They are looking at 1,000,000% inflation, which means that prices double every roughly 30 days.
On the bright side, Morgan Tsvangirai is to return tomorrow, so that he can start campaigning.
Month: May 2008
The Americans Leave Sadr City, and the Violence Ends
As this Washington Post article notes, U.S. Absence Seems To Make Difference:
Sadr City is a largely impoverished section of Baghdad that is home to about 2 million people, many of whom support the anti-American Shiite cleric Moqtada al-Sadr, a onetime backer of Maliki who has become his chief rival. Sadrist officials negotiated the entry of Iraqi troops, apparently winning agreement that U.S. forces would stay out.
This is not by accident. While the American public is shielded from this, it is clear that American deployment stirs up nationalistic violence, and it is also clear that, notwithstanding US protestations of precision, the carpet bombing of whole neighborhoods that provide any level of threat make the violence a couple of magnitudes worse beyond that.
We need to leave now.
McCain Going to Extreme Lengths to Conceal Medical History
The campaign just made McCain’s medical records available:
- To a limited number of reporter.
- Does not include earlier records, which might detail the physical and psychological consequences of his captivity in Vietnam.
- It is being done on a Friday, and not just any Friday, but one before a 3 day weekend.
- The reporters get 3 hours to review 400+ pages.
- They are not allowed to make copies.
If I had something to conceal, and knew that I had to release something, this is how I would do it. If you have a problem, even seemingly innocuous records can show a red flag, but if you have non-medical political reporters who have about 90 seconds to review a page, those flags get missed.
Another Financial Bigwig Says US is Goosing Inflation Statistics
This time, it’s Pacific Investment Management Co.’s Bill Gross, who has been called, ” Called “the nation’s most prominent bond investor” by the New York Times.”
You can read his essay here:
The U.S. seems to differ from the rest of the world in how it computes its inflation rate in three primary ways: 1) hedonic quality adjustments, 2) calculations of housing costs via owners’ equivalent rent, and 3) geometric weighting/product substitution. The changes in all three areas have favored lower U.S. inflation and have taken place over the past 25 years, the first occurring in 1983 with the BLS decision to modify the cost of housing. It was claimed that a measure based on what an owner might get for renting his house would more accurately reflect the real world – a dubious assumption belied by the experience of the past 10 years during which the average cost of homes has appreciated at 3x the annual pace of the substituted owners’ equivalent rent (OER), and which would have raised the total CPI by approximately 1% annually if the switch had not been made.
Me, I’d argue that he’s conservative in his estimates, and place the error closer to 3% than to 1%.
Note that as a bond trader, he is in a segment of the market most effected by these aberrations, and by virtue of being Bill Gross, the financial press will cover this.
Lieberman Proposes Commodities Restrictions
Joe Lieberman is saying that he is, “considering legislation to place limits on large institutional investors in commodities markets“.
Even if he weren’t a complete asshat, nothing would come of this, because he is from Connecticut, and with New York City being the world’s capital for such activities, and with many of the people who make a living on the trade living in Southern Connecticut, there is no way that he would really press this.
While I believe that one of the problems with any market today is excessive speculative capital in and out flows, Lieberman’s proposal is rather limited, directed at limiting pension funds and closing a few loopholes, and won’t do much good, because there is already an industry full of people who find ways of ignoring such restrictions.
Instead, I suggest a transaction trading tax on financial instruments. It’s easily implemented, hard to avoid, and penalizes those who trade the most.
The Good Guys, and the Veterans Win
The new GI bill passed by a vote of 75-22 in the Senate, and so was attached to Bush’s Iraq war supplemental.
Republicans, including the sick old man running for president, John Sidney McCain III, argued against this, saying that it was “too generous”, and so might lure soldiers out of the military because they would want to go to school and better themselves now.
Note also that McCain couldn’t even be bothered to show up for the damn vote.
They included some other extras too:
The bill also includes money for housing and levees devastated by Hurricane Katrina, heating subsidies for low-income families, the space shuttle program, the Food and Drug Administration, biomedical research, roads and bridges, federal prisons, grants to local police departments, aid to rural schools, suppression of wildfires and preparations for the 2010 census.
The bill would extend unemployment benefits by 13 weeks nationwide, with an additional 13 weeks for workers in states with high unemployment.
The only thing that surprises me here is the fact that we aren’t already paying for preparations for the 2010 census.
The Bush Blue Dogs in the House are insisting that there be some sort of tax to offset these costs, but I think that they will fold, as this is ready made for the campaign slogan, “Congressman voted not to support our veterans”.
New York Times Comes Out For Net Neutrality
I think that this OP/Ed is a pretty good indication that this discussion has entered the mainstream, which is good, and the fact that the “Paper of Record” has come out in favor of network neutrality is better.
UBS Has Fire Sale on its Own Stock
In order to raise cash following its disastrous investments in the US mortgage market, UBS is holding a fire sale on its own stock, in order to raise needed capital.
UBS AG said Thursday that it would raise $15.5 billion in a rights issue at a 31% discount below the current share price.
UBS (UBS), hard hit by its exposure to the U.S. mortgage market, said it will sell new shares at $20.09 each to existing shareholders, compared with the closing price of $29.31 on the Zurich exchange Wednesday.
Shareholders will receive one subscription right per share held, with 20 of the rights entitling the holder to buy seven new shares. The new rights will be tradeable, the bank said.
Needless to say, this serves to dilute share holder equity, and it shows that there is just a bit of desperation here.
Texas Appeals Court Rules Revokes Texas Custody In Raid on Polygamy Compound
I already noted that the original complaint call leading to the raid was a hoax, and now the appeals court has ruled unanimously that, “the the state did not establish proper grounds to remove the children from their families.”
The ruling — an unusual mandamus opinion granting relief in a case not yet decided — came on the application of 38 women who challenged state custody and another 54 who filed a second action. But lawyers said the burden was on the state to show why it should not apply to the rest of the children as well.
It sounds to me like someone was cowboying way too much on this.
Someone screwed up, big time.
OK, I’ve Predicted It, so What Does it Mean if the Countrywide Deal Crashes and Burns
It’s pretty clear that if Bank of America does not go through with the purchase, Countrywide is insolvent, and it gets shut down, because it is, by any standard, insolvent without a white knight of some kind.
Nouriel Roubini considers this to be a distinct possibility:
The views of Whalen are – based on a survey I made of banking experts – shared by most bank analysts. On May 2nd S&P cut Countrywide’s rating to junk; while on May 5th a number of analysts recommended that BAC walk away from this lousy deal. BAC is already sitting on a potential loss of about $1.3bn from its initial $2bn stake in CFC but as one analyst put it: “I hope Bank of America isn’t throwing good money after bad”.
Thus he raises the question as to what exactly such a collapse might mean, given that Countrywide has originated nearly 1/5 of the mortgages in the US in recent years.
He takes a look at the bigger picture:
Of course the bust of CFC is only a symptom of a much bigger systemic banking problem in the US: with 47% of the assets of all large US banks being related to real estate (residential, commercial, etc.) and with 67% of assets of smaller banks being related to real estate hundreds of smaller community banks and dozens of regional banks and a few national banks will be bankrupt in the likely scenario that home prices fall at least 20% (they are already down 14.7% from peak based on the Case and Shiller/S&P Index) and possibly as much as 30% by the time they bottom out in 2009-2010.
That’s hundreds of banks, some of them of a fairly significant size, that end up liquidated and under FDIC stewardship.
If he is 10% right, then we aren’t even half way through the down slope on this thing.
Sadr City as Iraqi Troops Enter Slum
So far, it appears that Iraqi troops have now been able to enter the city and set up check points, though they did find a weapons cache.
I’m not optimistic. Both sides are waiting for the right moment to restart this, though my money is on Maliki doing it, because if he does not disrupt the Iraqi provincial elections, which have now been oh so conveniently pushed past the November US elections, it’s pretty clear that his party Dawa, and that of the his Hakeem allies, will get shellacked.
I Just Threw Up in My Mouth, That’s What I Think
I keep hearing chatter about a rockin’ post-partisan general election campaign with Obama-Hagel and McCain-Lieberman duking it out in the fall.
What do you think?”
I’m tasting bile right now.
D’Oh!!!!!!!!!
Congress leaves 34 pages out of the farm bill that Bush Vetoed, so they will have to pass it again, have Bush veto it, and then do the override.
Someone should get fired because of this, but no one will be.
Well, This Just Makes You Proud to be an American
Now we are using guards to drag physically drag detainees into court.
While some of these cases might be tough, it is clear that many are not, but they are still irrevocably tainted by the vile, and quite frankly un-American techniques endorsed and encouraged by the torture fetish crowd in the Bush White House.
Economics Update
Obviously the economic news of the day, hell the news of the day period, was oil surging to above $135/bbl, though they settled about $4 lower.
Retail gasoline hit a new record, the 15th straight, $3.831/gallon.
Dollar has taken a hit too, which is common when oil surges.
In employment news, US initial jobless claims fell, though the number of people collecting benefits remains at a 4 year high, so it appears that the unemployed are not finding new jobs.
In real estate, the OFHEO reports that house prices fell 1.7% in Q1 of 2008, (PDF) the sharpest decline in since records began to be kept in 1991.
The Financial Ratings Model is Broken, Just in Case You are Wondering
That commie pinko rag the Financial Times discovered that Moody’s improperly rated a complex entity called a constant proportion debt obligations (CDPO) giving them the much desired AAA rating, when it should have been 4 levels lower, Baa.
Moody’s was the second rater, in addition to S&P, which also rated them as AAA, though a number of other ratings agencies, Fitch Ratings and DBRS, disputed rating these securities so highly. (There is a graphic at the link that is rather byzantine, which is a sign to run the other way):
The results showed that early CPDOs might lose between 1.5 and 3.5 notches in the Moody’s Metric, an internal measure, which equals up to four ratings notches.
Some Moody’s analysts had concerns. With so many transactions from other banks in the rating pipeline, the code could not be left as it was. The bug was corrected.
At the same time, the documents record that Moody’s staff looked at how they could amend the methodology to help the rating.
Some of the most senior managing directors in Moody’s European structured finance division were involved in meetings to discuss the updating of the methodology for rating CPDO-like transactions in February.
The staff also looked at reducing assumptions about the future volatility of the credit markets so that Moody’s model only anticipated minor moves in credit indices over the next 10 years.
This had the effect of reducing the negative impact on the ratings of correcting the code error.
So, they goofed on a rating, but S&P thought that everything was just ducky, and their reaponse was how do we cover this up.
It’s no wonder then that the agencies are vehemently opposed to the idea of guaranteeing the quality of their ratings. Because it’s a fundamentally dishonest mindset in a business that appears increasingly dodgy.
As Tanta of calculated risk notes, it’s the last two paragraphs of the story (first link)that are scary:
The world’s other major credit agency, Standard and Poor’s, was the first to award triple A status to CPDOs but many investors require ratings from two agencies before they invest so the Moody’s involvement supplied that crucial second rating.
S&P stood by its ratings, saying: “Our model for rating CPDOs was developed independently and, like our other ratings models, was made widely available to the market. We continue to closely monitor the performance of these securities in light of the extreme volatility in CDS prices and may make further adjustments to our assumptions and rating opinions if we think that is appropriate.”
This implies a sort of mutual back scratching to generate fees that makes all of the ratings suspect.
Germany: Old Economy Doing Just Fine
For the past couple of years, Germany has been the engine of the Euro zone economy.
Turning bolts, Germans were told – often by other Germans – had no future in Germany. The persistence of heavy manufacturing symbolized the country’s inability or unwillingness to transform itself into a modern, services-oriented economy like the United States or Britain, two oft-used yardsticks.
Today, the manufacturing sector in Germany is growing as a proportion of the country’s total economic output, and Germany looks set to outpace far larger economies like China and the United States as the world’s largest merchandise exporter for the fourth year running.
In addition, making all manner of valves, motors, machine tools and robots is providing Germans with something rare in the global economy: shelter from the storm. Thanks to bolt-turning, the German economy grew at an annual rate of 6 percent in the first quarter of this year.
In the US, we are told it’s all services baby. Sell houses (like that’s working), or sell securities (the revenue model is vanishing in a puff of smoke), or maybe sue people for patents on stuff you never made….
Not working so well, and that’s because brokering is essentially a parasitic activity. We have been taking other’s people money and we’ve been….I don’t know…I guess employing no account coke head brothers-in-law or something.
Our economy is far closer to Spains during the height of its colonies now than it was in 1929. Then we had a robust manufacturing sector that could power a recovery, once demand picked up.
Right now, however, what does the US really make?
Damned if I know.
School Districts Employ Snitches to Throw the Newly Foreclosed Out of School
Yep, school districts are employing private investigators to find foreclosed children so that they can thrown them out of school.
I would note that it’s frequently illegal, “The McKinney-Vento Homeless Assistance Act, an updated version of a 1987 law, says school districts can’t deny enrollment to children who are homeless because of foreclosure or other economic hardship.”
As the good Rev. Wright says, “God bless America.”
H/T Calculated Risk
House Judiciary Committee Subpoenas Karl Rove
The real question is what to do. Since Mukasey has been adamant about refusing to use the DoJ to enforce congressional subpoenas, the only real alternative is to take the sergeant at arms and have him detain Rove in the cell in the basement of the Capitol.
Won’t happen. Or to quote Nancy Pelosi:
NOT ON THE TABLE! NOT ON THE TABLE!
Aggressive Challenges to Property Tax Assessments Rising
This is not surprising.
People are struggling, and their assessed property value often is well over market rate, so it is no surprise that a rapidly growing industry is evolving to help people challenge property tax assesments, particularly among people attempting to sell their homes.
The fact that one has successfully lowered the taxes makes the home more salable.
Of course, it’s going to devastate the tax revenues of municipalities just as an economic downturn increases demand for their services.