icandoitdon

The Puzzles of U.S. Political Economy Today

how refreshing to know that the same pack of thieves who benefited so handsomely from the lack of regulatory oversight on the way up are also profiting at taxpayer expense on the way down.

as for the "things would have been worse" argument that justifies this thievery, says who? the path not taken is inherently unknowable. what is more easily predictable, however, is that there are likely to be many long term adverse consequences created as a result of propping up these dinasaurs through the twin gifts of taxpayer assumption of their worthless investments and subsidy of their operations through artificially depressed interest rates .

let's be clear as to what happened here. the federal government decided to force losses onto the taxpayer class rather than the investors class. even today the federal government continues encourage borrowers...however imprudent their leverage...and punish savers. cash for clunkers. housing tax credits. stimulus checks. pile it on, folks....the country needs you to spend like drunken sailors just to keep treading water.

think of it. the housing market...a huge driver of consumer wealth...continues to depend on the federal government's efforts to prop up prices with contrived (low) mortage rates and buyer rebates. if this doesn't speak volumes to you about the continuing cost of the u.s. having bailed out wall street and the ability of our economy to stand on it's own, it's because you' not listening. what it tells me is that we're not out of this mess by a long shot.

'Almost All Assets Appear to Be Overvalued' - Bill Gross

the right name for those corporate bonds you bought that yield 13% is junk bonds. just in case you didn't know....


On Oct 27 06:45 PM noblepaladin wrote:

> There are good securities in every asset class. I loaded up on "too
> big to fail" bank bonds and preferred and other various corporate
> bonds during the March lows because I felt that they were less risky
> than equities. I got some pretty amazing returns, the stuff I brought
> at the low returned as much as 200-400% (too bad I can't time it
> perfectly, averaged all the way down and up). Unless we have massive,
> double digit inflation coming up within the next year or two, there
> are some great bond buys, last month I picked up some great corporate
> bonds yielding 13% that I think has very low default risk.
>
> On average, however, I think the SP500 is starting to get to the
> overvalued side and the Treasury bonds and average corporate bond
> yields are not taking into account the threat of a dollar collapse
> or massive inflation down the road. But there are select securities
> within the asset classes that are very attractive.

ING Shows How Bank Dismemberment Is Done

i'll do what john was too polite to do.

only an imbicile could defend the structure of the financial services industry in the united states. it's clear to all without an atrophied brain that it was the too big to fail culture that would have bankrupted the entire system had the federal reserve and treasury not both guaranteed private debt and turned on the printing presses 24/7 to prevent it. the treasury still guarantees the debt of many of these institutions and taxpayers remain on the hook for billions. and nothing about the structure of the financial system has changed. the fed still keeps rates at zero, using those taxpayers smart enough to acquired assets the hard way...through savings...to recapitalize these failed institutions that nearly bankrupted the system through ignorance and greed. and you think they deserve another bite at the apple just because you own a few shares of shitibank.

you're clueless.


On Oct 27 03:40 PM DonFurio wrote:

> Hey idiot author, the gov't is up big on C because they own the common
> at around 2.60 a share. C will pay the gov't back in full if they
> give them time. TARP was supposed to be for 3 years and then it got
> more punitive, but it's barely been 1 year and all you crazies are
> trying to blow up everything now in the name of "punishment" or in
> author's case because he's short. C is not expected to be profitable
> until the middle of next year, but once they get through this period
> they will be profitable, although smaller, but the asset sales will
> have helped them weather the storm and the stock will have risen
> from 4 now to 12-15 by 2012.
>
> There is a plan for AIG. Some of their strongest insurance companies
> will been spon-off and have an IPO. Others will be sold as the market
> comes back in a few years. In the end, the gov't will make a profit
> on the pref stock they bought in the financials which will be way
> more than they will be able to say about GM and Chr.

Nouriel Roubini, One on One: More Doom and Gloom

sorry, friend, you need to get your facts straight.

in comparing UUP (u.s. dollar index) against USO (proxy for the price of oil), the u.s. dollar is down about 5% over the last 2 years, virtually all of which has occurred in the last 3 months, compared to a drop in oil of around 40%. the normal inverse relationship one would expect to see between the cost of a barrel of oil and the value of the u.s. dollar doesn't hold during this period. why? because oil was in a speculative bubble 2 years ago. roubini's fear is that the speculative bubble is now reforming and he has good reason to be fearful. while the u.s. dollar has declined around 10-12% over the last 6 months, the price of oil has climbed over 45% in a still-weak world economy.

oil prices continue to be substantially driven by speculation..not the value of the u.s. dollar, supply/demand, war premium or fears of "peak oil."


On Oct 23 12:42 PM Shaftsinker wrote:

> How can he talk so much about oil without mentioning the devaluation
> fo the US dollar?
>
> Does he actually believe a $100 barrel in today's dollar is even
> close to being as much as $100 was two years ago?

FOMC: Wimping Out, Again

maybe you can explain to us all why we're even in afghanistan. we'd d love to know. you might also want to send your comments to george will, since he apparently doesn't understand either.

On Sep 23 11:22 PM doubleguns wrote:

> Yes, and they are all wimping out (bailing out). BO is wimping out
> on Afgan which really pisses me off since that puts our troops in
> harms way without the support we should be providing. Not going to
> provide it pull them out. BO needs to quit looking to see which way
> the political winds are blowing to make a decision. The political
> winds will always be changing, thus he will never make a decision.
>
>
> Pathetic wimp. Dead Troops.
>
> I am disgusted.

Waiting for the Death of the Chicago and Keynesian Schools, Redux

you will not find a single guardian of the financial system.....republican or democrat, inside or outside any administration, present or future, who has the cojones to do what is necessary to purge the country from it's addiction to cheap and plentiful credit. this is not simply a result of politicians protecting their reelection prospects; it cuts to the underlying fabric of the american people and what they've come to expect of their government.

the kind of americans who went through the great depression and fought world war II don't exist any more. today's generation has been softened by years of government coddling and acceptance of mediocrity as the norm. we want more and better health care but at lower cost, bigger cars but cheaper gasoline to fuel them and low cost credit to finance them. we want higher wages even as our educational standards and achievements continue to decline as measured against the rest of the world. we want even lower taxes despite dramatic reductions in marginal tax rates over the last 30 years.

there is a certain human nature in wanting more while paying less but we have come to view it as a birthright. it is similar to our idea of patriotism, which is to put the flag out on memorial day or slap a "we support our troops" bumper sticker on the suv during our government's latest misguided foreign engagement. we'd scream like hell if the imposed sacrifice of a military draft were invoked. that kind of sacrifice would force us to confront our values...including the lives of our own children instead of the children of others. it's the kind of uncomfortable choice we would rather avoid. our government is only too willing to help us avoid it because it would otherwise restrict its own freedom to wage wars of choice. from the military perspective, that was the best learned lesson of vietnam.

corporate america is no better. the continued survivial of companies like general motors and citigroup stand testimony to not just our tolerance of failure...but our willingness to reward it. the arrogance of financial firms in paying out bonuses in a year in which their firms would not have survived without government bailout is simply astonishing. they're utterly blind to their own incompetence. for years, corporate america demanded, and was given, less regulation and more freedom. freedom enough to hang themselves as it turned out. but not the freedom to fail, which is the one freedom they fully deserved.

we've also been given the kind of government we deserve.

Did Bernanke Save the World?

you not just wrong....you miss the point entirely.

there were many economists, from the late 90s forward, who warned of the dangerous effects of repeated bubbles and "too big to fail" institutions. the driving force behind these bubbles, whether technology, commodities, real estate, bonds, et. al., was excessive and cheap credit, and the rapid growth of securitized financing schemes that drew investors like moths to a flame searaching for yield thanks to fed cheap money policies. the fed ignored them all because they weren't "in the mainstream." in other words, they didn't suffer from groupthink like the fed, which was collectively too stupid to understand the simple notion that unchecked credit and cheap money isn't an absolute good.

the federal reserve's primary mission is to preserve the stability of the financial system. from the greenspan era forward they have utterly failed in that task. it's a dysfunctional, political organization that has outlived its usefulness and if the events of the last 2 years haven't been convincing enough you'll just have to wait until the next fed-induced crisis to help your thinking along. i promise there will be one because neither the fed or the treasury have done a single thing to solve the "too big to fail" problem that nearly caused the collapse of the financial system. in fact they are pushing the same swill that contributed to its collapse. derivitives trading remains unregulated, financial institutions remain overleveraged and overleveraged consumers are urged to keep borrowing and spending, even as their bad debts are picked up by taxpayers, while savers are systematically swindled with yields so low investors would literally be better off having their money stuffed in a mattress.

this is what our financial system has come to...ass backward incentives that make no sense in order to keep the economy going at any cost. if you think the economy is out of the woods i think you'll be pretty disappointed at what follows. the overlevered, overpriced housing market is a good microcosm of our economy. it can't even function on record low mortgage rates. if yields only return to some semblance of normal the economy would freeze solid. the fed knows it and they're scared to death of it.

the fed hasn't stopped the train wreck...it's deferred it. if you think that's a victory you have just what it takes to be a federal reserve governor.


On Aug 24 10:11 PM FB5000 wrote:

> I can see that the Clowns are out in force tonight.
>
> How man of you geniuses - including the author saw this coming? Are
> you kidding me? This was "obvious"? Really?
>
> Ok. The path to enlightenment begins with honest self evaluation.
> Ask yourself the question. Did I see this coming. Be honest.
>
> Then ask yourself - what would you have done if you had your shot
> on the big stage.
>
> This is piece is about the funniest thing I have read in a while.
> "Although Bernanke is correct to say that in August 2008, counterparty
> risk levels had not yet breached the March peak reached when Bear
> Stearns nearly failed (although they did very soon afterwards), it’s
> pretty evident to anyone, looking at this chart, that financial market
> strains had been on a general uptrend since the beginning of 2007.
> Indeed, the average credit default swap spread on these dealer banks
> was 13 times higher in August 2008 than it had been in January 2007."
>
>
> January 2007 it was virtually zero. 13 times that is like wow. A
> lot right? So what.
>
> Pretty evident to anyone, eh?
>
> I love it. Dude - if it was so evident to anyone and you why the
> hell are you wasting your time producing this type of claptrap for
> SA - unless you are doing it from your 400 foot super yacht and are
> just killing time as you cruise the Med. from Istanbul to Alexandria.
> (Which I highly recommend)
>
> Editor. Thanks a million. This one made me laugh.
>
> History will be kind to Bernanke. He should be reappointed. Best
> one for the job.
>
>
>

How Is China's Export Driven Economy Booming?

Mr. Lounsbery writes:

"Larry refers to a paper written in March by the Kansas City Fed head, Thomas Koenig, entitled "Too Big Has Failed." Larry says the two underlying issues in the financial crisis have not been addressed and resubmits Hoenig's short list:

1. Losses must be identified and realized.
2. Management must be replaced.

Until both these steps are taken, true health can not return to the system.

Hoenig echoes economist Allan Meltzer’s view that “capitalism without failure is like religion without sin."
_________________________

this is heresy. mr. lounsbury clearly doesn't understand u.s. style capitalism, namely:

1. unlike other countries, the u.s. can have it's cake and eat it too. pain is for those countries who lack a reserve currency. in other words...everyone but us.

2. we don't fire incompetence...we embrace it. we've proven this time and again in both politics and business.

3. most important of all, hank paulson, ben bernake and tim geithner are national heros. we know this because they've all made this point repeatedly in recent months.

as for meltzer's view that "capitalism without failure is like religion without sin...." i think fed chairmen and treasury secretarys, and preachers and rabbis, see failure and sin the same way....something their respective flocks practice far more than themselves.

Has President Obama's Mortgage Modification Plan Failed?

kind of a replay of bush in his second term, wouldn't you say?


On Aug 20 05:54 PM Loulun wrote:

> It seems Obama is failing at everything Bail out failure,Cash for
> clunkers failure, Loan modification failure, Healthcare reform Failure,
> Afganastan will be a failure and Iraq will become a diaster. Then
> the stupid 51% will vote for him again in November 2011

Fannie Mae Needs $1.7 Billion in New Treasury Capital

the imbicile who wrote this has to be in the housing or mortgage lending business. a young, dumb (but college educated), without a pot to piss in up and comer who is no doubt in hock up to his neck himself.

the dramatic escalation in credit availability is little more than 30 years old in this country. the insane, no money down and no-doc mortgage scams pushed by everyone from financial institutions to congress iteself occurred only during the last 10-15 years. asset securitization barely existed 20 years ago. derivitives trading, created by wall street and for wall street, also about 20 years old, has become a crucial part of the profit model of every "too big to fail" financial institution...without which they'd close up shop and go home because the "services" these wall street firms provide don't serve the public...they serve only each other.

i don't give a damn if goldman sucks makes 100 billion a year speculating with its own capital. but the first time the u.s. government had to step in and back their debt and inject capital is where it should all stop. they will now and ALWAYS operate under implicit taxpayer protection. regulation will never work when the regulators are in bed with the offenders. that firm and everyone like it should be shuttered.


go figure.


On Aug 07 08:39 PM Leonard C. Tekaat wrote:

> Lately there has been some very disturbing news about Fannie Mae
> and Freddie Mac. The economy needs Fannie and Freddie. Without them
> we would not have a mortgage market. Banks and financial institutions
> sell their mortgages to them. The economy needs the housing market
> because this is how credit is supplied to small business and consumers.
> Without collateral banks will not and cannot loan money. If the price
> is going down the equity is continually decreasing.
> It has been reported, that 50 to 90 percent of housing is underwater
> with their mortgages. This means that there is no collateral to
> secure a loan. Credit is our primary means of exchange. Without
> credit money, exchanges of goods and services can not take place.
> There is not enough paper money in our economy to facilitate all
> the transactions that must take place. Economic activity is reduced;
> unemployment increases. For the economy to fully recover housing
> prices must be stabilized quickly or we will have a major problem
> on our hands. I have posted solutions to the problem on my web site
> economysflaw.wordpress...

Buffett's Betrayal

the two faces of warren buffett. thanks for a good job exposing them.

The Proposal to Limit Commodity Positions Will Hurt Free Markets and Economic Growth

'But an active market with heavy interest on both the buying and selling side will by definition lead to efficient prices given the information that is available at the time."

like other nice sounding platitudes there is just enough truth in this one to sound appealing. while this statement might be true in the context of normal supply/demand based trading, it is utter rubbish when you add a significant financial speculation component that is indifferent to supply/demand factors. further, to believe this statement one must also deny the existence of speculative-induced bubbles and collapse, for such events are characterized by exploding trading volumes. last year's oil markets are the modern day poster child for this phenomenon. anyone who doesn't acknowledge that $140 oil was not an efficient price but a bubble.....and there were no shortage of these true believers as it was occurring...are members in or candidates for a doomsday cult.

as for hurting "markets and growth," how ludicrous can you get. the economy functioned just find prior to the advent of futures trading. it sure as hell doesn't need financial speculators in oil and gas futures to do so today.

A Look at Caterpillar's Blowout Quarter

not a mention of CAT's effective tax rate for the quarter...which was all of 10%. just another overpriced stock as far as i'm concerned.

There's Still No Household Debt Crisis

tracing error is spot on. this idiot doesn't even understand the limitations of his own statistics. if you weren't suspect of this article from the first word, his mention of "don luskin" should have sealed it for you.

Why Crude Oil Traders Should Care About Wheat

"What I am trying to tell you (but is apparently not penetrating) is that the oil market was NOT distorted."

i suspect you would also deny that there was a speculative technology bubble at the end of last decade; or that we didn't have a housing bubble or that we're currently in the midst of a bubble in treasury securities. or maybe you also think that the infamous "tulip bubble" of the 1600s was just misunderstood and that tulips were appropriately priced given market conditions at the time. we're all free to believe what we choose, whether logical or illogical, or based on fantasy or facts. even alan greenspan, dottering old fool that he was, believed that speculation-induced bubbles existed, notwithstanding his myopic aversion to spotting them.

no, i'm afraid it isn't penetrating. by your logic, speculators can never distort markets because any market price is the "correct" price, even on a futures exchange that permits 90% leverage. had oil gone to $500 a barrel before crashing back to earth, that price would have been "appropriate" wouldn't it? simply absurd. and let me take issue with your characterization of the "fall" of oil prices of 75% in about 9 months time...they didn't fall...they crashed, because the hot money left faster than it came in, as it always does in speculative bubbles. i don't know what the price of oil might have been absent the existence of low-margin futures trading but i suspect that price volatility would have been far more tame than what we went through and that the world would have functioned just fine. i would also make the point that the energy "security" of the united states is in no way dependent on the existence of speculation in oil futures. here is why:

what you fail to see is that markets do not need speculators to set market prices. the futures markets are less than 40 years old and commodities have been traded on world markets a hell of a lot longer than that, with no trouble setting spot prices as conditions affected supply or demand changed. tell me why that wouldn't work today?

i don't object to futures markets as originally designed...which is to provide a vehicle for commercial producers and users to hedge their production and consumption activities. let them be licensed to trade at low margin. anyone lacking a license is a speculator. no need to ban them. they can trade too if they want to post 50% margin. and if you actually think that wouldn't affect your ability to trade i assume you wouldn't object to a higher margin requirement. many would object because it would price them out of the game....and that's the whole idea.

you may have the last word if you choose...