TWOfold

Matt Taibbi: Obama's Big Sellout

Nope. You see, Taibbi doesn't "get it," either.

Here's where he shows that he still has on his left-wing blinders at the very beginning of his article: "Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received..."

You see, that's wrong. 0bama wasn't just the President-elect. Nope. He was a sitting, elected, Senator from Illinois while the Citi bailout was crafted and voted on and passed.

0bama was *not* just the President-elect. He was a Senator (save for a few seconds when he resigned after the damage had been passed).

15 Notes on Our Current Economic Situation

Inflation would be welcome. Inflation means higher prices, which for those who own homes and who invest in stocks would be a godsend. Wouldn't it be lovely if home prices and stock prices increased?!

But that's too good to be true. It's just wishful thinking that because the government has spent a lot of money that our homes are about to go up in price (inflation).

Japan hasn't seen such. Their real-estate, both commercial and residential, has stagnated at 50% of its 1989 peak. People, this is 2009. That's two full decades of half-price real-estate in the (at the time in 1989) 2nd largest economy in the world.

And Japan has outspent the U.S. They owe much more than us.

So yes, inflation here in the U.S. would be welcome. We'd love to see our home prices go up. We'd love to see our stock prices go up. We'd love to see our salaries go up.

But are home prices going to increase while we have 19 million vacant homes in the U.S.?

Are salaries going up while unemployment increases?

Are stock prices going up while GM files bankruptcy and overall profits are below 2002 levels?

Moreover, Baby Boomers are now "desperate investors." They've been crushed. Their 401k's are now 200k's or 100k's. Every Baby Boomer out there is looking for a quick score to get back into the game. Here they are, days from retirement age, and their homes are underwater and their stock portfolios are ghosts of their former selves.

So they are going to be chasing every investment fad with gusto! They've got to win all of that money back before they (can) retire!

Well, if you've ever been to Vegas, this is precisely how the gamblers think once they get behind the House. This is how the casino cleans out their pockets of every last dime. As they get behind, suddenly they start throwing even more of their remaining money at boxcars to come up on the next toss of the dice.

Seldom happens. They wind up broke and homeless and alcoholic.

And that's the next phase here. An entire generation is going for broke in the stock market, desperately pretending that they see "green shoots" to justify their risky investment ideas.

As Malls Turn into Ghost Towns, Still Looking for Green Shoots

Oversupply. Too many shopping malls (Internet, anyone?!). Too many office towers. We've got 14% vacancy rates in office space already.

Too many homes. 19 million vacant homes in the U.S.

Too many factories making too many cars and electronics, worldwide. Overcapacity.

Too many airlines trying to haul too few people.

Well, the market fights surplus capacity in a singular manner...it lowers prices. Deflation. Deflation will continue until the excess capacity is removed from the economy.

Surplus shopping malls? Gone. Enjoy their empty grey parking lots for the next hundred years.

Governments can pour money into shopping malls to bring in schools and such, but the malls are dead eventually. At some point even governments will tire of pouring money into black holes.

And at that point, the market wins again. Deflation will have removed the surplus capacity.

Won't be quick, and the more that governments fight it, the more it will cost to reach the inevitable end game.

Dollar's Purchasing Power Annihilated - The Chart They Don't Want You to See

Who wants to live at a 1933 standard of living? Note that the decline in the Dollar's purchasing power nicely coincides with an increase in prosperity since 1933 until today.

Let deflation creep back in to raise the value of the Dollar and you will get another Depression. You can "Bank" on that fact.

Why Hyperinflation Is Not Coming

Nice article. It's insightful and it runs against the "common wisdom." Because it goes against common wisdom, it will be assaulted. So that took courage to post.


Inflation?! We should be so lucky. Japan's been trying to generate inflation by running their printing presses for the past 20 straight years. Hasn't worked for 'em.

Inflation would mean rising prices...faster velocity of money...greater demand...higher salaries.

I wouldn't count on any of the above.

Right now we have the opposite: deflation. Falling prices. Look at stocks. Look at homes. Look at what businesses are being sold, and for how much (no, for how little).

Unemployment is going up, but that's not inflation. Moreover, that doesn't translate to higher salaries for the remaining rat racers.

Deflation.

Just like Japan.

Oh, the U.S. ran the printing presses faster in the past, anyway. 1945 had a greater debt burden than today...and there was no inflation back then.

Hyper-inflationists can't explain the U.S. in 1945. They stutter and stumble and claim that *what* and *where* the U.S. spent all of that borrowed money (read: printing presses running faster back then than today) matters more than the debt. That's a weak counter-argument.

Hyper-inflationists can't explain why Japan has been in Quantitative Easing (QE=Running Printing Presses Full Speed) for the past two decades...without inflation.

Hyper-inflationists can't explain why the $12.8 Trillion injected by Bush/0bama/Congress/The Fed/Treasury/FDIC so far since mid-2008 has seen oil go from its mid-2008 peak of $147/barrel down to under $50...and they can't explain why houses continue to fall.

Well, the U.S. has 19 million vacant homes. Google it. That's a stunning number. That translates to a 14.4% vacancy rate. You aren't going to get rising home prices (AKA "inflation") with a 14.4% vacancy rate.

Office space has 14.2% vacancy rates. So office rents are plummeting. Landlords are trying to pay their onerous mortgage payments, so they are dropping their rents in order to fill their massiv enumbers of empty office buildings.

Employment is falling. GM alone has gone from 345,000 workers down to a now-scheduled 30,000. An order of magnitude is gone or on the way out the door.

Falling employment means falling salaries, falling wages, fewer hours, and falling bonuses...the empty tax coffers of Wall-Street bonus states such as New York emphasize that fact.

Credit availability is much less today. That means that the consumer's individual ability to buy is reduced.

That fact translates to reduced economic activity nationwide...for years...maybe decades.

The current plunge in economic activity has only been given a temporary parachute via massive federal spending.

Any cuts in future/near-term federal spending will resume the national free-fall.

And as Japan has shown, running the printing presses won't change that fact.

Rupert Murdoch Interview: 'Economy Weak; Danger of Inflation Great'

Inflation?! We should be so lucky. Japan's been trying to generate inflation by running their printing presses for the past 20 straight years. Hasn't worked for 'em.

Inflation would mean rising prices...faster velocity of money...greater demand...higher salaries.

I wouldn't count on any of the above.

Right now we have the opposite: deflation. Falling prices. Look at stocks. Look at homes. Look at what businesses are being sold, and for how much (no, for how little).

Unemployment is going up, but that's not inflation. Moreover, that doesn't translate to higher salaries for the remaining rat racers.

Deflation.

Just like Japan.

Oh, the U.S. ran the printing presses faster in the past, anyway. 1945 had a greater debt burden than today...and there was no inflation back then.

Krugman: Why Britain's No-Euro Policy Is Helping Right Now

Krugman is such a tool. He loves Britain for being able to print their own currency, yet compares the U.S. to Ireland, who is stuck on the Euro and can't.

Paul Krugman is the living embodiment of the dumbing down of America...and since Europe gave him a Nobel Prize for his hatchet theory of international trade...one can say that Krugman likewise epitomizes the dumbing down of Europe, as well.

Hey Krugman, Ireland can't print their own Euros! Now tell me again why Ireland's financial crisis is like the U.S...

Is China the Next Great Bubble?

People are acting as though China has an internalized economy when the opposite is true: China depends on exports.

Well, exports are down globally for most everyone. It's a global recession.

Moreover, there's no guarantee that consumers will return to the old free-spending ways of the past.

And if consumers are consuming less, then exports won't return to their former glory.

Export nations are then stuck with a flawed business model that does not bode well for investors.

Krugman's Wrong: U.S. Credit Problems Aren't Similar to Ireland's

Krugman will say *anything*, especially if untrue, to further his ideological goals (e.g. nationalizing all banks).

How to Determine the End of the Current U.S. Dollar Rally

Last country with a strong currency is a rotten egg.

More Economic Markers Pointing to Recovery

LOL! Thin gruel for optimists right now.

A Third Way in the Current Inflation / Deflation Debate (But It's Even Scarier)

45% of the world's wealth has been wiped out in the past 6 months. That's not inflation, that's deflation on a scale not seen since the fall of the Roman Empire.

With 45% of the wealth gone, there's substantially less collateral for loans. Credit scores have likewise suffered. Poor credit risks and less collateral do *not* make for an environment that makes a lot of new loans.

So it shouldn't surprise any observant person to see Deflation. Negative CPI numbers. Negative PPI numbers. Falling house prices. Falling stock prices. Falling salaries. Declining employment...all of which will accelerate downward if the Velocity of Money isn't sped up.

But hey, we're all equal when the world runs out of wealth altogether. Then there's no disparity between rich and poor. Everyone can live under the ruins of society together singing Kum Ba Ya.

Derivatives: A $700+ Trillion Bubble Waiting to Burst

Derivatives neither create nor destroy net wealth; they are economically neutral.

At most, derivatives may move the same money from one player to another.

But the economy sees no net increase, even if one player wins a derivatives bet.

Likewise, the economy sees no net decrease, even if one player loses a derivatives bet.

The derivative players can gain or lose money based on the performance of their derivative bets (typically just insurance contracts written outside of insurance industry rules), but whatever one player gains comes at the expense of another player.

Thus, derivatives are not only economically neutral to the aggregate system, but are also Zero Sum.

By definition, economically neutral, zero sum financial instruments can not cause an ecojomic collapse.

And it is for that reason that the notional values of derivative contracts can be so astromical ($700 Trillion!)...because they cancel out.

Derivatives are a non-issue. They might tank one company, but they will enrich another to that same degree.

General Growth Properties: Lender Protections Appear to Have Disappeared

GGP missed at least $1.2 Billion in loan payments (principle + interest) since November. GGP has been in default for roughly half a year, but the *lenders* feared bankruptcy more than GGP.

At this point, GGP has nothing left to lose, so into bankruptcy it went...and the lenders' fears are now writ large.

GGP *may* have enough income to make interest payments on all of its bonds and loans. Maybe.

But GGP's occupancies are down and it has been putting off maintenance and renovations of its properties for at least 2 years, which combines to suggest that paying any principle, in addition to interest and future maintenance, is out of the question.

The above implies that GGP properties will have to be sold, but what the lenders saw, and why they didn't force GGP into bankruptcy 6 months ago, is that GGP is underwater, or nearly so, on most (perhaps even all!) of its old shopping mall properties.

Each property is already encumbered with debt so high that selling any given mall at this point may not retire said mortgage.

If you believe GGP's appraisals/estimates, then their shopping malls are worth roughly 8% more than the debt that is owed.

But GGP is in no position to sell all of its malls for top Dollar to snag that 8%.

That's the upside, by the way. The *most* that an investor could hope for today is that buying all of GGP's malls, selling them, and paying off the debt on them would earn 8%.

You are talking about putting up Billions of Dollars, then going through an arduous process of selling that much commercial real-estate (years), to finally pay off the debt to score that 8% upside.

More realistically, GGP will have to *discount* some or all of its properties to get them to sale. Will an 8% discount really entice $29 Billion worth of commercial property buyers into this depressed market?

If so, then GGP is worth nothing. All properties sold and all debts paid.

Of course, an 8% discount might not do it. If GGP has to discount by more than 8%, on average, to sell all of its malls in this market, then again GGP is worth nothing because all of its assets would be sold and all of that money would have gone to retiring some, but not all, of GGP's massive debt.

So what we are really talking about today is that the Market was prescient...GGP hasn't been worth anything...as its stock price indicated...for some time.

In my opinion, Ackerman will attempt to bail from this obviously sinking ship by offering some sort of control or purchase preference option to Simon, who will then cherry pick the top GGP properties.

Lenders and bondholders and remaining stock holders (suckers!) will then be stuck with all of the remianing debt, minus the best GGP properties.

It will be an ugly implosion.

Those remaining shopping malls will then go dark. There won't be any money to keep the lights on.

Lawsuits will fly, though pointlessly, as remaining tenants in those less-than-prime remaining GGP malls attempt to enforce their leases.

Eventually, all of the doors will close. Liquidation will ensue, dumping more than 100 malls at that point onto the current oversupplied, underdemanded, depressed commercial property market.

If you thought that commercial property was bad before, just wait.

It's about to get considerably worse.

Why I Think Paul Krugman Is Wrong

Krugman's critique of 0bama's plan is that the Markets can not, will not, and never have been able to price accurately.

The above is a purely *economic* point, as 0bama and Krugman share the same politics, yet disagree on this particular bank rescue plan.

I disagree with Krugman, taking 0bama's side that the Markets actually can price assets accurately, especially when done in volume and even moreso when decent information is available (another part of the bank rescue plan).

Yet you are intimating that my disagreement with Krugman is political. How is that possible?!

One can either agree with 0bama or agree with Krugman on this economic bank rescue plan, but either way both men share the self-same politics.

Have you really thought about your "political" claim, or was it simply the most convenient, knee-jerk reaction that popped into your head?

Can you defend your claim that my disagreement with Krugman's economic analysis is somehow political?

I doubt it.

I have taken your measure, and found you wanting, Robert Ash.


On Mar 24 03:47 PM Robert Ash wrote:

> I'm guessing you disagree with his politics. On economics his reputation
> seems deserved, as I haven't been able to find serious fault.
>