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March 25, 2009

Comments

Thomas

Now I know to whom Zero was referring when he talked about folks clinging to their guns, religion and xenophobia. Foreign exchange market participants! They'll listen to any crazy rumor put out by the Vast Limbaugh Right Wing Conspiracy!

Charlie (Colorado)

Jesus, first it's toxic securities and now we're gonna poison banks.

matt

I've been following the currency issue for years, and repeatedly over the past 10-15 years, the Saudis, Iranians, Russians and others have been pushing for an alternative reserve currency. The prime reason is mistrust of the United States fiscal policy.Now the Chinese, our largest creditor, have joined the chorus. Frankly, the only thing saving the dollar right now is that no one trusts any of the other major currencies.

It really doesn't matter what Yglesias says or does, the global markets are speaking. Obama and Geithner are now "welcoming' such a discussion. Basically we are looking at the downfall of the dollar similar to that of the Pound Sterling back in the 1970's. The sun is setting on American economic leadership unless the grown ups act responsibly. To me, this is economic treason.

bad

TM's bloomberg link:

McCormick at Citigroup said it was a concern that Geithner said he hadn’t read Zhou’s comments. “If I’m running the Treasury I would want to have been briefed on that.”

That's funny on a number of levels.

bgates

If I’m running the Treasury I would want to have been briefed on that.

Sounds like he's at a job interview.

Maybe he is.

By the way, does anybody get anything out of these quotes from Wile Y Glasias, Super-Genius?

hit and run

TM:
Now let's play "Juxtaposition". Matt Yglesias can go first:

...Echo Chamber Fomenting

Now let's play "Juxtaprojection"...

And http://www.slate.com/blogs/blogs/kausfiles/archive/2009/03/11/palmieri-we-want-an-echo-chamber.aspx>Jennifer Palmieri* can go second:

Center for American Progress' Jennifer Palmieri says the http://www.politico.com/news/stories/0309/19846.html>daily "8:45 A.M." call among leftish activists (disclosed by Politico) is an attempt to give the White House a "coordinated echo chamber on the outside."

-----------
*Matt's acting boss at CAP, apparently not afraid to http://www.slate.com/blogs/blogs/kausfiles/archive/2008/12/22/jennifer-palmieri-is-the-kindest-bravest-warmest-most-wonderful-human-being-i-ve-ever-known-in-my-life.aspx>put him in his place

Thomas Collins

Whoops! Didn't mean to change my screen name on that last post.

bad

TM, Austan Goolsbee was on CNN yesterday and twice refused to deny the consideration of a new International currency. He did say it was "unlikely."

Then Geithner did his thing today. No wonder there was some freak-out in the exchange market.

pagar

"coordinated echo chamber on the outside.

They already have Castro and Chavez, how many more do they need?

Boatbuilder

The Bloomberg photo says considerably more than a thousand words could. It took me a moment before I realized that wasn't Larry Fine.

Jim Ryan

Maybe Geithner and O are waiting for the teleprompter to complete its analysis of the new currency idea. You say "maybe good, maybe bad" when asked, until you hear from your boss.

Jim Ryan

Boatbuilder, unbelievable! Because I couldn't help thinking of Curly when I read the line from Yglesias!

Jim Ryan

And when Geithner said "maybe good" Yglesias went "Woop! Woop! Woop!" and ran in circles.

bad

You say "maybe good, maybe bad" when asked, until you hear from your boss.

It also offers the possibility to say, "As I've always said", 'cause you have multitudes of positions to cover any position ya wanna take.

TCO

Well, you're the little pussy who gave in to the bailouts. I predicted this would spiral into more and I was right. You're a maggot.

bad

Take your meds TCO.

Paul Zrimsek

Tranches? We don't need no steenking tranches!

Boatbuilder

I always thought that Armitage had a lock on the Curly look-alike contest--but these guys are giving the Stooges some serious competition.

TCO

I'm sorry. Had a bad day at work.

MarkJ

"Timmy Two-Time" Geithner needs some counseling a la "Goodfellas":

"Timmy, you gotta take your first pinch like a man and learn the two most important things in life. LOOK AT ME. Never rat on your friends...and ALWAYS keep your mouth shut."

Ignatz Ratzkywatzky

Take your meds TCO.

Bad, that is TCO on his meds.

TCO

http://www.youtube.com/watch?v=94lW6Y4tBXs

Check this out you little RINOs. You little Bush-McCain-Obama bailout lovers.

BobS

did obama make the clain last night that he'd saved teacher's jobs? bull shit....almost a dozen teachers at my HS are being told they are not coming back next year.

bad

TCO, I pray for you.

TCO

Thanks, bad.

clarice

I wonder if TCO is really that crazy that he thinks whatever we thought about the bailouts ipacted on whether or not they took place.

bad

If only we had that power...

matt

Gao Ziqing's comments were in an excellent interview in The Atlantic in December and were a preamble warning the United States to put its financial house in order, so how Geithner could possibly have missed them is an amazing indictment of his incompetence. That Zhao's comments came as a surprise is mind blowing after the financial flummery that has taken place in the past 60 days.

The global markets have simply had enough. The UK and US are basically bankrupt and there is no plan in place to do a Chapter 11. So what will it be? Chapter 7 after the dunces get done with further ruining our economy?

TCO

You could have spoken out against them. You could have rallied. You could have called congre4ss critters and the like. Look at Malkin.

TCO

Matt: We could have let the people ,who lost money take their losses. Instead we have looted the Fed to pay for Goldman. This is rank socialisim and politicians wanting to avoid appearance of failiures and in the process making things worse. And then you have the RINO jerks here who supported the bsailouts. makes me sick.

clarice

TCO--Let me break this to you gently..the Dems control by a significant margin both houses of Congress.
BOTH. Significant Margin.

narciso

What's frightening is that this is much like that scene in Jurassic Park, where
they try to start up the electrified fence, but they have to get past all the safe guards. Well this is what it's been like for at least the last five years. Dodd and Frank, and the occasional republican like
Rich Davis, blocked any regulation of CDO's which caused Lehman to collapse, creating
a cascade that led to AIG's fall, from the operations of their offshore unit, which created the economic crisis which catapulted
Obama to office, which in turn disbled other safeguards in the form of the TARP , the auto bailout, the stimulus and other
elements. Now the tax hikes including on charities threaten to finally tip the economy into a full fledged spiral, the final tripwire followed by the collapse of the dollar, and the end of Western civilization.

Danube of Thought

Hell, it's all so depressing that I think I'll revert back to Yogi-isms; on the earlier thread I left out my all-time favorite.

When informed that the Mayor of Dublin was Jewish, Yogi said "Only in America."

centralcal

ha ha, DoT! Gotta love Yogi.

Joan Minor

However he says it (rudely or obnoxiously), I remember that TCO was against the first bailout. It was supposed to have saved our economy. It didn't. My sister, (who had been a big fan of jom and who is a die hard conservative, posted on here back when Bush and the Democratic treasury secretary were throwing money at the banks) that throwing money at the problem was wrong and wouldn't work. If you are a conservative and believe in conservative principles, you don't get rattled and change basic ideals and principles in a crisis. The majority of posters on here were certain that if we didn't bail out the banks, etc., that our economy would crash and worse and only throwing trillions of dollars would solve our problems. My sister quit reading this wonderful blog in disgust. I checked in every day or so because I've loved jom since I first discovered it, but finally gave up because I didn't understand the financial intricacies of the situation. I still don't. I only know that the bailout didn't solve the problem the way it was supposed to, just like my sister said it wasn't going to. Now we have Acorn and other idiots hiring buses to harass and hound the poor people who were paid contracted bonuses, and we have people like Chris Dodd, Barney Frank, and Nancy Pelosi lying to us, plus they are using the Federal tax laws to punish the people who earned their bonuses. This situation reminds me of a communist country, when there is so much envy and hate that all reason flies out of the window. Bush was wrong. Paulson was wrong. The Democrats were wrong, and the Rinos were wrong, and now the world economy is in near chaos and we have a president who giggles when asked about the financial situation on the television show 60 Minutes. God help us all.

Charlie (Colorado)

However he says it (rudely or obnoxiously), I remember that TCO was against the first bailout. It was supposed to have saved our economy. It didn't.

See, there's your first mistake. It did save the economy. In Argentina when something similar happened, they had 25 percent unemployment six months later. Here, six months later housing starts are increasing, major manufacturing is increasing, and we've got, what, 8 percent unemployment?

Frankly, the very fact that you can say it didn't save the economy mainly means you don't have the foggiest notion what a really bad economy is like.

Here. if the credit crunch had continued in the way it was going, big companies would have found themselves unable to pay payrolls; grocery stores and drugstores and such, that operate on floorplan, would have had empty shelves; farmers would be scrambling for seed. Obama would have won with 80 percent of the vote and we'd be seeing a real re-run of FDR's first 100 days. The collapse of the US economy would have propagated -- as it was, Japan has had about three times the impact on GDP we've had. There would be unrest at best in China and india, and the Democrat nutcases would be able to pass anything.

Not only would we have a worse economy, we'd probably have the trillion dollar "stimulus", AND nationalized banks AND nationalized health care.

BR

I'm with you, Joan. And where in the Constitution does it say the Federal government has any right to interfere with business.

Jim Ryan

Charlie, shouldn't you qualify your statement by saying "With some indeterminate but intolerably high likelihood" when you say the economy would have gone belly up?

narciso

Days like this make me feel like going back into my TypePad dungeon, and locking the door. Dodd and Frank, and Biden and Obama, and ACORN, a cast of thousands led us to this precipice. We were skeptical that a bailout might work, yet we didn't see a solution, then that wouldn't involve a Mellon style liquidation strategy, we still don't see a solution. We see now from the counter party transactions that AIG fall would have likely toppled Goldman, and several foreign institutions. We still hand one hand off the cliff, because the American people, well the 52% didn't 'chose wisely, whereas the 46% held our nose, and voted more for the person at the bottom of the ticket, than the top. Our judgement on that score is more justified, our concern is more magnified, he can't even even do the pretense of the right thing. Geithner, the Asian studies major, should really study up on seppuku, that kind of mistake
well it's 'above his paygrade'. As some one
pointed out on a Ace thread, referring to Ghost Busters, when they ask you're a God
say yes. when they ask you about replacing
the world's reserve currency say no.

TCO

Bullshit, Charlie. You don't understand economics, arbitrage, micro or "core fin". You're just a fucking idiot on the internet.

Charlie (Colorado)

Kaus's BS detector explodes

Jim Ryan

If "standing on principle" of free market economics means descending into complete economic collapse, then you better have plenty of wheat berries in the basement and a wind-up lantern. And a snowsuit.

Plus, I don't know how that stands for free market principles. Did they have a free market in Blade Runner? “I’ve abandoned free market principles to save the free market system” makes sense if the degree of probability of economic collapse without last fall's bailout was high enough.

Charlie (Colorado)

Charlie, shouldn't you qualify your statement by saying "With some indeterminate but intolerably high likelihood" when you say the economy would have gone belly up?

Yeah, probably. But I'd like to see someone point out an example of a country where the banking system has been broken to that degree where something like that didn't happen.

Charlie (Colorado)

Bullshit, Charlie. You don't understand economics, arbitrage, micro or "core fin". You're just a fucking idiot on the internet.

Okay, he's drunk enough he can't keep from swearing, but he can still type. Usually he doesn't pass out until he can't spell the dirty words any more.

bad

Obama at his first fundraiser after becoming president:

“I know it can be easy, especially in Washington, to get caught up in the day-to-day chatter on cable television, to be distracted by the petty and the trivial, and to fall in the trap of keeping score of who’s up and who’s down. There will be days where we may be declared winners and there will be days where the umpires say, ‘oh, they lost that one.’ There will be days where the markets go up and there will be days when the markets go down. But you and I, we measure our economy recovery in different ways.”

AAAAAWWWWWWWWWWW

LUN

Pofarmer

Here. if the credit crunch had continued in the way it was going, big companies would have found themselves unable to pay payrolls; grocery stores and drugstores and such, that operate on floorplan, would have had empty shelves; farmers would be scrambling for seed.

All of which is 100% pure conjecture. The terms might have been less favorable, but the money would have been there.

Charlie (Colorado)

“I’ve abandoned free market principles to save the free market system” makes sense if the degree of probability of economic collapse without last fall's bailout was high enough.

See, the thing is that when the slogans-in-place-of-thought crowd starts up, they usually skip a couple of things. The first is that this mess was the result of long-standing market distortions; it's the Pottery Barn problem. Having broken the dish, the best you can do is sweep it up before someone cuts themselves. In this case, before someone cuts themselves, turns out to be diabetic, gets gangrene, and ends up having one of those horrible protracted deaths as the docs amputate pieces trying to get ahead of the gangrene, and failing.

The second is that politics is an equilibrating process. It doesn't matter, to some extent, how wonderful your free-market ideals, not everyone is going to share them. What's worse, the "please run my life" party always outnumbers the "please leave me alone" party. So you never have a really pure free market any more than you really can keep water pure when you mix it with salt.

This is the paradox that underlies doctrinaire libertarianism: if you're really doctrinaire, there are a lot of people who don't agree with you completely, and you can't make them do what your doctrinaire libertarian ethics demand without compulsion or coercion -- at which point you cease being a libertarian and you're just another common garden fascist.

So you either learn to live with a somewhat mixed system, or you become a drunken crank like TCO, reduced to railing impotently, making yourselves unpopular and making it even less likely that you'll change anyone's mind.

Charlie (Colorado)

All of which is 100% pure conjecture. The terms might have been less favorable, but the money would have been there.

Show me a single example of a country where the banking system collapsed without a situation at least as bad as what I described occurring.

Hell, Argentina was relatively benign; there are lots worse examples.

But be prepared to show your work, because I'm tired of listening to slogans in place of critical thought.

Jim Ryan

amputate pieces trying to get ahead of the gangrene

Thanks, Charlie, now you've put me off my sheperd's pie.

Charlie (Colorado)

Thanks, Charlie, now you've put me off my sheperd's pie.

What can I say? I've been watching House again.

Jim Ryan

The second is that politics is an equilibrating process...live with a somewhat mixed system

Indeed. Conservatism, the only non-fetishistic political philosophy. Still, you should pull pretty hard towards the right values, via the forum, even while you "live with" etc.

Charlie (Colorado)

I'm with you, Joan. And where in the Constitution does it say the Federal government has any right to interfere with business.

Article One Section Eight.

Charlie (Colorado)

Indeed. Conservatism, the only non-fetishistic political philosophy. Still, you should pull pretty hard towards the right values, via the forum, even while you "live with" etc.

Yup. And recognize there are times where you need to look for the best possible compromise instead of insisting on impossible purity.

Pofarmer

So you either learn to live with a somewhat mixed system,

O.K.

That, I can agree with.

Got any examples where a country went into deficit spending equal to it's GDP in 4-8 years?

Thing is, I don't know how the economy of Argentina was structured. We STILL haven't recorded two full quarters of contraction and folks are saying we avoided the great depression. The banking crisis was going on at a time when GDP and unemployment were low. Now, I'd felt for some time that consumer debt was too high, still think it is. BUT, the main thing going on was that the big banks weren't lending to the other big banks. We didn't have systemic meltdown going on, we had kind of blowoff top happening. There are thousands and thousands of other healthy banks in the country, yet we're pumping trillions into a few at the top. Yeah, I know, I know, it trickles down, but it sure looks like it's just trickling AROUND the top when you look at it. The key here is getting rid of these big banks, and DECENTRALIZING the system. That's not gonna be Obama's first instinct. I suppose, that maybe that was one good funcition of MBS, it rather concentrated where the bad assets were held, which turned out to be not so groovy to the ones that held them, but better for those who'd passed them on. Solving a problem caused by too much govt regulation and interference with MORE govt regulation and interference?????????

Yeah, this probably isn't going to end well. It never was, except now the American taxpayer is going to be TRILLIONS in debt on this deal, but, heh, at least AIG and Goldman will be O.K.

daveinboca

I know lil Ezra & the JListers are po-ed they didn't catch the first echo fast enuf.

Charlie (Colorado)

Got any examples where a country went into deficit spending equal to it's GDP in 4-8 years?

Yeah, Japan, a couple of European countries.

But that's a red herring; I was asking about a country that survived a banking system collapse.

I'm sorry, but part of the problem here is that you simply don't understand -- not because you're actually stupid, but because you're reading people who feed you slogans that you accept uncritically -- the banking system as a system.

You also either have an attention deficit problem, or you never learned how to stay on one argument, or you're consciously raising red herrings and straw men when you're caught on something. It's hard to tell which from here; I'd like to believe it's unconscious, but you do it consistently enough, and egregiously enough, that it's hard to tell. See above, where you respond to my question about a country that hasn't had an Argentina-style collapse after a banking collapse with a question about 8-year deficits. That's called, technically, a red herring: it's trying to put the argument off on a side track. It's also not very well informed, since there are a number of examples.

Worst of all, it's not even actually right: the word you want is "debt" -- deficits aren't cumulative, and in any case no model has the deficit even close to the GDP, by a factor of about 12.

That's why it's clear you're not thinking about this stuff -- you don['t know the history, you won't do the arithmetic, you can't offer any alternatives better thought out than "there are regional banks". You're parroting.

So there are regional banks that keep lending -- that's fine. But what happens to those banks when the major banks are really frozen? When they can't access their money-market accounts? When they can't get checks processed? When John Deere can't deliver tractors, or build them because it can't pay salaries? What happens to the little old lady down the road when her retirement annuity that Hiram bought her stops paying off?

Go ask around -- but don't ask your banker, because he's afraid you'll start a run on the bank.

Yes, if that happens, there are backups. The biggest one is the ability of the Fed to pump out money ("open the discount window") to banks. If your bank loses enough, FDIC comes in.

In other words, what would happen is that the federal government would come along and bail out the banks. It's just do it in the little banks, while hurting a bunch of people while it sor4ted itself out.

What do you offer as a counterproposal? "Decentralize the banks." How? You're complaining about not using "free market principles" -- well, in what perversely ignorant version of "free markets" is using the government to break up the big banks a "free market" solution? Or did you have some other notion of how you'd break up the big banks? (Pitchforks and torches?)

You're perfectly willing to see the government abrogate employment contracts and steal people's regular compensation, as long as someone has told you the compensation was "bonus" instead of salary. What kind of "free market" is that? Most of the people that harms aren't even the ones who made the problems -- unless you figure they should all be punished on the basis of guilt by association. Why? because you're mad that AIG got a "bailout" -- but you hadn't even troubled yourself to pay enough attention to know that AIGFP was being liquidated; you were astonished to find it out. Doesn't matter -- someone is telling you what to think, you don't need to keep up with the little details.

So yeah, if this all went on to multitrillion dollar debt, it would be bad. (Not that I'd been defending it.) So? The money's not spent yet. Do you think talking about the collapse of the current economy is helping? Do you think that letting the banking system collapse during the end of Bush's term would have prevented Obama from being elected? Do you imagine that if Obama has won with a 65 percent margin, instead of a 53 percent, he'd be more likely to do things the way you'd like them?

daddy

Yippee, Great news everyone.

GE just signed a deal to build a gas pipeline all the way across the country!

Oh, my mistake. It's in China">http://news.yahoo.com/s/ap/20090325/ap_on_bi_ge/ge_china">China

RichatUF

Pofarmer-

AIG is being sold off in pieces at a loss so they won't be around much longer to kick. Goldman will go private by the end of the year.

The key here is getting rid of these big banks, and DECENTRALIZING the system.

But wasn't this the problem with AIG, a college of 400 regulators all had a piece to look at but no one saw the whole until it was too late (sort of like a Treasury version of being unable to "connect the dots"). In re: banks, small local concerns didn't spare the Russian markets (which were so bad off they had long periods where they were closed) and in the grand scheme of things Iceland's banks weren't that big but they blew up all on the same day anyway.

And in other great news the British had a bond offering which failed to cover.

Elliott

The administration continues to demonstrate its commitment to a strong dolor policy.

narciso

Yes it's very painful, Elliot, is that no what you meant at all.

RichatUF

Now were getting somewhere-

A careful look at the international evidence on severe banking crises suggests a far more cautious assessment. The recessions that follow in the wake of big financial crises tend to last far longer than normal downturns, and to cause considerably more damage. If the United States follows the norm of recent crises, as it has until now, output may take four years to return to its pre-crisis level. Unemployment will continue to rise for three more years, reaching 11–12 percent in 2011.

Don’t Buy the Chirpy Forecasts

cathyf
The first is that this mess was the result of long-standing market distortions; it's the Pottery Barn problem.
Yeah, that's the part that keeps getting lost. The single most important cause of this mess was the Boston Fed "study" where they either deliberately faked or incompetently bolluxed up the data. The study "concluded" that minorities with lower credit ratings than white people with higher credit ratings were no more likely to default on their mortgages. Therefore when banks refused to lend to minorities with lousy credit, it could only be explained as racism. This resulted in banks being outlawed from using minorities' credit ratings to deny them loans.

Everything else flows from this. The Fed enforcing quotas for minority lending. The FM's enforcing quotas for minority mortgages in the MBS's that they bought. The ratings agencies giving MBS's made up of these loans AAA ratings. Insurance companies and pensions buying the MBS's.

(As a model for catastrophe, this predicts the outcome of the global warming hoax in a frightening manner.)

glasater

On March 9th Warren Buffett was on CNBC's Squawk Box and answered questions of all sorts for three hours.

I got up early to watch and listen to his responses but some really enterprising fellow in Sydney Australia transposed the event and and caught something I had partially heard and reported on this blog somewhat incorrectly.

This is what should be noted that Mr. Buffett said:

BUFFETT: Yeah, the interesting thing is that the toxic assets [of American banks is] if they’re priced at market, are probably the best assets the banks has, because those toxic assets presently are being priced based on unleveraged buyers buying a fairly speculative asset. So the returns from this market value are probably better than almost anything else, assuming they’ve got a market-to-market value, you know, they have the best prospects for return going forward of anything the banks own. The problems of the banks are overwhelmingly not toxic assets, you know. They may have been one or two at the top banks, but they are not going to do in–if you take those 20 banks that are subject to the stresses, they’re not going to do those banks in. Those banks have the earning power which has never been better on new business going out of this to build capital positions if they pay low dividends which they’re starting to do now. BUFFETT: Toxic assets really are not the problem they were. Now, when I said it was contingent–I didn’t remember being exactly contingent on TARP, but it was contingent on the government jumping in. BUFFETT: The government needed to act big time in September, I will tell you that. BUFFETT: And they did act big time.

Source

BR

BR: ...where in the Constitution does it say the Federal government has any right to interfere with business?

Charlie: Article One Section Eight.

BR: Which subsection of Eight? 1-6.

"Section 8: The Congress shall have power

[1] To lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defence and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;

[2] To borrow money on the credit of the United States;

[3] To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;

[4] To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States;

[5] To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;

[6] To provide for the punishment of counterfeiting the securities and current coin of the United States; "

***

I see paying the country's debts, yes; regulation of internation, interstate and Indian Tribe Commerce, yes; and bankrupty lawmaking, yes; but not bailouts of banks and interference with renumeration contracts.

sbw

Joan, I hate to break it to you, but nowhere in the JOM charter does it say that the participants are obliged to be perfect. Please tell your sister.

Secondly, it is precisely because most of the people here are humble enough to see that, that they try their best here, not to blindly adhere to what are brazenly called principles, but to understand things as best they can to make wise choices.

Third, run out and buy P. J. O'Rourke's "On the Wealth of Nations", the world's best representation of Adam Smith's two books that are the cornerstone of understanding what has never worked in economic history and never will.

Principles are not something to be prayed to. They are useful lessons extracted from history, projected outward to see if that future is one we care to live in. Then, of those that seem still to make sense, we try the most practical for today.

You see, Joan, a conservative is really a classical liberal, while today's American liberal is the conservative he labels us to be. A better name for them, because they act in such bad faith, is Proglodyte.

Pofarmer

(As a model for catastrophe, this predicts the outcome of the global warming hoax in a frightening manner.)

Awww, gee, thanks Cathyf.

clarice

Cathy, Do I have to break your arm to get you to write that up into either a short blog or a longer article for AT? The Boston Fed folderol is lost in the noise, provides a critically important lesson for policy makers and you can write this up better than anyone.
Tell the editor I sent you.

Pofarmer

O.K.

I'm probably not going to get through all this before I gotta run kids to school.

Yeah, Japan, a couple of European countries.

As has been discussed her before, over 80%, close to 85% of Japanese spending was financed by Japanese citizens buying Japanese bonds. It wasn't anything close to the way we're doing it.

But that's a red herring; I was asking about a country that survived a banking system collapse.

Which is kind of a straw man, becuause the specific countries that you've asked about first had a CURRENCY collapse that precipitated a banking collapse. I'm sorry, I'm not well read enough to know about every banking collapse in the world.

not because you're actually stupid, but because you're reading people who feed you slogans that you accept uncritically -- the banking system as a system.

No, not at all, what I accept is that SYSTEMS have the ability to change. I see it every day out here in something called the "real world". Suppliers go under, new one's spring up. You need to understand something. I don't live in a world where I get a 3% raise everyear and an extra 3 days vacation. I live in a world where my gross income can vary by 1/3 or more and my net can easily vary by 100% or more.

See above, where you respond to my question about a country that hasn't had an Argentina-style collapse after a banking collapse with a question about 8-year deficits.

Because, once again, the problem in Argentina didn't START with a banking collapse, it started with a currency collpase cause by a default on an IMF note. Cause's baby, causes.

you won't do the arithmetic

I don't beleive that we know enough numbers to do the arithmatic. Once again, I've done enough budgets to know that things can fluctuate WILDLY. Right now I'm updating production budgets weekly, sometimes DAILY. I'm not pushing the math because I can't do it, but because it can be made largely irrelevant by political occurances or changes in the marketplace.

In other words, what would happen is that the federal government would come along and bail out the banks. It's just do it in the little banks, while hurting a bunch of people while it sor4ted itself out.

You misunderstand my arguement. What I think is that the govt should protect the Citizens and businesses from the repercussions of a banking related collapse. That's what it tried to do when it opened up the commercial paper window, which is what it should have done before it started bailing out banks. My thoughts are that the Fed should put down the Ouija board and quit trying to predict and control what's happening, and actually respond to the consequences of what actually DOES happen.


O.K.

I have GOT to go.
But, what I've been worried about from the point this started, is that the actions taking by the govt are going to trash our currency and our economy. Supposedly, in the Treasury offering yesterday Bernanke was offered 3 times the t-bills he went to buy. This thing could STILL collapse, and it will collapse for the same reasons that Argentina did, if it does.

rhodeymark

Take it further, CathyF - it was eggheaded physics "quants" who modeled the safety of the securitization markets. We aren't $crewed - the models say so! (The models giveth, the models taketh away).

bad

Rahm and Freddie.

LUN

cathyf

Actually not, rhodeymark. I've spent 2 decades implementing pricing models into systems. While they were models of market risk not credit risk, the same GIGO principles apply to credit risk models: if you underestimate the risk of default of your counterparties, you underestimate the valuation of the credit default swap. In this case it's because a trusted source -- the Boston fed was trusted both as politically independent and competent to do economic research -- came up with a bogus conclusion which was then forced upon anyone who was dubious.

There is nothing wrong with the models. If you say that subprime borrowers are no more likely to default than prime borrowers, then the model will price CDS's on subprime mortgages no higher than CDS's on prime mortgages.

pagar

If you want to see the speaker behind the words:

“You know and we know and you know we know…”

“…you are the devalued prime minister of a devalued government.”

and one can change prime minister to president and have it apply to the US today.

From the RBO site, who got it from John Batchelor--who reports--I mention the detail that since I wrote (above) in praise of Mr. Hannan, the views of the clip have climbed from 316,000 to 520,000. I have clearly missed the mark of how big this number will be by the G20 meeting. Blockbuster.

I can't see where they determine the number of views, if anyone can tell what the number of views currently is, I would sure like to know. I really think Obama and Geithner are going to turn the G20 meeting into a huge disaster for the US.

hit and run

So we've got the Boston fed study, global warming models; let's throw in on smaller scales the wonderful figure Obama is using about a family going bankrupt every 30 minutes becuase of healthcare costs* ... and, well, the question at the presser about 1 in 50 kids being homeless.

Listen, people, the science is settled.

----------
*On a happy personal note, our COBRA coverage is to begin Apr 1st -- but my employer has decided to continue us on our regular coverage another 60 days, meaning my severance checks separation bonus income will net at the same amount as when I was employed. Healthcare costs are mrs hit and run's biggest worry in my current state of full-time blogging** job searching, so this is very welcomed news.

-----------
**If you have not already signed and returned your NDA, please do so immediately. Your prompt attention to and cooperation in this matter is greatly appreciated.

clarice

cathy, pretty please will you write this up?

clarice

(I'm happy to hear that, Hit.. I still have everything crossed hoping that you will be employed again soon even if it means fewer postings.

bad

That's wonderful news, Hit!!!

sbw

I understand a monumental historical discovery has be made -- the previously unknown final clause in JOHN ADAMS, letter to Abigail Adams, after May 12, 1780, added in brackets at the end:

The Science of Government it is my Duty to study, more than all other Sciences: the Art of Legislation and Administration and Negotiation, ought to take Place, indeed to exclude in a manner all other Arts.—I must study Politicks and War that my sons may have liberty to study Mathematicks and Philosophy. My sons ought to study Mathematicks and Philosophy, Geography, natural History, Naval Architecture, navigation, Commerce and Agriculture, in order to give their Children a right to study Painting, Poetry, Musick, Architecture, Statuary, Tapestry and Porcelaine [... so that, in turn, their Children may forget History, Economics, and Rhetoric and Piss Away all that has gone before, giving up Liberty on a fruitless Alchemist's Search for the Holy Grail of government-imposed Equality sold by Greedy Charlatans as a Free Lunch.]

Pofarmer

what perversely ignorant version of "free markets" is using the government to break up the big banks a "free market" solution?

Is this where I have to cop to my Palinesque Populist streak? Call me crazy, but I don't think any one segment are a few players in it, should be allowed to become so large that their failure threatens the entire country.

You're perfectly willing to see the government abrogate employment contracts and steal people's regular compensation, as long as someone has told you the compensation was "bonus" instead of salary

No, I think the government should LAY OFF. But, what I see happening is that this group of executives got together when the bright lights were on and said"O.K., I'll work for a buck to shut down the company, while simultaneously having their pay written in at the end of the year as a "Bonus". As usual, I imagine there's more to this story than we're hearing, and I'm not inclined to give this the most favorable hearing. I think they thought they were gaming the people and the folks in Congress, and they pissed some people off. I'm sorry, but around here we do quarter million dollar deals on a handshake and the paper work is a formality. Would you do that with this bunch?

So yeah, if this all went on to multitrillion dollar debt, it would be bad. (Not that I'd been defending it.) So? The money's not spent yet.

The projected deficit for this year is something on the order of 1.9 BILLION dollars. The projected deficit for next year is around 2 BILLION dollars. Now, I'll grant that that hasn't passed, but it's certainly been proposed and is being debated. That's 4 TRILLION dollars in new debt in 2 years, that's 30% of GDP in 2 years, so, I can easily see this joker running up a debt/deficit/whatever you want to call it in a four year term equal to whatever GDP is at the end of that term.

Pofarmer

awright sbw, that was awesome.

hit and run

Thanks....First phone interview was last week. Second phone interview yesterday. Third phone interview in 20 minutes (three different companies).

I am very pleasantly surprised at the quick interest I'm seeing. I was expecting much less in this economy.

bad

Well, Hit. I'm not at all surprised by the interest. I'm VERY interested.

bad

LOL SBW

clarice

Well, stapling that nude picture to the application was a stroke of genius, Hit.

Excellent, SBW. I can't say that I haven't had the same thought myself. I expect what has saved many American families from the ignominy of turning out more Stewart Motts is the tendency of future generations to periodically marry the children of poor immigrants and thereby keep alive the memory of first things first.

narciso

The real camel under the tent, since 1934, has been fragrant some would say
'promiscuous'use of the Interstate Commerce clause, I remember that from my one con law class, particular a series of cases, that came after FDR's threat to pack the court. Compared to that, article one, section 9, is a very weak thread. Otherwise it would have been employed many years ago. Frankly if any party had refused the TARP, and challenged it's authority in court, it's dubious they would have any recourse; I'm assuming that the courts actually follow the precedents, therein)

Oh, and if the hypocrisy of the Balleen Whale aka Celtic Diva's little stunt, against the Governor of Alaska,isn't galling enough consider this much larger scandal that the AD News effectively buried
involving Anchorage Mayor now Senator; and once and future Gubernatorial candidate Mike Knowles, who we discover from the Portfolio piece, is a Yale educated millionaire oilman; but Google cache can often not be your friend.

bad
One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.

As gatekeeper to Obama, Emanuel now plays a critical role in addressing the nation's mortgage woes and fulfilling the administration's pledge to impose responsibility on the financial world.

Not much has been said about Rahm and his Freddie Mac connection. This story is a good sign.

Richard Holbrooke's board position on AIG during the AIG stuck on stupid years could use some more coverage as well.


Andrew

Lassie says that Timmy is in the well - leave him there!

memomachine

Hmmmm.

@ Charlie (Colorado)

But the --banking system-- was NOT under collapse.

Specific --banks-- were in danger of collapsing but the banking system as a whole was NOT in danger of collapsing. In fact there are thousands of banks all across the USA that are liquid, whole and lending.

Additionally the one step that the USA could have done in the face of the collapse of large banks is to -create new regional banks- with taxpayer money, run them under a public/private system where the board of directors were appointed by the President/Congress but the actual executives were private. Fund the new regional banks to the tune of $100 billion each and then let them take over the positions formerly held by the failed banks.

Then in 5 years IPO the banks and get the taxpayer money back.

And that's just one of a multitude of different schemes that would have accomplished much more without the nasty side effects of a bailout.

Another simple solution would be an insurance pool that would cover the toxic assets.

A -better- solution would simply to have modified Mark to Market to include income flows which would have vastly increased the on-book value of assets that were unsaleable but which still had income flowing in. That alone would have radically changed the balance sheets of many banks.

Another would have been a modification of the 10-1 loan-asset ratio that banks are required to adhere to.

...

Another point is that the USA and Argentina are two completely different scenarios. Comparing the two is ridiculous and you know it.

Cecil Turner

I think they thought they were gaming the people and the folks in Congress, and they pissed some people off.

Sorry, Po, but this is not reasonable. Unless you're positing they hid it by doing it in plain sight, that theory is unsupportable. Various congresspersons were attempting to demagogue the issue last year:

The California lawmaker received a letter about the AIG retention program back on Dec. 16, 2008, when Rep. Elijah Cummings, D-Md., asked him and Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight Committee, to call a hearing on AIG's compensation policies.
And though little came of it, it was obviously not hidden. As the now-infamous Crowley video amply demonstrates, Congress knew all about the retention "bonuses," and had ample time to consider whether to limit them . . . and expressly considered (and eventually rejected) that option:
"Just last month, AIG paid 343 employees of AIG FP -- their financial products division that created the financial hole that AIG is in, and in turn a multibillion-dollar bill for American taxpayers -- $56 million in bonuses and are slated to pay an additional $162 million in bonuses to 393 participants in the coming weeks," Crowley said. "And there's more. Further bonus payments totaling approximately $230 million are due to 407 participants at AIG's financial products division in March 2010."
It's a made-up issue anyway, but Congress could've restricted compensation any way they wished. The decision not to was partially confusion, and partially Treasury officials deciding it'd be counterproductive. Democrats finally got the class warfare outrage they were looking for, but it backfired when the backstory of behind-the-scenes authorization emerged. But in any event, this is an all-Democrat politician affair. Blaming it on AIG is just not sensible.

Middle -aged Lurker

re: cathyf
Let me add my unknown lurker voice to Clarice's request that you write the aforementioned article for American Thinker. I am certain that I am one of many lurkers that have a very difficult time understanding the in depth financial discussions taking place here at JOM. I manage to understand about 1 in five sentences. However I fully understand just about everything that you write on the crisis. Your explanations are crisp and clear and your examples are stellar. So I ask that for the benefit of the one in fivers out here in lurker land---Please consider the article---as I a sure there are many, many more like me out there.
Thank you for your consideration.

And as an aside, Good Luck Hit and Run.

bad

WSJ:

Those who remained had been asked a year ago to stay and work themselves out of a job. In accepting the terms offered to them, they committed no offense (say, failing to pay taxes). Their only crime was possessing marketable knowledge -- all the more marketable because of the opportunity for hedge funds and other counterparties to profit from AIG's distress. Had the company submitted to Chapter 11 rather than a government takeover, a bankruptcy judge might well have authorized identical incentives to minimize losses and maximize recovery for legitimate stakeholders.

True dat..

LUN


bad

Welcome, Middle aged Lurker!! Stay and contribute often. Glad you recognize the value of our CathyF. She is a treasure.

clarice

Ditto, bad.

Jim Ryan

SBW, goodness, something always bothered me about that Adams quote, and that was it! Thanks.

narciso

The U.S. is an entity much larger, in a quantum level, than Argentina. There's something I don't get though, the
institutions that have received the bulk of the TARP/Stimulus are large, Morgan,
Citigroup, AIG, etc, but what percentage of the overall economy do they represent; that
was the problem with the credit crunch, that is why Main Street was effected. Despite that, lending has not appreciably ticked up, partially because every encouraging move, to expand business, no matter how slight, is opposed by the overlords in Washington, from Lehman's decorations to AIG's conference. The solution that they offer, doesn't begin to address the source of the problem, which is the derivatives, transmuted almost like alchemy from the toxic asset base in real estate, which has been traded all around the world, and has created a downturn that is toppling governments, right, Iceland, Hungary, Czech Republic, next, Brown any day now. Now this crisis, which can never fail to be exploited, as Axelrod says, has
supposedly kept us in a glacial state,
Meanwhile the resets, thanks to Greenspan's eerie evocation of the late George Strong, which provoked this problem, are nowhere
close to being complete. As Prime rate mortgages will soon follow into the subprime
default net. Nothing makes any sense, or is that just me.

bad

The Hill: LUN

The Democratic Senatorial Campaign Committee (DSCC) has apparently decided to keep $100K in contributions from Bernie Madoff, who faces up to 150 years in prison for swindling billions from the likes of Steven Spielberg, Elie Wiesel, Kevin Bacon and Kyra Sedgwick in a massive Ponzi scheme. ------------------ Given the economic uncertainty our nation faces and that Madoff not only fleeced the rich and famous but major corporations such as HSBC — in other words, Madoff swindled all of us — the DSCC's decision is shockingly tone-deaf.

However, what’s almost equally surprising is the virtual silence from the media. During the Enron scandal, returning campaign money was a daily drumbeat, as were the news stories discussing Enron’s purported ties to President Bush. Now, when the Democratic Senate campaign vehicle makes the conscious decision to keep $100K in Madoff money, stolen just as if it came from a bank holdup, there's little to no outrage. Why?

Tone deaf indeed. But I am puzzled by those pols who gave their Madoff money to charity. Seems it should have gone into the pot to help reimburse those whose money was stolen.

Old Lurker

MAL is right about CathyF, this from OL. As we age, you can become OL, and I VOL.

SBW, I'm sure that was an authentic Adams quote. Good find. Not an accident, that old saw about "shirtsleeves to shirtsleevs in three generations..."

jwest

A few thoughts on a post- bank meltdown economy…..

Having just returned from Argentina on Saturday, I’ve had a chance to experience what life is like in an economy where the consumers have little confidence in the banks and the banks have no confidence in the consumers.

Cash is king. From the apartment we rented to the dental work we had done, everyone insisted on cash. Buenos Aires imposed a 21% city tax on all transactions, so the only way around it is to operate with dollars. There are no mortgages. Our realtor tells us the closing on any purchase must be cash in full. Car loans are just becoming available with half down.

There is something to be said for an economy that operates on the theory that if you have it, you must own it free and clear. However, the big offset is the growth rate. Without credit, everything takes much longer to bring to fruition. As always, those with the cash get great deals on everything while those who are struggling have it that much harder.

Sure, we could have let the banks fail and the world wouldn’t have come to an end, but if there was any chance of saving the system we have, it was worth a shot. If the bailout was limited to the funds needed to maintain viability as opposed to funding every liberal wet dream imaginable, the cost would have been acceptable.

pagar

Further bonus payments totaling approximately $230 million are due to 407 participants at AIG's financial products division in March 2010."

Does anyone think that people who got robbed by a masked AG/Congress in Mar 09 are really going to stick around and get robbed again in Mar 10.
Plus, If it were me, I believe I would be tempted to throw a little sand in the gears on my way out.

bad

It passed. My mom is gonna be POed when they start telling her what to do.

LUN

clarice

Thanks for the link, bad..And I agree with you--the money should have gone back to the fund that is holding all the retrieved madoff assets to be apportioned back to those he stole from.

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