Thursday, July 31, 2008

Completey Unsound Financial System

Never before in history have we seen charts like this before. The entire banking system is basically insolvent, if not for the Fed borrowing facilities. The first chart is borrowed reserves and the second chart is non borrowed reserves

Wednesday, July 30, 2008


I know some of our blog writers and readers are fluent in various areas of economic and cultural history. Now for a question that combines the two that I've been pondering, and one related to the post below.

I've been thinking about the history of our "culture of consumption" recently. Nowadays, we live in a world where after a foreign attack on our own soil we are told to return to our malls, and in the midst of a war longer than WWII told to go shopping more. My question: what is the origin of this world?

There seems to be three answers, the first two of which are rather simple. First, Americans have always had a particular propensity to truck, barter, and exchange stuff. De Tocqueville noted it (and if he didn't he should have), as did Weber in the Protestant Ethic, etc. Second, the proliferation of credit and installment plans in the 1920s disincentivized being thrifty and saving up for goods.

The third, though, would be Keynesianism: that theory of theories that tells the state to spend its way out of recessions and, accordingly, to citizens that they need to do their part in spending. Anybody have any thoughts or know of anything out there that addresses the culture of consumption before Keynesianism? What did general economic theories hold about the role of consumerism in boosting an economy?

We Are All Theodore Roosevelts Now

While I have yet to conduct an empirical analysis, I can say with near certainty that the past couple of months have featured more odd references and comparisons to Theodore Roosevelt than to any other figure in American history. Christopher Nolan apparently remarked that his reincarnated Batman is based on a particular reading of Edmund Morris' The Rise of Theodore Roosevelt. Today, we learn that an ABC interviewer once compared Osama Bin Laden to TR--in an interview with Bin Laden in the late 1990s. By far the most frequent obeisance to Teddy has come from the McCain campaign and its minions, a subject I will return to later. (For a head start, see McCain sample rousing TR speech in a recent campaign ad, and the usually accurate Eric Rauchway who opines that Roosevelt was kind of different.)

Everyone, it seems, has his or her uses for the brilliant, complicated, and inconsistent Teddy these days. I am no exception. My interest in TR, like many others I suspect, was aroused by reading John Cooper's excellent Warrior and the Priest this summer. Together with T.J. Jackson Lears' No Place of Grace: Antimodernism and the Transformation of American Culture, 1880-1920, a far different picture of TR emerged than the one I had previously imagined. Given that TR was a president during this period we call the Progressive era, I had always grappled with Roosevelt as a figure dealing with the same emerging broad problems most historians have associated with the time: as a member of a particular class and ethnic background whose influence was quickly waning; as the executive of the state in an age of the first billion dollar trust; and as commander and chief in the years following America's first successful attempt to expand its economic and political power outside of the continent. The dominant ideology of Roosevelt I had always took be simple: the need and will to assert the power of the nation-state so as to put big business (that is, monopoly capitalism) in its place. Thus, although Roosevelt was in practice not much of a "trust buster," as we are taught in school, it was true that should a company egregiously overstep its boundaries contrary to the express wishes of the government, it would be prosecuted. Likewise, if big business thought U.S. foreign policy should dedicate itself to providing predictable commitments to secure their investments, they would discover that it was hegemony, not merely economic power, that drove the government, etc.

What the Cooper and Lears books demonstrate, however, is that the implications of Roosevelt's
ideology were quite contrary to the dominant trends of the time. His embrace of the "strenuous life," of militarism, and national greatness he believed could come only at the expense of America's obsessive concern with material possessions. While economic issues had always dominated political debate among the average American voter--currency and tariff reform being the two most salient--Roosevelt believed the cure to the nation's ills lay elsewhere, via non-economic and material means. As Cooper wrote, "with his heroic virtues and renunciation of materialism, he represented a road not taken for American conservatism" (219).

With McCain, I do think we are seeing conservatism take this road. His and TR's shared militarism and "America is awesome and should be awesome" project in many ways explain why they both put economic matters in a distant second. The daily material concerns of Americans is beneath them and insignificant when measured against the such unifying and edifying activities as public service, military victory, and minor though symbolic domestic reforms. I can neither recall nor imagine any other candidate, other than these two who in the history of this country would readily admit that he was not adequately informed (or concerned) with economics. While the jury is still out as to what this kind of conservatism would actually amount to, I have a feeling there's a reason American conservatives have eschewed it.

Filed Under No Clue How I Missed This for So Long...

Tuesday, July 29, 2008

Obama Strategy

I think Obama's strategy is fascinating. I have such a top-down view of politics and the media, which has been reinforced by Bushs "I'm the decider"(and my-way-or-the-highway, blatant lying and manufacturing of threats, civil rights abuses against American ciizens, and legal limbo for those in Guantanamo based on a Presidential Directive) mentality, that to see Obama actually DO politics differently is a refreshing reminder that this kind of wishy washy stuff I learned about at college is still possible. Bush and the Republicans have so dominated the political landscape in the last 6 or 7 years, I think it is hard for many people to remember that there is actually another party that actually is capable of DOING politics differently, not just policy. When I see Obama speak, his insecurity, honesty, openness, and sensitivity, his embrace of difference and nuance, and his skin color, all seem so foreign to me as to make me feel uncomfortable. I think this is a stark reminder of what the Republican's actual plan was - to create a permanent Republican majority(Greenspan talks about such plans in his book Age of Turbulence) and how close they came! Indeed, I think one of the more horrendous and dangerous consequences of the Bush administration was the effect on our culture. Now I am not privy to the actual mechanics behind politics influence of culture, perhaps Scantron might have something to add, but in a general sense it is quite easy for one to see how the more authoritarian a political system becomes, the more the personality of one man, or one Republican system, with his/its ENORMOUS power and presence, can influence the more docile and passive apes in the jungle. In the last 7 years, the examples are plentiful and they are global. And of course, the policies(who can say Bush's time in office has not been marred by his uncompromising commitment to violence, epic nightmarish violence against a people and a region) can certainly affect the culture of the country, as can the main support groups who have such a say in our political system - in this case THE EVANGELICAL RIGHT: THE CRAZIES! And so, when I saw Obama speak, it really was, not really Hope(I'm not that desperate yet), but it was something I think many of us had forgotten, somehow Bush and the Republicans disconnected us from each other and our common humanity - from a divisive war, to economic inequality, to intolerance, and the chief culprit - single mindedness. Bush's refusal to change dug the hole only deeper. And this makes sense - by refusing to change policy you maintain that YOU are in charge, that you do not answer to anyone but yourself, and that no "people" will have a say in how you proceed, you can exact your will as you wish and as you please. You are that powerful and in control.

However, Obama's strategy is clearly a bottom-up strategy. He visits with people and builds consensus. He builds emotional momentum. This strategy is something you can not see - it is not as easy as running a tank into Baghdad and not as visible, or a better example would be feverishly pointing fingers at the White House Press Corps while proclaiming "I'm the decider" - but still, it is working. First, his campaign built its momentum in the United States during the primaries...his own rocketship...and with the wind at his back captured the hearts and minds of students and liberal intellectuals, and all of us in a way, with his rhetoric and his public displays of kindness - yes Barack is a moral leader - not a dogmatic one - but..what's it called...secular humanism..and now he is talking about breaking down the walls that divide us..the walls that George Bush built and used to shout down at us(see first paragraph). He has no illusions about American military power - yes we can kick ass, but come on this is not supposed to be used is DEATH after all....and I think, despite public pronouncements, envisions a world with a nuclear Iran, which is something we can deal with because war would, of course, be a much worse thing than a nuclear Iran...and....well to use the bomb would mean the end of the world and Iran is not CRAZY, just impotent enough to act crazy with those British sailors - but this is just my opinion.

But look at what Obama is doing. He is extending his primary strategy to the world stage. He is building what he calls "momentum." Grass roots Chicago style organizing on a global scale - THE ONLY WAY TO DO IT! It may be so..after all this is a quiet revolution against an oppressor - King George - that's what this is about, in America and Europe. Grass roots organizing is(ha ha) bottom-up. This is a bottom up revolution on a global scale. It is fascinating.

Man has always tried to overthrow his master, his oppressor, and throughout history has fought in the name of all sorts of variants of justice, in order to preserve the human condition, freedom, and rights. Is our time so different? Yes, this was a fairly corrupt time by historical standards - in every facet of civic life. But there is nothing history and humanity have more in common than examples of intolerance for excessive power - ala parental relationships or society. Here it comes again.

Monday, July 28, 2008

Oh Ronald!

Thursday, July 24, 2008

There's Anarchists in them there jungles

Here's a fascinating piece of living history. Robot, you ever hear of the Durruti Column while in Spain? (Not to be confused with the punk band, Durutti Column.) Between this and Orwell's Homage to Catalonia, it's clear how much some Spanish leftists loathe(d) the Catholic Church. Again, Robot, what is the social-political perception of the church now?


Friends Referenced on Blogs

Wednesday, July 23, 2008



Tuesday, July 22, 2008

Go Obama!

Interneetional Diplo

Friday, July 18, 2008

International Relations

Saw these in a bookstore yesterday. Pretty funny. In the German one they're constantly saying things like, "You'll notice several historically attested traits of Germans, like irrational Jew hatred, fearsomeness, and an urge to dominate." The funny thing is that I've seen basically the same sentence used by otherwise intelligent philosophers when talking about Hegel, who seems to bring out these sorts of sweeping statements.

From the French edition: "If you should happen to imagine that the first pretty French girl who smiles at you intends to dance the can-can or take you to bed, you will risk stirring up a lot of trouble for yourself - and for our relations with the French."


Thursday, July 17, 2008

Titanic Sequel Planned

Flipping channels, I just fell on the BBC. With the sound mercifully off, sparing me the banal 'reality' of the situation, I just saw the current pope sitting front and center thronged by minions on an enormous luxury yacht. The scene was awe inspiring; if only he started carrying a serious mace we could go back to what luxuries Rome once knew.

Wednesday, July 16, 2008

Fred Hiatt and the Trotskyists at WSWS agree on Obama

In an interesting convergence of views, both the Washington Post and the World Socialist Web Site today claim that an Obama Presidency will continue a policy of U.S. imperialism. In the Post's case, the assumption is that Obama will assuredly "come around" to this view; for the WSWS, Obama is (unsurprisingly) already there.

Here's the conclusion to the Post editorial:
The message that the Democrat sends is that he is ultimately indifferent to the war's outcome -- that Iraq "distracts us from every threat we face" and thus must be speedily evacuated regardless of the consequences. That's an irrational and ahistorical way to view a country at the strategic center of the Middle East, with some of the world's largest oil reserves. Whether or not the war was a mistake, Iraq's future is a vital U.S. security interest. If he is elected president, Mr. Obama sooner or later will have to tailor his Iraq strategy to that reality.
The WSWS piece differs in that it assumes that a "bi-partisan" consensus is emerging that the U.S. can secure its "vital interests" in Iraq with fewer troops, but (in the WSWS's view) that permanent bases in Iraq and escalation of the war in Afghanistan constitute what is still essentially a militaristic, imperialist policy.

What the WSWS makes explicit, and what the Post surely implies by its knowing reference to inevitability ("sooner or later"), is that the only ones fooled into thinking the outcome will be otherwise are "Obama's 'left' apologists." Indeed, I would say that for those who profess principled opposition to the war there are mounting reasons for abandoning that camp.

Reflections on the recently deceased

No, I'm not talking about the characters in Beetlejuice; I mean Jesse Helms and Tony Snow.

If there are two things the death of Jesse Helms has taught us, they are 1) that the conservative establishment feels no qualms about embracing this monster, and 2) that for the rest of us, it is "ok" not to feel that sad about the North Carolina Senator's death. Or rather, we shouldn't necessarily wish that he had never been born, but instead that he had not chosen to pursue the policies that he did, especially as regards race. The general feeling, among "centrists" and "mainstream liberals" alike, is that the world would have been a better place had Jesse Helms not taken his odious stances.

This is all well and good, but as I was saying to the Sheriff the other night in a delightful phone conversation that spanned continents (and which was united by, among other things, an admiration for Irish whisky), there seems to be some serious cognitive dissonance afoot. Senator Helms' chief sin was to be an unreconstructed racist -- I discount as lacking in anything resembling good faith conservative protestations that he merely opposed the "equivalent evil" of "race quotas." Now, Helms' racism probably resulted not only in extreme psychological discomfort for certain minorities, but also in some cases in actual, physical disadvantages, whether through the conscious barring of minorities from opportunities for advancement, or simple, naked terrorization.

My question is: Is this fault on the part of Senator Helms really worse than the decision, promoted by this administration and approved by almost all Republicans and a significant number of Democrats, to invade the country of Iraq, in the process creating a situation which has led to hundreds of thousands of deaths? If not, why not, and according to what calculus? If so, why is the fact of Helms' racism, which has certainly made many people's lives worse, considered (generally/in the press/in the "mainstream media") more egregious than hundreds of thousands of human beings' lives being ended? (I should emphasize that Senator Helms is of course to be included among such warmongers, and is of a particularly grotesque and shameless type, whose bloodthirstiness predates Iraq by several decades. When told by peace activists of murderous activities on the part of the Contras in Nicaragua, Senator Helms' office replied, "Well, they're just communists -- they deserve to die.")

Now for Mr. Snow. As far as I can tell, Tony Snow is the first Bush administration official to have died in the aftermath of the Iraq War. This fact has challenged me on several levels, and I confess that consideration of them throws into confusion certain of my assumptions. For example, I have for a while now considered the actions of the current administration to be in line with some form of rational thinking -- that is, I am not content with theories that ascribe "radicalness" or "craziness" to their reasons for wanting to go to war. Instead I see their ratiocinations as on a spectrum of thought which falls within the boundaries of what previous superpowers/empires have considered their first principles of action (they are extreme, but they are ultimately intelligible). This means that, barring a few cases of purblind ideological allegiance, most administration officials "know better." They recognize the results that their policies entail, for example, the enrichment of private persons, individual and corporate, by means of aggression and exploitation. They must also recognize that their methods are in stark contrast with at least one strand of American thinking, which is the consideration of policy among free and equal citizens on a standing of mutual respect and honesty.

The mundane dictates of greed mean that so long as individuals stand to gain from such practices, they will engage in them. However, the fact of mortality throws them into stark relief. Once a person is faced with the "final curtain," what prevents him or her from admitting the errors s/he committed while pursuing such profit? There are several answers: loyalty, intransigence, and perhaps even sincerity. Tony Snow exhibited one or more of these traits up til the end, with no regrets.

Am I naive for thinking he might not have done so, that his conscience might usually have weighed so heavily as to prevent his abiding fealty? I'm certainly not suggesting that "deep down, everyone thinks in their hearts of hearts just like I do." That is naivete for sure. Even though several of the everyday transactions of, for example, capitalism seem to me inherently unjust, I don't expect people to feel the same way. The processes are too embedded, people too accustomed, individuals too honestly invested in the supposed justice of the cause. But the especial heinousness of this administration's actions seems atypical, almost prima facie wrong. Perhaps it is not so, and perhaps Snow would dispute me.

I'm at a loss here: Are this administration's crimes par for the course? (In which case "sensible people" might regard them as no crimes at all.) Is the world really so ideological that anything (namely, something of this level of depravity) can pass for acceptable? If not, then why has nothing been done about it? (I don't expect "good" to triumph, but I at least expect it to put up a fight.) In short, what kind of a world is it that we inhabit when the White House spokesperson can go to his ultimate end without a hint of remorse? I'm not looking for a "good" or "bad" world, but one that can merely be comprehended, for better or for worse.

Tuesday, July 15, 2008

Love This Guy - Most Successful Investors are Radical

Monday, July 14, 2008

Benjamin Mk. II

In light of some pretty sw33t posting by Austin-5K, I wanted to draw our attention to the most recent issue of the New Left Review, which features:
Benjamin’s last, unpublished report on the literary situation in France. Critical reflections on the fiction, philosophy, memoirs and art criticism of the time—and on Paris, Surrealism and the logic of Hitlerism—moving constantly from the realm of letters to a world at war.

I've yet to read it myself, but I'm looking forward to it.

Sunday, July 13, 2008

The Defender Back

It is going to be interesting times in the economy with lots of postings. Thus, I have reopened The Defender to keep from dominating your posts. Domurl:

Saturday, July 12, 2008

Very Bad

Friday, July 11, 2008


Is This For Real?

I can't tell if this is a massive exaggeration of problems at Fannie Mae and Freddie Mac. I simply can't find any evidence that would suggest they are on the brink of bankruptcy. Granted, their liabilities are greater than their assets. But would they really be allowed to fail?

They lend half of the nation's mortgages, about 5 trillion dollars of the 12 trillion dollar market. They provide liquidity to the MBS(Mortgage Backed Securities Market). If they have problems fulfilling these two functions, it means a total meltdown of the mortgage market - beyond what we have seen thus far -, in other words, there would be no way to get a loan to get a house!!! And the banks would suffer much more mortgage losses - with zero hope of a revival anytime soon because the administration's plan was to use Fannie and Freddie as the mechaism for revival.

It would be end game for a long time for the U.S. Economy. It would lead to a massive depression.

This is so serious I almost think it is exaggerated. It's simply too big for me to comprehend or believe.....that no one would do anything to help these companies. If the government nationalized the companies, it would mean, literally a 5 trillion dollar nationalization...on the back of the tax payer, and would double the national debt over night. These numbers are so big that it makes me think commentators and investors are blowing shit out of poportion -but one of these "investors" was a former Federal Reserve President who declared Freddie and Fannie insolvent.

Is this for real?

Distribution of Class of 2006 Lawyer Salaries

Oil Up on JPOST Report

"On Friday, sources in the Iraqi Defense Ministry told a local news network that Israel Air Force (IAF) war planes are practicing in Iraqi airspace and land on US airbases in the country as a preparation for a potential strike on Iran. "

"According to the sources, former military officers in the Anbar province said IAF jets arrive during the night from Jordanian airspace, enter Iraq's airspace and land on a runway near the city of Hadita. The sources estimated the jets were practicing for a raid on Iran's nuclear sites.

The sources also said the American bases in Iraq might serve as a platform for the IAF from which to attack Iran. If Israeli warplanes will take off from Iraq, they can reach Bushehr in five minutes - a "record time," the sources said."


Thursday, July 10, 2008

America, Ex-Distortion

April 12, 2008. In yet another sign that the end is near, Harper’s Magazine, that venerable fount of left wing culture, has become a source of clear-eyed financial journalism. In February it ran a cover story by iTuilip’s Eric Janszen explaining America’s devolution from goods-production to paper shuffling. Janszen calls this the FIRE economy (for Finance, Insurance, and Real Estate) and concludes that it can only survive by blowing ever-bigger bubbles (read the article here for Eric’s prediction on where the next bubble will appear). And the May Harper’s just hit the newsstands with a cover story by veteran political analyst Kevin Phillips on how the U.S. government has been systematically distorting the economic numbers it reports. Here’s his opening More...

Second Round Acute Phase

If these two GSEs, Fannie Mae and Freddie Mac fail, it would most certainly put us int a depression. Poole today said the two entities were insolvent. The entities comprimse 50 percent of all outstanding mortgages in the United States. That's 5 trillion dollars. And they are on the brink.

But Poole warned about this very situation in 2005, time to pay the piper, here are two snippets:

GSE Risks
William Poole
President, St. Louis Federal Reserve
St. Louis Society of Financial Analysts
St. Louis, Mo.
Jan. 13, 2005

GSE Risks
Almost two years ago, in a speech at a conference hosted by the Office of Federal Housing Enterprise Oversight (OFHEO), I argued that Government Sponsored Enterprises (GSEs) specializing in the mortgage market, especially Fannie Mae and Freddie Mac, exposed the U.S. economy to substantial risk, primarily because their capital positions are thin relative to the risks these firms assume.(1) I had a number of specific risks in mind, but did not elaborate the nature of these risks. My purpose tonight is to provide that elaboration. I will concentrate on risks facing Fannie Mae and Freddie Mac, but it should be understood that the Federal Home Loan Banks raise many of the same issues.

Concluding Remarks
My purpose has been to provide an outline of all the risks facing Fannie Mae and Freddie Mac. There are six risks to consider: credit risk; prepayment risk; interest-rate risk from mismatched duration of assets and liabilities; liquidity risk; operational risk; and political risk. Much more could be said about each of these risks, but I thought it would be useful to discuss each of them briefly in order to have a complete catalog.

I’ve particularly emphasized the importance of facing up to the implications of low-probability events. A low probability must not be treated as if it were a zero probability. Moreover, extensive evidence from many different financial markets, reinforced by similar findings in commodity markets, indicates that price changes in asset markets are characterized by fat tails. The probability of large price changes is much higher than suggested by the familiar normal distribution. In the case of the 10-year Treasury bond, changes of 3.5 standard deviations or more are 16 times more frequent than expected under the normal distribution.

More generally, the probability of shocks of many sorts may be higher than one would think. The accounting problems that surfaced at both Fannie and Freddie would surely have been assigned a very low probability two years ago. Unlike the situation in financial markets, where a wealth of data permits some formal probability estimates, the probability of other sorts of events is much more difficult to judge. For this reason, I believe that the capital held by F-F should be at a level determined primarily by the cushion required should an unlikely event occur rather than by an estimate of the probability itself. It may be that the highly volatile interest rate environment of the early 1980s is extremely unlikely to recur, but I would like to see F-F maintain capital positions that would enable the firms to withstand such an environment anyway.

One thing I think I know for sure is this: An investor who ignores the risks faced by Fannie Mae and Freddie Mac under the assumption that a federal bailout is certain should there be a problem is making a mistake.

Monday, July 07, 2008

Everyone hates Al Sharpton. (Coincidentally, everyone is also a fucking twit.)

Matt Yglesias' recent series of posts on the legacy of Jesse Helms has been insightful, but then you get this:
One fascinating thing about the death of Jesse Helms is the conservative reaction. One might expect that Helms' death would prompt from conservatives the sorts of things that I might say if, say, Al Sharpton died -- that he and I had some overlapping beliefs and I don't regard him as the world-historical villain that the right does, but that he's a problematic guy and I regard him and his methods as pretty marginal to American liberalism. But instead conservatives are taking a line that I might have regarded as an unfair smear just a week ago, and saying that Helms is a brilliant exemplar of the American conservative movement.
What is it about Sharpton that makes so many "thoughtful" liberals buy into this crap?

I have reviewed some articles on Sharpton and cannot find anything that would put him even close to being on the same level of moral hideousness as Helms. Yet so many liberals are willing to take the bait on Sharpton and treat him as the Democratic Party's equivalent of a neo-Nazi, thus legitimizing the terms of the debate promulgated by the Right.

To my knowledge, Sharpton has made a few comments about "white folks" which could be taken as bigoted, as well as some about Jews (a gibe about yamulkas), homosexuals, and, in the most recent primary season, Mormons. In almost every case he has apologized profusely for his remarks or misunderstandings stemming therefrom, in some cases meeting personally with Mormon leaders who afterwards declared their good will towards him. Far from appealing to homophobia, Sharpton has taken the admirable steps of supporting same sex marriages (something no Democratic candidate will do -- so much for the supposed "backwardness" of African-Americans on this question as compared to mainstream liberals) and promoting efforts within the black community to recognize and tolerate gay relationships.

In any case, the plain facts of Sharpton's life reveal a man totally committed to equal justice for African-Americans and willing to go to jail -- even almost be murdered -- on their behalf. The mere suggestion that he is the mirror image of Helms seems on its face ridiculous. And Sharpton's life-long commitment to strategies of non-violence make comparisons between him and someone like, say, Yasser Arafat inappropriate. (This is not to accept another set of terms of discourse about Arafat, merely to state the fact that the charge violence is unattributable to Sharpton.)

Is there something I don't know about Sharpton? Some secret stash of quotations that will automatically besmirch his reputation in my mind? I'd like to know. In the meantime I will have to go on assuming that the self-righteous slandering of Sharpton, a man committed body and soul to progressive principles, by "mainstream" liberals is either an unwitting caving to right-wing rhetoric, or is itself the product of a right-wing mentality that attempts to marginalize minority- and popular-power figures in an attempt to fashion itself as the true arbiter of the "liberal" movement. (Instructive here is the near-constant rhetorical use of Sharpton as a foil for the "responsible," "dignified," "post-racial" politics of Obama -- a trope used by both liberals and conservatives. Obama himself has activated this rhetorical nonsense with such statements as: "Whose Christianity would we teach in the schools? Would we go with James Dobson's or Al Sharpton's?" Unbelievable.)

I wrote this before reading the comments section of Yglesias' post, thinking there might be some there in agreement with me. Amazingly, almost every commentator sympathetic to Yglesias says that the analogy is inappropriate, not because the comparison of Sharpton and Helms is patently absurd and right-wing in its assumptions, but because Sharpton "has no comparable power" in the liberal movement and is "marginal" vis-a-vis Helms. This is another favorite tactic of "common-sense" liberals: distance yourself from a figure perceived as "fringe" (never mind the soundness of his or her positions) simply in order to satisfy the great cosmic balance of "left-right-center." That the resulting state of play is drastically skewed to the right never seems to bother these people, presumably because they are in no position to benefit from actual social justice, or because there is no principle they will not abandon in exchange for acceptance into the political chattering class.

Sunday, July 06, 2008


Paul Kedrosky posted on a report published in a Swiss paper (he courteously provided the English translation) of the results of a study prepared for hedge fund Bridgewater Associates that projects that total losses to the financial system from the credit crisis will reach $1.6 trillion. Note that losses taken to date are only $400 billion. This is consistent with the off-the-cuff view of Ted Forstman in an interview with the Wall Street Journal that we are only in the second inning of the credit crisis.

The IMF has forecast total losses from the credit contraction of $945 billion, and that included damage to hedge funds and other investors, not to the financial intermediaries that are an integral part of the functioning of advanced and even not so advanced economies. By contrast, Goldman Sachs has put the likely damage at $1.1 trillion, George Magus of UBS at $1 trillion, and hedge fund manager John Paulson at $1.3 trillion. So this is far and away the grimmest estimate to date, particularly given its focus on financial intermediaries.

Reader Dwight, who pointed out this post to us, wonders if this report (or perhaps thinking along similar lines) is the basis for recent apocalyptic calls from RBS, Barclays, Fortis. SocGen, and the BIS.




Pretty Funny

From Dec 31, 2006

Saturday, July 05, 2008


In reference to my last post - that wealth was not for everyone:

The failure of political Keynesianism, and then monetarist policies to ressurect rate of profit dovetailed with a 'we don't know what to do so lets try 19th c laissez-faire on a world scale' set of policies demanded by the U.S., given voice by Reagan and Thatcher in her famous statement: 'There Is No Alternative [to a worldwide free market]', or TINA.

Borders to capital flow in all its manifestations had to be everywhere broken; state owned industries had to be privatized; poor fiscal management had to be tightened and almost everywhere on the backs of the working class and poor as needed social services were cut and cut again. Debt payments, no matter how great a percentage of export earnings, had to be made if a government were to expect future access to IMF and World Bank funds.

Neoclassical economists and their theories provided ideological justification; a sort of 'we are all neoliberals now' attitude infected world leaders until, in 1989, John Williamson coined the term 'Washington Consensus', which was very much not the consensus of those most subject to the various 'shock therapies'.

So, how did the world do under this set of misguided fundamentalisms?

"Real global GDP growth averaged 4.9%a year in the Golden Age years from 1950 through 1973, but dropped to 3.4% annually in the unstable period between 1974 and1979. Dissatisfied with the instability, inflation, low profits and falling financial asset prices of the 1970s, advanced country elites pushed hard for a switch to a more business friendly political-economic system; global Neoliberalism was the result. World GDP growth averaged 3.3% a year in the early Neoliberal period of the 1980s, then slowed dramatically to 2.3% from 1990-99 as Neoliberalism strengthened, making the 1990s by far the slowest growth decade of the post war era." (James Crotty)

Amazing Wealth in Our Lifetime

It is truley amazing the amount of wealth that has been created in our lifetime. Marvel in it. It's a wonderful time to be alive.

Interesting Graphs.

Looks like the government is baking in a large precipitious decline in energy consumption as a result of an ever increasing deflationary enviornment, leading to a substantial price decline from the current highs. This scenario, like most things in economics, has its pros and cons. But for me, its mostly a con, as a deflationary enviornment in the real economy would filter back into the banks and lead to more writedowns on credit card loans, auto loans, and the esoteric instruments and markets currently being disrupted - the eventual outcome being bank failure(among the regionals). Plus, even with a decline in the amount projected, it offers little hope for restitution among the consumer - energy consumption as a percentage of GDP will still be at record or near record high levels. The net result is the deleveraging process among banks has a long way to go, as does consumer suffering, and as we know - home price decline. A vicious vicious cycle - from the financial sector to the real economy, from the real economy to the financial market, and back to the real economy. When will the cycle end?

Thursday, July 03, 2008

This is a real government official.

Tuesday, July 01, 2008

Three Thoughts on the (Sub?)Urban Crisis

1. Ever wondering how downtown Memphis got its groove back? Turns out, the renewal involved reducing violent crime in the downtown area by dispersing it, and the structural factors associated with it, to the periphery. A rather compelling and depressing and lengthy Atlantic Monthly article has the details for all the Washav Memphis ex-pats. A friend of mine who alerted me to the piece I think summed up the sentiment nicely: it's just politically disappointing.

2. Matt Yglesias alerts us that Shelby Steele is back at it again telling Americans the big dangerous idea that no one is quite ready to swallow: that white people aren't so bad, and that the problems of this country stem from them being just too benevolent to their former slaves and underclass. On the one hand, I think it's entirely justifiable to maintain that exclusively placing emphasis on policies like affirmative action and certain forms of welfare only mask the much more substantive and comprehensive policies that are actually necessary for solving the chronic problems associated with black America. Where I begin to get annoyed is when conservatives blame liberals for not actually caring about these problems because they are for policies like affirmative action and certain forms of welfare. My understanding has been that places like universities and people like academics are by and large for affirmative, certain forms of welfare, and substantially more local, state, and federal investment in black communities than are conservatives. When did support for the former two preclude support of the latter two except when various reactionary white folks decided that they would sort-of-kind-of-but-not-really support affirmative action and certain forms of welfare but absolutely not substantially more local, state, and federal investment in black communities. But then again, what am I saying? I momentarily forgot that liberal "white guilt" is the enemy here and not a history of structural inequality and racism.

3. The Atlantic piece (particularly the embedded video) also explores the question as to why the urban crisis is no longer a part of our national conversation. One would hope that an Obama victory would at least help matter a little. He would, after all, be the first truly urban President (who has worked on urban problems) since ... Kennedy (Ford might also possibly count). In addition, one would presume the continued trickle of folks back into the city would jump-start a sustained discussion of urban problems. The problem with this logic is that it assumes urban problems will stay urban rather than being outsourced to the suburbs as the Memphis article shows. With the urban crisis evenly dispersed into suburbia, I'm not sure whether we get silence or La Haine.