Year: 2008

Economics Update

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Well, I just overheard on the radio that the Baltic Dry Index, a measure of the cost of shipping, just fell to a more than 5 year low.

Ships are sitting idle as manufacturers try to reduce inventory.

We are also seeing this at the other end of the manufacturer to market equation, with retail sales falling 1.2% in September…And remember, this was before Lehman imploded.

The Federal Reserve’s Beige Book, a report of the state of the economy, is pointing down too, as is the New York Fed’s Empire State Manufacturing Survey.

In energy, crude oil ended at less than $75/bbl today…..One note, when I predicted some time back that we would never see the south side of $100/bbl, I was wrong.

Interestingly enough we are also seeing reports that Paulson can give money to banks, but he can’t make them lend it out, which would seem to imply that we need someone more interventionist at the helm.

Canada: More Harper

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Cons.
Lib.
B.Q.
N.D.P.
Other
Total
Leading:
144
75
49
38
2
308
Popular vote (%):
37.4
27.3
9.3
18.2
7.8
100

My condolences to the people of Canada. Even though it is a minority government, I can’t see a coalition government going the other way, when one party captures 143 of the 155 votes needed for a majority.

It doesn’t help that the Libs and the BQ really don’t like each other.

So you will see 4 more years of Western Petro-Neanderthal policies….Hope that he does not completely destroy the NHS.

The meltdown did prevent an absolute majority though, and should make it more difficult for his party to destroy government health care in Canada.

Overheard on Stellar Parthenon

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I should note that the private BBS, Stellarparthenon.org, frequently supplies me with ideas, or at least a direction in the generally civil and well informed discussions there.*

It turns out that even the musings on conspiracy theories tend to be pretty literate and well reasoned.

Case in point, SP member “Pickapeppa” made the following observation:

So just for the sake of discussion, let’s say Bush does intend to declare martial law and become it’s first dictator.

What do you think would be the first thing he’d want control over besides the military (which he already has).

Perhaps the banks?

Well, I’m sleeping like a baby tonight.

*The “closed” bit is why there are, “generally civil and well informed discussions” there.

George W. Bush Gives in to Axis of Evil

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Or at least the one member of the axis: It appears that the U.S. dropping North Korea from terror list, as it had to promised to do in negotiations, and the DPRK is resuming dismantling its nuclear program.

The Japanese are pissed off about this, what with the whole bizarre, “Kidnapping Japanese citizens,” thing still unresolved, but pretty much everyone else is happy about this development.

It appears that South Korea will be sending a delayed shipment of steel to the DPRK, and we now have reports that the IAEA has had its access restored.

Economics Update

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Normally, I don’t comment on normal swings in the stock market, but there is nothing normal about the Iceland Stock Market, which dropped 77% after trading resumed following a 3 day suspension.

Iceland is in for some very hard times. It’s because the past few years of their prosperity were due to the pseudo-economy of the carry trade, which makes nothing, and so now they will bear the costs of the resultant excesses.

Speaking of excesses, it looks like the Royal Bank of Scotland will be first in line to sell itself to the British government, which is unsurprising as they were at the forefront of complex financial deals and mergers.

It should be noted that U.S. banks are lining up for partial nationalization too.

Additionally, we are having confusing moves by the FDIC on Regulation. It appears taht the FDIC will guarantee, “Senior unsecured debt, such as commercial paper and transfers between banks, issued through June 30, 2009, to help banks fund operations and let the institutions convert maturing senior debt into new issues fully backed by the FDIC.”

There has to be some sort of major blow-up at the center of this, but I am not sure exactly what it is.

In the mean time, oil is down, on expectations of a deep recession and reduction in demand, and so is the dollar, on….I’m not sure, but my hunch is on the realization that Treasury Secretary Paulson is a moron.

That being said, the newly nationalized GSEs are not getting much love with the debt spreads widening on Fannie and Freddie, probably because the Treasury is directing them to buy some really awful financial instruments.

Inflation is the Solution, Not the Problem

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So, we have noted investor Julian Robertson saying that the US is looking down the barrel of a 10-15 year downturn, and we have concerns that the bank bailouts will cause a period of “hyper inflation”.

I think that these are related, but not in the way that the economic community does.

I think that inflation is the solution, rather than the problem.

The problem right now is that assets are in too many cases worth less than what is owed on them.

The problem is not that assets are currently underpriced, but that they were overvalued when they were purchased.

The solution is to devalue the currency that is owed on these loans, and the word for this devaluation is inflation.

As long as we put in a structure that ensures that wages (not income, but earned wages) for the bottom ½ or ¾ of the population keep pace, so that people can live, people will do OK, and the people at the core of this crisis, banks and entities that act like banks, will pay for their problem by a reduction in the value of their cash hoards.

Retirees and near retirees will take a serious hit, but society as a whole will do better.

I think, given the enormous amount of money pumped into the system by Alan “Bubbles” Greenspan over the past 20 years, and the positively mind boggling amount of money pumped into the system over the past few months by Bernanke and Paulson, that inflation is inevitable anyway.

With 20% inflation, prices would double in about 3½ years*.

One of the problems here is how to reign in the beast before you need a wheelbarrow of currency to buy a loaf of bread, and how you stop inflation once the problem is done.

My suggestion is to do it via legislative fiat: Instead of allowing inflation to come, simply pass a law devaluing the US dollar by 50%.

This law would necessarily ensure that the payments for existing contracts, including wages, would necessarily double, as would regulations such as the minimum wage.

Of course, I I’m an engineer, not an economist, dammit,† and I’m sure that any economist would consider my proposal batsh%$ insane.

*Rule of thumb on interest: If you divide the number 72 by the interest, you get the approximate time to double. It’s called the rule of 72.
†I LOVE IT when I get to go all Doctor McCoy!!!

Sarkozy Opposes Rule of Law With Regard to IP

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Apparently, it appears that Mr. Congeniality has sent a letter to the European Commission demanding that authorities be able to cut off people accused of violations of IP laws without judicial review.

It seems that a bill going through the European parliment has the following language:

No restriction may be imposed on the fundamental rights and freedoms of end-users without a prior ruling by the judicial authorities.

It also appears that Sarkozy thinks that this is too much of an imposition on the IP dependent industry.

The European commission told him to go pound sand.

I Really Hope that He’s Right

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William Volk, a long time denizen of the tech industry,* wonders if the financial crisis spells the death of Web 2.0, or more accurately whether it spells the death of the venture capital supported business models for internet companies.

I hope so, because I am sick to death of the kule kidz business model.

What is going on here is that the capital costs of creating an internet presence are vanishingly small, look at the cost of building just one automobile assembly plant, so silicon valley snake oil salesmen are(were) able to get money and line their pockets.

To be fair, there are two groups of people making out like raped apes on this bit of dishonest persiflage, the owners of the internet firms with non-existent business models, and the VC firms that get a commission every time that they spend other people’s money.

It’s been a profitable scam for some time, funded largely by the stupidity of Alan “Bubbles” Greenspan, and now it looks like the the carnival is over.

*He was actually at the legendary meeting where a senior executive doubted the marketability of Teenage Mutant Ninja Turtles in a video game. The company also turned down licensing the Simpsons when they were still just a short bit on the Tracy Ullman Show.

This is What Happens When You Allow Republicans to Reflag as Democrats

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Rep. Tim Mahoney (“D”-Fla.) has been accused of using the threat of firing to maintain an affair with a subordinate.

What’s more, he’s released a statement that seems to confirm the affair, if not the sexual harrassment.

Here is the small story with the big lesson: He’s a reflagged Republithug.

What’s more, Rahm Emmanuel and His Evil Minions™, made sure he won the primary to run for Mark Foley’s seat, beating out a real Democrat in the primary, who would also have won once Foley’s hitting on Congressional pages was revealed.

Damn.