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April 28, 2009 | The Mess That Greenspan Made
It's hard to argue with this logic about pushpins from the folks at The Onion.With unemployment at its highest rate in 25 years and countless retirement savings wiped out by the collapse of the stock market, experts say the American pushpin industry may be the lone bright spot in an otherwise bleak financial landscape.I've used pushpins a lot more than usual over the last year. Anyone else?
knows that when the economy contracts, pushpin sales expand," said Paul Michelson, a pushpin analyst for Wells Fargo. "
In uncertain times, they provide a sense of stability to those who just lost their jobs or may be late with their mortgage payments."
Added Michelson, "Pushpins are sharp, rigid, and enable you to attach thin items to the wall. People really gravitate toward that."
In times of prosperity, however, consumers tend to be more interested in high-ticket items such as flat-screen TVs or oil paintings. During economic booms, the pushpins go in the back of the junk drawer until hard times hit again.
April 27, 2009
"Inflation is the senility of democracies."-- Sylvia Townsend Warner Equities Are Likely Heading Lower Resist the Temptation to Short Them -- Seeking Alpha
What do you suppose a Goldilocks Zombie would look like? I am guessing a trifle chubby, and unshaven . .Why Jim Rogers and Robert Shiller Aren't Buying U.S. Stocks Yet -- Seeking Alpha
the real reason financial firms are paying big again is simply because they can Money for Nothing, by Paul Krugman, Commentary, NY Times
The classic "West Side Story" is enjoying its Broadway revival. Now comes the remix, "Worst Slide Story."Animation Recession Sing-A-Long! (Walt Handelsman) - Newsday.com
By and large, though, markets are unpredictable, and they need to stay that way. If markets were predictable, they would cease to exist... some one or a few would run off with all the money. To the extent that it has been "predictable" and made some corporations lots of money recently... as we have seen, that was largely due to manipulation and corruption, not the effects of free markets.
A few have run off with all the money. Who was on the other side of those massively leveraged positions that the banks lost on? It seems to me that the fact the losers are now being bailed out by the government means that effectively there has been a massive transfer of wealth from taxpayers to the "winners" of those bets.
Manipulated, corrupt and un-free markets indeed.
My suggestion to the submitter is to try a more honorable career, like record-company executive or drug-dealer.
I think Lou meant to say,
"He dozed off on fiscal responsibility".
===LOL! The Stimulus Czar needs stimulating... asleep at the wheel while Obama blabs away. Perhaps a portent of things to come? Will this administration sleep while Rome burns?
Since going long "hope" and short "realism" doesn't seem prudent for me I guess I'll keep waiting for the buzz to wear off.
What good are economists anyway? A commenter on a housing blog wrote recently that economists did a worse job of forecasting the housing market than either his father, who has no formal education, or his mother, who got up to second grade. “If you are an economist and did not see this coming, you should seriously reconsider the value of your education and maybe do something with a tangible value to society, like picking vegetables,” he wrote on patrick.net.
Take that, you pointy-headed failures! Go jump off a supply curve!”
April 24, 2009 | Los Angeles Times (699 Comments)
Republican Rep. Michele Bachmann of Minnesota recently said she fears that Obama will build "reeducation" camps to indoctrinate young people. But Obama hasn't made any moves toward taking anyone's guns, and with money as tight as it is, the last thing the president wants to do is run a camp where he has to shelter and feed a bunch of fat, angry white people.
Look, I get it, "real America." After an eight-year run of controlling the White House, Congress and the Supreme Court, this latest election has you feeling like a rejected husband. You've come home to find your things out on the front lawn -- or at least more things than you usually keep out on the front lawn. You're not ready to let go, but the country you love is moving on. And now you want to call it a whore and key its car.
Americans may be struggling to pay their credit card debt. But for Larry Summers, President Obama’s chief economic adviser, the issue is apparently a snooze.
Mr. Summers was caught dozing in a Roosevelt Room meeting this afternoon as Mr. Obama addressed credit card industry officials, according to a White House pool report.
Mr. Summers “appeared to be nodding off near the beginning’’ of Mr. Obama’s remarks, the report said. It went on “And then he DID nod off, doing the head on the hand and then head falling off the hand thing.’’
The photographers had a field day at what would otherwise have been just another White House photo op with officials seated around a table.
- I’m sure he’s burning the midnight oil on all our behalves…Obama should bang the table tho and wake him up; it’s a little embarrassing.
- Well it WAS a boring meeting topic. I mean, unless it involves hedge funds or bailing out his buddies, the Masters of the Universe, why would Summers care? Only Little People pay credit card interest, after all.
— Parakeeta Byrd
- He was having a dream that went like this:
” Water glass: $5.00
” Embossed namecard: $10.00
” Official pen: $11.00
” Access to the President: priceless.”
— a. hamilton
- Obama likes to talk and talk and talk, so no wonder Summers is bored out. He has probably heard Obama say the same thing a 1000 times. Kudos to Summers for actually getting a power-nap while Obama keeps blabbing.
— Jimmy Ortega
Eric (member) wrote (in reply to...) on Tue, 4/21/2009 - 11:57 am
peon@wallstreet ~$ su
root@wallstreet ~$ dd if=/dev/zero of=/dev/sda bs=512 count=1
root@wallstreet ~$ reboot
root@wallstreet ~# chown -R goldman.sachs /
Comrade-Dope jg (member) wrote on Tue, 4/21/2009 - 4:29 pm
My prediction: Obama folds on this like a cheap tent.
Anonymously wrote on Tue, 04/21/2009 - 4:04pm.
COF's situation reminds me of the line from Kirk to Spock: "Why aren't you dead?"brewcrew wrote on Tue, 04/21/2009 - 4:36pm.
Borrow from the Fed at 0%, lend at 30%, and be backstopped by the Fed? Even I could make money doing that. Sign up for your pre-approved Brewcrew card today! Special lower interest rates for customers of Lefty's Liquors.Anonymous wrote on Tue, 04/21/2009 - 4:40pm.
Let me "articulate" this: Perhaps if they didn't "upgrade" customers' interest rates to 35% they wouldn't see so high of a charge-off rate. Dumbasses!The Devil wrote on Tue, 04/21/2009 - 4:41pm.
But I thought that usury was always profitable..Angry Saver wrote on Tue, 04/21/2009 - 5:02pm.
After certain well connected banksters are bailed out, then the hard work of paying off all this household debt will begin.
Should take the better part of a generation.
"One of the lessons that investors seem to have to learn over and over again, and will again in the future, is that not only can you not turn a toad into a prince by kissing it, but you cannot turn a toad into a prince by repackaging it. But very imaginative people in the securities market try to do that. If you have bad mortgages they do not come better by repackaging them. To some extent the chickens are coming home to roost for the mortgage originators and securitisers."
Warren Buffett, Financial Times, October 26, 2007
The Big Picture
Nassim Taleb suggests ways to make economic life closer to our biological environment: smaller companies, richer ecology, no leverage. The risk takers of the economy should be entrepreneurs, not bankers; Companies should be born and die every day, without making the news.
In other words, a place more resistant to black swans.
Ten principles for a Black Swan-proof world
- What is fragile should break early while it is still small. Nothing should ever become too big to fail.
- No socialization of losses and privatization of gains. Whatever may need to be bailed out should be nationalized; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism.
- People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organizations staffed with economists) lost its legitimacy with the failure of the system.
- Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”.
- Counter-balance complexity with simplicity. The complex economy is already a form of leverage: the leverage of efficiency.
- Do not give children sticks of dynamite, even if they come with a warning.
- Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Be robust in the face of them.
- Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is denial.
- Economic life should be definancialised. Citizens should not depend on financial assets or fallible “expert” advice for their retirement.
- Make an omelets with the broken eggs. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself.
And what I find most amusing is that everyone expects to make 8-10% when the economy is growing at a much smaller rate than that.
Remember over the last decade how the mantra defending all this was "spreading risk." Funny you don't hear that anymore, because they were right. We all got the risk, whether we wanted it or not.
The Big Picture
Now, I think that is funny. But they don’t — they are serious:
“In a new white paper, S&P lists six qualities investors want from ratings firms: all public ratings available to all investors without charge at the same time; a ratings process free from conflicts of interest and independent of issuers, investors and governments; ratings based on sound, consistently applied methodologies that consider real-world trends; broad and consistent coverage of a wide range of securities and asset classes; ongoing scrutiny to ensure timely upgrades or downgrades if appropriate; and freedom to choose rating opinions from multiple sources and additional benchmarks on issues besides the likelihood of default.”
These guys should work for HBO — seriously, give them a job doing anything but rating credit.
From Fed Chairman Ben Bernanke: Financial Innovation and Consumer Protection (ht Rex)
[W]ith hindsight, we can see that something went wrong in recent years, as evidenced by the currently high rates of mortgage delinquency and foreclosure
With hindsight? Hoocoodanode?
Welfare Queens on Wall Street rely "Visible Hand" instead of invisible.
The argument for bailing out AIG essentially amounted to this:
Goldman, Welfare, Queen & Sachs the counterparties need to be helped.
- I wouldn’t be surprised if Gamblers Anonymous had a special chapter for derivatives gambling.
- I heard as l'Oreal's internal slogan: "we are not selling shampoo, we are selling dreams" -- in fact, derivative contracts are not zero sum games, there are intermediaries, ******-shuffle them, and they are to an important extent intermediating among retail investors for a fat fee. You may have noticed those sport cars these financial volks drive... it is not because they are smart; it is because they are -- collectively -- selling dreams of getting rich, and selling these dreams bloody expensive.
It's over — we're officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.
... ... ...
The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).
So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream.
You may still call California, California, but it is really known as Northern Mexico.
Government Sucks is headed in the same direction as the US econo-political system--COLLAPSE. Don't get carried away by bear market rallies. They are to suck more dopes.republicans are TRAITORS wrote on Sun, 04/12/2009 - 7:34pm.
Goldman Sachs employees provide a service. You give them billions of your tax dollars and they promise not to stop spending. I mean just think of all the private airline pilots that would lose their job if GS was allowed to stand on their own.
Nemo (member) wrote on Mon, 04/13/2009 - 1:43pm.
Since a strong leader makes a strong nation, I for one am pleased to see that our country's true rulers are doing so well.REally wrote on Mon, 04/13/2009 - 1:43pm.
- NemoArbitrage Macht Frei wrote on Mon, 04/13/2009 - 1:45pm.
1. Mark to maybe
2. Post bonus amounts later
3. Get an overnight deposit from the Fed to bloat the Balance Sheet
4. Postpone all accts payable (issue IOUs)
5. Send a big check to O
6. Pay HP his ghost retainerac wrote on Mon, 04/13/2009 - 1:55pm.
It might be time for GS to start a couple of new corporations, perhaps the Shenadoah II and Blue Ridge II would be appropriate?Arbitrage Macht Frei wrote on Mon, 04/13/2009 - 2:28pm.
If I were to have my moniker saying "Hedging makes one free" it wouldn't have the same meaning, so i'll just leave it as is.popeye (member) wrote on Mon, 04/13/2009 - 2:53pm.
Nades,Arbitrage Macht Frei wrote on Mon, 04/13/2009 - 3:17pm.
Countless millions of lives will be lost in this perfect financial maelstrom, all on account of hedging.Broward Horne wrote on Mon, 04/13/2009 - 2:49pm.
We're witnessing one of the greatest non-violent crime sprees in history.
Michael's exhortation of the 7th amendment makes better sense each day. Imagine and Ordinary Joe who shoots his banker and the jury returns a verdict of "self-defense".
“I’d rather be out of the market wishing I was in, than in the market wishing I was out.” -- Louise Yamada
I'm going to introduce the "nades uncertainty principle" (Yes similar to the Heisenberg uncertainty principle)
It says that once something is identified as a true predictor it ceases to be predictive in the future.
I'm trademarking that mofo!
Just 53% Say Capitalism Better Than Socialism
Thursday, April 09, 2009
Only 53% of American adults believe capitalism is better than socialism.
The latest Rasmussen Reports national telephone survey found that 20% disagree and say socialism is better. Twenty-seven percent (27%) are not sure which is better.
Adults under 30 are essentially evenly divided: 37% prefer capitalism, 33% socialism, and 30% are undecided. Thirty-somethings are a bit more supportive of the free-enterprise approach with 49% for capitalism and 26% for socialism. Adults over 40 strongly favor capitalism, and just 13% of those older Americans believe socialism is better.
TJ and The Bear (member) wrote on Thu, 04/09/2009 - 8:22pm.
All this happy talk always drives me back to this:
1927-1933 Chart of Pompous Prognosticators-----
"Hope for the best, prepare for the worst"
10 Apr 2009:
Eric Hobsbawm: Whatever ideological logo we adopt, the shift from free market to public action needs to be bigger than politicians grasp
The consensus that's being cried out for, supports the de-centralisation of markets yet the participative democracy of socialism. Centralised forms of state socialism are indeed dead. Markets are good at allocating resources, when unhindered by the crises and contradictions of capitalism.
It appears we are angling towards market socialism. A system of democratically-run co-operatives competing in the marketplace. It was an idea that was intellectually 'fashionable' in the 80s - but is long overdue a reappraisal.
The best way to introduce such a system with minimal controversy (and I do stress minimal, not zero) is to introduce favourable tax breaks to encourage co-op start-ups; and phased subsidies, eventually disappearing after three years when its assumed the enterprise is stable and self-sufficient.
Nobody seriously thinks of returning to the socialist systems of the Soviet type - not only because of their political faults, but also because of the increasing sluggishness and inefficiency of their economies - though this should not lead us to underestimate their impressive social and educational achievements.
Impressive social and educational achievements? You mean the totally unncessary and deliberate starvation of some twenty million peasants?
Or the mass grave of Kolmya?
These are the social achievements we are supposed to be impressed by?
It is a relief to see that good Professor no longer wants to create that mass murdering totalitarian state in the UK - one that would almost certainly have killed me and most posters here - but it is a shame to see that building autobahns and making the trains run on time is not the be all and end all of Government. There is that little thing about genocide as well.
As for the rest of the article, it is built on a fantasy. He says:
Impotence therefore faces both those who believe in what amounts to a pure, stateless, market capitalism, a sort of international bourgeois anarchism, and those who believe in a planned socialism uncontaminated by private profit-seeking. Both are bankrupt
But in fact this pure stateless market capitalism does not exist outside of his imagination. Britain still takes 40 pence in every pound. The State continues to regulate and run large parts of the economy. It owns a large chunk of it as well. Nor is there any evidence that it is bankrupt as an idea. Socialism is dead, but there is no viable alternative to that mixed capitalist model.
And, by the way, the heaviest regulated sector failed. The banks. Not the least regulated Hedge funds. The problem is, as always, stupid Government.
Britain deregulated its markets, sold its industries to the highest bidder, stopped making things to export (unlike Germany, France and Switzerland)
This claim is utter b*ll*cks. Britain has a larger manufacturing sector for the size of its economy than France does. I don't know about Germany or Switzerland and I can't be bothered to look it up.
Given the level of research the good Professor put into his article, I don't feel any particular need to either.
From: Stress test command and control center
To: Field testers/bank handholders
Subject: Lowering bar further in light of FOMC outlook
- Anonymous said...
- Again: What has the US citizenry done to stop what is going on?
You must have read or heard it: people get the government they deserve.
- B. Mull said...
- Actually officials said the stress test results are EVEN BETTER than expected!
Wow. That's good enough for me. Recession over. Now I'm going to ride the tide by putting all my last $40K in bailout mutual funds.
...here's the old story of a thoroughly drunk (and married) Winston Churchill stumbling up to an attractive woman at a party.
"Madam, will you sleep with me for five million pounds?"
"Would you sleep with me for one pound?"
"Of course not, what kind of woman do you think I am?"
"Madam, we've already established what kind of woman you are," said Churchill. "Now we're just negotiating the price."
Like Winnie-the-Pooh, I'm left scratching my head. How could a ‘safe' deposit account evaporate, leaving the bankers unscathed?
This will cheer you up. I lost a big sum of money recently. It evaporated with Lehman Brothers. As it happens, I was hardly aware that I had anything deposited with this distinguished banking house (or hopelessly greedy incompetents, depending on the way you choose to look at them) until I telephoned the manager of my account at a hedge fund.
Now let's go back. I am a financial innocent. I distrust all wealth management and fund manager types. I distrust them from a deep, puritanical atavistic well. But I happen to have savings and pension funds to consider. We drones make our money by luck and talent, by inventing things or creating things, and not by accountancy, so we are doomed to be the patsies of the financial sector. We are the wildebeests by the waterhole. We are the ones who have to die to feed these ghastly, lazy, incompetent predators.
Subprime by Todd Federman
Inspired by “There was an old lady who swallowed a fly”, lyrics by Rose Bonne
No money down, two years interest free,Todd Federman www.RhymesForTurbulentTimes.com
Buying a house was no problem you see.
And so the young man along with his spouse,
They could not afford, but yet bought the house.
A company provided the debt,
That allowed the couple to buy, but yet
They did not provide the money for free,
They packaged and sold it off for a fee.
And so the young man along with his spouse,
They could not afford, but yet bought the house.
The rating folks called the bonds triple A,
The sun was shining, it was time to make hay.
It allowed the company to sell off the debt,
To earn fast fees, a good business bet.
And so the young man along with his spouse,
They could not afford, but yet bought the house.
The banks came along and bought the debt,
Locked in a spread that yielded great net.
They thought the bonds were Triple A,
Or so the rating companies say,
Of the bonds offered by the company,
The ones packaged and sold for a fee,
That allowed the young man and his spouse,
Though they could not afford, but yet bought the house.
But the terms soon changed for the young man and his spouse,
They could no longer afford to own the new house.
The rating companies had erred quite a bit,
All of a sudden the banks took a hit.
On bonds they had thought risk free,
That they bought from a company that had earned a fee,
For providing the loan to a young man and his spouse,
They could not afford, but yet bought the house.
The Fed came along to bail out the banks,
A task for which they deserve little thanks.
Shouldn’t they have known all along?
Banks chasing yield would end up so wrong?
And couldn’t the rating companies see,
This kind of debt is more like Single B?
And the company that provided the debt for a fee,
Should never have lent to the man and his spouse,
Because they could not afford, but yet bought the house.
2. No socialisation of losses and privatisation of gains. ...
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. ...
4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. ...
6. Do not give children sticks of dynamite, even if they come with a warning . ...
8. Do not give an addict more drugs if he has withdrawal pains. ...
"The Best Way to Rob a Bank Is to Own One."
If there was one thing the Bush Administration did that was extremely harmful to the country, it was to verify that if you tell the lie long enough, the people stop asking you to tell the truth... While Obama is wow'ing Europe with his rock and roll status, his appointment and bank stooge Tim Geithner, is stealing the silverware out of the White House drawers.
Mar 26, 2009 | FT.com Willem Buiter's Maverecon
As an aside: it is astonishing that Congress and much of the US populace are apoplectic about $165 mn (perhaps $182 mn) of bonuses paid to AIG executives and employees, when $170 billion or so of public money is at risk (and tens of billions probably already gone out of the window) in the rescue of this most undeserving of companies. Perhaps you can only get indignant about what you can comprehend… .
Apr 4, 2009 | Calculated Risk
dow30 summer weight:
"It is as hard for a former community organizer to understand profits as it is for a Fortune 500 CEO to understand social justice."
Posted by Stacy-Marie Ishmael on Apr 03 20:57.The Palm Beach Post reports:
Bernard Madoff’s $9.3 million Palm Beach mansion is now in the hands of the U.S. government, along with two of his boats and a Mercedes.
At 6 p.m. Wednesday, about a dozen agents from the U.S. Marshals Service descended on the five-bedroom, seven-bath house along the Intracoastal Waterway.
“I’ve never seen so much bull in my life,” Deputy U.S. Marshal Barry Golden said shortly after entering the house. “Pictures of bulls, bull statues, even bulls on clothing. There’s a lot of bull in the house.”
The bull theme even extended to the boats seized earlier Wednesday. A 55-foot yacht moored at a Fort Lauderdale marina is named Bull. A 24-foot speedboat taken from a warehouse in Palm City is named Little Bull.
You couldn’t make it up.
There’s an old saying “the definition of insanity is to keep doing what you’re doing expecting a different outcome”.
TCA says: Today, 1:47:26 PM
“Question for the commentariat: What's the economic rationale for paying one's second position loan if you have no equity?
- a said...
- "Oh my God, do they believe the garbage they shovel out?"
The worst of it is, I think they do.
- killben said...
- "The dishonesty of this crowd is just breathtaking. The Bushies were blatantly high handed, while Team Obama prefers the Big Lie and assumes we are all too dumb to see through it"
Amen to the dishonesty!!
- Keenan said...
- Anon 9:21 writes:
"Will someone explain to me what is the difference between these folks and a mafia?"
The "stars & stripes" and the anthem. Nothing much else different.
If it stands, the FASB ought to change its name to the Fraudulent Accounting Standards Board. It’s that bad.
An Indian-born economist once explained his personal theory of reincarnation to his graduate economics class. "If you are a good economist, a virtuous economist," he said, "you are reborn as a physicist. But if you are an evil, wicked economist, you are reborn as a sociologist." —Paul Krugman, "Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations" (1994, page xi):
Jan 30, 2009 | Naked Capitalism
Reader Tim C pointed us to a post on Tim Price's blog, "The Price of Everything," which provides astute financial and sometimes social commentary. Below is an excerpt:Dear Western banking establishment,
I notice that your unauthorised credit facility from international lenders of last resort now totals approximately $10 trillion. As a taxpayer and therefore your largest shareholder I would be grateful if you could repay this facility at your earliest convenience. I have charged you an additional £30 for this letter and a monthly unauthorised overdraft fee of £28. If you do not repay this facility shortly I will have no choice but to become further massively impoverished along with legions of fellow taxpayers for multiple generations to come.
I would also be grateful if the strategists and economists who work for you could abstain from publishing their unsolicited opinions about resolving the banking crisis within the financial media. I am sure you will agree that hearing from the same strategists who worked for the architects of such widespread financial destruction is likely to irritate those of us who were not actually complicit in the extraordinary and venal credit boom of the last several decades. There is an expression that if you’re not part of the solution, you’re part of the problem. Those of your employees who were the public face of the problem are, I think you will agree, unlikely to represent the solution, unless perhaps they are fired – en masse, from a giant howitzer, into an area where they can do no further harm. Alaska, perhaps. I would further suggest that the high profile commentators who work for you and who have implicitly played their part in marketing and then amplifying this catastrophe might consider quietly entering another field with superior ethics and enhanced value to society at large: perhaps as piano players in brothels. This note has been copied to the letters editors of The Financial Times and The Wall Street Journal (which I understand is shortly to be renamed simply The Journal on the basis that Wall Street no longer actually exists – as was noted this week by Messrs Wen Jiabao and Vladimir Putin at Davos. Don’t worry about not being there – you weren’t missed).
Since the start of the year is always a time for slimming and working off the excesses of the festive period, I wonder whether your industry would consider operating along similar lines. Just as there is no real need to have 18 different coffee bars all touting their wares along my High Street, there is probably no real need to have 18 different banks, not all of which are subsidiaries of Santander, clogging the High Street and busily not wanting to extend me back any of my own money so generously lent to them.
I would also be interested in your views as to the wisdom and efficacy of the monstrous pile of credit being shovelled at you and your peers by governments when it was overmuch credit creation that precipitated this crisis. I do not, of course, expect anything other than a self-interested response. But you may find the following observations pertinent. If they seem acutely relevant today it is because they were written in the early 1930s, by one Garet Garrett (and a grateful hat tip to M. Gandon):
“The general shape of this universal delusion [that is, credit] may be indicated by three of its familiar features.. First, the idea that the panacea for debt is credit.. The burden of Europe’s private debt to this country now is greater than the burden of her war debt; and the war debt, with arrears of interest, is greater than it was the day the peace was signed.. Debt was the economic terror of the world when the war ended. How to pay it was the colossal problem. Yet you will hardly find a nation, state, city, town or region that has not multiplied its debt since the war. The aggregate of this increase is prodigious, and a very high proportion of it represents recourse to credit to avoid payment of debt.
“Second, a social and political doctrine, now widely accepted, beginning with the premise that people are entitled to certain betterments of life. If they cannot immediately afford them.. nevertheless people are entitled to them, and credit must provide them.. Result: Probably one half of all government, national and civic, in the area of western civilization is either bankrupt or in acute distress from having over-borrowed according to this doctrine.. Now as credit fails and the standards of living tend to fall from the planes on which credit for a while sustained them, there is political dismay.. When [people] have been living on credit beyond their means the debt overtakes them. If they tax themselves to pay it, that means going back a little. If they repudiate their debt, that is the end of their credit. In this dilemma the ideal solution, so recommended even to the creditor, is more credit, more debt.
“Third, the argument that prosperity is a product of credit, whereas from the beginning of economic thought it had been supposed that prosperity was from the increase and exchange of wealth, and credit was its product.”
The post continues here. Enjoy!
Models & Agents
In his bluntest admission to date of his role in inciting the financial crisis, former Fed Chairman Alan Greenspan has decided to come out clean:
“I screwed up!”
Greenspan, 83, was speaking at a press conference in Basel, Switzerland, at the fringe of the Global Symposium on Rebuilding the Pillars of Self-Regulation, which he intended to boycott.
Asked about his one-time conviction about bank officers’ superior risk-management skills to those of regulators, the Maestro conceded:
“They had me with their fan charts! Default probabilities in color!… I’d never seen them before!… Bayesian, no less!”
Greenspan expressed his stern commitment to do whatever it takes to redeem himself, including re-writing his memoirs, proofreading FOMC minutes, or even taking a job at the Treasury.
Yet, local sources, who spoke on condition of anonymity, revealed Greenspan has applied to extend his Swiss visa, after being tipped by Chinese secret agents he had been shortlisted by Secretary Geithner for the post of Bank Nationalization Czar.
“That would be a step too far,” he suggested, when asked about the prospect.
Chinese secret agents were not available for comment.
Still, trusted sources report China is working to quash Greenspan’s plan to stay in Switzerland, luring him instead into spending his latter years in Beijing.
Greenspan did not seem entirely closed to the idea. Visibly distressed by the fatals flaws he discovered in his ideological framework, he said:
“As long as I can get my saving deposits out of Citi and into China, it could help me find my peace of mind,” he said.
Indeed, sources say he is already considering a lucrative offer to employ his formidable forecasting skills as prime-time anchor for the Chinese weather channel.
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