Month: March 2008

Old Man McCain Has “Senior Moment” on Iraq and Iran

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Yes, the sick old man, the one whose only claim to the presidency is his knowledge of foreign policy, claimed that Al Queida was being trained by Iran, and Joe Lieberman had to literally whisper in his ear to get him to correct it.

John McCain has no foreign policy experience, he just wants more war all the time, which is what the very serious people inside the Beltway&trade call foreign policy experience.

100 years more war in Iraq, Iran, Afghanistan, and who knows where else this doddering old fool would take us.

Economics Update

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Any time that the Fed cuts rates, it’s the lead economic story, and today the Federal Reserve huts its discount rate by 75 basis points to 2.25%.

There is not a whole bunch left for the Fed to do. At the rate that they have been cutting this year, they will be at zero some time in July.

We are in a pickle, and Paul Krugman is right when he says that at best we are almost in a liquidity trap, if we aren’t already there. The Fed cutting rates has very little effect on interest rates for the rest of the economy right now.

As a result of the rate cuts, and the inflationary pressures involved, Oil appears to be heading back up.

Additionally, low interest rates tend to push the dollar down. The dollar spent most of today above $1.58:€1.00, though it’s now strengthened to a bit less than $1.57, about 1% below the all time low of $1.5904:€1.0000 reached on Monday.


Our economy in 1000 words.

Of course the real economy, the one that most of not on Wall Street live in, had a few statistics too, with Industrial output dropping 0.5% in February and inflation on the move, with the core producer price index increasing by 0.5% in February.

And it’s not just our economy, it’s both pillars of “Anglo-Saxon Hypercapitalism”, with banks the Bank of England’s emergency 3 day loans totalling £5 billion obeing oversubscribed by almost 500%.

It also looks like Lehman may be the next brokerage to have to deal with a run on its accounts. It’s shares were down 39% in early trading Monday, though it had largely recovered today.

One source of revenue for the various financial houses, private equity buyouts and other forms of leveraged merger and acquistion activity, appear to be drying up. No one wants to lend right now.

It probably does not help that we have it looks like a new star is born in the ppathetic theater that is the monoliner insurance debacle, FGIC, which posted a $1.89 billion loss. If people cannot trust the insurers to pay off if you default, then maybe they don’t want to fund your ill conceived takeover scheme.

This applies to foreigners, who not only are not interested in investing in American businesses, but are avoiding what used to be the safe haven of US Treasuries.

Finally, housing starts hit a 17 year low, though the article optimistically states that it is “above forecast”.

A pox on economic reporters. A little truth a little earlier, and perhaps housing starts would not be the lowest since Poppy Bush was in the White House.

A Correction on Dean Baker’s Tax Proposal

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I just had an email exchange with him, and he referred me to his (along with Robert Polli and Marc Schaberg) paper, Securities Transaction Taxes for U.S. Financial Markets, and he does in fact call for a sales tax on most securities.

ABSTRACT: This paper examines the viability of security transaction excise taxes (STETs) as one policy tool for promoting a more stable financial environment, specifically with respect to the U.S. economy. Contrary to a large recent critical literature, we show that a STET can be designed without creating large distortions between segments of the financial market. We also show that a modest STET for the U.S.—beginning with a 0.5 percent tax on equity trades and scaled appropriately for other financial instruments—would generate substantial new government revenues, on the order of $100 billion per year.

The link is to the abstract, and the whole paper is a 55 page double spaced PDF, which you need to read on paper, with a highlighting and a regular pen so you can take notes.

It’s not a light read, but it’s a good read.

On a more general level, I think that, given the current downturn, we will see a large expansion in taxes at all level, with things like internet download sales being taxed, and that we will see an aggressive pursuit of online and mail order sales taxe evasion too.

The state and local governments will have no choice.

Then again, considering my record on predictions, and the fact that the only formal training I ever had on economics was high school, where I did a presentation on microeconomics*, what the heck do I know.

*Microeconomics is a study of the economics of individual businesses, as opposed to entire economies. I prefer it, because the systems are not so huge and complex that cause and effect breaks down. Macro economics sometimes makes my head hurt.

Diarist Strike at DailyKos?

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First, in the interest of full disclosure, while I still read there, I have been banned from posting there, with good cause, as I was sock puppeting.

I still read it, truth be told, I think that the diaries are more interesting than the front pagers, but you have perhaps a dozen front pagers, and something like 1000 times as many diarists daily.

I started coming across various comments, some snark, and some serious, and finally tracked this all down to one user who has announced his withdrawal from Kos for the duration of the nominating process.

His complaints were justified. The place has been nuts on this lately. Hell, so has Americablog, MyDD (on the other side), Oliver Willis, Taylor Marsh, etc…..

Let’s make this clear, to quote myself, “If I had a choice I would vote for a syphilitic goat,” ahead of any Republican.

The shrillness level, and not just on Kos, regarding the Democratic Party nominations is in-bloody-sane.

Take a chill pill.

A Big Wet Kiss, With Tongue, and Possibly on the Genitals, to the Upper Management of Bear Stearns, Courtesy of the New York Times

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Maybe I’ve grown hard hearted in my middle age, but somehow, the plight of upper management at Bear Stearns does not inspire the empathy in me that it does Landon Thomas Jr. of the New York Times.

Bear Stearns has always been one of the shadier brokerages, with line fuzzing being a part of their investment strategy, so I’m just not upset that James E. Cayne “billionaire just over a year ago when Bear’s stock soared past $160, his 5.8 million shares are now worth about $28 million at Monday’s closing price of $4.8”.

Nor am I distressed that, “Some executives had moved quickly, putting their weekend homes on the market”.

Because of their work there are now people with no home at all.

And then there are the poor investors, “Bear executives were not the only big losers. Joseph Lewis, the Bahamas-based financier, invested $1 billion at prices above $100 last year, and top institutional investors like Morgan Stanley, Legg Mason and Barrow, Hanley, Mewhinney & Strauss, a value investor in Dallas, have been recent buyers of the stock.”

Boo F*&%ing Hoo.

Disgraceful.

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Representatives Debbie Wasserman Schultz and Kendrick Meek have declined to support Democratic candidates running against Republicans incumbents in Florida.

Here’s the kicker. If you want a house leadership position, and Meek is a member of the 30-Something Working Group, and has been a vice chairman of the DCCC, and Wasserman Schultz is co-chair of the Red to Blue committee.

These are leadership positions. If you take those positions, you have an obligation to do your damn job.

I don’t care if your daughter is running as a Republican, and her alleged rapist is running as a Democrat, you work for the Democrat. If you can’t hack it, then go and be a back bencher.

We need to go after both of these folks in the 2010 primaries, hard.

Money quote on the real reason:

However, Stuart Rothenberg, editor of the Rothenberg Political Report, which tracks political campaigns, said the lack of support from top Democrats could make donors leery.

”Debbie Wasserman Schultz is a favorite of leadership, somebody on the move,” Rothenberg said. “When somebody like that doesn’t want to be a major player in taking on a Republican, that’s a signal.”

Yet Rothenberg says the situation is not without precedent: He noted several Republican and Democratic senators from the same states honor nonaggression pacts.

Both Meek and Wasserman Schultz have benefited from a close affiliation with the U.S.-Cuba Democracy PAC, which since its founding in 2003 has contributed $22,000 to Wasserman Schultz’s campaign committee and $10,500 to Meek’s.

Wasserman Schultz said the PAC support played no role in her decision, but she acknowledges she’s closer to the Republican incumbents on Cuba issues than she is to the Democratic challengers, who favor easing restrictions on family travel to the island.

When Castro dies, can we send tham all back to Cuba? Let them f$%# up that country.

Obama Campaign in Full Stonewall Mode in Michigan, and Florida Says No Vote

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That’s the only explain the various chicken egg objections of Obama supporters, who won’t say if they support a concept of a revote unless they have finished legislation, but also say it’s not worth coming up with finished legislation unless they have sign on by both campaigns.

There is only one real issue here, making sure that the already broke state of Michigan is not left holding the bag on the cost.

In related news, the Florida Democratic party has said there will be no revote.

Truth be told, what happened in Florida was much more a Republican effort, the Dems tried to change the date, but rules are rules.

No delegates may be a good thing, because it will lead more people to question the role of Iowa, New Hampshire, and South Carolina. It’s an accident of history that does not need to be repeated, particularly in South Carolina.

The worst solution is Chris Dodd’s where the delegates are split 50/50. That says, “the voters be damned, but the political big wigs should get their junket to Denver.”

Also, the super delegates, who were largely the folks who voted to set those dates at that time, should be excluded too.

Krugman Says Bailout In Evitable, We Need to Go Swedish

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I think that it is likely that a taxpayer funded bailout would be the only viable option, as Paul Krugman says in his NY Times OP/ED. He also notes that while the whether to bail out is settled, the how is not:

The U.S. savings and loan crisis of the 1980s ended up costing taxpayers 3.2 percent of G.D.P., the equivalent of $450 billion today. Some estimates put the fiscal cost of Japan’s post-bubble cleanup at more than 20 percent of G.D.P. — the equivalent of $3 trillion for the United States.

If these numbers shock you, they should. But the big bailout is coming. The only question is how well it will be managed.

As I said, the important thing is to bail out the system, not the people who got us into this mess. That means cleaning out the shareholders in failed institutions, making bondholders take a haircut, and canceling the stock options of executives who got rich playing heads I win, tails you lose.

In his NYT blog, he also notes that when one looks at financial meltdowns, the Swedes handled it best, with the handling of their financial problems in the early 1990s”.

He points us to Justin Fox of Time, who in turn quotes Merrill Lynch Economist David Rosenberg from his “morning call notes” (sorry, can’t find a link, any hints?):

The Japanese credit crisis is usually cited as the benchmark for what not to do. But few cite Sweden’s crisis as a template on what might actually work. … the Swedish authorities realized early on that a banking crisis cannot be resolved until the problem is properly defined. That means assessing who the “bad” and “good” houses of issues are and be willing to allow the “bad houses” to fail (as an aside, “good houses” do not necessarily imply “big” houses).

… Sweden established a Bank Support Authority to undertake “reality testing” on the loan books of Sweden’s largest banks and had a “board of valuation” experts go in and value the assets on the books of all the lenders. Call it invasive if you will, but then again, the government was doing the work that market players could not or would not do – value the collateral and do it quickly. This is similar to what Barney Frank is proposing in the US mortgage sector today. …

It should also be noted that it was Sweden’s equivalent of the US Treasury, and not the central bank, that played the primary role in this crisis management stage (though the Riksbank maintained an accommodative monetary stance and lowered interest rates right through to December 1993, more than a year after the markets had bottomed). And, it obviously required the heavy hand of government intervention; there are solid grounds for this when there is market failure in the private sector, in this case, insufficient information regarding the quality of financial sector balance sheets. …

I would add that my post on Dean Baker’s proposal of a stock transaction tax, along with my suggestion that it more generally cover financial instruments (here) is both a good way to cover the budget hit and a good way to discourage excessive arbitrage.

Dean Baker Has a Great Idea, But it Needs to go Further

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Dean Baker suggests that we implement a stock transfer tax. He mentions that the UK has a stock transfer tax of 0.25%, and London is second only to New Work as one of the great financial capitols of the world.

He notes that it would generate $150 billion/year in revenue.

While I agree, I do not think that this goes far enough. It should apply to all financial transactions, stocks, bonds, derivatives, hedging, futures, etc.

I would have an exception for initial purchase, but not resale, of government bonds, but that’s it.

In addition to generating a lot of revenue, it also makes increasing level of arbitrage increasingly more expensive, which is also a good thing.

Speaking of Political Prosecutions…

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Well, for those of you who were wondering if the corruption case against, “Celebrity pathologist Cyril Wecht” was politically motivated, the fact 24 of the counts filed against Wecht involve the sum of $3.06.

Nope….Not missing a decimal point. Three dollars and six cents. Not three hundred dollars, not three millions, three dollars.

Nope, nothing political here.

He had some people working for both his private practice, and for the county, and this is a Federal case, because he is a Democrat.

The crux of their case:

Wilson noted the work of Eileen Young, who was Wecht’s top administrative aide in the coroner’s office. Despite being paid a county salary, Wilson said Young spent the bulk of her time in the county office as “office manager” for Wecht’s private practice.

Wilson said the evidence showed that, for 2004 alone, the correspondence Young mailed or faxed brought $790,000 in revenues to Wecht’s private practice.

So, Wilson might have made some faxes or phone calls on county time, and they are literally trying to make a federal case out of this.

This is the sort of thing where the local DA gets him removed, and he gets a fine, if it’s true.

I’m still trying to get my head around the whole concept of “celebrity pathologist” thing though.

I really don’t want to know what a “celebrity proctologist” is.

Bush Political Show Trial Overturned

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I’m not normally on the side of overpaid chief executives, but Joe Nacchio is the exception.*

Nacchio was convicted of insider trading, but this has ju
st been overturned by the appellate court, and remanded back to the lower court, with a the old judge being removed from the case.

This is noteworthy, because much of the financial problems resulted from Qwest refusing to execute surveillance against the American public when requested to do so in February 2001, a full 7 months before the attacks on the Pentagon and WTC.

Basically, the judge excluded a number of arguments improperly, and he got seriously reamed out by the appellate court.

I believe that the prosecution was intended as a warning shot to other Telco executives by Bush and His Evil Minions™, “You do whatever we tell you, and f%$# the law, or you sleep with the Fishes.

It was 2-1 decision, with one ultraconservative Bush II appointee, Jerome Holmes, siding with a Bush I appointee who dropped 3 grand at a strip club one night, and may have patronized an “adult dating service”. He also parks in handicapped parking, and threatens people who complains.

We really are going to have to “debushify” our government when this is all over.

*Full disclosure, Qwest is my long distance carrier. I dumped AT&T and signed on with them about a year ago, specifically on the illegal surveillance issue.

Shorter Nicholas Kristof: Women Cannot Be Trusted With Their Bodies

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Damn, this is really a day for incoherent NY Times editorials.

Along with the rest of the anti-sex anti prostitution crowd who think that and sex is icky.

Slowly, here is the equation: Pimps exist because prostitutes need them to protect them from a criminal justice system that victimizes them.

How is their job any different from bull semen “extractor”?

As to whether or not it’s “voluntary”, the claim that because of economic need, it’s not voluntary, means that I’m a slave.

I need the money.