Why do we have these things?

I saw the best minds of my generation destroyed by blinkered liberalism

Here is one of the leading liberal bloggers of our day:

It seems to me that any talk of the end of conservatism is not only premature, but fundamentally misguided. It’s in the nature of things that politicians and intellectuals whose ideas tend toward the preservation of existing wealth and privilege are going to manage to find money and institutions to support them. The right sequence of events could push such a movement out of power for a while, but any incumbent regime is bound to be tripped up by bad luck or mistakes soon enough. And when it does, people turn to the alternative.

This is what I'd like to call "silly-ass" on several levels. The first thing to say is that it doesn't make any sense by Yglesias' logic to say that conservatives are and always will be defenders of "the preservation of existing wealth" if the very idea of "existing wealth" should (theoretically at least) be dependent upon the type of government in place. In other words, if "progressives" manage to take over come November and redistribute or do whatever it is they do, won't "existing wealth" then become an outcome of their own policies? And won't "progressives" then de facto be "defending" that existing wealth regime?

The real point is that all of this begs the question of Democrats' actual commitment to challenging existing wealth and privilege. Yglesias doesn't even say what's wrong with existing wealth and privilege. It can't be (for him) that wealth and privilege are per se wrong, or that all currently existing wealth and privilege was acquired unjustly.

He should specify what he means, because of course Democrats are comfortable with -- in fact, they have a long history of -- allowing extreme inequalities of wealth and privilege, so long, hypothetically, as the government provides some minimum of social insurance to people. Yglesias makes it sound as though the opposition, once in power, will effect a liquidation of existing wealth and privilege and an equalization of opportunity, but of course those currently wealthy and powerful will by and large remain so.

The final point is that this is an absurdly sanguine view of democratic electoral politics. He seems to assume that coalitions of popular movements that challenge wealth and privilege will be the default parties in power, with plutocratic "alternatives" sneaking in when the former are "tripped up by bad luck and mistakes." (But again, where will this cadre of fatcats come from if progressives have so far leveled wealth and privilege?)

Politicians and intellectuals don't have to search for money and institutions. Money and institutions find them, and the Democrats are certainly no exception. The idea that all of the righteous and just elements of American society are not only represented by, but actually spearhead, the Democratic party is ludicrous and Manichean.

Yes, yes, he's in the seating

My friend's mother received this in a chain email from a coworker in rural Ohio:

This will make you re-think: A Trivia question in Sunday School :
How long is the beast allowed to have authority in Revelations?

Revelations Chapter 13 tells us it is 42 months, and you know what that is.
Almost a four-year term of a Presidency .

All I can say is 'Lord, Have mercy on us!'

According to The Book of Revelations the anti-Christ is: The anti-Christ will
be a man, in his 40's, of MUSLIM descent, who will deceive the nations with
persuasive language, and have a MASSIVE Christ-like appeal....the prophecy says
that people will flock to him and he will promise false hope and world peace,
and when he is in power, will destroy everything..

Do we recognize this description??

I STRONGLY URGE each one of you to post this as many times as
you can! Each opportunity that you have to send it to a friend or media outlet..do it!
I refuse to take a chance on this unknown candidate who came out of nowhere.

My question is, wouldn't this be a pretty good incentive to vote for Obama, since it accelerates your chances of seeing the return of Jesus during your lifetime?

My friend also noted that the Book of Revelations apparently did a pretty good job predicting the "Muslim" character of the anti-Christ, considering the fact that it predates Muhammad by about 400 years.

Life imitates parody of life

"Original": "Republicans urge minorities to get out and vote Nov. 3."

"Copy" of "original": "Phony flier says Virginians vote on different days."

I think the fundamental problem here is the attempt to put structure on what is ultimately an unstructured world. The structure itself must be as nimble and flexible as the changing world in which we live. Otherwise, when change comes, it will fail. More intelligent processes, intelligent structures, are in order.

By "here", I literally mean most places in which symbolic structure exists.

Attempted Citizen's Arrest of Rove

"Turdblossom" almost gets what's coming to him....

Hugjh Hendry

Q: Today, liquidity is being pumped in by Greenspan, then?
A: Yes. The mechanism is the government-sponsored enterprise sector in America, the Fannie Maes and the Freddie Macs. The U.S. has nationalized the credit-creating process, previously the preserve of the banking sector. Freddie and Fannie can borrow money at almost the risk-free rate. At times of anxiety, they are profit-motivated to expand their balance sheets because government bond yields, the risk-free rate, fall during times of risk aversion. The spread widens between riskier assets like mortgage-backed securities, which Fannie and Freddie buy, and Treasury bonds. The combined balance sheet of Fannie and Freddie is $3 trillion, 30% of the U.S. economy. The annualized growth rate in September and October of their balance sheets was 50%. Now when people talk about M2 or the old monetarism, it hasn't kept pace with the disintermediation, which has gone on in the economy. It doesn't include agency paper. The money supply looks as if it's waning. It's not. There's enormous dollar creation. You can control the domestic price of money. Short-term interest rates have not gone up in America because of this economic Frankenstein. But you can't control the external price: The dollar is weakening versus everything, even versus the ruble.

The response to the crash since March 2000 has been to create even more money. Just as it was 300 years ago. We've created a tidal wave of liquidity, with the Dow back at 10,000. But in doing so, strange things have happened. Gold has broken its 25-year downtrend and has now established an uptrend. The CRB index is at a nine-year high. Oil prices didn't come down after the Iraq war concluded. Strange things are going on in the world at large. But not strange to a citizen of Paris in 1720.

Q: And this suggests?
A: The authorities have broken their trust with us. Middle-class society preserves its wealth in paper assets and the honesty of the paper asset is that the central banks will not dilute your financial assets by printing too much money. We're having to go to extreme measures to preserve our wealth by owning gold, a barbarous relic. Greenspan is the smartest guy on the planet, but you know what? Wise guys make mistakes. That's what LTCM [the Long Term Capital Management hedge fund] was all about. In 1998, the Fed made the same mistake it did in 1927, used an overseas agenda to determine its interest rates. The Asian economies are on their backs. Russia does the unthinkable and defaults. LTCM defaults. And Greenspan, acting like James Bond, saves the world by cutting interest rates when the U.S. economy is expanding at 7½%. In doing so, he throws petrol on the flames. Nasdaq goes exponential. He unlocks a bubble in domestic stock markets and we've been paying for it ever since. He knows the consequences are a period of prolonged economic weakness and that terrifies him because he's got so much debt in the economy. Debt today is 360% of GDP. Not just in America but elsewhere. We're ill-prepared for a rise in savings. And so he's done everything to prevent a rise in savings.

If the Fed succeeds in re-inflation, then the good news is that the Dow is going to be at 10,500... in 2020.

Table: Hendry's Picks and Pans1




Q: That's the good scenario?
A: The other scenario is that we can envisage a situation where it becomes possible that the tail can wag the dog. The stock market today is capitalized at 100% of GDP and debt is 360%. Here we are with the U.S. gross domestic product recently having shown 8.2% growth, a classic economic recovery. But history suggests that if growth continues, then 10-year bond yields will have to go to 6%-7%. But that debt level -- i.e., mortgage refinance-based consumer spending -- can't accommodate such high interest rates. That's why the Fed keeps saying that it will be putting the short rate up; it's desperate to control the long rate. This is a bear-market rally. They have never lasted more than 12 or 13 months in any asset class. This market bottomed on the ninth of October last year, so we're [generally] in that 12-month period. At this point, I feel very much like Jesus in the desert. I haven't eaten for 40 days, and I'm getting fed up with the juniper berries. The devil is saying to me: 'Look what I've done to the Nasdaq. Up 80% or so. Russian equities were up 100% a few weeks ago. All of this, this could be yours if you would give up on your disciplines.' If it rolls over, if all the bears are converted back into bulls, concluding it's a natural cycle, then this market will test last year's lows. If those are breached, then I believe you could lose 80% of the value of the S&P and the Dow from their peaks.

On Being Modern

My breakfast this morning struck a fantastic chord in me. I had two slices of (excellent) toast and a cup of coffee. I felt thoroughly modern, like 1950's engineer modern. In the pursuit of being a better student of planning, I will attempt to eat this breakfast more often--despite my love of the breakfast taco.

However, I was also reminded of Fillipo Marinetti's excellent manifesto "Against Pasta". The futurists captured some of the most exciting and best sides of the undead horrors we call modernity and modernism, though in their case it lead them on the road of fascism. I hope my toast emboldens me to seek the heights of iconoclastic egalitarianism, and not the establishment of some master toast-race.

Hi.

Congrats!

UPDATE: BUT SRSLY, if you really want to figure out what this award is all about (instead of listening to Liberty's ramblings), you might want to start here and here.

How did I miss this?

Just wanted to let everyone know how surprised and excited I am to see a socialist ticket poised to win the election so handily.

Lehman CDS: Friday

Well, we'll see what the market will be like in the coming months a short while after Friday, when up to $400B payouts on Lehman's bankruptcy has to be settled in the CDS market. Will there be bankrupticies from the payouts? Bilateral agreements halting payout?

The expected payouts on Lehman bankruptices, and others like it, is why there is no lending going on. Banks have to use all the cash they get from the Fed in order to maintain these CDS commitments. There will be more CDS settlements so while tomorrow is a big test, it does not mean we are out of the woods yet in terms of the CDS market's vulnerabilities. If it goes badly tomorrow, however, we can be sure it gets tougher for all markets, for the rest of the year.

To Grasp Reality

For over a year now, I have been warning of a complete systemic collapse of the U.S. Banking System. I was a bit biased towards the downside to begin with, as I started working in finance as a trader during the month of August in 2007. This was when the world found out that the seemingly impenetrable, multinational banking institutions, the symbols of American might that turned regular college students into Pavlov's drooling dog, were susceptible to reality. 120k earnings your first year out of school? Maserati at 28? It was, it turned out, just a dream.

I posted graphs from the Federal Reserve which I thought would illustrate why I believed this could turn into a depression. I made many timley macroeconomic predictions, and some individual stock predictions, and I routinely warned about an esoteric but sixty-two trillion dollar market called CDS.

The only one of my predictions from late 2007 to early 2008 that has not panned out(I never claimed with certainty we would go into a depression) is the complete collapse of the CDS market - the market Warren Buffet labeled as a "financial time bomb" whose architects were "mad men." I never really used the term depression to describe the events that would follow a CDS market implosion, but internally and in my discussions with others, I think it was clear that if this market were to fail, then "that would be it." Bernake and Paulson also seem to think so(AIG, Bear Stearns).

But these predictions were all made on paper - through research and diligence, technical analysis and fundamental calculations. I never really knew what it would feel like to actually live through this nightmare - through "hard times" - indeed, I think many kids our age forgot that the economy can have a seizure. The last twenty years have been an age of incredible wealth creation.

Main St. has not had hard times yet. But I think anyone with a grasp of reality can see where this is headed. Things will be very hard - and if the CDS market implodes - as I have said in early January and many other times - get ready for an outright catastrophe - massive instability will ensue. This is by god the only market we should care about right now - not the subprime bonds, not the bad loans that Hank Paulson wants to buy up and remove from the balance sheets of institutions, but the Credit Default Swaps market - whose purpose was to protect against the defaulting of corporate debt held by one party in the form of a one time payment if that debt ever defaulted. The payments are huge - like in the billions. No one has this money now. And no one had it to begin with - CDS is a legal contract but the capital commitments outlined in the contracts were not checked by any party. Now the total outstanding value of the CDS market is 62 trillion dollars - 4 times the size of the American economy. Parties have legally binding commitments to payup when a credit event occurs, but no one has the money now to pay, and some people never had the money to begin with!

So for example, if Bank Fish promises to protect Bank Huffy for James' TShirt Store, and the store goes plooie, then Bank Fish has to pay Bank Huffy a certain amount of money. Many of these payments are in the billions of the dollars - in fact I would say a billion dollars is the average. The bankruptcy rate prior to October 2007 was about .26 percent....way out of historical norms of a 1.25 percent default rate. Since we are in a financial tsunami, that rate is going to be much higher than this 1.25 percent normal average. Now, the geniuses of these CDS contracts didn't realize that their selfish interests would also create widespread risk - if James' T Shirt Shop goes bankrupt, and Bank Fish has to pay 1 billion, and Bank Fish is impaired, then Bank Fish is gonna go bankrupt, and now Bank Huffy, who promised to pay Bank Lick if Bank Fish went bankrupt, has to have 1 billion in capital outflows during a severe recession, and is gonna go plooie.

What got me thinking about this again was Yves latest post on nakedcap saying that the first settlement(when money changes hands) for the Fannie, Freddie, Wamu, and Lehman bankruptcies is this month. Granted, I don't think there are going to be major problems with this month's CDS contracts because many people hedged their risks - people have known that these institutions were in trouble for quite some time . However, according to today's FT, the contract value on Fannie and Freddie is 400B, with 35B of that 400B expected to be paid out by sellers. Who has this kind of money to spare nowadays? Do you see the problem?

The reality to grasp here is that it will be difficult to stop the CDS market from imploding. In fact, as long as the federal government bails out institutions and prevents any of the markets from clearing, the longer they continue to intervene(to a point), the worse shape companies will be in for the CDS tsunami...and the less likely they will be able to pay what their contracts say they must.

The Fed is again having an emergency meeting on Tuesday with the banks to set up a clearing house of some sort which will allow the CDS market to be organized better. In the future such an agency will verify capital commitments made by the paries, and right now, it will be primarily used for 'net-settlement', which is a way of hedging your risk on a specific CDS contract..basically nuetraling it out.

The Fed is preparing for the CDS storm and so should you. The CDS situation is more than just an economic issue for the parties involved, it goes right into the heart of trust in the system(62 trillion? are you kidding), the financial system, the legal system, and of course the regulators - who allowed such a monstrosity to occur. They only mandated paperwork be kept for such things in 2004. Before that, you need not even have a record.

As more entities go bankrupt, more contracts with be triggered. Then, more people will not be able to pay their obligations and will go bankrupt. Rinse and repeat. Or you might just want to take a shower after the bloodbath.

Good Article on Bailout

Mish: www.globaleconomicanalysis.blogspot.com/2008/10/bailout-bill-passed-so-what-happens-now.html

Are stocks in a bubble?

Either the credit market is right and this is a real disaster, or the equity market is correct and there will be a future.

One of these markets will reprice themselves. The farther divergence between the two means the one that is wrong is going to reprice itself at an accelerated pace.