Author: Matthew G. Saroff

Zimbabwe, Yet Again

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I think that the reason that I cover this is because I really don’t care about it, but I know that I should. It’s kind of funny that way.

Its an important story, and one that should be engaging more of the world than it does, but it does not even engage me.

I’m not sure why, perhaps I’m dismissive of troubles in Africa because so little goes right there, or perhaps, it’s a subtle manifestation of my own bigotry.

In any case, we now have Robert Mugabe accusing Morgan Tsvangirai of treason, and, “of working with Britain to oust the President from power,” which is, of course, absurd, and it is not a welcome development.

However, there has been some good news, as South Africa is finally calling for the vote results to be releases. Government spokesman Themba Maseko has said, “When elections are held and results are not released two weeks after, it is obviously of great concern.”

The question here is whether this is a change in policy from Thabo Mbeki, or a reflection of the rest of the ANC deserting him.

It’s clear that Mbeki has been the second biggest impediment to any sort of resolution on this, after Mugabe himself, for years, so I believe that if he has had a “battlefield conversion”, it is only because he has seen the writing on the walls.

As to the deeper reason’s for Mbeki’s enthusiastic boosterism regarding Mugabe, I tend to favor Tapiwa Kapurura’s thesis, that Thabo Mbeki in some way finds a personal threat to him or to the ANC in developments in Zimbabwe.

What is going on with the elections in Zimbabwe is that ZANU-PF, a party that is still attached to its revolutionary roots, has lost to the MDC, which is largely a more conventional Labor-type party.

It should be noted that analogy could be made between ZANI-PF and MDC and the ANC and the Congress of South African Trade Unions, a junior party in the ruling coalition in South Africa.

The Debates

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Switched over to them after 5 minutes from Olbermann, because I didn’t want to hear the intro.

Should have waited 10, but the whole Olbermann hatin’ on Hil is getting really old.

Then the questions. Stupid, really stupid vacuous question. Back to Olbermann. More hatin’ on Hil, back to the debate, and more evidence that Mike Judge was an optimist when he wrote and directed Idiocracy.

At the rate this is going I expect Gibson to ask about the designated hitter rule.

Can’t take it. I’m switching to Good Eats (Alton Brown) until “Bushed” on Olbermann.

I am not alone in my opinions, see here (“shoddy, despicable performances), and here (“perhaps the most embarrassing performance by the media in a major presidential debate in years”).

I watched perhaps 15 minutes of the debate, it was all I could take.

Next time, I’ll do the home root canal kit instead, or if I can’t do that, then I’ll watch a Fox TV reality show **shudder**.

Did I Say $45 Trillion? Me bad. $62 Trillion

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Yep, the numbers for Credit Default Swaps are far higher than I had previously noted. It’s $62.2 Trillion, up from $34.5 trillion a year ago, and up from my earlier number of $45 trillion.

By way of reference, world GDP is listed at $65.82 Trillion.

So we have something near the entire economic capacity of the Earth in complex instruments which may be worth nothing, and no one really knows what they are worth.

Paul Calello, head of investment banking at Credit Suisse, will tell the Isda meeting that the banking sector must accept that regulators will become more involved in the CDS market and other areas of derivatives in the future.

In particular, bankers and other financiers must now work with regulators to make the infrastructure more robust, since the crisis has exposed some serious potential weaknesses.

“There will be new regulation and there should be; voluntary efforts are not enough,” Mr Callelo will say. “We cannot expect ‘business as usual’.”

But Alan “Bubbles” Greenspan said that, “The use of a growing array of derivatives and the related application of more sophisticated methods for measuring and managing risk are key factors underpinning the enhanced resilience of our largest financial intermediaries.”

And as we all know Alan “Bubbles” Greenspan, acolyte of Ayn Rand, and poster child for sex without partners, is never wrong.*

*I know cheap shot, fish in a barrel. But I’m a cheap shot, fish in a barrel kind of guy.

Anti Terror Clown Show: Liberty City Seven

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After another few hundred thousand dollars of tax payer money, we have another mistrial.

It’s clear what happened here, a bunch of losers were contacted by an FBI informant, and they thought that he was al Queida, and that they could scam him out of money, uniforms, and maybe some assault rifles.

Fundamentally the real problem is that the material support statutes are so vague and so broad that the judge can’t throw this out of court with a big “BS” scrawled on the indictment.

Good News on that Pesky Nuclear War thing

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It appears that the US and the DPRK have come to an understanding over a North Korea-Syria connection and Uranium enrichment.

It involves the release of a document where the US makes the charges, and the DPRK acknowleges the US concerns.

Also, Iran has expressed a willingness to enter into talks over nuclear and other issues.

On the latter, the issue has always been more the US than Iran, because of the Bush admin’s insistence on it being a single issue negotiation, with Iranian capitulation being a necessary condition for even that.

Economics Update

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First, the Euro just hit an all-time high, $1.5968:€1.0000 (see also here)

I don’t think that it’s going to get better either, because its clear that Bernanke is not going to raise rates any time soon, because Euro zone inflation just hit an all time high of 3.6%, which means that the ECB will raise rates, as their only official duty is to prevent inflation, as opposed to the Feds dual roles of both price and employment stability.

This seems to be reinforced by the statements of Jean-Claude Trichet, the president of the ECB, who is saying that the European Central Bank is still focused in inflation, and that there is, “a strong belief that a solid anchoring of inflation expectations is of the essence”.

US inflation was pretty much in line with forcasts in March, 0.3% for the CPI, and 0.2% for the so called “core rate”

Finally, oil broke the $115/bbl barrier, hitting $115.07/bbl.

OK, This One is Really Bad News if True

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OK, for a while now, I have been talking about how the increasing TED and other spreads indicate that the credit market has not unfrozen.

It now appears that at least one of these numbers, the LIBOR, the London inter-bank offered rate, may actually have been significantly understated, meaning that the spread is higher, which means that people are more timid about lending money than has been previously reported (H/t Paul Krugman)

There are now indications that some banks may be under-reporting both the interest rates on the loans that they are paying, because it would be seen as financial weakness, which might lead to downgrades, and possibly a run on the institution.

Questions about Libor were raised as far back as November, at a Bank of England meeting in which United Kingdom banks, the firms that process bank trades and central bank officials discussed the recent financial turmoil. According to minutes of the meeting, “several group members thought that Libor fixings had been lower than actual traded interbank rates through the period of stress.” In a recent report, two economists at the Bank for International Settlements, a sort of central bank for central bankers, also expressed concerns that banks might report inaccurate rate quotes.

It’s of interest to more than the markets. LIBOR is also what many adjustable rate mortgages use as a benchmark to set their rates.

The financial system really does seem on the verge of collapse. We are getting to the point where there is absolutely no reliable data upon which one can make a decision, whether it is an individual investor, or the Federal Reserve.

Iraq Update

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First, we are seeing
another surge in bombings across Iraq, which should make one doubt about the claims of success with the US military surge.

Part of the problem, of course, is that Maliki is fundamentally disinterested in anything other his own very sort term sectarian power needs. First, he actively participated in ethnic cleansing, and now the only groups providing any meaningful aid to the million or so internally displaced Iraqis are the militias.

As to the conflict with Sadr, which is all about Maliki trying to gain an electoral advantage, not Iran or “lawlessness”, Major General Jeffery Hammond has announced that the US military has no intention of moving any further into Sadr city, which sounds an awful lot like the start of a “Fallujah moment”, when the generals declare victory and pull out.

That being said, the Iraqi troops are not waiting for a declaration of victory, they are leaving now.

The episode began when Major Sattar, the leader of an Iraqi company that had taken up positions 700 yards in front of the Americans, suddenly appeared at Company B’s field headquarters in the southern part of Sadr City.

The major’s company had replaced a more battle-hardened Iraqi unit just two days earlier, and he had been unhappy to find that he would be occupying a position to the front of the better trained and equipped Americans.

I’d be unhappy if I were told that my job was to be a speed bump too.

Zimbabwe Update

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Well, the call for a general strike went over like a dead balloon, though I think that the excuse, that too many people are too near starvation to participate, has some validity.

In terms of a runoff, Morgan Tsvangirai says that he will participate if, “a tally verified by both parties and the Southern African Development Community shows no candidate won more than 50 percent of the vote”, as he has no confidence in the electoral commission, which is clearly in Mugabe’s pocket.

In terms of the brighter side of this whole mess, it appears that Thabo Mbeki is also a loser in this affair, as members of the ANC, including ANC leader Jacob Zuma’s proxy Matthews Phosa are openly criticizing him. (also here)

This is a good thing. With his unqualified support of Mugabe, and his quite frankly delusional opposition to the use of anti-virals to fight AIDS, Mbeki is well past any usefulness to either the nation of South Africa, or the southern African region as a whole.

Credit Default Swaps: Another Primer

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In 2002, Greenspan discussing the CDS said that, “The use of a growing array of derivatives and the related application of more sophisticated methods for measuring and managing risk are key factors underpinning the enhanced resilience of our largest financial intermediaries.

Now we have $45 TRILLION of potential exposure out there.

Bloomberg has a pretty good primer here, and it’s fairly entertaining, which goes along with the fact that “Frankenstein’s Monster” is in the title.

Obama Would Investigate Bush Law Breaking

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According to Attytood, in response to a question from Will Bunch, Obama replied that he, “would ask his AG to “immediately review” potential of crimes in Bush White House.”

That’s good, though I admit that there is a part of me that wants to see them all water-boarded, I know that this is wrong.

The question is how aggressively he will pursue people after the inevitable flurry of pardons in December and January, which will make this like peeling an onion.

Oops! Wholesale Prices Surge

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Wholesale prices rose by 1.1% in March, analysts had been predicting .4%, and over the past year, it has been 6.9% (I’m not doing the core rate bull sh@# for a 1 year reading, that’s enough time to smooth out the noise)

This means that there is more pressure to raise rates:

  • Lower interest rates make it cheaper to accumulate stock piles of raw materials and keep them off the market.
  • Inflation fears drive the dollar down.
  • Low interest rates drive the dollar down.

I don’t expect any interest rate increases in the next couple of months, but we might have seen the end of rate cuts, which have pretty much stopped working anyway.