Another problem with trying to finance our grand recovery schemes with debt.
To do all Obama wants to do, on top of what Paulson & Bernanke have already done, America needs a lot more money from China. At some point, China will decide that American debt is riskier than it used to be and will demand a better deal on their loans. In other words, higher interest rates are coming on Treasuries.
Those higher interest rates will push interest rates up through the entire American financial system, providing us with higher rates precisely when the orchestrators of our monetary policy want interest rates to drop.
Sunday, November 30, 2008
The real reason for the season
Perhaps our economy's tanking because all our productivity's been sucked into the Youtube vortex. Speaking of which, check this out. Quite awesome.
Saturday, November 29, 2008
Some Hope From the Melt
Remember a few weeks ago when Treasury elected not to buy the mortgage backed securities, and instead use their money to inject capital into banks (and ultimately, to prop up Citigroup by $320 billion)?
So, what happened to all those "toxic" securities then? Read this. It's an amazing lesson in how this whole fiasco should be handled. Washington just needs to get the f*ck out of the way.
So, what happened to all those "toxic" securities then? Read this. It's an amazing lesson in how this whole fiasco should be handled. Washington just needs to get the f*ck out of the way.
What Happens When The Debt Grows Too Large?
Tuna Melt intends to do lots of research and make some predictions about where things are headed now that the US government is putting itself into an unprecedented amount of debt. Perhaps in the big scheme of things, all this debt will only be a drain on the economy that can be overcome with a few good years (by the mid-80's, there was lots of fear that the US would never get out of the Reagan debt, but after the arms race ended, it happened rather quickly, maybe we'll be so lucky again).
Or, perhaps we're just a few more sandbags away from sinking this balloon. What happens if that's the case?
I don't know. That's why we have the Internet. Let's all figure this out together. For starters, let's take a few moments to learn what we can about the Latin American debt crisis of the 80s
Or, perhaps we're just a few more sandbags away from sinking this balloon. What happens if that's the case?
I don't know. That's why we have the Internet. Let's all figure this out together. For starters, let's take a few moments to learn what we can about the Latin American debt crisis of the 80s
Friday, November 28, 2008
Friday Night Off the Cuff Solutions to the World's Problems
Readers probably know how Tuna Melt would solve the financial crisis. It involves private defense companies.
But what if Tuna Melt were to propose politically feasible solutions (ie - things that could actually be done by politicians today if they had the desire to do so)? Here we go.
#1. A moratorium on all new government debt. No new Treasuries issued until further notice. We've got to get the investment capital going back to productive purposes right away, like stocks and corporate bonds.
#2. Capital gains tax gone, completely gone, right away. Even the most hardened socialist now knows that this is a nonsense tax that actually reduces overall tax revenue simply through its existence. It only sticks around year after year because people are petrified that the uber rich could completely finagle their way out of paying taxes at all were it not present.
#3. Stimulus? Yes. The good old fashioned way. Tax rebates. The Keynesians are falling all over themselves to argue that the summer stimulus checks didn't work, but that's not what I saw. The prices of oil, gold, steel, food, EVERYTHING, took off like a rocket in the two months following that oh so sweet mailing (I have two kids -- my check was a nice fat one). The market is smart that way. Our rebate checks last summer were made entirely of funny money, financed with government debt, and the market heartily responded. The dollar plummeted, prices went up, tah-dahhh! This time....wait, didn't we just say no new debt?
#4. Cut government spending in line to match the rebate stimulus being sent out. Yes, I know, this was supposed be politically feasible. Allow a guy to think, if only for a moment, that in times of crisis, Washington actually could find a way to pull it together. They can't...I know it and you know it....oh man...we're screwed. But, supposing they could...note that the exact opposite of this is what's being proposed. Keynes's ghost looms in Washington right now, telling those goobers that the road to recovery is paved with government expenditures, but we're seeing quite clearly as we speak that it is not. Government can finance their expenditures through tax increases (would be disastrous) or debt, and government debt more than anything is what's strangling the credit markets, and unstrangling the credit markets is priority one in rescuing the economy.
#5. Pass income tax cuts. Pass 'em to whatever brackets you want. As big as you can make 'em.
#3 would be the only temporary measure. The rest would be permanent. The rest would result in long-term growth, enough growth that we might pay down some of this debt before the Medicare crisis arrives. What's that? you say. Medicare crisis? Did you not know that we've got a meltdown on the horizon that makes this one look like the '92 recession? That will be for another post down the road. That post might be titled "Default."
But what if Tuna Melt were to propose politically feasible solutions (ie - things that could actually be done by politicians today if they had the desire to do so)? Here we go.
#1. A moratorium on all new government debt. No new Treasuries issued until further notice. We've got to get the investment capital going back to productive purposes right away, like stocks and corporate bonds.
#2. Capital gains tax gone, completely gone, right away. Even the most hardened socialist now knows that this is a nonsense tax that actually reduces overall tax revenue simply through its existence. It only sticks around year after year because people are petrified that the uber rich could completely finagle their way out of paying taxes at all were it not present.
#3. Stimulus? Yes. The good old fashioned way. Tax rebates. The Keynesians are falling all over themselves to argue that the summer stimulus checks didn't work, but that's not what I saw. The prices of oil, gold, steel, food, EVERYTHING, took off like a rocket in the two months following that oh so sweet mailing (I have two kids -- my check was a nice fat one). The market is smart that way. Our rebate checks last summer were made entirely of funny money, financed with government debt, and the market heartily responded. The dollar plummeted, prices went up, tah-dahhh! This time....wait, didn't we just say no new debt?
#4. Cut government spending in line to match the rebate stimulus being sent out. Yes, I know, this was supposed be politically feasible. Allow a guy to think, if only for a moment, that in times of crisis, Washington actually could find a way to pull it together. They can't...I know it and you know it....oh man...we're screwed. But, supposing they could...note that the exact opposite of this is what's being proposed. Keynes's ghost looms in Washington right now, telling those goobers that the road to recovery is paved with government expenditures, but we're seeing quite clearly as we speak that it is not. Government can finance their expenditures through tax increases (would be disastrous) or debt, and government debt more than anything is what's strangling the credit markets, and unstrangling the credit markets is priority one in rescuing the economy.
#5. Pass income tax cuts. Pass 'em to whatever brackets you want. As big as you can make 'em.
#3 would be the only temporary measure. The rest would be permanent. The rest would result in long-term growth, enough growth that we might pay down some of this debt before the Medicare crisis arrives. What's that? you say. Medicare crisis? Did you not know that we've got a meltdown on the horizon that makes this one look like the '92 recession? That will be for another post down the road. That post might be titled "Default."
Follow The Bouncing Funny Money
90s: all stocks, but tech stocks in particular
2001: first half of 2005: all real estate, but American housing in particular
first half of 2005 - first half of 2008: commodities. oil, gold, silver, copper, food..
second half of 2008: US Treasuries, the dollar, the yen.
The loose money of the Fed has resulted in a roving speculative bubble that blobs from one section of the economy to another, sucking real investment along with it as it goes, and leaving tremendous overcapacity behind when it leaves. The amount of loose money pumped in from 2001-2004 grew the blob to such size that we've found trillions of dollars worldwide mis-invested into capital projects with no return. Down goes Bear Sterns, Lehman, Washington Mutual, Wachovia...
What's frightening now is that the over-investment is in US treasuries. At least when the loose money was in housing, a house was built. Now that it's in Treasuries, the loose money is funneled straight into the Washington productivity incinerator.
Thursday, November 27, 2008
Word's Getting Out 2
An increasing number of mainstream outlets are calling for changes that we nutjobs on the fringe have wanted for years.
Wednesday, November 26, 2008
Word's Getting Out..
...from an AP wire story today that got picked up by all the major papers:
"One big worry stifling activity in the markets is that if the government is doing so much lending and backstopping now, it's going to need to do a lot of borrowing, too, to finance those efforts. And if the government is seeking lenders to buy its debt, what is going to happen to other borrowers looking for lenders?
As the Federal Reserve and Treasury act to rescue borrowers, Simons said, 'they're starving other private sector borrowers.'"
It's a good sign that the mainstream is acknowledging this.
What's happening right now is the final stake in the heart of Keynesian economics, or maybe I should say, would be the final stake if Keynes wasn't so damned appealing to politicians. Keynes was a hearty advocate of using government debt to "stimulate" us during economic downturns. In the past few months, we have followed the Keynesian prescription in the most extraordinary way imaginable, and it's becoming clear that the very act of doing so is why the credit crunch continues.
Even as commercial banks are eager, desperate even, to find borrowers for small, standard loans (notice all the 0% auto loan commercials are back, just as they were in late 2001?), the corporate bond market remains in a death spiral. No one wants to buy corporate debt. Why would they? At this time last year, Citigroup bonds were 5-star, good as cash assets (trust me, this I know well). 12 months later Citigroup was circling the drain and got the biggest bailout yet. The rating schemes on which the entire bond market was based have turned out to be crap, and who wants to buy crap when you can buy a United States Treasury Bill?
"One big worry stifling activity in the markets is that if the government is doing so much lending and backstopping now, it's going to need to do a lot of borrowing, too, to finance those efforts. And if the government is seeking lenders to buy its debt, what is going to happen to other borrowers looking for lenders?
As the Federal Reserve and Treasury act to rescue borrowers, Simons said, 'they're starving other private sector borrowers.'"
It's a good sign that the mainstream is acknowledging this.
What's happening right now is the final stake in the heart of Keynesian economics, or maybe I should say, would be the final stake if Keynes wasn't so damned appealing to politicians. Keynes was a hearty advocate of using government debt to "stimulate" us during economic downturns. In the past few months, we have followed the Keynesian prescription in the most extraordinary way imaginable, and it's becoming clear that the very act of doing so is why the credit crunch continues.
Even as commercial banks are eager, desperate even, to find borrowers for small, standard loans (notice all the 0% auto loan commercials are back, just as they were in late 2001?), the corporate bond market remains in a death spiral. No one wants to buy corporate debt. Why would they? At this time last year, Citigroup bonds were 5-star, good as cash assets (trust me, this I know well). 12 months later Citigroup was circling the drain and got the biggest bailout yet. The rating schemes on which the entire bond market was based have turned out to be crap, and who wants to buy crap when you can buy a United States Treasury Bill?
The Legacy
The welfare state is the primary negative outcome one can point to regarding Great Depression 1. An oppressive, strangling burden of government debt will the primary negative outcome we'll point to on the other side Great Depression 2.
That is, of course, unless the US Treasury ultimately defaults.
At the beginning of all this, I spoke of default on government debt rather flippantly. "Ha, ha -- they keep this up, we'll end up in a spot where the government will default some day."
Ha ha.
That is, of course, unless the US Treasury ultimately defaults.
At the beginning of all this, I spoke of default on government debt rather flippantly. "Ha, ha -- they keep this up, we'll end up in a spot where the government will default some day."
Ha ha.
Monday, November 24, 2008
Math Problem
The Washington Post:
"Facing an increasingly ominous economic outlook, President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years....Obama has set a goal of creating or preserving 2.5 million jobs by 2011."
Class, grab your pencils and prepare for a long division 'story' problem. Here we go.
The American economy has gone under and millions of people are losing their jobs. The amazing new president, The One, "The Grownup," ("America, F*ck yeah!") has come up with a plan to create and save millions of jobs. Congress has given him $700 billion dollars to spend on his plan. If Super Obama spends $700 billion to create 2.5 million jobs, what is the average amount he spends on each job created?
"Facing an increasingly ominous economic outlook, President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years....Obama has set a goal of creating or preserving 2.5 million jobs by 2011."
Class, grab your pencils and prepare for a long division 'story' problem. Here we go.
The American economy has gone under and millions of people are losing their jobs. The amazing new president, The One, "The Grownup," ("America, F*ck yeah!") has come up with a plan to create and save millions of jobs. Congress has given him $700 billion dollars to spend on his plan. If Super Obama spends $700 billion to create 2.5 million jobs, what is the average amount he spends on each job created?
The Melt Returns
What's the biggest difference between October 2008 and October 1929?
In October 1929, there were no Treasury bills. They didn't get first issued until December of that year.
This is what got me down on Friday. All sorts of interesting things have happened these past few months, good and bad, but the most interesting of all, and the most bad by far, is the historic flight to Treasury bonds.
In times of uncertainty, why would anyone invest their cash in a business, which has to deal with the rigors of survival in a tanking economy, when they can put their money in Treasury bonds for a guaranteed return? And if everyone is willing to buy government debt, even at ZERO YIELD, why wouldn't the government expand its debt base?
Rather than having a market give money to those who can make it grow, which is the whole idea of capitalism, we instead have everyone loaning their money to the government, and the government in turn giving that money to people who have an unusual aptitude for making it shrink.
When all this started, people were fascinated by my pessimism at where this all might lead, but not even I thought it would get as bad as this. Government debt has royally screwed up our capital markets. This mess started with an explosion of bad debt, but it has spilled over into the mother of all economic downturns because the people who have the capacity to PRODUCE something can't get any money to do so. All the MONEY has been lent to the government!!
And the bigger problem is the way the bureaucrats are salivating at all this cash investors are throwing their way. The plan now is for Congress to draft and pass a "stimulus" package in time for Obama to sign it on his first day. The gossip about this plan is....
...beautifully absurd.
And now we all must take a deep breath and enjoy this ride, because this sucker's about to get wacky. The great Terry Gilliam movie Brazil is coming to life before our eyes. New airport runways, giant windmill farms, new bridges, old bridges, new roads, new railroads, "green" car-building factories, and any other excuse to give away all this cash to people who can help the politicians get rich and re-elected. All is on the table. All will be financed by the debt money. All will be overseen by government, so none of it is gonna work. A million new little defective projects all over America. "Bailout" is going to be replaced in our lexicon with "stimulus," as in, "Where's my stimulus?" "Harry's family got in on the stimulus," "He's just a no-good stimulus-grabbing loser." Twenty years from now, the landscape will be cluttered with beautiful, rusty ruins. We'll call them "stimulus projects."
In October 1929, there were no Treasury bills. They didn't get first issued until December of that year.
This is what got me down on Friday. All sorts of interesting things have happened these past few months, good and bad, but the most interesting of all, and the most bad by far, is the historic flight to Treasury bonds.
In times of uncertainty, why would anyone invest their cash in a business, which has to deal with the rigors of survival in a tanking economy, when they can put their money in Treasury bonds for a guaranteed return? And if everyone is willing to buy government debt, even at ZERO YIELD, why wouldn't the government expand its debt base?
Rather than having a market give money to those who can make it grow, which is the whole idea of capitalism, we instead have everyone loaning their money to the government, and the government in turn giving that money to people who have an unusual aptitude for making it shrink.
When all this started, people were fascinated by my pessimism at where this all might lead, but not even I thought it would get as bad as this. Government debt has royally screwed up our capital markets. This mess started with an explosion of bad debt, but it has spilled over into the mother of all economic downturns because the people who have the capacity to PRODUCE something can't get any money to do so. All the MONEY has been lent to the government!!
And the bigger problem is the way the bureaucrats are salivating at all this cash investors are throwing their way. The plan now is for Congress to draft and pass a "stimulus" package in time for Obama to sign it on his first day. The gossip about this plan is....
...beautifully absurd.
And now we all must take a deep breath and enjoy this ride, because this sucker's about to get wacky. The great Terry Gilliam movie Brazil is coming to life before our eyes. New airport runways, giant windmill farms, new bridges, old bridges, new roads, new railroads, "green" car-building factories, and any other excuse to give away all this cash to people who can help the politicians get rich and re-elected. All is on the table. All will be financed by the debt money. All will be overseen by government, so none of it is gonna work. A million new little defective projects all over America. "Bailout" is going to be replaced in our lexicon with "stimulus," as in, "Where's my stimulus?" "Harry's family got in on the stimulus," "He's just a no-good stimulus-grabbing loser." Twenty years from now, the landscape will be cluttered with beautiful, rusty ruins. We'll call them "stimulus projects."
This Is Pretty Incredible
Peter Schiff is an Austrian economist with his own financial firm. Wish I'd been paying attention.
Friday, November 21, 2008
Tuna Can't Blog
Tuna Melt is crashing all the trusted economics and financial sources to bring you the greatest coverage of GFM, as per usual....and must take a night off.
Tuna Melt has been predicting GFM for eleven years, since he first read HB's great works of the 70's. Tuna Melt came to believe that he had no idea what was going on when GFM never came and turned his attention elsewhere.
Now that GFM is on, Tuna Melt has been amazed at how right HB was all this time.
Tonight, what Tuna Melt is seeing out there in the world of economis and finance is the scariest Tuna Melt has ever seen in the eleven years that Tuna Melt has been predicting GFM. Needless to say, if there was a real blog post tonight, it might say something like, "Buy a shotgun."
Tuna Melt hopes to soon enter another 11-year span where Harry Browne was wrong. Lights out until Monday.
Tuna Melt has been predicting GFM for eleven years, since he first read HB's great works of the 70's. Tuna Melt came to believe that he had no idea what was going on when GFM never came and turned his attention elsewhere.
Now that GFM is on, Tuna Melt has been amazed at how right HB was all this time.
Tonight, what Tuna Melt is seeing out there in the world of economis and finance is the scariest Tuna Melt has ever seen in the eleven years that Tuna Melt has been predicting GFM. Needless to say, if there was a real blog post tonight, it might say something like, "Buy a shotgun."
Tuna Melt hopes to soon enter another 11-year span where Harry Browne was wrong. Lights out until Monday.
Thursday, November 20, 2008
Another Trillion Dollars Wiped Out Today
Who cares? Really, is it that important? It's only money.
Tuna Melters, the video below shows what it looks like when people have to deal with genuine tragedy. It isn't pretty, but I hope you'll suck it up and watch. We all need some perspective.
Tuna Melters, the video below shows what it looks like when people have to deal with genuine tragedy. It isn't pretty, but I hope you'll suck it up and watch. We all need some perspective.
Wednesday, November 19, 2008
Top 5
Most evil politicians (an easy one - just go by body count)
5. Josip Broz Tito
4. Pol Pot
3. Hitler
2. Stalin
1. Mao (he should actually own the top 100 spots all to himself. this was one evil dude).
Most evil US Presidents:
5. FDR
4. GW Bush
3. Lyndon Johnson
2. Theodore Roosevelt
1. Woodrow Wilson (like Mao, absolutely dominates the list. This was one evil dude).
Sleaziest Current American Politicians (per Nilfisk request)
5. John Edwards (would have been #1, but this dude is so sleazy he got called out and is hardly even a politician anymore).
4. Hillary Clinton (every word from her mouth is so drenched in sleaze I must turn the channel when she comes on).
3. Mitt Romney (sleazy and slick go together so well)
2. Ron Paul (the fact that he actually understands economics and still plays the games necessary to stay in Washington is evidence of one Grade A sleaze).
1. Harry Reid (he's the key player so far in the auto bailout madness, which is the sleaziest game in town right now, so he takes the #1 spot -- speaking of which, have you read the latest?)
5. Josip Broz Tito
4. Pol Pot
3. Hitler
2. Stalin
1. Mao (he should actually own the top 100 spots all to himself. this was one evil dude).
Most evil US Presidents:
5. FDR
4. GW Bush
3. Lyndon Johnson
2. Theodore Roosevelt
1. Woodrow Wilson (like Mao, absolutely dominates the list. This was one evil dude).
Sleaziest Current American Politicians (per Nilfisk request)
5. John Edwards (would have been #1, but this dude is so sleazy he got called out and is hardly even a politician anymore).
4. Hillary Clinton (every word from her mouth is so drenched in sleaze I must turn the channel when she comes on).
3. Mitt Romney (sleazy and slick go together so well)
2. Ron Paul (the fact that he actually understands economics and still plays the games necessary to stay in Washington is evidence of one Grade A sleaze).
1. Harry Reid (he's the key player so far in the auto bailout madness, which is the sleaziest game in town right now, so he takes the #1 spot -- speaking of which, have you read the latest?)
Tuesday, November 18, 2008
Sunday, November 16, 2008
Saturday, November 15, 2008
The Bailout - Public Choice Theory in Action
Your average university economics professor harbors a dirty secret. She's a professor, so she leans left (she had to to get the job), but after years of thought about the provision of goods and services in a society, even the most hardened leftist with any intellectual honesty is forced to accept three free market truths. These truths have been so thoroughly studied, debated, and resolved in the academic journals that there is no place for a market hater to hide, even in a university. They are:
1) Free trade between nations always results in an improved standard of living for both sides.
2) The minimum wage hurts the poor more than it helps them.
3) Representative democracy creates tremendous incentives for all involved to engage in "rent seeking" and theft.
#3 is an entire field of economics, called Public Choice Theory.
The $700 billion bailout has turned Washington into a full-on Public Choice Theory experiment, perhaps the largest ever undertaken. Congress approved an unprecedented amount of cash for open handouts. Let the games begin!
Case in point: the auto industry. On Monday, the Senate will begin discussing the 25 billion auto industry bailout. Here's how this works. Washington democrats have spent their entire lives decrying corporate welfare, but now find themselves arguing passionately for one of the largest and most ridiculous corporate welfare checks in history. They're doing so even though their constituencies despise the idea.
Why? Three reasons.
1. The American auto industry is most important to Michigan, Ohio, and Pennsylvania -- crucial swing states all.
2. In January, the Democrats will take full ownership of Washington and everything that comes out of that town will be on their shoulders.
3. Unions make up a small percentage of democratic voters, but a large percentage of democratic donors.
The goal is to get a bill passed before Bush is out, so that he will be faced with the decision to veto. Everyone knows that this bailout package isn't just a bad idea, it's a truly, truly terrible one. Everyone also knows that Michigan and Ohio are going to remember this vote for a generation.
Further, despite being the party whose public face HATES corporate welfare, the bankruptcy of the Big 3 means the potential dissolution of the United Auto Workers and their tremendous financial might. This $25 billion is being floated with the goal of getting a ton of it back in future campaign contributions.
And hence we may be faced with the absurd prospect of Bush signing a bailout bill into law, a bill that Republican voters oppose, but that Republican operatives need in order to please the swing states. It's a bill put forth by a Congress who knows it's wrong, and knows it is against the wishes of their voting base, but also knows that voters in California will be quick to forgive, but voters in Ohio will be slow to forget. Go democracy!
1) Free trade between nations always results in an improved standard of living for both sides.
2) The minimum wage hurts the poor more than it helps them.
3) Representative democracy creates tremendous incentives for all involved to engage in "rent seeking" and theft.
#3 is an entire field of economics, called Public Choice Theory.
The $700 billion bailout has turned Washington into a full-on Public Choice Theory experiment, perhaps the largest ever undertaken. Congress approved an unprecedented amount of cash for open handouts. Let the games begin!
Case in point: the auto industry. On Monday, the Senate will begin discussing the 25 billion auto industry bailout. Here's how this works. Washington democrats have spent their entire lives decrying corporate welfare, but now find themselves arguing passionately for one of the largest and most ridiculous corporate welfare checks in history. They're doing so even though their constituencies despise the idea.
Why? Three reasons.
1. The American auto industry is most important to Michigan, Ohio, and Pennsylvania -- crucial swing states all.
2. In January, the Democrats will take full ownership of Washington and everything that comes out of that town will be on their shoulders.
3. Unions make up a small percentage of democratic voters, but a large percentage of democratic donors.
The goal is to get a bill passed before Bush is out, so that he will be faced with the decision to veto. Everyone knows that this bailout package isn't just a bad idea, it's a truly, truly terrible one. Everyone also knows that Michigan and Ohio are going to remember this vote for a generation.
Further, despite being the party whose public face HATES corporate welfare, the bankruptcy of the Big 3 means the potential dissolution of the United Auto Workers and their tremendous financial might. This $25 billion is being floated with the goal of getting a ton of it back in future campaign contributions.
And hence we may be faced with the absurd prospect of Bush signing a bailout bill into law, a bill that Republican voters oppose, but that Republican operatives need in order to please the swing states. It's a bill put forth by a Congress who knows it's wrong, and knows it is against the wishes of their voting base, but also knows that voters in California will be quick to forgive, but voters in Ohio will be slow to forget. Go democracy!
Thursday, November 13, 2008
How's That Bailout Working For Ya?
It's not just the auto industry. Everyone wants a piece of the bailout pie.
From an article in the NY Times (who, like GM and Ford, will be bankrupt by 2010 unless we float them billions of stolen cash):
"The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — as well as for improbable candidates like a Hispanic business group representing plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning through buying distressed mortgages."
From an article in the NY Times (who, like GM and Ford, will be bankrupt by 2010 unless we float them billions of stolen cash):
"The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — as well as for improbable candidates like a Hispanic business group representing plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning through buying distressed mortgages."
Wednesday, November 12, 2008
Another Tuna Melt Prediction
Make no mistake, this blog is all about doom and gloom.
But we'll take a break for something more optimistic. Here's another Tuna Melt prediction.
Sooner than you think, solar energy will be entirely viable and profitable for so many applications that most of the jibber jabber about peak oil and global warming will go away (sure to be replaced with new, equally pointless jibber jabber about dead nanobots in our food supply or whatever). Successes with nanotechnology in labs around the world a few years ago is now translating to new factories in China to make nanosolarbot paint and other weird stuff that's about to become buzzwordworthy.
Right now, solar can only provide a tiny percentage of the world's energy needs, but a few years ago, it could provide only a fraction of a tiny percentage. In other words, get ready because this chariot's about to race. You'll know we've hit the elbow in the growth curve when GE and the oil companies start announcing gigantic solar manufacturing initiatives. The tech bubble will return full force and we'll call it "The Green Bubble." Let's all agree to get in early this time.
But we'll take a break for something more optimistic. Here's another Tuna Melt prediction.
Sooner than you think, solar energy will be entirely viable and profitable for so many applications that most of the jibber jabber about peak oil and global warming will go away (sure to be replaced with new, equally pointless jibber jabber about dead nanobots in our food supply or whatever). Successes with nanotechnology in labs around the world a few years ago is now translating to new factories in China to make nanosolarbot paint and other weird stuff that's about to become buzzwordworthy.
Right now, solar can only provide a tiny percentage of the world's energy needs, but a few years ago, it could provide only a fraction of a tiny percentage. In other words, get ready because this chariot's about to race. You'll know we've hit the elbow in the growth curve when GE and the oil companies start announcing gigantic solar manufacturing initiatives. The tech bubble will return full force and we'll call it "The Green Bubble." Let's all agree to get in early this time.
Tuesday, November 11, 2008
Not that any of you need convincing that the Big 3 need to go bankrupt, but if you're keen on a long blog post about just how screwed up the American auto industry is and what a terrible, terrible idea a bailout is, Megan Mcardle at Atlantic Monthly has written one.
Here's an excerpt.
"Having driven the companies right up to the verge of bankruptcy, [the United Auto Workers] conceded literally only when it became clear that the union members were about to get their contracts unilaterally rewritten by a judge, lose their health benefits, and possibly get their pensions crammed down by the PBGC, which maxes out somewhere slightly north of $40K per annum. Then the unions ever so generously agreed to cut health care costs by 30% in exchange for job security guarantees. And now that their game of collective bargaining chicken has resulted in the obvious disaster, they want us to pay to save their jobs, at a cost of over $300,000 per."
Here's an excerpt.
"Having driven the companies right up to the verge of bankruptcy, [the United Auto Workers] conceded literally only when it became clear that the union members were about to get their contracts unilaterally rewritten by a judge, lose their health benefits, and possibly get their pensions crammed down by the PBGC, which maxes out somewhere slightly north of $40K per annum. Then the unions ever so generously agreed to cut health care costs by 30% in exchange for job security guarantees. And now that their game of collective bargaining chicken has resulted in the obvious disaster, they want us to pay to save their jobs, at a cost of over $300,000 per."
Monday, November 10, 2008
Lessons From the First Great Depression II
It wasn't just the top tax rates. From the definitive paper on fiscal policy in the thirties:
"The primary failure of fiscal policy to be expansive in this period is attributable to the sharp increases in tax structures enacted at all levels of government...The Revenue Act of 1932 pushed up rates virtually across the board, but notably on the lower and middle income groups....Personal income tax exemptions were slashed, the normal-tax as well as surtax rates were sharply raised, and the earned-income credit equal to 25 percent of taxes on low income was repealed. Estates tax rates were pushed up, exemptions sharply reduced, and a gift tax was provided. Congress toyed with a manufacturers' sales tax, but finally rejected it in favor of a broad new list of excise taxes and substantially higher rates for old ones...."
"The primary failure of fiscal policy to be expansive in this period is attributable to the sharp increases in tax structures enacted at all levels of government...The Revenue Act of 1932 pushed up rates virtually across the board, but notably on the lower and middle income groups....Personal income tax exemptions were slashed, the normal-tax as well as surtax rates were sharply raised, and the earned-income credit equal to 25 percent of taxes on low income was repealed. Estates tax rates were pushed up, exemptions sharply reduced, and a gift tax was provided. Congress toyed with a manufacturers' sales tax, but finally rejected it in favor of a broad new list of excise taxes and substantially higher rates for old ones...."
Lessons From the First Great Depression I
Inflationary bubbles burst about once every decade. Every single recession in the United States since 1913 has been caused by a preceding Fed-fueled boom. Recessions typically last for about 6 months, bad investments get liquidated, and normal economic activity resumes.
But in October 1929, a particularly bad bubble popped, and the downturn lasted for 15 years. Why was that one so much worse?
Here's the first reason.
But in October 1929, a particularly bad bubble popped, and the downturn lasted for 15 years. Why was that one so much worse?
Here's the first reason.
I, Pencil
A comment by Nilfisk leads to an invitation to all Tuna Melt readers to check out this 1958 essay and ponder the fallacy that government can "stimulate" the economy by handing out cash to politically connected construction companies.
Extra! Extra!
The headlines this morning:
AIG gets $40 billion more bailout money.
Obama's new chief of staff is an advocate for an auto industry bailout.
China's government unveils a $600 billion stimulus plan.
But amidst all the daily madness, thus far there hasn't been any noise yet about this.
AIG gets $40 billion more bailout money.
Obama's new chief of staff is an advocate for an auto industry bailout.
China's government unveils a $600 billion stimulus plan.
But amidst all the daily madness, thus far there hasn't been any noise yet about this.
Saturday, November 8, 2008
Bring Back the Edsel While We're At It
Apparently, Congress wants the Treasury department to give some of the $700 billion bailout money to the Big 3 automakers.
"A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector's work force," Congress says.
I agree, but floating billions to companies that should go under is no way to make for a healthy sector.
The Big 3 need to go under. Toyota, Honda, Mitsubishi, Volkswagon, whomever needs to come in and buy them. Frightening as that will be for many Americans, it is the only way America will ever have a healthy automobile manufacturing sector.
Yes, the capital will be owned overseas, which kind of sucks for us, but the factory jobs will stay here, and for the first time in my lifetime, American automobile factories will truly be able to compete.
Why? Because the United Auto Workers won't be able to bully around foreign companies. The auto unions will be left with a choice: work for a living like everyone else or watch all the jobs go someplace else.
Friday, November 7, 2008
Democracy At Work
Christina Aguilera on Prop 8's failure in California:
“I don’t understand how people can be so close-minded and so judgmental. We chose an African-American president who means so much in a time in history of great change and open-mindedness. Why is this any different?”
On the ballot, Prop 8 read, "Eliminates the right of same sex couples to marry." It passed. Gay marriage in CA is done, for now.
The Mormons were the money machine behind passing this ballot initiative.
I'm guessing, could be wrong, but guessing, that a majority of Mormon voters went for McCain.
Until 1978, blacks were denied full membership in the Mormon Church.
I'm guessing, could be wrong, but guessing, that a majority of black voters went for Obama.
But on the fateful day of November 4th, blacks and Mormons, regardless of their presidential votes, regardless of party affiliation, put that whole "mark of Cain" thing behind them and came together as one to CRUSH the gays.
I love democracy. Without democracy, it would be so hard to arbitrarily but severely punish those that irk us for no good reason.
“I don’t understand how people can be so close-minded and so judgmental. We chose an African-American president who means so much in a time in history of great change and open-mindedness. Why is this any different?”
On the ballot, Prop 8 read, "Eliminates the right of same sex couples to marry." It passed. Gay marriage in CA is done, for now.
The Mormons were the money machine behind passing this ballot initiative.
I'm guessing, could be wrong, but guessing, that a majority of Mormon voters went for McCain.
Until 1978, blacks were denied full membership in the Mormon Church.
I'm guessing, could be wrong, but guessing, that a majority of black voters went for Obama.
But on the fateful day of November 4th, blacks and Mormons, regardless of their presidential votes, regardless of party affiliation, put that whole "mark of Cain" thing behind them and came together as one to CRUSH the gays.
I love democracy. Without democracy, it would be so hard to arbitrarily but severely punish those that irk us for no good reason.
Wednesday, November 5, 2008
RIP Michael Crichton
The articles on the Internet emphasize The Andromeda Strain as the novel that invented the techno-thriller, the amazing success of Jurassic Park, the longevity of ER, and the controversy surrounding State of Fear.
For me, Crichton is high on my list of authors because of Disclosure, which I would rank among the all-time great page-turners.
The last time I re-read Disclosure, it didn't feel as revolutionary as when I first read it, but I think it's because every thriller written since (including the Great American pro wrestling novel) by necessity must co-opt some of the plot devices he used to such effect in that novel.
For me, Crichton is high on my list of authors because of Disclosure, which I would rank among the all-time great page-turners.
The last time I re-read Disclosure, it didn't feel as revolutionary as when I first read it, but I think it's because every thriller written since (including the Great American pro wrestling novel) by necessity must co-opt some of the plot devices he used to such effect in that novel.
Back to Reality
Try as I might, I cannot bring myself to be excited about a new president, and as I watched the footage of people falling over themselves in joy, I wished I too was that excited and hopeful. What a nice moment for all those people.
Alas, I really didn't care who won.
But this...THIS fills me with love, joy and inspiration. It gives me hope for humanity. I hope it does the same for you. Enjoy.
Alas, I really didn't care who won.
But this...THIS fills me with love, joy and inspiration. It gives me hope for humanity. I hope it does the same for you. Enjoy.
Tuesday, November 4, 2008
Rosy Thought For the Evening
Writes University of Buffalo Professor Michael Rozeff:
"The $700 billion bailout adds immensely to an unstable arrangement that will end in the collapse of the U.S. government. When? With some probability, it could happen at any time -- due to an unanticipated event involving a foreign country's currency or financing, such as a currency collapse in Russia or Korea. With some probability, it could start in and grow as the deficits grow rapidly now and when Medicare expenditures balloon. It took about 5 years, from 1918 to 1923, for Germany to collapse. The exact timing and nature of the triggering event or events can't be known now. The 1997-1998 Asian crisis was warning 1. The current crisis, which may suddenly grow worse at any time despite the current respite, is warning 2. There may not be a warning 3. The international monetary system is falling apart. Even if the system totters on for awhile, the growth will be anemic."
"The $700 billion bailout adds immensely to an unstable arrangement that will end in the collapse of the U.S. government. When? With some probability, it could happen at any time -- due to an unanticipated event involving a foreign country's currency or financing, such as a currency collapse in Russia or Korea. With some probability, it could start in and grow as the deficits grow rapidly now and when Medicare expenditures balloon. It took about 5 years, from 1918 to 1923, for Germany to collapse. The exact timing and nature of the triggering event or events can't be known now. The 1997-1998 Asian crisis was warning 1. The current crisis, which may suddenly grow worse at any time despite the current respite, is warning 2. There may not be a warning 3. The international monetary system is falling apart. Even if the system totters on for awhile, the growth will be anemic."
A Friendly Reminder From Tuna Melt
“I don't vote. Two reasons. First of all it's meaningless; this country was bought and sold a long time ago. The shit they shovel around every 4 years doesn't mean a fucking thing. Secondly, I believe if you vote, you have no right to complain. People like to twist that around – they say, 'If you don't vote, you have no right to complain', but where's the logic in that? If you vote and you elect dishonest, incompetent people into office who screw everything up, you are responsible for what they have done. You caused the problem; you voted them in; you have no right to complain. I, on the other hand, who did not vote, who in fact did not even leave the house on election day, am in no way responsible for what these people have done and have every right to complain about the mess you created that I had nothing to do with.”
--George Carlin
Sunday, November 2, 2008
Trade
From India, a point about Obama versus McCain that has been absent from the discussion in America.
"McCain has voted 88% of the time against bills creating trade barriers, and 90% of the time against export subsidies for US producers. Few other senators have such a splendid record."
Of all the horrible government interventions that turned the 1929 panic into The Great Depression, perhaps the worst was the near shut-down of global trade as every nation tried to subsidize their own exports and tariff the smoot out of their imports.
"McCain has voted 88% of the time against bills creating trade barriers, and 90% of the time against export subsidies for US producers. Few other senators have such a splendid record."
Of all the horrible government interventions that turned the 1929 panic into The Great Depression, perhaps the worst was the near shut-down of global trade as every nation tried to subsidize their own exports and tariff the smoot out of their imports.
Saturday, November 1, 2008
More Unsolicited Investment Advise From A Poor Bloke
I don't know why I keep making market predictions. To be clear, I have no investment income to speak of, no investment record other than simple stocks (of which I own none right now) and mutual funds, and my 401K looks as bad as everyone else's right now.
That said, I'm now prepped to tell you about "the next big thing." Were you too young to get in on junk bonds in the 80s? Miss the tech boom? Buy a house after the price explosion was already on?
Here's where to go next.
Put options on U.S. Treasuries.
"What?"
Here's a primer.
When the dollar starts to dive, all the trillions of dollars that moved out of the stock market and into US Treasuries will reverse course. Make your arrangements early and get rich, yo.
To extend the disclaimer that began this post, unless I sell the novel for 6 figures, I won't be taking my own advice on this one. For regular Schmoes (not Joes, mind you -- I ain't no plumber), this sort of shit just isn't practical. You could lose your shirt.
That said, I'm now prepped to tell you about "the next big thing." Were you too young to get in on junk bonds in the 80s? Miss the tech boom? Buy a house after the price explosion was already on?
Here's where to go next.
Put options on U.S. Treasuries.
"What?"
Here's a primer.
When the dollar starts to dive, all the trillions of dollars that moved out of the stock market and into US Treasuries will reverse course. Make your arrangements early and get rich, yo.
To extend the disclaimer that began this post, unless I sell the novel for 6 figures, I won't be taking my own advice on this one. For regular Schmoes (not Joes, mind you -- I ain't no plumber), this sort of shit just isn't practical. You could lose your shirt.
From the leader of "White Aryan Resistance" who prefers Obama to McCain.
"See, I’m a leftist. I’m not a rightist. I hate the transnational corporations far more than any black person."
Other surprising views from avowed racists in this Esquire article.
"See, I’m a leftist. I’m not a rightist. I hate the transnational corporations far more than any black person."
Other surprising views from avowed racists in this Esquire article.
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