Skjellifetti

How the AIG Bailout Scuttles the Chance for a Second Stimulus

Neither Geithner not Summers ever believed we could pump enough money in to the system via monetary stimulus to raise the animal spirits from the dead. They know we are caught in a liquidity trap. But Obama was not willing to expend the political capital necessary to push through a fiscal stimulus package of the size that was required to get us out of this mess. And now Obama is caught in a political trap of his own making. By failing to nationalize failed banks like C and bailing Wall Street out instead, he has lost whatever goodwill with Main Street he started with. The result is going to be just like Roosevelt in 1937 who kowtowed to the Republicans by prematurely withdrawing the fiscal stimulus and ended up putting us back into a recession.

On Nov 18 03:24 PM Davewmart wrote:

> Not even Geithner or Summers now believe that they can get away with inflating the economy by pumping money in to raise 'animal spirits'.

Bair's Chutzpah

> But the fact is that she did have the option of paying off WaMu’s senior unsecured bondholders, and she dismisses that option a little bit too blithely in saying that she doesn’t like “bailouts”.

Umm, why do the owners of senior unsecured bonds have any expectation that the FDIC will cover them if a bank fails?

> Maybe this is a matter of opinion, since it’s hard to prove a direct causal relationship, but Bair, here, wiped out the senior debt of an enormous commercial bank — the kind of debt which is exactly what Libor measures.

Are you suggesting that Libor has built in expectations that unsecured bonds are, uh, secured by the government? Isn't this the essence of the moral hazard argument of private profit and socialized losses that has so enraged Main Street this past year?

Understanding the Dollar Debate

There seems to be a very strange almost Calvinist "The recession is proof that we did not have enough faith and therefore we must let the failures proceed in order to be cleansed of our sins" streak that permeates Austrian economic doctrine.

> "The prescription embraces a willingness, perhaps even a necessity, for the recession to become much deeper. The resulting unemployment and business failures are part of a needed cleansing process that will avert an inevitable deeper economic decline."

The Unsustainable Lie of Inflation

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it..."

The lie that is being repeated too often by folks who haven't any real understanding of Keynes is that QE is going to (or has already) caused an inflationary problem.

Wall Street: Dumb as It Ever Was

The old formulas were based on linear approximations of non-linear phenomena. We simply don't consume the same basket of goods over time and measures of inflation, etc. have to reflect that.

On Nov 06 02:40 PM JeffDB wrote:

> So how exactly does Shadow Stats get things wrong? From their page explaining some of the issues they have with the official government figures, they don't mention sampling errors, or math errors etc. Their contention is that the government, over a number of different administrations has deliberately revamped the formulas themselves to make the numbers look better. Do you dispute this? If so, on what basis? Do you have any hard evidence to back up your contention?

Wall Street: Dumb as It Ever Was

I completely agree. The "I read it on shadowstats so its gotta be true" crowd is getting tiresome.

On Nov 06 10:20 AM American in Paris wrote:

> Shadow Statistics is a bunch of rubbish. I have a background in statistics and am intimately acquainted with how the government samples populations to to form estimates. It's quite solid.

> Shadow Statistics is just one notch above the Conspiracy Theorists.
> Just one short step ....

Charlie Gasparino: Another Crash 'Has to Happen Again'

Calvinist financial prudes are just as obnoxious as the shop 'til you drop crowd. There is nothing wrong with using debt in your personal financial picture. But you do need to know where the sensible limits are.

On Nov 06 12:21 PM Michael Clark wrote:

> Spending money you don't have is immoral and leads to an Armageddon. If you ignore this truth, then the punishment will be even worse the next time.

Why There Can't Be a Cap on Bank Capital Ratios

For someone who is as disparaging of economics as Taleb is, that sure looks a lot like a rather ordinary application of standard economic maximization. Seems like "Risk Engineering" is just economics dressed up in new clothes.

The DJIA's Dangerous Indexing Philosophy

The Fine Print: As Registered Investment Advisors ...

And you just now figured this out?

The Roots of the Coming Crash

Its when you're following the herd that the rattlers are most dangerous. Its the leader that wakes the rattler up. The second guy in line riles him up. The third guy is the one that gets bit.

On Nov 04 05:13 PM Mad Hedge Fund Trader wrote:

> zxb I almost stepped on a rattlesnake last night.

America, The Nanny State

On Nov 02 08:50 AM O-B-WON wrote:

> If only all of the citizens of the United States of America would read and comprehend the above information, we might have a chance to turn "things" around.

We The People have read this kind of diatribe before and We The People have rejected it. You are in the minority. Get over it.

Arianna Huffington: New Media Outlets Must Prove Commitment to Truth

We need both HuffPost and Fox for the simple reason that most of the mainstream journalists have become too lazy to do anything more than simply reprint whatever was in the press releases the politicians and businesses hand out. Did any of the mainstream press do any real digging about, say, the WMDs that the Bush admin claimed were in Iraq before we went to war? Where was the mainstream business press when AIG was buying and selling swaps like they were baseball cards?

Forecaster Gerald Celente: 'There Is No Economic Recovery'

Food riots? Obamageddon? Facism in the U.S.? HAHAHAHAHAHAHAH! The fringe element on the right is certainly good for some laughs!

This article just put M. Prieur du Plessis on the "Not Worth Taking Seriously" list.

The Intrinsic Value of Nothing, Part 1

On Oct 27 12:50 PM jeffgroove wrote:

> The problem with other schools of economic thought is that they assume good intentions on behalf of the people in charge ...

Bzzzt. No school of economics assumes anything of the sort.

The Intrinsic Value of Nothing, Part 1

The Labor Theory of Value was actually first espoused by none other than Adam Smith and is associated with a whole host of early classical economists (Smith, Malthus, and Ricardo) as well as Marx.

"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people."

-- Wealth of Nations Book 1, chapter V

"The value of any commodity, ... to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities."

-- Wealth of Nations Book 1, chapter V

Most economists today start with utility theory which basically says that individuals have a set of preferences where a larger quantity of a good is preferred to lesser quantities of the same good and preferences are transitive so that if a bundle of goods (A) is preferred to another bundle (B) and B is preferred to still another bundle (C), then A will be preferred to C.

Because people have preferences, goods have value to them even in the absence of exchange because a person can always state whether they prefer one bundle of goods over another (i.e. they value one set of goods over another). In fact, it is downright inane to argue that something has value to you only because someone else finds it valuable as well. This is one of the traps that caused the labor theory of value to be abandoned because they could never quite reconcile the concepts of value in use and value in exchange. Today we do that via supply and demand curves derived from costs of production on the one side and utility theory on the other.

"The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called 'value in use ;' the other, 'value in exchange.' The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it."

-- Wealth of Nations Book 1, chapter IV