A few posts ago, Tuna Melt predicted inflation was coming, and it would lead to a rapid "recovery" of the stock market.
Nouriel Roubini of NYU, who's become the go-to guy for GFM 2008, predicts just the opposite.
Game on, Roubini.
Here's where Tuna Melt disagrees with you:
You say:
"First, the massive injection of liquidity in the financial system--literally trillions of dollars in the last few months--is not inflationary, as it accommodates the demand for liquidity that the current financial crisis and investors' panic have triggered."
TM says: And the dollar has benefited from everyone's desire to get into cash. But there's a buttload of cash out there now. More than at any time in the dollar's history. At the first hint of an upward trend in any asset market, the cash will start to move in, and the snowball will roll. You say central banks can and will mop up the excess before inflation starts. I say they tried that in 06, 07 and caused GFM oughteight.
You say:
"As long as deficits are financed with debt--rather than by the printing presses--fiscal costs will not be inflationary, as taxes will have to be increased over the next few decades and/or government spending reduced to service this large increase in the stock of public debt."
TM says: have you met the United States government? Don't forget that a Social Security/Medicare disaster is looming a decade out. The only way Big G can finance all the schemes in store for us is with the printing press.
You say:
"Wouldn't central banks be tempted to monetize these fiscal costs--rather than allow a mushrooming of public debt--and thus wipe out with inflation these fiscal costs of bailing out lenders/investors and borrowers? Not likely in my view. Even a relatively dovish Bernanke Fed cannot afford to let the inflation-expectations genie out of the bottle via a monetization of the fiscal bailout costs."
TM says: On this you are correct, but I think it's already too late for poor Ben. The Fed has pumped out an unprecedented amount of cash into the world and we're nearing the point where foreign investors don't want to touch American debt.
Friday, October 31, 2008
Thursday, October 30, 2008
Madison would be ashamed.
From Federalist #10
"The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State."
Are you an elector? Then why are you voting for President?
Madison and others knew that democracy inevitably turns into grand, organized theft, and tried to curb it by making the Union a republic. But democracy turned out to be much more insidious than they ever imagined. States quickly starting choosing "slates" of electors via popular vote, and that was enough to let "the influence of factions" run rampant.
"The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State."
Are you an elector? Then why are you voting for President?
Madison and others knew that democracy inevitably turns into grand, organized theft, and tried to curb it by making the Union a republic. But democracy turned out to be much more insidious than they ever imagined. States quickly starting choosing "slates" of electors via popular vote, and that was enough to let "the influence of factions" run rampant.
Will the US go bankrupt?
The US government is on pace to go so deep into debt that the solvency of the whole operation might one day come into question (unless the dollar tanks and the existing holders of Treasury bonds find themselves holding more worthless paper....hmmmm....).
Where might this all lead?
Today the earth has a real-time example of a first world country that's become entirely insolvent. Let's watch what happens with Iceland and see what might be in store for America some day.
Where might this all lead?
Today the earth has a real-time example of a first world country that's become entirely insolvent. Let's watch what happens with Iceland and see what might be in store for America some day.
More Crystal Balling
It's hardly a prediction to say Obama will win. The sun will rise, the earth will turn, the government will grow, and Obama will win.
Tuna Melt thinks the recent media reports of McCain gaining in the polls won't amount to anything. Not only will Obama win, but the democrats will crush, and I mean CRUSH, in the Congressional, state, and local races. And then in 2010 the Republicans will retake Congress in their own crushing win. And on and on...the government grows...the flow of confiscated money continues...from the politicians to the domestic bureaucrats to the tort lawyers to the bottom of the Atlantic Ocean.
Tuna Melt thinks the recent media reports of McCain gaining in the polls won't amount to anything. Not only will Obama win, but the democrats will crush, and I mean CRUSH, in the Congressional, state, and local races. And then in 2010 the Republicans will retake Congress in their own crushing win. And on and on...the government grows...the flow of confiscated money continues...from the politicians to the domestic bureaucrats to the tort lawyers to the bottom of the Atlantic Ocean.
Wednesday, October 29, 2008
Tuna Melt Steps Out On A Limb
The man behind the curtain of this blog has been content to make general political predictions that are safe to put out there. Bet that government will always grow and make even bigger messes and you'll always be right.
But tonight I'm feeling a bit more reckless. Junk bond trading hedge fund leveraging capitalist reckless.
Tuna Melt predicts that the stock market is going to come roaring back much faster than anyone (including me) ever expected when this unraveling began.
Why?
Because the dollar is about to take a nosedive. Stocks, oil, gold, silver, steel, food, and everything else that's come down from the stratosphere in the past few months (with one exception)* will find their way back to pre-GFM or near pre-GFM prices soon.
Forget the proverbial spigot. The Fed now has the fire hoses out and open to full blast. For the past few weeks, banks have been collecting all the water, but soon their stores will be full and the floodgates will open.
Stocks will rise for the simple reason that more dollars will be required to express the same values.
Fill up your gas tanks now.
* the exception is housing. It filled the role of biggest bubble in the recent pricing explosion. Regulators won't let that happen again. The uber-bubble will form somewhere else. Chinese real estate anyone?
But tonight I'm feeling a bit more reckless. Junk bond trading hedge fund leveraging capitalist reckless.
Tuna Melt predicts that the stock market is going to come roaring back much faster than anyone (including me) ever expected when this unraveling began.
Why?
Because the dollar is about to take a nosedive. Stocks, oil, gold, silver, steel, food, and everything else that's come down from the stratosphere in the past few months (with one exception)* will find their way back to pre-GFM or near pre-GFM prices soon.
Forget the proverbial spigot. The Fed now has the fire hoses out and open to full blast. For the past few weeks, banks have been collecting all the water, but soon their stores will be full and the floodgates will open.
Stocks will rise for the simple reason that more dollars will be required to express the same values.
Fill up your gas tanks now.
* the exception is housing. It filled the role of biggest bubble in the recent pricing explosion. Regulators won't let that happen again. The uber-bubble will form somewhere else. Chinese real estate anyone?
Saturday, October 25, 2008
Friday, October 24, 2008
This Novelist Needs a Bad Metaphor
Subprime mortgage derivatives = bullets
Government issued currencies = gunpowder
Central banks = guns
Central bankers = firing squad riflemen
World leaders = firing squad commander
Government issued currencies = gunpowder
Central banks = guns
Central bankers = firing squad riflemen
World leaders = firing squad commander
Greenspan the Musical
It would be awesome. Ayn Rand, Andrea Mitchell, Bush I, Clinton, Bush II, a chorus of Bernanke Bailout Boys...narrated for the audience by Harry Browne.
A Modern Lear
From Greenspan's testimony
"What went wrong with global economic policies that had worked so effectively for nearly four decades? The breakdown has been most apparent in the securitization of home mortgages. The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of crisis) would have been far smaller and defaults accordingly far fewer."
Yes, Alan, without derivatives, there would have been far less subprime lending. But so long as the Fed is pumping and dumping, the money has to go somewhere.
With interest rates from 2001 - 2004 in the negative after inflation, borrowers in effect made money simply by borrowing it. And borrow they did. They borrowed to buy the home. Then an investment bank borrowed to buy the borrowed-backed security. When the banks found out that everyone wanted to buy the securities, they lent more money so they could sell more securities. The global economy turned into a snake eating its own tail. It had to come to an end either with:
a) a massive crash in the value of the dollar.
b) a painful unraveling of the entire scheme if the phony capital driving it ever ran out.
Letter A began to happen, so Bernanke raised the interest rate, bringing about letter B.
Sub-prime mortgage derivatives aren't the root of this mess. If they were regulated away, the loose money coming out of the world's central banks would have found something else to rocket into the stratosphere. Who knows? There was so much loose money floating around, maybe other assets got an artificial lift too. Perhaps oil? Maybe gold? Maybe silver, zinc, copper, steel, food, STOCKS!!
I feel for Alan Greenspan. In the sixties, he was without question one of the world's greatest economists, perhaps one of the greatest ever. When he was offered the big job in '83, he probably thought he could use his smarts for good. It just never, ever works that way up there. At some point, probably at the height of the nineties boom he oversaw, the brilliant economist became "The Maestro."
His boom crashed. Planes hit the World Trade Center. He wasn't the only one who lost his head.
And now the brilliant young mind who once wrote articles on the need for sound money, on the danger of government despots bent on destroying the currency, of the incentives in American-style democracy to inflate into regular booms and busts, became that which he despised, and then some.
His testimony before Congress yesterday, where every word was chosen without a care for how the markets might react, but instead in the hopes of keeping his butt out of jail, was the climax of a tragedy so perfectly soaked in irony I'm amazed it's really happening.
"What went wrong with global economic policies that had worked so effectively for nearly four decades? The breakdown has been most apparent in the securitization of home mortgages. The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of crisis) would have been far smaller and defaults accordingly far fewer."
Yes, Alan, without derivatives, there would have been far less subprime lending. But so long as the Fed is pumping and dumping, the money has to go somewhere.
With interest rates from 2001 - 2004 in the negative after inflation, borrowers in effect made money simply by borrowing it. And borrow they did. They borrowed to buy the home. Then an investment bank borrowed to buy the borrowed-backed security. When the banks found out that everyone wanted to buy the securities, they lent more money so they could sell more securities. The global economy turned into a snake eating its own tail. It had to come to an end either with:
a) a massive crash in the value of the dollar.
b) a painful unraveling of the entire scheme if the phony capital driving it ever ran out.
Letter A began to happen, so Bernanke raised the interest rate, bringing about letter B.
Sub-prime mortgage derivatives aren't the root of this mess. If they were regulated away, the loose money coming out of the world's central banks would have found something else to rocket into the stratosphere. Who knows? There was so much loose money floating around, maybe other assets got an artificial lift too. Perhaps oil? Maybe gold? Maybe silver, zinc, copper, steel, food, STOCKS!!
I feel for Alan Greenspan. In the sixties, he was without question one of the world's greatest economists, perhaps one of the greatest ever. When he was offered the big job in '83, he probably thought he could use his smarts for good. It just never, ever works that way up there. At some point, probably at the height of the nineties boom he oversaw, the brilliant economist became "The Maestro."
His boom crashed. Planes hit the World Trade Center. He wasn't the only one who lost his head.
And now the brilliant young mind who once wrote articles on the need for sound money, on the danger of government despots bent on destroying the currency, of the incentives in American-style democracy to inflate into regular booms and busts, became that which he despised, and then some.
His testimony before Congress yesterday, where every word was chosen without a care for how the markets might react, but instead in the hopes of keeping his butt out of jail, was the climax of a tragedy so perfectly soaked in irony I'm amazed it's really happening.
Gonna Be a Bad Morning Out There
The severity of the malinvestment worldwide is only now becoming apparent and today is looking like it might be the new, most memorable day of GFM 2008 (replacing Lehmen collapse day as the first most memorable day, and bailout fails as most memorable day #2).
Thursday, October 23, 2008
A conservative estimate
Time to start thinking about what worked and what didn't work last time.
Tack on another 7 for Hoover's early interventions and you've got a financial crash and one year of misery stretched into a decades-long mess.
Tack on another 7 for Hoover's early interventions and you've got a financial crash and one year of misery stretched into a decades-long mess.
Wednesday, October 22, 2008
Long, Boring, and True
If you don't mind reading a long post by a professor, spend ten minutes here .
Stimulating
Tuna Melt is glad to provide you with all the questionable, speculative opinions about GFM that your heart desires. Thank you for your business.
But, again, it is now time to re-iterate that, while we at TM personally aren't in favor of Treasury buying toxic mortgages, the Fed buying into money market funds, partial nationalization of our banks, or giant liquidity injections by the world's central banks, we understand the economic rationale behind these movements and don't fault the world's leaders for trying to cover their butts. To hell with long term consequences, we need to shut down this meltdown!
But, Fancy Nancy People, this ongoing talk in Congress of hundreds of billions for public works projects is bad, bad, bad news. It WILL turn a bad recession into a Depression, just like it DID once before.
We don't support McBama. We don't care for Democratic Republicanism. We like to make jokes at the expense of all and laugh and be cynical and laugh about how cynical we are, but, jokes aside, this is some serious badness we're talking about here. Another "stimulus" of tax rebate checks is fine (just inflationary since there isn't a corresponding decrease in spending elsewhere). 300 billion from Washington, doled out in political favor trading to the Blackwaters of the construction industry will sink this ship.
But, again, it is now time to re-iterate that, while we at TM personally aren't in favor of Treasury buying toxic mortgages, the Fed buying into money market funds, partial nationalization of our banks, or giant liquidity injections by the world's central banks, we understand the economic rationale behind these movements and don't fault the world's leaders for trying to cover their butts. To hell with long term consequences, we need to shut down this meltdown!
But, Fancy Nancy People, this ongoing talk in Congress of hundreds of billions for public works projects is bad, bad, bad news. It WILL turn a bad recession into a Depression, just like it DID once before.
We don't support McBama. We don't care for Democratic Republicanism. We like to make jokes at the expense of all and laugh and be cynical and laugh about how cynical we are, but, jokes aside, this is some serious badness we're talking about here. Another "stimulus" of tax rebate checks is fine (just inflationary since there isn't a corresponding decrease in spending elsewhere). 300 billion from Washington, doled out in political favor trading to the Blackwaters of the construction industry will sink this ship.
China Product Safety
Are Chinese-made products (read: just about every product in every market) safe?
They are now. There are and have been thousands and thousands of government regulations "overseeing" every product imported from China that may or may not have had any impact on product safety.
But now people who know what they are doing are getting involved.
They are now. There are and have been thousands and thousands of government regulations "overseeing" every product imported from China that may or may not have had any impact on product safety.
But now people who know what they are doing are getting involved.
Tuesday, October 21, 2008
Nothing for me, thanks.
David Sedaris in The New Yorker:
"The flight attendant comes down the aisle with her food cart and, eventually, parks it beside my seat. “Can I interest you in the chicken?” she asks. “Or would you prefer the platter of shit with bits of broken glass in it?”
To be undecided in this election is to pause for a moment and then ask how the chicken is cooked."
"The flight attendant comes down the aisle with her food cart and, eventually, parks it beside my seat. “Can I interest you in the chicken?” she asks. “Or would you prefer the platter of shit with bits of broken glass in it?”
To be undecided in this election is to pause for a moment and then ask how the chicken is cooked."
Thursday, October 16, 2008
Tuna Melt Will Be In Greenville Mississippi Until Next Week
Home of Great Grandma. Birthplace of Jim Henson.
Wednesday, October 15, 2008
Arcadia, Santa Claus, and Heaven
54 year-old white male, voted Kerry '04, Bush '00, Dole '96, hunter, NASCAR fan...hard for Obama said: "I'm gonna hate him the minute I vote for him. He's gonna be a bad president. But I won't ever vote for another god-damn Republican. I want the government to take over all of Wall Street and bankers and the car companies and Wal-Mart to run this county like we used to when Reagan was President."
Excerpted from a recent focus group. More here. Another excerpt:
A woman, late 50s, Democrat but strongly pro-life. Loved B. and H. Clinton, loved Bush in 2000. "Well, I don't know much about this terrorist group Barack used to be in with that Weather guy but I'm sick of paying for health insurance at work and that's why I'm supporting Barack."
Excerpted from a recent focus group. More here. Another excerpt:
A woman, late 50s, Democrat but strongly pro-life. Loved B. and H. Clinton, loved Bush in 2000. "Well, I don't know much about this terrorist group Barack used to be in with that Weather guy but I'm sick of paying for health insurance at work and that's why I'm supporting Barack."
Chart 2
This chart shows the money supply over a longer time period (click on the image to get a better view). 1971 is when Nixon pulled us off the gold standard. Greenspan took over in 83. 2001 is when our monetary policy went bonkers and caused the current fiasco.
Chart 1
US Money Supply as measured by M3 (the best aggregate). The government quit reporting M3 in 2006 (I wonder why). M3B is a measurement now captured and maintained by commodity investors as an attempt to measure what M3 used to be.
Oy
Australia's Prime Minister blames "extreme capitalism" for the market turmoil.
Government spends trillions on defense and social policy in the 80s and needs an inflationary monetary policy to support it. We get a big ol bust in 87...and massive liquidity injections are used to bring us out...which gives us a short boom in the nineties followed by a bust in 2000 that just happens to coincide with the beginning of the greatest growth of government since the 30s, and the most inflationary government monetary policy yet to get us out...which leads to an even bigger bust and NOW...the most inflationary monetary policy EVER happening RIGHT NOW which may well lead to a nice but short-lived near-future boom that will land in an even bigger BUST.
Rampant, unstoppable, extraordinary government growth + government outright destruction of the value of our money = extreme capitalism.
Government spends trillions on defense and social policy in the 80s and needs an inflationary monetary policy to support it. We get a big ol bust in 87...and massive liquidity injections are used to bring us out...which gives us a short boom in the nineties followed by a bust in 2000 that just happens to coincide with the beginning of the greatest growth of government since the 30s, and the most inflationary government monetary policy yet to get us out...which leads to an even bigger bust and NOW...the most inflationary monetary policy EVER happening RIGHT NOW which may well lead to a nice but short-lived near-future boom that will land in an even bigger BUST.
Rampant, unstoppable, extraordinary government growth + government outright destruction of the value of our money = extreme capitalism.
Tuesday, October 14, 2008
Monday, October 13, 2008
Comparing The Two Economic Crisis Plans Rolled Out This Week
For Anyone Who Thought The Republicans Were The Free Marketeers and The Democrats Were the Bleeding Hearts:
Obama proposes:
1. A $3000 per-job tax credit for small businesses that create new jobs over the next few years.
2. Tax-penalty free withdrawals from retirement accounts.
3. 90-day foreclosure moratorium for homeowners.
4. A new government lending facility to provide cash to states and municipal governments.
#3 & 4 on the list are problematic, but not nearly as bad as this:
McCain proposes: $300 billion of government money to buy the mortgages of homeowners who are in danger of foreclosure. Ownership of those mortgages transferred to Fannie & Freddie and a new, lower interest rate is given to the homeowner.
Obama is proposing a big tax cut (absolutely the correct response to this crisis). McCain is proposing the biggest government takeover of private property since before I was born.
Ready for this? The social scientists at Yale and Columbia much prefer McCain's plan. So does NPR. Dear Lord, you should have heard them gushing this afternoon on Democracy Now.
The Obama campaign? They have called the McCain plan "too costly."
A good sign today.
No, not the Dow. That could mean anything.
Talking about the publication of this article in the UK's Independent. Check it out.
Talking about the publication of this article in the UK's Independent. Check it out.
The Meaningless Nobel
The Peace Prize to Arafat a few years ago. Now the economics Nobel to Krugman? Early money that next time they award posthumously to Marx.
Sunday, October 12, 2008
Diluting the Tuna Melt Brand
A break from GFM for SLAM (Spencer Literary Agent Meltdown).
In September, it was looking good for the current novel. One agent came back to the well three times, one letter proclaiming he raced to the end of the partial request and was sad he didn't have more to read.
In the past few days, he and everyone else declined. Queries sent out over a span of months came flying back as rejections all at once. It's been a Bear Stearns freefall to zero wipeout. I wonder if Bernanke can arrange a fire sale of my manuscript to a more solvent writer.
In September, it was looking good for the current novel. One agent came back to the well three times, one letter proclaiming he raced to the end of the partial request and was sad he didn't have more to read.
In the past few days, he and everyone else declined. Queries sent out over a span of months came flying back as rejections all at once. It's been a Bear Stearns freefall to zero wipeout. I wonder if Bernanke can arrange a fire sale of my manuscript to a more solvent writer.
Saturday, October 11, 2008
Where Were You During the Last GFM?
Stock market tanks. War with Iraq. President Bush. Hundreds of banks going under. A government "bailout" in the hundreds of billions.
I am of course referring to the late 80's / early 90's. The stock market crashed in 1987, the S&L crisis unfolded, the economy went into a slump, people wondered if they needed to buy a shotgun and lock their front door.
The good news: Not only did we recover, but we recovered into a massive good-times boom.
The bad news: if we judge only by the size of the government bailout (even adjusted for inflation), this one's about 5 times worse than that one.
This morning I was reminiscing with my wife about how weird I was in middle school. I owned an exercise machine that could either be a rower or a cross country skier, and I used it every day while listening to my "Rudolph Serkin Plays The Beethoven Sonatas" tapes on my walkman. Danny and I relentlessly practiced our jumpshots (the road to impressing the cholas at St. Charles began on the basketball court. He who could score big against Queen of Heaven might score big with Maricela).
I had no idea we were in a GFM. Did you?
I am of course referring to the late 80's / early 90's. The stock market crashed in 1987, the S&L crisis unfolded, the economy went into a slump, people wondered if they needed to buy a shotgun and lock their front door.
The good news: Not only did we recover, but we recovered into a massive good-times boom.
The bad news: if we judge only by the size of the government bailout (even adjusted for inflation), this one's about 5 times worse than that one.
This morning I was reminiscing with my wife about how weird I was in middle school. I owned an exercise machine that could either be a rower or a cross country skier, and I used it every day while listening to my "Rudolph Serkin Plays The Beethoven Sonatas" tapes on my walkman. Danny and I relentlessly practiced our jumpshots (the road to impressing the cholas at St. Charles began on the basketball court. He who could score big against Queen of Heaven might score big with Maricela).
I had no idea we were in a GFM. Did you?
Friday, October 10, 2008
Am I Opposed?
Opposed to?
The bailout plan: yes.
Buying equity in banks: yes.
Emergency lowering of the interest rates: yes.
More than a trillion dollars of money injected by the world's central banks: yes.
A stock trading hiatus while "we rewrite the rules.": yes
Do I blame them for trying any of this? No.
The world wouldn't stand for anything less than extraordinarily aggressive action from our governments. And there is broad agreement among the world's economists that the actions taken so far are the way to go.
But this is just uncool. It was garbage like this that turned what would have been a routine (if severe) money crisis in 1929 into a worldwide depression that lasted twenty years.
The bailout plan: yes.
Buying equity in banks: yes.
Emergency lowering of the interest rates: yes.
More than a trillion dollars of money injected by the world's central banks: yes.
A stock trading hiatus while "we rewrite the rules.": yes
Do I blame them for trying any of this? No.
The world wouldn't stand for anything less than extraordinarily aggressive action from our governments. And there is broad agreement among the world's economists that the actions taken so far are the way to go.
But this is just uncool. It was garbage like this that turned what would have been a routine (if severe) money crisis in 1929 into a worldwide depression that lasted twenty years.
Credit Card Debt Crisis in the Wings?
That's the latest chatter. My suspicion is that it's already ON and is part of the reason this meltdown is so much worse than all but the grizzlies were predicting.
Other thoughts on this:
1. The credit card debt backed securities have ALREADY tanked and the investment banks that held them have gone under. They might even be undervalued at this point.
2. The banks with heavy exposure in this game are the aforementioned Big 3 uber banks who, as we speak, are getting bought into by the Treasury and are allowed to sell their bad mortgage debts to the government over the next few months.
Other thoughts on this:
1. The credit card debt backed securities have ALREADY tanked and the investment banks that held them have gone under. They might even be undervalued at this point.
2. The banks with heavy exposure in this game are the aforementioned Big 3 uber banks who, as we speak, are getting bought into by the Treasury and are allowed to sell their bad mortgage debts to the government over the next few months.
Thursday, October 9, 2008
Where We're Headed - Will Happen
7. A few crazy-ass months to end 2008.
8. The worst of the credit crunch abates. The economy is in deep recession, but outright armageddon has been avoided. America is left with an economy newly injected with the heaviest dose yet of the Fed's funny money and the most nationalized American banking system since Andrew Jackson killed The Second National Bank.
9. Many second and third world economies go the way of Zimbabwe, with their governments only avoiding outright default by igniting hyperinflations that destroy their currencies. Pakistan is one of those countries and we all freak our sh*t over it. Only China is solvent enough to provide the sorts of emergency loans once provided by the United States. Some Kissinger or Soros or other old white dude is all over the Sunday morning talk shows calling China the world's new lone superpower. The "War on Terror" is quietly reigned in as a much weaker US is forced to pay attention to the desires of the rest of the world.
8. The worst of the credit crunch abates. The economy is in deep recession, but outright armageddon has been avoided. America is left with an economy newly injected with the heaviest dose yet of the Fed's funny money and the most nationalized American banking system since Andrew Jackson killed The Second National Bank.
9. Many second and third world economies go the way of Zimbabwe, with their governments only avoiding outright default by igniting hyperinflations that destroy their currencies. Pakistan is one of those countries and we all freak our sh*t over it. Only China is solvent enough to provide the sorts of emergency loans once provided by the United States. Some Kissinger or Soros or other old white dude is all over the Sunday morning talk shows calling China the world's new lone superpower. The "War on Terror" is quietly reigned in as a much weaker US is forced to pay attention to the desires of the rest of the world.
The Dow
I'm the berriest of bears, but even I think we're nearing or have already zoomed below a rational valuation of stocks. Of course, I don't know what Apple should be priced at any more than the next guy, but it looks to me like a good old-fashioned panic out there right now. I hardly have the expertise (or the net worth) to give anyone financial advice, but I personally will be increasing my 401K allocation.
Where We're Headed - Happening and Will Happen
5. In addition to buying their bad assets, the government floats taxpayer money into banks in exchange for equity rights, furthering the already strong connection between big banks like BofA, Chase, Citigroup and the government.
6. The Fed opens the floodgates, dwindling its reserves to the lowest rates in history.
6. The Fed opens the floodgates, dwindling its reserves to the lowest rates in history.
Wednesday, October 8, 2008
Tweedle Global Hellfire or Tweedle Nail in the Coffin
Alternate Post Title:
If our candidates were named Mao and Stalin, which would you pick?
Alternate Alternate Post Title:
None of the Above
My readers know that I am no fan of democracy.
The McCaininites among you are used to hearing folks say they're not choosing your guy. Face it, you don't even like him, but are just choosing him because he seems a little bit less socialist.
But the Obamacons can't fathom why someone wouldn't vote their way, if nothing else than to ensure McCain stays out of office. Obama seems a little less eager to go after Iran. Isn't that enough for you to put up with any other flaws?
With GFM upon us, I ask you now to ponder the 10-percent increase on the top tax bracket Obama proposes. There's been a bit of flippancy about this (myself included) -- "yeah, his tax plan is sure-fire recession, but at least it isn't war with Iran."
But what about now, when we're already in the deepest recession in 100 years? How eager are you now to implement a new tax plan that's just plain retarded?
And don't forget - whenever Obama is asked, he's plenty eager to talk tough. We're all just guessing that deep in his heart, he really doesn't want World War Whatever even as he tells us we need to "take out" Pakistan.
If our candidates were named Mao and Stalin, which would you pick?
Alternate Alternate Post Title:
None of the Above
My readers know that I am no fan of democracy.
The McCaininites among you are used to hearing folks say they're not choosing your guy. Face it, you don't even like him, but are just choosing him because he seems a little bit less socialist.
But the Obamacons can't fathom why someone wouldn't vote their way, if nothing else than to ensure McCain stays out of office. Obama seems a little less eager to go after Iran. Isn't that enough for you to put up with any other flaws?
With GFM upon us, I ask you now to ponder the 10-percent increase on the top tax bracket Obama proposes. There's been a bit of flippancy about this (myself included) -- "yeah, his tax plan is sure-fire recession, but at least it isn't war with Iran."
But what about now, when we're already in the deepest recession in 100 years? How eager are you now to implement a new tax plan that's just plain retarded?
And don't forget - whenever Obama is asked, he's plenty eager to talk tough. We're all just guessing that deep in his heart, he really doesn't want World War Whatever even as he tells us we need to "take out" Pakistan.
No Good Deed....
Warren Buffett has been injecting millions of dollars into under-capitalized institutions. He's doing it in a way that, if he calculated correctly, he'll make a huge profit. He's also doing the economy an enormous service. Healthy firms need capital and are having a tough time getting it (the essence of a credit crunch), but if capital is put into unhealthy firms, no one benefits (and the capitalist loses big-time).
Someone needs to determine which firms get capital and which are left to die. This is the entire purpose of the financial sector.
But, with all the positive press Buffett is getting, I wonder...
How long before the other billionaires of the world are "asked" to inject more of their capital into the well-connected companies of the world?
Someone needs to determine which firms get capital and which are left to die. This is the entire purpose of the financial sector.
But, with all the positive press Buffett is getting, I wonder...
How long before the other billionaires of the world are "asked" to inject more of their capital into the well-connected companies of the world?
Tuesday, October 7, 2008
Where We're Headed - Happened and Happening
Steps 1 - 4 (you're not ready for Step 5 yet).
1. Fannie & Freddie are nationalized (already happened)
2. The government writes itself a check to buy all the mortgage-backed securities it deems necessary (already happened).
3. The government orchestrates "bailout" mergers, rescuing the deposits in smaller banks and turning them over to a shrinking number of larger banks. These new banks are much more closely tied to the government than normal companies (happening now).
4. The government intervenes in the subprime mortgage market, re-negotiating better interest rate terms on volatile home loans (began Monday when Bank of America wrote down $8 billion on home loans initiated at Countrywide).
1. Fannie & Freddie are nationalized (already happened)
2. The government writes itself a check to buy all the mortgage-backed securities it deems necessary (already happened).
3. The government orchestrates "bailout" mergers, rescuing the deposits in smaller banks and turning them over to a shrinking number of larger banks. These new banks are much more closely tied to the government than normal companies (happening now).
4. The government intervenes in the subprime mortgage market, re-negotiating better interest rate terms on volatile home loans (began Monday when Bank of America wrote down $8 billion on home loans initiated at Countrywide).
Curious
Your exercise for the night.
1. Go to trends.google.com
2. Search for Austrian economics
In addition to observing the trend, note the #1 city.
1. Go to trends.google.com
2. Search for Austrian economics
In addition to observing the trend, note the #1 city.
More regulation needed? Let's ask Europe.
An imperfect article that mostly gets it right. The key point:
"Who were the purchasers? They were by no means unregulated. U.S. investment banks, regulated by the Securities and Exchange Commission, bought piles of toxic waste. U.S. commercial banks, regulated by several agencies, including the Fed, also devoured large quantities. European banks, which faced a different and supposedly more up-to-date supervisory scheme, turn out to have been just as rash."
Or, as we're now learning, the heavily regulated European banks were quite a bit more rash.
"Who were the purchasers? They were by no means unregulated. U.S. investment banks, regulated by the Securities and Exchange Commission, bought piles of toxic waste. U.S. commercial banks, regulated by several agencies, including the Fed, also devoured large quantities. European banks, which faced a different and supposedly more up-to-date supervisory scheme, turn out to have been just as rash."
Or, as we're now learning, the heavily regulated European banks were quite a bit more rash.
Monday, October 6, 2008
The Best Article to Read about GFM
Everywhere you turn, you see Madeline Albright. She's standing in the median. She's in your cup of coffee. She's seated at your dinner table. She's using your bathroom.
You change your behavior. You go places where she hasn't appeared yet. You begin to distrust your eyes. You ask your friends what they're doing to avoid her. You do it too.
Tuna Melters, the most important information you have every moment of every day is what you see. You are constantly making decisions based on what your eyes tell you. When horrifying phantom Madeline Albrights start showing up everywhere, you have no choice but to mind them. Your behavior becomes absurd.
The most important information in an economy is pricing. Prices give us instant information about the perceived values of anything that's up for trade. Prices govern the flow of capital, sending money into channels of greatest value.
Loose money screws up the pricing system. Since the early 90's, and much more acutely from 2001 - 2004, the Federal Reserve has flooded the economy. The pricing system, particularly the price of money as expressed in the interest rate, has been nonsense, and our behavior has become absurd.
There's a lot to ponder right now. What's going to happen next? What do I do with my money? How can I protect myself?
More important than all of this is: why did this happen and what steps should the citizens of the world take to prevent it from happening again?
Take a read.
"Nothing is more vital to capitalism than capital, the financial seed corn dedicated to next year's crop. Yet we, believers in free markets, allow the price of capital, i.e., the interest rate on loanable funds, to be fixed by a central committee in accordance with government objectives. We might as well resurrect Gosplan, the old Soviet State Planning Committee, and ask them to draw up the next five-year plan."
Here's the rest:
http://online.wsj.com/article/SB122273029076687929.html
You change your behavior. You go places where she hasn't appeared yet. You begin to distrust your eyes. You ask your friends what they're doing to avoid her. You do it too.
Tuna Melters, the most important information you have every moment of every day is what you see. You are constantly making decisions based on what your eyes tell you. When horrifying phantom Madeline Albrights start showing up everywhere, you have no choice but to mind them. Your behavior becomes absurd.
The most important information in an economy is pricing. Prices give us instant information about the perceived values of anything that's up for trade. Prices govern the flow of capital, sending money into channels of greatest value.
Loose money screws up the pricing system. Since the early 90's, and much more acutely from 2001 - 2004, the Federal Reserve has flooded the economy. The pricing system, particularly the price of money as expressed in the interest rate, has been nonsense, and our behavior has become absurd.
There's a lot to ponder right now. What's going to happen next? What do I do with my money? How can I protect myself?
More important than all of this is: why did this happen and what steps should the citizens of the world take to prevent it from happening again?
Take a read.
"Nothing is more vital to capitalism than capital, the financial seed corn dedicated to next year's crop. Yet we, believers in free markets, allow the price of capital, i.e., the interest rate on loanable funds, to be fixed by a central committee in accordance with government objectives. We might as well resurrect Gosplan, the old Soviet State Planning Committee, and ask them to draw up the next five-year plan."
Here's the rest:
http://online.wsj.com/article/SB122273029076687929.html
A Theme
There are ten million long, difficult articles in the world on the GFM already. Go find one if you'd like. I'll try to keep the linked content and the original content more concise. To start, please forget whatever you think you know about GFM, especially if you think more regulation would have prevented this, or Wall Street has run amuck, of this is somehow a failing of capitalism, and start here:
Welcome
Tonight my brother asked that I put my opinions regarding the Global Financial Meltdown (GFM) in a blog. So...until I get bored of this...
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