Complete with Keith Olbermann
Author: Matthew G. Saroff
Economics Update
While I am not a strict monetarist by any means, I’m an engineer, not an economist, dammit,*, I think that the fact that central banks are continuing to shovel money out of helicopters upon the financial markets will eventually create some very real, and potentially severe inflation.
In any case, if the spreads between two year interest rate swaps and treasuries hitting a record, 166.38 basis points, is any indication, all this money is not doing much anyway, except possibly pushing the dollar lower.
It’s not not doing much with real estate either, with US existing home sales falling 2.2% in August, and mortgage applications falling 10.6% last week.
This may be why S&P just cut WaMu’s credit rating again.
In energy, oil was down a bit on report of decreased demand, and retail gasoline fell for the 7th straight day.
*I LOVE IT when I get to go all Doctor McCoy!!!
More Whining from the Rich Pig Crowd
It appears that the Wall Street bankers, writing the SEC as the American Bankers Association, are objecting to an accounting rule that requires that assets be priced on their balance sheets at a realistic market value.
They find it inconvenient that assets that they won’t even try to sell, because they might get 15¢ on the dollar, which would make them technically insolvent.
Dudes, you are broke. You are not broke because of an accounting rule, you are broke because your so called assets on your so called balance sheets are about as popular as the idea of giving Dick Cheney a rim job.
The American Bankers Association, today’s wankers of the day.
Karachi, We Have a Problem
We have US sources accusing Pakistani forces aiding the Taliban, and reports that the Pakistanis have shot down a US drone.
This is not moving in a positive direction.
Credit Default Swaps, Barn Doors, and Cows
Well it appears that the state of New York is moving toward regulating some credit default swaps as insurance.
This is actually important, since it has been known for 300 years that insurance is not just any sort of financial instrument.
Basically, when insurance policies are traded as securities, you get fraud. This was learned in bubbles in the British markets in the 1700s, and so insurance is allowed only for those who have the actual loss.
About a decade ago, New York State said that CDS were not insurance, and so they were not subject to insurance regulation, leading to the current orgy of fraud, speculation, and abuse.
That being said, this is too late, and we know this because SEC Chari Christopher Cox is calling for regulation too, and Cox is a Randroid free-marketeer, and as such, never calls for regulation until it is too late.
Because Palin is a Lazy, Uninformed, Idiot
Well it appears that the final details of the debate have been negotiated, and after much whining, I’m sure, the McCain campaign got a bubble for Palin:
At the insistence of the McCain campaign, the Oct. 2 debate between the Republican nominee for vice president, Gov. Sarah Palin, and her Democratic rival, Senator Joseph R. Biden Jr., will have shorter question-and-answer segments than those for the presidential nominees, the advisers said. There will also be much less opportunity for free-wheeling, direct exchanges between the running mates.
Biden will still destroy her, the only question is whether she loses it on stage, and if she does, whether Sarah “Barracuda” Palin goes after him with a knife or a gun.
I mean, after, this woman got completely Pwn3d by Charlie Gibson, which is like being gored by Bambi.
Economics Update
Again, the elephant in the room, the Paulson, “Let’s give it to the American Taxpayer without lube,” plan is not included here.
First, let’s start with the continued deflation of the housing bubble, with home prices down 5.3% in July as compared to the previous year.
This one reason that retailers are forecasting an absolutely dismal holiday season.
It also appears that the Paulson plan, or at least whatever is making its way through Congress is not getting a vote of support from the bond market, with money still fleeing to treasuries, and the spreads between them and short term “safe” private debt remaining historically high.
It’s the same with the dollar, which is up a bit vs. yesterday’s bloodbath, but still weak.
Of more concern are indications that we are seeing a run on hedge funds.
In any case, oil prices are down a bit from yesterday’s hysteria, settling at $106.61/bbl, and retail gasoline is down again.
Comedic Genius
This guy owes me a whole box of screen cleaners
Obama to Nation: “F$#@ this sh#@, I’m outta here”
September 19, 2008 at 12:21 am · Filed under political humor
In the wake of an epic financial meltdown that threatens to derail the U.S. economy for years, Barack Obama announced he was ending his run for President of the United States, declaring to a stunned nation, “Man, this is bullsh#@.”
In a boisterous and hastily-called press conference, Obama detailed his reasons for the decision. “I was prepared to fight global warming, reform the health care system, repair our crumbling roads, create a 21st century electric grid, find Bin Laden, end the war in Iraq, and bring peace to Israel and the Palestinians. But now you tell me I have to clean up the worst financial mess since the Great Depression too? One that’s going to plunge our economy into a recession for most of my administration while I take the blame? F$#@ that. That’s f$#@ing ridiculous. You guys clean up your own sh#@. I’m outta here.”
….
Read the rest, in all its profane glory, at the link.
Great Economics Writing
Nouriel Roubini The Shadow Banking System is Unravelling, in which he reposts an article in the FT.
Well, He Wasn’t Fired for Fighting Sexual Assault
It turns out that Walt Monegan’s trip to Washington to secure funding for fight child rape was with permission.
The McCain campaign’s response, and they are running the Alaska governor’s office right now, is that he may have been approved to travel, but preventing child rape was not approved by the governor.
Whatever these folks are smoking, I want none of it.
The Shrill One Speaks
Paul Krugman makes a very good note here about the performance of Ben Bernanke, that Bernanke overstated the power of central banks in these sorts of financial meltdowns, and that dropping money from above does not work as well as he had previously anticipated.
It’s a slightly wonkish post, but for the economics groupies out there, it’s a worthwhile read.
Update: Dodd Bill Does Have Bankruptcy Changes
According to Politico.com:
Among the major provisions Dodd is adding:
- Authority for bankruptcy judges to restructure mortgages for homeowners facing foreclosure. This was considered a poison pill in a housing bill that passed Congress earlier this summer, but it has gained much more currency now that Washington wants to bail out Wall Street.
Two snaps up to the distinguished gentleman from Connecticut.
Lawmaker Pushback on Paulson’s Plan
I think that it’s clear that Paulson’s plan will be subject to sagnificant modifications in the legislative process with the Democrats seeing a need for new and stronger regulations, an equity stake in exchange for the bailout, and seeing serious questions raised by the portions of the proposed law that prohibit judicial review.
Of course, if I were them, I’d also be flipping out over the idea of Treasury hiring the Wall Street firms who f%$#ed up in the first place to manage the assets once they are purchased.
I would also note that some Congressmen want some sort of mortgage aid to distressed homeowners to be a part of the plan. (IMNSHO, allowing bankruptcy judges to handle this is the best, cheapest, and most efficient way to handle this).
I should note that the the Wall Street boys hate the idea of restrictions or equity stakes, but they have always wanted, to quote Dire Straits, their , “Money for Nothing”.
It does appear, however that the White House and the Congress are narrowing their differences.
Perez Asks Livni to Form Ruling Coalition
Basically, everyone knows that Benyamin, “The Craziest Motherf%$#er in the Middle East,” Netanyahu will win a snap election, so this is an attempt to push the election off to a later date.
I don’t think that it will work, and my prediction, that Kadima without Sharon will be a distant 3rd in the next elections, stands.
Bailout Plan Appears Even More Sweeping than Proposed
First, let’s note that under his proposed plan, Paulson can buy non-American, non-mortgage assets, which sounds an awful lot like some of this money will go to benefit UBS, where Phil “Mr. Congeniality” Gramm, sits on the board of directors……Funny that, huh?
Furthermore, the $700 billion quoted is low. The real reckoning of the cost of the plan is $1.8 Trillion:
- The $700 billion of this plan
- $50 billion from the Exchange Stabilization Fund
- The Fed discount window loans.
- $10+ billion of Treasury purchases of mortgage backed securities (MBS)
- $144 billion in MBS purchases by Fannie and Freddie.
- $85 billion loaned to AIG
- $87 billion in repayments to JPMorgan Chase for loans to Lehman Brothers
- $200 billion for Fannie and Freddie from the Treasury
- $300 billion from the FHA to refinance bad mortgages
- $4 billion to communities to buy and resell abandoned homes.
- $29 billion to JPMorgan Chase’s to pay them off for taking over Bear Stearns
- $200 billion made available through the Fed’s Term Auction Facility
Someone is getting a haircut, and it ain’t Wall Street executives.
Why Friends Don’t Let Friends Use AT&T
Because when a company buries customer rights in a 2500 page manual, one can be reasonably assured that they are not customer friendly in their outlook.
Lovely Nuclear Weapons, and the Country is Falling Apart
We have a major truck bombing in Islamabad, with 53 dead.
Pakistan has never been a particularly stable place, but it appears to be getting worse.
Bailout Plan Opinions
Deep Thought
Any member of Congress who looks at the plan to give Hank unchecked power to transfer $700 billion from the Treasury to his friends’ companies and has any reaction other than ‘You’ve got to be f%#@ing kidding me’ does not deserve to hold office.
Krugman opposes the plan, at least in the form presented by Henry Paulson, though he is more receptive to Chris Dodd’s version, which requires equity from the firms rescued for buying their part of the big sh$#pile.
Sebastian Mallaby, who normally favors economics for the benefit of rich folk, hates the Paulson plan too.
Brad DeLong is of a similar mind to Krugman.
In The Nation, William Greider calls the Paulson plan a, “historic swindle.”
Dean Baker, as is his wont, gets into some fairly specific proposals in some depth, which which I agree.
Robert Reich is less specific, but he does add one specific proposal: allowing primary mortgages to be modified by a bankruptcy judge, with which I also agree.
As for me, I will merely note that Henry Paulson holds hundreds of millions of dollars worth of shares on Goldman Sachs, and the idea that he get a blank check to work this is therefore nuts.
Watching Krugman on Olbermann
Just a thought watching him: He’s a really smart guy, but he is profoundly uncomfortable and awkward on television.
Republicans who are drooling morons get some coaching do the dance on TV, and folks like Krugman don’t.
It’s not fair how much this effects our discourse, but maybe we should set up some sort of liberal org to coach people to do the gasbag bit more convincingly.
Economics Update
Once again, the big story is the bailout, which I will not cover here, it gets its own posts, though I will be dealing with some of the market effects of the proposal, which can be viewed as positive, if you are an optimist, or negative, if you are me.
First, the US dollar took it’s biggest hit vs. the Euro in 7 years, because of concerns that this bailout will end up being so expensive that it will debase the currency, and as a result, crude oil climbed the most ever, more than $25/bbl before settling at the end of the day at $120.92/bbl, up $16.37.
You can view the price in oil as a belief among traders that the economy, and hence demand, will be recovering, or you can believe that traders think that this plan will push the dollar over the edge. I think that the contemporaneous fall of the dollar indicates the latter.
The increase in prices appears to be a part of a more general rebound in commodities, though retail gasoline continued its downward path, but gasoline tends to lag oil by a few weeks, as it is actually a manufactured final product, as opposed to a raw material.
In either case, it appears that The Commodity Futures Trading Commission is not taking a close look at oil trading as a result of the volatility today.
The Chicago Fed sees more signs of a recession, reporting a drop in economic activity.
Finally, it there are indications that investors are just beginning to see US treasuries the same way that they did during the Japanese meltdown…You know…the one that lasted fifteen years.
Honestly, if that happens to the US, it will be much worse, because we lack the safety net of Japan.