Posted on 01/29/2009 9:06:43 AM PST by Attention Surplus Disorder
I don't know where to start today - there's too much to make sure I hit all the points, but I'll give it a decent shot. Be warned - if you don't like rants, this Ticker isn't for you.
First, China:
"Chinese premier Wen said America's voracious appetite for debt and "blind pursuit of profit" had led to the worst recession since the Great Depression which has rocked the 2,500-strong political and business elite gathered in the Swiss mountain resort."
Premier Wen: Bite me.
Let's quit the lying, eh? Since I never intend to visit your corrupt, polluted and putrid excuse for a nation and you can't send me to the gulag for 40 years for speaking the truth in this country, I'm free to call BS on your mendacious nonsense.
China is a willing co-conspirator in this mess. Your nation participated as a free and fully-involved party in artificially holding down interest rates on all sorts of debt, including mortgages, by purchasing debt that was intentionally mispriced. What's worse is that you still are doing it (in the form of US Treasuries) and have yet to repudiate that policy, call it what it is, and refuse to continue participating!
I fully understand why you were engaged in this policy. Doing so was a necessary part of pumping our real estate and other asset bubbles which in turn was necessary for consumers in this nation to have access to credit they could not qualify for on any reasonable and prudent set of terms. This in turn enabled our consumers to purchase $30 DVD players and various other forms of plastic crap that your citizens cranked out while working for wages and working conditions that were last seen in this nation during the 1800s prior to the Civil War - on a plantation. If you didn't do this (or if you stop now) you run the risk of a real, no-nonsense 1776-style event in China, topped off with you being the "State Dinner." Backed into this corner your puerile rant makes sense, but only in a sad sort of way, much like Hitler probably did just before he blew his own brains out.
IF we are as a group of nations to get through this crisis without having it turn into a shooting war somewhere down the line the BS, lies, complicity and games must stop. This means that everyone involved must admit to the behaviors that caused the crisis in the first place from an economic perspective (I will leave the sins of commission such as melamine-laced dog food for another time) and to the extent that those behaviors are still ongoing they must stop it.
Specifically:
Our nation intentionally pumped liquidity into the market after the 2000 Tech Wreck, distorting the market for homes and other assets, thereby creating "false wealth" that never existed but which fueled the consumption of "stuff", much of which was produced in China. Your nation intentionally purchased this debt knowing that this "asset boom" was unsustainable for the explicit purpose of "sterilizing" the capital flows that would have otherwise required your government to restrain the growth of your economy to a reasonable level or suffer much higher rates of inflation. In other words, you were willing co-conspirators in pumping asset prices and the unsound lending that was taking place in America in order to maintain an unsound economic system in your nation. Today, with the bubble having collapsed, you have the gall to stand before world leaders and business people and claim innocence while bashing The United States as admitting the truth would require your resignation - or commission of seppuku.
I refuse to sit quietly by and allow that sort of garbage to go unanswered.
I understand why you're pissed. When you got in debt trouble over there in Asia not all that long ago, we preached austerity and forcing the bad debt out into the open where it would default. That, by the way, was the right thing to do.
When we got in trouble, doing pretty much the same thing (with your help) that you did to yourselves, we instead become more profligate with spending and debt, as if a heroin junkie can fix what ails him with "just one more shot."
You're right to complain that this policy is bankrupt and won't work.
Where you're dead wrong is that you can put a stop to it tomorrow but are instead continuing to be an enabler, and therefore you have absolutely no right to complain.
To heap further insult upon yourself and make clear you really are stupid The Fed today said it intended to tamper in the Treasury market! So now you're going to stand by and lecture while our Federal Reserve says in public that they intend to do whatever the hell they'd like, including debasing our currency and tampering with the Treasury Market and you continue to buy Treasury debt?
Are you insane?
If you wish to stand in Davos like a prima donna and insult America as "responsible" for this mess then sell your Treasuries and withdraw your currency peg, allowing the Yuan to float freely against other currencies in the world.
Bingo - we're forced to do the right thing here and now.
But so are you.
Instead, you have the gall to step up and lecture our government and our people about our evil heroin (credit) habit while at the same time you are pushing more drugs at our nation right out in the open!
That's a total load of crap and I, for one, am tired of this sort of garbage. The drug pusher cannot harp on the drug addict so long as the pusher continues to shove more dope under the addict's nose and insists that he consume it.
Either accept responsibility for your personal and national complicity, quit being complicit (and then complain) and put your own house in order, or shut the hell up.
In national news The House passed the "Economic Stimulus Bill" this evening with zero "yea" votes from Republicans. Gee, how nice - now that the Republican Party has lost it's majority, ran a senile old man as a Presidential candidate who supported bailing out bad bets made by banking executives with public money, got their heads cut off in November as a consequence and nearly wound up with a filibuster-safe minority in The Senate they finally transplanted a set of stones between their legs! Unfortunately for The Republicans their "alternative" is simply to cut taxes - a nice idea when you have lots of extra money, but a non-starter when you're deeply in the hole.
We still haven't found the people who are supposed to be Republicans - you know, those folks who for years argued for things like jailing people who break the law, not bailing out those who make bad bets, "rugged individualism" and similar? Yeah, those Republicans. They're still notably absent in Washington DC and I'm not voting for "borrow and spend" Republicans - now or ever.
I like the "principled opposition" but two wrongs don't make a right; fix the stupid and you'll regain my support.
Next up is the fact that California is apparently not going to be issuing tax refunds since they're short of money, claiming that they must pay other expenses instead.
"ABC News has learned that tax refunds are now on hold in California for the first time in state history, according to the state controller's office. "
Heh Arnie, let me make something crystal clear to you and the rest of the clowns out there in Sacramento. Tax refunds are not your money. They are excess amounts that the state has no claim to as they were not owed to to the state in the first place. They are the legal property of the person who remitted them in excess of their lawful tax obligation and you have zero right to hold them for so much as one minute beyond the date when you are supposed to return them.
If the citizens of California allow the state to literally steal money from them that they own free and clear, and that the state has no lawful right to retain, then California's residents truly deserve the title of "the fruit and nut brigade."
This is deserving of an immediate lawsuit demanding an injunction - at minimum.
Of course PIMpCO is back in the news with Bill Gross once again claiming that the government "must stop declines in asset prices" to "revive the economy in 2010."
Here's a clue-stick Bill: The former prices for those "assets" were fraudulent. They were pumped by loans written to people who the lenders knew couldn't pay. These loans were then packaged into securities that had credit "ratings" that were false as they were based upon fanciful assumptions and even data that was literally invented out of whole cloth. Not content with the cash flow out of actual bonds the banks then went one step further and created out of whole cloth synthetic (!) instruments that were backed by nothing other than an indexed performance ratio and sold those! There is no means to "support" the price of something that is based on a lie from top to bottom. Prices for assets must and will revert to levels that are supportable by the income used to pay for them whether we like it or not; all attempts to stop that from happening are no more effective than throwing money into a black hole. Mathematics always wins whether you like it or not, and the sooner you and the rest of the loudmouth fools running around demanding that government perform impossible feats of magic stop it the sooner we can take the economic pain that is necessary and be done with it.
Finally we have the insane opposition to the Real Estate auctions that are happening nationally. Dig what some so-called "consumer advocates" have to say:
"Auctions exacerbate the crisis, says Ira Rheingold, executive director of the National Association of Consumer Advocates, a nonprofit attorneys group in Washington.
“They are just furthering the depressed market, because what they are doing is selling properties really, really cheap,” Rheingold says. “I don’t know that it does anything for the market except make some greedy speculators rich.”"
Riiiight. So do the weekly automobile auctions for used cars that take place in dozens of locations all over the country, so does eBAY, so do estate auctions, and so, for that matter, do art auctions at houses like Sothebys?
Exactly what is the problem with auctions? They determine a price - efficiently, quickly, and with finality. There is no haggling, there is no lengthy period of waiting, and there are no leaches trying to intentionally distort the market with fraudulent appraisals, appealing to "payment" instead of price and other similar games. There is only price - a single number argued over by a whole bunch of buyers in the same place who keep going until the last man stands with the highest bid.
What possible expression of capitalism supersedes the open-outcry auction (whether conducted over a computer or in person) as a means of price discovery? It happens every day in the stock market, on the futures exchanges, in the pits of Chicago and New York. Buyers and sellers haggle daily for the price of a barrel of oil, a basket of stocks, a bushel of corn.
In point of fact the complaint being voiced here is that avoiding price discovery has been and remains the KEY element of virtually everyone in this mess, from banks to cities and states to Realtors to Appraisers. Absolutely everyone is hellbent and determined to avoid asset price discovery throughout the marketplace by any means possible.
Yet if we have any desire and intention to solve this crisis and restore growth to our economy we must first perform that price discovery process no matter where it leads.
Only then can we restore balance to our economy and credit markets and those who stand in the way of that process must be ignored and, to the extent that their attempt to game the process stems from self-dealing or other means of intentional distortion find themselves held to account under the law.
Thanks so much for the wonderful analysis and comment.
Ping!!!!
Denninger writes an almost-daily commentary at the referenced site. I am appreciative of his brutally frank expressions of his outlook. He also has a pile of YouTube videos more timely with the passage of the original bailout bill(s). Also a fearsome stock trader.
Highly recommended.
I read that and chuckled. Denninger has a way of cutting through the bull in a way rarely seen elsewhere.
Indeed. Karl Denninger is the guy who authored (mostly) and recommended The Genesis Plan to deal with the Credit Default Swap crisis back in late 2008. Very interesting reading that would probably be lost on most politicians. Certainly all the ones who voted for TARP.
Interesting read.
To restore TRUST this is what Denninger recommends:
1. Force all off-balance sheet “assets” back onto the balance sheet, and force the valuation models and
identification of individual assets out of Level 3 and into 10Qs and 10Ks. Enact this requirement
beginning with the 3Q 2008 reporting period which begins next month. Total taxpayer cost: $0.00
2. Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity
markets. This permanently defuses the derivatives time bomb. Give market participants 90 days to get
this done; any that are not listed in 90 days are declared void; let the participants sue each other if they
can’t prove capital adequacy. Total taxpayer cost: $0.00
3. Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer
leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or
more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of
the excess taken down monthly. Total taxpayer cost: $0.00
"ABC News has learned that tax refunds are now on hold in California for the first time in state history, according to the state controller's office. "
Let's say that a Californian buys a TV online for $899 plus $50 shipping and pays by credit card a total of $949.
The TV is delivered. The TV company calls the buyer the next day to say, "We apologize for the mess up but the TV price was actually $799....you overpaid. However, we're going to keep the extra $100 dollars since we have some unexpected bills to pay."
How pissed off would said Californian be?
I realize everyone here gets this but it leaves me shaking my head at Arnie's gall.
I will be amazed if there is not some sort of suit filed in "Gullifornia" over this.
This is gonna end up a family discussion. Great post. What I’d like to know is BELOW what age does this brilliant essay make no sense, due to a lack of understanding of basic economics. Is that subject even taught any longer in school. At one time in the USA, the truths written herein were learned in HIGH SCHOOL. Rather than a course in SELF-ESTEEM, students actually studied a course titled ECONOM ICS. I wonder if today’s college grads could pass an “olde tyme” economics test...doubtful. I am positive the Democrats can’t. We are in deep doo-doo .
“We are in deep doo-doo”
We are. But, IMO the great US/ChiCom devil’s bargain that grew and grew and morphed into whatever-you’d-to-characterize-where-we-are-now.... was not precedented in world financial/economic history AFAIK.
As for your question, [below what age...?] there are some prerequisite concepts (like compound interest, sterilization, securitization) that are probably going to be pretty arcane for the pre-teen set, no matter how they’ve been educated.
In their place I would most heartily recommend a truly excellent presentation by Chris Martenson titled “Crash Course” which is beautifully done and divided into easy-to-digest segments. Now there is 1% global warming crapola in there with which I disagree, but that’s insufficient reason to discard the 99% with which I DO agree and which would serve youngsters very, very well to be exposed to.
http://www.chrismartenson.com/crashcourse
Very, very well done, superb, excellent.
Let's face it, just about everything ends up being a family discussion topic. Good thing we are all like-minded thinkers.
In answer to your question, “is economics taught in high school”: NO! Truthful run-of-the-mill American History is barely taught these days. We are lucky to be in a school system that still makes the kids have several US History and US Government classes to graduate. But what they are not taught (unless they choose Economics as an elective - which most high schoolers don't) is Eco 101. The average kid has no clue how the economic world really works.
Our kids were taught at the kitchen table! As a college kid and high schooler they are among the few who are already working, saving, and taking on the responsibility for all or part of their own college educations.
We, the USA, need Economics taught in school. But what I fear is that the National Teachers Democrat/Socialist Organization will teach a skewed lesson.
How the hell do we take our country back?
Elementary my dear spousal unit;
The same way it was done the first time.
"The Tree of Liberty must be refreshed from time to time with the blood of patriots and tyrants." - - Thomas Jefferson
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