Recent comments

  • Reuters put out numbers for the total derivatives market at $560 T. That includes I suspect, much more than just swaps. The other number that I have seen bandied about is the $65 T number to which you refer. One might conclude that this refers to the CDS/CDO etc fraction of the derivatives market. But then again, who knows? Really. The DTCC recently said that the number was $34 T. Do they really know? The derivatives market is unregulated, thinly traded and largely obscure. Where are these numbers coming from? From the stories I've read, there are situations so complex that the total number of counterparties to any one debt obligation is uncertain. Then we get the "settlement" of swaps for Lehman Bros, which is curiously subdued and the numbers relatively trivial. According to DTCC, many of the swaps cancelled out and only $6.2 B was paid out. But, then the news filtered out that most counterparties didn't settle, the consequences of which are discussed here http://www.nakedcapitalism.com/2008/11/credit-swaps-top-33-trillion-depo.... Oops. So does the DTCC number reflect the actual number of CDS obligations or just the number that they are aware of? What a mess.

    Reply to: Bad Ideas, Bad Management are Rewarded with Taxpayer Money   16 years 1 month ago
    EPer:
  • We have a presidential election, a chance to try a new set of policies and politics.

    Perhaps we need to start over with a new economy every 4 years as well.

    Reply to: Bad Ideas, Bad Management are Rewarded with Taxpayer Money   16 years 1 month ago
    EPer:
  • Last I read the derivatives market was estimated to be $65 trillion, which includes the CDS market.

    I asked NDD and midtowng last night to validate my math because I couldn't believe what I was seeing and NDD sent back other bloggers writing the same thing I did in this post.

    Mish: Mish

    Barry Ritholts: Barry Ritholts

    Tim Iacono: Tim Iacono

    So, it appears that financial institutions are getting more money than their entire value or the entire value of the supposed problem.

    That excludes though the shadow banking system, derivatives market. I'm not going to say I know what I'm talking about here but more we need more raw data and research, checking the numbers because that is what I'm finding.

    I agree with your analysis, they could indeed save every single foreclosure with this kind of money and your estimates for saving most foreclosures is probably on.

    What's even more odious is several banks have announced multi-billion dollar home mortgage refinancing, including principle but it doesn't add up to the money pouring from the Treasury and Fed.

    Reply to: Bad Ideas, Bad Management are Rewarded with Taxpayer Money   16 years 1 month ago
    EPer:
  • Anybody with any sense at all would have granted the United States a 'ZZZ' rating five years ago. I won't touch government bonds with a 20 foot pole at this point, seeing as how they've yet to pay off WWI.

    Reply to: United States Risk of Default Jumps   16 years 1 month ago
    EPer:
  • I think I've got a theory why hyperinflation hasn't happened.

    ALL OF THIS STIMULUS is being done as either investment or loans.

    Overleveraging of investment and loans is what got us into this mess in the first place and is the primary cause of the deflation.

    Therefore as long as we keep structuring these bailouts as M2 or M3 money instead of directly printing new money without loans, all we're going to do is make the hole deeper and the depression longer.

    I've got to put more thought into this. Perhaps a blog posting after Thanksgiving.

    Reply to: Bad Ideas, Bad Management are Rewarded with Taxpayer Money   16 years 1 month ago
    EPer:
  • Why, Why? Bob would the big boys settle for a solution that rights the mortgage markets and restores a calculable level of risk that allows for the CDS market to work reasonably well when they can make a multiple of the value of underlying assets by gaming the system?

    This is part of the diary that I've been wanting to write.

    The CDS market is a multiple of the value of the underlying assets insured. Now no one really seems to be true size of these markets, but the Office of the Comptroller of the Currency produces a quarterly derivatives report. (pdf!)

    The entire CDS market is valued at about $16.473 trillion dollars. Presumably somewhere between 5-20% of that are subprime mortgages that have been securitized. And some fraction of that let's say 25% have gone into default.

    So even in the worst case scenario, we are talking about $824 billion to just scoop up the mortgages.

    Further, by working deals out with homeowners, you could discount the value of the mortgage by a rate similar to the house value fall, and keep these people in their houses.

    And, by doing that, you are limiting the burden of this project to maybe a quarter of that $824 billion or about $206 billion.

    And that is a pretty manageable number.

    You restore confidence, and money starts moving again.

    I strongly believe that the CDS and all other derivatives markets should be nationalized, so that any future profits go to the government, and they can be regulated in the context of full information.

    But this isn't going to happen, because Obama is in hock to these people from the Hamilton Project and Rubin.

    I have to admit that Dean Barker has been growing on me the past few weeks.

    Like when he called out the outrage at a bailout for autoworkers making $57,000 a year when the same article doesn't even mention how much Rubin's walking away with from this deal.

    We are in for a whole hell of a lot of pain unless these jackasses are called out for the charlatans and treasonous bastards that they are.

    Reply to: Bad Ideas, Bad Management are Rewarded with Taxpayer Money   16 years 1 month ago
  • There are studies that show it takes about a year for changes in food and fuel prices to percolate through the economy (and thus, to have full affect on the "core"). There are also studies showing that the core number is a better predictor of the headline inflation number ~30 months out, than is the current headline number.

    In response to your question, it suggests core should be lower, all things being equal, about a year from now. But far, far less in amount.

    Reply to: Manufacturing Monday: Week of 11.24.08   16 years 1 month ago
  • I have noticed that many economists/financial types have delusions about their understanding the financial world. The reality is that those trained in economics and finance are often the most ignorant of the true nature and scope of their actions.

    What is the purpose of money or economic activity? I am suggesting that the true purpose of such concepts and activity is to prevent people from killing each other. The fringe benefits of money and economic activity such as as trade, "progress" and wealth creation are secondary.

    However many economists and financial types believe that money is real. Though many of them profess to believing that money is merely a medium of exchange and storage of commercial activity, their actions suggest otherwise. It is curious that kids stop believing in santa claus and the easter bunny as they grow up but start believing in the "realness" of money. Money whether gold based or fiat based is not real. Neither is debt, your favorite economic model or theory. Money is worthless if it cannot create new wealth or keep people from killing each other.

    The concept of money, as most people understand it, was created in a feudal and mercantile age when the majority had a subsistence level existence. It is therefore not surprising that it evolved mainly to keep people from killing each other and simultaneously control people (we are just smart apes who seek short term dominance over long term gains).

    However the full fruits of industrialization, various historical events and widespread multi-generational acceptance of concepts like fiat currency have made the consumption of the average person the only dominant driver of the economy (consumer economy). While some people express moral misgivings about such a transformation, the reality is that people who advocate a move away from materialism, towards conservatism, fiscal discipline, frugality are the merely the priests of a new religion. They seek to control and dominate the lives of other people just like the 'priests' of every religion from catholicism to environmentalism and "capitalism".

    Many educated people harbor subconscious fantasies about a return to a world where their less well educated peers are peons, serfs and slaves. The problem with this approach is quite simple- the level of complexity and hidden supports that keep our society functioning will collapse and we will cease to live in a functional society.

    Many educated people also harbor the fantasy that they can return to a medieval age where the level of complexity was "about right" for the "human brain". This belief is mistaken for a few reasons-

    a] We have no comprehension about the full capability and potential of the human mind. For most of history we have lived in tribes of less than 200 people, however given the right conditions we have been able to repeatedly form large complex societies. The same minds that are supposed to be capable of only forming medieval societies at best also create complex mathematical models that can ruin the world (as you might have heard recently). While our motivations may be base, our ability to perform complex tricks to obtain those base aims is rather surprising. Complex scams are hardly restricted to the financial sectors- the entire medical industry, construction industry and pretty much any regulated/licensed/ union job is essentially based on a complex scam.

    b] Living in medieval society was no picnic. People who visit heritage parks or attend renaissance fairs have a rather incomplete understanding of the hardships in those periods. This situation is not unlike many outdoors enthusiasts who rail against development but who depend on the gear, technology and laws of modern society.

    c] Western (white majority) societies are in decline. Throughout history, the intelligentsia of declining societies have always rationalized their downturns as natural, global , inevitable and understandable. The common thread through such declines has always been the belief that "we have reached the peak of human achievement and it is downhill for every human from here on". History suggests otherwise. However this phenomenon has never hit western societies on this scale and scope- until now.

    d] Emergent systems guided by chaoas and evolutionary pressures are unlikely to return to their starting point- or even retrace their steps. Much has changed in the 70 odd years since GD1, especially in regards to the permutations and combinations of possiblities.

    I believe that the best way forward for us a species is to think about the following concepts.

    1] What is money? Why should it retain its value? What is the use of money if it cannot buy you wealth. What use is your 1913 pre-fed dollar if it cannot buy you a circa 2008 - 4 dollar walmart prescription for your kids strepthroat. Do you have any clue about how many kids got rheumatoid arthritis or pneumonia from then untreatable strepthroat. Most people who died in the 1918 flu epidemic died from seconday bacterial pneumonia not the virus.

    Gold based or strict credit economies cannot create the infrastructure and technological breakthroughs we are accustomed to. We are quite pathetic at predicting the effects and potential of any any new innovation/ product or service- nothwithstanding the beliefs of of famous and clever white (and asian) men who have proved so wrong about the future of the areas in which they were considered to be experts. Rationing money for innovation would be rather similar to the soviet practise of command economics. In any case it is possible to employ 30-60 people for the total yearly income of an average mid-level investment banker who plays paper games, misjudges opportunities, screws over innovators and also loses your investments.

    2] Do banks have any "real" money in a fiat currency based world. Given that the vast majority of banks are either insolvent, propped up zombies or the walking dead- why do we need them (in their current form)?

    I believe that banks in a fiat currency world are best operated as utilities, not as the fiefdoms and the extortion rackets they have been to date. The biggest problem with this alternative model is that bankers cannot make obscene amounts of money by shuffling contracts and sucking money from the consumer economy.

    I propose that we pay for sending the current crop of bankers on a one way trip to the sun. It would be cheaper to put bankers and their families in launch vehicles directed towards the sun, than bail them out of their fictional mathematical games. The 'Zenit' rocket system can put one kg of stuff in orbit for less than three thousand dollars- You could put a family of bankers in orbit for less than a million. Building the launchers for putting bankers in orbit would create more real jobs than the trillions wasted in the futile efforts to make banks lend to consumers.

    3] Large misguided credit expansions, abuses and bankruptcies are inevitable in a species like ours. We like to screw our fellow human for a quick buck. The real question then is how we mitigate the negative effects of such abuses. I believe that any abuses which do not exceed a certain % of GDP should be watched but not intervened in - the dotcom boom created a very good high speed network that we are only now using to it's full potential. The factors that should prompt intervention are high relative size of the bubble to the GDP) and the low potential to create jobs or useful capabilities (housing- we already had a surplus).

    I, for once, would welcome a bubble in space exploration, engineering, chemistry, biotechnology or anything else that produces lots of jobs with the small prospect of big unexpected breakthroughs.

    4] In a system where the future is unpredictable, can credit be repayed completely or even partially? Given the factors I have listed in 3], periodic widespread debt forgiveness might be necesary to keep the system from collapsing. What do bakers lose anyway? Paper, ink, electrons? They certainly do not lose their previous paychecks, commisions, fees and other assorted loot made from the issuance of bad credit.

    Would 1.2 Trillion to repay credit cards + 1 Trillion to repay student loans + 1.5 trillion to pay other personal debt have stimulated economic growth better than pissing the money in a black hole to honor CDS bets (and keep apperances in this nonsensical paper game). Hell, yes!!

    5] Maybe we should accept that the two major roles of money are 1] keep people employed / civilized 2] create new wealth through innovation in the non-financial world. It might be time to give up on ideas such as full repayment of debt, money having a constant value and paying sociopaths to manage your wealth. Honestly, how many people who invested in the financial world are gonna make more money (inflation adjusted) than they put in- and guesses on gross percentages.

    But first we must put the banksters and their handmaidens into incinerators- heating water in boilers might be the most productive thing they have done in their lives.

    Reply to: Bad Ideas, Bad Management are Rewarded with Taxpayer Money   16 years 1 month ago
    EPer:
  • New Deal, I didn't think of that. You make a good point, my good man. See, I thought they were calculated together. Hrmm..so perhaps then we'll see Core go down then. The question is, by the same amount or less?

    Reply to: Manufacturing Monday: Week of 11.24.08   16 years 1 month ago
    EPer:
  • LOL

    While this is validating as hell that all of the folks wanting policy in the US national interest, working America's interests are now realizing we just got the DLC elites running the country again.

    (I must write a post on how Centrist means Corporatist)

    What are we gonna do now? We have a lot of true Progressive-Populists in Congress now, but not in leadership, either house.

    Reply to: They will NEVER be held accountable!   16 years 1 month ago
    EPer:
  • If Merkley meant to withdraw from the WTO or tariffs, he would have said that. He's not going to say that because that is not what the Populist/Progressive caucus has as their policy agenda. Fair trade does not mean that because as I repeatedly pointed out, I don't know how many posts I've already written on this, there are more ways to get fair trade that are much more sophisticated. I don't know how many posts I've written on the Horizon Project policy recommendations alone on here.

    ya know, if you cannot comprehend the facts, keep working on it. I don't want to sit here and type empty arguments in comments. It gets really old.

    I just pointed to how VAT is collected at the border, as a duty tax. It would be very helpful if you would consider reading Choate's book. I think he gives a very good explanation on how this works.

    Reply to: Obama Picks Cheap Labor & Guest Worker Queen Janet Napolitano for DHS!   16 years 1 month ago
    EPer:
  • She sounds more like a corporate apologist for Wall Street. She also has the annoying habit of lecturing people. I'd have to smack her if I talked to her for more than a few minutes.

    Reply to: They will NEVER be held accountable!   16 years 1 month ago
    EPer:
  • And funny- the EU VAT is collected as a consumer tax, at retail (at least according to that wikipedia writeup), not at borders, which means while it might act like a tariff sometimes, it's less powerful than a tariff and hits domestic producers equally with foreign producers.

    All I did to kick this off was mention that in my district at least, Merkely was running on a "reciprocal fair trade" platform- which I and several other voters certainly did take to mean tariffs & just say no to WTO/*AFTA free trade, since our enemies in this economic war are using tariffs. And that as such, the 41 new Senators who join 37 other Senators who came in in 2006 that support FAIR trade, might make a good spoil to the fact that Obama seems to have forgotten his campaign promises on this score.

    Reply to: Obama Picks Cheap Labor & Guest Worker Queen Janet Napolitano for DHS!   16 years 1 month ago
    EPer:
  • "If not in the short run, at least in the long run, where (baring corporate collusion) slave labor as a practice is eliminated."

    But that's the problem. As long as deficit spending (Consumer debt) is allowed, slave labor will never be eliminated. And minimum wage work is actually *worse* than slave labor- you're taking all of the work a person has to offer without paying for his food, clothing and shelter.

    To this end, it's time to realize that globalization is nothing more than a hot war targeting a nation's lower classes- and we should respond in kind, with nukes.

    Reply to: Obama Picks Cheap Labor & Guest Worker Queen Janet Napolitano for DHS!   16 years 1 month ago
    EPer:
  • EU VAT wikipedia.

    example of a VAT. The US has no VAT.

    A VAT can act like a tariff but is legal under the WTO.

    In terms of Domestic production there are a series of adds and subtracts depending upon how the system is set up, but it's basically a PPP (purchase power parity) equalizer and can be much more finely tuned than a tariff.

    In Pat Choate's book he writes chapters on VAT and I suggest reading this.

    Also, can we please try to keep the comments attached to the posts they belong to?

    the point is to keep the site organized as well as tracking on the comments, which are threaded.

    This post has nothing to do with trade, VATs and so on.

    Reply to: Obama Picks Cheap Labor & Guest Worker Queen Janet Napolitano for DHS!   16 years 1 month ago
    EPer:
  • by definition, hit everybody who was "adding value". Anyway, that's the way it works in the UK. How can you have a VAT that *only* hits imports?

    Tariffs, being assessed at the border, only hit imports by default. Are you saying your VAT would only be assessed at the border?

    Reply to: Obama Picks Cheap Labor & Guest Worker Queen Janet Napolitano for DHS!   16 years 1 month ago
    EPer:
  • Would be to select people at random who haven't done the job previously, since it's obvious that those who HAVE been doing the job are inherently unqualified.

    Reply to: They will NEVER be held accountable!   16 years 1 month ago
    EPer:
  • What it will do is make imports more expensive, not Domestically produced goods. If you think a VAT is expensive to consumers, try a tariff, which is across the board price increase.

    Reply to: Obama Picks Cheap Labor & Guest Worker Queen Janet Napolitano for DHS!   16 years 1 month ago
    EPer:
  • I said it too but one of the problems in the U.S. are getting qualified candidates to even run who can also handle the job.

    Reply to: They will NEVER be held accountable!   16 years 1 month ago
    EPer:
  •  Huge tariffs.  Found the link in your sidebar.


    For generations, American policymakers and experts – like the world’s leading Depression “expert” and Federal Reserve chairman Ben Bernanke – have looked at the trade protection of the Depression with scorn. They should have been looking at it as a model for coping with difficult times. The United States cannot compete with wage rates in Latin America and Asia, but our obligations to “free-trade” propelled us into a fight we are doomed to lose.

    If the United States simply placed a tariff – or even a quota – on Chinese imports it would be able to counteract the imbalance and make homegrown alternatives seem more reasonable. The U.S. doesn’t produce anything of substance in its “modern” economy, we all live on imports in every phase of life (you are probably reading this right now on a computer filled with Asian-made components).

     

    Reply to: Obama Picks Cheap Labor & Guest Worker Queen Janet Napolitano for DHS!   16 years 1 month ago
    EPer:

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