Month: September 2008
A Very Good Read on the Economy
Titled The End of Leverage. Money quote:
An enormous hoax has been perpetrated on global financial markets during the past 10 years. An American economy based on opening containers from China and selling the contents at Wal-Mart, or trading houses back and forth, provides scant profitability. Where the underlying profitability of the American economy was poor, financial engineering managed to transform thin profits into apparently fat ones through the magic of leverage.
This paragraph illustrates why I am such a bear.
In 1929, the US was an energy exporter, and the most robust manufacturer in the world.
Today, it’s all arbitrage with other people’s money….We have nothing left to fall back on.
Go read it.
Borat Economics
Felix Salmon of Condé Nast notes:
It’s not just hedge funds, either, which could end up being the vector by which crisis is spread. It could be a big insurance company, or it could be a series of failures of small and medium-sized banks. Or it could come out of left field entirely: the “shadow banking system” is now so big and so global that for all we know a series of bad decisions by a mid-level technocrat in Kazakhstan could precipitate cataclysm across America and the world.
(emphasis mine)
I would note that Borat Sagdiyev hails from, “Glorious Nation of Kazakhstan”.
It does raise the point that when markets are deregulated to the degree they are, people will stomp all over the line in an attempt to maximize short term gain, and this raises the possibility that minor actions will have major effects on the economy.
That’s why we need regulation in the first place. Enlightened self interest absent common sense regulation, gives way to unenlightened, and uninformed self interest, which invariably becomes bubbles and fraud.
H/T Kevin Drum for the catch.
Breathalyzer Firm Must Turn Over Source Code
In Arizona, Pima County Superior Court Judge Deborah Bernin has told breathalyzer manufacturer CMI to turn over the source code for their devices to the defendants.
This is more than just a legal ploy to get out of a drunk driving charge,* there actually appear to be some reliability issues with the device in question:
Allegedly inconsistent, odd or inexplicable results involving the Intoxilyzer 8000 have led to legal action in six states (Florida, Louisiana, Massachusetts, Minnesota, Tennessee and New Jersey as well as Arizona). A Florida judge also ordered CMI to hand over the source code running the controversial devices but the firm has refused to comply, earning it $1.2m in fines as a result.
I support this ruling, even without the history of problems. Having a closed box that just says, “guilty” is not acceptable.
*Full disclosure, my mom was killed by a drunk driver when I was 14.
Finally!
It looks like the Obama campaign has concluded that “behold my incredible awsomeness” is not a winning strategy, so they have reversed themselves, and they are telling Democrats that they should “get serious” about contributing money to “independent” groups to attack McCain.
Nice that they finally got a clue that they need a a way to point out the many problems that McCain has with his temperament, ethics, philosophy, intellect, and health.
They are right to go after McCain’s character, after John Sidney McCain has no character, it’s just a pity that they are this late to the game.
Iran Improving Nuke Centerfuges
So says the IAEA, and I’m sure that Darth Cheney is lobbying for an airstrike.
Palin Refuses to Cooperate with Investigation
They are claiming that the investigation approved by a unanimous bipartisan vote of the Alaska Senate is too political…Though the announcement came from the McCain Campaign, not the governor’s office.
I gotta check if Lieberman is showing up again on the Intrade Prediction Markets:
Ukrainian Government Coalition Collapses
It appears that President Viktor Yushchenko and Prime Minister Yulia Tymoshenko* have a major difference of opinion regarding foreign policy.
It appears Yushchenko is natavist Ukrainian nationalist bellicose nut, and Tymoshenko merely hates the Russians with a white hot passion, so she doesn’t want to start shooting at Russians today, so the President thinks the PM is some sort of traitor.
*Why can’t news happen in places where I can spell the damn names.
Stupid Lawsuit of the Day
Merrill Lynch shareholders suing, because they think that they did not get enough from Bank of America to buy them.
If BoA shareholders sued, they would have a case, because Merril shows every sign of being like Countrywide, where every few days/weeks, more unpleaseantness will be found as rocks are turned over.
BoA bought itself another money pit.
I approve of the right to litigate, but this is a stupid lawsuit.
AIG Nationalized
The FRB: Press Release:
The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.
The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.
Fragility, huh? If this economy had any more of a glass jaw, it could shave with Windex®.
BTW, the following is a lie:
The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.
The Fed is treating this as a liquidity problem but in fact, it’s an insolvency problem. There is not enough assets to pay back the Fed.
Meanwhile, In Iraq
Female suicide bomber kills 20.
It’s likely to get worse as the Maliki government continues its assassination campaign against the Awakening councils
David Brooks Disses Sarah Palen
I waiting for monkeys to fly out of tuchas, because he just called Sarah Palin unqualified to be president
David Brooks?
Economics Update
You know that there is a problem, when I open with ratings downgrades.
We have S&P downgrading Washington Mutual to junk status, and even more significantly, AIG, the largest insurance company in the world has been downgraded by Fitch Ratings to A from AA-, and S&P and Moody’s downgraded them too, from to A- from AA- for S&P, and to to A2 from Aa3 for Moody’s.
This is ugly, and it is not surprising that the costs of corporate bond insurance has skyrocketed on what is called “counterparty risk” by the MBA types, and the belief that you are dealing with a bunch of lying bastards foo the rest of us.
It’s the same reason that the costs of overnight borrowing has gone up too, with the LIBOR more than doubling from 3.10625% to 6.43750%.
No one knows when the next shoe is going to drop, and even the additional $70 billion that the Fed dropped out of helicopters wasn’t much help.
It’s why we’re seeing Thornburg Mortgage struggle under a sudden onslaught of margin calls.
When Goldman Sachs earnings 70%, even though they hedged against the real estate crash, you know that no one is making money.
And at the end of all this the Fed decided to leave interest rates unchanged, which is not surprising, since they are already pushing on a string.
Meanwhile, the dollar is behaving like my cat when he gets outside in a rain squall, it really did not move, but you can see the conflict between fear driving people to dollars, and the fear of the US financial meltdown driving people away from the dollar.
We actually saw consumer prices fall, driven by falling energy prices (oil is now about $91.15/bbl on demand concerns from the financial meltdown)
Gasoline still went up, driven by the came hurricane refinery concerns that have driven prices over the past 4 or so days.
John Sidney McCain III Invented the BlackBerry
No, this is not a report from Declan “Draw By Crayon Libertarian” McCullagh, this is an actual claim from the McCain campaign:
Asked what work John McCain did as chairman of the Senate Commerce Committee that helped him understand the financial markets, the candidate’s top economic adviser wielded visual evidence: his BlackBerry.
“He did this,” Douglas Holtz-Eakin told reporters this morning, holding up his BlackBerry. “Telecommunications of the United States is a premier innovation in the past 15 years, comes right through the Commerce Committee. So you’re looking at the miracle John McCain helped create and that’s what he did.”
It would be less laughable if he had not become chair of the commerce committee until 1997, by which point, RIM had been in existence for seven years.
How the Chicago Boys Wrecked the Economy
Some times you come across something about which you have nothing to add but an admonition to go and read it.
Thisinterview with Michael Hudson falls in this category.
So go and read it.
Why We Love The Rude Pundit
Here, the Rude one taking on Sarah Palin.
Very funny….rude…but very funny.
Why State Secretaries of State Matter
Ohio Secretary of State Jennifer Brunner, a Democrat who replaced the Uncle Tom Republican Ken Blackwell, has just moved against voter caging, “Brunner issued a release last week directing that 60-day notices sent by boards of election to voters that are returned as undeliverable cannot be used as the sole reason for canceling an Ohio resident’s voter registration.“
This is why having a Democrat as the chief election official in the state, and why Republicans try for these positions.
Republicans take a page out of Stalin’s book,* “Those who cast the votes, they decide nothing. Those who count the votes, they decide everything.”
*Actually, it’s not his book, it was the memoirs of his secretary, who quoted Stalin as saying this.
McCain Wants to Take Your Health Insurance
You can read the full report from Health Affairs, a medical journal, but the under rated Bob Herbert completely nails the issue when he says, “These are changes that will set in motion nothing less than the dismantling of the employer-based coverage that protects most American families.“
Read both.
Barack Obama: Fire Cass Sunstein Now.
Because he just called Roe v. Wade an unsupportable decision. He does day that it should remain as precedent, underthe principle of stare decisis, but that the decision is not based, “in either the text of the Constitution or its own precedents.”
First, this analysis is just plain wrong, the precedents of Griswold v. Connecticut and Eisenstadt v. Baird, which prohibited states banning contraception on the basis of privacy rights, and which he studiously, ignores is clearly on the path to Roe.
Second is that his embrace of stare decisis would invalidate rown v. Board of Education, the national minimum wage, and the National Labor Relations act.
For Barack Obama to continue to have him as an adviser, or to consider him as a member of the cabinet, or as senior Department of Justice appointment would be a betrayal of his supporters and the Democratic party.
H/T TalkLeft.
Well, It’s a Start
It looks like some states are making the restoration of voting rights for ex-convicts easier, though it would be nice if they were restored once no longer incarcerated.
One of the consequences of the “war on drugs” is that over 5 million people are denied the right to vote, but that’s a feature, Republicans don’t want n*gg*rs to vote.