June 30, 2010

Much ado about bullshit

Last week, New Home Sales came in WAY lower than expected. In fact, they came in at the lowest level since 1963, when the sales number began to be recorded.

So, naturally, economists, bankers and investors all took this data rationally and understood that in the face of nine months of inventory and still more properties waiting for a stronger market to sell into, this is a really good number since people still need a place to live. Further, they realized that while the new home market may be REALLY slow, the overall economy is growing and adding jobs. With that, it's only a matter of time before housing ramps back up though it'll be a slow ramp (my own personal view is that housing prices have bottomed, absent spot declines in markets and sub-markets, but that reinflation probably won't occur until we start seeing some broad, not general, wage growth).

But, that's not really what happened... while people didn't exactly panic, it was clear from the number of assholes talking about a double dip recession that there are still precious few looking at the big picture.

Meanwhile, a bunch of stupid old men (seriously, I think all these people are intellectual pygmies, especially Alan Simpson who should be setting an appointment with Dr. Kevorkian, not worrying about the debt which he doesn't understand) are meetin' to save social security. The ironic thing is that many of them were involved with the first fix in 1983 that levied new, higher taxes but didn't separate the funds. Never mind the fact that with minor, actuarial changes to the program, the long term solvency can be fixed easily, with little pain. The short term problem is PRECISELY why, once we get out of this economic mess, we have to return to a balanced budget.

Greenspan, unsurprisingly, still doesn't fucking get it.

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June 22, 2010

There's a ridiculously EASY solution to this

There is still a crisis in small business lending. The contraction of 2007-2009 hasn't eased any for small and medium sized business. Banks say there are fewer seeking credit and those that are asking for loans aren't credit worthy.

That's a load of bullshit. The problem is, the enhanced guidelines being followed by the banks fail to take into account real world conditions and are overweighted toward hard asset financing vs working capital.

There is, of course, a really easy solution to this... we need to end programs that allow banks to buy Treasuries with deposits and soak up a very nice spread. It's time for them to start taking a little risk again. If they won't, the government should immediately open up a small business funding program and allow all originators of FHA loans that ability to originate loans under that program and sell the loans to the government. We have to get employers back into a position to expand and we can't do that without funding.

While we're on the subject of the economy, let's take a moment to more completely denigrate those calling for AusterityNOW! These are some of the same people who also believed in Drill Here, Drill Now (you know, the assholes blaming enviros for BP's colossal mistake in the Gulf) and are basically the teabaggers you see out, running their little teabagger errands, demanding services (like Medicare and Social Security with a fat COLA) all while bitching about how high their taxes are and making the 7% of the federal budget that's purely discretionary the bogeyman for all their financial problems.

OK, here's the deal fat, middle class boomers... you fucks have made taxes the central issue of your entire political lives as you got more and more conservative. You took your eyes of the ball that IS income and forget that to pay taxes you have to have some. The declining amount of disposable income you've been dealing with for years isn't because of taxes (most of you are paying the lowest tax rates in more than 60 years), it's because income growth in the US (for the lowest 97% of the economy, i.e., the vast majority of Americans) has been non-existent for more than 30 years. Sure, there were a few good years under Clinton but then he got a blowjob from some fat chick and then we got Bush who promptly put an end to the rebuilding of the middle class.

As an aside, it would be super if certain companies would actually pay their taxes like the rest of us do. That would certainly put a big hole in the deficit.

Now you're all whining about the federal deficit as if the massive deficits right now aren't keeping the economy from going into a deflationary death spiral. The latest bit of nonsense is this ridiculous piece from David Brooks (or, as we like to call him, the poor man's William F Buckley).

By 57 percent to 37 percent, voters in these districts embrace the proposition that “President Obama’s economic policies have run up a record federal deficit while failing to end the recession or slow the record pace of job losses.”

Instead of building faith in government, the events of 2009 and 2010 further undermined it. An absurdly low 6 percent of Americans acknowledge that the stimulus package created jobs, according to a New York Times/CBS survey.

Well of course these people think that. They've had a steady diet of just this kind of bullshit from conservative commentators doing their best impression of people far smarter than they. And these voters, overwhelmingly boomers, believe it. None of them look deeply into the talking points from the right and instead take in every breathless word from Rush Limbaugh as truth despite the fact that Rush knows dickall about, well, anything.

The reality is that absent the stimulus (which, because of the Republicans and a few weak ass Democrats, was far smaller than it needed to be) this country would have an unemployment rate pushing 15%. Without the so-called bailouts, we'd have unemployment in the high 20 percent range and we'd be in a sever depression. Have the Democrats done a piss poor job of messaging this? Hell yeah. Democrats need a solid round of completely justifiable self-aggrandizement.

Of course, Brooks doesn't stop there...

Bitterly and too late, Dr. Faustus acknowledged that after a period of overconsumption, Americans now see debt as the primary threat to their well-being. Dr. Faust and his fellow liberals may see themselves as the champions of the little guy, but in the new age of austerity, many voters see them as protectors of the special interests, as the guardians of the unaffordable promises.

Brooks, being an even bigger buffoon than Bill O'Reilly, never bothers to mention that the underlying assumption (deficit spending in a recession) is EXACTLY the right thing to do. He also never bothers to mention that if these people get their way, they can expect their benefits to be cut. Dramatically. And this little offer from Gates would be about $300 billion too little.

I think that's the best talking point to get these folks to refocus their efforts because they need to know... what they are demanding will end up forcing them to eat catfood in their golden years. And we still haven't accomplished any of what's needed to rectify the income inequality that's choking this country.

I leave you all with this from Jim Chanos. You won't know who he is, so I'll just say he's a really rich guy who got that way by making smart decisions and working hard.

“What I do have a problem with, personally, is the hedge fund industry or the private equity industry or the venture capital or the real estate –all private capital –asking for and still getting to some extent, lower tax rates on certain forms of income that I believe are income, not returns on capital, than say teachers, soldiers, fireman and policeman.”

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June 08, 2010

The deficit (right now) doesn't matter

With all that's going on, it's hard not to think that we're spending ourselves into fiscal oblivion. In the past, I've been a deficit hawk. There were a few of us who started bitching about the irresponsible tax cuts and debt increases coming from the past administration. Our point was not then (and isn't now) that we couldn't borrow the money, it's that it didn't make any sense at the time. What Bush and the Republicans in Congress did prior to 2006 was massively increase structural deficits to finance the operation of the government. The problem with that is, when a serious economic dislocation occurs, you need to be able to spend massively to make up for the shortfall in the private sector.

And that means lots of new debt. If we were already in deficit, it really starts to add up.

In effect, what the tax cuts did was double our debt without providing solid, broad economic growth and leave us in a hole. Then came the global credit crisis and the most severe recession in this country since the Depression. Unfortunately for all these new deficit hawks, they're getting it wrong (just like Pete Peterson). Now they're all clamoring for fiscal austerity.

OK, let me point out that this isn't new (we talked about it last year). Those same folks also said stimulus wouldn't work and it did (the most recent job report notwithstanding... but, take a second and remember WE TOLD YOU STIMULUS NEEDED TO BE LARGER). They also said that all this new debt would drive up interest rates (they were wrong, again), mostly because investors need to make returns on their money and there is precious little in the way of investments out there in fixed income world in terms of new issuance. Which means the government is the only game in town if you want a net positive return.

These new deficit hawks promoting austerity were wrong then and they are wrong now. This guy is right... spot on, completely, right. So is this guy.

Trumka made it very clear. “We have no short-term deficit problem.” We have a jobs problem, and we’re not doing a heck of a lot about it. And more is being done inside Washington to pay attention to the former than the latter. “The deficits facing our country right now are our jobs deficit and our infrastructure deficit.”

The deficit, right now, ain't the problem. Without a real economic recovery that's sustainable, tax receipts will never go up and we'll continue running structural deficits which will continue to add to the debt. The deficit will come down, on it's own, when we get the economy really moving. It's starting now and there are tons of positive signs. However, doing what the assholes want will crush that nascent recovery and then we'll have much larger problems.

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June 04, 2010

The jobs report... Reality is Reality...

The jobs report, in no uncertain terms, sucked. Obviously, it's prompted still more questions about additional jobs stimulus and whether the government should do more. Of course, had the stimulus been what was needed more than a year ago, all this would be a non-issue. But Democrats caved into the Republicans and we got their version of a stimulus plan in the name of bipartisanship.

Can we now say enough with bipartisanship and let's get on with doing what's best, politics be damned (though, in all honesty, if the D's are afraid of the R's attacking them for doing the right thing they need to think about a different line of work)?

It's time to correct the error and finish what's needed to recover, once and for all. We've tried the carrot, now it's got to be the whip to employers to get them back into hiring.

The 09 stimulus package, being way too small, was ineffective in a couple of areas, including changes to tax policy which benefited employers who hired additional workers. All in all, one of the more decent right wing economic ideas that nonetheless still doesn't work in the real world. Why? Well, as it turns out, employers make the decision to hire based on profits and expected future revenue, not taxes. Of course, I knew this years ago but Republicans are only now catching up. So are some of my dumber Democratic brethren.

So, we need a stimulus plan that heavily incents hiring and wage growth. At the same time, we need to remove incentives for outsourcing and change tax policy to effectively end the subsidy enjoyed by many companies for moving workers overseas. Additionally, capital gains and taxes on dividends (including those hidden as retained earnings) must go up and we need to begin closing corporate income tax loopholes... I'll even give them a reduced tax rate but no more escape hatches other than those for hiring Americans.

And I'm also a massive fan of a 45% tax rate on incomes exceeding $1mn individually and $1.5mn as a couple. Sorry, but y'all have had an effective tax rate of less than 20% for too long and it's time you paid your fair share like the rest of us.

I'm tired of hearing the President and Democrats talk about how much they want the economy back on track and then talking about the random, stupid things they are doing to achieve that goal (it's like you're all sharing Larry Summers rat brain) as if any of it will be effective. The time for half measures and playing nice while hoping for the best is over. We need leaders now who will do the right thing.

The current state of the economy is, entirely, exactly what was always bound to happen since policy shifted in this country toward Friedmanite ideas and a right wing ideology. It all looks great on paper, in theory, since it promised the proverbial free lunch. However, in the real world, it's a set of policies and ideas that will always lead to disaster.

If Democrats need some help explaining that, just let me know.

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May 05, 2010

Dear Eurozone : Fuck Greece

Seriously, y'all, just let that little basket case of a country go down the motherfucking tubes? Retirement at 55 with a full government pension?!?!? Oh, and more than a third of the population doesn't pay any tax and the rest of the country is actively engaged in tax evasion?

Cut these fuckers lose and let them sink into the Aegean.



Fuck Greece. Honestly, it's like a teabagger heaven... They get government services, but they don't pay for them. And now, you get to see what happens as a result, your country goes broke and no one gives a shit about it.

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April 22, 2010

Timing is everything...

In the debate over Financial Regulatory reform (or, as I like to call it, Financial Re-Regulation) a troubling theme has popped up from even those who support reform (tacitly, at least). Basically, there are a number of forces saying we're moving too fast and we need to be more deliberate with regard to changes to the regulatory framework. To support this idea, they talk about the 1907 Panic and the time between it and the creation of the Federal Reserve System. Then there were the reforms during the Depression and the lag there was about four years.

Here's the problem with this argument... we now have access to historical data on panics and depressions going back to the 19th century that's very easy to find. Our ability to evaluate and make changes should be much faster now. In short, we know what needs to be done to create a viable framework that will allow this country to prosper without the occasional market dislocations that lead to economic shocks.

We are more than 2 years since the collapse of Bear Stearns. This isn't at all too fast. If anything, it's moving more slowly than it really should. This isn't an issue where we need to reinvent the wheel...

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April 15, 2010

Burt Folsom is the moron of the universe

Thursday on Bloomberg, Burt Folsom fell in with Amity Shlaes with regard to the effort of the right wing to deny the benefits of the New Deal and ignore what really prolonged the Depression in the US.

Sounds kinda dry and boring, but considering what's going on now, it's hyper relevant.

Burt's prescription for the US? Cut income and capital gains taxes which will do only one thing... depress economic activity AND concentrate wealth in this country. For the bottom 97% of the people in this country, there is no benefit. There are a few reasons...

1) Tax rates are, even without the Bush tax cuts which dramatically increased the deficit, on the left side of the Laffer Curve which means that additional cuts reduce government revenues AND don't produce additional economic activity because if taxes are lower, people don't need to do as much to keep income at a steady or slightly increasing level.

2) The policies Burt proposes will end up concentrating wealth at the top since it's basically a reduction on the taxes levied against capital, not labor, without making any demands on that capital to be put to productive use. It's like the positive tax benefit of an IRA, you get to continuously reinvest your earnings without paying taxes, concentrating your earning power. Note that you're not really creating jobs or real GDP. Another example, take the case of banks today... they can plant money in Treasuries at 3-4% while they pay depositors 1% or less. It's a risk free trade for them and it doesn't require them to extend credit to anyone in the US which might actually help the economy. It does, of course, make the banks a lot of money since they don't need to reserve for losses.

And Burt the Bore even reused the tired old Republican talking point about revenues increasing with tax cuts which even David Stockman of Reagan Administration fame admitted years ago wasn't at all valid since the increase in revenues was temporary due to tax planning (people deferred income and capital gains until the tax rate changed, then took the charge. If you're an idiot like Burt Folsom, you draw the erroneous conclusion that lower taxes equal higher revenues which isn't the truth at all. This is one of those times when you just can't listen to stupid people like Burt Folsom).

Now back to the Depression... Amity and Burt both think that the New Deal had little to do with economic recovery out of the Depression. They say it was World War 2 that really did the trick and they're right. However, they're ignoring the massive GDP growth during the post-New Deal 30's up until the 1937-38 recession which was driven by the disastrous budget cuts demanded by conservatives at the time. They're also ignoring that unemployment had been cut basically in half when new workers are factored in. In short, they ignore the very real success of the New Deal and Keynesian economics in a deflationary environment.

But don't take my word for it, here's a really good take on Amity's shitty work that could be repeated, almost word for word, in a review of Burt Folsom's crap-o book.

Burt finished up talking about the Bush tax cuts which produced anemic growth in GDP but actually caused losses in real wage growth because they were targeted at (wait for it) THE RICH. He then went on to assert that after World War 2, the Republican Congress cut taxes and we had an economic boom. The top tax rate, even in the 50's, was 91%, far higher than now (35%) and higher even than the rate during the 30's under Roosevelt and the Democrats. It wasn't a tax cut that created an economic boom in the 50s.

But don't tell Burt Folsom... he wouldn't want to hear it anyway.

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On the economy, two things to remember

  • The DJIA is now within 500 points of it's high before Lehman Bros and AIG.
  • The assistance given by the Federal Reserve and the government (TARP, TALF, etc) is going to cost much less than expected... and FAR less than the S&L bailout of the early 90s.
  • For everyone still kvetching about bailouts, the reality is that they saved the entire economy from a meltdown that would have made the depression look like good times. Of course there is a cost and we desperately need reform of financial services. However, this actually isn't all that bad when you compare it to other fiascos.

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    January 20, 2010

    You've heard it from me...

    ...now you can hear it from an economist. Current deficits are not a problem and should be far larger. We're in a recession which results in lower taxes at the same time government is spending much more. In fact, it's criminal that the Democrats have allowed the blue dogs and every Republican to browbeat them into spending less than needed to pull the country out the economic abyss.

    And yeah, cutting taxes ain't going to do the trick. Sorry. You're as dumb as Debra Medina if you think that. And no, I don't want to hear your theories on the Constitution.

    But back to deficit and debt mania. Digby thinks it's all about hurting social security which is pretty accurate considering that it's all coming from the Petey Peterson Foundation which we talked about almost a year ago. Let me save you all a lot of worry and prep you for discussions you may have some of the, shall we say, ill-informed members of your family : we do not have trillions of future liabilities for social security and medicare/medicaid. The reality is that we have an actuarial hole in the funding because people are living longer and there are fewer workers supporting too many beneficiaries. You fix that by increasing the retirement age (which really should have been done 20 years ago) and then by repealing the tax cuts of the last ten years.

    The reality of our economic situation is that it's not as dire or disastrous as Peterson and his folks would think. We're running deficits now because of a number of factors...some out of our control and right now deficits are not our biggest concern. It's the economy, stupid, and if we do what Peterson wants, we'll be in the economic toilet for a long time.

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    January 19, 2010

    Thank you, Kenneth Feinberg

    It's always refreshing when something works. President Obama's pay czar decided that some at AIG didn't need to make more than 500k per year. Some of those people wrote him a letter and said they'd resign and pull far more in severance. Feinberg looked them in the eye and said, leave.

    So one of them resigned and as of today, the company has not collapsed. As for whether or not she'll get her full severance pay out, that's still up in air. I really hope not... because she wouldn't have gotten it in the event of a bankruptcy (she would have been a WAY junior creditor).

    The reality is that none of these people are too valuable to replace

    Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said no AIG employee was irreplaceable.

    "We have been duped into thinking that these AIG employees have some kind of secret code that no other employee could discover if they were hired to replace them and therefore they are able to basically hold the company ransom," Hurley said.

    Goddamn that do sound familiar, don't it? Sorry, couldn't resist the gratuitous high-five with myself from almost a year ago. As if that wasn't enough, here's the kicker to the whole thing (and I'm not really happy about this); Companies can pay more than the limits he sets but they have to do it in stock which really sucks for existing shareholders who are about to get diluted. As it turns out, the folks at AIG don't like the idea either. Why? Excellent question!

    Or there was A.I.G.’s behind-closed-doors argument against Feinberg’s directive to pay its top people in large part with A.I.G. stock. The company’s reasoning? That the stock — trading briskly at the time at around $40 on the New York Stock Exchange — was actually worthless.

    Reality is always way better than fiction, don't you agree? Wouldn't you also like to see some of these fuckwits out repairing a sidewalk with a sledge? Let them see what real work feels like and pays.

    As I write this post, this song popped into my head...

    I guess that means I better, you know, stop before I do something rash.

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    November 30, 2009

    Two data points, one conclusion...

    First off, more people were out shopping on Black Friday this year. However, on average they spent less than last year. Not the end of the world and aggregate sales should be higher... but it paints a grim picture of a still distressed consumer.

    Next up, banks are taking cheap money from depositors and the Fed and then investing it in US Treasuries. Why? Well, banks survive off fees and spread income. Spread is the difference between what banks pay depositors (or the Fed) and what they get in terms of a return on the money they lend. Since they are essentially paying 1% or less to depositors, they can make a risk free return by investing in long term Treasuries at 3-4%. It's easy because for the foreseeable future, there is no reason for banks to expect short term rates to spike higher which would destroy the spread.

    So what to do? One idea is to jack interest rates to 2% which would keep them low and 'force' the banks to stop with the treasury trade. Of course, what it would really do is drive up longer term rates which would stifle the recovery in housing and equities destroying what little of the wealth effect has been rebuilt. So, in other words, that's a stupid idea.

    What we need to do is nationalize one of the big banks and Geithner needs to let the others know, in no uncertain terms, they're next if they don't start lending to consumers and businesses. Only then will they finally act to restore credit to the economy.

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    November 10, 2009

    Questioning the stimulus...

    Chris Thorman forwarded me a piece he did on the effect stimulus funds have had on construction jobs. He did a really fantastic job analyzing the data without skewing in one direction or the other. The verdict is that at this stage of deployment, it's clear the stimulus is having a positive impact, albeit a small one. That will likely change on a go-forward basis as more funds are deployed and projects approved and funded enter more labor intensive phases.

    This piece is exactly the sort of thing the MSM and bloggers should be writing about, not the process stories involving the he-said, she-said between R's and D's in DC over 'wasting' money and deficit spending. Politicians don't know what the hell they're talking about, especially on the Republican side.

    While we're on the subject, it might be good to actually learn a little something about stimulus in an economic decline. Stimulus, and this is what's so confusing to our rightard friends, is a stop gap measure to arrest decline, stabilize and reignite growth. You can do it every time you have a recession, however there's a big difference between monetary (the Fed lowers rates) and fiscal (the government spends money) stimulus. You can only do the latter under limited circumstances when certain monetary factors are in place and the net effect on inflation is zilch. Otherwise, you extend UI bene's, drop interest rates and wait it out. During this cycle, we hit the trifecta... we have tightening of credit due to an asset bubble and collateral overvaluation, we have tons of capital sitting on the sidelines not being being invested in any sort of recovery and a massive write down of assets that functionally eliminated trillions from the economy and caused massive deflationary pressures. In that type of environment, the Fed can't just lower interest rates (monetary stimulus) and we'd recover. The problem, as CR and Krugman have been pointing out, the Fed would have lower rates below zero to promote growth and you can't do that. Thus, you need the government to spend lots of money. Voila! Fiscal stimulus.

    Despite what some have lied about, fiscal stimulus is not always the cure for a recession and no one (outside of the rightard spin machine) is saying that, cue Krugman yet again. It's also why some deficit hawks, myself included, have done an about face and said the government should be spending a lot more and borrowing at least another trillion. The key in this type of situation is to think about things in terms of the house on fire metaphor. When your house is blazing, you don't worry about what that water used to put it out is going to cost or fret about how much of it will soak your furniture. So, yeah, inflation is not so much a concern when facing a deflationary death spiral that leads to a nasty depression.

    Which takes us back to Thorman's piece and this, also from Krugman. We knew, months ago, that we needed more stimulus and that it needed to be more spending than tax cuts. Instead, the D's (at the urging of the President who either ignored good advice or was given bad, or some combination of the two) cut a deal with R's and gave us a stimulus package that was too small for the crisis at hand. Thus, the jobs saved number has been low and we're still seeing declines in employment. When the book is finally written on the government's response to the crisis, it's going to note that what was done to shore up the financial services industry was laudable with few exceptions (see here and here). However, the government's fiscal stimulus was woefully inadequate and caused unnecessary suffering for Americans as a result of political posturing. If you want someone to blame, look no further than the teabaggers, Limbaugh, Beck, Hannity and Savage. None of them knew what they were talking about yet they pontificated at length on the evils of 'encroaching government' and drove a political movement made up of people who were, in effect, hurting themselves.

    Then turn to blame the chickenass politicians who ignored good advice and went with political expediency rather than take on the forces of stupid in a head on PR war. Let this be a lesson for all voters... do not support candidates who are wishy washy and wrong on issues. Support the ones who'll take a stand and fight, the ones who'd rather convince those who disagree with them than compromise with naysayers in some useless gesture.

    We have always had issues that the vast majority of people in this country just don't understand. We've had one party who has turned lying to them into a cottage industry which has helped them get elected and re-elected. We have another party who polls incessantly, finds out what people think, and agrees with them. We need politicians strong and bold enough to stand up and say 'I know that's what y'all think, but it just ain't so. The other sumbitch is lying to you and here's why...'.

    And yeah, it really is that simple.

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    October 15, 2009

    Payroll Tax Holiday?

    If we need another round of stimulus, I can't think of a better idea...

    The Administration and Congress are informing the public that everything is beginning to look good because of the trillions of dollars that they provided to repair the banks. The problem is that they have it backwards; the economy is best fixed from the bottom up rather than the top down.

    In June 2008, Warren Mosler proposed three ‘bottom up’ policies to fix the economy. The first proposal is for a full Payroll Tax Holiday for both employees and employers. This stops the government from taking approximately $20 billion a week from people working for a living (a total of $600 per month for someone making $50,000 per year) rather than using that $20 billion to keep some bank limping along. The Government would still continue to credit the social security and the Medicare accounts, so employees and employers will never have to pay back the monies they received. The Payroll Tax Holiday would restore income to American workers (and businesses) to help make their loan payments, rents, pay bills, and sustain their households. The real economy would benefit as Americans both reduce debt and resume consumption. Banks will benefit because there will be fewer delinquencies and foreclosures in non fraudulent mortgages, which will also help limit home price declines. The Payroll Tax Holiday would also reduce corporate cost structures and help contain prices and inflation. The payroll tax is regressive (it is not graduated based on income like the income tax), so the Payroll Tax Holiday will benefit those in the lower income levels the most. This “People Power” solution will be far more effective than the Bush and Obama trickle down solution. And the Government can decide to end the Payroll Tax Holiday should the economy become too strong and inflation become a concern.

    While the banks did need to be stabilized, the President and the Congress (mostly because of Republicans and Blue Dogs) focused the stimulus more on marginal tax cuts than on real tax cuts to people who would actually spend money.

    Of course, Mosler isn't saying anything about wage growth which is the real, far larger problem. Until we fix that, we're going to continue to concentrate wealth at the top and we'll be continuously vulnerable to another economic meltdown.

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    October 09, 2009

    Once more, Bruce Bartlett

    Why Bartlett continues to call himself a Republican is a mystery, especially when he says things like this...

    His conservatism starts with the idea that high taxes are no longer the problem, even if complaining about them still makes for good politics. This year, federal taxes are on pace to equal just 15 percent of gross domestic product. It is the lowest share since 1950.

    As the economy recovers, taxes will naturally return to about 18 percent of G.D.P., and Mr. Obama’s proposed rate increase on the affluent would take the level closer to 20 percent. But some basic arithmetic — the Medicare budget, projected to soar in coming decades — suggests taxes need to rise further, and history suggests that’s O.K.

    For one thing, past tax increases have not choked off economic growth. The 1980s boom didn’t immediately follow the 1981 Reagan tax cut; it followed his 1982 tax increase to reduce the deficit. The 1990s boom followed the 1993 Clinton tax increase. Tax rates matter, but they’re nowhere near the main force affecting growth.

    And taxes are supposed to rise as a country grows richer. This is Wagner’s Law, named for the 19th-century economist Adolf Wagner, who coined it. As societies become more affluent, people demand more services that governments tend to provide, like health care, education and a strong military. A century ago, federal taxes equaled just a few percent of G.D.P. The country wasn’t better off than it is today.

    Yes, that's right kiddos! A conservative who actually understands the Laffer Curve.

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    September 09, 2009

    I'm gonna keep pounding on this...

    ...until y'all get how important it is. Yes, that's right... ANOTHER post about income inequality. Quit crying and pull up your big girl panties.

    There are two data points here. The first is that income inequality is the highest it's been since the Depression, actually since WW1. It's even higher than 1928. The second is that the top 1% of this country has managed, during the Bush years, to capture TWO THIRDS of the income growth in this country.

    What can we glean from this, other than that I think it's important and you should as well? Supply side economic policy doesn't build jobs or a strong economy because of it's irrational focus (in practice) with tax cuts as opposed to fiscal responsibility and tax targeting for desired outcomes. The notion that you can drive expansion of the economy by increasing capacity through preferential tax cuts for the wealthy is, well, WRONG. The rich, rather than invest in new capacity, will invest in existing assets. Or keep the money in cash. The certainly aren't building a new tire plant in Cleveland.

    Further, when you combine this information with the doubling of the federal debt and the reality that at some point in the future we'll have to pay higher interest rates due to this debt, you should get pretty pissed about ever believing anyone, Republican or Democrat, who advocates supply side.

    In fact, I'd like to punch them in the face.

    Posted by mcblogger at 10:27 AM | Comments (1) | TrackBack

    September 04, 2009

    Income, Taxes and some Wage Growth : What American's Need Now

    Burger King and Goldman Sachs

    Let's cut the crap... the way to end income concentration and restore the middle class is taxes, but it's not what you think. Instead of taxing massive corporate salaries and bonuses that are received by individuals, tax the companies giving them. Massively, for any management level salary that exceeds 20x the pay of the lowest paid worker. The second thing that absolutely has to be done is a tax CUT to companies on a scale that increases as the lowest paid worker (no distinction between hourly and salary) gets closer to making more than twice the poverty level. For a family of four.

    This incentivizes good behavior, creates real wage growth and has no net negative effect on businesses because they'll get a tax cut just by doing the right thing. The stick there is scrubbing every corporate loophole and making this the only way to reduce tax burden.

    I offer this as a solution to income disparity and the lack of strength in employment. If this country is to endure, it's the middle class that must expand. Keep in mind this is coming from someone who makes many multiples of the poverty line. I voted for Obama knowing that my taxes would probably go up either on earned or unearned income.

    Some of you will think it's unfair that we tax higher incomes more than lower incomes. Here's the thing... a doctor in Botswanna doesn't make anything close to what a doctor in the US makes. Part of that disparity is that the American doctor was lucky enough to be born in the US. For winning the ovarian lottery, he or she gets the privilege of a prosperous career. This country is the way it is in large part because of those who came before us, who paid their taxes and created an environment where that doctor could prosper. Why shouldn't they help pay to support it for the next generation?

    To put it more plainly, someone like myself has a skillset that allows us to make a very comfortable living in the US. In Bangladesh, those skills would be worthless. Being HERE, in this country at this time, affords me the opportunity to live very well. So, no, I don't have a problem supporting the country that enables me to do that.

    Neither should CEO's and the other uberwealthy whose only talent was coming out from between the right pair of legs.

    Posted by mcblogger at 12:21 PM | Comments (0) | TrackBack

    August 31, 2009

    Get your Treasuries while you can!

    As the economy continues to stabilize overall and even return to growth in some sectors, Treasury's issuance of US debt is going to decline. Sharply.

    OK, quit with the laughter, asshat... Here's the thesis:

    1) Current deficits are being driven by war obligations (about to be sharply reduced), economic stimulus and infrastructure reconstruction. As the economy stabilizes, stimulus is going to stop as is infrastructure reconstruction (there's a limit to how much we can pump in for infrastructure in one year without causing inflation). The two combined with war obligations will dramatically reduce deficits.

    2) Tax receipts will increase because of the economy and slightly higher tax rates. This will close the gap and put us back into surplus.

    3) New issuance driven by SS and Medicare long term short falls won't be needed as the government steps up to make actuarial changes to the system to bring long term projections back to par.

    As new issuance falls back, there will only be refinancings to look forward to. This may help explain why investors are so eager, despite our allegedly precarious financial position, to buy our debt. It's not just a safe haven, they're looking down the road to severely diminished supply.

    Posted by mcblogger at 09:28 AM | Comments (0) | TrackBack

    August 13, 2009

    Stiglitz on infrastructure

    Wednesday afternoon on Bloomberg, Nobel laureate Joseph Stiglitz was interviewed by Carol Massar about the economy and the best thing to do moving forward. While it primarily focused on the banks and the aid to them (Stiglitz wasn't a huge fan of providing the banks with equity without making sure they'd lend money), the discussion veered over to investments in the country as part of the stimulus. He also discussed the 30 years of underinvestment and our need to step it up.

    Specifically, he was talking about raising taxes to fund this. We've coasted on the infrastructure (schools, roads, water systems, telecom systems) we built over the 20th century for basically the last 30 years. We've failed to adequately build for a prosperous future and now we have to make up for lost time. Normally, we could borrow and invest but we can't right now because we've been borrowing and spending on tax cuts for years. As it turns out, tax cuts, once again, don't pay for themselves.

    So we need taxes, but the good thing is that taxes collected and spent on building things we need helps the economy through employment and increased economic efficiency. In other words, it's not lost down a black hole like a war.

    Posted by mcblogger at 02:15 PM | Comments (0) | TrackBack

    July 31, 2009

    Reversing Reagan...

    Yeah, it needs to happen. And we'll all (even the rich) be better off when it does.

    The Reagan Revolution didn't help the country, it helped about 7% of this country get very wealthy while income for the other 93% stagnated. If that doesn't reverse, we're headed for a disaster that will make this country weaker than France.

    Kuff has more on what's happening on a local level with property taxes in the Houston area. It points out something fundamental... the obsession with ever lower taxes has led our schools, roads and many other basic pieces of infrastructure to deteriorate. As a result, we're now having to cut back on already reduced services. And then people wonder why things are bad.

    The fault is just as much with the Republicans as it is with the Democrats and I'm not just talking about the ardent tax cutters. Don't get me wrong, selling the voting public on the free lunch that is a tax cut is cynical and fundamentally traitorous. However, the ones who know this on both sides and say nothing... well, they're even lower.

    Posted by mcblogger at 10:26 AM | Comments (0) | TrackBack

    July 15, 2009

    The Stupid Peter Boockvar

    While I like MillerTabak for the most part, I do not like Peter Boockvar. Peter LOVES going on TV to talk about, well, economics and his take on the course we're on. I saw him on Bloomberg this afternoon talking about 'how the economy has to deleverage' which is essentially the same thing he's been saying since before the TARP was put into place.

    This afternoon Peter brought up consumer refinancing at lower rates which the Fed and government programs have made possible. Peter doesn't think this does much good because he thinks the debt should be, in a word he's fond of using, extinguished. The mechanism to bring this about remains a mystery as does what Peter expects Americans to do while this delevering is ongoing since it will cause explosive deflation with a concomitant depression (assets decrease in value along with goods and services meaning businesses run constantly in the red and the workforce contracts... basically, the Great Depression on steroids. With an HGH booster).

    Here's the thing... whether you are paying off or refinancing debt, you are increasing your disposable income. In this environment, it keeps the consumer basis of the economy from falling off a cliff and increases savings. Savings that, in effect, delevers consumer balance sheets without having to liquidate assets or cause a panic. Employment, while diminished, doesn't implode. Neither do prices for goods and services as everyone is given some breathing room. As banks regain confidence in the performance of their books, and investors in the performance of asset backed securities, credit for expansion becomes available again and asset prices start to increase which in turn takes even more pressure off consumer balance sheets.

    The caveat to all this is that income is also dropping which, even with refinancing, puts pressure on the ability of save or spend. However, the rate of decline in consumer spending has decelerated and the savings rate is much higher than the loss in incomes.

    What we're going to see next is a pickup in hiring as manufacturers gear up to meet decreased demand (sounds stupid but our demand right now for many items outstrips production. Prices haven't gone up because we have inventories still to sell... that reverses around August). As those workers come back on, they'll start spending again, further driving the economy. In the end, it all comes back to normal over the next two to three years. We would nominally increase GDP to pre-recession levels quickly but we won't this time because of ... the very delevering that Boockvar says is so essential.

    I think it's going to be 2011 before we return to 2007 levels of GDP. However, it's going to be a more productive economy with a much stronger balance sheet. But, I'm sure, Boockvar will still find something he doesn't like in it.

    Posted by mcblogger at 03:12 PM | Comments (0) | TrackBack

    July 14, 2009

    It's time to bail out the bailout!

    By now I'm sure you've all heard pundits on both sides discussing the bailout. Well, the truth of the matter is we can never know how bad things would have gotten without it. My guess would be, had Bush not acted quickly to save the financial industry (hey, even a broken clock is right twice a day!) and had Obama not acted to pass the first stimulus package, we would be in a deep and dark depression. I would assert that today we'd have 25% unemployment, the financial markets would have ceased to function and we'd have absolute mass hysteria. Instead, we are left with almost 10% unemployment, financial markets that are recovering and yes, still mass hysteria. At this point, the primary problem we face is consumer confidence.

    When the first bailout happened, nobody was writing about us being on the edge of a great depression. Nobody realized JUST how close to the edge we really were. So we reacted to avert a major recession. Because things were so bad, instead we GOT a major recession and averted a major depression. Now is the time to help aid our ascent out of this mess and to treat the real problem. Sitting back and doing nothing is negligence at best and absolute meanness at worst (people ARE suffering).

    So, how do we do it? Well, we need to spend a bucket of money. On what, you may ask. Well, what's a big problem we are currently facing. Oh, ENERGY. The "cap and trade" bill that passed the House has been watered down so much it is currently USELESS. PLUS, and this is most important, it is a "free market" solution to the problem. However, some problems the state faces are "bigger" than the market can handle. What we need is a NEW solution. The government has the ability, if it so choses, to change the paradigm completely and create unlimited "free" energy. Here's how:

    Step one: immediately build wind farms in as many locations as are feasiblle.

    Step two: create a tax nullifying the price for businesses and people to install solar panels on their houses.

    Step three: contemplate building nuclear facilities in places where wind and solar are not feasible.

    Step four: massively upgrade the electric grid to allow for distributed power creation so people can feed into the grid as well as take and, hopefully, the grid can become 100% self sustaining without the use of coal OR natural gas plants.

    Step five: GIVE THE ENERGY AWAY. Yes, you heard that right. It's the single biggest business AND consumer "tax cut" EVER. No more electric bill... EVER.

    Furthermore, since we have a problem with car emmisions, let's build biofuel "farms" and refineries across this country. Our goal should be to allow algea to COMPLETELY replace oil. Again, GIVE THE STUFF AWAY. Not paying for gas would be the SECOND biggest "tax cut" for businesses and consumers ever.

    This plan stimulates the economy now (can you imagine how many jobs would go into all of this building) PLUS gives us a MONUMENTAL comeptitive advantage in the global marketplace in years to come.

    Uh oh, what about the boogy man, the national debt. I'll stipulate, it's a PROBLEM. HOWEVER, we will NOT fix the deficit in the short term or debt in the long term by allowing tax revenues to stay as low as they are now by prolonging this recession. If we do this plan, we will ensure in 5-10 years our tax revenues will SKYROCKET as people use this newfound energy independence to increase consumption AND productivity. Plus, combined with nationalized healthcare, we will once again become the single best place to make stuff in the WORLD, thus increasing export revenue. In short, we're taking out a loan today to create a return on investment that pays the loan off PLUS pays off all of the debt we had before. Oh, and it solves for the current Great Recession.

    So, congress, DO THIS. DO IT NOW. Don't be wimps! It's time to be BOLD and think BIG. JFK and FDR both did! Why can't you!

    Posted by MasterConsultant at 09:49 AM | Comments (1) | TrackBack

    July 09, 2009

    Fun with unemployment!

    The crew over at Three Wise Men have been lamenting the sorry state of employment in the US. The numbers do not look at all good with close to 17% being either unemployed or underemployed. The topline looks bad but underneath things are far worse as the length of time it's taking for the unemployed to find new work is, in many cases, stretching beyond six months.

    Which leads to the question, how are we going to dig ourselves out of the hole we're in with reduced industries coming out of this recession?

    The answer is not at all simple, but here's a simplistic explanation of what will happen... we'll do it by expanding enterprises already in existence and creating new ones.

    Already we're seeing migration of those employed in financial services in New York out of the city and to places like Austin, Kansas City and Dallas where they are staffing up small and medium sized banks. No, the money's not as good but the quality of life is far better. The same thing is playing out in a number of different industries on a very small scale now. Watch as the recovery begins to take hold and it continues to expand.

    The reality is that we're going to see a weaker dollar over time. It should be far lower now, but there are issues with the large private and central banks globally that have a lot of their capital tied up in dollar denominated assets. They can't dump dollars without negatively impacting those assets and the capital. So we'll likely be on a long slow slide for a while.

    That's bad for imports and good for exports. That, coupled with a weak job market, will bring back manufacturing jobs in the US. And, of course, there is infrastructure reconstruction and the transition to green energy, both of which will require enormous numbers of people.

    Over the last thirty years, since the Reagan Revolution, we've seen a decline in manufacturing in this country. That will start to turn and create jobs. There is a chance we could actually see some real wage growth again in this country especially if the tax laws are altered to favor increased payments to labor. This trend could also gain significant strength if China is successful in it's drive to develop a real consumer economy.

    Certainly things look bleak now for many. But nothing goes down forever and there is a genuine chance that we'll come through this far stronger than we have been in a long time.

    Posted by mcblogger at 08:59 AM | Comments (0) | TrackBack

    July 04, 2009

    On Krauthammer, Obama and even Bush

    Has Obama's Shelf-Life Expired?

    These days well-known political commentator and Washington Post op-ed columnist Charles Krauthammer is making the rounds "respectfully" chastising U.S. President Barack Obama and the current administration. Krauthammer is a gifted and intelligent writer and it is apparent that while he respects President Obama's personal and political skills, he questions the President's real focus and objectives. Personally, I think all Americans should question the focus and objectives of each president. However, Americans should find many of Krauthammer's opinions in his recent speech on Obama questionable, if not obtuse.


    That stated, Krauthammer does make quite a few good points about Obama. In his recent speech and opinion piece "Obama in Bush Clothing" he points out several of Obama's hypocrisies and doing what he refers to as the "Obama three-step", which is to "(a) excoriate the Bush policy, (b) ostentatiously unveil cosmetic changes, (c) adopt the Bush policy."


    It is true that Obama has performed a "two-step" in front of Americans, by promising to end the war in Iraq and Afghanistan, but instead then increasing military movement in Afghanistan. He also told the public he would close down the prison in Guantanamo Bay, but now is keeping it open. He swore to provide millions of new jobs, but so far has fallen short of his promise.

    I am very familiar with Krauthammer's history and writings, and I think the gist of what he is saying is about Obama is incorrect. I can't see how receiving the auto and finance industry bail-out is "a bonus" as Obama continued the Bush policy of providing "bail-outs" to them. Wall Street, the auto industry and special interest unions are NOT going to let Obama & administration manage and operate their sectors. That's just not going to happen.

    I also disagree with Krauthammer in that I believe it is a good idea to extend the program of Medicare to all Americans. While Medicare is administrated by the government, it is operated chiefly by private industry who still are making a fortune from it --- not as much as the private sector makes from its private plans, but not too shabby. To be a successful program, some modifications [tweaks] are needed. Paying for it will have to be from taxes, e.g., increasing the Medicare Tax on salaries by employees, have employers pay some of the taxes and provide a Medicare Fund to draw the money as needed. Nobody likes paying taxes; however, the money for health care needs to come from somewhere.

    Could Obama lose in the next election? Yes, but it would depend on the results of his current efforts and who the GOP has to run against him. The fact that the current big 3 are Sarah Palin, Mike Huckabee and Mitt Romney does not provide the GOP with a tangible opponent against Obama.

    Will a 10-percent unemployment rate kill Obama's chances in 2012? I don't think so because it depends on what he does after that. If unemployment increases even to 12 percent at first, Obama has 3 years to bring down the numbers. By the time he runs for reelection, the unemployment issue will have passed. He is working on providing stimulus packages into the economy, but our government is set up to make changes slowly.

    Consequently, the MILLION$ already approved and provided for various industries have not yet actually been dispersed to them, so the economy is getting worse. Once the monies have been received and used by the industries we will see the economy improving, but it still will be a slow improvement. While I don't agree with many of the bail-outs, these were initiated by the Bush administration and Obama has built onto them. I don't see that as "a bonus".

    I think a bigger factor in the possible demise of Obama is his stance and management of Iraq, Afghanistan, Pakistan, Iran and North Korea. I think his handling of all those issues can kill his chances of being reelected.

    As for Krauthammer, he is a good writer but as all good writers he bends a lot of his so-called facts to underscore his opinion, which may be true or not. Let's not forget that Krauthammer was one the consultants for Bush's inauguration speech.


    I also disagree with Krauthammer's perspective of how Bush will be remembered for his presidency. He says that Bush kept us safe after 9/11 for 6 1/2 years more than people thought. He also says that Bush will be remembered more for having disabled a hostile Iraq and having that nation turn from a hostile enemy into a world ally. I can see how twisted minds can do that, but in my own opinion, they would be wrong. In many ways our relationship with Iraq and the rest of the world has become more unstable, e.g., those nations I mentioned above with respect to Obama.


    I know our economy and unemployment are in shaky shape, but I really believe that once the money allocated is directly injected into the economy it will turn around. It has started to stabilize already for the most part. I would like to see more of a focus on creating jobs. I have written to Obama about that. I also believe that in part unemployment and health care are the 2 top issues. Obama knows that as well. I hope he deals with these more quickly, but he also has to deal with a hostile GOP, He is trying to work with GOP party members, but there is a lot of resistance and he needs to do whatever necessary to resolve these issues more quickly --- with or without GOP support.

    As for our military focus, we need to get out of the Middle East, but that won't happen. Too many corporations have invested in that area and to withdraw completely will affect their profits and our own economy again. I also don't believe that Middle East nations would sit down together at a table to iron-out their differences, although most, if not all, want the U.S. to leave.

    So, while Krauthammer is indeed an intelligent and gifted writer, Americans should question many of his opinions and comments regarding Obama and Bush. As Krauthammer himself often states to others re: Obama, "Don't listen to what he says, watch what he does." Readers have to make up their own minds about Krauthammer in much the same way.


    Peter Stern of Driftwood, Texas, , a former director of information services, university professor and public school administrator, is a political writer well-known and published frequently throughout the Texas community and nationwide. He is a Disabled Vietnam Veteran and holds three post-graduate degrees.

    Posted by pstern at 04:33 PM | Comments (0) | TrackBack

    June 17, 2009

    The deficit, debt and a poor understanding of the past

    Are you one of the freaks out there worried about the horrible Federal debt and the amount of paper being shoved out into the market? The recent runup in interest rates has been related to a few things...

    1) Speculation that the US debt rating will be cut because of (wait for it) a possibility that the US will default (just FYI, there is zero chance that will happen)

    2) Speculation that buyers will eventually dry up and no one will be left to purchase the debt.

    Notice that both of these issues are based on speculation, not reality. The first issue is just patently ridiculous. The second assumes that there is enough debt issued by other countries for investors to put their money in and that those investors will shun US debt in favor of debt issued by other countries. Which is silly since collectively, there isn't enough fixed income issuance globally right now to soak up all the available cash. Period. Which is why the Treasury auctions have continued to be oversubscribed (more buyers than securities available)... and will continue to be oversubscribed.

    Other part of this is that the overall fixed income market, globally, has shrunk pretty dramatically. While the amount of excess capital being generated has slowed due to the global slowdown, it has not disappeared. Which means it's looking for a place to be invested at exactly the same time that there are fewer investments available. That, my friends, leaves Treasury debt in a very strong position. Krugman has more (and a lovely chart) describing the decline and how government borrowing hasn't made up the gap. Which leads me to this piece by Reich about fearmongering regarding the debt...

    Odd that it would return right now, when the economy is still mired in the worst depression since the Great one. After all, consumers are still deep in debt and incapable of buying. Unemployment continues to soar. Businesses still are not purchasing or investing, for lack of customers. Exports are still dead, because much of the global economy continues to shrink. So the purchaser of last resort -- the government -- has to create larger deficits if the economy is to get anywhere near full capacity, and start to grow again. ...

    Even odder that the Debt Scare rears its frightening head just as the President’s stimulus is moving into high gear with more spending on infrastructure. Every expert who has looked closely at the nation’s crumbling infrastructure knows how badly it suffers from decades of deferred maintenance -- bridges collapsing, water pipes bursting, sewers backed up, highways impassable, public transit in disrepair. The stimulus, along with the President’s long-term budget, also focus on the nation’s schools, as well as America’s capacity to reduce emissions of greenhouse gases. These public investments are as important to the nation’s future as are private investments.

    Or, to put it plainly, we're in a period in the economic cycle when you are supposed to lard up with debt. Normally, you'd spend accumulated savings at a time like this but we can't do that because of Republicans who spent us into oblivion over the last eight years. All we have left is to borrow and there's more than enough capacity for us to do so. The awesome thing about this is that, unlike Reagan's massive debt accumulation, we're actually spending the money on things that will help the economy grow. Democrats are making some crucial investments in the infrastructure of this country that will make possible dramatic economic expansion which will grow the economy far in excess of our debt/GDP.

    But there are some people, we'll call them uninformed, who just don't get it. Take this asshat at the Weekly Standard.

    But Obama may have a broader ambition. He wants to be Ronald Reagan in reverse. Running up the debt, creating a host of new budgetary commitments and enlarging the government's role in the economy will take generations to unwind. And the engines of bigger government also require fuel in the form of taxes.

    Reagan did the opposite. He cut taxes to make government expansion harder. Obama is transposing Reagan. He is growing government to make future tax cuts more difficult.

    Wait a second... Obama is running up debt to DO something, Reagan ran up debt and did, well, nothing other than cut taxes which did free up capital since tax rates in the early 80's were pretty far on the right hand side of the Laffer Curve (he also bought some cool military shit which provided a short boost to weapons manufacturing jobs).

    Obama, on the other hand, faces tax rates on the far left hand side of the curve and his deficits will actually provide longer term growth. In point of fact, the Democrats CAN raise taxes from here without causing ANY damage to economic growth prospects because rates are so far to the left of the prime spot that the impact is actually positive given that higher taxes means less government debt issuance and capital being returned to debt holders. It also means that speculative money will be pulled out of the economy forcing investors to make smarter long term decisions which always grow the economy MORE than speculation.

    The rest of the piece in the Standard is really very silly. You should take a moment to read it if you are in the mood for fact-free opinion thoroughly devoid of any basis in reality. The scariest thing about what conservatives know are the things that just aren't so, to paraphrase Twain.

    A few years from now, probably before the 2012 cycle, we'll be out of this mini-depression, the economy will be growing at an aggressive rate and federal surpluses will either be a reality or a reality in the near future. THEN we can worry about paying off the debt. Depending on that election, we may actually get to do that for a while until the country gets fat and happy again... and they decide to elect another compassionate conservative.

    Posted by mcblogger at 11:55 AM | Comments (0) | TrackBack

    June 12, 2009

    Wonder how the recession is impacting families?

    Just ask Wal-Mart... apparently, they can tell you everything you need to know.

    Food, of course, is high on those lists (discretionary items like clothes and furniture are not). But consumers are cracking their wallets only so far. Many are trading down to private label groceries. At Wal-Mart, sales of refrigerated pizza were up last month compared with a year ago. Lower grades of meat are outselling the higher-grade, pricier cuts. A recession protein hierarchy has emerged, with ground beef trumping steak, and chicken trumping beef. Some consumers are forgoing protein altogether, opting for pasta.

    “We’re seeing a movement away from protein into carbohydrates,” Mr. Fleming said. “It stretches the dollar a lot further.”

    Retailers generally don’t divulge details of their sales by category of goods. But they were willing to discuss trends. One stood out: consumers are discovering there’s no place like home.

    “This whole idea of staying home and entertaining at home, we’re seeing that everywhere,” Mr. Fleming said, “from the ‘take and bake’ pizza to the $5 movies.” Ms. Tesija noted that “sales of popcorn poppers and microwave poppers are very strong.”

    America, I give you your future look...


    Posted by mcblogger at 02:37 PM | Comments (0) | TrackBack

    May 17, 2009

    In which he drops Phil Gramm in the grease...

    Thank you, Prof. Galbraith. While I may disagree with you on the value of reduced documentation loans (which DO make sense in limited situations), this entire piece is largely spot on.

    And the Lyceum is retarded for giving Dick Armey a platform to speak. The man is a lunatic and a moron, even more so than the ridiculous Phil Gramm. It's not so much that I mind people who disagree with me as much as I really fucking hate people who are extraordinarily stupid yet speak as though they know what they are talking about.

    Posted by mcblogger at 02:24 PM | Comments (0) | TrackBack

    May 01, 2009

    How much blame does the Fed deserve for the credit collapse?

    Food for thought...

    One of the Fed’s biggest blind spots has been its failure to recognise the problems that huge financial conglomerates would pose for financial stability – including their key role in the current debt overload. The Fed allowed the Glass-Steagall Act to succumb without appreciating the negative consequences of allowing investment and commercial banks to be put together. Within two decades or so, financial conglomerates have come to utterly dominate financial markets and financial behaviour. But monetary policymakers failed to recognise that these behemoths were honeycombed with conflicts of interest that interfered with effective credit allocation.

    Nor did the Fed recognise the crucial role that the large financial conglomerates have played in changing the public’s perception of liquidity. Traditionally, liquidity was an asset-based concept. But this shifted to the liability side, as liquidity came to be virtually synonymous with easy borrowing. That would not have happened without the marketing efforts of large institutions.

    My second major concern about the conduct of monetary policy is the Fed’s prevailing economic libertarianism. At the heart of this economic dogma is the belief that markets know best and that those who compete well will prosper, while those who do not will fail.

    How did this affect the Fed’s actions and behaviour? First, it explains to a large extent why the Fed did not strongly oppose the removal of Glass-Steagall restrictions.

    Posted by mcblogger at 02:33 PM | Comments (0) | TrackBack

    April 27, 2009

    How much could we lose on TARP?

    BW has a nice little gut-check piece to freak you out a little about potential losses in TARP.

    Ethisphere, a research think tank that examines whether companies can benefit from using ethical practices, created a TARP Index in December to track losses taxpayers are taking under the TARP program. Since TARP's inception on Oct. 7, 2008, the government has lost $104.2 billion (as of Apr. 10). The Treasury Dept. did not respond to questions about the losses so far.

    The index was created out of skepticism about a remark by Senator Judd Gregg (R-N.H.) that TARP would turn out to be profitable for the government. "It rang hollow for us. [Gregg] was taking into account the imputed interest averaging across these investments," says Alex Brigham, Ethisphere's executive director. "You can get paid interest, but if you don't get your principal back, who cares?"

    The biggest losses under TARP as of Apr. 10, Ethisphere estimates, are $30 billion for AIG (AIG), $25 billion for Citigroup (C), and $2.4 billion for Wells Fargo (WFC). These loss calculations are based on stock price declines and each company's financial condition, says Stefan Linssen, managing editor of Ethisphere magazine and one of the lead research analysts for the TARP Index. The largest estimated gains under the program are $3.9 billion for Morgan Stanley (MS), $1.0 billion for Goldman Sachs (GS), and $125.2 million for Financial Institutions Inc. (FISI). These gains are based on those companies' higher stock prices, Linssen says.

    Now, ultimately, once regulation is restored and a measure of confidence returns, it's likely the government will recover a substantial amount of it's investment in AIG either by spinning it back to investors or selling it off in chunks. But will we get all of it out? Nah. The frictional cost of all this will be $100 bn or more. In the grand scheme of things, it's minor compared to a collapse in the economy. However, it still hurts.

    I still have some hope that government will end up making something off all this. However, I'll be satisfied with us just not going through another depression.

    Posted by mcblogger at 08:35 AM | Comments (0) | TrackBack

    April 25, 2009

    Speaking of taxes...

    Here are a few things you may have missed...

  • Corporations are costing you and I and the states we live in by dodging their taxes. Here's the state by state breakdown... an extra $8 billion per year sure would help us build some roads, wouldn't it?
  • Former Labor Secretary Robert Reich wrote this rather excellent piece about taxes and the right wing...
    6. "We have a patriotic duty to stand up against Washington taxes!" Just the opposite. We have a patriotic duty to pay taxes. As multi-billionaire Warrent Buffett put it, "If you stick me down in the middle of Bangladesh or Peru or someplace, you'll find out how much this talent is going to product in the wrong kind of soil. I will be struggling thirty years later." President Teddy Roosevelt made the case in 1906 when he argued in favor of continuing the inheritance tax. "The man of great wealth owes a particular obligation to the state because he derives special advantages from the mere existence of government."

    An acquaintance from law school, now a partner in one of Washington's biggest and wealthiest law firms, explained to me one day over lunch how he and his partners use tax rules to create offsetting taxable gains and losses, and then allocate the gains to the firm's foreign partners who don't pay taxes in the United States. That way, they keep the losses here and shelter their income abroad. I noticed he had an American flag lapel pin. "You're supporting our troops," I said, referring to his pin. "Yup," he replied, entirely missing my point.

    True patriotism isn't cheap. It's about taking on a fair share of the burden of keeping America going.

  • Speaking of taxes and the right wing, it would do a lot of good for them to realize that many of them would lose out on federal money they depend on. If they were to secede and all.
  • New Jersey is better than Texas? As it turns out, yes when it comes to per capita income...

    Matthew Yglesias notes that Tom DeLay is under the strange misapprehension that Texas is rich thanks to its low taxes and lack of regulation.

    Just one minor issue: you really shouldn’t use median income, which can be distorted to the extent that inequality differs across states. You should instead use income per capita. As it happens, the comparison is even more striking. Texas, with its glorious free market regime and deeply incentive-creating 25 percent rate of health uninsurance, has a per capita income of $37,187; nanny-state New Jersey, with its oppressive taxes and regulation of everything (what it takes to get permission to cut down a dying tree … ), has a per capita income of $49,194.

    And that, really, is what should piss you off about the Republicans in Texas. They've made us fall behind NEW JERSEY.

  • Posted by mcblogger at 12:58 PM | Comments (0) | TrackBack

    April 22, 2009

    Pity the bankers...

    As many of you know (because I've gone to great lengths to beat you over the head with the knowledge), I have little respect for the managerial class and even less for those in that class who run or work at money center banks. From the investment bankers all the way down to the trading floor, these are a group of people who've always been, in my opinion, far overpayed relative to the intrinsic value they bring to the table.

    Seriously, you tell me why I should be paying a 22 year old fresh faced BBA 7 figures to trade with my money? It just never made sense to me, especially now that we know those profits were all illusion (or in the case of AIG's Financial Products division, actual insurance fraud).

    Of course, there are some who just can't get used to the new world. Take this wife of a Wall St. CEO whose company received TARP funds. They've seen their nestegg disappear as most of it was in company stock. But, even more shocking, there is no remorse for the shareholders who trusted her husband to take care of their capital. And who are now broke, without the salary her husband still enjoys.

    Or these scheming little bitches in this article about the dry-up of bonuses and increased taxation. Here's a jewel from it...

    “No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?” e-mails an irate Citigroup executive to a colleague.

    None taken, DBag. I would like to point out though that the guy who delivers shit for Sysco actually makes money for his company. All you've done is lose money. Without the government, your hard work would have resulted in Citi's bankruptcy. Unarguably, the delivery guy provides far more to GDP than you.

    Oh, and on behalf of Citi shareholders around the world, you can go fuck yourself. Thanks for losing their goddamn money, asshole.

    Their anger takes many forms: There is rage at Obama for pushing to raise taxes (“The government wants me to be a slave!” says one hedge-fund analyst); rage at the masses who don’t understand that Wall Street’s high salaries fund New York’s budget (“We’re fucked,” says a former Lehman equities analyst, referring to the city); rage at the people who don’t “get” that Wall Street enables much of the rest of the economy to function (“JPMorgan and all these guys should go on strike—see what happens to the country without Wall Street,” says another hedge-funder).

    To the hedge fund analyst, speaking in hyperbole makes you look stupid. Now, run along before I ram a copy of Atlas Shrugged up your ass. This country enabled you to succeed and make money. Just like the rest of us, you'll pay your taxes to support it. As for the other hedge-funder, absent the government there wouldn't be a JP Morgan. As for what would happen to the country without Wall Street, as if you're all heading to a gulch somewhere with perpetual motion machines, don't flatter yourselves.

    With the advent of real time information services, talent no longer needs to be tied to lower and midtown Manhattan. Nor do we need the folks in Greenwich, CT. In Dallas, LA, Houston, Austin, SF, Portland, Seattle and Chicago there are tons of talented people who are ready to step up to the plate to provide financing to the people of this country. And they work cheaper than you do anyway. From community banks and credit unions to regional and superregional investment houses, we can replace all the supposed talent that got us into this mess. Not to mention, the B-schools nationally are churning out ever higher numbers of BBA's and MBA's.

    No, really, you won't be missed. Especially by shareholders who will be infinitely better off without you.

    Posted by mcblogger at 01:03 PM | Comments (0) | TrackBack

    April 18, 2009

    FRB-SF President Yellen - Lehman was a mistake

    While much has been said about the stupidity of letting Lehman Bros go into BK, Paulson and Geithner have never actually admitted that LEH's BK actually dramatically worsened very crisis they were trying to end.

    Until Janet Yellen finally said something. And no, there's isn't anyone still buying the stupid "we didn't have the legal authority" bullshit. Barclays was on the hook until the government refused to give them the same guarantees they gave JPMorgan Chase when it purchased Bear Stearns.

    Posted by mcblogger at 12:15 PM | Comments (0) | TrackBack

    April 02, 2009

    The bailout(s)

    CNN has a nice little table of the different facilities, guarantees and other elements of the overall effort to bailout the economy. And, while the overall number is large, we've only used about 25% of what's been set aside.

    Looking at this, the only thing that's obvious is that the government has allocated close to 75% of GDP to fix this. Given that, it would seem pretty stupid to bet against it. Because, simply put, even if they fuck up on certain things they are putting enough money in that eventually, even blindly, it will stabilize the economy.

    That's not to say I think the stock market is all good. What we're seeing now is a bear market rally and yeah, I'm selling a little into it. I want to see a retest at or near the lows. I want to know we're done.

    Posted by mcblogger at 12:35 PM | Comments (0) | TrackBack

    April 01, 2009

    Enjoy your extra $33 or $66

    This month, the oh-so-good withholding tax miniholiday takes effect. I still don't know what kind of effect an extra $33-66 is supposed to have, but I sure hope it's not what we're hanging our hats for recovery on.

    I think I will use mine to buy a bottle of the scotch I like. I will, of course, have to put a little of my own money with it.

    Posted by mcblogger at 03:48 PM | Comments (0) | TrackBack

    Securitization isn't the problem

    Krugman wrote something about securitization being the big problem. Ritholtz wrote a nice piece taking him to task.

    Do not forget that Securitization had been around for decades without major problems. And over the entire period of time in question, credit card loans, auto financing, and student loans were securitized without incident (other than expected cyclical recessionary downturns).

    The same can be said about derivatives. Handled properly, they are tools that serve a function. Let loose with no regulation/supervision/transparency/reserve requirements, you have the making of a disaster . . .

    We can even say the same about Mortgages. Would you draw the conclusion that because the lending industry made so many bad loans, that mortgages were the problem, and therefore we should do away with them? You have to look at the context in which the loans took place.

    Securitization is no different.

    Under normal circumstances, it works fine. And if we tweak a bit around the edges — make sure that securitizers cannot shed liability as easily as they have, and adjust incentive compensation away from the current hit & run style of faux profits but real bonuses, Securitization will work just fine.

    Like him, I frequently agree with Dr. Krugman, especially during Our Most Recent Financial Crises, brought to you by the folks who told you government wasn't the solution, it was the problem. Much like those folks, though, Paul is blaming the tools and not the users.

    Posted by mcblogger at 09:50 AM | Comments (0) | TrackBack

    March 31, 2009

    Oh yes! Let's see what systemic risk looks like!

    This little column in Time makes a retarded case for letting AIG go down the tubes. Considering how WELL that went with Lehman, I say let's just call this fucker an idiot and move on down the road.

    Posted by mcblogger at 02:13 PM | Comments (0) | TrackBack

    March 30, 2009

    I LOVE Paul Volcker

    As for China’s criticism of the U.S., Volcker was unsympathetic. “I think the Chinese are a little disingenuous to say, ‘Now isn’t it so bad that we hold all these dollars.’ They hold all these dollars because they chose to buy the dollars, and they didn’t want to sell the dollars because they didn’t want to appreciate their currency. It was a very simple calculation on their part, so they shouldn’t come around blaming it all on us.”

    Click the link for more.

    Posted by mcblogger at 01:31 PM | Comments (0) | TrackBack

    Frontline does the meltdown

    Honestly, it's a good piece and you should take about an hour to watch it.

    As part of the piece, this interview stuck out for just how mind numbingly clueless almost everyone was regarding the collapse of Lehman. It was the decision by Paulson to let Lehman collapse that almost brought down Goldman Sachs, Merrill and Morgan Stanley. It directly caused the problems at AIG.

    Here's an excellent article on the collapse of Bear Stearns. While Bear had problems they, like Lehman 6 months later, were undone in much the same manner... a crisis of confidence. It was, simply, a run on the bank but instead of depositors storming the lobby, removing the deposits that commercial banks depend on, it was the creditors that floated them the billions they needed daily to operate.

    Once it was clear that the government actually would let the investment banks fail, all the creditors of every other investment bank (and I'm including some of the larger integrated commercial banks since they were using the repo markets for cheap short term funding) ran for the door. That caused the system to seize up completely as no one wanted to accept any bank as a counterparty.

    So, brass tacks... how does this affect you. If you use credit cards, buy cars, buy a home...if you buy anything on credit, you're part of the structured finance market. When that froze up, it effectively removed 50% of the capital the US needs on a daily basis and the reverberations were global.

    So, yeah, this stuff effects even you.

    Posted by mcblogger at 09:05 AM | Comments (0) | TrackBack

    March 25, 2009

    Really, this is it?

    Yeah, I watched some of the hearings yesterday. I wasn't terribly impressed and didn't even find it very funny, except for Michelle Bachmann quizzing Geithner and Bernanke on the constitutionality of their actions (I guess she was absent the day they discussed the commerce clause in law school). But other than that, I'm pretty much at a loss.

    First off, this is Paulson's original TARP plan, but doing now doesn't make as much sense to me. For one thing, the Fed has the ability through already created mechanisms to help industry digest these assets. For another, the gap between what the market is offering on these assets and what the banks need them to be worth to maintain solvency is VERY large. Given that, why wouldn't the banks temporarily offload some of their assets to the Fed in intermediate term repo's and then use the money to grow fully marketable assets, shaving off a few points per transaction until the holes in the balance sheets can be filled?

    The funniest thing about this is the defense of it and how it's fair. Austan Goolsbee, who is about half an economist at best, takes on Krugman regarding his criticism of the plan. To say it's an epic fail for Goolsbee you have to ignore his takedown by Tanta a few years ago. In the scheme of things, this is really just another foot-in-mouth fuckup for him, kinda like the one Larry Summers had, also with Krugman.

    What positives are out there seem to be of the 'well, it's what we've got' variety. I think that's bullshit since, in the end, it probably will work. And yes, some already rich folks will get a lot richer. What I'm curious about is what happens to the institutions that are forced to sell some of these assets below their carry value? When those big holes in their balance sheets become realized losses, what happens then? Do we buy still more stock in those companies to shore them up or do we go ahead and, you know, nationalize and wipe out the equity holders?

    I said earlier that this was basically Paulson's original idea for TARP. What bound him up was the inability to value the assets which are currently worth far more than the market will pay because of irrational fear and some quite legitimate uncertainty. Pay too much and it's crony capitalism and a waste of taxpayer funds, too little and you leave the problem unfixed. Geithner's plan gets around these issues neatly by subsidizing (and that's what this IS, boys and girls) private investors to perform price discovery (with government money) and to create a market where the assets can trade (made liquid with government money).

    It also busts, like a pinata hit with a stick, the idea that the market has money, it's just nervous. The fact is these investors are somewhat cautiously in the market now, picking up things on the cheap. They're willing to pay more than they are now IF they get cheap government money that doesn't need to be repaid if they default.

    Which leads me to believe this plan is bullshit, the price discovery will be in a vacuum and in the end you'll end up nationalizing the banks anyway. What we need is a solid valuation model and then government can buy the assets to hold. My way saves taxpayers money... Geithner's way makes a lot of rich people, richer, with our money and we risk losing a lot.

    Oh, both plans will work. My way just socializes the risk and the reward. Geithner's socializes the risk completely and only partially socializes the reward.

    Posted by mcblogger at 01:16 PM | Comments (0) | TrackBack

    Galbraith tags Geithner's plan

    Honestly, it's not a bad piece for Galbraith. A little heavy, but he's got a good point... the best way to get valuations on the so-called toxic assets is to break them apart and look at the performance of the underlying credits. Either that or use a discounted cashflow model based on the income in aggregate which would be a lot faster but not nearly as thorough.

    Still, either way works better than the Fed's loaning money (non-recourse) to hedgies so they can pay whatever they want.

    Posted by mcblogger at 09:03 AM | Comments (0) | TrackBack

    March 23, 2009

    No, Matt Taibbi... you DON'T know what you're talking about

    Over at Rolling Stone, Matt Taibbi has a really frustrating piece of journalism about the credit crisis, underlying causes and what's happening now to fix it. It's the last part where Matt goes off the goddamn rails and proves just how hard this stuff is to understand.

    Grayson pressed on, demanding to know on what terms the Fed was lending the money. Presumably it was buying assets and making loans, but no one knew how it was pricing those assets — in other words, no one knew what kind of deal it was striking on behalf of taxpayers. So when Grayson asked if the purchased assets were "marked to market" — a methodology that assigns a concrete value to assets, based on the market rate on the day they are traded — Kohn answered, mysteriously, "The ones that have market values are marked to market." The implication was that the Fed was purchasing derivatives like credit swaps or other instruments that were basically impossible to value objectively — paying real money for God knows what.

    "Well, how much of them don't have market values?" asked Grayson. "How much of them are worthless?"

    "None are worthless," Kohn snapped.

    "Then why don't you mark them to market?" Grayson demanded.

    "Well," Kohn sighed, "we are marking the ones to market that have market values."

    In essence, the Fed was telling Congress to lay off and let the experts handle things. "It's like buying a car in a used-car lot without opening the hood, and saying, 'I think it's fine,'" says Dan Fuss, an analyst with the investment firm Loomis Sayles. "The salesman says, 'Don't worry about it. Trust me.' It'll probably get us out of the lot, but how much farther? None of us knows."

    Here's the thing... just because something doesn't have a mtm price doesn't mean it's worthless (and Rep. Grayson's a fucktard). There's discounted cashflow and other valuation methods, for example, so despite what the loser from Loomis Sayles (where the not too bright go to die) says, it's not about trust. It's about hard data and the Fed EXISTS for just this type of market breakdown. Meanwhile, to Matt, it looks like the goddamn crooks are out to steal from us again, which was, not coincidentally, exactly what he was trying to pound into the reader for graff after tedious graff.

    Don't get me wrong, he nailed the stuff about deregulation and the fact that the largest banks are growing far too large at the expense of smaller competitors who don't enjoy the use of taxpayer capital. And the portrait of AIG's Cassano was brilliant.

    But the breathless, they're-stealing-everything tone was far better suited to Rush Limbaugh... or Michelle Malkin.

    Posted by mcblogger at 09:42 AM | Comments (0) | TrackBack

    March 15, 2009

    The huevos on some people

    AIG last week said it was paying out some phat bonuses to the very people who put AIG (and taxpayers) in the position it's in today. Treasury said not so much. AIG CEO Liddy said he was doing it anyway...

    A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives.

    “We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he wrote Mr. Geithner on Saturday.

    Still, Mr. Liddy seemed stung by his talk with Mr. Geithner, calling their conversation last Wednesday “a difficult one for me” and noting that he receives no bonus himself. “Needless to say, in the current circumstances,” Mr. Liddy wrote, “I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.”

    First off, while AIG is nominally an ongoing concern, it would be bankrupt were it not for taxpayers. That alone would have wiped out the bonuses because a BK judge would never have approved them. ESPECIALLY since 'the best and brightest' were the very folks who put the company in the position it's in now. And what did the best and brightest do? They wrote insurance policies on financial assets (CDS) at bargain basement prices and without adequate reserves against losses. That's it, boys and girls... that's what the best and brightest were up to.

    These bonuses were based on illusory profits on fundamentally unprofitable business.

    It's time to finish the wipeout of AIG and for the government to begin liquidating it totally. It's clear that current management is willing to be 'legally bound' to a contract that no one in their right mind would pay out. The company, on the whole, simply needs to be scrubbed out and the taxpayers need to be made whole. Enough with the half measures and bullshit.

    Seriously, there are 100,000 people in the world who can do the unwind on the derivatives that these fucks are being paid to do. As an added bonus (no pun intended), most of them are now unemployed and would be willing to work for far less.

    Posted by mcblogger at 11:46 AM | Comments (0) | TrackBack

    March 13, 2009

    Let's buy a hooker for Paul Volcker!

    Photobucket This guy is Paul Volcker. He's well known in business circles as one of the few things that President Carter did right. He's also the guy who ended up making Reagan look good. President Obama has now tapped him to head up a team on fixing the economy. Needless to say, he's hella busy with a ton of stressful business.

    Wouldn't it be nice if WE could do something for him? Like get him a REALLY good hooker?

    Seriously, is it just me or are you also thinking that would be a hell of a lot nicer than a thank you card?

    Posted by mcblogger at 02:17 PM | Comments (0) | TrackBack

    Things that act like Hedge Funds (but shouldn't)

    I've been trying to really get a grip on a few things. First, there was this article in Vanity Fair about the disastrous decision by Iceland to turn itself into a hedge fund in 2003.

    Just after October 6, 2008, when Iceland effectively went bust, I spoke to a man at the International Monetary Fund who had been flown in to Reykjavík to determine if money might responsibly be lent to such a spectacularly bankrupt nation. He’d never been to Iceland, knew nothing about the place, and said he needed a map to find it. He has spent his life dealing with famously distressed countries, usually in Africa, perpetually in one kind of financial trouble or another. Iceland was entirely new to his experience: a nation of extremely well-to-do (No. 1 in the United Nations’ 2008 Human Development Index), well-educated, historically rational human beings who had organized themselves to commit one of the single greatest acts of madness in financial history. “You have to understand,” he told me, “Iceland is no longer a country. It is a hedge fund.”

    Now, what on earth could have caused a nation of rational (Bjork aside), well educated people to have made such a bad decision? Easy. Mr. Deregulation himself, Milton Friedman, whose teachings were very popular... especially with poets who found themselves running a country.

    Then came Bernanke's admission the AIG was functionally a hedge fund attached to an insurance company. With even dumber management insuring far too much risk for far too little money.

    In Iceland's case, as in America, the culprit was a belief that greed would override stupid decision making, in effect, faith in people to make rational, well informed decisions. In Iceland, the entire economy was changed overnight from safe and steady to 'how much risk can I lard on?'. In the case of the US, over the last thirty years we have dismantled the regulatory framework it took a generation to put into place after the last major financial calamity, the Great Depression.

    We did this to ourselves and now it's time we suck it up and realize that the market CAN'T self regulate. Actually, most of us already knew that but we're throwing our lot in with you folks who are just now coming to the conclusion that Ayn Rand and Milton Friedman really were full of shit.

    Finally, I'm forced to agree with Stevie Forbes. Of all goddamn people. Which makes me want to vomit blood.

    Posted by mcblogger at 12:24 PM | Comments (0) | TrackBack

    March 04, 2009

    Mortgage Writedowns... I'm THRILLED

    ... Jane is pissed as hell, mostly because she doesn't get the long term impact. Nor does she understand THAT THE HOMEOWNERS BEAR JUST AS MUCH RESPONSIBILITY AS THE BANKS.

    I'm TIRED of the 'the-banks-screwed-everyone, now-let's-screw-them' bullshit. Not only because it's based on a patently false assumption (that banks engineered loans for foreclosure), but also the fact that it fails to acknowledge the long term impact to the financial infrastructure of the US that will be caused by the judiciary being given arbitrary authority to write down debt on hard assets.

    People need help. I have no problem helping them. But fucking over banks in the process fucks us all, more slowly and over a longer period of time.

    Posted by mcblogger at 10:49 PM | Comments (0) | TrackBack

    February 27, 2009

    THIS is why tax rebates are stupid


    More here

    Posted by mcblogger at 01:34 PM | Comments (0) | TrackBack

    If Congressmen don't understand...

    ... is it little wonder that people don't understand. From Rep. Culberson's Twitter feed...

    -- A surplus is a TAX SURPLUS and should be refunded to those who paid it

    No, not really, Congressman. A tax is the price we pay to live in the greatest nation on Earth; Our contribution to maintaining the government that we all depend on. A surplus is what we'll be using to pay off the massive debt we accumulated while Culberson and his cronies were running things. Possibly, we'll be able to make some investments that will benefit the entire country. However, we gotta pay off our past excesses.

    This is, sadly, all moot since we're far from running surpluses.

    It would be nice to report Rep. Culberson was the only asshat in the bunch. Unfortunately, he's not... I give you Senator Liarson.

    Uhm... Senator, if you're going to talk about tax policy and revenue it would be AWESOME if you knew something about it. What you and every other Republican doucher is referring to is the Laffer Curve and we're on the wrong side of it for tax cuts to equal revenue. Or, just go on and read this.

    This is a time when there is a definitive right answer and a definitive wrong answer. And it appears that Republicans are going to continue to piss into the wind.

    Senator Hutchison... you really need to rethink your desire to run for Governor next year. The someone like Sen. Van De Putte will beat your ass.

    Posted by mcblogger at 10:44 AM | Comments (0) | TrackBack

    February 26, 2009

    This is why you don't cram down loans...

    As it turns out, the investors who buy the securities that are backed by the loans don't like their money being crammed down. Who knew?

    Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., told Bloomberg Friday that “there is still a concern that there is no guarantee” of agency debt and securities, even after the Obama administration has said it will sink as much as $400 billion in increased funding to backstop the operations of the GSEs, as part of its Homeowner Affordability and Stability Plan, or HASP.

    “Looking at the risk, [GSE bonds are] not so attractive,” he told the news service. “We need a guarantee before we’ll buy.”

    Simplistically, this is all about whether or not the government will backstop Fannie and Freddie. But it's more complicated than that and it falls right down to whether or not we'll honor the money these people invested. Foreclosure is one thing; cramming down is a quite another.

    Posted by mcblogger at 01:28 PM | Comments (0) | TrackBack

    Texas Leaders Send a Clear Signal

    But will Texans get the message?

    More than ever it is apparent that Gov. Rick Perry, Lt. Gov. David Dewhurst, Attorney General Greg Abbott and many legislators "don't give a hill of beans" about hardworking and hardly-working Texans.

    For the past decade Texans have watched helplessly as their daily living costs have sky-rocketed to oblivion:

    o Property taxes
    o Home insurance
    o Higher education tuition
    o Electricity
    o Loss of jobs
    o Toll roads
    o Fees and penalties
    o Utilities
    o Gas
    o Food
    o Other goods and services.

    Texas leadership has done little to lessen the financial burden on most residents. In fact, all too often they have been the cause of higher costs.

    Now that the federal government has provided additional "stimulus" money to provide some relief for most Americans, Texas leaders are refusing to accept the money.

    Our leaders have NOT been paying attention to the needs of most Texans. They say the first thing that is needed to get a stubborn mule moving is to get its attention by hitting it with a 2X4. Would it work on Texas leaders?

    Posted by pstern at 08:21 AM | Comments (0) | TrackBack

    February 25, 2009

    Trade Surplus/Defict : The Animation

    This a really cool graphical representation of US trade deficits and surpluses with some of our trading partners. And yeah, it'll surprise you.

    Posted by mcblogger at 10:19 AM | Comments (0) | TrackBack

    February 24, 2009

    Then there's nationalization and information flow

    Spot on, Bonddad.

    The threat of nationalization is what's weighing on the market. What's making me continue to buy? This

    "We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."

    His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.

    Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.

    "I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," Volcker said.

    I'm kinda surprised Volcker and Soros, two very brilliant minds, don't see what's happening. It's information flow. We don't live in a world where news takes weeks to travel. We live in a world where one bit of data can drive down the US markets in 10 minutes and all the other dominoes fall as well. And the one thing no one is talking about is that, in this type of environment, what drives you down can just as quickly drive you higher.

    What's funny to me are the folks out there who think this is the end of capitalism. It's not. It's the end of this particular experiment with laissez faire. Relatively soon people are going to get that. Until then, I'm happy to buy the securities you're dumb enough to sell at a loss.

    Today, Bloomberg had a chart up of the Dow showing volume. It's increasing as the market goes down.

    Posted by mcblogger at 09:43 AM | Comments (0) | TrackBack

    February 19, 2009

    Rep. Cantor and feathering your own nest

    Hypocrisy is a motherfucking pain. As it turns out, Rep. Eric Cantor's vote for TARP has ended up supporting the very bank his wife works for. I say work, but the reality is no one is really sure what she does

    Diana Cantor runs the Virginia branch of Emigrant's wealth-management division, called Virginia Private Bank & Trust, which targets an ultra-rich clientele. ... The Virginia Private Bank & Trust, a satellite opened this spring, is still getting off the ground. On Thursday, when ProPublica visited its small Richmond office in an office park not far from the Cantors' home, a sheet of white paper taped to the door served as its sign. One of the two employees there said the office had yet to serve a client since it opened last spring. She referred further queries to the bank's main office.

    Of course, after his wife's bank got their bailout, Cantor voted against TARP 2. And the Stimulus package for the rest of the county. It's good to know that his integrity is literally as deep as a shallow puddle.

    (Love to Digby and FDL for getting this out)

    Posted by mcblogger at 12:09 AM | Comments (0) | TrackBack

    February 18, 2009

    Class Flight

    After busing began to desegregate public schools, the middle class left cities for the suburbs. Now it looks like the cities are forcing out the rest of the middle class that moved back or remained and replacing them... with the rich. The trend is most pronounced in NYC.

    Posted by mcblogger at 01:13 PM | Comments (0) | TrackBack

    February 16, 2009

    Munger Speaks

    Charlie Munger, the Vice-Chair of Berkshire Hathaway and a Republican, wrote a brilliant op-ed piece in the WaPo covering the need for strict rules and enforcement to govern the financial system...

    Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed -- mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes.

    Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law.

    My FAVORITE part, especially since it comes from a Republican...

    Moreover, rationality in the current situation requires even more stretch in economic thinking. Public deliberations should include not only private morality and accounting issues but also issues of public morality, particularly with regard to taxation. The United States has long run large, concurrent trade and fiscal deficits while, to its own great advantage, issuing the main reserve currency of a deeply troubled and deeply interdependent world. That world now faces new risks from an expanding group of nations possessing nuclear weapons. And so the United States may now have a duty similar to the one that, in the danger that followed World War II, caused the Marshall Plan to be approved in a bipartisan consensus and rebuild a devastated Europe.

    The consensus was grounded in Secretary of State George Marshall's concept of moral duty, supplemented by prudential considerations. The modern form of this duty would demand at least some increase in conventional taxes or the imposition of some new consumption taxes. In so doing, the needed and cheering economic message, "We will do what it takes," would get a corollary: "and without unacceptably devaluing our money." Surely the more complex message is more responsible, considering that, first, our practices of running twin deficits depend on drawing from reserves of trust that are not infinite and, second, the message of the corollary would not be widely believed unless it was accompanied by some new taxes.

    Moreover, increasing taxes in some instances might easily gain bipartisan approval. Surely both political parties can now join in taxing the "carry" part of the compensation of hedge fund managers as if it was more constructively earned in, say, cab driving.

    The entire piece is well reasoned and well written which makes is very surprising that I would find it so compelling. Of course, I'm also really good at listening to people far more intelligent, educated and successful than myself.

    Posted by mcblogger at 12:57 PM | Comments (0) | TrackBack

    February 13, 2009

    Junio John Speaks

    Photobucket The stimulus bill is not going to work, mostly because of the tax cuts/rebates, which Junior John now says don't work. Which is kinda funny since part of the reason he's voting against it is because it's not 100% tax cuts.

    He also conveniently ignores the fact that the overweight toward tax cuts in the bill are the result of compromises to Republicans. Then he mentions a CBO study that says this bill will eventually crowd out private investment. Which is hilarious since this bill isn't even a tenth of the size of the US economy.

    Finally, Sen. Cornyn flat out lies about the efficacy of tax cuts vs. spending saying that spending is about half as effective.

    It's never been more clear than now that we need a real Democrat in the Senate representing Texas. I don't know that either Sharp or White are that guy. I have no idea what they think about fiscal stimulus in a deflationary environment. I can tell you this, listening to Cornyn makes it clear that we can not afford to elect another ideologue more committed to politics than actually governing.

    Which means, Sharp and White camps, you better get some goddamn good people to tell you what to say or I'm going to rain shit all over you both.

    Posted by mcblogger at 02:59 PM | Comments (0) | TrackBack

    Sen. Corynyn on Bloomberg

    PhotobucketIn about 15 minutes, Junior John will be appearing on Bloomberg TV to discuss his vote against the stimulus and the lies that make up the bulk of his reasoning to oppose it.

    Speaking for Texans, we'd like to apologize for not getting rid of this cocksucker last year. Please just ignore him and realize that we find him terribly embarrassing.

    Posted by mcblogger at 02:35 PM | Comments (0) | TrackBack

    There's dumb and then there's the AEI

    The AEI has a critique up regarding the report from the G30 on financial services regulation. Here's a brief excerpt

    A good summary is that bank-like regulation would be spread beyond the banking industry. But there’s a problem: banks have been tightly regulated for years, both in the United States and Europe, and of all the institutions hurt by the financial crisis, they are in the most trouble.

    It gets worse from there. I suppose it's worthless to mention to the author that much of this regulation was unenforced (which the report didn't fully address, but that's another problem) and that the current crisis is almost entirely attributable to the push for (and subsequent) deregulation of financial services. That's what allowed firms like Bear Stearns to lever up 30 to 1. That's what allowed Citi, one of the largest depository institutions in the country, to dump hundreds of billions into SIV's and leave themselves, ultimately, on the hook for those SIVs, not to mention the leverage in them.

    And the solution is less regulation? According the author who then goes on in his little critique to indicate that the report's recommendations were written entirely without analysis and the validity of them rests only on the credentials of the authors.

    Let's see... while the critique author was a special counsel to President Reagan, one of the guys who wrote the damn report was the chairman of a little organization called the Federal Reserve. He also happened to the guy who actually broke the stagflation of the 1970's. Credibility aside, there's also the issue of solvency (which the banks, thanks again to deregulation, would lack were it not for TARP) not to mention the crisis of confidence thanks to people like Madoff(who, it should be noted, wasn't regulated) and the collapse of many of the IB's on Wall Street. It's amazing to me that these morons really don't understand that part of what makes America work is the confidence people have in banks due to... wait for it... REGULATION.

    Peter Wallison and the other pathetic losers at the AEI would do better to keep their mouths shut given that they're all political hacks with little talent and even less skill. Better to be thought an idiot, don't you know...

    Posted by mcblogger at 01:20 PM | Comments (0) | TrackBack

    The Stimulus Plan as a picture



    And there it is, the inadequate fiscal stimulus, the best that could be obtained from the ridiculous centrists who predicated their support for the plan not on economic reality but on their own ideologies and political strategies. Which, thanks to their hard work, won't help as much as the plan the House passed. No, the centrist supported plan will create several hundred thousand fewer jobs.

    We knew all this a while back, but they still carried forward with stupid tax cuts. Sen. Cornyn even sent out a whiny email LYING about how many jobs the Republican plan would have created and about the ultimate cost of stimulus. Junior John, far smarter and better educated people than yourself have conclusively shown that you are, in fact, lying. As if that wasn't enough, we also have empirical evidence from our last tax cut rounds that they don't grow the economy.

    Meanwhile, the bad economy finally starts to hit Texans. And Governor Perry, it should be noted, has publicly stated that just might return stimulus money. And our two Senators voted against it. Makes you long for the days when Republicans worked with Democrats for the good of the country instead of playing politics with people's jobs and the greater economy.

    Posted by mcblogger at 10:46 AM | Comments (0) | TrackBack

    February 12, 2009

    Spot on, Robert Reich

    Playing politics with economic stimulus is like arguing over what started the fire while the house is burning.

    Yet at this very moment, Senate Republicans are seeking to strip the President's stimulus package of many of its spending provisions and substitute tax cuts. Part of this is pure pander: They know tax cuts are more popular with the public than government spending, even though spending is a far more effective way to stimulate the economy (more on this in a moment). Another part is pure partisan politics: Republicans are emboldened by Obama's willingness to court Republicans (taking three Republicans into his cabinet, bringing Republican leaders into the White House for consultations, putting all those business tax cuts into the stimulus bill in order to gain Republican favor) without getting anything at all back from the GOP. House Republicans snubbed the bill entirely. So, Senate Republicans say to themselves, what's to lose?

    Plenty. Millions more jobs and a full-fledged Depression, for example.

    Posted by mcblogger at 09:36 AM | Comments (0) | TrackBack

    February 11, 2009

    Two takes on Geithner's TARP, Part 2

    Krugman and then David Kotok.

    Of course, additional details are going to come out related to mechanisms for price discovery (using discounted cashflows, probably) for illiquid assets and the stress test designed for the banks. It's the latter that's going to be most interesting to me (the increase in the Fed's balance sheet was going to happen regardless... and, frankly, should be happening in this environment. That's WHY we have the Fed) especially because, at it's core, it's going to depend on asset valuations which leads us straight back into (oh, you had to see it coming) price discovery.

    You could also call it short circuiting FASB.

    Posted by mcblogger at 04:34 PM | Comments (0) | TrackBack

    The Economy : Stimulus, Deflation and more

    From Ritholtz

    Back to the planned US rescue packages, and specifically Bill King’s comments: “The main problem plaguing the US economy is too much debt has been accumulated on gratuitous spending and the papering over of declining US living standards. Solons espouse a monstrous surge in debt to fund even more consumer spending. The toxin is not the cure. Inducements to save and invest in production are the remedy. But the welfare state and its ruling class are trying a last grandiose socialist [Keynesian] binge in the hope of salvaging their realm.”

    OK, this guy's over the edge of the cliff with the Keynesian=socialist bullshit. That's not why I put up the quote, though it is fun to poke at the deranged thinking coming out of economists on the right. No, I posted it because he's got something down perfectly... the decline in living standards. What he means to say is the decline in real wages but he'd sound like a real economist then and the nutters would pull his membership card and parking privileges. Part of the reason we've been burying ourselves in debt is that it was the only way we could afford the standard of living to which we'd become accustomed. The trigger that collapsed the credit markets (built on the house of cards that was the CDS 'market' and levered banking) was higher than usual defaults on home loans which were caused by two factors... higher energy prices and interest rate resets on some sub-prime ARMs. When wages aren't increasing but the cost of living is, there is always going to be a breaking point.

    The solution? That's going to take some people smarter than me. I think it's a fundamental shift in tax policies that have favored short over long term gains that will do the majority of the heavy lifting. It's also paying more for the lowest levels of jobs. Just like many Americans have enjoyed cheap crap from China, they've also enjoyed paying lower than reasonable prices for real work. That's gotta change because you can't have a stable long term economy that sees people at the top making an unbelievable amount of money while a vast number at the bottom make less in a year than those people make in a day.

    And, just for fun, we're already in deflation and the only thing holding us up is the Fed and Treasury.


    All this is as a backdrop to this post over at Greg's Opinion that's spot on. Especially the takedown of new RNC Chair Steele who apparently hasn't seen that more than half the jobs Bush 'created' have disappeared.

    There is something else worth noting regarding the comparisons between now and the Depression, especially the notion that government spending didn't do the trick. Those on the right with just enough knowledge to be dangerous are fond of pointing out that in 1940 unemployment was still high. What they don't tell you was that in 38 and 39 the government tried to balance the books by slashing spending and increasing taxes. Which sent the economy back down again. In other words, there wasn't enough stimulus. Click here if you don't believe me.

    It should also be noted that even that high level of unemployment in 1940 was still about far better than the absolute worst level in the Depression (about 25% vs 16%) which also kinda deflates the ramblings of the new economic theorists on the right who are just now discovering fiscal responsibility. The problem with them, as usual, is that their timing is awful. Simply put, the government has access to money that is functionally free and the economy needs that money since it's not going into the private market.

    Think about it this way... it's analogous to worrying about what started the fire and how much it'll cost to put it out when the house is burning. And you're sitting in the living room.

    Oh, and just in case you were wondering, while the press may love the Republicans and their retarded antics, the polls are showing that the majority of Americans are OVER it. Just look.

    Posted by mcblogger at 12:25 AM | Comments (0) | TrackBack

    February 10, 2009

    Note to Rep. Neugebauer

    PhotobucketDear Rep. Randy... you really shouldn't talk about the economy. Or how to pull us out of recession. Or how to keep us out of a depression. Or adding federal debt (which, by the way, there is a tremendous demand for) to finance stimulus.

    Randy, buddy, I gotta tell you your ignorance of basic finance and market dynamics is pretty scary. You know the old saying about keeping ones mouth shut?

    Quit using talking points and playing politics. There is more at stake here than playing asshole in a stupid attempt to rebuild your moribund party.

    Hate you lots,


    Posted by mcblogger at 08:07 AM | Comments (0) | TrackBack

    Deregulation FAIL

    In 1999, Texas deregulated the retail electricity market. Austin kept it's municipal power company and remained regulated. Since 1999, rates have increased by 25% in Austin. In the deregulated parts of Texas, rates have gone up 64%. The industry wants to blame it on increases in natural gas prices but other states that are dependent on natural gas saw far lower increases in prices.

    The best part of the Statesman piece was this from Senator turned industry lobbyist David Sibley...

    The Legislature passed a sweeping deregulation law in 1999 that sought to break down electric company monopolies and remove strict government control over retail electricity rates. The idea was to allow competitive market forces to drive down prices. The sponsor of the legislation, former Sen. David Sibley, acknowledges that rates have gone up but said he still considers the law a success.

    Sibley, who now lobbies for power companies and others, blames the hikes on increased natural gas prices. He said Texas is far too dependent on natural gas and would see lower rates if it diversified to coal, nuclear and other energy sources.

    "The fuel mix is a problem," Sibley said. "We're building nothing but natural gas plants."

    But the report found that even when compared with neighboring states that are also heavily dependent on natural gas, Texas has higher rates. Oklahoma and Louisiana, for example, are big users of natural gas but did not deregulate their markets as Texas did, the data show.

    So, David, you told us that deregulation would save us money. Now, while working as an industry lobbyist, you want us to believe another of your lies? Sure thing. But first, would you mind setting your hair on fire?

    Texans will see lower electricity rates when we reregulate the market. Let's be honest, markets work best when someone is looking over industry's shoulder.

    Posted by mcblogger at 06:49 AM | Comments (0) | TrackBack

    February 09, 2009

    Our Future?

    This is what will happen to the US if we don't take solid steps now to end income stratification and turn tax policy to investments and building jobs, not taking profits.

    Posted by mcblogger at 01:11 PM | Comments (1) | TrackBack

    February 06, 2009

    RPT: "We're fucking the stimulus plan!"

    Seemingly proud of the Republicans in Congress from Texas who decided to vote against the stimulus package, the RPT sent out this nice little email

    Just last night, President Barack Obama put on the full-court press for the Democrat stimulus package. In his interviews with each major network anchor, he called on Senators to support this almost $1 trillion plan. Then his political committee sent an email to their list of over 13 million emails a few hours ago.

    You can see what tremendous pressure is being exerted as the Senate faces a showdown vote any day now. That's why it's so important for our Republican Senators to stand strong in opposition to this gigantic bailout full or pork-barrel projects and earmarks.

    Every single GOP congressman voted against the package last week, and our two Texas Senators are speaking out against it right now!

    Your support is needed to help these courageous Republicans stand against the onslaught of attacks coming their way.

    The onslaught of attacks? You mean the onslaught of well deserved attacks, don't you? As for the pork and earmarks, roads in cities and counties all over Texas are PORK?!?!?! Not so much because, and this will come as a shock, GOVERNMENT SPENDING IS STIMULUS. Every time the government spends money to buy something, someone has to make it, sell it and ship it. Those people will have jobs and money to then spend to churn back into the economy and pay their mortgages.

    The tax cuts ARE pork since they won't achieve the goal, but hey, that's what Democrats are having to give up to get some of you assholes on board. I don't think they should but it seems pretty clear they're as spineless as you Republicans are stupid.

    As for the full-court press, I must have missed that. I only caught how Republicans were holding things up.

    Posted by mcblogger at 11:21 AM | Comments (0) | TrackBack

    TARPing me to death...

    Elizabeth Warren is one of the few lawyers (Harry's the other) I actually trust. Her work on the abuses of credit card companies has been essential to shed light on and stop their most egregious packages. Her committee's report on TARP is out and the result is that that US got back $66 for every $100 it invested in these entities. Which conflicts with other reports.

    Oh, and it makes me mad as hell.

    Now, these aren't actual loses and the government is already receiving dividend payments. So the question becomes, why is the discount so high for the government? There is a simple explanation that the media are mostly ignoring, mainly that yelling fire in a crowded theater is dangerous. This money had to go to weak players and strong players on roughly equal terms. If that hadn't happened, people would have known easily which banks were weak and which were strong, leading to runs on banks that would have resulted in the US taking over some large banks and paying out far more than TARP.

    My personal opinion... I would question this valuation based on risk, especially since there is no way government can lose on this. If the banks default, government takes them over and privatizes them down the road. Government always wins. This is, of course, independent of the fact that Buffett won't get tax payments in perpetuity. Government has an incentive to keep these firms afloat.

    And we all have a pretty big incentive to keep the banking system working.

    While I have no real problem with the government making something on these investments, I want them closer to breaking even than massive profits. I know there will be those who disagree with me, but take a moment, set aside your hatred for bankers, financiers and investors and think about what it would be like to have your government acting like a merchant bank or vulture investor with your tax dollars.

    Posted by mcblogger at 10:39 AM | Comments (0) | TrackBack

    February 05, 2009

    Is Summers marginalizing Volcker?

    Straight from Bloomberg...

    Paul Volcker has grown increasingly frustrated over delays in setting up the economic advisory group President Barack Obama picked the former Federal Reserve chairman to lead, people familiar with the matter said.

    Volcker, 81, blames Obama’s National Economic Council Director Lawrence Summers for slowing down the effort to organize the panel of outside advisers, the people said. Summers isn’t regularly inviting Volcker to White House meetings and hasn’t shown interest in collaborating on policy or sharing potential solutions to the economic crisis, they said.

    While Summers, a former Treasury secretary, oversees the official White House economic policy apparatus, Obama tapped Volcker for a new Economic Recovery Advisory Board charged with injecting fresh, outside ideas into policy debates.

    “When you have two strong, highly accomplished, driven people, it’s not unusual that there is going to be a battle over turf,” said James Cox, a professor at Duke University Law School in Durham, North Carolina. “I would hope that Obama doesn’t lose Volcker’s counsel. They need someone to help them think outside the box.”

    The contretemps shows the difficulties Volcker, perhaps the world’s most respected economist, may encounter as an outside adviser charged with providing policy alternatives to the president, said William Silber, a finance professor at New York University’s business school.

    This is a time to take a moment and remember two things...

    1) Paul Volcker is brilliant.
    2) Larry Summers is not so much brilliant as he is middling.

    Larry Summers, let's not forget, is one of the people inside the Administration who hates infrastructure and, if rumors are correct, is pushing internally the tax cuts the Republicans want. Even though most sane people say they won't do the trick to jolt us out of recession.

    We can only hope that the President will slap down Larry and move Volcker to front and center.

    Posted by mcblogger at 12:44 PM | Comments (0) | TrackBack

    Circling the goddamn drain...

    I read this yesterday...

    I used to be optimistic about the capacity of our political leaders and central bankers to avoid the policy mistakes that could turn the current global recession into a deep and lasting global depression. Now I’m not so sure.

    I'm not quite as worried about some of Buiter's concerns, least of all protectionism (mostly because there's going to be so much demand from China's infrastructure stimulus that basic materials are going to rebound sharply, even in the US). However, I AM concerned about the weakness in Washington. And the more I think about it, the more I'm ready to say, simply, FUCK IT. I can do that. I have money and I can survive a two year depression. Most of you can't.

    In fact, a real depression would probably be good for me as it would allow me too pick up some great assets at 90% off their real value. Hell, I might just bail and leave you all here to rot. Maybe I'll be back when you fucks get your heads screwed on right.

    Why am I saying all this? Because the public has turned against the stimulus bill. Democrats are actively working against their party and their President with the Republicans on more of this tax cut nonsense. The Republicans are easy... any failure of this bill will lead to a lot of economic pain and Democrats are going to get blamed. The Democrats working against this? They're harder to explain... I think it has something to do with a fundamental inability to understand economics and how to maintain a capitalist economy. I also think they're as goddamn stupid as this guy. Or this idiot who seems to think TARP was a bailout for the wealthy. Guess he wasn't paying attention nor does he seem to care that's it's left the Treasury with actual assets. Because he and those like him never understood TARP or TAF, they've been beating a political drum about it for a while. Now that beat has started to poison the Stimulus Bill.

    It's kinda understandable, especially since the media is doing such a bang up job explaining all this to the American people. It almost makes me want to embrace what I see happening, the impoverishment of whole swaths of the country.

    All the while our President sits on the sidelines, going on TV, seemingly content to let the whole thing go down the drain while the partisan bitterness he refuses to engage in consumes the Capital. Of course, he could step in and really decimate the Republicans. Maybe he will. But I certainly doubt it. My question, for now, is the same as this one... WHY ON EARTH WOULD OBAMA HAVE EMPOWERED THE GODDAMN STUPID REPUBLICANS??!?!?!?!?!?! Or, WHY THROW THEM ANY BONES IN THE FORM OF TAX CUTS THAT DON'T WORK? Has it occurred to anyone other than myself that President Obama and the Democrats are wasting our money on Republican ideas we know damn well won't work?!?!?!

    Maybe, just maybe, the CHANGE we could believe in was nothing more than ineptitude. Not that asshat McCain would have been any better. I'm thinking more along the lines of Clinton or Edwards. God knows either of them would have already passed a much better bill and they would have browbeat the Republicans to do it.

    Posted by mcblogger at 12:07 AM | Comments (0) | TrackBack

    February 03, 2009

    Stupid people saying stupid things

    EOW pointed to an article at TPM regarding the lack of traction on the stimulus plan...

    ThinkProgress has admirably demonstrated that the cable networks continue to tip the scales in favor of Republicans by booking like twice or even three times as many Republicans as Democrats to discuss the Stimulus Bill. But that only tells us what we already know, which is that the Washington press establishment is still wired for Republicans. But there is a Democratic president. And he does have the bully pulpit. And he needs to make this argument, which he's not. Absent that, we can't be surprised and the Democrats are not in much of a position to complain if the vacuum is filled by a bunch of Republicans making statements that are either demonstrable nonsense or just lies.

    Look at what people are talking about and you wouldn't get the sense that we're actually in the midst of a major economic crisis that will likely send unemployment well into double digits if nothing is done quickly -- and a crisis that is in large measure the result of the economic policies that the Boehners and Cantors and McConnells are telling us, all the evidence to the contrary, will now save us. Everyone who's taking this situation seriously realizes that spending is the pivotal part of what the government needs to do to stabilize the economy in the face of this crisis. The multipliers for spending versus tax cuts simply leaves no question about that. Ask McCain economic advisor Mark Zandi. The solid critiques from the right aren't about whether spending is needed but which types are most efficient.

    At the core, this is going to have to be us talking it up since President Obama and Co. can't manage to do a goddamn thing right since taking office. Oh, I'm sure some of you will point to Gitmo and say THERE but it's the big ticket stuff, like actually VETTING Cabinet noms that they seem to be fucking up nicely.

    The economy needs this. I've worked in various parts of the banking industry for more than a decade and can tell you, this is BAD. The situation we're in is precisely the result of greed coupled with a lax regulatory structure and weak legal enforcement. In short, this is the ultimate economic paradise that the policies of Boehner and Cantor and McConnell (not to mention our own Junior John) have already led us to. Only in their idiotic world would more of the same be good. I don't know why I should be surprised since the only one out of the three that's ever held a real job (Boehner) was a salesman. For a packaging company that didn't actually make anything, they just sold what was made by others.

    In other words, what these morons have to say about regulation and the efficacy of fiscal stimulus is questionable. At best. Especially in light of the fact that they've been saying the same thing for decades, they got what they wanted and we're all enjoying the ruin where it was destined to lead.

    It is not enough any more to support our plan. That time has passed and the Republicans simply will NOT let it go. All that's left is for us to attack THEM. THEY caused this. WE'RE going to fix this.

    And it's time the President get geared up and get into the fight. A CHANGE would be a President that actually did something right.

    It's time to give old school, knock the other into the dirt and kick him when he's down, politics one last spin.

    Say it with me, boys and girls, "TAX CUTS AS STIMULUS DON'T WORK". They didn't work last year, they won't work this year. TARP has started to work to stabilize the financial system. We need this to the economy itself working again and put people back to work. It would also be nice if Geithner would step on the banks to start lending again.

    Posted by mcblogger at 10:00 PM | Comments (0) | TrackBack

    January 29, 2009

    Two takes on Inflation/Deflation

    First, there's the 'OMG! There's too much money in the system! Inflation!' argument, followed by Mish's elegant and short takedown.

    Honestly, Hamilton's argument is dependent upon ignoring the fact that credit and cash (M0) are both measures of liquidity (which Mish points out) and that velocity is a massive consideration in determining if there really is too much money in the system. In the end, the only thing that's clear from Hamilton is that he's blithely ignoring some very critical pieces in his analysis.

    I will bite on one point, that we've seen a real shrinkage in supplies of goods and services... just on it's face, anyone who has been shopping in the last two months knows that's not true. There's a true deflationary case to be made in terms of oil because there has actually been real demand destruction. And it continues which sets up an aggressive case for a lack of inflationary pressure.

    Posted by mcblogger at 09:12 AM | Comments (0) | TrackBack

    January 27, 2009

    Nationalization gets a second look

    via NYT

    Only five days into the Obama presidency, members of the new administration and Democratic leaders in Congress are already dancing around one of the most politically delicate questions about the financial bailout: Is the president prepared to nationalize a huge swath of the nation’s banking system?

    Privately, most members of the Obama economic team concede that the rapid deterioration of the country’s biggest banks, notably Bank of America and Citigroup, is bound to require far larger investments of taxpayer money, atop the more than $300 billion of taxpayer money already poured into those two financial institutions and hundreds of others.

    But if hundreds of billions of dollars of new investment is needed to shore up those banks, and perhaps their competitors, what do taxpayers get in return? And how do the risks escalate as government’s role expands from a few bailouts to control over a vast portion of the financial sector of the world’s largest economy?

    The Obama administration is making only glancing references to those questions. In an interview Sunday on “This Week” on ABC, the House speaker, Nancy Pelosi, alluded to internal debate when she was asked whether nationalization, or partial nationalization, of the largest banks was a good idea.

    “Well, whatever you want to call it,” said Ms. Pelosi, Democrat of California. “If we are strengthening them, then the American people should get some of the upside of that strengthening. Some people call that nationalization.

    “I’m not talking about total ownership,” she quickly cautioned — stopping herself by posing a question: “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?’ ”

    I talked about this last week and I'm not exactly opposed to it, I'm not in favor of it either. For one thing, the issue isn't any longer recapitalizing the banks. The issue is restoring liquidity to consumers and businesses which is what the banks should have been doing. As for their continued write downs, this is kind of a shell game. For one thing, they've now got really nice tax writeoffs and they get to keep the written down assets. Which means when people start buying again, they're going to sell and realize some really nice gains.

    That's the dirty little secret as to why the banks aren't selling. There are some bids coming back into the market but they're no where near what you'd get in a fully functioning market.

    If nationalization of a bank is what's required to get things moving again, then may I suggest Bank of America. It's got a lot of money, a good business and lousy management that should be removed. Which makes this part of the article so damn funny...

    Some of Mr. Obama’s advisers have asked who the government would get to run the banks. Many of the most experienced executives are tainted by the decisions they made during the age of excess. And how would the government attract the best talent if it demanded that they take minimal pay — a political reality in the current environment?

    This REALLY makes me laugh considering that our universities are churning out B-school grads semester after semester that, frankly, are a lot cheaper than current management and probably far more competent. The best part? They don't need millions in salary and stock options. Hell, most of the folks who come out of this program make fractions of Ken Lewis's salary.

    Posted by mcblogger at 12:57 AM | Comments (0) | TrackBack

    January 23, 2009

    The bottom?

    PhotobucketAccording to long term price charts, it looks like we've reached the bottom on the stock market.

    Posted by mcblogger at 01:18 PM | Comments (2) | TrackBack

    January 20, 2009

    This week in the Credit Crunch

  • First, there's this in the NYT regarding forcing banks to lend.

    It was foolishly easy credit that got us into this mess. A government-mandated return to such lending is not a viable solution.

    Ordering the bankers to make loans is both simple and satisfying. But it will not fix the economy or the financial system.

    Now, I've seen my share of stupid pap in the NYT. Even Krugman's been guilty from time to time. However, this is just pure bullshit. NO ONE is asking the banks to return to their old bad habits. All anyone is asking is for them to get back to work lending to good credits, WHICH THEY AREN'T DOING. For example, last Friday my company and several others were forced to increase fees on conventional loans related to 'elevated' risk. However, this is so broad based that it hits every credit class and loan to value ratio. This flies in the face of Treasuries intention to buy MBS in the open market to increase demand to the level that rates fall into the mid-4% range.

    In other words, while rates might be falling, fees are increasing scrubbing out the net gain for the consumer.

    In the late 1980's there was a joke going around in Texas about a company called North Carolina National Bank which had taken over several insolvent thrifts. The logo was NCNB which was jokingly said to be an acronym for No Cash (for) No Body. The successor bank to NCNB is Bank of America which is sitting on a ton of government money.

    It is absolutely critical that credit be loosened for companies. It IS the only thing that will keep the recession from deepening. The bankers say they'll lend when the economy turns. What they don't seem to understand is that it can't turn without credit.

    What irritates me most is the assumption that people are staying out of bank stocks because of possible nationalization. If that's such a damn concern, why aren't these bankers doing everything in their power to make sure that doesn't occur? Frankly, not to put too fine a point on it, we the people delegate to the government the responsibility to charter and regulate banks to create a financial system that will benefit us all. Banks are not operating in good faith and, frankly, stocks be damned, it would be a good idea to put some fear into them by nationalizing one of them.

    Finally, while it's true you don't fix the sins of the past by continuing the bad behavior, you certainly don't go overboard and cut off the good behavior as well. The credit crunch, despite all the crap, is ongoing mostly because some chickenshit bankers are overreacting on the downside just as they did on the upside. In short, incompetent men and women like Ken Lewis at Bank of America are, in fact, making a bad situation a great deal worse.

  • Nouriel Roubini thinks there could be another $2.6 trillion in bank losses and that the banking system is, at present, insolvent.

    First off, I love Roubini but I think this is really offbase. Let's take derivatives off the table since most of the contracts have been unwound. So, you're left with the bad loans... now, with a bad credit, you will still have an underlying asset. Usually, in liquidation, you will recover up to 80%. Let's say recovery is only 50%. That means Roubini thinks that up to $7.2 trillion, about a third of all loans outstanding, will go bad. Which could happen if the economy really went into a tailspin. Problem is, it isn't. Commodities prices are in freefall which is lowering the cost of living creating a net wage increase for all those still employed. Unemployment stands, right now, most likely around 10% and may decay another 1% but not much beyond that. We have a stimulus plan which, while not much, WILL drive a return to growth and when that happens you'll see more of the money pour into wages and paying debts which will stem losses.

    Without those write downs, stability will return to the marketable assets and the balance sheets of the banks (that is, of course, if they start rebuilding their book of business by lending again) which effectively put a cap on further losses. To this point the banks have written down more than $1 trillion, mostly on paper losses unrealized due to market conditions. I think the losses will wind down this quarter and will cap at around $1.3 trillion.

  • In local news, Treaty Oak Bank applied for and has received TARP funds. Not a real big deal, except for the press release which was a real hoot from the perspective of spin control...

    “We are very pleased the Treasury Department determined our organization an attractive investment opportunity,” said Jeffrey Nash, president and CEO of Treaty Oak Bancorp and Treaty Oak Bank. “Our bank continues to grow requiring additional capital. We had not initially anticipated participating in the CPP Program but given our appetite for capital and the attractive terms of this issuance it was an easy decision for our board of directors when Treasury informed us they had selected our bank.”
  • Right now, Barack Obama is taking the Oath
  • Posted by mcblogger at 11:05 AM | Comments (0) | TrackBack

    January 15, 2009

    Tollway traffic down in Centex

    Oh, Jesus H. Christ, Ben. This is a short term blip based on a temporary recession. This was the funny part

    Aside from any financial troubles existing roads might experience, does this tepid revenue mean that toll authorities in Austin might have trouble securing loans for the five other roads approved last year?

    "I don't think so," said Michael Walton , who holds the Ernest H. Cockrell chair in engineering at the University of Texas and is a transportation consultant. "I don't believe it's a significant long-term problem because we're in the early stages of development on those roads. As they become more of the economic fabric, then utilization will continue to grow."

    We ALL acknowledge we need roads and people are using the tollways. Granted not as much as the rosy projections may have led investors in the bonds to believe, but they are using them and that will increase over time. BECAUSE THEY ARE THE ONLY OPTION. The IB's LOVE these deals and they aren't going away any time soon, even if they have to be put on the backburner for a while due to the credit contraction. After all, where else can Goldman Sachs or Morgan Stanley get a government guaranteed high yield return? Certainly not in Treasuries.

    What Ben missed, again, was the central issue : How do we pay for the infrastructure we need? The argument has ALWAYS been about funding our infrastructure. Do we want tolls that soak a relative few or gas taxes that are affordable by many and more evenly distribute the cost of infrastructure to ALL beneficiaries of improved infrastructure?

    Some will tell you that it's unfair for the people in the central city to pay for infrastructure for rich suburbanites. You'll have to forgive them for not knowing that the average home sales prices in suburban counties are usually lower than those in the cities and that people live out there because it's what they can afford. Some of them, just FYI, don't even come into the city, while those in the city frequently drive out there (I'm one of them). Others will bitch and moan about congestion pricing as if it's some kind of panacea that will make traffic go away. Which it won't. It certainly hasn't improved the 405 in OC which, despite all the bullshit flying around in Austin, is still clogged like a fat guy's arteries.

    Frankly, I'm sick of the fucking debate and ready to let you poor people sit in goddamn traffic while I enjoy the Lexus lane. It's clear to me you're too goddamn stupid to get that you're voting against your own self-interest. It's also obvious that a lot of Democrats are in love with public private partnerships that are really more about government backstopping the losses of private investors who, in effect, put nothing at risk. Some of you electeds are so dazzled by the bankers from Goldman Sachs and Morgan Stanley that you're oblivious to the fact that these folks, though they did better than the people at Bear Stearns and Lehman, are only around because of the Government. They aren't wizards or geniuses. In fact, many of them were about two weeks from being bankrupt and unemployed.

    Posted by mcblogger at 08:49 AM | Comments (0) | TrackBack

    January 14, 2009

    Chase decides to fuck consumers and taxpayers

    At a time when the US economy needs as much liquidity as possible, Chase has decided to freeze out 60% of the home lending market and take it over. The official announcement (PDF) discusses the WaMu purchase and details that they now have retail or consumer direct access to 70% of the US market.

    Here's the thing. This is a strategic move by a firm which has received TAF and TARP funds to dramatically reduce consumer access to credit and reduce consumer transparency in the mortgage market because Chase retail doesn't have to disclose NEARLY as much to consumers as brokers do. And it reeks of desperation.

    If you have money at Chase, this might be a good time to remove it.

    Posted by mcblogger at 08:58 AM | Comments (0) | TrackBack

    January 10, 2009

    Real wage growth, or, What's needed now

    There are a bunch of you who are probably tired of me talking about real wage growth. I've been doing it for a while so it's understandable. It's really good to see others talking about it...

    I think the big thing I'd add to that is growth in median incomes. One way or another, there's really no way for the economy to grow strongly and consistently unless middle-class consumers spend more, and they can't spend more unless they make more. This was masked for a few years by the dotcom bubble, followed by the housing bubble, all propped on top of a continuing increase in consumer debt. None of those things are sustainable, though. The only sustainable source of consistent growth is rising median wages. The rich just don't spend enough all by themselves.

    And there it is, trickle down failed much like my effort to quit smoking in March. And June. And again in November.

    Posted by mcblogger at 03:33 PM | Comments (0) | TrackBack

    December 30, 2008

    Why you spend like a drunken sailor...

    ...in an environment like the one we're in. This is a great piece from John Mauldin discussing the velocity of money, how much it's dropped off and how much more money you have to put into the system in order to compensate and stop deflation.

    This is why all of you who may be worried about inflation really better wise up and understand that the much larger problem, especially right now, is deflation. In other words, get off Washington's back. They really ARE doing what needs to be done.

    And yes, it's long. Sometimes things worth knowing can't be condensed into a paragraph.

    Posted by mcblogger at 12:00 PM | Comments (0) | TrackBack

    December 29, 2008

    Missing the point at the NYT

    This is one of the dumber articles on the credit crisis I've seen published so far. In this one, it's all about Bush's focus on expanding homeownership.

    Of course, that had little if anything to do with it. His desire to expand homeownership and the increase in it was more coincidence than result of a detailed and well thought out plan. Further, the article completely misses the ability of the IB's to lever to infinity on short term debt that, when it dried up, froze their access to funding. Without that funding, their capital structures and leverage were unsustainable and they collapsed. As they collapsed, it constituted a credit event which triggered counterparty claims on CDS and triggered (for example) AIG's need to raise collateral which would have forced them to sell already depressed securities into an already depressed market.

    All this was because someone lied about their income? Or bought more house than they could afford? No, the credit markets collapsed because no one ever reserved for losses and a bubble was created by cheap money, largely unregulated. Not to mention the fact that many people paid A credit prices for C credit risks, a poor proposition in the best of times.

    This was, purely and simply, a lack of regulation and common sense on the part of regulators and the players, many of whom are taking home large bonuses even this year. It was in that environment that a few defaults can lead to more and more defaults and ever larger, more robust losses that eventually overwhelm an individual bank or even an economy.

    It would be AWESOME if some members of the so-called financial press would actually, you know, get it right.

    Posted by mcblogger at 09:00 AM | Comments (0) | TrackBack

    December 17, 2008

    The Economy : What's next?

    PhotobucketThis is gonna have to be somewhat short due to a meeting this AM and far too many things to do.

    First up, the Fed's decision to drop the Funds rate to 25 bps is not unexpected but it is a little irritating and tells me two things:

    1) Paulson is a pussy
    2) Bernanke is a cunt

    You do this, if you're the Fed, to provide liquidity to the banks so they can rebuild their balance sheets (we're about 60% of the way there) and start lending again. Of course, that's what the Fed and Treasury have been doing this entire time, with every rate cut and TARP purchase and TAF usage. And banks have, in turn, decided to continue to tighten the screws on businesses and consumers. As a result, unemployment is rising sharply, consumers have frozen spending, businesses are pulling back (they couldn't get capital now anyway) and we're staring at a very deep recession. I guess we should be happy it's not going to be a depression, right?

    Wrong. If the banks don't move off dead center, all that has transpired will be pretty worthless. Which means the Fed and Treasury need to do one of two things...

    1) Nationalize as many big banks as it takes to turn the spigot back on. This, honestly, is my favorite because it has the potential to squeeze the hell out of these glib CEO's. Call Citi and BofA and tell them, "You either lend or we wipe out your equity. And your pay package. And you can sue the Federal Government."

    2) Inflate the money supply but not by issuing debt. Just print more. This one is dangerous like a motherfucker because it leaves nothing on the table and devalues the dollar. Depending on what happens overseas, that could lead to a flight from dollar denominated assets leaving us with far higher rates over time. It would boost export income and would alleviate our real BOP issues (we're selling more overseas and paying off past debts with nominally cheaper dollars). However, there are already so many dollars out there that when asset prices stabilize and increase, we're going to have (in effect) the same issue. This is, in effect, like pouring gasoline on the fire. Krugman and Mankiw think it can be managed. I think they're crazy.

    Neither Krugman or Mankiw would be especially comfortable with option one because both are operating under the illusion that you can, through elegant measures like printing money, bully the banks. I prefer the more direct approach that creates real consequences. Neither understand that the 'free market' is functionally dead. We're back to managed capitalism in the US because it's clear that greed overrides common sense. We're not heading toward socialism but our latest flirtation with laissez-faire has failed, just like the others. The laws R's and some D's have spent the last three decade dismantling, as it turns out, were absolutely necessary. Who knew?

    Mankiw's uncomfortability with admitting error is especially clear in light of his disdain for new federal spending as it will burden our children. Please. Greg, in the abstract, is absolutely right. However, this is about stimulus and infrastructure investment. Personally, I don't think we need stimulus I think we need to spur the banks to loosen guides and lend some of this cheap money they've been given. They can then rebuild their balance sheets with the spread income, consumers will lower debt burdens and business will have the operating and expansion capital they need. That's why I like Option 1. Option 2 leads to a banana republic.

    As for Mankiw's dislike of other federal spending, I have only this to say... BITCH, WE NEEDS US TRANSPORTATION INFRASTRUCTURE. If you're so worried about the debt burden on your damn kids, think about how much more expensive building these roads will be in 2020 or 2030. We spend a trillion dollars and for that money we modernize our infrastructure for the next 20 years? It's a bargain and you should be looking at it that way, especially since all this debt being issued to finance it is functionally free.

    Right now, Housing is starting to turn. We still don't have a solid loan mod platform but prices are beginning to stabilize and the refi market has gone through the roof, mostly because the Fed and Treasury have been buying MBS dropping interest rates on home loans for consumers. Those rates got passed through because there are alternatives to banks for mortgages. Not so with most other types of borrowing. Given that, it's time the Fed and Treasury start acting like they have a pair and beat the fuck out of morons like Ken Lewis.

    Posted by mcblogger at 09:55 AM | Comments (0) | TrackBack

    December 16, 2008

    How does it feel?

    This was passed along over the weekend by Carl Whitmarsh.

    I have a question for all those working-class Democrats -- especially the ones employed directly or indirectly by the U.S. auto industry -- who in the 80s became so-called "Reagan Democrats" and voted Republican for the next 20 years. The question is this: Given the "fuck you" attitude being contemptuously displayed by Senate Republicans where it concerns a rescue plan for your industry, your job, your life, how do you feel now about your abandonment of the Democratic Party? Huh? Got an answer? Nothing deep. Just a quick sentence or two would do. I mean, how does it feel to have spent all those years voting your bigotry and your willful political ignorance and your sheep-like need to be manipulated by the thugs who infest right-wing talk radio, and now that your whole life is collapsing because of the policies of these Republicans (who never gave a shit about you anyway) you get to watch and listen as they kick you and your family to the curb and say, naw, we don't think the "taxpayers" wanna bail out the auto industry; we don't care if another three or four million more families head for the homeless shelters and food stamp offices.

    There's more at the link. Yes, it's harsh but it is spot on. People need to really think before they go into a polling place.

    Posted by mcblogger at 11:50 AM | Comments (0) | TrackBack

    December 10, 2008

    Vitter, Ensign, Coburn and Shelby are in a bus...

    ... wouldn't it be great if the bus went off a cliff? Metaphorically speaking, that was what happened in their press conference today opposing the auto bailout.

    What these bitches are talking about is union busting. And none of them know what the hell they are talking about, in so far as a bankruptcy filing. Americans will NOT buy cars from a company in BK, period. This isn't conjecture, it's fact. Add in that no one will carry the debtor in possession financing and you have a recipe for disaster if these companies have to declare BK.

    It shouldn't surprise me that Republicans are this stupid. But it does. What's most galling is Shelby, who is obviously shilling for the automakers who call his state home, Mercedes-Benz, Hyundai, Toyota and Honda. He has a vested interest in seeing the big three go down the tubes. It'll mean his foreign constituents will make more money since they'll have less competition.

    And where, pray tell, are OUR Senators Hutchinson and Cornyn? Where are they to fight for the GM plant in Arlington?

    I'm all for reorganizing these companies and for basically eliminating the top four layers of management. Because that's the kind of restructuring these companies need. What the R's want is for the unions to be broken in Bankruptcy court and that isn't the way to fix these companies. This is a microcosm for what's wrong with this county with lousy management never getting fired while ordinary workers end up taking a beating. And they want to rape the pension funds?

    And now Max Baucus comes out and says he's opposed to the auto bailout which just makes me so mad. Why won't anyone in the Capitol on the D side take on Ensign and that moron Shelby? They are intellectual pygmies hellbent on their own self interest rather than what's best for the country.

    Am I thrilled about the auto czar? No. However, I also know that if we're going to do this, we need someone to oversee taxpayer investment. And we do need to do this. This is a tipping point and a bunch of southern Senators are hell bent on taking us over the edge.

    Posted by mcblogger at 11:49 AM | Comments (0) | TrackBack

    10% delinquent or in foreclosure

    Not good. While 31% of US homeowners have no mortgage, of those that do, around 10% delinquent.

    Now, before you panic, this includes everyone from those 30 days late to those in foreclosure. And no, this isn't anywhere near as bad as the Great Depression.

    And this certainly didn't help... especially since this number is understated by around 2-3%.

    Posted by mcblogger at 09:29 AM | Comments (0) | TrackBack

    December 05, 2008

    Oil : How low do we go...

    This is one of the best pieces written on the oil market and the current position. The reality is that speculation was driving up prices (we talked about this) in concert with the weak dollar. I wrote that piece in May assuming that the world wouldn't fall apart and that demand wouldn't deteriorate as fast it did.

    Let me be frank... anyone who claims the drop in oil prices happened exactly as they predicted is lying to you. NO ONE anticipated demand destruction on the level we've seen this year with year over year declines of 5-10% in aggregate demand. That is a huge number. And while that depressed prices and deflated the bubble, the rest of the decline is purely related to the rise in the dollar. In my piece from May I thought that would only happen with restored fiscal policy. Turns out, all we needed was a collapse in the financial sector and a flight into dollars and dollar denominated assets to bring the dollar back up and drop the hell out of oil prices.

    Now, with supply high and demand unlikely to rise up to meet it as people continue to transition to cars and trucks that require less oil, the likelihood of a quick rise (despite the prognostications of commodities permabull Jim Rogers) is non-existent save speculation or a dramatic deterioration of the dollar. Even those may not be enough to return prices to the 90's/bbl. The reality is that the runup in prices was more about our dependence on oil than our demand for oil coupled with a speculative frenzy. The frenzy drove prices up and our dependence kept us buying because we couldn't reduce demand fast enough to compensate. The problem with demand destruction is that it takes longer to play out than a price spike... which means the demand fundamentals are going to continue to drop.

    At least we were right about one thing... once speculation was broken, the price did collapse. That being said, even we are stunned by this decline.

    Posted by mcblogger at 12:38 PM | Comments (0) | TrackBack

    Assigning blame

    Digby has Limbaugh's take on the Big Three's trip to Washington. Limbaugh is, of course, blaming the Democrats.

    PhotobucketI have some questions. You know, Pelosi, Reid, that crowd, they sent the auto execs home yesterday and they said, "You come back with a plan. We don't have the votes and you're not going to make us look bad. It sends a bad signal to the American people. We don't have the votes. So you come back with a plan. You tell us what you want for the $25 billion." Okay, I have some questions for the people like Pelosi and Reid and these other liberal hacks, just tough questions for you to ponder. With gasoline prices now under two bucks in most places and dropping, and the price of oil (I checked it right before the program) below $50 now ($49 a barrel it was earlier today.) So with the gas price under two bucks and oil plummeting, what would you say, Pelosi and Reid, if the car companies could become profitable by selling SUVs or go broke by turning out the green cars that you're going to demand they make? What would you say, Pelosi and Reid, if the best auto executive in the world could come in and fix the Detroit problem but he demands a hundred million dollars a year in income? Would you insist that they hire somebody who has no clue what they're doing and earns less than $400,000?

    Lookit, Limbaugh and his ilk have always found it easier to carp than offer real solutions. They have none which is par for the course with the unimaginative who refuse to think. Instead, they offer criticism and angry commentary that, frankly, is nigh unto incoherent. The problem with the auto industry has never been that they were making what Washington demanded, the problem was their planning and long term strategy was wrong. As oil prices increased, they never shifted gears. As the market transitioned to a recession, they never altered to more affordable cars or sought out cheap long term debt to bolster their capital structure. Now the problem is very dramatic as wages are cut, incomes drop and fewer people are buying cars.

    Their failure was a failure of management. For 30 years, they underfunded their pension plans. For thirty years they've been losing business to competitors who are just as large but far better at designing, building and selling what the market wants. Their failure is not the failure of liberal ideology, it's the failure of their leaders to adequately build for the future. They can blame CAFE, unions and anyone else they want but the failure is theirs.

    Despite having some of the best paid managers and CEO's in history. So, no, I would say that managerial talent is not worth $100mn per year. I'd put it at about $500k. Limbaugh is clearly a very poor businessman if he'd overpay THAT dramatically. But then again, people like Limbaugh often do things like that when it's not their money.

    There's one ally Democrats in Congress have on CEO pay and that's the millions of small investors like myself (those with net worth less than $1mn) who wholeheartedly agree with caps on CEO pay. In fact, we'd like to see caps on ALL executive and managerial pay. Unions and low level employees aren't bleeding us, as owners, dry. It's the management that is always to blame.

    And I'm all for creating problems for those parasites like Carly Fiorina who is best known for making Hewlett-Packard shareholders poor.

    Limbaugh's rant blaming the Democrats is not unlike the one being circulated by some in the media regarding the cause of the mortgage crisis. From the WSJ to the WaPo, there has been a lot written about the CRA being to blame which isn't even remotely true.

    While the issues are complex and ongoing, the bottom line is that a lack of regulation allowed people to create securities which hid the underlying risk. Subprime credits were packaged and credit enhanced to turn them into A credits. Investors looked the other way because whether it was A paper or subprime, they thought they were safe as houses since people always pay their mortgages. Well, they do as long as they have a wage. When all the equity they had accumulated has been used to offset the fact that borrowers wages hadn't really grown, they stopped paying their bills.

    The CRA requirements, for the last damn time, CAN NOT be satisfied with subprime loans. This isn't a point of disagreement I have with the WSJ, this is me saying they are completely wrong.

    Posted by mcblogger at 09:13 AM | Comments (0) | TrackBack

    December 02, 2008

    PSA : Speaking Authoritatively

    As part of our ongoing series of PSA's, we'd like to offer the following...

    Now, where did George Will go wrong? Possibly not having a full command of the economic history of the Great Depression? Maybe having a worldview driven less by reality and more by ideology? Using that worldview to draw conclusions that don't fit facts?

    If you answered all of the above, you're absolutely right. If you're going to speak authoritatively, it helps to know what the fuck you're talking about. And don't quibble with Nobel winners. If you are right, they'll never admit it anyway.

    Right, Paul?

    Posted by mcblogger at 03:15 PM | Comments (0) | TrackBack

    December 01, 2008

    Obama's Economic Team

    The WaPo has a good article up about the economic team that the President-elect is setting up and to be honest, I'm blown away by the quality of the people. Even Larry Summers.

    To fashion the government's response, Obama has turned to people who have been associated with more market-oriented approaches. Timothy F. Geithner, 47, Obama's choice for Treasury secretary, is president of the Federal Reserve Bank of New York and has been a key player in negotiations aimed at saving some of the nation's largest financial institutions.

    Lawrence H. Summers, whom Obama tapped to direct his National Economic Council, served eight years in the Clinton administration, including a year and a half as Treasury secretary. He has argued that the economic boom enjoyed during much of Clinton's presidency was largely a consequence of shrinking federal deficits.

    Both Summers and Geithner are proteges of Robert E. Rubin, Summers's predecessor as Treasury secretary and current Citigroup director and counselor, whose views in favor of free trade, deregulation and reduced deficits have come to define the economic approach of the Clinton years.

    Christina D. Romer, an economics professor at the University of California at Berkeley who is an expert on tax policy and the nation's recovery from the Depression, has been selected to lead Obama's Council of Economic Advisers. "She has the principal required characteristic of a CEA chair: the ability to clearly explain unpleasant and somewhat complex truths about the world to powerful people without making them mad," said Bradford DeLong, another Berkeley economist.

    "These are great choices," said Doug Roberts, chief investment strategist for ChannelCapitalResearch.com, an investment research firm. "Right now, economics is the key thing. He is looking for experienced technocrats, despite the fact that some come from the right or the left."

    What's even more heartening are the specifics. No more bullshit about how raising the minimum wage will kill jobs (It never does. It gets the marginally employed back to work). Massive infrastructure spending to repair our existing roads and build new ones, not to mention dramatically expanding public transportation, providing not only a jumpstart to job growth, but the foundation for the next leg of economic expansion.

    I still think the job growth targets are weak. However, I'm feeling a little better about the direction in which things are heading, especially with Paul Volker taking on a leadership role.

    Posted by mcblogger at 03:03 PM | Comments (0) | TrackBack

    November 24, 2008

    Democrats are much better Republicans

    Photobucket This is a GDP growth chart under different Administrations over the last 70 years from Brad DeLong's blog. Actually, he has a bunch more charts over there that are very interesting in so far as pointing out that Democrats are far better for the economy than Republicans.

    Over at Slate, there is a great article about sub-prime lenders who are still in business. We call them the good guys. Their down payment guidelines are very lax but everything else is just as tight as tight as A paper. And their default ratios are even lower.

    See, I keep telling y'all I know more than Larry Kudlow. He was wrong on who's best for the economy and the CRA.

    Posted by mcblogger at 09:03 AM | Comments (0) | TrackBack

    November 21, 2008

    It's Geithner. We hope.

    PhotobucketThe rumor floating around is that President-Elect Obama has chosen NY Fed President Timothy Geithner to be Secretary of the Treasury. We, like the market, could not be happier.

    Well, we could but it would take Bob Rubin to do that. While he may not have been the staunchest of supporters for regulation, his focus on fiscal responsibility was perfect. And he's come around on regulation, too. However, since he decided he'd had enough, we're pleased Geithner will be picked as opposed to Larry Summers.

    Posted by mcblogger at 03:12 PM | Comments (0) | TrackBack

    This crazy market

    Seriously, I don't know what else to say. When the CDS market is saying Berkshire Hathaway is more likely to default than Citi, then people have just gone out of their damn minds.

    Posted by mcblogger at 02:04 PM | Comments (0) | TrackBack

    Why yes, Mr. Cheney, deficits DO matter

    This is a video for IOUSA. It's well produced and eye opening for those of you who may not understand federal spending, the national debt and our future obligations. Yes, we've talked about this a number of times, however, you could always do with a refresher course.

    Sure, there are a number of holes, however the gist (the US needs to make some changes) is spot on. So what's to be done?

    While the issue is complex it's far from intractable. And we can deal with it. First off, there have to be caps on Federal spending. For one thing, our defense spending is just out of control and has to be scaled back dramatically. Cutting DoD by 50% would functionally eliminate the deficit without any changes to tax policy. Even then, we'd still be spending dramatically more on defense than many of the largest countries on the planet. Combined.

    Next up, we need some rationality on SS. The bottom line is that with health care most Americans live far longer than they did when the program was created. It's time to raise the retirement age to 68. That step alone will go a long way to eliminating the long term funding gap in SS and that age needs to be increased over time to compensate for people living longer.

    As for Medicare, it's more of a problem and will probably be fixed as part of a national reform of health care. Part D, the horrendous drug benefit, can be dramatically improved just by allowing the government to negotiate prices.

    Now we come to taxes. Income taxes are going to have to go up, mostly on the wealthy and upper middle class. It doesn't need to be a dramatic increase (as the movie suggests). Frankly, the closer you get to a 50% marginal rate it depresses the capacity of the economy grow. Ideally, you don't want to see a top marginal rate above 45%. Combine that with eliminating the cap on SS and many of our problems get fixed.

    There are a couple of things on which we need to spend money and before we can get to the good times (running surpluses again), we have to make some substantial investments in alternative transportation fuels (cutting the money we send overseas) and in infrastructure like schools, roads and public safety. Even if we have to run massive deficits (I'm thinking at least $1 trillion in new debt), this money will provide us with the infrastructure and energy solutions for the next leg of economic growth. That will complete the balance and should help finally reignite wage growth.

    All this can, of course, very easily be undone in about eight years with the return of fiscal irresponsibility. For 30 years people like Dick Cheney, George Bush, Sarah Palin, Rick Perry and Ronald Reagan have told Americans that tax cuts will pay for themselves. They don't and they never have.

    This is the reckoning and it's time we all stood up and made those who would return us to fiscal insanity are always shouted back down.

    Posted by mcblogger at 09:01 AM | Comments (0) | TrackBack

    November 18, 2008

    About GM

    Well, there's no shortage of opinions today out about GM. WhosPlayin' has a good (if simplistic) piece. Andrew Sorkin's article over at DealBook is beating the hell out of the unions and advocating the elimination of management as the US forces the company in bankruptcy.

    While this may surprise you given my vocation, I'm with Sorkin. Chapter 11 is necessary.

    First, let's head back to WP as it neatly points out that in the case of the automakers, things aren't as cut and dry as we'd like.

    More important still is the opportunity cost of saving the automakers. It is suggested that millions of jobs might be lost if the firms folded. That may well be true, but those workers would not remain unemployed forever.

    While this is true, the intermediate term pain will be very heavy and the effects cascade through the economy. You can't just scrub out the automakers and their payroll without causing dislocation nationally. For instance, the Big Three dealerships here in Central Texas provide for sales and property taxes, revenue that would have to be replaced if the companies were liquidated. That's just one of the effects from liquidating the automakers. Don't forget up to 10% of our workforce out of work as a result. That, plus our already high unemployment, would be a one two punch taking us directly into depression.

    Nah, the best thing to do is for the government to force them into a Chapter 11 re-org. But with a catch... 40% of the equity when the company returns to the public markets must be reserved with 20% to current shareholders of record on the date of the bankruptcy and the remaining 20% to the pension plans to make certain there is no cut to pensions. This will make it easier for workers to take the necessary cuts in benefits (sorry, you'll have the same crappy health insurance we all have) and slight cuts in pay to stabilize the company. Allowing existing shareholders to benefit post restructuring will make sure that pension funds nationally that carry GM stock will be able to benefit from a resurgent auto industry.

    Then, it's gotta be restructured.

    I'm all for merging GM and Chrysler but the brand strategy Sorkin lays out is incomplete...

    Both companies would have to jettison brands — lots of them. In the case of G.M., frankly, the only ones worth saving are Cadillac, Chevy and Buick. (Buick? Yes. Despite its lackluster sales and fuddy-duddy image in the United States, it’s a huge seller in China.)

    That means Saturn, Pontiac, GMC and Saab would all disappear. Deutsche Bank estimates that reducing G.M.’s brands from eight to three would bring down the company’s cost base by $5 billion annually. If you’re able to shut the dealerships too, lop off another $4 billion. Chrysler is an even sadder situation: the only brand with any value is Jeep. Its Dodge Ram truck lineup could be merged with Chevy, which would also pick up pieces of the GMC business. And Chrysler’s minivan business could be combined into the Chevy brand as well.

    Saab and Saturn should be merged and model numbers reduced. Saab is, oddly enough, a great brand. As for Chrysler, Pontiac and Dodge? Kill them.

    Some of you will no doubt think I'm crazy with only 'slight' paycuts. For one thing, this is temporary measure to boost earnings to pay off debt and rebuild the pension plan and you don't have to make massive cuts to achieve that objective when you're not paying a dividend. Once the company is restructured, with new management in place and a manageable debt load, you take it public again and with the money raised overfund the pension plan to 105% of obligations assuming a 5% asset growth rate. If there's any left over, cut pay down debt. GM has gotten itself into this mess in part by ignoring the pension plan that it's been underfunding for 30 years. But that's just part of the problem... the rest of it is management.

    For them, there should be nothing.

    Posted by mcblogger at 10:54 AM | Comments (2) | TrackBack

    November 17, 2008

    Economy : More fun to come

    Over the last four years, hedge and private equity funds have taken on a lot of debt they've used to buy companies to which they've then transferred that debt. And a lot of it is coming due fairly soon, during the worst credit freeze since the Great Depression.

    “The dangling other shoe is now about to drop,” said Jeffrey A. Sonnenfeld, senior associate dean of the Yale School of Management.

    When the economy was booming, the firms made huge profits by cutting costs at their new acquisitions, improving operations and then turning around and selling them. In 2007, at the height of the bubble, such deals totaled $796 billion, or more than 16 percent of the $4.83 trillion in all the deals made globally that year, according to data from Dealogic.

    Firms like the Blackstone Group and Kohlberg Kravis Roberts & Company, faced an image problem at the height of the bubble for excessive compensation and beneficial tax treatment, but their returns were so high that even investors like pension funds were drawn in. Now these firms, built on enormous amounts of debt, are being forced to go back to the financial markets just as those markets have nearly frozen up.

    If history is any guide, the worst may be yet to come. Steven N. Kaplan, a professor at University of Chicago Graduate School of Business, found that nearly 30 percent of all big public-to-private deals made from 1986 to 1989 defaulted.

    Without access to credit, many of these companies will be unable to pay their existing creditors, constituting a default event which will probably force them into bankruptcy where the funds will lose their equity. While this may seem like a wonderful solution, that equity really belongs to shareholders IN those funds. Pension funds, university endowments, insurance companies and the list goes on and on of the organizations that ostensibly invest for the future of ordinary people that will be hurt if these companies go under.

    Now, maybe, would be a good time to start regulating private equity?

    Posted by mcblogger at 08:56 AM | Comments (0) | TrackBack

    November 07, 2008

    The Economy, or, From the toilet to the sewer

    The unemployment rate in the US has now reached levels not seen since 1994 and is expected to continue to climb. The White House, for it's part, is still not real comfortable confronting reality...

    On Friday, a spokeswoman for President Bush, Dana Perino, called the employment numbers “a stark reminder of how critical it is we keep focused on utilizing” the programs that Washington has put in place, including a $700 billion bailout of the financial system.

    “We know what the main problems are — tight credit and housing markets — and we have the tools to solve them,” Ms. Perino said. “The programs we’re putting in place will improve the flow of credit to consumers and businesses that will spur economic growth, job creation, and stabilization of our financial markets.”

    A year ago, that was the problem. What has been put in place doesn't prevent a recession, it merely prevents a widespread collapse and a resulting depression. We're out of the woods there. However, we're entering a very dangerous time with unemployment creeping ever higher. Of course, these rates HAVE been high for years. We just haven't seen them because BLS has been politicized and the numbers were massaged.

    Typically, unemployment is a lagging indicator. First you see credit tightening, then businesses pulling back, then consumers, then layoffs and escalating unemployment followed by renewed growth. In other words, this is the crescendo. However, this doesn't mean things won't get worse before they get better. To wit...

    Many economists expect this picture to worsen as the consequences of the global financial crisis ripple out to businesses and households. Though the $700 billion taxpayer-financed bailout has staved off fears of an imminent collapse and restored some order to the financial system, it has not persuaded banks to lend freely. Credit remains tight for businesses and homeowners.

    OK, one way or another we have to get money back into the economy. If banks won't lend, then the government may do well to start lending itself or do a far larger stimulus package to reinflate the economy and kick start growth. We can worry about the resultant inflation once we are past the risk of deflationary death spiral. Inflation is easy to cure compared to deflation.

    My personal preference is to dump $1.5 trillion over 5 years into infrastructure. Schools, roads, public transport, etc. all need improvement and those improvements are expensive. For one thing, it lessens the budgetary constraints on the states and munis. For another, it drives job and wage growth from the lowest levels which creates a solid base from which to expand the economy dramatically over the next 20 years. Given the global financial crisis, the government can obtain this funding at very attractive interest rates.

    The long term prescription is wage growth at the bottom which will, in turn, drive up savings rates. Which is why tax policy at the corporate level needs to change dramatically.

    Posted by mcblogger at 12:01 PM | Comments (0) | TrackBack

    November 03, 2008

    BUT WHAT ABOUT ME?!?!?!?!?

    According to the NYT, some of you morons are upset that people are getting help to keep their homes.

    An airline pilot who lives outside Norwich, Conn., Mr. Lawrence has a traditional 30-year mortgage that he has no trouble paying every month. But, thanks to the plunging real estate market, he owes more on his house than it is worth, like millions of other people.

    If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break.

    “Why am I being punished for having bought a house I could afford?” he asked. “I am beginning to think I would have rocks in my head if I keep paying my mortgage.”

    OK, Mr. Lawrence... here's THE DEAL. Your credit is good. THAT'S what you get for not needing this bailout. More than likely, you won't have to give up a percentage of your equity. AND, while you're underwater now, if this keeps up and we don't start helping some of the people hardest hit, you're going to go a lot more underwater and probably lose your job. You dumbass, it's not like this solves just one problem. It takes care of a myriad of problems.


    THAT, my friends, is one of the biggest problems with this country. A focus on selfishness to the exclusion of all else, even thought you'll clearly benefit from being a little less self-absorbed. Watch Mr. Lawrence's airline lay people off and see how long it takes him to start asking for help.

    Posted by mcblogger at 02:39 PM | Comments (0) | TrackBack

    Feeling the economic pinch?

    We're here to help. Well, actually, UrbZen is here to help. Well, when you really dig down to it Apartment Living is here to help but UrbZen made some brill comments.

    3. Trade things you don’t want with friends, neighbors, relatives. Like your wife.

    9. Paper towels are expensive. Use washable cloth dish towels instead.
    Toilet paper is expensive, too.

    16. Consider cutting your family’s hair yourself.
    Because they don’t hate you enough already.

    24. Learn about the many bargains at ‘no frills’ discount stores.
    Like the guy who sells Prada out of his van in Riverside.

    Posted by mcblogger at 09:09 AM | Comments (0) | TrackBack

    October 16, 2008

    Paul's economic advisor speaks

    Ron Paul's economic advisor, Peter Schiff, has a great piece up at the WaPo. Well, at least part of it is wonderful. This part...

    Amid the chaos of recent days, as the federal government has taken gargantuan steps to stabilize the financial markets, realigning the U.S. economic system in the process, comes a nearly universal consensus: This crisis resulted from government reluctance to regulate the unbridled greed of Wall Street. Many economists and market participants who were formerly averse to government interference agree that a more robust regulatory framework must be constructed to cage the destructive forces of capitalism.

    Sounds good, right? Just like what we've been saying for a while, no? Well, it is. However, he goes on to blame the government for PROMOTING HOMEOWNERSHIP AND NOT REGULATING WALL ST. which is bizarre. Why? Because it was the libertarian philosophies of Schiff and those like him that said the market would self regulate and that we needed to get the nanny state off our backs. Meanwhile people like me were screaming about what had become SOP at all the investment banks... lever 'til it hurts, baby! You guys won the battle of who could eliminate regs. But, as it turns out, my side wins the war because we're the only ones who still have money.

    Never mind the fact that the entire economy almost fell off a cliff.

    The part of the piece that really struck me was this...

    Real credit can be supplied only by savings, so artificial steps to stimulate lending will only produce inflation.

    Would someone, you know, take a moment to discuss monetary aggregates with Peter and that deflation is now a far larger concern than inflation considering that more than $ 4 trillion has evaporated from the economy?

    Posted by mcblogger at 10:04 AM | Comments (0) | TrackBack

    October 10, 2008

    I'm voting for you, Rick

    ...but this was politics, it's shitty and you're a goddamn braindead simp for saying it. Cornyn has done soooo many things wrong that there are tons of issues to attack on. Instead, like any other craven politico, you attack him on the right decision on an unpopular issue that the mouthbreathers out in the hinterlands don't understand (but just so happens to be the one thing that might keep them from abject poverty).

    You could have beaten him up for supporting the very deregulation that created this mess. You could have gotten him on supporting the very lack of oversight that allowed companies to offer mortgages at insane rates to borrowers who were clearly not qualified.

    "We can't believe anything that we hear out of Washington, D.C., any more," Mr. Noriega said in a debate broadcast statewide on public television.

    "This decision was made in haste," he said, adding that the stock market's negative reaction shows the bailout wasn't well thought out.

    "It didn't have the accountability," Mr. Noriega said. "Quite frankly, we need to see that people go to jail.

    WOW. Where to begin... the first sentence is just stupid. THIS WASN'T COMING FROM WASHINGTON YOU ASSHOLE. This has been rolling downhill all over the planet for a year. Just because you only recently became aware of it doesn't mean it wasn't out there and it wasn't just as big as many of us said.

    The second point shows nothing of the sort. This is about redemptions and people panicking, it's hardly the market passing judgment on the TARP. TARP hasn't even been started. That's analogous to saying that a miscarriage was God's way of saying that he didn't want someone to be a mother.

    As for sending people to jail, for what? Doing stupid, but legal, things? Wanna make changes to the law and regs retroactive?!

    That's fucked up, hermano. As someone who has supported you from the Draft movement on, it's absolutely shameful to me that you would politicize what is in fact a very real disaster. If this really is how you feel, then I have serious doubts about your temperament and capabilities. If I were to tally up good vs bad decisions under both you and Cornyn, I'd have to say that you're still solidly beating the hell out of Cornyn. And I'm still voting for you.

    But I'm no longer voting FOR you. I'm now simply voting for the lesser of two evils and despite the fact that you're dumb enough to box yourself in on this, you're still the lesser of the two which ain't saying much.

    Thanks a lot, Prick.

    Posted by mcblogger at 11:30 AM | Comments (3) | TrackBack

    Shut up, Asshole

    Bush goes on TV and the Dow falls 200 points.

    We've got, what, a little over three more months of this nebbish? God in heaven, can't they just lock him in a broom closet?

    Posted by mcblogger at 09:32 AM | Comments (0) | TrackBack

    October 09, 2008

    Poll shows 60% of Americans are dummies

    You know, this would have been helpful a week ago Monday when all you morons thought we weren't in any real trouble. And now that we've got things somewhat stabilized, you think the world is about to end.

    Maybe, just maybe, it's because they're reading shit like this. My favorite part:

    There is trouble here. In the absence of a functioning market, how can the bureaucrats at the Fed figure out the right prices/yields to charge? This is the same problem as valuing level 3 assets, but without a profit motive to aid in focusing the efforts of the businessman.


    Point 1 - The Fed can rather easily determine the right prices by cashflow and performance analysis. That price then becomes the new mark to market (see Point 2). For example, if someone is trying to sell a CDO to the Treasury, with a face value of $1 bn, Treasury will do an analysis of the projected yield to maturity taking into the account the performance of the CDO. If 25% is not performing, then a baseline is $750 mn, less the already paid out portion. In general, you'd probably see a discount of 10-20% which would give a price of, say $600 mn. Granted, I'm not breaking out the math and some of these securities are a great deal more complex. However, that's essentially how this works.

    Point 2 - The price the Fed pays for one security can be cross applied to a similar security (it only takes one trade to make a market price). Thus, the null valuation for level three assets goes away and suddenly bank balance sheets look a lot better.

    Point 3 - The Fed and Treasury are likely to strip these pools apart and separate the good from the non-performing. The NP will then be sold off to loss mitigation folks. The rest of it will be insured and sold back into the market. Why will the market buy it?

    Point 4 - The market will buy it because every minute someone sits in cash costs money. It's not just inflation, it's opportunity cost. How long can they afford to sit this out? A month. Maybe.

    What's being missed is that this isn't 1929. Things move at speeds that would be unimaginable to the people of that era. The crash was long, drawn out and excruciating. This one has been short, deep and very painful. The recovery took a decade. Now, if it takes a year I'd be surprised.

    Could things spin out of control? Sure. Get over it. Simply, it's like worrying about dying. Sooner or later, it'll happen. It's worthless worrying about it.

    And quit watching Suze Orman.

    (h/t to KT)

    Posted by mcblogger at 09:18 AM | Comments (1) | TrackBack

    October 07, 2008

    The Nightmare and Oil

    More than a year ago, I wrote this about the nightmare scenario. We've experienced spot shutdowns in CP for more than year which has squeezed the investment banks. Unfortunately, it's now spread to a systemic problem which prompted the Fed to step in this AM to become the lender of last resort for commercial paper.

    A year ago I said an event like this could well cause the dollar to lose 30% of it's value. That flawed analysis was based on a breakdown mostly in the US. However, as the freeze in the capital markets has spread worldwide and as write downs have basically eliminated $2-3 trillion from the money supply, there is a flight to the perceived quality of US Treasuries.

    Voila! Instant dollar appreciation vs. other major currencies.

    What's the net effect? Well, for the $4-5 trillion on the sidelines, it's a wakeup call that the Fed and Treasury, working in concert with other central banks, will not let the entire global system go down the drain. Further, it lets them know that there are safe risks. Finally, they have got to get this money to work and were charging exorbitant rates to borrow. Now they have an absolutely massive competitor which will have a cooling effect on credit cost increases. This should accelerate a return to normalcy.

    This was the bogeyman in the closet. Now that it's come out, we realize it's not carrying a chef's knife. It's carrying a plastic potato peeler. And we have gun.

    This doesn't mean all is rosy. Unwinding AIG and Lehman will be very difficult and probably will cause temporary shocks in certain areas as distressed assets are sold into weak markets. This is unavoidable but it's not fatal.

    But all the news is not bad. Some buyers are stepping back into the market. Take Wells Fargo's offer for Wachovia. And Citi's subsequent lawsuit. The bottom line is that Wachovia, even with it's problems, is worth a lot of money. By Citi's estimate, $60 bn. Which means shareholders won't get screwed in the ultimate sale because a buyer is going to have to pony up some money... they won't walk away with it for free (as Citi tried to do).

    One positive? With demand dropping and dollar strengthening, oil prices have fallen through the floor at $90/bbl. As the picture in financial securities begins to clear up, look for more and more speculative money to come out of oil and other commodities, dropping them still further. I do not think oil will drop much below $60-67 range which will leave intact the transition to biofuels and more efficient vehicles.

    Still, wages are slack and unemployment is climbing. That's the official number. The unofficial one is far higher. All that aide, we're heading for a recession. Which is a relief considering what we were looking into last week.

    Posted by mcblogger at 12:30 PM | Comments (0) | TrackBack

    October 03, 2008

    Recap bill passes the House; Republicans still spouting the stupid

    In spite of dippy little retards like Michelle Bachmann, the recap bill passed the House. The Republicans, even though we all know their ideology and philosophy of unfettered commerce were abject failures, are still sticking to their knitting and now, in the case of the aforementioned Bachmann, actually have the temerity to declare this was all the result of TOO MUCH regulation.

    Michelle, here's exhibit A in the proof of just how absolutely wrong you are.

    The 2004 decision also reflected a faith that Wall Street’s financial interests coincided with Washington’s regulatory interests.

    “We foolishly believed that the firms had a strong culture of self-preservation and responsibility and would have the discipline not to be excessively borrowing,” said Professor James D. Cox, an expert on securities law and accounting at Duke School of Law (and no relationship to Christopher Cox).

    “Letting the firms police themselves made sense to me because I didn’t think the S.E.C. had the staff and wherewithal to impose its own standards and I foolishly thought the market would impose its own self-discipline. We’ve all learned a terrible lesson,” he added.

    Michelle, this was a failure of the central tenet of your ideology... that the market can police itself. It can't. And when individual players make imprudent decisions, it can cause a systemic failure. This was a failure of cooler heads to regulate in a sensible way. And you're an idiot tax attorney who thinks she knows better. Tell you what, Michelle... why don't you let those who actually know something about banking handle this. We'll call you if we need advice on tax treatments.

    Whatever you do, don't repeat that lame argument that this was because of CRA or Fannie and Freddie. CRA didn't require Bear to leaver AS A FIRM to 33:1. It also didn't require them to fund loans to borrowers who could only prove that they were breathing.


    (And, Michelle, just in case you're wondering... it was your appearance on Bloomberg that prompted this post. A word of advice, better to be thought an idiot than to open one's mouth and remove all doubt. Get me?)

    Posted by mcblogger at 01:40 PM | Comments (5) | TrackBack

    October 02, 2008

    Senate Passes Recap Plan

    This may be the only time that I will ever find myself in agreement with how Sen. 28 Gauge voted and not agreeing with Sen. Feingold. The Senate passed the plan. The House may vote on it on Friday.

    As for the real world effects, this is just a taste. This is happening to small businesses now. Just imagine what would happen if this occurred to consumers who suddenly fund their credit cards cut off?

    And this, my friends, is what I was trying to tell you. It's page four that's the most important. I want y'all to read it. Then read it again. I want it to sink in fully so that you'll understand exactly the kind of disaster scenarios that have been going through my mind and the level of frustration I've felt from the ridiculous bullshit on both sides. Your political wrangling, fear mongering and STUPIDITY damn near drove us over the edge.

    Frankly, it may still.

    From now on, remember that I don't panic easily. And it would be nice if, in the future, you'd give me the benefit of the goddamn doubt before sending me emails about freaking out over nothing.

    Posted by mcblogger at 01:54 AM | Comments (2) | TrackBack

    October 01, 2008

    Laboring under the delusion that everyone is as smart as you

    With all the crazy cow crap flying about as if in a West Texas windstorm, you'd think the recapitalization plan would already be DOA. That WAS the goal of the Laborers' International Union. Until someone figured out that they could lose their jobs if the banking system collapses.

    A touch of earthy fatalism from the Laborers' President Terry O’Sullivan: "We probably will have to hold our nose, grab the barf bags and do this because unfortunately we've got ourselves stuck on the same ship as those who caused this crisis and if they sink, working people sink too. But a bailout cannot just be another no-strings Bush raid on taxpayers. We need real protections to keep this from happening again and a stimulus package that creates jobs by building America."

    Couldn't agree more! What kind of stimulus package did you have in mind?

    The 500,000-member construction union, which endorsed Obama, wants $100 billion to go for a massive infrastructure program instead.

    "Investing in America has an immediate impact on our economy. The U.S. Department of Transportation estimates that 47,500 good jobs can be created for every $1 billion investment building America," a spokesman wrote in a statement.

    For one thing, unlike many of you mouthbreathers (on the right and left), these folks really understand the real world impact of scuttling this. They lose their jobs. Just like many of us will.

    And where they are WAY OUT in front of many of you (again, on the right and left) is that we NEED infrastructure. These folks, with this one little thing, just became the smartest people I've read about in weeks.

    Posted by mcblogger at 02:09 PM | Comments (0) | TrackBack

    September 29, 2008

    Recap vote is failing and the Dow is falling UPDATED

    The US House of Representatives is holding the vote on the financial services recapitalization plan and it's currently failing. The Dow had fallen more than 600 points but has paired losses to just shy of 500.

    Thinks this stuff doesn't matter? If this doesn't go through, take a look at your retirement account in a few days.

    I'd like to take a personal moment to thank all the idiots, within the Democratic and Republican parties, who are voting against this (not to mention all the pressure from outside groups put on them). When the books are closed on this era of American history, you'll all be remembered as the people who collapsed our economy.

    UPDATE - Boehner is on TV whining that the R's voted against the bill because of what Nancy Pelosi said. Blunt is saying the same thing. The reality is that 75% of his folks voted against this bill. Of course, as Rep. Cantor (who flipped on his support for the bill from against to for) pointed out, NINETY FOUR DEMOCRATS voted against this.

    I can't wait to hear their individual reasons, other than being gutless trash (and basically Republicans).

    UPDATE 2 - Pelosi is saying that D's were to bring half and the R's were to bring half. It appears that the D's followed through and it was the R leadership that failed. Apparently there were 94 Dem's who just didn't like the fact that it was an improved Administration bill. So, the deal was made... the D's bring more than half and the R's just need to balance it out. Apparently, the R's were 12 short.

    UPDATE 3 - I love me some Barney Frank. He just said when asked about Boehner's comment that he simply could not believe that 12 Republicans would disregard the imminent peril to our country, to ordinary Americans, because they got their feelings hurt. He then offered, if the R leadership would give him the names of the people, to go to talk to them 'uncharacteristically nicely' if it would help. The press corps died laughing.

    Now it's Rahm Emmanuel. And he SUCKS BALLS as a speaker at a press conference. He looks and sounds twerpy.

    As of right now, the US Equity Markets alone have lost more than ONE TRILLION DOLLARS since this failed. Thanks a bunch, R's.

    Posted by mcblogger at 12:58 PM | Comments (1) | TrackBack

    September 26, 2008

    Gas pains

    As part of the 'Ike Tours Texas' fallout, refiners on the Gulf are still shut down which is causing spot shortages in Atlanta (which sucks anyway) and in Tennessee. And, apparently, Dallas. Here's what caught my eye (and keep in mind the effected refiners account for 20% of US capacity)

    U.S. crude oil refinery inputs averaged 11.5 million barrels per day during the week ending September 19, down more than 1.7 million barrels per day from the previous week's average. Refineries operated at 66.7 percent of their operable capacity last week. Gasoline production fell last week, averaging about 8.0 million barrels per day. Distillate fuel production decreased last week, averaging nearly 3.3 million barrels per day. (EIA)

    So, refineries effected by Ike account for 20% of US refining capacity and we're down to 66%??!?! That seems strange at a time where wholesale gasoline recently spiked to $5/gal.

    Then I saw this and start to think maybe there is something going on.

    SO, we have a massive crude and gasoline supply disruption as a result of a hurricane. Combine that with newfound regulatory zeal from governments around the world, all of whom are looking to strangle speculation and suddenly refiners have decided to artificially (for 'repairs') reduce the gasoline available in the market?

    Methinks this is a pretty clear cut case of supply manipulation. They can't play with the price since the speculators (those still left in the business now that LEH is gone and MS and GS are under scrutiny) have had to cut back. So they energy companies themselves have decided to create an artificial supply constraint by shutting in capacity unaffected by Ike.

    Ain't it nice that the oil companies care so much about their customers?

    Posted by mcblogger at 04:13 PM | Comments (0) | TrackBack

    September 25, 2008

    Doubling down (craving crow with seconds)

    So this morning I wake up to this story.

    Really? Why, I never. How dare the Bush administration demand concessions it can probably get from this Congress...for reasons COMPLETELY INEXFUCKINGPLICABLE considering the mood of the electorate.

    Go ahead, bitches. I dare you. Sack up and take on the 19% bogeyman or else go suck on Karl Rove's subpoena and stop sending me fundraising letters.

    Crow is best served as a two-course meal. Damn I'm craving some.

    Posted by hbalczak at 01:30 AM | Comments (0) | TrackBack

    September 24, 2008

    May you live in interesting times...

    This financial crisis is finally waning. They always end when buyers finally realize that the firesale won't last forever and they dip back into the market to buy deeply discounted assets. We got a big boost of this yesterday.

    Until now, Mr. Buffett, who has navigated the stock market with legendary prowess, has largely refrained from investing in the stricken financial industry, saying repeatedly that things could get worse.

    Thousands of people on and off Wall Street follow Mr. Buffett’s moves, so his decision to invest in Goldman immediately heartened investors. After falling nearly 1.5 percent during the day, the Standard & Poor’s 500-stock index erased half its loss in after-hours trading Tuesday evening on news of the investment.

    “Buffett is saying he’s confident,” said Brad Hintz, an analyst at Sanford C. Bernstein & Company.

    Mr. Buffett’s conglomerate, Berkshire Hathaway, unveiled the move only days after Goldman, long the premier investment house on Wall Street, embarked on a radical plan to transform itself into a traditional bank to ensure its survival. Goldman, which examined various options over the last week as its shares tumbled and some clients abandoned the firm, also said Tuesday it would sell at least $2.5 billion of common stock to the public.

    The difference between Buffett and others is that HE can afford to hold something for decades until BRK makes a profit on it. Even if he dies, there is management at BRK that thinks exactly like him. And his success has not been the result of luck, it's research and thorough analysis. It's making the right decision.

    Be fearful when others are greedy. Be greedy when others are fearful.

    Last night and this morning I posted a couple of emails to Carl Whitmarsh in Houston regarding something he'd sent out on his massive email list. The first article was this from George Will. Now, George has never been a big fan of McCain. However, that's not the meat of the article. It's the craptastic analysis of the US falling into socialism. Here's what I sent to Carl:

    It's funny to me that McCain would attack Cox for not regulating the very securities that McCain voted to keep unregulated.

    I LOVE the way conservatives have decided that this is socialism, as if the entire
    capital market is now under the absolute control of the Treasury and Fed. Their
    plan, buying assets that the free market has assigned zero value to, is absolutely
    sound. Why? Because occasionally the market goes crazy and won't buy something
    that's worth a dollar even if it's discounted to 10 cents. The market, in short, is
    not always right.

    The Fed was CREATED to avoid panic and provide liquidity in times of market
    dislocations. Which is exactly what we have now.

    That being said, Paulson's plan, as presented on Sunday, is a thoroughgoing mess.
    There will have to be oversight. There will have to be caps on CEO compensation.
    However, the basic idea to add liquidity to our deflated economy is a good one.

    The second comment was related to a piece Harvey Kronberg ran from Royal Masset

    I love Royal but he's wrong on what's happening in the financial industry. This is a panic, pure and simple, and it should wake people up to the reality that markets are far from perfect.

    Markets are nothing more than buyers and sellers. Period. They are dependent on
    humans and their imperfect decision making. The idea that markets self regulate with
    minimal impacts is ALWAYS wrong. They do self regulate and in the process create
    what can charitably be called distress.

    Regulation and enforcement, while imperfect and sometimes overreaching, is a hell of
    a lot better than mass unemployment and starvation.

    That's the lesson most of the 'free market' Republican's have never learned.

    Of course, there are number of others who have problems with buying assets. They see another solution, lend directly to the banks.

    Here's why you can't just lend money to banks, allow them to take the losses in selling these assets, and then repay the debt over time. For one thing, these losses are going to (in many cases) wipe out all the equity in banks, rendering many insolvent. You can't replace that equity with debt owed to the government. Debt is Debt. For another, the market is so freaked out and dislocated (not to mention fearful) that no one wants these securities at any price. It's not that these securities aren't worth something. After all, the vast majority are A paper mortgage credits. It's that investors can't see the value and won't take ANY risk.

    What is needed is a prime mover to get these assets moving, worked out and restore the market. That prime mover is the only entity capable of operating for the long haul, the Federal Government.

    The issue is that these assets, when marked to market, have no value because the market is buying and selling NOTHING. However, the loans underneath are STILL performing. On a cashflow basis, many are performing exactly as predicted. We may now need to look at discounted cash flow as a value model to fall back on when MtoM fails. Which it is prone to do when the market seizes up. Which it, of course, does from time to time despite what the Republicans say.

    We have to stabilize home prices which means we need people with jobs who can buy homes with mortgages. Unfortunately, as this crisis deepens, it begins to effect employment AND the ability of people to secure financing for homes. Without a market, the value of homes continues to drop. In the end, we fall into a Depression. THAT'S the end result of doing nothing.

    Finally, there are some lesson we all need to take from this experience...

    1) Regulation and enforcement are not obstacles to the success of the market. They are ESSENTIAL to the success of the market.
    2) Capitalism has not failed. What failed was our obligation to oversee it and make it work for the majority.
    3) Just because something is valued at nothing right now, it doesn't mean it's worthless.

    One last point... one that everyone needs to understand unequivocally, if we don't do this the whole damn country fails. THAT'S the reality and all the whining about taxpayers footing the bill (which is a load of crap) isn't going to change it.

    Posted by mcblogger at 03:10 PM | Comments (0) | TrackBack

    Methinks they doth protest well enough (and that's what has me worried)

    So if we're to believe our eyes and ears, the Administration's bailout proposal sure has everyone on the Hill all frothing at the mouth.

    I don't know about you folks, but it makes me real nervous-like when the Democratic congressional leadership rails this loudly about a Bush proposal this feculent. Because all too often, the squallin' and wall-eyed fits give way to The Big Cave-In [see, e.g., FISA, reauthorization of Iraq War funding, domestic spending levels, etc.].

    At times, it seems as if this sort of rending of garments and gnashing of teeth is almost a kind of obligatory theatrical foreshadowing of a preordained tragic climax wherein vile douchebaggery and bitchassedness prevail over courage and righteousness. For you English majors out there not yet done with the metaphor, I suppose the denoument would be the part where said players engage in post hoc bitching about how the executive branch has usurped all the power and singlehandedly ruined the country and that's why only our side can provide the bold, gallant leadership the nation needs, bleh bleh bleh.

    (And I type this while aiming Ye Olde Stinkeye in your direction, Nancy, Steny and Harry.)

    Hopefully, things will be different this time. Maybe Democrats on the Hill will say, in one, big, loud unified voice, "I'm Rick James, bitch!" and imprint the Will of the People upon the forehead of Connecticut-native George W. Bush with the almighty knucklebling of Article One power. Maybe instead of handing a blank government check to the Gamma Beta House and hoping they'll notice the phrase "public service project" written on the memo line, Congress will pass some completely pinstriped-ass-whuppin' legislation and rock the nation with a new number one hit single, "Smells Like CEO Comeuppance."

    Lord, I hope that happens. But I know better than to emotionally invest in that prospect. Kind of like how I learned, as a kid, to tense up any time I saw Charlie Brown on television hauling ass toward Lucy holding a football.

    You know, a big heaping plate of pungent raw crow sure would taste good right about now.

    Posted by hbalczak at 01:26 PM | Comments (0) | TrackBack

    September 23, 2008

    Rewriting history, with Kevin Hassett

    Bloomberg is carrying some rather odious commentary from Kevin Hassett of the American Enterprise Institute, the right wing institute which provides little in the way of real information and research but is LONG on commentary.

    According to Kevin, this is all the fault of the Democrats because they wouldn't reform Fannie and Freddie. What Kevin doesn't point out is that the bill in question would have so severely curtailed Fannie and Freddie that it would have eliminated them as real competitors and an effective counterbalance to the banks. Kevin claims, stupidly, that the failure of Bear Stearns was caused by... Fannie Mae.

    30 to 1 leverage in a CDO of CDO's had NOTHING to do with it, right Kev? Neither did Bear's never ending hunger for riskier and riskier sub-prime garbage that was priced inadequately for the inherent risk, I'm sure. Of course, I understand how you can make mistakes, Kev. After all, it's easy when you ignore reality.

    Kevin also points out that FNMA is holding $388 bn in sub-prime and Alt A credits. That's true. Considering that at the height Wall Street was issuing $600-700 bn PER YEAR in sub-prime issues, it kinda dwarfs Fannie Mae's holdings. I'd also like to know just who issued those sub-prime credits on Fannie's books. I'd be willing to bet some of them show Lehman Brothers, Bear Stearns and Credit Suisse as the vintners.

    Of course, Kevin leaves all that out and points out his own ignorance of structured finance and the house cards by alluding that AIG was also collapsed (as if by magic) by Fannie Mae. AIG is even easier than Bear... they wrote too much insurance, too cheaply and when the call came for more collateral from counterparties, they couldn't sell assets fast enough... because they were carrying some the same assets they were insuring against default.

    Brill business strategy, especially for an insurer.

    Of course, Kevin can be excused for not knowing any of this. He is, after all, a political moron and (again) completely ignorant of finance. His only real work experience in business is at the AEI and as a McSame campaign adviser. Which puts him right up there with other economic luminaries like Carly Fiorina and the crew of lobbyists that McSame calls his close friends and advisers.

    Posted by mcblogger at 10:26 AM | Comments (0) | TrackBack

    September 22, 2008

    The fallout...

    First off, for a moment, take a look at this again. Specifically point one. Think about that every time you read something from one of the chicken little's on the right (or left) who are bleating on about toxic securities.

    One more time, there is no such thing as a toxic security. There is only a toxic price. In other words, be rational about the prices you pay for assets and you'll be happy. The market for credits got very frothy and people overpaid either because they were dumb or they didn't really understand the securities they were buying. Now people have gone the opposite way and are unwilling to buy these assets at any price.

    As the old saying goes, be greedy when others are fearful. Be fearful when others are greedy.

    Unfortunately, it looks like many investors are going to take a pass on these assets. Which leaves the Fed's and the few willing and smart enough to jump into the fray (like JPM). First off, I'm pleased as punch about the government getting involved since the 'free' market has completely gone off the rails. However, Paulson's plan is still the wrong way to go.

    We're also mostly on the same page (though I, unlike Stirling, don't subscribe to conspiracy theory) except for a few highlights...

    1) Cramdowns - Basically, this is a modification for mortgages in markets with declining values. It's also useless. What about the homeowner who is making their payments EVEN though their home is worth less than they paid? There's really no need for this unless you're talking about doing a workout on someone who really can't afford the mortgage and the value has declined dramatically. However, I don't like the government getting a piece of the inevitable increase in value down the road through some kind of hitherto unknown lien position. If you're going to help people, help people.

    My advice : Don't do this with anyone who has had a greater than 50% decline in value. That's what you'll get on a foreclosure. Anyone more underwater needs to just walk away with a wipeout on the mortgage history so they don't have an adverse hit on the credit report.

    Last thing... change the tax laws to benefit workouts rather than foreclosures. It's easy... if a company does a workout that results in the loss of loan balance (say, from $200k to $150k) then they can take that as a loss against ordinary income immediately. If they foreclose, they have to take the loss on that against income over THREE years. Either way, you have to alter the law to keep these companies from 1099ing the people effected for the difference.

    2) Not so much with a national emergency and rationing. Let's look at changing tax policy to increase wages for ordinary people. That'll take care of commodities inflation and our negative savings rate. And that whole petroleum thing can be easily fixed with biofuels. Actually, it WILL be fixed fast as long as oil is over $50/bbl.

    I'm fine with expanding FDIC and LOVE what Obama is hitting on. Plus, as many of you know, I've always hated excessive levels of executive compensation. I say go for it, Congressional Democrats! Take this time to make this a real solution, instead of another Paulson bandaid.

    Now, onto what's happening today. Obvs, the market loved the Paulson/Bush/McCain plan as much as we did. The Dow is down around 3% and oil has shot back up to $120/bbl as investors pull out of equities and dump speculative money into oil.

    Needless to say, we ALL apparently want something other than another silly gimmick. Except for Michelle Malkin who has turned this into yet another attempt to divorce herself and her Party from responsibility for this problem.

    Robert Novak called attention to Paulson’s Democrat DNA last October. It’s worth reminding you of Paulson’s instincts and the liberal allies he has installed at the Treasury Department

    No, no, Bitch. Paulson's one of yours. And quit quoting that sad, old alcoholic. As for him bringing in 'libruls', the problem is that all your financial guys suck balls. They all end up going broke.

    Posted by mcblogger at 03:16 PM | Comments (0) | TrackBack

    September 21, 2008

    A special invitation to the Secretary of the Treasury

    Go FUCK yourself, Hank.

    Seriously, THIS is what you came up with? A massive expansion of the Executive Branch, no help for homeowners and absolute power with a blank check?

    It's clear to me now that Paulson has got to go and we need Bob Rubin back at Treasury. Larry Summers is wrong for the job (honestly, he's a dumbass anyway) and Rubin is the only one with the kind influence in financial and political circles to get something done. He's also far smarter than Paulson which should help.

    We need to re-regulate commodities and derivative trading (fuck you, Phil Gramm, you dirt leg moron) and begin requiring a lot more capital be held by companies wishing to operate in the securities industry. No more of this 30 to 1 leverage bullshit. But I don't see that it this little 'plan'. I also don't see anything to help expand efforts already proceeding to pull borrowers out of bad mortgages. No, I'm not talking about a cram down and share the wealth plan (seriously, why even bother, Ian? You gonna give everyone who's upside down on a car note a bail out, too? Just get them outta the bad loan and regular appreciation will work out the gap), just a reworking of underwriting guidelines and insuring to allow people to get into affordable mortgages.

    We needed real solutions and an indication of some sort of contrition. Instead, we get a brazen attempt to steal still more power for an out of control President.

    Congress should act. The Democrats should write one hell of a bill and tell the President to sign it or we'll let everything go down the tubes.

    Enough bullshit and politics. And Chairman Frank should immediately demand Paulson's resignation.

    Posted by mcblogger at 04:37 PM | Comments (0) | TrackBack

    September 03, 2008

    Cypress to shut down Fab 2

    Cypress Semiconductor has decided to shut down Round Rock based Fab 2, the facility where it has produced semiconductors for more than 22 years. The shut down will result in the loss of more than 200 jobs...

    The company informed the Workforce Commission that it will close the plant in four stages, eliminating 211 engineering, administrative and operator jobs. In the first stage, the company will cut 67 jobs between Oct. 27 and Nov. 11. Then it will cut 57 jobs between Nov. 10 and Nov. 23, followed by more job cuts between Dec. 8 and Dec. 21. The final 45 job reductions are planned to occur in early 2009.

    Cypress said that the Round Rock plant used older manufacturing process technology to make less advanced chips.

    "It is simply more cost-effective to shift manufacturing elsewhere than to retool Fab 2," said Shahin Sharifzadeh, the company's manufacturing vice president, last year.

    One has to wonder if Cypress received any 'incentives' and how much Round Rock has benefited from them. As for me, good riddance Cypress. You're kind of a loser any way. While it hurts to let jobs go, hopefully Samsung or another company will pick them up. They seem to be doing well.

    Posted by mcblogger at 02:15 PM | Comments (0) | TrackBack

    August 19, 2008

    Having it GOOOOOD (if you're a corporation)

    The WaPo decided to take some time out of it's busy schedule sucking up to McCain and his outrageously stupid staff to rain a little dookie on Senator Obama and his plan to stop offshoring American jobs and make sure corporations pay taxes on income earned by overseas divisions. Which is interesting in light of the recent report from the GAO that using loopholes, two-thirds (that's 66% for those of you who don't do fractions so well) of US and foreign corporations operating in the US didn't pay taxes between 1998 and 2005. In fact, 25% didn't pay a dime to the US Treasury on more than $1.1 TRILLION in revenue in 2005 alone.

    Some of course think this is great...

    I see it completely differently. First of all, corporations don't really pay any income taxes at all. People do. Every time a company decides to sell something to you, the price depends on a lot of things, including how much it costs to make the item, how much profit the company wants to make, and how high the company's tax bill is. You, the consumer, end up paying the corporate income tax with higher prices. And you want more of that?

    This is, of course, untrue. Whether a company makes a dollar or $1 billion, it should pay taxes on those profits. Consider it the cost of doing business in a country with a strong consumer base, a tradition of the rule of law (at least so far as commerce is concerned) and a fantastic (though deteriorating) infrastructure. Not to mention, police and fire protection and an education system that spits out workers that are easily trained. You don't get that in many other countries, especially not in those with lower taxes.

    Further, from an economic perspective, this is utter nonsense. For one thing, companies have competitors who offer similar products and servicesm not to mention a little something called demand elasticity. When consumers are gouged, they look for a cheaper alternative. Which means that it's hard to drive up prices arbitrarily, say to make more to pay your taxes as the author (a CPA) suggests.

    No, these taxes hit shareholders. As a shareholder in a number of companies, I'm fine with that. After all, in other countries, my stake could be arbitrarily taken away. Not so here. In point of fact, I'm happy to pay taxes... it means I made money and am doing my part as an American to maintain the country that has allowed me to prosper. You see, I'm a true conservative who believes fundamentally you pay for what you get. Sure, I don't want government waste but at the same time I don't want private sector waste, either. And the private sector is way more wasteful. I want efficiency and despite what some supposedly conservative ideologues would like to believe, GOVERNMENT IS THE ANSWER IN CERTAIN SITUATIONS.

    Finally, let's talk about corporations as people. The fact is, according to a number of SC rulings and interpretatins of the 14th Amendment, corporations ARE people. Why on earth shouldn't they pay taxes like the rest of the people?

    Krugman has his take on it and takes on the argument that poor US companies are taxed too high. Actually, as a percentage of GDP, American corporations are taxed at a rate that's middle of the road for first world countries. Only Germany and French corporations pay less as a percentage of GDP, something that will no doubt infuriate those who hate these allegedly socialist countries.

    The most striking thing about this debate are the ends to which some will go to dissemble. To wit...

    First, while it is true that 60 percent to 70 percent of companies in the study paid no tax in a given year, there was a big qualification. The study focused on an Internal Revenue Service tax database that included millions and millions of companies. The vast majority of firms in the study were tiny mom- and-pop enterprises.

    Why did the tiny mom-and-pop enterprises pay no taxes? Because they didn't make any money! The study reported that was the reason about 80 percent of the firms in the sample avoided taxes in a given year. How terrible of them.

    If the GAO issued a report that added together data for nine hot dog stands and General Electric Co., and found that 90 percent of companies didn't pay any tax, it would be a harmless and silly thing to do. But if the Democrats then rush to the microphones and insinuate to the general public that 90 percent of companies are tax dodgers, the stakes change.

    The author of the above is from the American Enterprise Institute and his focus was on the Democrats rightfully politicizing this. And, in case you were wondering, what he says above is utter bullshit. The focus of the study was on corporations with more than $50 mn in revenues and/or $250mn in assets. How many hot dog vendors do you think fall into that class? How many mom and pop Ebayers have more than $250mn in assets?

    Of course, the author didn't bother to leave his arguments there but instead decided to reiterate the tired assertion that US corporate tax rates are the highest in the western world. Which is true if you're looking at published tax rates. What he should be looking at is the actual tax burden which is composed of the actual taxes paid by companies in the US. That number is among the lowest in the world which rather neatly rains dookie all over the argument that our poor corporations are overburdened with taxes. Want more proof? See the Krugman link again.

    Leona Helmsley was often quoted as saying that only the poor pay taxes. They can't, after all, afford accountants to find exotic loopholes in the tax code and they certainly can't afford attorneys to defend them in the event of an audit.

    Posted by mcblogger at 02:03 PM | Comments (0) | TrackBack

    August 18, 2008

    Globalization and the Credit Crunch

    Everything is global...

    The past four years have brought India economic growth of seemingly unstoppable momentum, often 9 percent a year, helped along by big inflows of foreign investment. Rising incomes and low interest rates enabled many middle-class Indians to realize the dream of owning a home, even while still in their 30s.

    But economists warned that the economy was overheating, producing inflation and speculative bubbles in real estate and the stock market. So government policymakers moved to cool things down by raising interest rates and tightening the rules for home loans. Taken along with the general global slowdown and spiraling fuel costs, the measures have had the intended effect.

    On Wednesday, the government projected the growth rate would fall this year to 7.7 percent, compared with nearly 9 percent last year. Industrial output slipped to its lowest in six years, growing 5.4 percent in June, compared with 8.9 percent in the same month last year.

    Trapped in debt, many middle-class Indians are struggling to cope. Raina's monthly mortgage payment has gone up by 12 percent. "I have to cut corners now, or I may not be able to pay back my loan before retirement," he said. Payments on some loans have doubled since 2004, when interest rates were at a record low.

    "The boom of the last four years mesmerized them to live beyond their means," said Deepak Raheja, a therapist who runs a support group called the Hope Foundation. "In the past ten weeks, I am getting five to six new patients every week with financial worries about mortgages, loan repayments and credit card bills. All in the age group of 25 to 40. They exhibit anxiety, helplessness and depression. Some even contemplate suicide."

    No longer are financial shocks localized. We saw the beginnings of that in the late 1990's and it's continued to develop which points out one negative of globalization, bad policy and laws lead to a collapse in one country that can effect consumers on the other side of the planet.

    Posted by mcblogger at 09:47 AM | Comments (0) | TrackBack

    August 02, 2008

    Think the economy is good?

    Take a look at this... then tell me you're doing OK.

    Posted by mcblogger at 08:55 AM | Comments (0) | TrackBack

    July 30, 2008

    You're looking a little desperate...

    The EIA report came out this morning and had some interesting numbers. So far, the traders see it as bullish. So do the talking heads on Bloomberg, save one who picked up on the seasonal adjustment as refiners begin the shift to fall and winter formulations.

    But there's another issue as well... people aren't using as much. Margins on gas are tight. Therefore, refiners have been producing less which is why the dramatic drawdown in inventories. Refiners, simply put, are putting more emphasis on higher margin products like distillates. Now, want me to give you some back up numbers? How about this...

    Crude oil supplies declined 81,000 barrels to 295.2 million barrels last week, the report showed. A 1.3 million barrel drop was forecast in the Bloomberg News survey.

    Distillate Supplies

    Inventories of distillate fuel rose 2.4 million barrels to 130.5 million barrels last week, the report showed. A gain of 2.05 million was forecast, according to the median of 12 analyst estimates.

    So, Oil inventories dropped much less than expected (bearish for oil prices) and distillate inventories rose far more than expected. Everything fits... still, Goldman and the traders are focusing on gasoline inventories and bidding up oil. Goldman, for it's part, has dropped it's $200/bbl by the end of the year projection and replaced it with $149/bbl.

    Lehman is going in the opposite direction. Honestly, seeing the evidence and not really being prejudiced one way or the other, I'm going with Lehman.

    Posted by mcblogger at 02:09 PM | Comments (2) | TrackBack

    July 29, 2008

    Right. And Wrong.

    The NYT Ed team spent Sunday congratulating Democrats for stopping retarded R efforts to drill in ANWR and the OCS. Then they congratulated the R's for keeping the Demo's from enacting legislation to restrict speculation in commodities.

    While speculation is not the only thing driving oil prices, it IS a substantial component. Failure to acknowledge that fails to acknowledge the nature of markets and momentum players in them. For another, oil has steadily trended higher on rumor and, wait for it, speculation about events around the world. Why, for instance, Nigeria and production problems there have been the reason for fully $10 of the rise in oil at a minimum. Which would be understandable if Nigeria WASN'T PRODUCING ANY OIL.

    Like all commodities, demand is an issue. However, the primary talking point regarding the case for no speculative bubble has been (mostly from people in NYC) that gas demand hasn't fallen despite the historic high price. Of course, what's left unsaid is that refiners haven't been able to pass THAT price, NYMEX spot, onto consumers. And that demand destruction is, in fact occurring.

    The Ed Board at the Times apparently thinks that speculation is only someone trying corner the market. It's not. It's money chasing money regardless of fundamentals. While I wasn't a big fan of the D plan (I'd have rather seen short term cap gains taxes, realized in less than a year, drilled up to 70%) it would have at least done something. Of course, as the Times points out, it would have hurt hedging operations for airlines.

    I guess the bright folks up there don't realize that there are other ways to hedge. And that absent speculation, there isn't as much of a need TO hedge.

    Posted by mcblogger at 11:46 AM | Comments (0) | TrackBack

    July 28, 2008

    Oh, Paul... notes on the Housing Bill...

    Usually, I find myself agreeing with Krugman 90% of the time. This piece is absolutely spot on. As he astutely points out, financial regulations and statutes from the 1930's need to be updated for a 21st century global financial reality that includes 30 to 1 leverage and derivatives with notational values in the trillions.

    Basically, one firm going belly up can freeze the entire system. Thus, the need for the Fed and Treasury to step in because private firms went a little too wild and larded on too much risk. So much, in fact, that it stands to effect the 300 million of us who aren't investors in these firms. With that kind of reach, it's absolutely necessary that there be enhanced regulation. And Phil Gramm can go fuck himself.

    HOWEVER, I'm sick of the talking point, when referring the housing crisis, that this was all the fault of brokers.

    Mortgage originators didn’t worry about the solvency of borrowers, because they quickly sold off the loans they made, generally to investors who had no idea what they were buying.

    Uhm, Paul, originators can't originate a loan for which there aren't guidelines and a sales channel. In other words, for a loan to be originated there has to be someone willing to buy it and they set the rules. The people who bought and securitized these loans (like Bear Stearns and Lehman) knew exactly what they were getting.

    Think I'm wrong? Call an originator in the phone book, any originator, and ask for a 95% NoDoc loan with no MI for the purchase of a non-owner occupied property. They'll calmly explain that the product doesn't exist.

    Because the people who wanted them are either dead, dying or on life support. And that's not the fault of the originator. It's the fault of the moron bankers in the mortgage practice who thought these were such awesome credits that they should receive a premium price.

    Posted by mcblogger at 03:34 PM | Comments (0) | TrackBack

    July 25, 2008

    Really, Bill Poole?

    Nothing would make me happier than never seeing another ideological simpleton from the Friedmanite school of disaster capitalists ever having another job in government or private industry. Why? Because they have ideological blinders on that keep them from accurately assessing a situation and determining a proper course of action.

    Case in point, former St. Louis Fed President Bill Poole. Though he now likes to go by William, many of us know and remember him as Bill, Chairman Greeenspan's favorite echo chamber. Poole is all bullshit, all the time. His solution to this current crisis? Let's privatize Fannie and Freddie.

    One shouldn't bother Bill with details and facts. For one thing, he doesn't want to hear that taxpayers aren't going to pay a dime for any of this. These companies will, as the government is only providing liquidity for currently illiquid securities, guaranteeing that the system will continue to function and loss mitigation procedures can run their course. But Poole's a Friedmanite and they love them some shock to get things moving. Unfortunately for him, the Democrats in Congress aren't prepared to hand over Fannie and Freddie to private interests (screwing existing shareholders) for pennies on the dollar.

    What Bill doesn't want to acknowledge (here again, that pesky ideology) is that THE MARKET BROKE DOWN. The only thing anyone wants to own are credits backed by the government. And THAT'S the free market reality.

    Absent the GSE's and their implicit government guarantee, the mortgage market would have ground to a halt, interest rates would be 3% higher (at a minimum) and home sales would have dropped to zilch. In turn, the loss mitigation and clearing of home inventory would have collapsed leading to a downward spiral that would have made the 30's look like the 50's.

    Humans are imperfect. Humans in a market, whether for equities, commodities or debts, can act irrationally. They can bid up prices far beyond real value... and sell prices far below book value. That's why we need stop gaps. If you can't see that or think it would be just wonderful to return the pre-Fed, gold standard world, you're ignorant of the past and wholly unready to face the future.

    Posted by mcblogger at 03:02 PM | Comments (0) | TrackBack

    July 21, 2008

    What matters most

    Last week there was this in the WaPo regarding the criticism of a bailout by the Fed's of Fannie Mae and Freddie Mac. At the end of the day, the question is not whether IT is right or wrong; The question is whether or not it will do the trick.

    As for Fannie and Freddie, nobody would be particularly happy if it became necessary for the Treasury to inject some fresh capital into the mortgage giants, in exchange, say, for newly issued preferred stock that could be sold back at a profit when the mortgage market recovers. But even the editorialists at the Wall Street Journal acknowledged yesterday that this wee bit of socialism might be the most effective and least costly way to keep the mortgage market functioning and prevent a meltdown in global credit markets.

    A financial crisis is not a morality play. What matters most isn't the precedents that are set, the amount of taxpayer money that's implicated or whether people are made to suffer fully for their financial misjudgments. In the end, what matters most is that we get through it as quickly as possible with an economy and a financial system intact.

    Friday I had the opportunity to sit through the Subprime Lending panel at Netroots Nation. Honestly, I expected much more mostly because I have a tremendous amount of respect for the people on the panel. Even Rep. Miller who seems, though well intentioned, very unwilling to understand the impact of what he wants to do.

    For one thing, Rep. Miller has a real problem with mortgage brokers. ALL MORTGAGE BROKERS. Working in the industry I can tell you from first hand experience that there are far more great brokers than mediocre or even bad ones. Rep. Miller makes no distinction between the two groups. In fact, he really doesn't understand the difference, apparently, between brokers and bankers. Nor does he seem to realize that the end effect of his legislative agenda will not be to kill an industry or to stop abusive lending practices. It will be to convert brokers to bankers.

    Both Miller and Mark Griffith really seemed to come alive at the notion of new regulations and laws restricting what they considered to be unfair lending products. They are operating from the mistaken assumption that some of these products were engineered to create default or, worse, continual refinancing. I say mistaken because neither of them are apparently aware of the fact that loans that pay off early end up costing investors money and banks hate foreclosures, mostly because they end up costing more than a loan that just pays off. But I digress... the point was new laws and regulations. Which aren't really needed because the ones that are ON the books now would have gone a long way to preventing the current crisis. However, they weren't enforced. Griffith and Miller live in that fantasy world where people always follow the law and there's no need to fund the people who look over their shoulders. I guess neither of them have ever driven on a freeway.

    Hale Stewart made some excellent points and, having worked in the securitization side of the industry, had a great command of the subject matter. He made a comment that 20% of Countrywide's non-prime portfolio (made up of deep subprime and Alt A credits) was delinquent. That's true, but the actual default rates are the key and they aren't near 20%. Countrywide hasn't disclosed them, but industry estimates put the number at close to 5%. While Cwide didn't price these credits for the underlying risk (they booking these loans at far too low a coupon), the default estimates are inline with what you would expect for loans of this type.

    There was one minor point that made regarding Hale about securitization and elimination of risk. Some investors, the same ones who are panicked right now, never understood that home loans can go bad. Even the ones with really high credit score borrowers and big down payments. Securitization was a way of balancing risk and creating fungible product that could be traded like a bond. Hale was spot on in that investors panicked when they discovered that securitization didn't mean complete and total safety.

    The panel, on the whole, presented about half and half in terms of correct information vs. incorrect information. It was the stuff that was bad that got me since it wasn't just wrong, it was REALLY wrong. For instance, Griffith claimed there aren't subprime borrowers, only subprime loans. While this may fit an progressive ideological frame, it does not fit reality. The reality is that some people have credit that is significantly worse than others, people who have shown a history of paying slow or not at all on even the most minor debts. Should these people receive the same terms and interest rates that people with fantastic credit get? If so, how exactly do you plan to compensate lenders for the substantially higher risk of default you're asking them to assume? That thought apparently had not occurred to Griffith.

    Griffith also discussed the right wing talking point that CRA REQUIRED subprime lending. He's right and wrong in saying that's not true. While CRA did not require 2/28 ARMs and Pick A Pay, it did lead to the creation of subclasses on the prime side represented by products like Freddie Mac's Home Possible and Fannie Mae's My Community. Both of these products required minimal or no down payment (a high risk factor), had income limitations (usually no more than 100% of area median income unless the property to be used as collateral was in a designated census tract for renewal), were aggressively priced and the mortgage insurance on them was far lower than the coverage on comparable prime products. To add to the risk on the loan, these products were extended down to credit classes that would ordinarily have been unacceptable on the prime side. The end result is that the loans having the most problems on the prime side are these, vintage 2006 and 2007 when the guidelines were loosened so dramatically that damn near anyone could get a loan as long as they could prove income.

    The panelists were unclear as to what to do to fix the problem of abusive originators. So, I'd like to offer a few suggestions that will actually work... these are geared toward cleaning up and standardizing origination. The larger problem in the industry right now, liquidity in the market and solvency of the firms, is being addressed and should be considered a separate issue. You'll note that I'm using originator exclusively in this... these rules should apply to EVERYONE in the market, whether banker or broker.

    1) National licensing for all originators. The state by state foolishness has to stop and there needs to be a national program in place to regulate.

    2) Eliminate prepayment penalties. My peers will hate me for this, but the reality is that these penalties end up not producing stability in a portfolio which is why they were put in place. Period. Therefore, it makes sense to scrap them altogether and price loans appropriately for a payoff in 4 years or less.

    3) End bait and switch... this happens infrequently but often enough that it's a problem. The best way to do it is to eliminate all advertising which bears an interest rate. These are teasers and only available to those with superb credit and 20% or more to put down. Needless to say, that doesn't remotely represent the majority of the borrowers in the market. Further, eliminate all disclosure of rate at initial application. Most of the time, when a borrower first applies for a loan, they don't even have a house selected yet. No underwriter has seen the file to determine if the borrower meets credit guidelines. In that condition, there is no way for an originator to disclose rate and they shouldn't be doing it. Rate should not be disclosed until the loan has been through initial underwriting and a house has been selected. At that time an originator should fully disclose a locked rate and the money they are making on the end sale of that loan.

    What no one on the outside realizes is that an interest rate must be locked prior to closing a loan. Every one that 'falls out' (doesn't close) ends up costing money. No one comes after the borrower for this. However, we expect originators to commit to an interest rate BEFORE knowing the risk on the loan which is absolutely insane.

    4) There need to be definitive metrics for originator performance. Offering 'the best rate' is not enough since not everyone is entitled to the same rate or terms. What these metrics might be are fairly simple. For example, if a borrower wants to refinance their home without cashout, does the new loan meet a net tangible benefit to the borrower in saving them money? If so, then the originator has fulfilled their obligation to the borrower. Does the borrower have the wherewithal to make payments on the house in the event of a job loss or other financially damaging event? If no, the originator should have the responsibility to terminate the transaction.

    There also need to be some easy to understand disclosures to the borrower that if they change properties they'll lose their rate lock. If they decide to materially change the terms, the rate may change. Borrowers have to understand that their decisions and delays in providing necessary documentation can put their loan in jeopardy.

    5) Absolute ban on all payments by originators to Realtors under any circumstances and a complete ban on any Realtor having an ownership interest of any kind in an originator. While we're at it, lets just go ahead and ban cross ownership by people or businesses in the industry. Realtors shouldn't own appraisers or title companies. Originators shouldn't own credit companies, etc. Every piece must be independent from the others to maintain the integrity of the system. And throw in the builders as well. They don't need to subsidize their primary business with mortgage lending because it has a real impact on the true value of the collateral.

    6) Restrict, either through legislation or Fed regulatory guidance, the use of limited or no doc products. These are FANTASTIC products... for a self employed borrower with 10% or more to put down, fantastic credit and who can prove low payment shock (i.e., not jumping from $800 per month in rent to $3500 per month in mortgage). These are not loans for W2 wage earners who are trying to buy more home than they can realistically afford. The panel on Friday addressed this and they were SPOT on. However, there seemed to be agreement among them that these products were de facto bad and it's simply not the case. The problem is that they were handed out like candy to people who frankly didn't require them. Not to mention the fact that, again, they weren't priced appropriately for the underlying risk of default which was substantially higher than a full doc Fannie/Freddie loan.

    7) Eliminate all option ARM and Pick A Pay loans. Really, do I need to go into this? A home loan with credit card-like repayment terms is just a bad idea and a prescription for default.

    8) SEVERELY restrict home equity lending. It frankly should not be so easy to pull equity out of your home. Further, you should not be able to pull out more than it's worth. This is not only to protect homeowners but banks as well. Texas has some very restrictive home equity laws that could serve as a good starting point.

    9) Mandate disclosure of YSP/SRP at time of rate lock. This disclosure should explain to the borrower that the low out of pocket costs for their mortgage are being covered by this fee paid by the lender to the originator and that the money represents the profit to be made off servicing that loan until it pays off. Brokers are already required to do this. Banks will throw a fit. However, if you want to level the playing field and make things transparent, then this is the way to go.

    As for YSP, it's time to note something. I have originators here in Austin that I work with who write mortgages at basically par rates. They provide no real customer service and they only accept applications with extremely good credit and at least 20% down. Obviously, this is a very narrow segment. I have others who charge more and price their loans at higher coupons. However, they deliver superior service to their borrowers. They also work with borrowers who the other originators wouldn't touch. Both groups are still, on average, cheaper than retail banks.

    Banking is, at it's core, a service. No service is free and people should be compensated for the work they do. This has got to be understood. When I originated I had an extremely loyal client base. I still talk to most of them. Some of them could have found better rates somewhere else and they knew it. However, they came to me because I answered their questions, worked with them on their plans and gave them the options they had available. To them that was worth an additional 12.5 basis points (1/8th of a point on the interest rate).

    For a more readily understandable example, I have been going to the same lady for haircuts for 7 years. I don't go to her because she's the cheapest. I go to her because she does a great job and she's a blast.

    10) FUND REGULATORY AND INVESTIGATIVE BODIES. Rules and regulations are worthless without enforcement and I, among many, have been begging for it for years.

    Most of these ideas would be supported by the industry wholeheartedly. Well, except for maybe banning prepayment penalties but that's just a cross they'll have to bear. As for the budding consumer advocates, you're never going to kill payments of YSP. PERIOD. All you're going to do is force brokers (who have to disclose YSP) to bankers who don't have to disclose. The solution is to make everyone disclose and make the disclosure easier to read so people can really compare apples to apples. As a side note, there is an element of stupidity in the let's ban YSP movement. In ANY market there are going to be some providers of a good or service who charge more than others. Be a savvy shopper and really think about the level of service you want and are willing to pay for. I don't shop at Neiman Marcus because it's the only place that has clothes, I shop there because I want my ass kissed when I go to spend money. That and my experiences buying clothes online have been something of a dismal failure.

    In the final analysis, ideological blinders, whether Democratic or Republican, are absolutely worthless. Demonizing whole industries, especially when it's clear you don't understand them, is counterproductive and stands a good chance of digging us deeper into the hole. Make an effort, policymakers, to understand the industries you are trying to regulate and work with the people in them on rational solutions. Those of us in the industry would do well to make necessary changes now.

    Posted by mcblogger at 01:56 PM | Comments (0) | TrackBack

    June 25, 2008

    No. Really? You're Kidding me. Stop.

    Welcome to George Bush's economy... and just FYI, don't feel too bad for some of the poor, especially the rural poor. They've been voting Republican and they'll keep voting Republican.

    Actually, screw that. Feel bad for them anyway. You try to feed a family of four on minimum wage. I wouldn't wish that on my worst enemy.

    And thanks to the Statesman for pointing out the mind numbingly obvious. Really. I never would have guessed that someone would have problems surviving on a wage that, hourly, barely pays for a gallon of unleaded.

    Posted by mcblogger at 05:42 PM | Comments (0) | TrackBack

    June 24, 2008

    Winning the stupid olympics, pt 3

    REALLY. That's enough with the stupid, Republicans. I'm so sick of hearing all the lies coming from y'all. Well, it's either lying or just rank stupidity.

    Maybe I should call John McCain's spokespuppy and find out which.

  • Bush, clearly drunk, proposes expanding offshore drilling. There are a couple points here including
    1) There's not enough oil to really make a dent in demand.
    2) You can't bring what's there up fast enough to have a real impact on prices without stomping on speculation.
    3) Bush could end high oil prices in an afternoon by starving speculators.
    4) Did I mention there's not enough oil down there?

    But the biggest one is that there isn't enough equipment for offshore drilling available. Because it's already being used in the areas where you CAN drill offshore. Which also, it just so happen, is where 80% of the total oil available on the continental shelf (for those of you who've been voting R, 'right off the coast') is located. In other words, anyone that tells you we're missing out on some kind of oil panacea in the deep water is lying to you. But hey, it's not the first time Bush has lied.

  • This op/ed nails the delusional case for drilling offshore...

    There is no doubt that a lot of people have been discomfited and genuinely hurt by $4-a-gallon gas. But their suffering will not be relieved by drilling in restricted areas off the coasts of New Jersey or Virginia or California. The Energy Information Administration says that even if both coasts were opened, prices would not begin to drop until 2030. The only real beneficiaries will be the oil companies that are trying to lock up every last acre of public land before their friends in power — Mr. Bush and Vice President Dick Cheney — exit the political stage.

    To those who rise in support of expanded drilling I tell you earnestly that it is better to be silent and thought a fool than to open your mouth and remove all doubt.

  • Hava Goodun!

    Posted by mcblogger at 08:02 AM | Comments (0) | TrackBack

    June 04, 2008

    TXDOT, Tolls and riding off into the Sunset

    Some interesting things floating 'round the sphere...

  • Both Sal and EOW have the deets on the Sunset Commission's report. All in all, nothing terribly exciting and they're sticking with a Gubernatorial appointment to head the TXDOT, albeit shrinking the number to one person. We're continuing to think three elected officials would be better than any number of appointees, especially if elected to staggered terms.
  • 3 TXDOT officials plead guilty to taking bribes and rumors continue to circulate that Amadeo Saenz is involved.
  • TXDOT, after YEARS of ignoring Texas Democrats in Congress and spending lavishly (and illegally) on some of Tom Delay's former staffers turned lobbyists, is going hat in hand to those very same Representatives. A word of advice to the D's who are about feel the love... disregard it. Stomp on these people and create a federal law banning that unique form of corporate welfare known as the public private partnership
  • Is Perry contemplating a special session to kill 391 commissions (the citizen planning commissions that are right now creating very real problems for infrastructure privatization and the TTC)? In an election year? Are you kidding me? If he does, I'll put my money on the Lege being pissed and not doing much of anything. Which would be absolutely perfect for the Democrats running
  • Finally... proof that toll roads really are made of inferior materials and construction standards. I'll never drive over another toll bridge without thinking about disintegrating, substandard concrete
  • Can Sen. Hinjosa make TXDOT his bitch? One things for sure, he's actually achieving something unlike a certain fatass blowhard we could mention. Good thing the people of North Dallas have a choice this year.
  • Speaking of the Lege, it's pretty clear that 39% and TXDOT really aren't in a moderating mood...

    "While I am looking forward to addressing this issue [transportation] when the Legislature meets in 2009, " Perry said, "the state cannot afford to repeat 2007. Members of the Legislature must understand that 'no' is not a solution to this challenge. It is an abdication of responsibility." Perry made clear his determination to defend the renting of state right-of-way to private companies in exchange for a fee and building and operating a toll road.

    Actually, you ridiculous twerp, selling off your roads IS AN ABDICATION OF RESPONSIBILITY. Not only that, but you and your appointees are so incompetent or corrupt that you didn't even get us a good price. Probably because you're, again, either too incompetent or corrupt to calculate the present value of a revenue stream over time.

    This preceded their new Statement on Toll Projects which I'll take a moment to summarize and explain.

    1) Not selling the tolls roads... This is pretty dumb since a 50 or more year lease is widely considered a functional sale. In my industry, we call it a leasehold.
    2) No roads will be owned by foreign entities. No, but the leases will be held by them.
    3) We'll have a way to buy back the roads. Sure, but at what price? I don't expect the crack team at TXDOT to do a good job negotiating this. They're completely out of their element, just as former Commissioner Williamson clearly was.
    4) Tolls will be initially set by TXDOT, with formulas and government input for increases. Input isn't control. Nice try, Deidre, but only an idiot would fall for that turn of phrase.
    5) No restrictions or non-competes? I'll believe it when I see it, Deidre.
    6) Freeways not converted... but if we shrink down the freeway lanes to add a lane, we'll call that added capacity and we'll toll it

    This, my friends, is the translation. If you're dumb enough to fall for ANYTHING from this Commission, then you really don't deserve any spot at the table.

    All in all, this pretty solidly leaves corporate welfare proponents in the drivers seat and continues to ignore the most cost effective solution, which Burka NAILED.

    At the end of the day, this is so transparently a 'Let's give a perpetual revenue stream to a campaign contributor (ZACHRY)' that it surprises me so many 'fiscal conservatives' are in favor of it. Wonder if they're getting paid by Zachry as well. I already know 39% is.

  • Hava goodun!

    Posted by mcblogger at 10:04 AM | Comments (1) | TrackBack

    June 02, 2008

    ...And sometimes, the press is REALLY stupid

    Here's a dreadful piece of journalism from R. A. Dyer of the Fort Worth Star Telegram. He leaves out...

    1) Deregulation has failed Texas consumers
    2) The excuses, regarding fuel costs, are irrelevant. If the standards to market entry are set so low that retailers end up being financially unable to manage their businesses (and, you know, HEDGE THEIR RISK) then clearly there is something wrong.
    3) This is related to excessive speculation in the energy market coupled with the decline in the dollar which is setting prices high for ALL natgas, even that produced domestically since we don't produce enough to meet domestic demand.
    4) The cheapest, most dependable electricity in the state is in two markets, SA Metro and Austin Metro. Neither deregulated.
    5) The price spikes are clearly indicative of market manipulation.

    Dyer, if you're going to write about something at least learn about it.

    Posted by mcblogger at 10:03 AM | Comments (0) | TrackBack

    May 29, 2008

    Inflation and the next big bull market

    First off, the bad news. Inflation, using historical calculations, is running at 11%. That's pretty bad. What's worse is that high inflation tends to kick up interest rates dramatically. So get ready to pay more for those credit cards.

    The good part? High inflation periods usually depress the cost of financial assets, especially equities. And it's always a buying opportunity. For one thing, high commodity prices lead to periods of rapid growth in the supply of those commodities either through new technologies or expanded production. ALWAYS. Humans adapt and grow around constraints.

    Nothing lasts forever, boys and girls, frankly I'm thrilled at the prospect of being able to buy some good stocks at a nice discount. You should be as well.

    Posted by mcblogger at 03:45 PM | Comments (0) | TrackBack

    May 28, 2008

    Good to see OUR politicos aren't the only stupid ones

    Remember that dumbass idea to drop the gas tax? Remember how dumb we thought our politicos were for thinking up such a stupid idea? Remember when we longed for those intelligent and urbane European electeds who would never propose something so crass and stupid?

    As it turns out, they're just as dumb. Or at least, French President Sarkozy is.

    Pandering has now made the great leap over the Atlantic!

    Posted by mcblogger at 09:06 AM | Comments (2) | TrackBack

    March 18, 2008

    Perception is reality

    Take a balance sheet weakened by the non-marketability of assets on it. Add in doubts from counterparties and an unwillingness to take the other side of a trade to, for example, assume interest rate risks. Combine with client uncertainty and top it all off with the loss of access to the critical commercial paper market (the financial lifeblood of all the large non-depository banks) and you have the perfect financial storm that destroys an investment bank.

    That, in short, is what happened to Bear Stearns. Was Bear in trouble? Sure. The fact that the company made some horrendous bets on some very toxic MBS, mostly filled with Alt A and Sub-Prime credits. Then they dumped them into CDO's, in which interests were sold to investors. Just to add another layer of risk, they then borrowed heavily against the shit credits in the CDO to, wait for it, buy still more shitty credits to juice the return. The CDO could borrow cheaply so the spread income was very good and helped Bear come in with extremely good profits. As long as no one doubted the value of the credits in the CDO. When those became unsaleable, creditors called loans and there was a run on the bank.

    And that last bit is what killed Bear. You can't pay off $100 Billion in loans with $20 Billion in equity, for example. If you can't float that $100 Billion with constant funding, you're effectively bankrupt. Well, that's actually putting it mildly. You're a cautionary tale. The fact that the assets you've acquired with that debt are worth less than 1/10 what you paid just seals the deal on the tragedy.

    Though the underlying event was different, something very similar happened to Salomon Bros. in 1991. Then, a white knight was able to step in, restore confidence and, by extension, the funding. No such luck this time with JPMorgan Chase. The only question that remains is were their actions deliberate. Consider this...

    The swiftness of Mr. Dimon’s decision to buy Bear is remarkable given that he has not been an aggressive acquirer since he joined the firm after selling it BankOne, where he was chief executive. He has cautioned patience about making acquisitions, though he had suggested in recent months that the firm might be ready to make a major deal.

    Earlier this month, the co-chief executive of JPMorgan’s investment bank, William T. Winters, said on a conference call with investors: “If a special opportunity came up to acquire a prime broker at a decent return, we wouldn’t hesitate. We’ve always said, ‘Boy, if there was one for sale, we’d love to look at it.’ ”

    A deal needed to be reached quickly to protect the business from collapsing entirely. With most if not all of its clients stopping trading with the firm, its days were numbered.

    One has to wonder if maybe the crisis of confidence was, if only in part, exacerbated by JPMC. Of course, we'll probably find out. That's what lawsuits are all about.

    Posted by mcblogger at 11:59 AM | Comments (0) | TrackBack

    March 11, 2008

    Are you hungry?

    Apparently, so is the rest of the world.

    Farmers the world over are producing flat-out. American agricultural exports are expected to increase 23 percent this year to $101 billion, a record. The world’s grain stockpiles have fallen to the lowest levels in decades.

    “Everyone wants to eat like an American on this globe,” said Daniel W. Basse of the AgResource Company, a Chicago consultancy. “But if they do, we’re going to need another two or three globes to grow it all.”

    In contrast to a run-up in the 1990s, investors this time are betting — as they buy and sell contracts for future delivery of food commodities — that scarcity and high prices will last for years.

    If that comes to pass, it is likely to present big problems in managing the American economy. Rising food prices in the United States are already helping to fuel inflation reminiscent of the 1970s.

    UGH. Why is it that an article about tight commodities markets always has the doom and gloom quote from some guy who thinks the future is going to look a lot like Soylent Green? There's never the quote from the fella who points out that, historically, times of limited supply and relative scarcity have always been of relatively short duration and are always followed by long periods of overabundance?

    As for needing two or three earths? Not at all. What we need is for the rest of the planet to start farming like us. Well, maybe not with all the pollutions and problems of the past but instead with the best practices of today. Let's see some modern farming in Africa instead of the poor ass subsistence farmer plowing a field with technology from the 1860's.

    When you read the article, please note how much Nigerians love them some toast.

    Posted by mcblogger at 10:35 AM | Comments (0) | TrackBack

    March 07, 2008

    It ain't just subprime...

    ...that's roiling the capital markets, it's also all the bond guarantees for tolling projects that are failing to meet their projected traffic estimates. Sal has more about FGIC which, like AMBAC and MBIA, is having problems meeting it's obligations to bondholders who hold paper they guaranteed. Why? Poor projections from the same people who've been fucking up traffic projections for years, URS.

    Posted by mcblogger at 09:47 AM | Comments (0) | TrackBack

    March 06, 2008

    Silicon Valley turns to the sun

    Want to know what the next big technology trend sweeping the venture community is? Click here.

    Given the valley’s tremendous success in recent years with such down-to-earth products as search engines and music players, tackling solar power might seem improbable. Yet some of the valley’s best brains are captivated by the challenge, and they hope to put the development of solar technologies onto a faster track.

    There is, after all, a precedent for how the valley tries to approach such tasks, and it’s embodied in Moore’s Law, the maxim made famous by the Intel co-founder Gordon Moore. Moore’s Law refers to rapid improvements in computer chips — which would be accompanied by declining prices.

    A link between Moore’s Law and solar technology reflects the engineering reality that computer chips and solar cells have a lot in common.

    “A solar cell is just a big specialized chip, so everything we’ve learned about making chips applies,” says Paul Saffo, an associate engineering professor at Stanford and a longtime observer of Silicon Valley.

    Financial opportunity also drives innovators to exploit the solar field. “This is the biggest market Silicon Valley has ever looked at,” says T. J. Rogers, the chief executive of Cypress Semiconductor, which is part-owner of the SunPower Corporation, a maker of solar cells in San Jose, Calif.

    Mr. Rogers, who is also chairman of SunPower, says the global market for new energy sources will ultimately be larger than the computer chip market.

    “For entrepreneurs, energy is going to be cool for the next 30 years,” he says.

    Optimism about creating a “Solar Valley” in the geographic shadow of computing all-stars like Intel, Apple and Google is widespread among some solar evangelists.

    “The solar industry today is like the late 1970s when mainframe computers dominated, and then Steve Jobs and I.B.M. came out with personal computers,” says R. Martin Roscheisen, the chief executive of Nanosolar, a solar company in San Jose, Calif.

    Remember when laptops weighed 10 lbs , had 7" screens and costs upwards fo $4,000? That's the stage we're at with solar right now. Just wait... give solar ten years and you'll see a similar trend.

    Posted by mcblogger at 12:08 PM | Comments (0) | TrackBack

    March 05, 2008

    The Shock Doctrine : The Movie

    It's only 7 minutes long so you can totally take the time out of your day... it's well worth it.

    Posted by mcblogger at 02:19 PM | Comments (0) | TrackBack

    March 02, 2008

    The oil may get low sooner than we think

    For all the talk about drilling our way to energy independence, which is little more than than rambling by ridiculous little people with ridiculous little ideas, there is one inescapable fact. The well will always peak and from there on out that oil is going to get more and more expensive to the point of production costs going asymptotic, mostly because the reservoir pressure drops to the point where you are spending more and more to lift the next barrel of oil. It's happening in Mexico in the Cantarell field and in the Ghawar in Saudi Arabia.

    The other inescapable fact is that as oil increases in value, those states that produce it will find themselves more and more affluent. And affluent people tend to become rabid consumers, especially when gasoline in 7 cents a gallon.

    The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad, adding new strains to the global oil market.

    Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.

    Indonesia has already made this flip. By some projections, the same thing could happen within five years to Mexico, the No. 2 source of foreign oil for the United States, and soon after that to Iran, the world’s fourth-largest exporter. In some cases, the governments of these countries subsidize gasoline heavily for their citizens, selling it for as little as 7 cents a gallon, a practice that industry experts say fosters wasteful habits.

    “It is a very serious threat that a lot of major exporters that we count on today for international oil supply are no longer going to be net exporters any more in 5 to 10 years,” said Amy Myers Jaffe, an oil analyst at Rice University.

    The best part? Consumers in these countries care less about pollution than the rest of the world...

    In Mexico City the other day, a bricklayer named Jaime Guerrero arrived at a local Chevrolet dealership. His extended family cried “bravo!” as he signed the papers for his first car.

    “To have a new car in my name is a dream transformed into reality,” said Mr. Guerrero, 26. He and his family piled in and weaved through the chaotic traffic of the capital, hunting for a priest to douse the car with holy water.

    “I don’t worry about the climate or shortages of oil in the world,” Mr. Guerrero said. “I just worry if gasoline prices go up.”

    Frankly, it's a little hard for me to criticize Mr. Guerrero because he's representative not only of people in Mexico, but of people in the US and around the world. Given that, it's damn time we give him a cheaper, cleaner, long-term alternative.

    And just FYI, no damn interior decorator is going to do that. It's going to take someone like Dale Henry.

    Posted by mcblogger at 11:34 AM | Comments (0) | TrackBack

    February 27, 2008

    THIS makes me so mad!

    As unbelievable as it sounds, there are some really stupid people working at the Dallas Fed, namely W. Michael Cox and Richard Alm. Well, maybe calling them stupid is too harsh. They are more like idiot savants, so narrowly focused on one piece of data that they ignore the fact that their research is largely pointless.

    Cox and Alm hypothesized that the gap between rich and poor isn't that large in terms of of per person consumption. And they've proved it!

    Richer households are larger – an average of 3.1 people in the top fifth, compared with 2.5 people in the middle fifth and 1.7 in the bottom fifth. If we look at consumption per person, the difference between the richest and poorest households falls to just 2.1 to 1. The average person in the middle fifth consumes just 29 percent more than someone living in a bottom-fifth household.

    To understand why consumption is a better guideline of economic prosperity than income, it helps to consider how our lives have changed. Nearly all American families now have refrigerators, stoves, color TVs, telephones and radios. Air-conditioners, cars, VCRs or DVD players, microwave ovens, washing machines, clothes dryers and cellphones have reached more than 80 percent of households.

    They do acknowledge that the gap in income is 15 to 1. They also acknowledge that people in the lowest fifth of wage earners (also known as more than 30% of this country) are basically living on double what they earn. They explain this a number of ways...the poor are selling assets (because everyone knows that the poor are very asset rich), cashing in insurance policies (because everyone knows the poor are loaded in terms of fully vested insurance policies) and living off their savings (because everyone... you get the gist, right? On this one though, I have to ask these two idiots, When, exactly, were the poor supposed to build up positive balances in their bank accounts while spending more than they make?).

    Ok, so I lied. These are two of the DUMBEST economists on the face of the planet. Seriously, they lump in here the working poor, retirees and people who are taking time off from work (or are between jobs). Now those people do have disposable savings and non-taxable sources of income. However, even these folks aren't living on 9k per year. But, let's think in terms of averaging. What do you do about the massive number of people in this group who are making the average or less and have nothing to fall back on? Obviously, they aren't living beyond their means. What is THEIR level of consumption? These two brill economists make no attempt to even consider that. Nor do they even bother to analyze the fact that at a certain level of consumption, income becomes largely irrelevant. Which is the most interesting bit of data that can be used to refute the claims of certain 'conservatives' who think if you pay the poor an actual living wage all they'll do is spend every dime. This data supports the progressive idea... the poor would actually build savings just like those in the middle fifth and above income groups if they actually made enough TO SAVE.

    This data could have been very useful in terms of talking about wage inequality and the need for living wages. Instead, the two economists from the Dallas Fed choose to make it all about buying stuff. Nice work, guys.

    For another excellent counterpoint, click here.

    Posted by mcblogger at 03:15 PM | Comments (0) | TrackBack

    February 26, 2008

    Finally! The Hedgies start to cave on taxes!

    We've talked before about hedge fund managers who pay only 15% of their income in taxes. Via the NYT comes an article about Peter Peterson of the Blackstone Group acknowledging that it's time for the private equity flippers should start paying normal taxes. Just like you and me.

    Posted by mcblogger at 02:48 PM | Comments (0) | TrackBack

    February 14, 2008

    Just how BIG is DoD's Budget?

    BIG. In point of fact, it is just a few billion shy of being more than what the rest of the ENTIRE PLANET spends on defense. And brings up a good point... Instead of raising taxes, the Republicans have just run massive deficits. Which drives up the cost of borrowing. Which in turn makes it more expensive for consumers to buy cars, houses, everything. Which acts as a drag on the economy, not just in higher borrowing costs but in terms of a weaker dollar. A weaker dollar means dramatically more expensive energy prices which leads to inflationary increases in the prices of EVERYTHING. The end result, if we're lucky, will be a mild recession.

    If we're not lucky... well, read The Grapes of Wrath.

    The reality is that our infrastructure and social safety net are crumbling. It's not just the roads and medicare/medicaid, it's schools, police, fire depts, community colleges and universities. By spending an inordinate amount on defense, we're sacrificing our economic prosperity now and in the future. Food for thought for all the 'strong on defense' hawks.

    Posted by mcblogger at 07:52 PM | Comments (0) | TrackBack

    February 04, 2008

    Earmarks in perspective

    Recently, we made reference to Bush's complaints about 'earmarks'. We stated that he was complaining about 1% of the Federal Budget.

    We were wrong. It's actually less than that. It's .55% of the Federal Budget that Bush wants Congress to pass. $3.1 trillion and they are complaining about not having enough money to public education and infrastructure projects?

    Posted by mcblogger at 01:48 PM | Comments (0) | TrackBack

    January 29, 2008

    The supply side fallacy

    Once more, the real world results of supply side economics are deficits and economic recession. Period. The Republicans have been talking about the declining deficits. However, they aren't declining anymore. Even before the fiscal 'stimulus' package is added on, the deficit was expected to hit around $250 bn this year.

    Even without the stimulus package, the Congressional Budget Office is forecasting the deficit for 2008 will jump to $219 billion, up from last year's $163 billion. And CBO said its new estimate did not include still unapproved outlays for the wars in Iraq and Afghanistan, which will probably push the deficit to around $250 billion.

    Which makes Bush's whining about less than 1% of the Federal budget (earmarks) less than genuine given that it's mostly his off the charts military spending that is driving up the federal deficit. Not the projects that Members of Congress put in the federal budget to do something for their districts.

    Posted by mcblogger at 09:22 AM | Comments (0) | TrackBack

    January 22, 2008

    Bush proposes plan, markets react badly

    It's not all that surprising, given how stupid Bush's plan is, that the futures on all the major indices are way down right now ahead of tomorrow's trading. Overnight, oil closed around $88 which is great but a definite sign that markets are counting on recession. And joblessness. Which Bush's plan will do nothing to fix.

    The reality is that giving myself a tax cut isn't going to do anything other than exacerbate the trade deficit. If one really wanted to jump in and save the economy, implementing the cap gains tax increase we've talked about would be a great first step in stabilizing prices and cutting of rampant speculation, without inefficient price controls. Then, increase taxes dramatically on corporations that have a wide disparity between those at the lowest end of the wage pool and those at the top. Sure, it'll cut corporate tax income a little, but it will more than make up for it with an increase in real wages (and the taxes paid on wages) and spur a consumer led economic boom.

    Finally, any program that involves deficits MUST be used for things here. Build schools. Build roads. All of that puts real money into the economy and produces things we desperately need to keep the economy going.

    But Republicans won't be interested in that. The only thing they seem to be good at is collapsing the economy.

    Posted by mcblogger at 12:02 AM | Comments (0) | TrackBack

    January 07, 2008

    $200 a barrell for oil?

    Not yet and not likely barring some unforeseen event. Like the well heads in the Gwahar field being fused and shut off. Oh, and a nuke being dropped on the export facilities throughout the Persian Gulf.That's not stopping some speculators from bidding up futures on oil with a $200 strike...

    Options to buy oil for $200 on the New York Mercantile Exchange rose 10-fold in the past two months to 5,533 contracts, a record increase for any similar period. The contracts, the cheapest way to speculate in energy markets, appreciated 36 percent since early December as crude futures reached a record $100.09 on Jan. 3.

    While analysts at Merrill Lynch & Co. and UBS AG say the slowing U.S. economy will lead to the biggest drop in prices since 2001, the options show some traders expect oil to rise for a seventh straight year. Demand will increase 2.5 percent in 2008, according to the International Energy Agency. U.S. inventories fell to a three-year low on Dec. 28. Production from Mexico is declining and Saudi Arabia is behind schedule in opening its newest field.

    ``One hundred dollars a barrel is actually 14.9 cents a cup, so we're still talking about oil being remarkably cheap,'' said Matthew R. Simmons, chairman of Simmons & Co. International, a Houston-based investment bank that focuses on energy. Inventories ``are tight as a drum and I don't see how we get out of this box,'' he said in a Bloomberg television interview last week. ``Demand clearly isn't starting to slow down.''

    Simmons was one of the VERY few people in the late nineties talking about oil over $50/bbl when it was in the $20's. He was predicting a production peak in this decade and he may have been right. No, the current price is related more to weakness in the dollar and geopolitics than peak oil. Still, it is the reason oil should be between $50 and $60 just based off supply and demand.

    Posted by mcblogger at 02:24 PM | Comments (0) | TrackBack

    January 02, 2008

    Just how good has the economy been?

    We've known for a while that the economy hasn't been on all that great for the vast majority of Americans. The reality is that supply-side economics does exactly what it was always supposed to do... concentrate income and, as a consequence, wealth at the top. Here's a breakdown of the economic gains made from 2003-2005...

    Bottom quintile: 2%
    Next quintile: 2.4%
    Middle quintile: 3.9%
    Fourth quintile: 3.7%
    Top quintile: 16%
    Top 10%: 20.9%
    Top 5%: 27.7%
    Top 1%: 43.5%

    71.2% of the income available in the United States went to 5% of the population. While no one ever said capitalism was fair, it has historically been a good way to create and distribute wealth across a large population. However, what we functionally have now isn't really capitalism, it's a form of pseudo-fascism with incredible amounts of government cooperation with industry, especially in terms of military spending. Whether the Republicans realize it or not, they've engaged in economic manipulation and a redistribution of wealth that is functionally impoverishing the vast majority of the people in this country.

    The total income of the top 1.1 million households was $1.8 trillion, or 18.1 percent of the total income of all Americans, up from 14.3 percent of all income in 2003. The total 2005 income of the three million individual Americans at the top was roughly equal to that of the bottom 166 million Americans, analysis of the report showed.

    The report is the latest to document the growing concentration of income at the top, a trend that President Bush said last January had been under way for more than 25 years.

    Earlier reports, based on tax returns, showed that in 2005 the top 10 percent, top 1 percent and fractions of the top 1 percent enjoyed their greatest share of income since 1928 and 1929.

    I suppose it's purely coincidental that the 'trend' toward a concentration of wealth at the top has run along with the rise of 'conservatism' and supply-side economics. And now, it's time to put the brakes on in a big way. This isn't about socialism, this is about re-regulating the 'free' market to stop the abuses, not impose restrictions on profits or make it difficult for people to make a living. It's about recreating the progressive tax system that helped make this country an economic powerhouse and created the middle class.

    Now's the time for aggressive moves from the Democrats.

    Posted by mcblogger at 01:01 PM | Comments (0) | TrackBack

    December 11, 2007

    Breaking : Fed cuts Discount, Funds rate 25 bps


    US financial prospects continue to decline as a result of fallout from the mortgage industry. Concerns are biased toward inflation (which is why the cut was only 25 bps). The US economy overall continues to be strong despite the problems in the financial sector.

    The surprising thing is that the discount rate (the Fed to bank lending rate) was only cut 25 bps and not more. The real problem in financial services right now is the lack of liquidity on banks' balance sheets as most of the majors have been forced to move mortgage assets from level one to level three capital. A cut in the discount rate would have allowed banks to leverage off the Fed's balance sheet with oversight. Which would have freed up liquidity and helped liquefy the market.

    Posted by mcblogger at 01:16 PM | Comments (0) | TrackBack

    December 07, 2007

    Economy : No! Don't.Say.The.R.Word!

    'Advanced Manufacturing' is something that Labor Sec'y. Elaine Chao is really excited about. We used to call it final assembly, but Frank Luntz has been hard at work helping the Bush Admin to spin this pig of an economy. Elaine thinks this will save the US economy. Of course, by the time it's clear it won't, Elaine will be off on to a consulting gig. And trust me, no one on Wall St. will miss her or her pollyanna economic analysis.

    Here's what's out today

  • Non farm payrolls are in for November at 94k, full 60k less than the US needs to maintain static employment levels. Which means that over the past 6 months, we haven't hit static levels in any month. Unemployment held steady, mostly because the government is running those #'s in a really funky way. For one, after about 12 weeks you fall off the count whether or not you have a job. Which makes the Admin look good but hides how bad things really are
  • University of Michigan Consumer Sentiment falls from 76.1 in November to 74.5 in December. The dollar falls still further
  • Household income was marginally higher than expected, but still anemic and running behind inflation when you count food and energy prices. Which the Government doesn't.
  • But what about the subprime fix-it from Treasury Sec'y Paulson? Too little, too late. To paraphrase Senator Durbin, you have people drowning 20 feet offshore and the Bush Admin just tossed them a 10 foot rope. Not to mention the onerous guidelines for the freeze that are even tougher than those for an FHA loan. Then you throw in what this will do to the debt maket...

    ``If the government goes in and changes contracts it will definitely have a chilling effect on the securitization of mortgages,'' said Milton Ezrati, senior economist and market strategist at Lord Abbett & Co. in Jersey City, New Jersey, which oversees $120 billion in assets. ``When the government comes in and says you have contracted to have this arrangement and you can no longer have it, I think it opens the door for lawsuits.''

    Don't get it? Let me put it this way... you pay a premium for a bond that will deliver dependable principle and interest payments over time. Then the government steps in and renegotiates the contract, giving you less income. Sound fair, right?

    The bottom line is that a freeze isn't going to work, especially not with the economy spiralling the drain. What's needed to actually help people is to refinance them out of these mortgages. FHA Secure was a good first step, but what we need is FHA Modernization which is trapped in the Senate by some Republicans. Because of the perception that it will hurt the private mortgage insurance companies.

    Thanks, Sen. Dole! Way to put your own narrow interests ahead of the rest of the country.

    Posted by mcblogger at 02:26 PM | Comments (0) | TrackBack

    December 03, 2007

    Two takes on $100/bbl oil

    Friedman over at the NYT has a brill piece about how much a $1.00 increase in the gas tax would have helped the economy and started the long process of weening us off oil.

    “Think about it,” says Phil Verleger, an energy economist. “We could have replaced the current payroll tax with a gasoline tax. Middle-class consumers would have seen increased take-home pay of between six and nine percent, even though they would have had to pay more at the pump. A stronger foundation for future economic growth would have been laid by keeping more oil revenue home, and we might not now be facing a recession.”

    As a higher gas tax discouraged oil consumption, the Harvard University economist and former Bush adviser N. Gregory Mankiw has argued: “the price of oil would fall in world markets. As a result, the price of gas to [U.S.] consumers would rise by less than the increase in the tax. Some of the tax would in effect be paid by Saudi Arabia and Venezuela.”

    But U.S. consumers would have known that, with a higher gasoline tax locked in for good, pump prices would never be going back to the old days, adds Mr. Verleger, so they would have a much stronger incentive to switch to more fuel-efficient vehicles and Detroit would have had to make more hybrids to survive. This would have put Detroit five years ahead of where it is now. “It’s called the America wins program,” said Mr. Verleger, “instead of the petro-states win program.”

    We simply cannot go on being as dumb as we wanna be. If you hate the war in Iraq, then you want a gasoline tax so you can argue that we can pull out of there without remaining dependent on an even more unstable region. If you want to see us negotiate with Iran, not bomb it, you want a gasoline tax that will give us some real leverage by helping to reduce the income of the ayatollahs.

    This piece dovetailed nicely with this one in the WaPo regarding the geopolitics of $100/bbl oil. Not surprisingly, he thinks that part of this would be solved with higher energy taxes. Because from what we've seen in Europe and Japan, that's what you need to start people on a path to conservation.

    At some point, higher prices will dampen demand; changes in the weather and business cycle could also lead to lower prices. Still, a major turning point has been reached. Until now, oil's main geopolitical threat lay in the concentration of reserves in the unstable Persian Gulf. Supply disruptions (1973, 1979-80, 1990) coincided with wars and revolutions. Otherwise, surplus capacity cushioned losses from accidents and weather. Now, most of that surplus has vanished. The pivotal year was 2004, when global demand, propelled by China, rose about triple the expected rate, says Larry Goldstein of the Energy Policy Research Foundation.

    So the tightened gap between supply and demand has shifted power to producers. "Will competition for scarce resources lead to political or even military clashes among major powers?" asks a report by the National Petroleum Council. "Will bilateral arrangements among nations become common as governments attempt to 'secure' energy supplies outside of traditional market mechanisms?"

    Here is what we might do: Raise fuel economy standards for new cars and trucks; gradually increase the gas tax (possibly offset with tax cuts) to induce people to buy those vehicles; expand oil and natural gas production in Alaska, the Gulf of Mexico, and off the Atlantic and Pacific coasts. These steps would, with time, temper the power of oil producers while also checking greenhouse gases. But many liberals, conservatives and environmentalists oppose parts of a sensible compromise. The stalemate hurts mainly us.

    We have absolutely got to find a way out of this mess and we're not going to do it with new drilling and exploration, despite the idiotic opinion of a certain interior decorator who fancies herself knowledgeable about the oil and gas industry.

    Posted by mcblogger at 04:06 PM | Comments (0) | TrackBack

    November 30, 2007

    Draining the life out of us

    Two posts caught my eye and both are interrelated. One was from BlueBloggin' detailing the rise in oil prices as a function of commodities traders. Most of you know already that there is a substantial amount of the price of oil that has been increased by speculation. The author is right in that there there is no theoretical limit to how high oil can go with speculators in control.

    There's only one problem... speculators NEVER remain permanently in control. They will always lose eventually and the trade will go in the opposite direction. The only question is whether or not the economy and the middle class can endure until that breakdown occurs. Which is where this post from Eye on Williamson comes in. The middle class in the US has been under attack for 30 years, coincidental with the rise of the Republican 'conservative' movement that is anything but. Though the author of the piece doesn't talk about it, the middle class is itself in part to blame. They've kept electing these people cycle after cycle even though the economics work better for the rich than they do for the middle class.

    The sad reality is that the Democratic party and it's image consultants over the last 30 years are also to blame because for a time they abdicated the mantle of protectors of the middle class to the Republicans by allowing them to paint themselves as better on economic issues. That's starting to change which is why the polls look sooo bad for Republicans.

    It's about time people finally realized their economic well being and security is more important than whether or not the gays and lesbians can marry. And the price of oil is the most obvious indicator.

    Posted by mcblogger at 08:15 AM | Comments (0) | TrackBack

    November 28, 2007

    Frustrated douche to leave Bush Administration

    Al Hubbard, director of President George W. Bush's National Economic Council for almost three years, will step down by the end of the year and be replaced with Hubbard's top aide, Keith Hennessey.

    ``Al came to the White House after spending nearly 30 years as a successful entrepreneur and business leader,'' Bush said in a statement. ``He brought to the White House his capacity for hard work and creative thinking, and fostered an open, cooperative working environment.''

    Wait. This guy has been present for the creation of the problems currently leading us into recession? WOW. Sounds like getting rid of him isn't such a bad thing. 30 years as a successful entrepreneur? The guy ran a chemical company in Indiana. Other than that, it appears that damn near every one of his jobs has been related to politics. Which gives him a similar career track to the massively incompetent Dick Cheney. He also went to Harvard with W. What the hell? Was it just an extraordinarily bad year?

    Hubbard informed Bush of his plans this morning, press secretary Dana Perino told reporters at the White House. Hennessey, the current deputy director of the National Economic Council, is ``as prepared for the challenge of this job as anyone could possibly be,'' Perino said.

    '... As prepared for the challenge...' Well, that inspires a great deal of confidence. I'm sure Mr. Hennessey will be as much of a loser as Mr. Hubbard. He'll likely spend hours staring at charts trying to figure out how their brill economic strategies forced the country off the rails. They'll blame the Democratic controlled Congress who, though in power for less than a year, have clearly 'fucked everything up'. Except for the economy and, well, everything else.

    So why is Hubbard leaving? Apparently, he doesn't like not be able to get his way anymore...

    Hubbard expressed ``huge frustration'' with the Democrat- controlled Congress last month, saying lawmakers were resisting Bush initiatives that would help the economy. `I came out of the private sector, I'll go back to the private sector, and my orientation is getting things done and Washington is really gridlocked,'' he said in a Nov. 13 interview.

    Hubbard also said ``there would be a lot more cooperation with the Democratic Congress and unfortunately, the Democrats -- who control Congress -- have not been oriented towards getting things done.''

    Democrats were resisting Bush's stupid plans? Holy shit! You mean they are DOING WHAT THE AMERICAN PEOPLE HIRED THEM TO DO??!?!?? Why, that's unheard of! During Hubbard's time in government, the American economy saw massive stratification and little real growth. Wages stagnated and inflation is once again a top concern of Americans. Great job there, pal.

    On last thing caught my eye...

    Before coming to the White House in 2002, Hennessey was a top budget aide to Senator Trent Lott, Republican of Mississippi and also was an aide on the Senate Budget Committee, Perino said.

    He worked for Lott? And Lott is also retiring? Interesting... maybe they were both involved in the same scandal. Or maybe they were LOVERS?!?!?!?!

    I know, sometimes I gross even myself out.

    Posted by mcblogger at 10:12 AM | Comments (0) | TrackBack

    November 19, 2007

    Level 3 assets and the SIV backup fund

    Two weeks ago we talked a little about the next part of the meltdown in the credit markets, what will soon be the furor over level three assets. Now comes word that the nations big banks and investment houses have structured a fund that might actually help alleviate the problem. By creating a buyer of last resort in an illiquid market...

    Officials from Bank of America, Citigroup and JPMorgan Chase reached agreement late Friday, settling on a more simplified structure than had been proposed, said this person, granted anonymity because he was not authorized to talk for the group.

    Bank participants, money market investors and even some managers of the troubled investment vehicles that would benefit most had considered previous versions of the fund to be infeasible, casting doubt over a final plan. Discussions had been taking place since early fall, when the Treasury Department convened a meeting.

    Now, the proposed fund could begin operating by the end of December, this person said. The banks could begin asking roughly 60 financial institutions to contribute to the fund by Friday or early next week.

    Of course, this is kind of a backdoor way for the banks to take some pressure off their balance sheets from all the level 3 assets they've been forced to salt away. Look at it this way... you have a bunch of assets you can't sell because no one wants them. So, you create a company that will buy certain of those assets, creating a market value for them. It's self dealing, analogous to what our good friends at Enron did. However, unlike Enron, this is real capital the banks are having to cough up out of their equity. Frankly, it has to work or many of our largest banks are going to have to access their lender of last resort, the Federal Reserve, to remain solvent.

    Which is a nice way of saying US taxpayers.

    Posted by mcblogger at 12:44 PM | Comments (0) | TrackBack

    HR 3915 passes and other mortgage news

    Yes, HR 3915 has passed the House and is off to what one can only hope will be a rocky reception in either the Senate or with, God forbid, President Bush.

    Seriously, we need reform. The market needs regulation and consumers have to be protected. This doesn't do that AND it cripples the marketplace. Do you have any idea how depressing it is not only to see your party fuck up brilliantly but to be forced into agreement with douchebag's like Kenny Marchant and Patrick McHenry? I hate those guys.

    Still, they were right on this one. I guess it had to happen. Even a broken clock is right twice a day.

    In other mortgage related news, FHA Modernization was stalled out in the Senate by Tom Coburn, a Republican from Oklahoma (doesn't that make him a double retard?)

    Posted by mcblogger at 10:53 AM | Comments (0) | TrackBack

    November 12, 2007

    Bill Gross sees the future

    PIMCO bond fund manager Bill Gross recently said that the Fed can not afford to let the housing industry go down the tubes...

    The Federal Reserve "cannot afford" to let U.S. housing prices fall sharply and will have to cut interest rates aggressively to prevent that from happening, said the manager of the world's biggest bond fund on Monday.

    "A Fed cannot afford to let homes go down by 10 to 15 percent like we saw in Japan," said Bill Gross, chief investment officer of Pacific Investment Management Co. or Pimco, on CNBC Television.

    Already, the housing market is facing turmoil in so-called subprime loans made to borrowers with shaky credit. Delinquencies are rising on subprime mortgages and defaults are piling up at record rates as home prices sink, pressuring consumers' desire to spend.

    What does all this mean? The Fed will likely drop rates because a collapse in housing is the worst possible outcome. When that happens, the dollar will collapse still further making oil even more expensive and inflation a real concern. Which is why Gross is spending so much time buying assets denominated in anything other than the dollar.

    Gross manages more than half of a trillion dollars for PIMCO.

    Posted by mcblogger at 10:59 PM | Comments (0) | TrackBack

    Ouch! It hurts! or Rising oil price impacts around the world

    The WaPo has a great piece up about the impact of $100/bbl oil around the globe. It's not really surprising that exporters are doing well and importers are doing badly. What caught my eye is what's happening in Brazil...

    In Brazil, the region's largest economy, high oil prices have had a different political effect. Last year, the country became a net oil exporter, thanks to major increases in domestic oil exploration and the country's broad use of sugar-based ethanol as a transport fuel.

    Actually, Brazil doesn't produce much oil, less than the US in fact. However, they do use sugar cane ethanol for just about all their transport fuel with the remainder coming from soya diesel. Brazil's economy is soaring thanks to their independence from petroleum.

    Anyone who tells you that we can't move to biofuels in the US is lying. The Brazilians did it with sugarcane and we're a decade ahead of them in refining capacity thanks to all our work to render inefficient corn into ethanol. There really aren't any excuses. This is something that's not just good for the environment, it's the right thing to do for the economy.

    Posted by mcblogger at 12:31 PM | Comments (0) | TrackBack

    November 07, 2007

    Lying about the economy

    We talked about inflation last month, basically how the numbers were a load of crap and that any true measure of inflation must take into account food and energy prices. Now Bonddad has some more. And charts!

    I love me some charts!

    And for those of you who think inflation doesn't matter, the dollar has been hitting all time lows against foreign currencies, oil is hovering near $100/bbl and gold is $845/ounce. True, commodity inflation in terms of dollars has been extreme and is being caused by geopolitical issues and risks as well as inflationary monetary policy here in the US. However, the move is so extreme and so fast that it neatly points out exactly how wrong supply side theory in a low tax environment is.

    Finally, we haven't even hit round three of the credit crunch which will be closely tied to revaluations of level 3 assets and liabilities on corporate and bank balance sheets. Forbes has more on this here with a specific look at Citi. Here's the 10 cent explanation...

    On November 15th new FASB rule will alter the valuations than can be placed on level 3 assets and liabilities? What are level 3 A's and L's? Simply, they are assets and liabilities that do not trade in a liquid market environment, like a stock exchange. These are normally specialized assets tied to specific securities or risks that involve, in some cases, multiple counterparties one or more of whom may not be financially solvent. Which means that no one wants to buy the asset from you (they have no marketable value) and you may never collect from the counterparty should the trade turn your way.

    What's happening now is that CDO's (a group that included mortgage backed securities) are being moved from level 2 to level 3 assets since there is, in many cases, no liquid market for them. The cool thing about level 3 assets is that they are literally worth whatever you say they are worth. Oh sure, there are some complex financial models that tell you what they're supposedly worth. However, the models all depend on information. If there isn't any, then you're working off best guess and your financial model may as well be a coin you flip.

    Citi now says it has more than $140 bn in level 3 assets. Which, right now, effectively means that there is a $140 bn hole in Citi's balance sheet.

    When these assets get revalued it's going to suck conservatively $500 bn out of the US economy. Which will help stabilize the dollar at least. I just feel bad for the shareholders who are about to lose a lot of value because of more bad decision making by the management teams that run their companies.

    Posted by mcblogger at 02:02 PM | Comments (0) | TrackBack

    November 01, 2007

    I don't care about the Fed...

    Yes, I know the Fed cut the funds and the discount rate. Yes, this cut was already factored in and for the most part bonds have been moving in the opposite direction. No, I don't care about it other than to tell you unequivocally that when oil goes above $100/bbl, you'll know who to thank.

    Posted by mcblogger at 09:29 AM | Comments (0) | TrackBack

    October 19, 2007

    Inflation schmation

    Oh, I agree with ELLN and Bonddad...

    So -- why am I focusing on these two paragraphs rather than the headline number? I am personally having a really difficult time believing the "headline" inflation number largely because my personal experience just isn't jibing with an "inflation is benign" scenario. Here's why. I go shopping every 4-5 days. Over the last year or so I have seen chicken increase from about $4-$5 to $7-$8. Milk is now almost $4/gallon when it use to be $2.99/gallon. Simply put, the numbers just aren't adding up. While I don't know what is wrong exactly with the BLS' calculations and/or methodology, it simply isn't tracking what I am seeing at the retail level. Now I realize that the prices above are for food which isn't part of "core" inflation. This also illustrates how incredibly stupid the Fed's reliance on "core" inflation is. Core inflation is a great measure if you don't consume food or energy. For that small minority of the population that actually does consume food and energy, total inflation is a hell of a lot more relevant to daily life.

    The CPI ex food and energy has never made much sense to me since inflationary pressure in those two sectors tend to hold down inflation in core prices because, simply, there is less money to purchase core items. This gives a false impression of the strength or weakness of the economy.

    Of course, if the Fed started taking total CPI into account along with money supply, short rates would be in the 8-9% range. That would break inflation in energy costs rapidly.

    Finally, the most irritating thing about all this is that wage growth is still non-existent. The reality is that when you take into account total CPI, more than 95% of the people in this country have seen their purchasing power erode since the Supply-side/Trickle-down Revolution began. How's that for a successful economic policy?

    Posted by mcblogger at 12:16 PM | Comments (0) | TrackBack

    October 12, 2007

    Friedmanite utility dereg fails. Officially.

    Again, we're talking about utility deregulation. This time, from an analysis in the late to the party Chron (via Kuff)

    [T]he very structure of Texas' deregulated market exposes customers to the full impact of rising natural gas prices more than in other states, or even in parts of Texas still served by regulated electric companies, municipally owned utilities or electric cooperatives.

    The 25 percent of Texans living in those regulated markets generally pay less than rates available in markets that have been opened to competition.

    Houston residential consumers use an average of 1,130 kilowatt hours a month. Bills for that much power would range from $125.43 to $163.85 based on rates available in Houston at the end of September for a one-year, fixed-rate plan. The average rate available in Houston would produce a monthly bill of $142.95.

    The same amount of electricity would cost $97.41 in San Antonio and $105.32 in Austin, both served by municipally owned utilities.

    Deregulation supporters say its success should not be judged just on price, and point to the variety of electricity service options available to customers. But they have been slow to take advantage of the choices.

    The variety of service options? Like what? 12/12 plan that keeps my power on only for 12 hours a day and pulls me off the grid for the 12 that I'm at work/stuck in traffic? What difference does it make if the kWh is still more expensive than the pinko's in Austin are paying?

    Pretty sad when the widely derided most liberal city in Texas has better and cheaper utility service than the capitalist powerhouses of Dallas and Houston. But at least Dallas and Houston people have their choice from a 'variety of service options'.

    Variety of service options... You can stick that up a variety of assholes.

    Posted by mcblogger at 09:12 AM | Comments (0) | TrackBack

    October 11, 2007

    Draw your own conclusions...

    Naomi Klein has written a thoroughgoing indictment of Milton Friedman and his Chicago School of economic theory which is functionally supply-side with a penchant for what Friedman called 'economic shock treatment'. Basically, you create the conditions that allow the economy to get sooo bad that the people will accept a change, any change, that promises to fix the problems. In theory, it should expand services and create wealth across every economic level. In practice, it creates massive stratification and does little to fix or create critical services. It also makes everyone not already wealthy destitute...

    Klein argues that Friedmanian free market rules do exactly what they were designed to do: they don’t create a perfectly harmonious economy, complete with the much-lauded “trickle-down” effect, but rather, turn the already wealthy into the super-rich and the organized working class into the disposable poor. Further, she describes these orchestrated raids on the public sphere in the wake of catastrophic events, like war, as exciting marketing opportunities or “disaster capitalism.”

    So, why even mention this? Simple. This is about to happen to us and you might as well be prepared for it. Since the supply-side revolution Reagan ushered in more than 26 years ago, we've seen economic stratification climb to alarming levels not seen since the Gilded Age. Despite the fact that it doesn't really help anyone other than those already rich.

    Which brings us to the tax issue we mentioned yesterday. The supply siders will tell you that cutting taxes will increase economic growth and create surplus revenues. That's actually not true since it's dependent on the Laffer Curve and even it is subject to the law of diminishing returns. What's needed is a balance in marginal tax rates and efficient use of the money by the government, not endless deficits, mounting debt and low taxes for the already rich. That and the fact that tax policy has less of an impact on business conditions than interest rates.

    Think, for a second, about our crumbling infrastructure, our rising deficit, underfunded entitlement programs... it's all leading up to a situation in which things will spin violently out of the control. Of course, when that happens, then we'll be ready for shock treatment.

    Think it can't happen here? Cause a massive economic disruption in the US and people will accept anything that will fix it.

    They elected Reagan, didn't they? Think of that as a dry run.

    One other note about investments and taxes... I'm a HUGE fan of massive capital gains taxes, especially on gains realized in less than two years. Why? Because I hate traders and speculators. I'm a long term investor...THAT more than anything done by private equity companies actually provides long term stability and growth in businesses. It also stabilizes the retirements of hundreds of millions of people.

    Posted by mcblogger at 03:15 PM | Comments (1) | TrackBack

    Draw your own conclusions...

    Naomi Klein has written a thoroughgoing indictment of Milton Friedman and his Chicago School of economic theory which is functionally supply-side with a penchant for what Friedman called 'economic shock treatment'. Basically, you create the conditions that allow the economy to get sooo bad that the people will accept a change, any change, that promises to fix the problems. In theory, it should expand services and create wealth across every economic level. In practice, it creates massive stratification and does little to fix or create critical services. It also makes everyone not already wealthy destitute...

    Klein argues that Friedmanian free market rules do exactly what they were designed to do: they don’t create a perfectly harmonious economy, complete with the much-lauded “trickle-down” effect, but rather, turn the already wealthy into the super-rich and the organized working class into the disposable poor. Further, she describes these orchestrated raids on the public sphere in the wake of catastrophic events, like war, as exciting marketing opportunities or “disaster capitalism.”

    So, why even mention this? Simple. This is about to happen to us and you might as well be prepared for it. Since the supply-side revolution Reagan ushered in more than 26 years ago, we've seen economic stratification climb to alarming levels not seen since the Gilded Age. Despite the fact that it doesn't really help anyone other than those already rich.

    Which brings us to the tax issue we mentioned yesterday. The supply siders will tell you that cutting taxes will increase economic growth and create surplus revenues. That's actually not true since it's dependent on the Laffer Curve and even it is subject to the law of diminishing returns. What's needed is a balance in marginal tax rates and efficient use of the money by the government, not endless deficits, mounting debt and low taxes for the already rich. That and the fact that tax policy has less of an impact on business conditions than interest rates.

    Think, for a second, about our crumbling infrastructure, our rising deficit, underfunded entitlement programs... it's all leading up to a situation in which things will spin violently out of the control. Of course, when that happens, then we'll be ready for shock treatment.

    Think it can't happen here? Cause a massive economic disruption in the US and people will accept anything that will fix it.

    They elected Reagan, didn't they? Think of that as a dry run.

    One other note about investments and taxes... I'm a HUGE fan of massive capital gains taxes, especially on gains realized in less than two years. Why? Because I hate traders and speculators. I'm a long term investor...THAT more than anything done by private equity companies actually provides long term stability and growth in businesses. It also stabilizes the retirements of hundreds of millions of people.

    Posted by mcblogger at 03:15 PM | Comments (1) | TrackBack

    October 05, 2007

    "A Strong and Vibrant Economy"

    President Bush used the mediocre job report to beat up Congress about raising taxes on the 'hard-workin' people of 'Merica'. By 'hard-workin' people' he means those making more than $200m per year which is the only income class that has seen any growth in their income. It's also a relatively few people in this country.

    I referred to the mediocre job report. August was revised up from -4,000 to +89,000. That means that in August, using BLS' numbers, the economy added 89m jobs. That's only 61m short of STATIC employment. The economy needs to produce 150m jobs per month to keep employment at a static percentage. Why? Because of growth in the population of the work force, balanced by deaths and retirements. In August, as in most of the months of this terrific expansion, the miraculous republican economy hasn't even produced enough jobs to keep up with the new people coming into the economy. So, there's no wage growth and jobs, not even the bad ones that are the real 'strength' of this economy, are still fewer than they should be.

    The September report which came out today will probably be revised downward. However, for today it was 110m jobs. The unemployment rate 'ticked up' to 4.7% but in reality it's far higher since BLS no longer counts people who've 'dropped out of the workforce' which is their nice way of saying people who've been unemployed longer than 12 weeks in most cases. The real number is probably 2.5-3% higher and there's a really easy way to prove it. Just look at the earnings of the nations largest retailer, Wal-Mart. The lower end of the economy(which includes everyone making less than 200m per year), the one that actually spends money and generates consumer spending, is hurting and they aren't buying at Wal-Mart or other discount retailers.

    They are going without. And that's what Connecticut native George W. Bush calls a 'Strong and Vibrant Economy'.

    Posted by mcblogger at 09:33 AM | Comments (0) | TrackBack

    September 20, 2007

    Economy : The good, the bad and how the hell to fix the mess

    First off, the Fed's move... a couple of different reads as to what may have prompted it:

    1) That stagflation is a real possibility as the credit freeze continued, coupled with asset deflation, non-existent wage growth and our old friend commodity price inflation. The perfect prescription for an economic malaise.

    2) That the commercial paper market was already stagnant and the prospect of it fully unwinding into a period of non-activity scared the shit out of the Fed. Honestly, this scared the shit out of me as well.

    3) A combination of the two... or something even worse.

    Regardless, this was a big move and may have been prompted by the fact that the Fed's actions to date haven't had the impact they should. As to inflation and the effects on the dollar, I don't think it's as big an issue now as it might have been. We've seen several trillion dollars in asset values evaporate with the deterioration in the housing market. Further, the dollar has been weak based on economic uncertainty in the US. That's, to a limited extent, been eliminated.

    What happens next? Krugman has a good piece on the stupidity of supply-side economic policies promoted by idiots in the Republican Party (who are, coincidentally, traveling around the state talking about massive increases in the sales tax. Why is it that stupid, unsuccessful people always claim to know so much about the economy?) even today. He points out that wage growth has got to occur, broadly, for real economic growth AND an increase in the savings rate. We couldn't agree more. The best part is that someone from the Reagan Administration has finally come to terms with this as well...

    The jobs data and the absence of growth in real income for most of the population are inconsistent with reports of US GDP and productivity growth. Economists take for granted that the work force is paid in keeping with its productivity. A rise in productivity thus translates into a rise in real incomes of workers. Yet, we have had years of reported strong productivity growth but stagnant or declining household incomes. And somehow the GDP is rising, but not the incomes of the work force.

    Oh, and lest we forget, now Alan Greenspan doesn't like the tax cuts. In fairness to him, he talked about this in 2004 and 2005... but none of the Republicans listened to him.

    Greenspan accuses the Republicans who presided over the party's majority in the House until last year of being too eager to tolerate excessive federal spending in exchange for political opportunity. The Republicans, he says, deserved to lose control of the Senate and House in last year's elections. "The Republicans in Congress lost their way," Greenspan writes. "They swapped principle for power. They ended up with neither."

    We can't go on this way. Lest you think this just a bunch of rhetoric from a Democratic activist, I'm a wholesale banker. I'm a died in the wool capitalist who knows that neither capitalism nor democracy can survive when wealth begins to concentrate in outrageous amounts at the top.

    Posted by mcblogger at 01:33 PM | Comments (0) | TrackBack

    Bush Press Conference

    Right now, Bush is talking about being a 'supply-sider' who thinks that cutting taxes will increase revenues, despite the fact that ALL EVIDENCE IS CONTRARY TO THIS BELIEF.

    Bush is once again talking about SS/Medicare-Medicaid reform. Please. He says that he and Alan Greenspan used to talk endlessly about it. I think those convo's went something like this...

    GWB: Alan, d'ya think we can cut taxes and increase revenues?
    AG: Mr. President, please don't call me by my first name.
    GWB: Well, gee, Alan, I thought we was friends?
    AG: No. We're not. I have to work with you. At best, we're cube mates. If the secret service weren't protecting you...
    GWB: What's that?
    AG: Nothing...
    GWB: What about social 'scurity?
    AG: What about it?
    GWB: We should cut taxes and benefits to save it, shouldn't we?
    AG: (under breath) I could go down to LaFayette Park and have someone kill me right now...
    GWB: What d'ya say?
    AG: Just thinking about retirement.
    GWB: Yeah, you're pretty old.
    AG: Yes. Quite the Master of the Obvious you've turned out to be.

    Yeah, George, I totally believe you had long chats with Chairman Greenspan. Sure. The thrust of this seems to be that the Democrats are going to raise taxes on workin' folk (a lie) and that S-CHIP is going to be expanded to wealthy families (another lie). OJ Simpson on the witness stand lies less than this guy.

    Bush says this is about private vs. government health insurance. He's trying to give you the right to get screwed over by a private insurer just like the rest of us. Is it any wonder why everyone who can sign their kids up for CHIP does, happily, sign their kids up for CHIP?

    He's going to veto S-CHIP. It's gone. Now the question is, will the Democrats be able to override. If there are any Republicans who are thinking about sustaining the veto, take a long look around you. You won't be back in January, 2009 if you vote with your President.

    Last thing... he made some snide comment about MoveOn's Petraeus ad. He talked about Democrats being more afraid of MoveOn than they are of offending the US military. What the President doesn't understand is that the Chickenshit is now a political appointee charged with selling us on Bush's failed Iraq War.

    Bush dares to lecture us about being mean to Petraeus when he's willing to kick kids off health insurance? One hell of a President we have here. The only thing I don't understand is how everyone in Washington could so completely miss the fact that the rest of the country HATES this guy. Even in Texas we're 50/50 and that's in an easy, slanted poll.

    Posted by mcblogger at 10:28 AM | Comments (0) | TrackBack

    September 18, 2007

    FOMC - 50 bps cut on Funds and Discount - Cites Credit Crunch

    The FOMC decision on interest rates, posted at 1:15 CST, was to reduce both the Fed Funds (interbank) rate by 50 bps and the Fed Discount rate (Fed to Banks) by 50 bps. This is rather historic as it's unusual for the Fed to make such a dramatic move in both rates.

    Long bonds were mostly unchanged as short term yields dropped in measure with today's action. The inversion of the yield curve has begun to work itself out.

    Inflation, per the statement, continues to be an issue especially in non-core and highly volatile food and energy prices. The decision was based on overly tight credit conditions in the public markets and the necessity to maintain the liquidity in a deflated US economy.

    This is pretty impressive... and a little scary.

    Posted by mcblogger at 01:24 PM | Comments (0) | TrackBack

    September 12, 2007

    THE Country Song for the credit-crunch

    Posted by mcblogger at 12:25 PM | Comments (0) | TrackBack

    August 31, 2007

    Economy : Oh, well... this is a bad idea

    The Fed has decided to cut Citi and BofA some slack... by allowing their depository subsidiaries to loan money to their brokerage group. Prep work for the cut off funds in the commercial paper market or the prelude to another depression?

    Posted by mcblogger at 03:11 PM | Comments (0) | TrackBack

    In which two Republicans do something right

    Well, at least half right...Bush is proposing expansion of FHA along the same lines we've already discussed. See how smart I am? Not really. Seriously, anyone in banking could have said the same thing. It's unfortunate that our douchebag of a Republican President has a better proposal for dealing with this than our Democratic candidates. Obama the Tard has decided to punish third party originators (known as brokers and small banks) because they are all to blame for the mess, in his ridiculous opinion. Which is really smart and all because these same folks are on a first name basis with tens of millions of voters.

    Obama's proposal offers no real solution. Even if you want to collect penalties from brokers (which you can't do because more than 96% of them have never done anything illegal) they don't have the equity to pay the levy.

    The only problem I still have with Bush on this issue is broadening the GSE's (Freddie Mac and Fannie Mae) which is something Congress will have to do and shove down his still stupid throat. At least HE got half of it right, unlike our Democratic candidates who flubbed this like a motherfucker.

    Yes, there are two Republicans who've done something right. Perry finally gave in and commuted the sentence of Kenneth Foster.

    Republicans doing something right... not too impressive when you consider that a broken clock is right at least twice a day.

    Posted by mcblogger at 09:33 AM | Comments (0) | TrackBack

    August 28, 2007

    Economy : The Unthinkable

    The liquidity crises in the mortgage industry still has not abated, but it is slackening a bit. Here's the skinny:

  • Over the next two years, more than $2 Trillion in ARM's are going to reset. Most of these can be refinanced into fixed rate financing under Agency (Freddie Mac and Fannie Mae), or conventional conforming, guidelines. Most of the remainder can be refinanced into government insured (or guaranteed) programs, like FHA, USDA RD or VA.

  • The upside to this is that many people are going to find their mortgage payments going down. Which means, should the job market and wages remain stable, that consumers will have more disposable income with all other costs staying roughly the same. Any massive spikes in energy costs for example will, of course, suck up that money

  • The downside is that some will not be able to refinance. Those that can't afford the payments will default which will create a housing glut and depress values in many parts of the country. Most of this has already started and we should hit the worst of it around January, 2008. Keep in mind, nationally that means as many as 1 out of 300 homes will be in foreclosure. Thus, it's not enough to collapse the economy. It will be enough to create a recession.
  • All this is as things are now (how's that for bad writing). The nightmare scenario is that in the next 90 days the commercial paper market seizes up as the mortgage market has. If that happens, we're heading for another depression unless the Fed decides to liquefy the commercial paper market entirely. If that happens, you can expect the dollar to lose 30% of it's value vs. other world currencies.

    And a deep recession that won't be easy to recover from because it will have been caused by the very thing we're supposed to be able to depend on, the market. I guess no one ever explained to all those free market jackasses in the Republican party that sometimes markets break, mostly because they are made up of irrational humans.

    Posted by mcblogger at 12:23 PM | Comments (0) | TrackBack

    August 25, 2007

    Economy : Good news for housing

    Dodd is planning on bringing up statutory expansion of FHA (loan limits and loan to value ratios, aka, LTV's) in September when Congress returns. Depending on how fast this is implemented, this could be what ends up saving the US from a very deep recession.

    The House Financial Services Committee in June passed a bill that would give the FHA more latitude. Senate Banking Committee chairman and presidential candidate Christopher J. Dodd (D-Conn.) canceled the scheduled markup of a related bill but said this week that he hopes to bring it up after the Senate returns in September.

    In a statement issued by his office yesterday, Dodd said he is working with committee members "to find common ground on this important issue."

    One question to be resolved is whether the FHA should be given flexibility to insure loans without a down payment.

    This, along with expansion of Freddie Mac and Fannie Mae are essential steps in shoring up the housing sector and maintaining homeownership in the US. Given that wage and job growth are anemic, it's not like US homeowners can bail themselves out. They've also been piling on debt (and so have the Brits, apparently) mostly so they can afford to maintain their lifestyles without increases in wages.

    This problem has been cooking since the 1970's. Why? Because real wages have declined since around that time. Which makes me want to reiterate why increasing the minimum wage is a good idea and non-inflationary. Simply, people get accustomed to spending a certain amount of money and once they've achieved what they perceive to be an adequate lifestyle, they tend to save any excess income. Over the last six years, it's been impossible to generate income over and above basic living. In some cases, basic living expenses for many aren't covered by wages.

    So what's a way to test this theory? Just look at back history. The last time the US had a good savings rate was the post-World War II boom. While we don't need another war like that, we do need return to some of the economic and fiscal policies of the time. Let's start with higher real wages, higher corporate taxes and high marginal tax rates.

    Posted by mcblogger at 10:47 AM | Comments (0) | TrackBack

    August 22, 2007

    Economy : The Hedgies bitch and moan about taxes

    Lightseeker at Feet To Fire has a great post up about all the private equity and hedge fund fucko's who are bitching about finally having to pay regular income taxes on their income. See how that's unfair and all?

    Yeah, neither do I. Here's their reasoning...

    Tax-break supporters say fund managers deserve the low capital-gains rate because they contribute their ideas to the investment, and those ideas represent "sweat equity." Reformers say lots of people have ideas, such as chefs and scientists, but they still have to pay full taxes on their incomes.

    "There will be deals that don't get done. There will be entrepreneurs that won't get funded and turnarounds that won't get undertaken," said Rosenblum, who also is chairman of the Private Equity Council, an industry group.

    Yeah, Rosenblum, I'm gonna call bullshit right about here. Fact is, 'sweat equity' is nothing more than a nice way of saying 'I have no skin in the game and I still want to get paid'. The reality is, you guys exist ONLY because of imbalances in asset valuation (occasionally the market goes crazy and prices good assets as if they were going out of business... it's called 'panic') and super cheap money. There isn't anything innovative about it. It's the corporate equivalent of flipping a house. You go in, you make some improvements, tighten the balance sheet, and sell it all back to the public when the market calms down. Just as that type of investing is causing a great deal of problems in the housing industry, it will eventually cause problems in the entire economy. That's your contribution to the economy. Wow. We're so blessed to have you.

    Some in PE, namely the VC's who actually DO create wealth, aren't sold on the ideas of the company flippers.

    Denver venture capitalist William Stanfill disputed this argument, saying his colleagues have displayed a "chicken little" mentality. He noted venture capitalists are paid very well compared with other industries.

    It makes little sense to tax teachers, CEOs or surgeons at a higher rate than private equity executives, Stanford law professor Joseph Bankman said.

    No, it doesn't make sense. Match point to the guy from Stanford.

    All this comes at a time when people are starting to look closely at the third world-like income disparity that has permeated the US since Bush took office (we talked about this last week). Of course, not taxing PE and Hedge fund managers exacerbates this problem. Until we see growth on the lower end of the wage scale, the reality is that economy will NOT grow. It'll contract. It's happened before.

    We called it the Great Depression then.

    Posted by mcblogger at 11:16 AM | Comments (2) | TrackBack

    August 17, 2007

    FED cuts, stability ensues...

    The Federal Reserve today made an emergency policy change to reduce the discount rate by 50 bps. This is not as substantial as it seems, since the discount rate the rate that the Fed charges banks with performing assets who are facing margin calls. Had this been the funds rate, you'd see about 600 points on the Dow. The difference? The funds rate is that the rate set by the fed which banks can charge each other to maintain liquidity in the system, the discount rate is the rate at which certain financial institutions can borrow money from the Fed.

    Most people are saying this is 'symbolic', which is horseshit. The reality is that even the commercial paper (30,60 and 90 day money) market seized up like an engine without oil. What the Fed has has done is to remind everyone that THEY are the lender of last resort and they are paying attention.

    Posted by mcblogger at 09:21 AM | Comments (2) | TrackBack

    August 10, 2007

    Sometimes markets break

    The madness known as a credit crunch has set in. This is a fun time when private markets essentially break down and everyone is too scared to do anything. We talked about this last week in relation to the collapse of one lender in particular. What I didn't say was that the private secondary market was illiquid. By 'illiquid' I mean there was no money in it, even for A credits. In short, private investors were too scared to buy anything.

    The only investors still reliably buying loans were the GSE's, known popularly as Fannie Mae and Freddie Mac, which IS, in fact the reason they exist. President Bankruptcy (so known because of his business prowess) said yesterday that he saw no need for an expansion at Fannie and Freddie to buy mortgage backed securities (MBS) and credit default swaps (CDS) outside of their charter (like jumbos and some Alt-A, as well as expanding the amounts that could take in and hold). So, with them under the control of the infinitely stupid, the Fed was left with little choice but to step in and establish a floor to the market. Normally, Fannie and Freddie would be the lenders of last resort. Because of the President's stupidity, the Fed had to step in and buy $35 Billion just this morning in MBS.

    And that, my friends, is why you have government getting involved in private business. Occasionally, the markets collapse. That's a FACT that often is left out of the supply-side, get rich quick fantasies of the Republicans. When it happens, someone has to step in and make things work again. The reason organizations like the Federal Reserve and GSE's were created is to do just this... keep the market from getting too irrational.

    Posted by mcblogger at 12:36 PM | Comments (0) | TrackBack

    August 01, 2007

    The New Corporate Trend

    Please hold dear The United Corporations of America’s glorious solution to troublesome resources’ ungrateful demands for despicable pay raises from paternal, benevolent profit centers who must maintain discipline so to satisfy our individual needs.

    The Ministry of Kind and Understanding Corporatocracy reminds us that beloved leader Rupert Murdoch’s first editorial in the WSJ will rail against government’s burdensome regulations preventing employers from killing their employees.

    Posted by Captain Kroc at 03:23 PM | Comments (0) | TrackBack

    July 24, 2007

    Privatization... just look at how well it's gone for water

    With all the talk about how wonderful it is to privatize roads, I thought it might be a good idea to look at another public resource that is being privatized around the world...water. Wanna see some massive failure? Just look at what happened in Grenoble, France which saw water rates increase dramatically in the wake of privatization that was supposed to SAVE consumers money. There's also the ample failures, well documented outside of the US by new organizations around the world.

    The bottom line... there are SOME things that can truly be delivered most efficiently as a public service. While government may not be good at making soap and building TV's, not to mention retailing, it is extremely good at providing courts, law enforcement, fire departments, roads and, well, water. Fortunately, we have a chance to stop road privatization before this goes too far.

    Posted by mcblogger at 09:19 AM | Comments (0) | TrackBack

    July 10, 2007

    Columbia... extreme emerging market?

    Apparently so, at least according to CNBC which told me this morning that kidnappings throughout the country (and especially in Bogotá) are down 78%! That's EXTREME!!

    Posted by mcblogger at 05:52 PM | Comments (0) | TrackBack

    June 26, 2007

    Teacher pay

    The Star-Telegram (via Jobsanger) has a great post up about high teacher turnover and massive wage disparity at poorer school districts throughout Texas. Granted, it's common sense, if you pay people less they tend to seek better employment. What is surprising is that wage disparities exist intra-district...

    An Arlington teacher working at a campus with fewer poor or minority students is paid an average salary that is $2,700 to $4,700 more than a counterpart who works at a campus with many poor and minority students, according to Education Trust, which used 2005-06 statistics from the Texas Education Agency.

    Posted by mcblogger at 07:30 PM | Comments (1) | TrackBack

    May 22, 2007

    If you want to do something about high gas prices...

    ...here are a couple of ideas (provided you are in Congress):

    1) Windfall profits tax on all oil companies that are not reinvesting at least 30% of profits in additional distribution and refining capacity.
    2) Use some of the funds for advanced research into genetically modified biofuel crops.
    3) Use the balance to increase refining capacity nationwide. The Government has an interest in maintaining the economy and that can't happen with gas at historic highs.

    The refiners are going to whine and scream about regulation and it's bullshit. The reality is that the investment is minimal compared to the profit potential and Congress had better do something rational very quickly. We've talked about this before. We've also hoped the Lege would do something (which was, admittedly, about as stupid as a box of rocks). So far, nothing has happened and gas prices continue to escalate.

    I know we're not the only ones who get this. I know because I still have friends who work at the Merc. Why is it so difficult for our leaders to get it? And no, by leaders I'm talking about those to whom we actually look up and respect. Bush doesn't fall into that list. Let me tell you what some of my friends are talking about... isn't it curious that two major refiners are having issues at plants in Texas at the same time just as we're gearing up for summer? You know, because Attorney General Greg Abbott has done such a good job of prosecuting collusion and price gouging.

    Sure, BP and Valero. I totally believe y'all are STILL having problems.

    Posted by mcblogger at 09:48 AM | Comments (0) | TrackBack

    May 21, 2007

    One of the consequences of high gas prices...

    ... it squeezes the hell out of charities. Dig Deeper Texas has more on the effect of high gas prices on organizations like Meals on Wheels and the Capital Area Food Bank. I know you're feeling the pain at the pump as acutely as I. However, if you can help, please do.

    Posted by mcblogger at 08:23 PM | Comments (0) | TrackBack

    March 17, 2007

    Yeah, the RIAA still sucks

    Gizmodo continues it's quest to end the tyranny of the RIAA which has now decided to start charging podcasters who use music as part of their 'casts. Since they have such a MASSIVE listener base and are totally making fat bank off their podcasts.

    "Per performance" rates are charged per stream per listener. The example the Radio and Internet Newsletter gives is that an "audience of 500 listeners racks up 500 'performances' for each song" played. There is also a minimum fee of 500 bucks per station, even for tiny or noncommercial ones.

    The Mayor and I were thinking about a podcast of our own. Then Sister Ruth interjected, tried to become a part of it and we all decided she would only be allowed to participate by saying the words 'EXTREME SNOWBOARDING' and playing the cymbal on occasion. The entire project fell apart over the insistence of McSleaze and Spamburgler that it be called 'Happy Hour' and my belief that it would only be successful if it was called 'Zebulon'.

    'Happy Hour' is a dumb idea for a podcast that's only 10 minutes long and that most of us will pass out while making. Even Boobilicious thought it was dumb. The only thing she thought was dumber was calling it 'Zebulon'. You'll not be hearing from her for a while.

    Posted by mcblogger at 02:12 PM | Comments (1) | TrackBack

    March 01, 2007

    Innovatin' with Bill Gates

    MSFT Chairman Bill Gates wrote a great op/ed piece for the WaPo on what we as Americans need to do to foster innovation which is the motor that drives the economy.

    Innovation is the source of U.S. economic leadership and the foundation for our competitiveness in the global economy. Government investment in research, strong intellectual property laws and efficient capital markets are among the reasons that America has for decades been best at transforming new ideas into successful businesses.

    The most important factor is our workforce. Scientists and engineers trained in U.S. universities -- the world's best -- have pioneered key technologies such as the microprocessor, creating industries and generating millions of high-paying jobs.

    But our status as the world's center for new ideas cannot be taken for granted. Other governments are waking up to the vital role innovation plays in competitiveness.

    He goes on to advocate for two things:

    1) Better Education
    2) More H1B visas to bring in cheap, well trained labor

    See how I did that? Gates makes the case for better education and I personally think this is incredibly important. Of course, not knowing much about it other than that there is a great high school making math nerds in San Diego, CA, he doesn't address the real problem which is a chronic lack of funding in education. Corporations pay the least in taxes of any group in the United States, save those in poverty who don't pay anything. If you're going to reduce taxes on dividends, then taxes on corporate income have to go up dramatically and that money should be used for infrastructure. I'll go Gates one better... we need massive improvements not just to education but also to transportation and health care. We take care of these things and we'll set up this country for the kind of economic boom not seen since that which occurred post World War 2.

    On the issue of visas, I'm less than enthusiastic.

    Posted by mcblogger at 04:39 PM | Comments (0) | TrackBack

    February 26, 2007

    What is KKR up to?

    You've no doubt heard the news that shareholders at TXU have accepted the LBO offer from KKR. You've probably also heard about the commitment the new owners have made to taking the company in a much greener direction. That last part has left some wondering WTF are thinking? Is it pure social responsibility or business genius?

    KKR and Texas Pacific Group agreed over the weekend to drop most of TXU's ambitious plans for building new coal-fired power plants, a move designed to win support for the deal from environmentalists and other critics of the company. The new buyers also agreed to support a mandatory national program to cap emissions of greenhouse gases and pledged not to build coal-fired plants outside Texas.

    I'm voting for the latter, here's why...

    1) Value added services - the technology to deliver broadband over power lines has been in existence for a while. It's a new revenue stream for TXU that will require a minimal upfront investment since they already have the distribution system in place.
    2) The additional plants were a stupid move, over committing to a legacy generation system while technology continues to advance rapidly.
    3) Then there is this

    The Natural Resources Defense Council said the new buyers have agreed to withdraw permit applications for eight of the 11 proposed plants and decline to propose new coal plants outside Texas and support caps on emissions linked to global warming.

    The buyers also agreed to support a system of trading credits for cutting emissions, called cap and trade.

    Pollution credits... by voluntarily reducing emissions, they'll end up with some pollution credits they can sell and realize a gain on. Every single year, it's a revenue stream they can tap without any new investment. While pollution credits aren't worth much now, they are going to be worth something much more down the road.
    4) They are planning a massive expansion of wind and cheap solar capacity in West Texas, coupled with an investment in upgrading the distribution grid. Over time, wind power and passive solar are cheaper than coal by virtue of a free input. This is long term thinking that will reap big rewards down the road while earning huge PR benefits. See again #3 for the secondary impact on pollution credit sales.

    The credits are the big thing. As the EU moves to tighten restrictions these will be become inherently more valuable worldwide. The US will soon be moving in that direction. The reason the cap and trade system has not really worked is that companies have never had to face real consequences. That's changing and the system will start to show some of the promised benefits.

    Oh, and the KKR/TPG group stands to make a ton of money, not only off operations but through the eventual sale of the enterprise back to the public.

    Posted by mcblogger at 01:30 PM | Comments (0) | TrackBack

    February 24, 2007

    Again with the dollar coin?

    Photobucket - Video and Image HostingThe US Mint is once again introducing the dollar coin, this time a very special Presidential dollar coin that will bear a bust of Washington (shown here, in case you're a retard and didn't recognize the first President) or another, lesser President like Adams, Jefferson or Madison. The mint is thinking by the time Madison rolls out, these coins will be so hated that everyone will demand they be pulled. So they have only announced coins for the first four Presidents. I know this will be hugely disappointing to the knuckle dragging mongo's out there who will be eagerly awaiting the George W. Bush coin.

    Seriously, most people don't understand and don't want the dollar coin. Of course, opposition from the majority of the citizens of this country has never been a reason for the government to stop doing something.

    Posted by mcblogger at 01:08 PM | Comments (0) | TrackBack

    February 16, 2007

    Restrict Corporations? Commie...

    That's right, I'm a big commie. Not really, they wear ugly shoes and only drink vodka. I'm not so much for either.

    Capitalism, which has made this country a vibrant economic superpower, is being strangled not by communists or socialists but by corporations themselves. Who's Playin' has a great post up about restricting corporate lobbying, which has created too good an atmosphere for corporations. Why do corporations enjoy First Amendment protections of political speech? In Texas, we keep them out of it so why not at the Federal level?

    The point I’m slowly getting to here is that I do NOT believe that a First Amendment right to freedom-of-speech exists for corporations. I truly think that we would all be better off if certain restrictions were placed on corporate entities:

    1. No political lobbying.
    2. No political donations of any kind.
    3. No political advocacy of any kind.

    After all, our government is supposed to be a government of, by, and for the people. As long as the current rules allow for corporations to influence public policy, it is the ethical obligation of the officers and board members of that corporation to do their best to encourage public policy that protects the interests of the shareholders to the detriment of other market entrants or competing interests such as labor, public safety, or the environment.

    We've talked a lot about the failures of tort reform and deregulation. When you allow corporations to rewrite the rules, they won't do it to benefit consumers, especially when there is little more than lax government oversight. Deregulation is not altogether bad on it's face. However, it's time we take a serious look about what we're seeing in the competitive landscape and either prodding the companies forward to compete or re-regulate if they won't. That's a conversation that needs to be had sooner, rather than later and we need to cut the vocal chords of corporations first.

    I know the lobby will hate it but who the fuck cares? When was the last time you felt bad for Velma Luna?

    Posted by mcblogger at 03:10 PM | Comments (0) | TrackBack

    February 09, 2007

    Texas. It sucks for people

    So the economy here in Texas is super good. If you're rich, which I'm not. Of course, even that depends on your definition of rich. Chances are, if you're reading this, you aren't having a difficult time trying figure out which color scheme to go with as part of the interior package in your G550. It's not because the choice is totally obvious, it's because you aren't in the market for a G550 and that would be because you aren't rich. So life in Texas is, for you at least, not so sweet.

    The economy is about to suck a lot more, especially for owners of rental property in Farmers Branch, not to mention some of the people who rent from them.

    Dallas Progress and Bay Area Houston have more on this issue from Sen. Shapleigh's report on just how bad we rank nationally in a whole lot of things where we're in a bad spot (not mention John Coby's excellent find that Texas is the most expensive insurance market in the country).

    Posted by mcblogger at 11:51 AM | Comments (0) | TrackBack

    February 04, 2007

    Geopolitics and the price of oil

    The EIA report came out this past week showing a larger than expected build in oil inventories which is causing a drop in the price of crude. That at least is what is causing the traders on the Merc to sell but the reality is the Saudis are talking down the price to a large extent. Toward the end of the week there appeared to be a trading spike based on heating oil supplies... it won't last though and prices will likely return to the low 50s before rising above 60 during the summer.

    Why would Saudi Arabia, the worlds largest oil exporter want to talk down oil prices? In large part it's fear that their leadership role is being usurped by Iran. I mention this by way of a little known fact. For the Iranian economy to not run a deficit, oil must trade at $58 or above per barrel. The Saudi break even point is far lower, one of the reasons the Saudis, with prices in the low 50's, have said they are comfortable with current prices.

    Could Saudi Arabia be trying to hobble Iran the same way they supposedly did the Soviet Union? Consider that it's likely Iran's exports of oil could decline to almost zero by 2015, it wouldn't take much effort for them do it.

    Posted by mcblogger at 12:14 PM | Comments (0) | TrackBack

    January 18, 2007

    Bernanke, I love you!

    I'm watching Fed Chair Bernanke's testimony before the Senate Budget Committee and he just got a question from Senator Allard regarding the tax cuts, specifically, if Bernanke thought the tax cuts were essential to bringing money into the government.

    Bernanke said (and yes, I'm paraphrasing), that along the Laffer curve, at higher marginal rates of 90-100%, you would see increases in tax receipts with a cut from those levels as people return to those industries. However, I don't feel like we are on that side of the curve, as we've seen little net benefit from the cuts that have been made.

    Translation? The Tax cuts aren't growing the economy. Tax cuts aren't building jobs.

    Posted by mcblogger at 10:40 AM | Comments (0) | TrackBack

    January 15, 2007

    Two takes on the minimum wage...

    First off, there's George Will's retarded, incoherent ramblings that reveal the fact he doesn't know a damn thing about how a consumer driven market economy works. Then there is Ruben Navarette's extremely good commentary on increasing the minimum wage.

    If the richest country in the world is going to have a minimum wage, we should have the decency to not let it hover near the poverty level. Forget the old saw that raising the minimum wage causes job losses. Research shows better paying jobs result in more people working. Workers tend to spend their wage increases, which pumps money back into the economy.

    Raising the minimum wage isn't just good for workers. It's good for everyone.

    Guess which one you should pick to read...

    Posted by mcblogger at 01:00 AM | Comments (0) | TrackBack

    January 07, 2007

    Deregulation going full bore

    Dig Deeper Texas has a great post up about electric utility deregulation in Texas, primarily what a disaster it's been. Yeah, we already knew about that. What's new is that TXU and Reliant are moaning and whining because they just can't compete with the Austin and SA muni's. From the Star Telegram

    What chafes the North Texans are the lower rates in Austin and San Antonio, whose municipal systems were exempted from the 1999 deregulation law. Austin and San Antonio have emerged as direct competitors to Dallas-Fort Worth in industrial relocations, a point driven home three years ago when Toyota selected San Antonio for a big new car plant.

    As North Texans have paid 13 to 15 cents per kilowatt-hour for electricity this year, San Antonio’s average rate was 9.5 cents and Austin’s was slightly above 10 cents.

    Both systems, being government-owned, don’t have to pay taxes and can sell tax-exempt debt. Municipal systems and rural co-operatives have always enjoyed a price advantage because of their tax-exempt status. But the coalition complained in its report that recent increases in North Texas by TXU and its competitors have widened the disparity.

    Fucking losers. The last I heard, neither were selling power in TXU or Reliant's territory. Of course, that doesn't stop them from dreaming of entering the SA and Austin markets. Part of deregulation was that private enterprises, even without access to tax-exempt financing and no taxes, were supposed to bring down prices and be better for consumers. That hasn't proven true. Which makes the case for companies like TXU and Reliant pretty damn weak.

    I'm a capitalist. I hate excuses, especially from companies that hold public capital while spending huge sums on lobbying. That's the dirty little secret about all this... TXU got it's financing from the equity markets which Austin and SA muni's can't access. Of course, they don't worry so much about that. They just go on, day after day, providing the cheapest electricity in the state.

    If I was holding TXU stock, I'd serioulsy consider suing management for gross incompetence. If you can't compete against a municipal power system, with all the benefits of much great scale, then you don't deserve to lead a company.

    Posted by mcblogger at 12:06 PM | Comments (0) | TrackBack

    January 05, 2007

    Energy ideas that makes sense

    There is a great article up by Lord Andrew Turnbull of Booze Allen Hamilton about how government and industry must cooperate to determine the best energy mix to power our growing economies. He takes into account carbon taxes, among other things, to come to the conclusion that the best idea is a 'managed market' that takes into account all stakeholders and impacts.

    In policy circles, this is coming to be known as the “modified market approach.” The government (or perhaps a regional political structure like the European Union) establishes a framework for energy prices. This framework incorporates the prices and costs of energy, as set by supply and demand, but also takes into account the social and ecological benefits and harms of each fuel source. Fuels that exacerbate climate change, for example, are made more expensive; fuels that reduce the danger cost less. An implied surcharge on carbon-based fuels reflects the desired CO2 reduction target. Once a rationale is agreed on, the government embeds the new framework in permits, surcharges, and regulations, after which the various technologies can effectively compete in the marketplace.

    Texas is, surprisingly, leading the country in terms of renewable energy which puts us ahead of the curve on increasing carbon-neutral energy production. However, we do not have a true cost for carbon and air pollution. Maybe we should start looking into that, you know, while we can still breathe the air.

    Posted by mcblogger at 02:22 PM | Comments (0) | TrackBack

    Michael Medved endorses giant land grab; officially wins Stupid Olympics

    Who the fuck cares what a douche movie reviewer has to say? I mean, seriously, the guy couldn't keep his show going so now he's on radio and the web spouting off crazy about how neat the TTC is going to be. Since when do eminent domain and movie reviews have a common theme?

    Posted by mcblogger at 12:32 PM | Comments (0) | TrackBack

    December 28, 2006

    Here's something the Lege could do to help homeowners

    My job is to buy loans. It's exciting, it's fun and I get an expense account which rocks (it's kind of like being a lobbyist, except the people you're taking out actually need you as much as you need them). At least once a week I get a call from a client regarding the purchase of a loan in which the borrower would like to liquefy equity (AKA, a 'cashout') in their owner occupied property. Normally, these aren't that big a deal (despite the ridiculous home equity laws in Texas) and I deal with them all the time. The problem that crops up is if it's a multi-unit property, like a duplex. Did you know that if you buy a duplex in the state of Texas, live in one unit, homestead it and rent the other side it's almost impossible to borrow against the equity in it?

    The reason is that no case law has been established to support the lender's ability to perfect title in the event of foreclosure. The law (50(a)6) doesn't specifically address it and Texas judges, when it comes to homesteads, are notoriously borrower friendly. Which makes people nervous about lending in Texas, period. Don't get me wrong, legal protections for homeowners are important. However, lenders have to be able to foreclose cleanly should the borrower not pay.

    While this happens in the metro's more than the rural areas, it is an issue that affects a surprisingly large number of homeowners. Any legislators out there want to take a crack at fixing it?

    Posted by mcblogger at 01:35 PM | Comments (0) | TrackBack

    December 20, 2006

    Next stop for interest rates? Steady... then up

    The rosy outlook in stocks for 2007 is based on an assumption that the Fed is going to beging to lower interest rates next year. Problem is, the President of the Dallas Fed thinks inflation is still an issue which means he is less than inclined to begin dropping rates...

    Markets displayed little reaction to comments by Dallas Federal Reserve President Robert W. Fisher, who said in a speech Tuesday that inflation remains troublesome for the economy and that an increase in interest rates could be warranted.

    I wouldn't mention this but for the fact that lower interest rates are already cooked into equity pricing. The market likes to trade six months out which means investors are, on balance, anticipating a drop in interest rates in the next few months. I'm not sold. You shouldn't be either.

    Posted by mcblogger at 06:46 PM | Comments (0) | TrackBack

    Next stop for interest rates? Steady... then up

    The rosy outlook in stocks for 2007 is based on an assumption that the Fed is going to beging to lower interest rates next year. Problem is, the President of the Dallas Fed thinks inflation is still an issue which means he is less than inclined to begin dropping rates...

    Markets displayed little reaction to comments by Dallas Federal Reserve President Robert W. Fisher, who said in a speech Tuesday that inflation remains troublesome for the economy and that an increase in interest rates could be warranted.

    I wouldn't mention this but for the fact that lower interest rates are already cooked into equity pricing. The market likes to trade six months out which means investors are, on balance, anticipating a drop in interest rates in the next few months. I'm not sold. You shouldn't be either.

    Posted by mcblogger at 06:46 PM | Comments (0) | TrackBack

    December 19, 2006

    TXU runs afoul of the EPA and others

    You might remember that 39% fast tracked some dirty coal plants to be built over the next few years. Apparently, they are already running into problems. Somervell County Salon posted some items of interest on this, specifically

    In recent formal comments to the Texas Commission on Environmental Quality, regional EPA officials suggested that the state agency is not adequately taking into account the cumulative impact of the region’s proposed coal plants.

    ...In letters commenting on the permits for Lake Creek and Tradinghouse, EPA officials said more monitoring and analysis are needed to ensure the new plants don’t drive Waco and Robertson County into federal “nonattainment” status for ozone pollution.

    “Due to the ozone attainment challenges in Texas, EPA is concerned about the cumulative impacts of the proposed new power plants, especially on ozone levels,” wrote Jeff Robinson, EPA air permits chief, in a six-page letter to the TCEQ on Nov. 27.

    EPA officials also question whether TXU has proved that the pollution controls the company is proposing represent the “best available control technology,” as the Clean Air Act requires.

    Of course, the EPA is still solidly under the thumb of Connecticut native George W. Bush so don't expect too much from them. Might have better luck with the next group that has had a great idea... cut off TXU's funding

    The Rainforest Action Network (RAN) said it sent letters asking 54 financial institutions not to participate in lending TXU US$11 billion to fund construction of the plants.

    According to RAN, the plants will produce 78 million tons of new carbon dioxide emissions per year, greater than the greenhouse-gas emissions of 21 US states or the entire emissions reduction commitment of Japan under the Kyoto Protocol.

    TXU badly needs to rethink this entire project.

    Posted by mcblogger at 03:13 PM | Comments (0) | TrackBack

    December 14, 2006

    New solar startups and the quest for cheap, clean energy

    Photobucket - Video and Image HostingFor everyone that thinks solar power is mostly useless, the people who shrunk computers from the size of buildings to the size of paperbacks are now working on making solar power more efficient.

    "Silicon Valley," Cinnamon says, "is moving from a place that uses silicon to make something that consumes energy to one that uses silicon to produce energy."

    My money's on them. Solar may not be where we need it to be today, in terms of efficiency and the overall manufacturing process, but it's only a matter of time.

    Posted by mcblogger at 09:15 AM | Comments (0) | TrackBack

    The Death of Greed

    Actually, it's not the death as much as it is a new awareness of greed and a realization that income distribution under the Republicans is a large part of the reason for their losses in November.

    Things are going to get worse for them. Krugman tells why, as well has giving an excellent background on what's wrong with income distribution in the US. His tone is over negative in that things are already changing... the elections, for one, will long be perceived as a major shift in power. You're watching the end of the 80's, at long last.

    Ivan Boesky spent a lot of the 80's talking about how good greed was. He was wrong. Greed focuses people on short term gains at the expense of longer term profits and stability. That's about to change. It's worth noting that Warren Buffet was one of the leading voices against the 'greed is good' philosophy of the 80's. Even then, he was among the richest Americans. Now, he's the second richest American. It's worth noting that this died in the wool capitalist spoke out against the Republican tax cuts that have played such a significant role in retarding income growth in the US.

    There is a rising level of unionization in this country which is, on balance, a good thing. There's also a realization by the vast majority of the people in this country that they got fucked. That's why Bush's numbers haven't rebounded and won't... provided the Democrats do what they are supposed to do and NEVER let Bush take credit for the inevitable success. They must have a unified communications effort and they must step all over the President at every turn.

    In fact, the public perception needs to be that this country is being run from Congress. Bush clearly can't do the job.

    Posted by mcblogger at 01:13 AM | Comments (0) | TrackBack

    December 12, 2006

    Dregs : Dollar slides and Texas leads the nation in foreclosures

  • Bonddad has a fantastic post up regarding the slide in the dollar which is down, yet again. Greenspan thinks it's primarily related to the trade deficit and I'm inclined to agree. However, it should be noted that interest rates are also driving it as the perception remains that the US economy is weakening thus increasing the likelihood of rate decreases in the overnight Fed Funds rate.

    The short term solution is to return fiscal responsibility to Washington. This will have the double benefit of reducing new federal debt issuance and pull money out of the economy that is being used to grow our ever widening trade deficit.

    Of course, some of this will be self correcting in that eventually the dollar will weaken to the point that goods made in the US look cheap to foreign buyers. The only problem is that a lot of manufacturing capacity (both raw materials and finished goods) has been shipped overseas which means we don't make a whole lot that the world needs, other than food.

    The FOMC is meeting tomorrow. If they give guidance toward further tightening we could see a rebound in the dollar and, at some point thereafter, a drop in the value of Treasuries as long term rates begin to climb. At this point, that would be a welcome relief because it's better to accept higher rates now than later. If this drags on too much longer then you're going to see 70's style inflation mixed with early 80's style rates. And yeah, it'll suck.

    Last thing on this subject... everyone has ignored the fact that US companies have close to 1 trillion on their balance sheets. In cash. What are they going to do with it?

  • Texas is number one... in foreclosures.

    In Texas, 3,031 units were foreclosed and put up for sale in November. A total of 9,648 foreclosed units are on the market in the state, the second-highest number in the nation. In Michigan, 2,430 units were foreclosed and put up for sale in November.

    So much for that strong economy 39% was blabbing on about during the campaign.

  • Posted by mcblogger at 12:38 AM | Comments (0) | TrackBack

    December 01, 2006

    Dude! Where's my gas?

    Turns out, it was never made...

    The analysis, based on data from the U.S. Energy Information Administration, indicates that the (oil) industry slacked off supplying oil and gasoline during the prolonged price boom between early 1999 and last summer, when prices began to fall.

    That's right, folks. The AP's analysis shows that the oil industry was indeed restraining supply during the most recent price spike. This dovetails nicely with what we already knew about refining capacity being squeezed through a series of mergers beginning in the late 90's. In fact, the smart folks over at the AP picked up on that as well...

    Also, individual companies are freer to bottle up supplies without fear of losing business to competition, because fewer companies now control a production choke point: refining. Thanks to mergers, the top 10 companies now control three-quarters of national refining capacity, up from half in the early 1990s.

    "A handful of very large companies realize it's in their mutual interest to keep prices as high as possible," says Tyson Slocum, an energy expert at the consumer group Public Citizen, founded by Ralph Nader. "I don't think they're sitting around a table smoking cigars and price fixing, but I think there are sophisticated ways to manipulate the market."

    Can we now start talking about windfall taxes on oil company profits that are NOT used to expand refining and production? How about using the money generated to provide incentives to alternative energy companies for R&D as well as to increase production and build out distribution? What about helping manufacturers, (like GM, Ford and Chrysler) who have been hurt by higher energy prices, that increase fuel efficiency?

    Yeah, there's a lot that can happen. Oh, and just in case you were wondering, oil is trading at $62.46 up $1.47 and still trending higher. Better gas up now!

    Posted by mcblogger at 03:06 PM | Comments (0) | TrackBack

    November 27, 2006

    Phunny Pharm(a)

    PinkLady has a great post up about the pharmaceutical industry's efforts to persuade the new Democratic majority in Congress not to beat it to a bloody pulp. I kid. All the Democrats want to do is get the industry to play fair and allow the government to negotiate for the best prices for medicines (instead of the corporate welfare system we have in place now).

    Of course to the industry it feels like someone is taking a lead pipe to their heads. Get used to it, fuck-o's. You've abused the people of this country long enough.

    Of course, there are even those in Congress (Dingell) who actually believe that bullshit about how much big pharma spends on R&D (the only R&D they spend a lot on is how to 'entertain' doctors... if you ever have a chance to befriend a pharma sales rep, take it). The line goes that while production of medicines is, for the most part, cheap, the first pill is incredibly expensive.

    It's also bullshit.

    A word of advice to Democrats in Congress... play hardball with these fuckers. Put price negotiation into the law and tell the industry if they don't like it and want to offshore, you'll rewrite the patent laws. You really want to put the fear of God into the pharmaceutical industry? Tell them you're going to remove their IP protections.

    Posted by mcblogger at 12:03 PM | Comments (2) | TrackBack

    November 22, 2006

    Fun with the minimum wage

    ELLN has a great post up about the minimum wage including some data you might will find interesting.

    The best recent research on the economic impact of the minimum wage shows positive effects without job loss.

    Posted by mcblogger at 08:51 AM | Comments (0) | TrackBack

    Fun with the minimum wage

    ELLN has a great post up about the minimum wage including some data you might will find interesting.

    The best recent research on the economic impact of the minimum wage shows positive effects without job loss.

    Posted by mcblogger at 08:51 AM | Comments (0) | TrackBack

    November 20, 2006

    Have you noticed that gas prices stopped dropping?

    Oh, come on. You know you did. I did tonight as I pumped 12 gallons in at $2.19 per gallon. As Hal at Half Empty points out, this isn't unusual for the oil companies. I can add to his pessimism the fact that prices of crude have not continued to drop but have still gone down a little. It may not conclusively prove big oil was trying to swing an election, but it does beg the questions you and I are bothing thinking.

    Let's ask them aloud, shall we? Let's have Congress do a real analysis of the price of crude on a contract basis (the price the big oil companies pay for crude oil) vs. the price of gasoline, which is priced off the spot market on the NYMEX.

    How about a nice, fat tax on earnings that aren't reinvested into the business? Or a tax that's levied against earnings and used to finance public transportation and alternative energy projects? Combine either with an elimination of tax loopholes and pretty soon you've got an oil industry that's more responsive to the consumer.

    Posted by mcblogger at 09:16 AM | Comments (0) | TrackBack

    November 15, 2006

    What IS it with airlines?

    I woke up about 30 minutes ago and have been watching CNBC. They've been talking about this all morning but I've not been paying attention. However, it's finally sunk in. USAirways is proposing a merger with Delta in an effort to complete the creation of what some travelers are calling 'a Black Hole of suck'.

    Keep in mind when airlines merge, the shittier one ALWAYS ends up becoming the norm for the new company. Consider this: US Airways purchased America Worst and ever since has been a loser. Now they are going to join Delta... ugh. Anyone who has ever been trapped by them in Baton Rouge knows better than to fly Delta.

    Unless they're retarded.

    Posted by mcblogger at 06:54 AM | Comments (0) | TrackBack

    October 16, 2006

    Energy : Nuke me, Bitch; Perry gets bought and deregulation was a crock

    The DMN is reporting that the Nuclear Regulatory Commission (or the Nukular Commission to those in the know) is prepping to fast track a bunch of new power plants. Honestly, I don't think this is such as bad idea as they'll be using a standardized design to accelerate the time to completion. Part of the problem with older nuclear plants is that they are all unique, making safety and security evaluations problematic at best. With a standard design, there can be a fixed set of criteria that regulators can use to shut down badly operated plants, before they can harm people.

    As always, I'm concerned about the waste because really, Where is it going to be stored? Do we have that solved yet? I'm pretty sure (due to the anti-nuke folks) that these aren't going to be fuel-recycling breeder reactors.

    It's obvious our need for electricity is growing as fast as my need for alcohol (it's an insatiable thirst). However, we need to find a balance that will allow us to breathe (gratuitous slam against coal fired plants) and keep us from glowing in the dark. One point of curiosity, if utilities move forward with additional nuclear capacity, don't we need less coal fired plants?

    As it turns out, no. Those are going to move forward because of a certain cheap bitch named Rick Perry. Coal and utility interests have given him more than $132,000 SINCE he fast tracked the power plants. Who knew Perry could be purchased at such a discount? He's like the Dollar General of elected officials.

    And all this in the face of the fact that utility deregulation has been a disaster. Even the CATO Institute is for the re-regulation of the industry.

    A truly competitive market has never developed, and, in most areas, the number of power producers is small. In New Jersey, for example, only six companies produce power, and not all of them sell to every utility.

    Some utilities have decided to buy electricity not from the cheapest supplier but from one owned by a sister to the utility company, even if that electricity is more expensive. That has been the case in Ohio.

    And if electricity is needed from more than one producer, utilities pay each one the highest price accepted in the bidding, not the lowest. This one-price system, adopted by the industry and approved by the federal government, is intended to encourage investment in new power plants, which are costlier than older ones.

    Posted by mcblogger at 01:18 PM | Comments (1) | TrackBack

    October 06, 2006

    Republican scandals negatively effecting employment

    51,000 jobs. That was the number of jobs created during the month of September, per the Labor Dept.'s preliminary unemployment numbers. Even with such anemic growth, unemployment declined from 4.7 to 4.6% which is funny and all but not funny ha-ha... more funny, strange. You know, like that neigbor who lives nearby and totally creeps you out.

    Apparently, though growth in the previously booming Republican sycophant sector has slowed to a halt and even begun to decline, those laid off as part of the scandals are not being placed on unemployment, and no one knows why. Asked about this earlier today, Speaker Hastert said only, "Fuck off! I'm not resigning you goddamn vultures!". He then ran from reporters, got into an unmarked car and sped away. A disheveled staffer was asked about the Speaker's hasty get-a-way and simply shuddered uttering the words "Cracker", "Barrell" and "BelAir".

    Challenger, Gray and Christmas (it's real, bitches) reported growth in only one sector of the economy, retail. Are there many new Gaps opening? Maybe they are referring to the Neiman Marcus expansion?

    So what exactly DOES it mean when job growth is super low, not even enough to maintain static employment? You need to grow the economy by 150k jobs per month to take care of the net additions to the workforce. If that isn't happening, what's the deal with theunemployment number? Shouldn't the two jive? They would... if you used the same statistics for each number:

    The payrolls figure and the unemployment rate come from two different statistical surveys, which can provide -- as in Friday's case -- a somewhat mixed picture of what is happening in the labor market.

    The seasonally adjusted overall civilian unemployment rate -- 4.6 percent in September -- is based on a survey of 60,000 households. It showed that 271,000 people said they found employment last month, outpacing the number of people who couldn't find work.

    Economists tend to put more stock, however, in the much broader business survey of 400,000 work sites that is used to calculate the payroll figures.

    That's right... the unemployment number is based on household information, not information from people who actually write checks every two weeks. So the government is STILL counting the millions of people making bank by selling on EBay and craigslist. If that makes sense to you then you're one up on me because the reality is that asking people whether or not they are working (and only 60k households at that) makes as much sense as invading a country that poses no threat to the US. Look how well that turned out.

    Posted by mcblogger at 11:40 AM | Comments (0) | TrackBack

    October 04, 2006


    Proof that no matter how bad things are, they can always get worse.

    Federal investigators were set Tuesday to begin an investigation into a fire that ruined about 4 percent of America's yield of hops, used as flavoring in the brewing of beer and ale.

    The fire started shortly before noon Monday in a 40,000-square-foot (3,600-square-meter) warehouse operated by S.S. Steiner Inc., one of the four largest hop buyers in the Yakima Valley of central Washington. By mid-afternoon flames engulfed most of the building, sending up plumes of smoke and a pungent aroma.

    Municipal fire crews, aided by regional firefighters, ripped away metal siding to shoot water directly onto the hops.

    Based on an industry official's estimate of the quantity of hops in the warehouse, the loss could amount to $3.5 million to $4 million. The impact on brewers and beer prices was unclear early Tuesday.

    Posted by mayor mcsleaze at 08:37 AM | Comments (1) | TrackBack

    September 20, 2006

    Energy Update : Problems with Cuba, GM Cassava

  • I think the embargo of Cuba is retarded (even when I was a Republican). However, Republican's need those votes in southern FL so they will never repeal it. The problem is, Cuba has a lot of oil that India, China and Venenzuela are beginning to exploit... and US companies have been left out of bidding for tracts because of an archaic embargo of a country that can barely feed itself, let alone mount an attack against the southern US.
  • Monsanto and USAid are catching hell over a GM cassava crop introduced into Kenya. The transgenic was modified to resist disease but has apparently been extremely susceptible to cassava mosaic. Ostensibly, the crops were given out to help build food security in Kenya. There is speculation however that it's really to produce a high starch crop that can be used to make ethanol for the US.

    The DOE-JGI itself acknowledges that cassava is an excellent energy source which "is grown worldwide as a source of food for approximately one billion people, raising the possibility that it could be used globally to alleviate dependence on fossil fuels."

    According to the South African-based African Centre for Biosafety, these admissions mark a "dramatic about-turn from previous commitments to address hunger and the nutritional needs of people in developing countries."

  • Posted by mcblogger at 02:40 PM | Comments (0) | TrackBack

    September 14, 2006

    Ford Motor to make itself irrelevant

    This morning, Ford Motor Co., the perennial also-ran of the American auto industry, decided to announce ahead of a major restructuring road map to be released on Friday, that they were offering buyouts to 75,000 UAW employees. The move is expected to accelerate the closing of 8 final assembly plants nationwide.

    As Toyota expands, Ford contracts. Good job, Ford. Blame operational bloat for your problems, instead of the fact that you make cars that few rational people want to buy.

    Posted by mcblogger at 02:08 PM | Comments (1) | TrackBack

    September 13, 2006

    Oil Prices... what's happening

    OK, it's really simple... the markets are digesting current inventories being way higher than projections, coupled with apparent drops in hostility in the middle east. Of course, the next time Bush get's up someone's ass in Iran, oil will pop above 70.

    The key is that demand DID go down. People used less gasoline and as a result, inventories built as the refiners continued to run full out. They will more than likely start slacking production heading into the winter (because of seasonally decreased demand) which will start dropping the supply of gasoline, providing a spot market floor of about $1.48/gallon ($2.20-2.30 at the pump). We've probably seen the floor in crude. For more, see Goldman Sach's comments here.

    While it may seem a little suspicious that prices are falling ahead of the election, it's really not. It WOULD have been suspicious had it happened in mid-October with no apparent reason. It really doesn't matter because even at $2.00/gallon consumers are still hurting and people are still pissed.

    Posted by mcblogger at 06:09 PM | Comments (4) | TrackBack

    September 12, 2006

    Are Texas Ford dealers really going to diss gay customers?

    You know, as if Ford's piss poor corporate management and ugly ass products weren't bad enough, they've now decided to shun gay and lesbian customers... because the AFA crackers are on their ass. Can you believe that?

    Uhm... Texas Ford Dealers, y'all are already selling some of those dumbest cars in the world to a bunch of gullible queens and dykes. Well, except me... I'm gullible as hell but there's no way I'm driving a Ford product unless it's a Town Car.

    Oh, and I'm 90.

    I can't wait until I buy my next Japanese car! Thank's for making my decision easy, Texas Ford Dealers!

    Posted by mcblogger at 06:42 PM | Comments (0) | TrackBack

    September 06, 2006

    New oil field in the Gulf; AMAT to make PV panels

    On the energy front...

  • Chevron announced on Tuesday a significant new find in the Gulf of Mexico, 175 miles offshore. The reserves are estimated at 15 bn barrels. It's being touted as a significant addition to North American reserves. However, the only reason it IS significant is that proven reserve numbers are so low.

    The head of an energy consulting firm, Art Smith, told the Associated Press news agency that despite the discovery, the US will still be importing more than 50% of its oil needs.

    "The US still has a big difference between its consumption and indigenous production," Mr Smith said.

    Experts said the oil from the well is unlikely to be available for many years and the discovery is not going to ease spiralling global oil prices.

    It actually will ease prices as it is significant productive capacity that has been added to the world market. However, it's not a panacea... in case you were wondering, 15 bn barrels only covers US consumption for a little less than 18 months. The sad thing about this discovery? Chevron has been looking for it since 2004... they've been drilling a lot of dry holes in the Gulf which kinda deflates that whole 'we can drill our way to energy independence' argument.

  • Looks like Applied Materials has caught the green power bug...

    Applied, the world's largest maker of semiconductor-manufacturing equipment, says it will adapt its knowledge from making very advanced gear for processing silicon wafers and flat-panel displays into new equipment for making solar panels.

    "We plan to change the cost equation for solar power through the adaptation of our existing technology and through new innovation in order to help make solar a more meaningful contributor to the global energy supply," CEO Mike Splinter said.

    FINALLY! With the addition of AMAT to the mix, it's likely that production costs for PV systems will start to decline. That'll shift the cost differential in solar's favor, over coal and nuclear especially when carbon and waste are factored in.

  • Posted by mcblogger at 01:44 PM | Comments (1) | TrackBack

    August 30, 2006

    Proof positive that Perry and Republicans have failed Texas

    We've been talking about it for a while but now there is some definitive data. During Perry's Administration, poverty rates in the state of Texas have INCREASED and real wages have declined. Is this the Republican economic miracle? Make everyone poor?

    "As a state, we look pretty good in per-capita income, but we look terrible when you look at poverty numbers," said Eva Deluna Castro, an analyst at the Center for Public Policy Priorities, which advocates for low- and middle-income Texans. "If we mention these numbers, people think we're trying to start class wars. But if you don't acknowledge the gap is getting bigger, you can't come up with any long-term solutions."

    Then there's this from the DMN

    Jay Dunn, a manager at Stewpot, said that six years ago, the homeless ministry served about 300 free lunches per day. Now, the downtown Dallas kitchen dishes out about 550 meals during a typical lunch hour.

    "The numbers are moving in the wrong direction," he said.

    Central Dallas Ministries is a nonprofit group that tries to fill the gap between what working families bring home and what they need to survive. Executive director Larry James said that gap is widening.

    From May to July of last year, about 8,000 families walked through the resource center's doors, he said. Over the same period this year, 13,000 sought help.

    "It isn't that people aren't working or that they're not willing to work," he said. "It's that they're not earning enough."

    The rising cost of housing, food, gasoline and utilities drains the pocketbooks of people who can afford it least, he said. When wages dive as expenses climb, more families are pushed into poverty.

    "The economy is certainly a big factor in all this. ... It pushes everything down," Mr. Dunn said. "If somebody was making $50,000 a year, and now he's making $35,000 a year, what happens to the guy who was making $35,000 a year?"

    The other side is that higher incomes are doing quite well due to tax cuts and the reality that they are not impacted greatly by inflation. Of course, what most of that group doesn't understand is that the more the lower income levels sink, the greater the burden on city, county and state services. Further, it means that less money can go to discretionary spending which means that the middle manager at a corporate officer will be joining the ranks of the downwardly mobile sooner, rather than later. That will definitely put a crimp into corporate profits.

    If people have learned nothing from US economic cycles since WWII, they should have picked up on the fact that for the economy to grow and for prosperity to be most generally spread, stable and long lasting, the lowest earners must have livable incomes. The Republicans, in their zeal to concentrate wealth up from even the middle class, have forgotten to put fuel into the engine of the economy.

    As an aside, you can place place all the blame on lower skilled and uneducated people for dropping median incomes and increasing the poverty percentages. However, that's only a symptom of the disease that currently plagues Texas. There is absolutely no reason why people should be working, even at Wal Mart, for less than $12/hour in Dallas Metro.

    Posted by mcblogger at 09:22 AM | Comments (0) | TrackBack

    August 28, 2006

    Real wages are falling to lowest level in almost 60 years

    You know things are bad when Bush's Treasury Secretary says

    But in a sign that Republicans may be growing concerned about the public’s mood, the new Treasury secretary, Henry M. Paulson Jr., adopted a somewhat different tone from Mr. Bush in his first major speech, delivered early this month.

    “Many aren’t seeing significant increases in their take-home pay,” Mr. Paulson said. “Their increases in wages are being eaten up by high energy prices and rising health care costs, among others.”

    At the same time, he said that the Bush administration was not responsible for the situation, pointing out that inequality had been increasing for many years. “It is neither fair nor useful,” Mr. Paulson said, “to blame any political party.”

    Read the whole article in the supersize. The gist is that while productivity of American workers has continued to climb dramatically, the vast majority of those workers have not seen a gain in their wages commensurate with the increase. Worse, when inflation is factored in, wages have actually declined since Bush took office. So much for Republican prosperity...

    August 28, 2006
    Real Wages Fail to Match a Rise in Productivity

    With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers.

    That situation is adding to fears among Republicans that the economy will hurt vulnerable incumbents in this year’s midterm elections even though overall growth has been healthy for much of the last five years.

    The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

    As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

    Until the last year, stagnating wages were somewhat offset by the rising value of benefits, especially health insurance, which caused overall compensation for most Americans to continue increasing. Since last summer, however, the value of workers’ benefits has also failed to keep pace with inflation, according to government data.

    At the very top of the income spectrum, many workers have continued to receive raises that outpace inflation, and the gains have been large enough to keep average income and consumer spending rising.

    In a speech on Friday, Ben S. Bernanke, the Federal Reserve chairman, did not specifically discuss wages, but he warned that the unequal distribution of the economy’s spoils could derail the trade liberalization of recent decades. Because recent economic changes “threaten the livelihoods of some workers and the profits of some firms,” Mr. Bernanke said, policy makers must try “to ensure that the benefits of global economic integration are sufficiently widely shared.”

    Political analysts are divided over how much the wage trends will help Democrats this fall in their effort to take control of the House and, in a bigger stretch, the Senate. Some see parallels to watershed political years like 1980, 1992 and 1994, when wage growth fell behind inflation, party alignments shifted and dozens of incumbents were thrown out of office.

    “It’s a dangerous time for any party to have control of the federal government — the presidency, the Senate and the House,” said Charles Cook, who publishes a nonpartisan political newsletter. “It all feeds into ‘it’s a time for a change’ sentiment. It’s a highly combustible mixture.”

    But others say that war in Iraq and terrorism, not the economy, will dominate the campaign and that Democrats have yet to offer an economic vision that appeals to voters.

    “National economic policies are more clearly in focus in presidential campaigns,” said Richard T. Curtin, director of the University of Michigan’s consumer surveys. “When you’re electing your local House members, you don’t debate that on those issues as much.”

    Moreover, polls show that Americans are less dissatisfied with the economy than they were in the early 1980’s or early 90’s. Rising house and stock values have lifted the net worth of many families over the last few years, and interest rates remain fairly low.

    But polls show that Americans disapprove of President Bush’s handling of the economy by wide margins and that anxiety about the future is growing. Earlier this month, the University of Michigan reported that consumer confidence had fallen sharply in recent months, with people’s expectations for the future now as downbeat as they were in 1992 and 1993, when the job market had not yet recovered from a recession.

    “Some people who aren’t partisans say, ‘Yes, the economy’s pretty good, so why are people so agitated and anxious?’ ” said Frank Luntz, a Republican campaign consultant. “The answer is they don’t feel it in their weekly paychecks.”

    But Mr. Luntz predicted that the economic mood would not do significant damage to Republicans this fall because voters blamed corporate America, not the government, for their problems.

    Economists offer various reasons for the stagnation of wages. Although the economy continues to add jobs, global trade, immigration, layoffs and technology — as well as the insecurity caused by them — appear to have eroded workers’ bargaining power.

    Trade unions are much weaker than they once were, while the buying power of the minimum wage is at a 50-year low. And health care is far more expensive than it was a decade ago, causing companies to spend more on benefits at the expense of wages.

    Together, these forces have caused a growing share of the economy to go to companies instead of workers’ paychecks. In the first quarter of 2006, wages and salaries represented 45 percent of gross domestic product, down from almost 50 percent in the first quarter of 2001 and a record 53.6 percent in the first quarter of 1970, according to the Commerce Department. Each percentage point now equals about $132 billion.

    Total employee compensation — wages plus benefits — has fared a little better. Its share was briefly lower than its current level of 56.1 percent in the mid-1990’s and otherwise has not been so low since 1966.

    Over the last year, the value of employee benefits has risen only 3.4 percent, while inflation has exceeded 4 percent, according to the Labor Department.

    In Europe and Japan, the profit share of economic output is also at or near record levels, noted Larry Hatheway, chief economist for UBS Investment Bank, who said that this highlighted the pressures of globalization on wages. Many Americans, be they apparel workers or software programmers, are facing more comptition from China and India.

    In another recent report on the boom in profits, economists at Goldman Sachs wrote, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.” Low interest rates and the moderate cost of capital goods, like computers, have also played a role, though economists note that an economic slowdown could hurt profits in coming months.

    For most of the last century, wages and productivity — the key measure of the economy’s efficiency — have risen together, increasing rapidly through the 1950’s and 60’s and far more slowly in the 1970’s and 80’s.

    But in recent years, the productivity gains have continued while the pay increases have not kept up. Worker productivity rose 16.6 percent from 2000 to 2005, while total compensation for the median worker rose 7.2 percent, according to Labor Department statistics analyzed by the Economic Policy Institute, a liberal research group. Benefits accounted for most of the increase.

    “If I had to sum it up,” said Jared Bernstein, a senior economist at the institute, “it comes down to bargaining power and the lack of ability of many in the work force to claim their fair share of growth.”

    Nominal wages have accelerated in the last year, but the spike in oil costs has eaten up the gains. Now the job market appears to be weakening, after a protracted series of interest-rate increases by the Federal Reserve.

    Unless these trends reverse, the current expansion may lack even an extended period of modest wage growth like one that occurred in the mid-1980’s.

    The most recent recession ended in late 2001. Hourly wages continued to rise in 2002 and peaked in early 2003, largely on the lingering strength of the 1990’s boom.

    Average family income, adjusted for inflation, has continued to advance at a good clip, a fact Mr. Bush has cited when speaking about the economy. But these gains are a result mainly of increases at the top of the income spectrum that pull up the overall numbers. Even for workers at the 90th percentile of earners — making about $80,000 a year — inflation has outpaced their pay increases over the last three years, according to the Labor Department.

    “There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings.

    “And then there’s the working stiffs,’’ he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.”

    In 2004, the top 1 percent of earners — a group that includes many chief executives — received 11.2 percent of all wage income, up from 8.7 percent a decade earlier and less than 6 percent three decades ago, according to Emmanuel Saez and Thomas Piketty, economists who analyzed the tax data.

    With the midterm campaign expected to heat up after Labor Day, Democrats are saying that they will help workers by making health care more affordable and lifting the minimum wage. Democrats have criticized Republicans for passing tax cuts mainly benefiting high-income families at a time when most families are failing to keep up.

    Republicans counter that the tax cuts passed during Mr. Bush’s first term helped lifted the economy out of recession. Unless the cuts are extended, a move many Democrats oppose, the economy will suffer, and so will wages, Republicans say.

    But in a sign that Republicans may be growing concerned about the public’s mood, the new Treasury secretary, Henry M. Paulson Jr., adopted a somewhat different tone from Mr. Bush in his first major speech, delivered early this month.

    “Many aren’t seeing significant increases in their take-home pay,” Mr. Paulson said. “Their increases in wages are being eaten up by high energy prices and rising health care costs, among others.”

    At the same time, he said that the Bush administration was not responsible for the situation, pointing out that inequality had been increasing for many years. “It is neither fair nor useful,” Mr. Paulson said, “to blame any political party.”

    Copyright 2006 The New York Times Company

    Posted by mcblogger at 06:12 PM | Comments (0) | TrackBack

    August 25, 2006

    Recession in 2007? Bitch, it's already here!

    You're going to see it soon enough in the Q3 economic numbers. The preliminaries should be out in mid-October and then no one will be able to deny it. The recession itself will be officially declared probably in Q2 of next year, sometime in April.

    Nouriel Roubini of Roubini Global Economics said

    "This is the biggest housing slump in the last four or five decades: every housing indicator is in free fall, including now housing prices," Roubini said. The decline in investment in the housing sector will exceed the drop in investment when the Nasdaq collapsed in 2000 and 2001, he said.
    And the impact of the bursting of the bubble will affect every household in America, not just the few people who owned significant shares in technology companies during the dot-com boom, he said. Prices are falling even in the Midwest, which never experienced a bubble, "a scary signal" of how much pain the drop in household wealth could cause.

    Personally, I think it's a function of high energy prices more than anything. People are ridiculously clueless as to how much they are affected by the price of gas.

    Posted by mcblogger at 01:33 PM | Comments (0) | TrackBack

    Please note the right wing nutter adverts...

    ... to the right of our posts. PLEASE click on them repeatedly. Over and over again. Then switch computers and do it again. Rinse, wash, repeat.

    Why? I WANT SOME OF THEIR MONEY. See, this morning I went ahead and paid the server bill. No, it wasn't much... not even close to a bar tab. HOWEVER, I see no reason why Republicans shouldn't pay to keep our labor of love up and running.

    So, take a moment, dear heart, and click that ad. As many times as you can!

    Posted by mcblogger at 01:09 AM | Comments (2) | TrackBack

    August 18, 2006

    Dobbs is upset and making sense about self-sufficiency

    I love me some Lou Dobbs. This week's commentary is all about the lack of self-sufficiency in the US...

    What a blessing, all these superpower advantages. What other people besides Americans can afford not to make their own clothes? The world has other people for such menial tasks, and they sell us all but a few of our shoes, shirts, slacks, suits, dresses and coats (and, of course, accessories). We now import around 96 percent of our clothing.
    What other nation can afford to dismantle its manufacturing base and export high-paying middle-class jobs overseas to lesser, cheaper foreign labor markets and then buy back the goods those poorer people provide us?

    And energy? Why, we Americans have money to burn. We spend $15-20 billion each and every month to import fuel for our cars, trucks, office buildings and few remaining factories and plants. We can be heedless to the consequences, because as Vice President Dick Cheney suggests, conservation doesn't work well anyway. So why be bothered with such irritating constraints?

    It's gotta be inconvenient for Republicans when someone like Dobbs keeps making sense...

    Full text in the supersize

    Dobbs: It's good to be a superpower

    By Lou Dobbs

    Editor's note: Lou Dobbs' weekly commentary will return on September 6.

    NEW YORK (CNN) -- The Soviet Union, Marxist Leninism, the Evil Empire and their ugly metaphor, the Berlin Wall, crumbled and collapsed almost 17 years ago.

    At the time, I thought it was strange that the United States didn't have the inclination to celebrate. There were no victory parades and no fireworks; nor did Congress declare a V-CW Day, as in Victory in the Cold War. There weren't even any grand speeches about America's emergence as the World's Only Superpower.

    But a grand smugness did grip most of Washington. And hubris became the foundation of almost every national policy, foreign and domestic. And why not? We were entitled as the World's Only Superpower.

    What a blessing, all these superpower advantages. What other people besides Americans can afford not to make their own clothes? The world has other people for such menial tasks, and they sell us all but a few of our shoes, shirts, slacks, suits, dresses and coats (and, of course, accessories). We now import around 96 percent of our clothing.

    What other nation can afford to dismantle its manufacturing base and export high-paying middle-class jobs overseas to lesser, cheaper foreign labor markets and then buy back the goods those poorer people provide us?

    And energy? Why, we Americans have money to burn. We spend $15-20 billion each and every month to import fuel for our cars, trucks, office buildings and few remaining factories and plants. We can be heedless to the consequences, because as Vice President Dick Cheney suggests, conservation doesn't work well anyway. So why be bothered with such irritating constraints?

    Because we're a superpower, we needn't concern ourselves with silly little annoyances like trade and budget deficits. Who cares? What greater proof of our superpower status can there be than 30 consecutive years of trade deficits, evaporating surpluses in services and agricultural goods and even technology.

    Our trade deficit in manufacturing soared nearly 300 percent from 1997 to 2005, surging to $662.5 billion. Our business and government leaders soothingly remind us that we are a technology economy and needn't be distracted by developments like the reversal of what was a $35-billion surplus in high-tech goods to what is now a $44-billion deficit. It's great to be The Superpower.

    What about all that money we're burning? Not to worry. Spend it if you got it. Well, we really don't have it, actually. We're borrowing more than $2 billion a day to send to those lesser souls who are uncomfortably situated in poorer nations that can only aspire to our superpower status.

    As to our government's budget deficit, again, that's not a problem. Our federal government keeps two sets of books: one that shows our budget deficit shrank to $319 billion last year and the Treasury Department set that shows $760 billion. Now, we don't want anyone to get needlessly anxious here. It turns out that our national debts and commitments actually stand at an incredible $49 trillion. But let's just keep that little number amongst ourselves.

    The federal government uses a quaint accounting system that would be illegal for any large enterprise in America, and there are those who believe our government should be more transparent, or perhaps honest, if you will. One of those with a very unpopular wet-blanket attitude is David Williams of the Citizens Against Government Waste. "If this happened in the private sector, we would call the government 'Enron,' " Williams says.

    David, David, David...A little less negativity, please. David Williams is among that small, insignificant and clearly irrelevant group of eccentric rationalists who care about cause and effect, truth and consequence.

    Rep. Jim Cooper, a Tennessee Democrat, is among them as well. In his new book, Cooper writes about things like the fact that our federal government last year paid out $38 billion to the wrong people and that $20 billion of taxpayer money simply disappeared from the government's treasury.

    Negativists like Williams and Cooper get all a-gaggle over the fact that the GAO can't certify the books of the Pentagon, the Department of Homeland Security, the Energy Department and NASA. They're even upset that the federal government has failed its annual audit for nine years in a row. Talk about Nervous Nellies.

    So what if the U.S. debt rating is heading for junk status by 2025, according to Standard & Poor's. That's a problem for nations that aren't superpowers, don't you think?

    When it comes to international relations, our superpower status is even clearer. Though admittedly, it is a little embarrassing to watch how easily the United States imposes its will on the Middle East and brings aspiring superpowers like China to heel on issues like human rights and democracy.

    Looking back, I'm grateful that we didn't celebrate our emergence as the World's Only Superpower those many years ago. In our current exalted state, it's clear we were wise not to do so.

    Posted by mcblogger at 03:24 PM | Comments (8) | TrackBack

    August 07, 2006

    BP closes Alaska pipeline

    BP is shutting in production from Prudhoe Bay because of a 'tiny spill'

    BP learned on Friday that data from an internal sensing device found 16 anomalies in 12 locations in an oil transit line on the eastern side of the field. Follow-up inspections found "corrosion-related wall thinning appeared to exceed BP criteria for continued operation," the company said.

    Workers also found a small spill, estimated to be about four to five barrels, roughly 200 gallons of crude. BP said the spill has been contained and clean up efforts are under way. It added it was sending additional resources from across the state and North America to hasten the inspection of the remaining transit lines. About 40pc of the lines have been inspected.

    Crude as of 11:06 AM is up $1.84 to $76.60 in Merc trading. Spot gasoline has moved up $0.03, just over 1%. OPEC (specifically Saudi Arabia) is saying it can take up the slack but even the floor traders are figuring out that they no longer have the ability o swamp the market.

    I guess it's good they caught this early on but it would be nice if they had a slightly more agressive contingency plan.

    Posted by mcblogger at 11:09 AM | Comments (1) | TrackBack

    July 19, 2006

    Speculation, Geopolitics and Terrorism

    US Energy Secretary Samuel (BitchBoy) Bodman thinks that high oil prices are a function of speculation in the market. Eric Bolling, a Merc trader agrees with him. Bolling's estimate is that around $30 of the price of oil is related purely to speculation, geopolitics and terrorism.

    The interesting thing is that neither of them will say anything about the difference between the spot market and contract pricing of oil. Meaning, that the oil used to make the gasoline Exxon sells at the pump costs Exxon LESS than the spot market price. However, they base their price to the consumer off the spot market. There is not really a wholesale market for crude. That's the real shame.

    Accounting rules should be changed for oil companies and taxation should be levied accordingly. Theoretically, that already happens, right? Not really. Exxon really doesn't pay much in taxes compared to their profits and the massive tax breaks they get from the government. So, we need to change the way we look at how government taxes them. That's the only way gas companies will see it in their best interests to start competing on price, instead of the defacto fix based on the spot market.

    Posted by mcblogger at 02:18 AM | Comments (0) | TrackBack

    July 14, 2006

    New way to suck oil out of Central Asia

    With the opening of the BTC Pipeline we can do lean back and relax... the oil bomb will be a dud.

    Speaking at the opening ceremony on Thursday, Recep Tayyip Erdogan, the Turkish prime minister, called the pipeline "the Silk Road of the 21st century", saying it would boost economic development, co-operation and stability in a region that was once the Cold War frontier between Nato and the Soviet Union.
    The pipeline will carry oil from the Caspian Sea fields, which is the world's third largest reserve, to Western markets.

    Oh wait... the damn thing only carries 1mm/bbl per day. And we use 20 mm/bbl per day.

    Posted by mcblogger at 12:11 PM | Comments (0) | TrackBack

    July 07, 2006

    Growing a Coke bottle

    So while everyone is busy wringing their hands over the end of cheap oil, no one seems to be thinking about the things we create out of a barrell of oil. Plastics. You know, coke bottles, cling wrap, Todd Staples' hair and Susan Combs' suits.

    Wired has a great article up on making plastics from sugar. It's not the most exciting thing in the world, but it should provide at least a little reassurance that even though oil may be getting more expensive, American's will still be able to continue our love affair with wasteful packaging and ugly clothes.

    Posted by mcblogger at 09:23 AM | Comments (0) | TrackBack

    July 05, 2006

    Texas Pensions : More regulation needed

    So the Lege passes the statute to create oversight for public pensions around the state. BUT, they don't make it strong enough because plans across the State have just decided that they don't so much want to participate.

    HOWEVER, the original problem remains... the oversight of public pensions is lax, municipalities aren't putting enough money away and the two groups who will eventually get screwed are the firefighters, police and other muni employees who depend on the funds for retirement. Oh, and the tax payers who will have to ante up to pay the obligations.

    When will these morons learn that fully reserving for pension obligations is better THAN waiting until things go bust?

    (crossposted at KAB)

    Posted by mcblogger at 01:22 PM | Comments (0) | TrackBack

    June 30, 2006

    Not so much with the trickle down...

    Bonddad, whose children I would love to have (if I, you know, had a uterus), has an excellent post up over at BOR thoroughly refuting trickle down economics.

    Trickle-down economics “is the view that to benefit the wealthy is to benefit the middle classes and even the poor. Essentially, high taxes prevent upper-income taxpayers from spending and investing. By freeing them from high tax rates, their expenditures will have a “trickle-down” effect that will benefit lower income earners. However, Republican economic policies have demonstrated trickle-down economics offer no revolutionary effect. Instead, the resulting wage, investment and job growth is on par or below levels associated with an economy that uses higher-marginal tax rates on upper-income earners.
    First, note that this argument assumes the top income earners have a disproportionate amount of national wealth. Why else is it necessary to free this trapped money? In short, trickle down confirms the wealthy have a disproportionate amount of assets.

    Posted by mcblogger at 02:05 AM | Comments (0) | TrackBack

    June 29, 2006

    Nanotechnology and the Environment

    The DMN had a great article in the Business section recently regarding Nanotechnology, it's growing impact on the economy and possible environmental effects. As one might expect, the author cast it as innovators vs. luddites to some extent. However, it was a decent enough article and I'm posting the entire thing in the extended entry.

    Nano is often touted as the future of manufacturing, a panacea for everything ranging from waste (toxic and otherwise) to the exotic materials that will allow us to build cars and planes that are extremely light, very fuel efficient and incredibly strong. There is no one who seriously doubts that nano is going to be extremely important, however the problem is that few of the developers whose current income depends on selling product, seem to know or care how their work might effect the environment. The most recent historical comparable would be working with nuclear materials before we understood the effects on human physiology of radiation exposure.

    Clearly it's important and it's extremely unfortunate that the Administration has placed more emphasis on short term economic gain than long term sustainable growth with environmental protection.

    As nanotech business grows, so does debate

    Unknowns are cause for fear among environmentalists and others

    June 19, 2006

    By Victor Godinez / The Dallas Morning News

    The nanotechnology industry used to be almost as tiny as its products.
    Michael Hogue / DMN
    Eye on nanotechnology

    But now that it's on the verge of hitting the big time, some environmental groups want to slow down or even shut down the industry altogether.

    The health and environmental side effects of nanotechnology are still largely unknown, they say, and not enough government regulations are in place to tell companies and consumers what's safe.

    But local nanotech firms and industry backers, who want to see Texas in general and the Dallas-Fort Worth area in particular become a center for nanocompanies, say too much regulation could backfire.

    They argue that although further research into the health and environmental effects of nanotechnology makes sense, squeezing the industry too tightly could send it skittering to less restrictive countries.

    “We are certainly paying attention to the debates and hopeful that we don't go overboard with such restrictions that it shuts down the business before it even gets off the ground,” said Jim Von Ehr, founder, chairman and chief executive officer at Richardson-based nanotech firm Zyvex Corp.

    The company has grown from $150,000 in revenue in 2001 to $10.3 million last year.

    According to market research firm Lux Research, $32 billion worth of goods sold in 2005 included some type of nanotechnology, and that number is expected to climb to $2.6 trillion by 2014.

    Many people are working to make sure the Dallas-Fort Worth area is where the place nanotech gets off the ground.
    What is nanotechnology?
    Nanotechnology is the science of working with machines and materials at the molecular level.

    Generally, the size scale for something to be considered nanotech is between 1 and 100 nanometers. A nanometer is 1-billionth of meter. For comparison, a human hair is about 80,000 nanometers thick.

    The value of nanotechnology is that materials built on that tiny scale often have different physical properties than their larger counterparts. For example, a lump of carbon isn't particularly tough. But when you link together individual carbon atoms in a particular way, the result is a material that is stronger and lighter than steel.

    The concern from environmental groups is that those different physical properties could hurt your health or the environment if nanoparticles are inhaled or released into the water supply.

    Zyvex is the best-known nanotech company in the region.

    The Nanotechnology Focus Group at the Metroplex Technology Business Council in Richardson is hoping to stir up more firms like Zyvex, and the region will get a big boost this fall from a major nanotech conference in Dallas.

    On the research side, scientists at the University of Texas at Dallas have done pioneering work on a material known as carbon nanotubes.

    “There is a strong movement statewide for D-FW and the rest of Texas to become an epicenter for nanotech worldwide,” said Dave Hofman, one of the founders of the Nanotechnology Focus Group and an attorney with Haynes and Boone LLP.

    Assuming, that is, nanotech doesn't get smothered in its crib.

    Backers of the technology foresee a time when nano-size assemblers work like an army of microscopic ants, collecting piles of molecules and rearranging them into nearly any conceivable final product.

    Other nanomachines will be swimming through your bloodstream, clearing clogged arteries and battling diseases.

    Carbon debating

    Right now, though, nanotech firms such as Zyvex are focused on developing simple nanotech materials, rather than assemblers or robots. Zyvex's carbon nanotubes are used, among other applications, by a sporting goods company to make lighter, stronger baseball bats.

    But the tiny tubes and other nano materials are the subject of growing debate. Is it safe to breathe in carbon nanotubes, for example?

    “If you happen to be a lab rat, and you get very, very large doses of nanotubes injected into your lungs, that's not good,” Mr. Von Ehr said.

    But there are medical benefits to nanotechnology as well.

    Mr. Von Ehr said, for instance, that human nerves grow well on carbon nanotubes, which could help people with damaged nervous systems regain functionality.

    Fears and a fake

    There are other concerns about nanotechnology.

    Christine Peterson, founder of the Foresight Nanotech Institute and vice president of public policy at the think tank, said some firms are using potentially dangerous nanomaterials in consumer products just to appear cutting edge.

    “I think it's a legitimate issue,” she said. “Cosmetics are not well-regulated, compared to food and drugs. They can put pretty much whatever they want in cosmetics, which is a little scary.”

    Ms. Peterson said she knew of one cosmetics firm using what are known as buckyballs — basically the same material as a carbon nanotube but shaped into a hollow sphere rather than a tube — in face cream.

    “They were asked, 'Why did you do this?,' and they said, 'It's a strong antioxidant,'” Ms. Peterson said. “Just because something is a strong chemical, that doesn't mean you put it in a face cream. They weren't thinking.”

    “We may very well end up with some of these particles being treated as toxic waste because they're so strong,” she added.

    But some nanotechnology fears are being inflamed by phony scenarios, industry backers and researchers say.

    The most prominent example is a glass sealant in Germany called Magic Nano that caused breathing problems in several customers.

    The environmental organization ETC Group used the occasion to repeat its call for a complete moratorium on nanotechnology product research and a recall of all products containing nanotech particles.

    Although Magic Nano was ultimately found not to contain any nanotech particles, the group has not changed its position on a research moratorium and product recall.

    Other environmental organizations are taking a less strict stance and trying to develop a compromise position that researchers and corporations will agree with.

    One such group is Environmental Defense, which wants to see the government spend more money on researching the potential health and environmental effects of nanotech.

    Creating guidelines

    Scott Walsh, project manager at Environmental Defense, said that until the government gets more active in nanotech regulation, the group would like to see the companies themselves adopt some kind of voluntary guidelines.

    Environmental Defense has been working with DuPont to come up with such a set of guidelines.

    Mr. Walsh said most of the nanotech firms he talks to are willing to address these issues.

    “It does seem like a lot of companies, broadly speaking, are trying to be proactive,” he said. “That's a good sign. They're definitely engaging on this.”

    Dr. Wade Adams, director of the Richard E. Smalley Institute for Nanoscale Science and Technology at Rice University in Houston, was at UTD recently to deliver a speech about applications for nanotechnology in the energy industry.

    Afterward, he addressed some of the health and environmental concerns, saying that researchers and corporate executives are acting responsibly.

    “The last thing you want is another asbestos,” he said. “No one is saying 'Trust me.' ”

    Ms. Peterson at the Foresight Nanotech Institute said nanotech companies would benefit if the federal government were to certify the safety of nanotech products.

    “What industry wants is a safe harbor, and they don't have that right now,” she said. “So what they really want is the government to step up and fund more research.”

    But Dr. Adams cautioned that overly intrusive regulation could have unintended consequences.

    “The industry is going to press on, and research is going to continue,” he said, but firms uncomfortable with the regulatory environment in the U.S. will migrate to Asia or other regions.

    That's a possibility that weighs on Mr. Von Ehr at Zyvex. He doesn't want to relocate his company but has considered the issue.

    “I'd rather do it here,” he said. “I kind of alternate between being depressed at things and excited that it's still a great opportunity.”
    Online at: http://www.dallasnews.com/sharedcontent/ptech/generalstories2/061806ccdrPTECHnano.a0a4e036.html

    Posted by Neumann's Machine at 01:40 AM | Comments (0) | TrackBack

    June 27, 2006

    Paulson Confirmation : Trent Lott just can't help being creepy

    I'm watching the Paulson confirmation hearings (PLEASE! NO MORE CHARTS, DEMOCRATS!) and they've allowed Mississippi Senator Trent Lott to speak, always a dumb idea.

    TL: I'd like to thank you for taking on this job and I promise we won't hold being a cradle robber against you since it's obvious that's what you did since you've been married so long to the same woman and she seems too young and I want to congratulate you on your good judgement.

    I wrote this from memory but that's was almost verbatim. He couldn't just say "I'd like to thank you for taking ont hsi responsibility and congratulate you on your marriage of 35 years to your wife, ______"?

    Posted by mcblogger at 10:54 AM | Comments (0) | TrackBack

    June 26, 2006

    Vespa going public?

    Oh, goodie!

    From the AP via the SF Chronicle

    Vespa Maker Piaggia Goes Public - By COLLEEN BARRY, AP Business Writer Wednesday, June 21, 2006

    (06-21) 12:02 PDT MILAN, Italy (AP) --

    Nothing on wheels more personifies Italian style than the Vespa scooter, whose carefree spirit was immortalized by Audrey Hepburn and Gregory Peck circling Rome's piazzas in the 1953 film "Roman Holiday."

    The Vespa's familiar curved frame has a found a place in design museums and in the hearts of Europeans, who first hopped aboard simply to get around after World War II and who still cling dearly to its handlebars as they zip through clogged streets.

    Now, as the Italian icon turns 60, the company that makes the Vespa is about to go public.

    The move is a sign of Piaggio & C SpA's return to health after being rescued from the verge of collapse by Roberto Colaninno, the former Telecom Italia chief executive whose holding company Immsi SpA bought Piaggio in 2003 and brought the company to record sales in two years.

    "The IPO is the conclusion of the rescue started at the end of 2003, and the result of agreements signed at the moment of the decision to save the company," Colaninno told reporters Tuesday after presenting the company's portfolio to potential investors. "We have a strong young boy who is now ready to walk on his own."

    Europe's largest scooter-maker by revenue, Piaggio is selling a 31 percent stake raising between 274 million euros and 348 million euros ($346 million and $440 million) during an initial public offering that ends July 5. Shares are priced in a range of 2.30 euros to 3 euros ($2.90 to $3.79), valuing the company at between 886.8 million euros and 1.16 billion euros ($1.12 billion and $1.46 billion).

    Uhm... yeah, I'd rather have the shares than the scooter. Granted, they may not be that profitable but it's not bad for a European manufacturer. Further, NEVER underestimate how sucessful a company can be with a premium signature product. Think Apple with the iPod...

    Posted by mcblogger at 09:39 AM | Comments (0) | TrackBack

    June 25, 2006

    China and Africa - A relationship in the making

    Bloomberg.com has a great piece up by William Pesek Jr. on the impact of China's budding relationships across the African continent (full text int he SuperSize). Africa, rich in natural resources and a labor market just waiting for an opportunity, is increasing looking to the East for development partners.

    As Pesek points out, there are obvious problems with the relationship especially given China's rather pragmatic attitude towards it's foreign partners (hear no evil, see no evil). However, there are some tremendous opportunities for Africa to go on the fast track to a better economic future.

    William Pesek Jr. is a columnist for Bloomberg News. The opinions expressed are his own.

    China May Be Africa's Savior or Its Curse: William Pesek Jr.

    June 23 (Bloomberg) -- More than being scooped on a story, journalists hate being wrong. Examining where we erred and why can be an invaluable learning experience.

    My reports from Africa six years ago are a case in point. After spending some time in Cape Verde, Mozambique, Nigeria, South Africa and Tanzania in 2000, I wrote that Africa was about to boom. Leaders seemed to be getting serious about reducing debt and corruption and increased trade with the U.S. promised to boost living standards. For the most part, I was wrong.

    After decades of false starts and shattered promises, African economies being left behind may have finally found a way out of despair. It's not international aid or debt relief. It's China.

    In fact, it's not just China that holds the potential to boost Africa, but India, too. ``China and India shouldn't be viewed as competitors or clients, but as contributors to Africa's development,'' Jakaya Kikwete, president of Tanzania, said earlier this month.

    China and India offer models for globalizing economies as a means of reducing poverty. While both still have far to go, their journeys could offer a roadmap for African nations struggling to get on investors' radar screens. More importantly, demand for resources from Asia's No. 2 and No. 4 economies could be quite a boon for Africa.

    ``The hunger of China and India for commodities is an opportunity for Africa to create significant wealth and global champions in that sector,'' James Goodnight, chief executive officer of U.S. software company SAS Institute Inc. and co- chairman of the World Economic Forum African Summit, told the Xinhua news agency this month.

    Blessing or Curse?

    Of course, a sudden windfall could do the opposite: make Africa even more complacent.

    ``The risk is that African countries that are currently benefiting from the demand will not invest current profits in long-term priorities -- education, health care and infrastructure,'' Goodnight said.

    The global commodity boom could lead to a dynamic akin to the ``oil curse'' that lulls nations rich in energy, gold, diamonds or other underground treasures. With so much money rushing in, there's little incentive to create industries to employ the masses. Once the resources are depleted, Africans could be worse off. Cheap Chinese goods may hurt some African companies, too.

    China pursues a policy of non-interference with nations' domestic affairs. That see-no-evil-hear-no-evil approach could come at a cost if corruption worsens.

    Risks Abound

    Another risk is that Africa becomes vulnerable -- if not addicted -- to Asian business cycles. The specter of developing economies relying almost solely on other developing ones for growth may not sit well with investors.

    Even so, rising commodities demand offers Africa a rare opportunity to repair government coffers, reduce debt and improve education, health care, roads, bridges and power systems. It's a chance to expand manufacturing and services and make African economies more competitive.

    Thanks partly to Asia, African nations on average are experiencing their fastest growth in 30 years. The Organization for Economic Cooperation and Development predicts that African growth will average 5.8 percent this year.

    Generalizing Africa's experience is always dicey. In a way, the continent is still trying to get out from under Bob Geldof's shadow.

    Opportunities, Too

    In 1984, Geldof's Band Aid project produced an album to raise money for famine relief, anchored by the title song ``Do They Know It's Christmas?,'' which left the impression that Africa is a place where ``nothing ever grows; no rain or rivers flow.'' Africa, it's important to note, has its success stories, including Botswana and Ghana.

    Looking ahead, economies with rich oil reserves -- including Angola, Sudan and the Republic of Congo -- have a great advantage. Cameroon, Chad, Equatorial Guinea, Gabon and Nigeria also are increasing energy exports to Asia.

    ``China will remain hungry for commodities over the coming 15 years,'' said Tamara Trinh, Frankfurt-based economist at Deutsche Bank Research. That's why Chinese Premier Wen Jiabao is on a seven-nation African tour just two months after President Hu Jintao visited Nigeria, Morocco and Kenya.

    Asians will be buying more and more iron ore from South Africa, manganese from Ghana, cotton from Benin, Mali and Burkina Faso, coffee from Kenya and Malawi, copper from Zambia, diamonds from Botswana, fish and shrimp from Namibia, gold and platinum from Tanzania and Zimbabwe, cocoa and gas from Ivory Coast, tea from Uganda, sugar from Mauritius and chemicals from Senegal.

    Latin America's Turn

    Asia's rise also will boost a number of Latin American economies, Trinh said. China and India may buy increasing amounts of iron ore from Brazil, copper from Chile and Peru, soybeans from Argentina and Paraguay, meat from Uruguay, foodstuff for animals from Peru, oil and gas from Colombia, Ecuador and Venezuela and nickel from the Dominican Republic.

    Africa is benefiting from Chinese investment, too. Chinese companies are bidding aggressively for projects to build hydroelectric dams and pipelines, pave roads, upgrade ports and lay railroad tracks. The upgrades will spread the benefits of growth.

    Asia's rise won't ensure a vibrant future for Africa; it's had way too many false dawns for that. Yet Asia is offering the continent a rare opportunity to add steam to its economies. It's a chance for Africa to get things right this time.

    (William Pesek Jr. is a columnist for Bloomberg News. The opinions expressed are his own.)

    To contact the writer of this column:
    William Pesek Jr. in Tokyo at wpesek@bloomberg.net or

    Posted by Neumann's Machine at 06:26 PM | Comments (2) | TrackBack

    June 23, 2006

    Energy and Transportation Policy : A proposal

    In the early 80's a group of American technology companies looked to the future and decided the best thing they could do to ensure their own futures was to form a consortium for research and development in which they could could pool their resources and knowledge to stay ahead of foreign competitors. They named the endeavor Microelectronics and Computer Technology Corporataion, MCC for short. The State of Texas, looking to diversify it's economy in the face of fluctuating oil prices, wanted MCC so a Democratic Legislature passed and then a Democratic Governor signed laws that gave MCC land and set up a partnership with the University of Texas.

    The result? UT has a world class information technology infrastructure and is one of the leading electrical engineering schools in the world. Austin, even after a recession, still has a vibrant technology economy, as does Dallas with the Telecom Corridor. What we need now is that same kind of foresight, but not in technology. We need an MCC for transportation and energy.

    America and the world face a real problem... the end of cheap, portable energy. Note I'm not writing about the end of oil because that's just stupid. We will NEVER pump the last bit of crude from the ground. For one, fossil fuels ARE a replenishing resource, they just happen to be created over thousands, sometimes millions of years. The second reason we'll never extract the last drop of oil is that it will simply be too expensive. By the time you get to that point, oil would be at $100,000/barrel in 2006 dollars. At that level, it's probably cheaper to power your car off some kind of nuclear power source.

    We are at the bare beginning of the end of cheap oil. It will likely take 10-15 years for real shortage problems to develop (at current growth levels) which would cause far more dramatic price movements than we've yet seen. Think $70 a barrel is ok? Try $350/bbl. It's going to happen and there's no way to drill ourselves out of the hole. As just about eveyone who has really looked this can see, we need a real long term solution that can meet out growing need for energy at a cheap price. That's why I'm proposing something that could do the trick.

    Think about gasoline for a second. Other than the repulsive smell, what IS it? I don't mean a product refined from oil. I mean what DOES it do for us? It's an energy 'source' simplistically, not unlike a battery. A battery (storage medium) can be charged with electricity (energy) that can deliver it's stored electricity (energy) at a measured rate over time. Isn't that EXACTLY what gas is? The engine in your car is really nothing more than the positive and negative terminals on a battery... it's good for only one thing, discharging energy from gasoline and using that energy to move you and your car.

    The easiest thing for us to do in a short time (over the next 5-10 years) is more fully develop biofuel feedstocks (soy, corn, even President Bush's much loved switchgrass), possibly genetically engineering them to be more fully refinable into fuel. The hardest thing is to invest resources into high conductivity electrical transmission, hyper-efficient discharge (motor) equipment, and high density storage.

    There is no reason why someone shouldn't be able to charge a full size car in less than 8 minutes (the average time spent each time we stop at the gas pump) that can go more than 500 miles until it's next charge AND will drive like a car with an internal combustion engine.

    So, what's the solution? How do we get from here to there? It's simple but it requires the kind of vision I've yet to see from any of the candidates for Governor (except, on occasion, Bell). Make no mistake, this could be a huge issue and I hope Bell will focus on it.

    The key is to involve industry and government. Sounds simple, right? It is. Many companies are interested in this from GE to Austin Energy. It won't be hard to get them to underwrite the project, in cooperation with the State of Texas, as it will give them new markets and drive their future profitability. The State could mandate production facilities in Texas which would increase employment here. It's the right thing to do for the economy, for the environment, for our children.

    We also need to think seriously about our transportation infrastructure which has not kept up with development and is beginning to be a drag on the economy. Toward this end we need a cooperative between the State and conctractors, consultants and materials companies to determine the best way to meet our ever growing transportation needs. Electric cars meet a definite need as personal transportation is going to continue to be the primary way Texans get from one place to another. However, with some of the technology that comes from that project, cheap high speed rail can be developed as can smart freeways.

    Now's the time for bold ideas. Tomorrow will be too late. While this is hardly bold, it's definitely necessary.

    Posted by Neumann's Machine at 01:19 PM | Comments (1) | TrackBack

    Net Neutrality in the Senate and on our minds

    The debate moved to the Senate today and it looks like it will carryover to manana. From ZDNet

    WASHINGTON--The first day of the Senate Commerce Committee's debate on a massive communications bill ended without any votes related to the divisive concept of Net neutrality.

    But Senate Democrats and a lone Republican on Thursday pledged again to codify the antidiscrimination mandates sought by Internet companies and consumer groups, while Republicans cautioned that tinkering with the existing language could cause the entire 159-page proposal to collapse.

    Tim Berners-Lee weighed in on his blog. You might remember the Berners-Lee as the guy who actually invented the web.

    In a post on his blog titled Net Neutrality: This is serious, Berners-Lee explained his worry that, without net neutrality, legislation-free use of the internet by millions in the US could come to an end.

    "When I invented the web, I didn't have to ask anyone's permission. Now, hundreds of millions of people are using it freely. I am worried that this is going end in the USA", Berners-Lee wrote.

    Sean-Paul of The Agonist has been keeping a close eye on this for months. Today he posted information about KBH v. BAR on Net Neutrality.

    Many of you probably know I am no fan of Kay Bailey, one of my Senators from Texas. (But if it were her vs. Cornyn, hell, I'd vote for her without a second thought--but I digress.) Here's the deal: Kay Bailey has the chance to get net neutrality right. She literally has the opportunity to save the internet or give it away to special interests.

    She's also running for re-election. And her opponent, Barbara-Ann Radnofsky is on the right, er correct, side of the issue.

    So, yesterday on of the Save The Internet Coalition members sent out Barbara-Ann's and Kay Bailey's phone numbers, so their members could voice their concern over this critical issue. Of course, the people who called Senator Hutchison got her office and left a message with a staff member. On the other hand, those that called Radnofsky actually talked to her, as the email had accidentally included her personal cell number (oops). But Radnofsky was ecstatic about it. She took over 200 calls from people concerned about net neutrality and how the telco cartel was fighting this in Congress.

    Would Kay Bailey do the same thing? More importantly, will she do the right thing?

    Call her office in Austin 512-236-8656 or D.C.202-224-5922; 202-224-0776 (FAX): urge her to save the internet and support the Snowe-Dorgan Internet Freedom Preservation proposal.

    Take action: Call Congress: 888-355-3588, it"s free Write Congress, Blog it or add the logo to your site, and make it your MySpace best friend!

    Yes this is important and you should be making that call to KBH.

    Posted by Neumann's Machine at 12:10 AM | Comments (7) | TrackBack

    June 21, 2006

    The Budget, Taxes and the Economy

    BondDad over at BOR has been doing an excellent job dissecting and explaining economic issues. Seriously, if you want to be able to make your mortgage payments and maybe be able to afford gas, you need to pay attention here. Ostensibly because it effects your life, but the real reason I want y'all to get interested in this is that DEMOCRATS ARE BETTER ON ECONOMIC ISSUES THAN REPUBLICANS. And for those of you thinking people have forgotten about their wallets, the economy WAS an issue in 2004... D's just did a bad job with it.

    Seriously, Kerry did a piss poor job of explaining where he stood on economic issues and he fell victim to the same R bullshit that's been pumped out like sewage from a backed up septic tank since Reagan ran in 1980. Don't buy into that crap that 2004 was an 'unusual year' in which voter's opted for values over their wallets. Kerry just did a bad job of selling them on what should be a Democratic strength for the next 20 years.

    The first article BD put up was related to the positive benefits of a balanced budget. I agree with his overall conclusion even if we differ on the impact of effects of massive deficit spending. I for one think that while there is a definite crowding effect from massive government debt sales, it's probably not as pronounced as would be expected. Still it IS there. The biggest points are that operational deficits (like the ones we're running now) are bad because they do make capital more expensive (hand in hand with higher interest rates) , limit the capacity of the economy to grow and make it extremely difficult to handle major disasters like hurricanes.

    Think of it this way... deficits are good when we get something from them. For example, rather than spending $100Bn/year in Iraq, we could have been spending that on mass transit and infrastructure throughout the US. Think of what that would have done for the productive capacity of US citizens, entrepenuers and business.

    While our interest rates have not gone up as much as one might expect due to Repubublican deficits, there are a number of factors. For one, most of our global competitors do have rates inline or lower than ours because they are not currently as fiscally irresponsible as the US. Another common justification for why US rates have remained relatively low despite our profligate spending on credit is the idea of a global savings glut.

    The Right Wing Noise Machine will attempt to rebut this argument with Bernanke's "global savings glut" theory. Bernanke's theory is wrong. As the IMF pointed out in chart 2 of this presentation, the "global savings glut" is in fact a 30 year low in Asian investment. When Asian investment picks-up, the global savings glut theory will diminish as well. In other words, low US low-term interest rates for the 2004-2005 period were the result of a historically low investment rate and should be considered an anomaly.

    The second article BD recently posted was an analysis of noise being made about higher than expected tax receipts. The number one thing here is not that supply side economics works (they don't). It's that when you start with already low expectations, it's pretty easy to exceed them. While tax receipts are higher on a year over year basis, they are not higher when compared to pre Bush tax cut numbers and growth in the economy has been much lower than expected.

    I bring both these articles up because they dovetail very nicely... the R message is full o half truths, lies, damned lies and statistics that fall apart on close inspection. Their ability to sell the public on their specious claims of economic prowess rest solely on the lack of an effective Democratic counter argument. If we're to stop the US from sliding into third world status, we must have a strong, effective message. It's absolutely critical.

    Posted by mcblogger at 01:42 PM | Comments (2) | TrackBack

    June 12, 2006

    Insurance carriers place moratorium on Florida as Alberto approaches

    A 72 hour moratorium is now in effect for new insurance policies in Florida as a result of the rapidly approaching tropical storm Alberto. The moratorium affects most new insurance policies in Florida which will cause problems for people looking to buy everything from a car to a beachside condo.

    Photobucket - Video and Image Hosting

    Have I ever mentioned how happy I am not to live on the coast?

    Posted by mcblogger at 10:30 AM | Comments (0) | TrackBack

    June 11, 2006

    More on the AT&T layoffs

    (Sorry about the delay in posting today... I'll get a recap up of last night as soon as possible along with the first batch of pictures. For now, all I'll tell you is that LFT and DU peeps are FUN to drink with)

    Bradley Bowen at the North Texas Liberal has some pictures up and additional details on the story.

    Mike Littleton, the Southern Area Director of the CWA, said that the group was protesting the announced layoffs from AT&T. "We don't feel it's right that employees are laid off while in the meantime, the company is doing well." Over 200 people in the immediate Ft. Worth area will lose their jobs with the communications giant. Mr. Littleton pointed out that with only about 2,000 Ft. Worth area citizens actually working, 200 out of work is a big proportion. He said that most of the layoffs would affect telephone operators.

    Anyone want to make a bet about how many of those jobs will go to nice facility in Bangalore?

    Posted by mcblogger at 08:19 PM | Comments (7) | TrackBack

    June 09, 2006

    CWA Layoffs - AT&T Fucks up in Fort Worth

    Talk about bad idea jeans... AT&T sent out a 'surplus announcement' which means (here in Fort Worth) that they have 235 people they are about to layoff. Bitches. Of course, they choose to do this AS the Democratic State Convention is going on. Across the street. How's that for smart?

    CWA Local 6201 has set up a picket line which several Democrats were marching on, including Sandra Ramos and David Van Os. It's pretty obvious from talking to one union member that AT&T plans to outsource jobs to contractors here AND OVERSEAS.

    Guila Jackson, a member of the CWA Local 6201 said that the worst part has been dealing with HR at AT&T which outsourced health care to Sedgewick CMS. Apparently, they are denying a number of claims that were covered under the CWA contracts with AT&T. The methods are entirely familiar... denial after denial, always for a different reason AND then change the forms frequently so no one knows what's going on.

    Jackson went on to tell of one worker, a veteran of Iraq, whose claim was denied for an unspecified reason.

    Please crosspost on this as what AT&T does here they're probably planning to do across the State.

    Posted by mcblogger at 01:01 PM | Comments (8) | TrackBack

    June 07, 2006

    Price of oil $30 too high? Yeah. Sucks to be us, no?

    We've been talking about it for a while. Apparently, so has the oil industry team at Banc of America Securities.

    James Wicklund, an analyst at BofA Securities appeared on CNBC and said

    There is about $30 added to the price of oil that's directly the result of international tensions and hyperactive trading.

    Granted, I don't think he ascribes nearly as much importance to currency fluctuations as he should and the impact on the dollar that deficits are clearly having. Still, it's nice to have someone in the markets thinking rationally.

    Posted by mcblogger at 09:42 AM | Comments (0) | TrackBack

    May 26, 2006

    Dell : On track to further reduce their Austin workforce

    Seriously, I had to look pretty hard for this story as it disapeered from the last few spots the Statesmen posted it. So, I'm reprinting it in the supersize just in case Mikey calls and demands they pull the story

    The company is expected to make an announcement about the location of the plant in India over the next few weeks, said Paul-Henri Ferrand, Dell's general manager for South Asia.

    "The facility will be up and running by end of the year," Ferrand said. "We couldn't be happier as it will finally give us a chance to get rid of some of our rather expensive Central Texas workforce while still enjoying the abatements and other tax breaks the State of Texas and the Cities of Round Rock and Austin lavished on us. Did you know some of our employees even think they should get health insurance? Can you believe that?"

    The plant, he said, will enable "substantial" cost cuts and help the company compete in the Indian market, where it trails rival Hewlett Packard Co., Indian computer maker HCL Technologies Ltd. and Lenovo of China.

    Then there is another reason for opening a plant in India... they're working on getting around Indian taxes (is that all these guys think about?)

    Dell currently lags largely because of taxes that result in higher prices for its products. The Indian government imposes higher import taxes on fully assembled computers than computer parts, and Dell currently ships complete computers to India.

    A plant in India would help the company avoid some taxes, improve delivery time and cut logistics and transportation costs.

    Computer sales in India are expected to increase to 10 million annually over the next three to five years.

    Honestly, manufacturing to grow the business is great. I'm all for this... however, shuttering ops centers here only makes people hate you guys. Which is why HP is doing so much better than Dell now.

    Computer maker Dell sees plant in India ready by year-end
    AP Business Writer

    NEW DELHI — Dell Inc. said Thursday its plans to build a manufacturing plant in India have made progress and that it would be ready by the end of this year, helping the personal computer maker beef up its presence in one of the world's fastest-growing markets.

    The company is expected to make an announcement about the location of the plant in India over the next few weeks, said Paul-Henri Ferrand, Dell's general manager for South Asia.

    "The facility will be up and running by end of the year," Ferrand said.

    The plant, he said, will enable "substantial" cost cuts and help the company compete in the Indian market, where it trails rival Hewlett Packard Co., Indian computer maker HCL Technologies Ltd. and Lenovo of China.

    Dell didn't give details about the capacity of the plant, or how it could come into operation in such short time. But Judy Low, a company spokeswoman, said Dell started production in China in just six months from announcing to set up a plant there.

    She also said Dell had done well in selling its products here. Its revenues from India increased to $80 million in the quarter ending April, up 40 percent from the same period a year ago.

    Still, the Round Rock, Texas-based company has a market share of just 5 percent in India.

    Dell currently lags largely because of taxes that result in higher prices for its products. The Indian government imposes higher import taxes on fully assembled computers than computer parts, and Dell currently ships complete computers to India.

    A plant in India would help the company avoid some taxes, improve delivery time and cut logistics and transportation costs.

    Computer sales in India are expected to increase to 10 million annually over the next three to five years.


    May 25, 2006 - 9:46 a.m. Copyright 2006, The Associated Press. The information contained in the AP Online news report may not be published, broadcast or redistributed without the prior written authority of The Associated Press.

    Posted by mcblogger at 10:22 AM | Comments (0) | TrackBack

    May 25, 2006



    Count One - Conspiracy : GUILTY
    Wire Fraud : GUILTY
    Securities Fraud :GUILTY
    Insider Trading : NOT GUILTY
    Lying to investigators : GUILTY
    18 total GUILTY verdicts


    2 Wire Fraud Counts : GUILTY
    3 Securities Fraud Counts : GUILTY
    Conspiracy : GUILTY

    Posted by mcblogger at 11:02 AM | Comments (2) | TrackBack

    May 11, 2006

    Upward Mobility? That is SOOO 20th Century!

    From ABC News

    America may still think of itself as the land of opportunity, but the chances of living a rags-to-riches life are a lot lower than elsewhere in the world, according to a new study published on Wednesday.

    The likelihood that a child born into a poor family will make it into the top five percent is just one percent, according to "Understanding Mobility in America," a study by economist Tom Hertz from American University.

    By contrast, a child born rich had a 22 percent chance of being rich as an adult, he said.

    "In other words, the chances of getting rich are about 20 times higher if you are born rich than if you are born in a low-income family," he told an audience at the Center for American Progress, a liberal think-tank sponsoring the work.

    He also found the United States had one of the lowest levels of inter-generational mobility in the wealthy world, on a par with Britain but way behind most of Europe.

    Yeah, this is where an overemphasis on supply-side economics will take you. Exciting, isn't it? We already have so much in common with Britain, it's nice to see that we're close to them even in terms of low opportunity for our children.

    Posted by mcblogger at 03:23 PM | Comments (2) | TrackBack

    May 06, 2006

    UPDATE : Ask A ... Newly Retired CEO Lee Raymond late of ExxonMobil

    I'm reposting this due to the small (read: two) number of questions received so far. Lee's waiting... so get those questions in!

    This week we're oiling the skids for the inevitable descent straight to hell! Our exceutive committee (ExComm) has made the decision to go with someone from the world of business for this week's Ask A... . We're terribly excited to have former ExxonMobil CEO Lee Raymond answering your questions!

    Photobucket - Video and Image Hosting

    Lee's career has in many ways mirrored my own except for the 'working for an oil company and making millions of dollars per year' stuff. We did both live in Dallas metro at around the same time, though this is more coincidence, I would guess, since so did more than 3 million other people. Lee was born in 1938 and looks every one of his 67 years. You probably would to if YOU'D BEEN RESPONSIBLE FOR GASSING UP AMERICA FOR OVER A DECADE. He joined Exxon in 1963 and here are some astounding highlights from an amazing career:

  • President of Exxon Nuclear Company, Inc. in 1979

  • Executive vice president of Exxon Enterprises, 1981

  • Elected to the Board of Directors, 1984

  • President, Exxon Corp in 1987

  • Was President during the ExxonValdez 'minor oil transport accident' in Alaska

  • CEO and Chairman, Exxon Corp, 1993 where he remained through the Mobil merger and until his retirement
  • I know you'll all have a ton of questions for Lee so don't be bashful, email them to mcblogger@mcblogger.com so we can get those questions answered!

    Posted by mcblogger at 11:06 PM | Comments (0) | TrackBack

    May 05, 2006

    ANOTHER sucky employment number

    The U.S. economy added 138,000 jobs in April, the Labor Department said, compared with a forecast of 200,000. The unemployment rate was 4.7 percent, unchanged from March.

    Without commentary, please keep in mind that the economy needs to produce 175,000 jobs monthly just to kep up with growth in the labor force. Also, the unemployment number understates unemployment (according to Challenger, Gray and Christmas) by as much as 4%.

    Posted by mcblogger at 11:41 AM | Comments (0) | TrackBack

    April 25, 2006

    RealtyTrac : Foreclosures up 38%

    Giving still more proof of just how robust the economy created by the Republicans really is, RealtyTrac the nation's largest online database of foreclosures reports that Q1, 2006 foreclosures are up 38% over Q4, 2005. Of course this is dwarfed by the realization that 72% more people lost their homes in Q1, 2006 than did in Q1, 2005.

    "The sharp increase in foreclosures in Q1 continues a steady upward trend that we've observed since the beginning of last year," said James J. Saccacio, chief executive officer of RealtyTrac. "Foreclosures have now increased in four consecutive quarters and are on track to go above 1.2 million in 2006, which would push the nation's annual foreclosure rate to more than 1 percent of U.S. households."

    Cheerful, no?

    Posted by mcblogger at 09:47 PM | Comments (0) | TrackBack

    April 24, 2006

    Lou Dobbs : It's all about Hu you meet

    I must admist I never watch Lou Dobbs Tonight, but I think I'll have to state. His commentary on the Wednesday, April 19th had a clarity that is lacking from the political discourse floating about today. Of course, that's to be expected since he's on CNN instead of Fox. And he's sane.

    Discussing Chinese President Hu Jintao's visit to the US, he makes a very good point that Hu made it obvious that he knew who really ran the show in Estados Unidos, the business leaders like Bill Gates he met with BEFORE traveling to Washington to meet el Presidente Retard.

    The fact that Hu's summit at the White House comes only after touring two of our most profitable businesses means "checkbook diplomacy" is no longer purely an American strategy.

    Being partisan as hell (no... does it show?), I especially enjoyed this part:

    The fault lies entirely with the U.S. government, our lack of strategy and our failed policies. This administration and U.S. multinational corporations have lost sight of the national interest. This administration and the Republican-led Congress have permitted the dismantling of America's manufacturing base and created a dependency on China for our clothing, computers, consumer electronics and a host of other products that is greater than our dependency on foreign oil.

    The point? Don't blame China for their ability to maipulate and take advantage of us when WE ALLOW THEM TO DO SO.

    The full text is after the jump and it's worth the read.

    Dobbs: Hu's visit shows who's in charge

    By Lou Dobbs

    Wednesday, April 19, 2006; Posted: 6:57 p.m. EDT (22:57 GMT)

    Hu Jintao
    Chinese President Hu Jintao has made meeting American business leaders a priority on this trip.

    NEW YORK CITY (CNN) -- Chinese President Hu Jintao meets with President Bush in the nation's capital Thursday after a cross-country trip for Hu that follows his state dinner with billionaire Bill Gates.

    The Chinese president's first two days in this country included stops at Boeing and Microsoft, raising questions about the purpose of President Hu's visit. The fact that Hu's summit at the White House comes only after touring two of our most profitable businesses means "checkbook diplomacy" is no longer purely an American strategy.

    China's economy has grown by an average of about 10 percent a year over the past two decades. This year, China moved ahead of Britain and France to become the world's fourth-largest economy. It's also changing the global supply chain, becoming the world's leading buyer of basic commodities, whether grain, meat, coal and steel, and is second to only the United States in consumption of oil. China is buying up American companies and other multinational corporations with almost $900 billion of hard currency reserves.

    China has now arrived, and we no longer refer to our series on China's rapid economic and military build-up as "Red Star Rising." The title of that reporting is now "Red Storm."

    But the Red Storm cannot be blamed for its continued manipulation of its currency, for its record $202 billion trade surplus with the United States or for buying up American businesses and hard assets around the globe while restricting access to its market and economy.

    The fault lies entirely with the U.S. government, our lack of strategy and our failed policies. This administration and U.S. multinational corporations have lost sight of the national interest. This administration and the Republican-led Congress have permitted the dismantling of America's manufacturing base and created a dependency on China for our clothing, computers, consumer electronics and a host of other products that is greater than our dependency on foreign oil.

    Make no mistake: Our leaders are the fools, and China's leaders are not to be blamed for taking advantage of this administration's commitment to faith-based economic theories and so-called free trade that permits the Chinese access to the world's richest consumer market while China denies our businesses access to its emerging market.

    We can only blame ourselves and our business leaders for offshoring production to China. We can only blame ourselves and our business leaders for permitting the transfer of our knowledge base in technology to China. And we can only blame ourselves and our business leaders for shipping middle-class jobs to China in search of lower labor costs.

    When you watch President Hu and President Bush shake hands at the White House, it would be wise for all of us to remember what that handshake costs America. And remember, there's a reason President Hu met with business leaders in Seattle first. He obviously knows who's really in charge of this country.

    Posted by mcblogger at 11:29 PM | Comments (0) | TrackBack

    April 23, 2006

    The ever shrinking middle class and Deficit's matter because it makes oil more expensive

    bondad over at BOR has an extremely good post up about class warfare. It's really no longer the rich vs. the poor, it's the rich vs. everyone. Of course, it's more subtle than that since the middle class are constantly prepping for the day they'll be rich and the poor are just trying to survive. The rich, meanwhile, fund think tanks that (much like the Social Darwinism of Spencer and Graham) reinforce their view that they are at the top because 'they are better/deserve to be'.

    This article is good because it provides real world evidence that things aren't great in el Presidente's economy. What it doesn't do is explain why the middle class so blythely accepts things as they are. IMHO, it's the belief that they will get something better and that once they do 'fuck everyone else'. Think of it as the American Dream with a lottery win replacing the house in the 'burbs.

    The next one that caught my attention was an article up about how deficits affect the value of the dollar and the actual cost of (and our ability to) buy oil.

    What are the consequences of the past five years of fiscal irresponsibility? The value of the dollar has fallen by over 30% since May of 2001. When our money is worth less, we pay more for everything from real estate to oil. For example, in May of 2001, a barrel of oil sold for about 28 dollars, or about 33 euros. Today, that same barrel of oil sells for over 70 dollars, and just over 56 euros. This means that while Americans are paying 150% more for a barrel of oil today than they were five years ago, Europeans are only paying 70% more for that same barrel.

    That’s right; the price of oil has risen over twice as fast for us as it has for Europeans. This difference is the result of the falling value of the dollar – if the dollar had retained its value vs. the Euro, the price of oil, currently about $72 per barrel, would be about $50 per barrel.

    Posted by mcblogger at 12:48 AM | Comments (0) | TrackBack

    April 12, 2006

    The Bank Of Wal - Mart

    Oh, you had to know it was coming! This has been around for a while (Wal-Mart's been trying to enter banking since 1999) but this time they may actually get it pushed through considering that the argument in favor is quite sound. OK, so I'm not particularly happy about Wal-Mart entering financial services but what they are proposing is setting up a bank to handle merchant services. Currently, they pay a fee to banks for clearing non-cash transactions. What they want to do is set up a bank to clear it themselves and save on the fees charged by the banks. Theoretically, they'll pass the savings on to the consumer.

    Yeah, I called bullshit about the same time as you. What's worse, the major opposition to this move aren't consumer advocate groups, it's the banks who stand to lose the most.

    Wal-Mart says they will not expand to retail banking. I think that's a lie on a level comparable to 'Iraq poses a clear and present danger to the United States'. I'm therefore very opposed to Wal-Mart entering banking. Still, it's funny to see the financial services industry get their collective panties in a twist over this.

    Posted by mcblogger at 02:54 AM | Comments (0) | TrackBack

    March 27, 2006

    This weekend... Chopstick environmentalism, Selling parks and Feingold

  • The NYT has an op/ed up about China's newfound love of the environment. Well, at least environmental regulation. I fully support the chopstick thing... just check my silverware drawer.
  • Who knew Yankees like to eat their own almost as much as Texans! Apparently, Alfonse D'Amato is causing all kinds of problems with Republicans in NY. Absolutely heartwarming!
  • Bush's new FDA nominee... what to do? Hummm let me see... maybe hold up his nomination until the morning after pill is approved? Yeah, that sounds like a marvelous idea especially since the R's seem hell bent on bringing back the coat hanger abortion.
  • Feingold ROCKS! And now we have post-Censure proposal numbers to prove it!
  • The Republican plan for balancing the budget? You know that Coldwell Banker sign in front of the entrance to Rocky Mountain National Park... that should give you a clue.
  • Posted by mcblogger at 12:33 AM | Comments (2) | TrackBack

    February 22, 2006

    No shit, Sherlock!

    San Francisco plans to harness the power of poo

    City officials are hoping to harness the power of dog doo. San Franciscans already recycle more than 60 percent of their garbage, but in this dog-friendly town, animal feces make up nearly 4 percent of residential waste, or 6,500 tons a year — nearly as much as disposable diapers, according to the city.

    Within the next few months, Norcal Waste, a garbage hauling company that collects San Francisco's trash, will begin a pilot program under which it will use biodegradable bags and dog-waste carts to pick up droppings at a popular dog park.

    The droppings will be tossed into a contraption called a methane digester, which is basically a tank in which bacteria feed on feces for weeks to create methane gas.

    The methane could then be piped directly to a gas stove, heater, turbine or anything else powered by natural gas. It can also be used to generate electricity.

    Posted by mayor mcsleaze at 06:35 PM | Comments (0) | TrackBack

    February 18, 2006

    When constabulary duty's to be done, to be done

    A policeman's lot is NOT a happy one

    Citing public pressure, Spotsylvania County's sheriff said yesterday that he has suspended the practice of allowing detectives to receive sexual services during prostitution investigations, a technique that brought the quiet Virginia exurb attention from across the nation and around the world.

    "As Sheriff, I understand the feelings and concerns the citizens of this county have expressed," Sheriff Howard D. Smith said in a statement. "And I empathize with those feelings."

    Spotsylvania detectives on assignment to crack down on prostitution in county massage parlors visited Moon Spa three times in January and paid for massages, baths and sexual acts on four occasions, court documents show. On one occasion, they left a $350 tip, records show.

    Smith and William F. Neely, the county's top prosecutor, said the sexual acts were necessary because the masseuses had poor English skills and would have been unable to make clearly spoken offers of sex for money. Such offers and evidence that more than touching occurred are needed to make a case under Virginia law, they said. Only unmarried detectives were assigned to the cases, Smith said.

    Posted by mayor mcsleaze at 01:58 PM

    February 02, 2006

    Creep out family, friends, neighbors and associates

    Alan Greenspan retired this week. That event has sparked a week of tributes and ass kissing from the crew at CNBC. Of course, the big event is a charity auction on EBay. Keep in mind, this isn't an auction of something Greenspan donated (like maybe his briefcase,which could throw markets into a tailspin or spur a rally depending on how full it was as he walked into an FOMC meeting) but is instead an auction of work by a painter who only does portraits... of Greenspan.

    Image hosting by Photobucket

    Yes, the auction is for a good cause (Autism Speaks). But why not skip the creepy art and just write a check? The high bid right now is $116,100. How much would you pay for art which might cause a seizure?

    I have a ton of respect for Greenspan even though I did feel his fear of inflation was a bit overdone. Still, I'm not sure if the best way to honor his service to the government is by auctioning a painting that reminds me of Munch.
    Image hosting by Photobucket

    Posted by mcblogger at 03:26 PM | Comments (0) | TrackBack

    January 26, 2006

    Endless deficits and countless excuses

    Remember Bush's promise to cut the deficit? Well, not so much...

    CBO Projects $337 Billion Deficit in 2006

    That's the headline but the news is worse. Though as a percentage of GDP the number is low, taxation is extremely low, longer term spending on Social Security is about to increase dramatically and the global economic environment is very different than the 80's. There are better places for investors to put their money which leaves our Chinese creditors to pick between our spendthrift ass and hookers. I'm thinking they'll soon opt for the hookers.

    What's the deal? Well, Bush would have you believe it's Katrina and the Iraqi occupation which is total crap. It's the tax cuts and the fact that they haven't grown the economy much in five years. The other stuff is big, but completely digestable... if he'd left long term tax policy in place and allowed the Fed to pull the monetary trigger they were already starting to pull in 2001 by dropping rates.

    Posted by mcblogger at 08:20 PM | Comments (1) | TrackBack

    January 23, 2006

    Firing is Job 1

    Ford announced today it would be laying off between 25,000 and 30,000 people over the next few years. Actually, they're thinking through 2012. So much for that 'booming economy' Bush was talking about. I guess that kind of makes him a liar. A liar with a bad haircut and retard's sense of humor.

    One qoute from the press conference made me laugh...
    bill ford

    "...we need to build cars that the American people want..."

    I can tell you what the American people want without even digging into marketing demographics... they want a Toyota, Honda, Mercedes or BMW. Until you guys dig head out of ass and start designing cars people want, you're going to continue to lose business. I have little sympathy for a company that blames it's problems on it's workers and that's what the layoff is all about.

    Beating up on manufacturing personnel is the real 'job 1' at Ford.

    Posted by mcblogger at 09:54 PM | Comments (0) | TrackBack

    January 19, 2006

    Osama show cancelled, Kerry and we're heading for a recession, part 200

  • The ever tedious Osama was back in the news today. He threatened more attacks and offered a truce, but no terms and would say nothing about what he'd give up. Bitch sounds like one of my exes.

    The amusing thing about it... no one gave a fucking damn. No one. The stock market kept going up and people went about their lives. What could this possibly mean? No one's scared of him. Or al Qaida. Or willing to accept a bunch of shit from Bush for protection.

  • Kerry's panties are in a twist over an article in GQ... A) no one reads GQ. B) no cares about Kerry. Notice this is cross posted under poop tells vomit it stinks?
  • Bush fucked up by not letting all members of the intelligence committee updated about the illegal wiretaps. In both houses of the Congress. Oh, and the taps were illegal.
  • The TIC report came out yesterday and in a word, ugly. Foreign capital inflows to the US continue to prop us up (Federal debt plus Current (mixed in with Trade) account deficit requires us to borrow almost $1 Trillion/year). Disturbingly, an increasing amount of money is going to hedgies in the Caribbean. You remember them... the Asian Currency Crises of 1997-1998? And now they're loading into dollars. Hedgies like to pump and dumb. Look for $2 to the Euro.
  • Posted by mcblogger at 10:55 PM | Comments (1) | TrackBack

    January 06, 2006

    Why listen to facts when I have a speech based on bullshit?

    Treasury Secretary John Snow at the US CoC yesterday said the US was the 'economic envy of the world'. Maybe it's because our interest rates are pretty much the highest of industrialized nations. Then we get this not so good job report which reinforces the case that the tax cuts haven't really done shit for the economic fortunes of the vast majority of Americans.

    For those keeping score, the economy has to produce 180k jobs per month just to keep up with the growth in the workforce, more to actually bring down unemployment and cover immigration. 2005 has been decent with us JUST covering this number but, of course, it doesn't do much for those who've been hit hardest by Bush's jobless recovery.

    Posted by mcblogger at 01:08 PM | Comments (0) | TrackBack

    January 02, 2006

    Remember that recession...

    yeah, looks like it's going to start a little early...

    Last week the 2 year Treasury yeild went higher than the yeild on the 10 year bond, offically inverting the curve.

    One of the big factors keeping our rates from rapid escalation is almost non-existent interest rates in Europe and Japan. As those economies accelerate, those rates are going to go up, forcing us higher. Combine that with this...(scroll to Casey Wian's report) and you have the makings of that recession I wrote about a few weeks ago.

    Happy New Year!

    Posted by mcblogger at 11:46 PM | Comments (0) | TrackBack

    December 28, 2005

    That dog don't hunt...

    el Presidente and his staffers have done a tremendous job of talking up their economic achievements over the last month. Said achievements can be summarized as follows:

  • Record setting deficits

  • Pathetic job creation

  • Tax policy geared to crush the middle class

  • and these are the highlights!

    Here's some common sense... if you have tax cuts in a high tax environment (which we didn't have in 2001) then you'll get a boost in the economy. If you change tax policy to discourage business expansion and investment (like the R's did in 2001 and after) and instead favor profit taking then you'll get exactly what we have now, weak employment and non-existant wage growth. The fact that this happened in a low interest rate environment (not to mention a very compliant government when it comes to regulation) WITH good consumer spending means that business has done all it's going to do. Period. There's no tremendous boom coming. It's just not going to happen.

    In other words, Bushites have made a disaster of the federal budget without providing ANY gains that would at least compensate. Much like their foreign policy, their economic policy has been a disasterous failure.

    Posted by mcblogger at 12:19 AM | Comments (0) | TrackBack