmerican:
Re: That, though, is just what America wants.
Vote Republicrat! Because we have nothing to sell but fear itself.
Different clowns, same circus.
Stelios Theoharidis:
None of the responsible parties are going to be punished for
this unless we actually have a serious follow-on to the financial
crisis. While it may not be in the interest of the public, a double-dip
would probably foment enough rage in the general populace to clear
out the politicians that have been bought and paid for to obstruct
the political process. But that can’t be certain, given the state
of general delusion it may only bring in xenophobic populists bent
on scapegoating the crisis upon minorities.
I can’t be but amazed over the mastery of public sentiment. The
options have already been set forth, all the public gets to do is
decide amongst them, the game is rigged in that sense. Unfortunately
everyone just keeps pulling the slot machine handle. We have this
rabid sense of fear over the external terrorism, immigration, crime,
drugs, stranger-danger amongst the general populace that has been
cultivated for some time now. While the real dangers to the public
and the solvency of the USA are all internal obesity, smoking, unchecked
business, inadequate public education, lagging competitiveness,
government capture, and environmental hazards.
In framing the fears of the public and crystalizing them into
a set of issues that can only be resolved by a larger defense and
prison industrial complex citizens were herded into defending a
set of cows sacred to specific interests, they were distracted by
two wars while the regulatory apparatus was dismantled, their savings
were pilfered (social security surpluses during Clinton and Bush),
jobs exported overseas, and the political process was captured.
When this financial crisis occured they were then duped into socializing
risk and bank losses while allowing the gains to be privatized.
In short order a set of private and powerful interests has the US
on a pathway to cannibalized itself, its become quite tough to exploit
third world nations since there a lot more competitors out there
these days, so it was the only natural option.
Maybe the dog will get tired of getting kicked and eventually
bite the foot off, I don’t want to be around when the USA hits inequality
levels like those in Brazil or South Africa. Unfortunately that
seems like the path that we have been heading towards since the
70s. You can’t have money down their without armed guards and 14-foot
walls and a constant threat of kidnapping. The reason we feed the
poor is so that they don’t feed on us.
"The banality of evil." Because accountants
and auditors allowed Wall Street firms to carry assets at "completely fraudulent"
valuations, he says the industry looked hugely profitable and was able to
use borrowed funds to make leveraged bets on all sorts of esoteric instruments.
"Their bonuses were based on profits they never made and the leverage they
never could have gotten if the numbers were right - no one would've given
them the money in their right mind,"
Jul 01, 2010 | Yahoo! Finance
Day one of the Financial Crisis Inquiry Commission's two-day hearing
on AIG derivatives contracts featured
testimony from Joseph Cassano, the former head of AIG's financial
products unit. Goldman Sachs president Gary Cohn was also on the Hill.
Meanwhile, the Democrats are still trying to salvage the regulatory
reform bill, with critical support from Senator Scott Brown (R-Mass.)
reportedly
still uncertain.
According to Howard Davidowitz of Davidowitz & Associates, what connects
the hearings and the Reg reform debate is the lack of focus on
the real underlying cause of the financial crisis: Fraud.
"It was a massive fraud... a gigantic Ponzi Scheme, a lie and a fraud,"
Davidowitz says of Wall Street circa 2007. "The whole thing was a fraud
and it gets back to the accountants valuing the assets incorrectly."
Because accountants and auditors allowed
Wall Street firms to carry assets at "completely fraudulent" valuations,
he says the industry looked hugely profitable and was able to use borrowed
funds to make leveraged bets on all sorts of esoteric instruments.
"Their bonuses were based on profits they never made and the leverage
they never could have gotten if the numbers were right - no one would've
given them the money in their right mind," Davidowitz says.
To date, the accounting and audit firms have escaped any serious
repercussions from the credit crisis, a stark difference to the corporate
"death sentence" that befell Arthur Anderson for its alleged role in
the Enron scandal.
To Davidowitz, that's perhaps the greatest outrage of all: "Where
were the accountants?," he asks. "They did nothing, checked nothing,
agreed to everything" and collected millions in fees while "shaking
hands with the CEO."
Hello :
Look what the idiots at the FED are doing with our money! "Federal
Reserve Chairman Ben S. Bernanke and then-New York Fed President
Timothy Geithner told senators on April 3, 2008, that the tens of
billions of dollars in “assets” the government agreed to purchase
in the rescue of Bear Stearns Cos. were “investment-grade.” They
didn’t share everything the Fed knew about the money."
http://www.bloomberg.com/news/2010-07-01/fed-s-maiden-lane-made-taxpayers-junk-bond-buyers-without-congress-knowing.html
taopraxis:
It's known as, "The banality of evil." All the little eichmanns
in bespoke suits that pimp for the Wall Street casino and the Washington
war machine are more than happy to sell out their country and their
fellow Americans for a fat bonus, a trophy wife, a suburban manse
with a pool, and a fleet of lux mobiles. Basically, these people
are devoid of imagination, all playing follow the leader...in a
word, they're fascists. Historically, a group mind's grandiose delusions
will carry them for about twelve years before it blows up. We only
have a couple of years to go.
clinton:
We build a culture that has only one moral directive -- gain
as much wealth as you can. Being rich and having lots of things
is the only goal we promote and we promote it loudly, clearly, and
often through every possible venue. Now we're surprised and outraged
that the Wall Street dudes took us seriously? Puhleeze, folks, stow
your indignation. We are all responsible for this mess. Hmm. Maybe
it's time to rethink what's important and restructure our message.
Just a thought.
Almost half of U.S. companies that reduced or suspended their contributions
to employee retirement plans during the recession haven’t restored them,
according to
Towers Watson & Co.
A
survey of 334 firms with more than 1,000 employees in April and
May found that 18 percent reduced or suspended their contributions to
401(k) plans since September 2008 to save cash. About 49 percent of
them haven’t resumed their matches, the New York-based benefits consultant
said today.
“Some of the companies who have reinstated or who are thinking about
reinstating are making the contributions contingent on profits of the
company,” said Robyn Credico, defined-contribution practice leader in
North America for Towers Watson. “If there is ever another downturn
they don’t have to go through the painful experience of communicating
to employees that they’re suspending the match.”
Companies including General Motors Co.,
Ford Motor Co.,
Eastman Kodak Co. and FedEx Corp. have restored contributions to
401(k) plans, according to the
Pension Rights Center, a consumer group based in Washington.
Motorola Inc., with 53,000 employees globally, will reinstate its
contributions to employee plans starting July 1, said
Tama McWhinney, a spokeswoman for the mobile-phone maker.
Sears Holdings Corp. with 290,000 U.S. workers, hasn’t reinstated
its match, according to spokeswoman
Kimberly Freely.
The most common contribution by larger employers is 3 percent if
workers save 6 percent of their salaries, Credico said. The average
account balance of workers was $71,044, according to the survey, which
represents more than 5.3 million plan participants.
Society
Groupthink :
Two Party System
as Polyarchy :
Corruption of Regulators :
Bureaucracies :
Understanding Micromanagers
and Control Freaks : Toxic Managers :
Harvard Mafia :
Diplomatic Communication
: Surviving a Bad Performance
Review : Insufficient Retirement Funds as
Immanent Problem of Neoliberal Regime : PseudoScience :
Who Rules America :
Neoliberalism
: The Iron
Law of Oligarchy :
Libertarian Philosophy
Quotes
War and Peace
: Skeptical
Finance : John
Kenneth Galbraith :Talleyrand :
Oscar Wilde :
Otto Von Bismarck :
Keynes :
George Carlin :
Skeptics :
Propaganda : SE
quotes : Language Design and Programming Quotes :
Random IT-related quotes :
Somerset Maugham :
Marcus Aurelius :
Kurt Vonnegut :
Eric Hoffer :
Winston Churchill :
Napoleon Bonaparte :
Ambrose Bierce :
Bernard Shaw :
Mark Twain Quotes
Bulletin:
Vol 25, No.12 (December, 2013) Rational Fools vs. Efficient Crooks The efficient
markets hypothesis :
Political Skeptic Bulletin, 2013 :
Unemployment Bulletin, 2010 :
Vol 23, No.10
(October, 2011) An observation about corporate security departments :
Slightly Skeptical Euromaydan Chronicles, June 2014 :
Greenspan legacy bulletin, 2008 :
Vol 25, No.10 (October, 2013) Cryptolocker Trojan
(Win32/Crilock.A) :
Vol 25, No.08 (August, 2013) Cloud providers
as intelligence collection hubs :
Financial Humor Bulletin, 2010 :
Inequality Bulletin, 2009 :
Financial Humor Bulletin, 2008 :
Copyleft Problems
Bulletin, 2004 :
Financial Humor Bulletin, 2011 :
Energy Bulletin, 2010 :
Malware Protection Bulletin, 2010 : Vol 26,
No.1 (January, 2013) Object-Oriented Cult :
Political Skeptic Bulletin, 2011 :
Vol 23, No.11 (November, 2011) Softpanorama classification
of sysadmin horror stories : Vol 25, No.05
(May, 2013) Corporate bullshit as a communication method :
Vol 25, No.06 (June, 2013) A Note on the Relationship of Brooks Law and Conway Law
History:
Fifty glorious years (1950-2000):
the triumph of the US computer engineering :
Donald Knuth : TAoCP
and its Influence of Computer Science : Richard Stallman
: Linus Torvalds :
Larry Wall :
John K. Ousterhout :
CTSS : Multix OS Unix
History : Unix shell history :
VI editor :
History of pipes concept :
Solaris : MS DOS
: Programming Languages History :
PL/1 : Simula 67 :
C :
History of GCC development :
Scripting Languages :
Perl history :
OS History : Mail :
DNS : SSH
: CPU Instruction Sets :
SPARC systems 1987-2006 :
Norton Commander :
Norton Utilities :
Norton Ghost :
Frontpage history :
Malware Defense History :
GNU Screen :
OSS early history
Classic books:
The Peter
Principle : Parkinson
Law : 1984 :
The Mythical Man-Month :
How to Solve It by George Polya :
The Art of Computer Programming :
The Elements of Programming Style :
The Unix Hater’s Handbook :
The Jargon file :
The True Believer :
Programming Pearls :
The Good Soldier Svejk :
The Power Elite
Most popular humor pages:
Manifest of the Softpanorama IT Slacker Society :
Ten Commandments
of the IT Slackers Society : Computer Humor Collection
: BSD Logo Story :
The Cuckoo's Egg :
IT Slang : C++ Humor
: ARE YOU A BBS ADDICT? :
The Perl Purity Test :
Object oriented programmers of all nations
: Financial Humor :
Financial Humor Bulletin,
2008 : Financial
Humor Bulletin, 2010 : The Most Comprehensive Collection of Editor-related
Humor : Programming Language Humor :
Goldman Sachs related humor :
Greenspan humor : C Humor :
Scripting Humor :
Real Programmers Humor :
Web Humor : GPL-related Humor
: OFM Humor :
Politically Incorrect Humor :
IDS Humor :
"Linux Sucks" Humor : Russian
Musical Humor : Best Russian Programmer
Humor : Microsoft plans to buy Catholic Church
: Richard Stallman Related Humor :
Admin Humor : Perl-related
Humor : Linus Torvalds Related
humor : PseudoScience Related Humor :
Networking Humor :
Shell Humor :
Financial Humor Bulletin,
2011 : Financial
Humor Bulletin, 2012 :
Financial Humor Bulletin,
2013 : Java Humor : Software
Engineering Humor : Sun Solaris Related Humor :
Education Humor : IBM
Humor : Assembler-related Humor :
VIM Humor : Computer
Viruses Humor : Bright tomorrow is rescheduled
to a day after tomorrow : Classic Computer
Humor
The Last but not Least Technology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
Ph.D
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Last modified:
March 12, 2019
