Wackonomics

[Mavdog]

Originally Posted by alexamenos

How on earth do these two dudes in italy just walk away? That can't be the end of the story.

well, the bonds were described as being "like monopoly money", so when the two guys pulled a "get out of jail free" card from their pocket the police felt it was only right to let them go....

[alexamenos]

Big Surprise....the Banker's Boondoggle is Good for Goldman Sachs

Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

...

David Williams, an investment banking analyst at Fox Pitt Kelton, said: "This year is shaping up to be the best year ever for investment banks, or at least those that have emerged relatively unscathed from the credit crisis.

"These banks are intermediaries in the bond markets where governments and companies are raising billions of pounds of new money. There is also a lack of competition that means they can charge huge sums for doing business."

Last week, the firm predicted that President Barack Obama's government could issue $3.25tn of debt before September, almost four times last year's sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds.

[DirkFTW]

Where is the tax on windfall profits?

[alexamenos]

Originally Posted by DirkFTW

Where is the tax on windfall profits?

I imagine that if there is a tax on windfall profits, the fed will simply print a few extra gillion and it give it to GS to pay the tax....some former GS / lobbyist type will probably get a nice commission on the deal.

if this doesn't burn you up....

the firm predicted that President Barack Obama's government could issue $3.25tn of debt before September, almost four times last year's sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds.

There's nothing more than a revolving door between Goldman Sachs, the Federal Reserve and the US Treasury Department.....they're really just three branches of Corporatism, Inc....

So....Corporatism Inc makes a massive amount of money in the process of creating a big bubble in the housing industry. When that bubble pops, Corporatism Inc responds by giving itself tons of freshly printed FRNs and tons of new power vis the Federal Reserve Division. On and on and on...where CI's solution to every problem is to take actions that result in CI getting more money and power.

The one thing of minor interest here (for me) is whether Obama and any of the other cretins on Capitol Hill will feign some populist sensibilities in this. I suspect they've hit a point where the pretense is pointless.

[DirkFTW]

"I am shocked, shocked to find gambling is going on in here!"

"Here are your winnings, sir."

[DirkFTW]

Tyrannasaurus Debt

Aww, he's so cute! The bigger he is, the more there is to love!

[dalmations202]

Originally Posted by DirkFTW

Aww, he's so cute! The bigger he is, the more there is to love!

That's what she said!

[92bDad]

Originally Posted by dalmations202

That's what mom said!

Doing my best to kill the "That's what she said" jokes...somehow she being mom just changes the meaning enough to make it uncomfortable.

[DirkFTW]

[Mavdog]

Originally Posted by 92bDad

Doing my best to kill the "That's what she said" jokes....

here's an idea....if you don't like the "that's what she said" jokes, maybe you could just ignore them.

[DirkFTW]

Of all the statistics pouring into the White House every day, top economic adviser Larry Summers highlighted one Friday to make his case that the economic free-fall has ended.

The number of people searching for the term “economic depression” on Google is down to normal levels, Summers said.

http://www.politico.com/news/stories/0709/25083.html

Thankfully the decrease in searches wasn't because (a) people had their electricity shut off, (b) people started googling "end of the US" instead, and/or (c) there's no longer a need to google what people have already concluded.

[DirkFTW]

Huh...

http://zerohedge.blogspot.com/2009/0...my-stupid.html

"In our view, the only thing propping this market up is investor sentiment. Earnings have not improved. Keep it simple, stupid - investing is and has always been about the real economy, and this market is ignoring the hard data. You can invest in sentiment if you want to, but as we have said before, we prefer to invest in real things."
-From Sprott Asset Management's July 2009 Comment

We are all Baghdad Bobs today.

[alexamenos]

Originally Posted by DirkFTW

We are all Baghdad Bobs today.

funny....

Summarizing virtually every news report in the recent past and probably for some time to come on the state of the economy:

Things are getting better because economic indicator X didn't fall as much this month as it did the month before.

[DirkFTW]

Originally Posted by alexamenos

funny....

Summarizing virtually every news report in the recent past and probably for some time to come on the state of the economy:

Things are getting better because economic indicator X didn't fall as much this month as it did the month before.

My favorite is "In surprisingly good news, economic indicator Y only fell 24%, which was less than the 27% experts had expected. Investors rallied behind the good news."

[alexamenos]

Originally Posted by DirkFTW

My favorite is "In surprisingly good news, economic indicator Y only fell 24%, which was less than the 27% experts had expected. Investors rallied behind the good news."

Yesterday in the Dallas News -- "some certain economist thought a few months ago that texas was going to lose 400,000 jobs this year, but now it looks like texas will only lose 300,000. Yeah progress!"

[Mavdog]

Originally Posted by DirkFTW

Huh...

"In our view, the only thing propping this market up is investor sentiment. Earnings have not improved. Keep it simple, stupid - investing is and has always been about the real economy, and this market is ignoring the hard data. You can invest in sentiment if you want to, but as we have said before, we prefer to invest in real things."
-From Sprott Asset Management's July 2009 Comment

We are all Baghdad Bobs today.

huh? the averages (and the stocks that make them up) are rising because many cos have reported earnings which HAVE improved from the past couple of quarters....

apple, starbucks, wells, chase, no trust, pf changs, southwest, cat, vf.... the list is long.

[aquaadverse]

Originally Posted by alexamenos

Yesterday in the Dallas News -- "some certain economist thought a few months ago that texas was going to lose 400,000 jobs this year, but now it looks like texas will only lose 300,000. Yeah progress!"

Welcome to the "doesn't sweat much for a fat girl" school of economics.

[alexamenos]

I think the guy is talking about the "real economy" (not corporate accounting) when he says that earnings have not improved.

As he notes, manufacturing capacity utilization is under 70%, rail car loading is down 20% from a year ago, and (as he doesn't note) corrugated box manufacturing is down 10% from a year ago (and still falling). Any time we make anything it gets shipped somewhere and/or put in a box. When these sort of things are down the economy is down, way down, and there aren't any real indications that things are coming back up (there is hope, perhaps, but that will change I'm afraid).

[Mavdog]

alex, "real economy"? the market moves on "corporate accounting" ie real earnings.

there is no doubt that as it stands today the recovery is without increased employment and without a solid rise in production, but conversely inventories are down so there should be higher factory utilization in the near future. retail sales are flat rather than decreasing, housing starts bottomed out at the end of 1Q and are now trending upwards.

earnings are improving for the simple fact that companies are lean and are conducting business more efficiently. that does not bode well for out of work employees in the short term, but it does bode well for the company's stock price as the price is a reflection of their future earnings, which as I noted are trending up.....

[GermanDunk]

R.I.P

[wmbwinn]

http://www.youtube.com/watch?v=-Psfn...layer_embedded

here is some fun...

[alexamenos]

Wacko from the WaPo...

THE FEDERAL Reserve Board's independence is a bit like the judiciary's independence. Absolutely vital for the institution's proper functioning, it nevertheless depends on Congress and the president to respect decisions with which they disagree. In such cases, the best protection for either the Supreme Court or the Fed is to stay strictly within its legally prescribed authority and to act according to principled criteria: legal ones for the justices, technical economic ones for the central bank.

Yes, the Federal Reserve is like the Supreme Court in that the Constitution provides for four separate branches of government: the legislative, executive, judicial and central bank branches...

By opening up the Fed's most sensitive interest rate and credit policies to public second-guessing, the bill would create a risk -- real and perceived -- of monetary policy bent to suit congressional overseers.

certainly, because the as we should all clearly understand by now, the purpose of the fed is to bend monetary policy to the interest of the banksters, not congress which is clearly vested the power of coining money by the Constitution....

(fwiw....my guess is that hr 1207 doesn't stand a chance not-withstanding the fact that 2/3rds of congress is cosponser to the bill. government of the banks, by the banks and for the banks and what not....)

[alexamenos]

Bernanke, mildly paraphrased: "a very long period of very low interest rates didn't cause housing prices to skyrockets, it was those damn jew bankers and their tricky ways""

Increasing interest rates wouldn’t have prevented the downturn, Bernanke argued before the meeting of the nonprofit academic group.


“Monetary policy is also a blunt tool, and interest rate increases in 2003 or 2004 sufficient to constrain the [housing] bubble could have seriously weakened the economy at just the time when the recovery from the previous recession was becoming established,” he said.

He said linkages between the sharp rise in housing prices and monetary policy is “weak.” .... “House prices began to rise in the late 1990s, and although the most rapid price increases occurred when short-term interest rates were at their lowest levels, the magnitude of house price gains seems too large to be readily explainable by the stance of monetary policy alone.”

Instead he blamed the increased use of “exotic types of mortgages and the associated decline of underwriting standards,” which could have been curtailed with stronger government regulation. “The lesson I take from this experience is not that financial regulation and supervision are ineffective for controlling emerging risks, but that their execution must be better and smarter,” he said.

Economic Law -- lower interest rates yield higher asset prices (all other things being equal)

Bureaucratic law -- when a government bureaucracy fucks up, the bureaucracy invariably claims it needs more power to prevent the problem from recurring.


Bernanke's explanation that the housing bubble was caused not by lower interest rates but instead by a lack of sufficient regulatory oversight says more about his bureaucratic instincts than his economic reasoning.

[alexamenos]

One small hint as to why the Fed administrators and acolytes are so adamently opposed to a meaningful audit measure:

Jan. 7 (Bloomberg) -- The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008.

The Federal Reserve handed Goldman Sachs and a few other buddies a hundred or so billion dollars with AIG acting as the middleman and then said, "lets keep this a secret among friends."

To borrow a line from Stalin....if someone steals $1,000, he's a theft. If someone steals $100,000,000,000 he's a financial wiz who kept our economy afloat.

[Usually Lurkin]

As almost always, the Onion helps me to make sense of alexamenos's paranoid Ron Paul mumbo jumbo:

WASHINGTON—The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct.
. . .
A few U.S. banks have remained open, though most teller windows are unmanned due to a lack of interest in transactions involving mere scraps of paper or, worse, decimal points and computer data signifying mere scraps of paper. At a Bank of America branch in Spokane, WA, curious former customers wandered aimlessly through a large empty vault, while several would-be robbers of a Chase bank in Columbus, OH reportedly put their guns down and exited the building hand in hand with security guards, laughing over the inherent absurdity of the idea of $100 bills.
...
The realization that money is nothing more than an elaborate head game seems to have penetrated the entire country: In Wilmington, DE, for instance, a collection agent reportedly broke down in joyful sobs when he informed a woman on the other end of the phone that he had absolutely no reason to harass her anymore, as her Discover Card debt was no longer comprehensible.

http://www.theonion.com/content/news...nds_to_halt_as

[GermanDunk]

Daimler stock today

[alexamenos]

the unemployment game show

[mcsluggo]

Hayek versus Keynes Rap smackdown?

[mcsluggo]

Originally Posted by alexamenos

the unemployment game show

U is just a standard measure of the underlying phenom of the "level of employment" (actually, "U3", apparently). It is a standardization, not much more or less.... the question here is whether THIS standardized index misses some extra dynamics in an downturn versus a broader measure (one that includes discouraged workers, for instance). Ex ante I would SUSPECT that it WOULD catch something more, but an eyeball glance at teh two time series makes tham LOOK pretty damn consistent with each other (but eyeballs are often deceiving)


U3 (standard measure of unemployment) <<roughly 10% now>>
http://portalseven.com/employment/unemployment_rate.jsp



U6 (which includes discouraged workers) <<roughly 17% now>>
http://portalseven.com/employment/un...nt_rate_u6.jsp

[alexamenos]

Krugman's smelly dirty memory hole

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense...

...unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

Maximus Wackonomicis can see the writing on the wall, and of course he understands wherein the problem lies:

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery.

Of course...when Keynesianism fails it invariably fails because we didn't spend enough. That $800 billion obviously wasn't the kind of money that was needed all along. had those obstructionist republican types not gotten in the way then the recovery package would have been more like what Krugman thought was necessary:

...we need a fiscal stimulus big enough to close a 7% output gap. Remember, if the stimulus is too big, it does much less harm than if it’s too small...

When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.

That’s twice what the unreliable rumor says. So if there’s any truth to the rumor, my advice to the powers that be (or more accurately will be in a couple of months) is to think hard – you really, really don’t want to lowball this.--November 2008

Damn shame they didn't follow Krug's advice or we wouldn't be sitting in basically the same situation we were in 18 months ago....hey wait a second....$800 billion is a lot more than the $600 billion, isn't it?

We did follow Krugman's plan--we exceeded the worlds greatest keynesian's estimate of what was necessary, yet here we find ourselves staring at a very long period of japanese style deflationary stagnation with (as Krugman calls it) catastropohic levels of unemployment.

You gotta appreciate the memory-holish irony of this quote:

...over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy....the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover...

Krugs busts out the trope "it was Hoover's horrible laissez faire ways that got us into the great depression". Really?

It's especially interesting how Krugman refers to hard-money and balanced budget type of thinking as "orthodoxy". There is nothing orthodox about hard-money inside the beltway...when was the last time any person of political prominence described Ron Paul as orthodox? As Nixon said, 'we are all Keynesians now.'

Krugs is not a lone voice crying for Keynesian reason in the face of Austrian hegemony and he's delusional to suggest otherwise. The current situation and coming calamity (or extended malaise) are products of neo-keynesian/monetarist orthodoxy and it's the keynesian/monetarist solutions that are failing.

[dude1394]

Originally Posted by alexamenos

Damn shame they didn't follow Krug's advice or we wouldn't be sitting in basically the same situation we were in 18 months ago....hey wait a second....$800 billion is a lot more than the $600 billion, isn't it?

It is surprising (NOT) that I've yet to read this anywhere on the left side where they are touting Krugman as the guy who has it right. How many times can you be proven so damn wrong and still be considered credible?

[alexamenos]

Yeah, Krugs is wacked out of his mind. This depression may very well do to the presently hegemonic Keynesian / Monetarism school what the collapse of the Soviet Union did to communisn. I suspect Krugs recognizes this potential, hence his bristling at the 'green shoots' of what he refers to as the "orthodoxy"...a classic school of economic thought which has not been orthodox in nearly 100 years.

[alexamenos]

Keeping up with Krugs --


Some previous things we've learned from the esteemed Keynesian / NY Times Columnist:

-terrorists flying planes into buildings is good for the economy;

-people don't like to spend money to buy fun shit and therefore they need to be prodded in order to keep them from saving all of their hard earned dollars;

-congressman are excessively frugal and ill-disposed towards taking chances with taxpayer dollars.

Now we learn that a file cabinet full of IOUs from a bankrupt borrower is a really really valuable thing.

...Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund. The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted...

You have to be a Nobel Prize winning Keynesian economist to imagine that money which has long since been spent is patiently waiting to be spent yet again. Anyone under the age of about 62 who is counting on Social Security to fund any meaningful portion of their retirement deserves the cracker and catfood diet which is their future.

[dude1394]

It is amazing that he can honestly talk about the IOU's in the SS "trust fund" as investments versus...well IOUS that will have to be redeemed by more borrowing at higher interest rates to pay them off.

Unbelievable, anyone else running a pension plan like this would be perp-walked.

[alexamenos]

I suspect that deep down in his little socialist heart he knows good and well that Social Security is a welfare scheme with a highly regressive income tax and that the accounting facade is meaningless.

[DirkFTW]

Keynes v. Hayek: Round Two

[GermanDunk]

Great report on Greece by Vanity Fair

...As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past decade the wage bill of the Greek public sector has doubled, in real terms—and that number doesn’t take into account the bribes collected by public officials...

[DirkFTW]

"Gasoline is too damn high!"

I think this could turn into a promising campaign platform:

1) Rent is too damn high
2) Gasoline is too damn high
3) Deficit is too damn high
4) Jihad is too damn high
5) River is too damn high
6) Pollution is too damn high
7) Kids are too damn high
8) Speculation is too damn high
9) Healthcare is too damn high
10) Partisanship is too damn high

A little something for everyone!

[Underdog]

Lol, sounds like he's too damn high...

(or just high enough?)

[dude1394]

Home depot founder tells it like it is...

http://jammiewearingfool.blogspot.co...ma-im-not.html

Home Depot Co-Founder: 'I'm Not Sure Obama Would Understand Anything That I'd Say'
In a discussion about the current moribund job climate, Home Depot co-founder Bernie Marcus discusses the situation today contrasted with when he first started up the retail giant in 1978. Remarkably, the darkest days of Jimmy Carter were brighter than today's despair under the failed Obama presidency.
IBD: What's the single biggest impediment to job growth today?

Marcus: The U.S. government. Having built a small business into a big one, I can tell you that today the impediments that the government imposes are impossible to deal with. Home Depot would never have succeeded if we'd tried to start it today. Every day you see rules and regulations from a group of Washington bureaucrats who know nothing about running a business. And I mean every day. It's become stifling.

If you're a small businessman, the only way to deal with it is to work harder, put in more hours, and let people go. When you consider that something like 70% of the American people work for small businesses, you are talking about a big economic impact.

IBD: President Obama has promised to streamline and eliminate regulations. What's your take?

Marcus: His speeches are wonderful. His output is absolutely, incredibly bad. As he speaks about cutting out regulations, they are now producing thousands of pages of new ones. With just ObamaCare by itself, you have a 2,000 page bill that's probably going end up being 150,000 pages of regulations.
Brutal. Yet sadly, all too true.

Marcus isn't finished hammering the hapless Obama.
IBD: If you could sit down with Obama and talk to him about job creation, what would you say?

Marcus: I'm not sure Obama would understand anything that I'd say, because he's never really worked a day outside the political or legal area. He doesn't know how to make a payroll, he doesn't understand the problems businesses face. I would try to explain that the plight of the businessman is very reactive to Washington. As Washington piles on regulations and mandates, the impact is tremendous. I don't think he's a bad guy. I just think he has no knowledge of this.
He's wrong about one thing. Obama is a bad guy. This says it all.
IBD: Why don't more businesses speak out?

Marcus: They are frightened to death — frightened that they will have the IRS or SEC on them. In my 50 years in business, I have never seen executives of major companies who were more intimidated by an administration.
It's only going to get worse.
Posted by JammieWearingFool at 9:23 PM