Blackeyebart

Buy Puts on Geithner

Whoop Whoop Pull up! pull up! Crash!!!
That the sound of complacency meeting reality!.

Why do people think that a change of government after 55 years will not really be any change at all? Japan's new DPJ Government will do what all new government must do - they will make the changes they have to make while they can still blame the old Government for the problems.

Yes there are problems with their economy, but their problems are different from the US problems. They have more money so more options. They need to diversify from the US so they will. Why not? If the Chinese want a new currency, then why not get in early?


Their big problem is North Korea. Japan wants quiet influence in the region, so North Korea sounds their horn in the middle of the night. Annoying but worse it attracts attention from the US, a nation as strong and calm as a 25 foot tall teenager on speed. Japan thinks that if only North Korea would shut up the US would forget where it is in a couple of years. They are probably right.

The other big problem Japan has is a defining issue.An underlying purpose, what is Japan all about in 20xx? Every new Government needs this. Will they look out at the world in financial meltdown and see a purpose - possibly - if so we just recreated the German Japanese alliance, but in a much more benign way.

Pictures of the Real Economy

"You know, we really don't need a ream of statistics and a cadre of expensive analysts to understand the real economy. Here are a few charts; they are enough."

But can't we just look at the recent stock market rise and forget the facts? That way we could put a bit of boom back in housing, solve insolvency, turn CDS into SCD and take a trip to Belgrade.

The USG clearly does not believe that the facts you quote are the important ones.

The State of the Consumer

Traden4alpha says "As long as unemployment remains high, consumer spending won't recover to pre-crash levels."

This bothers me. It assumes that a recession is an aberration. A sort of collective mistake. People will get over it, and things will get back to "normal".

I view the recession as a correction. A return to fundamentals. A chance to get things right. To clear out crappy stocks and crappy thinking.

Pre crash normalcy is something we should not aspire to.

10 Reasons Why We Still Haven't Hit Bottom

I don't know if we have hit bottom, but what surprises me is that
almost everyone appears to have forgotten the original problem.
There is no sign of a new regulation regime to control CDS, MBS, Banks or Insurance companies. A quick look on this site comes up bare, (Bear?).
The Government is pouring huge quantities of money into this damaged vessel.
Confidence is supposed to grow from a process that makes no logical sense. Yet in a mad way it seems to be working.
Everyone is looking for the bottom. No-one is looking for the hole.

This Recession Is a Reset to a New Normal

"hard to Love" says "The single greatest mistake in our history was giving the federal government the power of taxation"

Have I got a deal for you! - there are plenty of places to go where you don't have to pay taxes at all. Problem solved!

Take a gun. Good luck



On Mar 22 11:18 AM HardToLove wrote:

> Great article.
>
> Your piece, with the comments from others, prompts a question for
> me. It really wanders off topic, but I can't help myself. I see a
> fundamental weakening of the concept and application of capitalism
> as a result. I believe this leads to the shift you describe and demonstrate
> with the charts and statistics.
>
> Ignoring the "cyclical nature" of business, often attributed to the
> existence of the privately held Federal Reserve, can this new paradigm
> (whatever it ultimately becomes) be attributed to historical trends
> encompassing several fundamental shifts away from the foundations
> of our country?
>
> I think specifically of the concepts embedded in our constitution
> of "private property" - the foundation of all the capitalist tools
> that served us so well for so long.
>
> It seems to me that through the apathy of good folks, and the hubris
> of well-meaning but mis-guided social architects and/or politicians,
> we have slowly but inexorably eroded the concept of private property
> and leaned at an ever-accelerating pace towards a pure socialist
> society and government. There is really no ability to rely on the
> concept of "private property" any longer.
>
> For recent evidence of such a claim, look at the recent abuse of
> "eminent domain", serious recent attempts at abrogation of contract
> law by certain members of government (e.g. AIG bonuses), application
> of retroactive taxation to specified individuals rather than a "general"
> policy (AIG again - many thanks to the Senator that has asked for
> a more lengthy reasoned consideration of the implications of this),
> and so many other examples that others could cite from our brief
> (relatively) history as a nation.
>
> Not being a scholar about this or any other major subject, I still
> have the intellectual curiosity to posit the following.
>
> The single greatest mistake in our history was giving the federal
> government the power of taxation, ostensibly through representatives
> of the people - such no longer exist, in my opinion, as they are
> representatives of corporate bodies now.
>
> The most egregious manifestation of the results of this is the income
> tax. Why? Because it was the final step in allowing the unrestrained
> growth of the federal government, a complete contravention of the
> intentions of the founding fathers. It was also the deepest penetration
> by government into the direct confiscation of private property for
> "social purposes" - taking directly from the wages of individual
> labor before it could even be applied to second-order functions.
> Money directly taken from the citizens' labor, by coercion, is diverted
> to Washington and redistributed as Washington desires, including
> being coercively returned (after frictional losses) to the states
> - if they comply with federal mandates (think seat belts, helmet
> laws, national speed limits, etc.).
>
> No more egregious example occurs to me.
>
> In my opinion, the budget of the federal government should be cooperatively
> set *and* funded by the states themselves - the exact mechanism being
> open for discussion. Even the "fair tax" or national sales tax concepts
> fail to address the basic problem I see in the current processes.
>
>
> This "budget and fund" by states *only* achieves one important goal,
> keeping decision-making *and* concomitant results as close to "home"
> as possible. One can envision all sorts of good (and bad) results
> of this, a discussion of which certainly belongs in other fora. Of
> course this would seem to be "unworkable", but then so was our form
> of government considered prior to its successful application. "Politically
> impossible"? Yes, until it is accomplished.
>
> Well, I'm sure I've taken this further than most would desire.<br/>
>
> HardToLove

Seeking the Fix That Will Finally Work

Getting bank loans going is not so hard but I don't see many ideas out there: Here's one:
Bank A creates an new account with Bank B. This is a special account called a "Federally Guaranteed Interbank Account". There are rules. The account can only be used to receive cash equivalent from Bank B, not Intra bank transfers or interest or charges. The Fed Guarantees the account. A certificate is issued with the loan stating the terms. The Fed gets a fee for this service.
The balance can only be paid back to Bank A.
This is cheaper for the Fed as they don't have to find the cash.
This is good for Bank B, it gets the cash to carry on.
It's good for Bank A too. Just by loaning the money they get a Federal Guarantee. But Bank A is still hanging out for the interest, so it needs to be careful who they lend to.
Surely someone can put up a better idea ...

Why The Paulson Plan Won’t Work

Paulson’s Trillion Dollar Bailout won’t work
Here’s why


1 There are mortgages some of which are failing. Above them is a huge stack of transactions called derivatives.
2 Above in this sense means later. The latest transactions are at the top of the pile.
3 Risks accumulate as the piles rise. Security is dispersed. Each new participant adds his own risk, to a greater or lesser degree. (Who would have predicted the AIG risk?) The added risk cannot be removed. The new buyer cannot obtain what the seller does not have.
4 We imagine that the reverse auction should take out the weakest transactions first. These are probably the transactions near the top of the pile that have accumulated the greatest risk.
5 But that is not what will happen. It is not the transaction that matters but the player who holds it. The auction will be “won” by the weakest player. The most desperate player. The player that can not longer continue to play the game. The same transaction is valued differently. (Metaphor: One home owner sees their negative equity and quits, another with better cash flow, hangs on.)
6 Paulson does not plan to fix the problem securities, he plans to liquidate them. This is the equivalent of a fire sale. This will not make the seller stronger just (temporarily) more liquid. In many cases not liquid enough. The seller can only pass on the cash he has to those above him in the pile.
7 The people above the auction “winner” must now accept the valuation of that “winner”. The risk/loss is passed upwards until someone with deep enough pockets is found to stop the chain. The potential risk is then exchanged for certain loss.
8 There is no way for this to flow downwards.
9 Each auction is likely to increase the need (increase the desperation) of those above them in the pile. One auction creates the need to for another auction above it. The underlying mortgage (the original problem) remains unfixed.
10 This process is built on weakness. It destroys the pile without fixing the problem. It does this by accepting the valuation of the most desperate player.
11 Forcing the weakest player’s valuation on everyone above him/her guarantees the worst possible outcome.