Rolling US Economy Into The Shitbin Thread

Agreed.

I feel the same way about the term "wealth destruction" - the wealth wasn't really there to begin with.

Anyone have any thoughts about Obama's bank plan / Glass Steagall 2?

i'll believe glass steagall 2 when i see it
jobless rate to stay above 8 percent until 2012
at this point i can imagine out of work rednecks refusing to look for jobs just to keep the unemployment rate high

Um, whut?

Also the ridiculousness of that suggestion aside, refusing to look for a job would ultimately put them in a "discouraged worker" category and thus not in the unemployment rate.

jokes jokes but if you want to take it seriously, the putative rednecks on strike against fascism/marxism might not be honest about how they file their unemployment

i like seeing paul volcker next to obama but no way is this going to do anything to the banks

taibbi is awesome as per usual -

http://trueslant.com/matttaibbi/2010/01/27/populism-just-like-racism/

The Dow closed just above 10,000, dropping 2.6 percent, when two of Wall Street’s biggest fears — a deteriorating jobs market and the debt woes facing foreign governments — re-emerged on Thursday.

What? You thought we were on our way to a recovery? If so, I have a Timothy Geithner I can sell you for cheap.

just saw there's a new baseline.

yeah, i did feel like we were on the way to a recovery. still hoping, maybe foolishly.

that baseline scenario is loooonnnnnngggg. key point that jumped out at me is the need for a second, robust stimulus:

9) On a Q4-on-Q4 basis, the US will struggle to grow faster than 2 percent (the IMF forecast is for 2.6 percent). This within year pattern will likely involve a significant slowdown in the second half – although probably not an outright decline in output. The effects of fiscal stimulus will begin to wear off by the middle of the year and without a viable medium-term fiscal framework there is not much room for further stimulus – other than cosmetic “job creation” measures.

. . . but i haven't read the whole post yet in detail, so maybe i'm off-base.

juicy quotes just how utterly vapid congressional republicans are from hank paulsons memoir

Just in case you miss the drift, he describes his meetings with Senate Republicans, in sum, as completely useless.

First on the chopping block, McCain: The former Goldman Sachs CEO blasts the ’08 GOP presidential hopeful for suspending his campaign for a disastrous Sept. 25 meeting at the White House with Bush, Obama, Cheney, et al. Paulson says the meeting was pointless and describes McCain’s suspension “impulsive and risky,” adding, “When it came right down to it, he had little to say in the forum he himself had called.”

Palin, he says, “rubbed me the wrong way,” meetings with the Senate GOP were “a complete waste of time for us, when time was more precious than anything,” and Cantor’s suggestion that TARP be replaced with an insurance program met with outright derision from Paulson.

The usually unsnarky Paulson hits the minority whip particularly hard, ridiculing Cantor’s insurance plan by sarcastically suggesting the administration abandon efforts to prop up the collapsing financial system — just to try out Cantor’s unproven, “unformed” insurance scheme.

“I got a better idea. I’m going to go with Eric Cantor’s insurance program,” he writes. “That’s the idea to save the day.”

lol want to read paulson's book

ha me too.

geithner & nationalization one year (or so) on. or the story of differing definitions of success:

http://www.newyorker.com/reporting/2010/03/15/100315fa_fact_cassidy?currentPage=4

http://www.lrb.co.uk/v32/n05/john-lanchester/the-great-british-economy-disaster

http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/print

points of interest: still clinging to the idea that nationalization wouldve been a mistake and mb more convinced that w/e were calling health care reform now couldve been shelved (sorry max) for more/better/comprehensive finance reform & reregulation. have no idea now what is even possible politically. lanchester's point about debt is p interesting in the american context w/r/t to social spending.

shld probably find some time to read up on the impact/feasibility of higher taxes

Impact of raised taxes is a republican rhetorical holocaust

this makes sense to me. the US is hemmoraging jobs, and other countries apparently do a lot of our former-jobs more efficiently. so what to do? change the focus to a newer industry and/or paradigm, where the playing field is more level and where we can lead. also, we spent decades profiting by ruining the environment, and much of that opportunity (for the US, at least) seems to have run its course. it seems sensible to me to begin profiting by helping the environment, if possible.

relax, we'll be fine.

Over the next 40 years, Kotkin argues, urban downtowns will continue their modest (and perpetually overhyped) revival, but the real action will be out in the compact, self-sufficient suburban villages. Many of these places will be in the sunbelt — the drive to move there remains strong — but Kotkin also points to surging low-cost hubs on the Plains, like Fargo, Dubuque, Iowa City, Sioux Falls, and Boise.

said "real action" may play out any number of ways on the US Politics thread imo

Why The Obama Plan is Working.

Arrgh. As I suspected, Business Week says Obama's plan is working because "the markets are right".

And the markets are happy because Obama, with the full urging and connivance of Bernanke and Geithner, has poured vast amounts of free money into the system, while not yet having made any move that would effectively curb the powers or excesses that drove the collapse in the first place. So, basically, it is the same old path we've been on since Reagan: all profits are privatized while most losses are socialized.

BTW, last night I dreamed I pulled a dollar bill out of my billfold and found Reagan's face where George Washington should be. My dream-self reaction was, "Oh, I see they finally got their way."

This column is a great luscious orgy of optimism. This column is a great luscious orgy of optimism. This column is a great luscious orgy of optimism. This column is a great luscious orgy of optimism. This column is a great luscious orgy of optimism. This column is a great luscious orgy of optimism. This column is a great luscious orgy of optimism.

http://graphics8.nytimes.com/images/2006/04/02/opinion/ts-brooks-190.jpg

Hi, I'm David Brooks. Welcome to my luscious orgy.

pffft, even if Brooks and the BW articles are correct when most people think about the economy they think about j-o-b-s. and that hasn't really gotten any better. until that happens, all of this "happy talk" will mean nothing to folks who answer polls about the economy.

newsweek, 04.09.10 -- How America pulled itself back from the brink—and why it's destined to stay on top.

you're right, the market isn't everything. but (a) it is something (significant, in the proper context) and (b) there are many other indicators of vibrancy, as the newsweek article indicates. there's a growing raft of evidence that obama's economic policies are working, even though the key element for many -- understandably, jobs -- is, as is often the case, lagging behind at the beginning of the recovery.

Interest Rates Have Nowhere to Go but Up

I wonder if rising interest rates on credit cards and other debts will have any effect on the assumption that you have to carry a cc balance from month to month and be somewhat in debt in order to have "good" credit (as judged by the same companies who benefit from your indebtedness).

Right under the surface of all this "recovery" wonderfulness are a multitude of grim facts that aren't going to change any time soon. Raise interest rates at all and they'll come popping up to the surface. Keep interest rates where they are and a new bubble (or bubbles) will replace the old one.

The basic elements of a productive economy have been ebbing in the USA for a long time and they will not reappear any time soon under current conditions; the USA has a long way to claw back.

lol Goldman Sachs, BTW ... carried over from the more general politics thread!!

i am thinking of an anecdote abt yacht buying

i read a WSJ opinion piece today that led to a question (unfortunately, it's behind a pay-wall, so i can't cut-and-paste). basically, it says that the "long investors" in the goldman CDOs weren't really investing in the mortgages inside the CDOs. instead, it says they were making a bet that the "short investors" were wrong, and if the "long investors" were right, they would make a "premium income stream" from the successful bet.

the author's point was that it wouldn't have mattered to the "long investors" if they knew that paulson -- a particular "short investor" on this CDO -- had a hand in selecting the mortgages that would go into the CDO, because the "long investors" knew they were in a bet against "short investors" on the mortgages in the CDO. does anyone know if this is right?

sorry, i realize this is a lot of jargon. i'm too tired from flying to unpack it all now, and i didn't want to forget the basic concept. it seems like an important piece of the puzzle to me. having said that, i have a lot of difficulty accepting that (a) the "long investors" and (b) the independent agent that signed-off on the securities put into the CDO "wouldn't have cared" if they knew that paulson was gaming the system.

actually, the author said that the "long investors" were buying CDS (credit default swaps -- or insurance on an investment) on the CDOs (collateralized debt obligations -- or a big box of debt obligations; "long investors" invest in the CDO, and are repaid via payments by the underlying consumers on their mortgages, car loans, and so forth; if the consumers default, the homes and cars and so forth secure payment of the debt). that didn't make sense to me.

are they talking about investor's timeframes or their actual positions in the market? this reads as a little confused to me and kinda clearly retarded: the idea of a "premium income stream" from held debt still requires the underlying assets to have value iirc?

its an empty truism to say that sum1 holding a long position in a stock is betting against a person shorting the stock but i also dont think was entirely about price manipulation - its also about the value of the assets inside the cdo itself. so the fraud doesnt just effect the mkt price of the asset but the income that can be derived from it?

Steve Waldman has a good post on this:

http://www.interfluidity.com/v2/784.html

are they talking about investor's timeframes or their actual positions in the market?

the latter.

haha oh okay waldman's ibm analogy is better than mine and yeah the crucial distinction here & what i was trying to get at is:

CDO, synthetic or otherwise, is a newly formed investment company. Typically there is no identifiable “seller”. The investment company takes positions with an intermediary, which then hedges its exposure in transactions with a variety of counterparties. The fact that there was a “seller” in this case, and his role in “sponsoring” the deal, are precisely what ought to have been disclosed. Investors would have been surprised by the information, and shocked to learn that this speculative short had helped determine the composition of the structure’s assets. That information would not only have been material, it would have been fatal to the deal, because the CDO’s investors did not view themselves as speculators.

the author's point was that it wouldn't have mattered to the "long investors" if they knew that paulson -- a particular "short investor" on this CDO -- had a hand in selecting the mortgages

This is pure shite.

Every investor who isn't shorting a market is effectively making a bet against those taking a short position. That is definitional. But if I were deciding whether to go short or long on a particular investment, and I knew that someone who stood to benefit from a short position had material control over the composition of that investment I would consider that to be vital information!

yeah, that certainly makes sense to me. i wish i was able to paste the article, because i think a further discussion of it is useful. that interfluidity blog post seems outstanding (i've only skimmed it), but -- at least at this juncture -- i don't understand all parts of it.

http://www.cnn.com/2010/POLITICS/04/23/sec.porn/index.html?hpt=T2

As the country was sinking into its worst financial crisis in more than 70 years, Security and Exchange Commission employees and contractors cruised porn sites and viewed sexually explicit pictures using government computers, according to an agency report obtained by CNN.

"During the past five years, the SEC OIG (Office of Inspector General) substantiated that 33 SEC employees and or contractors violated Commission rules and policies, as well as the government-wide Standards of Ethical Conduct, by viewing pornographic, sexually explicit or sexually suggestive images using government computer resources and official time," said a summary of the investigation by the inspector general's office.

More than half of the workers made between $99,000 and $223,000. All the cases took place over the past five years.

The inspector general's report includes specific examples of misuse by employees.

A regional office staff accountant tried to access pornographic Web sites nearly 1,800 times, using her SEC laptop during a two-week period. She also had about 600 pornographic images saved on the hard drive of her laptop.

Separately, a senior attorney at SEC headquarters admitted to downloading pornography up to eight hours a day, according to the investigation.

1,800 times during a two-week period. Damn!

The case against Goldman Sachs must be dropped at once!

biggest new-home sales jump since 1963

a couple more months of this and all other election-year questions will be academic

this made me feel a little better, gotta say

http://www.ritholtz.com/blog/2010/04/10-things-you-dont-know-gs-case/

there's no doubt we're in a recovery. and i think it's stabilizing. i understand aimless' concerns that the fundamentals are still weak, but for being such a pessimist, i'm optimistic about the economy. financial reform will help, steering industry towards green-technology and efficient automobiles will keep us innovative in areas where we can lead, and other reforms (e.g., cap-and-trade, if it comes) will jolt the economy, too. admittedly, we need (a) more personal savings (and less consumer debt), (b) more manufacturing-sector jobs, and (c) to reduce the debt (after the recovery puts us beyond the point where another stimulus may be needed).

We can fix fundamentals in the great crash of 2018

more manufacturing-sector jobs

so not gonna happen

It's funny, read any post-personal computer essay about the future (like those found in Asimov's "The Roving Mind") and it talks about how computer are beautiful machines that will make production incredibly efficient and in the future nobody will have to work because computers will give us this great abundance of the things we need.

They got it right, except their vision of the future sort of overlooked capitalism. Now we can make all the things we need except the people with the most stuff won't give any of it away.

soooooo the DOW was just down 900 points?

yes

my dad was telling me to buy short funds on sunday. I DIDN LISSEN. http://www.google.com/finance?q=NYSE:VXX

intertsing that earlier today ritholtz let it be known that his portfolio had just become 100% cash

Said Ritholtz post.