Total lending by the Federal Reserve:
I think that my inflation solution is going to happen whether we want it or not.
H/T The Big Picture
Author: Matthew G. Saroff
Because the Sh&%s at the IMF Have Done So Well Helping the 3rd World
We are supposed to believe their prediction that the markets are less than 20% from their bottoms.
“Prosperity is just around the corner.”
Yeah, right……
Bush Broke the Law….Again
That is the conclusion of a Bipartisan majority on the Oversight and Government Reform Committee, which says that the decision by Bush and His Evil Minions™ to withhold the FBI interview with Dick Cheney on the Valerie Plame outing.
Same sh%$ different day.
If there is any justice in the world, Dick Cheney will spend the rest of his life behind bars.
George W. Bush Gives in to Axis of Evil
Or at least the one member of the axis: It appears that the U.S. dropping North Korea from terror list, as it had to promised to do in negotiations, and the DPRK is resuming dismantling its nuclear program.
The Japanese are pissed off about this, what with the whole bizarre, “Kidnapping Japanese citizens,” thing still unresolved, but pretty much everyone else is happy about this development.
It appears that South Korea will be sending a delayed shipment of steel to the DPRK, and we now have reports that the IAEA has had its access restored.
Economics Update
Normally, I don’t comment on normal swings in the stock market, but there is nothing normal about the Iceland Stock Market, which dropped 77% after trading resumed following a 3 day suspension.
Iceland is in for some very hard times. It’s because the past few years of their prosperity were due to the pseudo-economy of the carry trade, which makes nothing, and so now they will bear the costs of the resultant excesses.
Speaking of excesses, it looks like the Royal Bank of Scotland will be first in line to sell itself to the British government, which is unsurprising as they were at the forefront of complex financial deals and mergers.
It should be noted that U.S. banks are lining up for partial nationalization too.
Additionally, we are having confusing moves by the FDIC on Regulation. It appears taht the FDIC will guarantee, “Senior unsecured debt, such as commercial paper and transfers between banks, issued through June 30, 2009, to help banks fund operations and let the institutions convert maturing senior debt into new issues fully backed by the FDIC.”
There has to be some sort of major blow-up at the center of this, but I am not sure exactly what it is.
In the mean time, oil is down, on expectations of a deep recession and reduction in demand, and so is the dollar, on….I’m not sure, but my hunch is on the realization that Treasury Secretary Paulson is a moron.
That being said, the newly nationalized GSEs are not getting much love with the debt spreads widening on Fannie and Freddie, probably because the Treasury is directing them to buy some really awful financial instruments.
Maureen Dowd Is Just Nuts
Or more accurately, she is so full of herself that she thinks that she can publish the substance of her OP/ED in Latin, and that people will want to translate so that they can read her deathless prose.
She did not even translate it herself.
Maureen Dowd, you are a very sad, very lame person.
Inflation is the Solution, Not the Problem
So, we have noted investor Julian Robertson saying that the US is looking down the barrel of a 10-15 year downturn, and we have concerns that the bank bailouts will cause a period of “hyper inflation”.
I think that these are related, but not in the way that the economic community does.
I think that inflation is the solution, rather than the problem.
The problem right now is that assets are in too many cases worth less than what is owed on them.
The problem is not that assets are currently underpriced, but that they were overvalued when they were purchased.
The solution is to devalue the currency that is owed on these loans, and the word for this devaluation is inflation.
As long as we put in a structure that ensures that wages (not income, but earned wages) for the bottom ½ or ¾ of the population keep pace, so that people can live, people will do OK, and the people at the core of this crisis, banks and entities that act like banks, will pay for their problem by a reduction in the value of their cash hoards.
Retirees and near retirees will take a serious hit, but society as a whole will do better.
I think, given the enormous amount of money pumped into the system by Alan “Bubbles” Greenspan over the past 20 years, and the positively mind boggling amount of money pumped into the system over the past few months by Bernanke and Paulson, that inflation is inevitable anyway.
With 20% inflation, prices would double in about 3½ years*.
One of the problems here is how to reign in the beast before you need a wheelbarrow of currency to buy a loaf of bread, and how you stop inflation once the problem is done.
My suggestion is to do it via legislative fiat: Instead of allowing inflation to come, simply pass a law devaluing the US dollar by 50%.
This law would necessarily ensure that the payments for existing contracts, including wages, would necessarily double, as would regulations such as the minimum wage.
Of course, I I’m an engineer, not an economist, dammit,† and I’m sure that any economist would consider my proposal batsh%$ insane.
*Rule of thumb on interest: If you divide the number 72 by the interest, you get the approximate time to double. It’s called the rule of 72.
†I LOVE IT when I get to go all Doctor McCoy!!!
Alan “Bubbles” Greenspan’s Legacy in Shambles
And now The New York Times and Bloomberg have published OP/EDs savaging him.
He may be the only political figure in the US less popular than George W. Bush right now.
Paul Krugman, fresh off of his Nobel, has been calling Greenspan the “villain” of this whole drama.
It’s good that he is alive to see this.
Sarkozy Opposes Rule of Law With Regard to IP
Apparently, it appears that Mr. Congeniality has sent a letter to the European Commission demanding that authorities be able to cut off people accused of violations of IP laws without judicial review.
It seems that a bill going through the European parliment has the following language:
No restriction may be imposed on the fundamental rights and freedoms of end-users without a prior ruling by the judicial authorities.
It also appears that Sarkozy thinks that this is too much of an imposition on the IP dependent industry.
The European commission told him to go pound sand.
I Really Hope that He’s Right
William Volk, a long time denizen of the tech industry,* wonders if the financial crisis spells the death of Web 2.0, or more accurately whether it spells the death of the venture capital supported business models for internet companies.
I hope so, because I am sick to death of the kule kidz business model.
What is going on here is that the capital costs of creating an internet presence are vanishingly small, look at the cost of building just one automobile assembly plant, so silicon valley snake oil salesmen are(were) able to get money and line their pockets.
To be fair, there are two groups of people making out like raped apes on this bit of dishonest persiflage, the owners of the internet firms with non-existent business models, and the VC firms that get a commission every time that they spend other people’s money.
It’s been a profitable scam for some time, funded largely by the stupidity of Alan “Bubbles” Greenspan, and now it looks like the the carnival is over.
*He was actually at the legendary meeting where a senior executive doubted the marketability of Teenage Mutant Ninja Turtles in a video game. The company also turned down licensing the Simpsons when they were still just a short bit on the Tracy Ullman Show.
Quote of the Day
Tina Fey on playing Sarah Palin:
‘If she wins, I’m done,’ Fey tells TV Guide. ‘I can’t do that for four years. And by ‘I’m done,’ I mean I’m leaving Earth.’
I can see how doing the “Weekly Palin” for the next four years might be a problem, but Chevy Chase did it with Gerald Ford, and ….Oh…I see.
This is What Happens When You Allow Republicans to Reflag as Democrats
Rep. Tim Mahoney (“D”-Fla.) has been accused of using the threat of firing to maintain an affair with a subordinate.
What’s more, he’s released a statement that seems to confirm the affair, if not the sexual harrassment.
Here is the small story with the big lesson: He’s a reflagged Republithug.
What’s more, Rahm Emmanuel and His Evil Minions™, made sure he won the primary to run for Mark Foley’s seat, beating out a real Democrat in the primary, who would also have won once Foley’s hitting on Congressional pages was revealed.
Damn.
I Gotta Start Watching Boston Legal
Boston Legal video: Dances With Wolves on TV.com
Watch…Wallet….Gun…Knee…Right Foot….Left foot…Only in America…………sweet land of Liberty Valance……
John Cleese on Sarah Palin
Damn, there is a snark gap, and the Brits have all over us in the US.
Economics Update
If there is any major difference between the US and the European response to the financial crisis, it is that the Europeans have their sh$# together relative to the US.
Britain was already taking equity stocks in banks this morning, and any sensible action by the Treasury department still appears to be weeks away, so it’s not surprising that the dollar is down relative to European currencies.
It is a vote on the confidence that investors have in the relative competencies of the governments involved.
Or maybe it’s the fact that the markets realize that the foreign exchange markets are subject to supply and demand too, and with the central banks of the industrialized world are shoveling dollars out their doors, with the Fed being the most aggressive.
I think that the goal was to lower interbank lending rates, which it appears to have done for a while, at least.
It appears that the markets are still seeing a recession, as commodities are generally down though oil ended up, above $80/bbl, today.
The bit of disturbing news is that it appears that the Treasury is
using Fannie Mae and Freddie Mac to buy $40 billion in junk mortgage securities, which is the wrong thing to do.
It’s why the even the knuckle draggers at the White House are moving from buying the sh#$pile to buying the banks that need recapitalization.
This is what the Swedes did, though they added a lot of F&^% you to bank management that we are unfortunately leaving out.
Expect to See this Number a LOT in the Near Future
Trillion
Joerg Haider Finally Did Something to Make the World a Better Place
He died in an auto accident. It appears that Austrian anti-immigration activist was speeding.
I’m pretty hard-ass on immigration, but this man was just a bigot and demagogue, and he leaves the world a better place by leaving this world.
The Upside of the Financial Meltdown
Conservatives losing elections, in this case the nasty bit of putrescence that is Canadian Prime Minister Stephen Harper.
He was hoping for an outright majority, they currently hold a minority government, and now it looks like the Liberals and the NDP would have control of a minority government.
At the very least, it would prevent the Conservatives from holding an outright majority.
We’ll know tomorrow evening.
Viktor Yushchenko Calls Snap Elections in Ukraine
Fissures in the “Orange Revolution”.
The short story is that Ukranian President Yushchenko and Prime Minister Yulia Tymoshenko are on different sides of the ideological divide.
Yushchenko thinks that they should do everything possible to piss off the Russians, so that they will attack, and Tymoshenko looks at Georgia, and though she hates Russia too, she saw what happened in Georgia, and thinks that needlessly tweaking their nose, and overt hostility to the large Russian ethnic minority in Ukraine is stupid, and will not be to the benefit of the country.
Basically, Tymoshenko is saying that she is not opposed to wars, “just stupid ones,” to quote the next President of the United States and Yushchenko is approaching the issue with the calm demeanor of the current President of the United States.
Speaking from experience here, let me advise the Ukrainian people that having a leader with a messiah complex is a double plus bad thing.
Morgan Stanley Is Not Dead.
Kind of like that old man in Monty Python and the Holy Grail.
We had Moody’s looking at downgrading Morgan Stanley’s debt, followed by their stock tanking, so their Mitsubishi UFJ was demanding more favorable terms to make a capital infusion, which led to
the Treasury department offering a promise protection to the Japanese investors, which means that group of government acronyms was just about ready to seize them.
After much hand wringing, and many attempts to make a buck off the situation by people not directly involved in the deal, they sealed the deal today.
One of the consequences of the collapse of the Japanese financial markets in the 1990s is that many of the companies are cash rich. They had to be to survive 15 years of very tight credit.
We may see a lot more of this for Japanese entities as a result.