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Where's the stage? Spurious Generalities => Politiw00kchat => Topic started by: jedifunk on August 19, 2011, 10:53:31 AM

Title: Global Economics
Post by: jedifunk on August 19, 2011, 10:53:31 AM
so, its not some much political, but rather financial, but i didn't really know where to stick it, so its going in here.

seems like finance gets pulled into political discussion in every thread, which is great because they are definitely joined at the hip, but i wanted to have a spot just for financial talk.

i definitely won't claim to be an expert or even fully understand the markets, but i do keep up with their news and happenings.  i also like hearing/reading others opinions/ideas on the markets and finance in general, so let's make this the thread to discuss them.
Title: Re: Global Economics
Post by: jedifunk on August 19, 2011, 10:55:25 AM
i'll start with this article i read this morning about the possible double-dip recession that seems fairly ominous at the moment.

http://business.blogs.cnn.com/2011/08/18/echoes-of-gekko-amid-markets-mayhem/?hpt=hp_c2

edit:  btw, the asian markets are getting hammered again today, with the hang seng down 3% already (-600pts)
Title: Re: Global Economics
Post by: runawayjimbo on August 19, 2011, 11:07:36 AM
Good call, jedi. I've been using the Inside Job or the Have you heard threads to throw out some of these issues but I think it makes sense to have a dedicated place for these discussions (especially these days).

As far as double-dip goes, I think that's kind of a misnomer:  the NBER may have declared the recession ended in July 2009, but I think most people would say we're just plowing through the longest recession in history (43 months and counting). But the Fed will try it's best to keep the wool pulled over people's eyes when they announce another round of QE in Jackson Hole next week.
Title: Re: Global Economics
Post by: jedifunk on August 19, 2011, 11:11:10 AM
i would agree with the idea that we've never really pulled out of the recession.  its never really felt like it to me anyways.

of course i think i mostly gauge that by whether my house is worth anything or not (which apparently its still not) ;)
Title: Re: Global Economics
Post by: Hicks on August 19, 2011, 11:12:59 AM
Shit if you ask me we've been in recession since 2001 the whole way.

A jobless recovery is no recovery at all IMO.
Title: Re: Global Economics
Post by: jedifunk on August 19, 2011, 11:28:42 AM
A jobless recovery is no recovery at all IMO.

QFT
Title: Re: Global Economics
Post by: susep on August 19, 2011, 11:40:49 AM
I too think we've never pulled out of a "recession", its been downhill since 9/11.  the only positive of the economy retracting is, as production decreases so too does the chain of energy production and consumption, a slowed economy both micro and macro = less impacts on the environment.

Title: Re: Global Economics
Post by: runawayjimbo on August 19, 2011, 12:00:59 PM
the only positive of the economy retracting is, as production decreases so too does the chain of energy production and consumption, a slowed economy both micro and macro = less impacts on the environment.

How is that a good thing? It's great there is less of an impact on the environment, but people are out of work and even those with a steady income are having a harder and harder time meeting rising food and gas prices while wages remain stagnant. Now, to the extent it helps people understand they shouldn't buy shit they don't need or can't afford and helps reverse the debt-fueled consumption binge we (both as a country and as individuals) have been on for a decade, I'm all for that.
Title: Re: Global Economics
Post by: kellerb on August 19, 2011, 12:25:36 PM
the only positive of the economy retracting is, as production decreases so too does the chain of energy production and consumption, a slowed economy both micro and macro = less impacts on the environment.

How is that a good thing? It's great there is less of an impact on the environment, but people are out of work and even those with a steady income are having a harder and harder time meeting rising food and gas prices while wages remain stagnant. Now, to the extent it helps people understand they shouldn't buy shit they don't need or can't afford and helps reverse the debt-fueled consumption binge we (both as a country and as individuals) have been on for a decade, I'm all for that.

= less impacts on the environment.

How is that a good thing? It's great there is less of an impact on the environment

uhh, the entirety of his post that you quoted is the answer to your question.  The word "ONLY" is an important word in the sentence.
Title: Re: Global Economics
Post by: runawayjimbo on August 19, 2011, 12:39:32 PM
the only positive of the economy retracting is, as production decreases so too does the chain of energy production and consumption, a slowed economy both micro and macro = less impacts on the environment.

How is that a good thing? It's great there is less of an impact on the environment, but people are out of work and even those with a steady income are having a harder and harder time meeting rising food and gas prices while wages remain stagnant. Now, to the extent it helps people understand they shouldn't buy shit they don't need or can't afford and helps reverse the debt-fueled consumption binge we (both as a country and as individuals) have been on for a decade, I'm all for that.

= less impacts on the environment.

How is that a good thing? It's great there is less of an impact on the environment

uhh, the entirety of his post that you quoted is the answer to your question.  The word "ONLY" is an important word in the sentence.

My point was there are other silver linings we can find from the prolonged recession and the impact on the environment is lower on my list of importance.
Title: Re: Global Economics
Post by: runawayjimbo on August 23, 2011, 11:20:45 AM
Hicks, this one's for you

http://online.wsj.com/article/SB10001424053111903327904576524821237618438.html?mod=googlenews_wsj

Quote
Goldman Chief, Executives Hire Outside Lawyers Amid Probes

NEW YORK—Goldman Sachs Group Inc. confirmed Monday that its chief executive, Lloyd Blankfein, and other executives hired outside lawyers to advise them after the U.S. Senate referred a report on the bank's activities to the Justice Department earlier this year.

A person familiar with the situation confirmed that Mr. Blankfein hired Reid Weingarten, a top criminal defense attorney at Steptoe & Johnson who has represented WorldCom Inc.'s former chief executive Bernard Ebbers, former Enron accounting officer Richard Causey and former Tyco International Ltd. general counsel Mark Belnick.

...

"As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department's inquiry into certain matters raised in the [Senate] report hired counsel at the outset," said Goldman spokesman David Wells.

Goldman faces multiple investigations and subpeonas on federal, state and local levels, though it isn't clear precisely why Mr. Blankfein hired a lawyer who focuses his practice on white-collar criminal defense.

...

Goldman shares fell $1.11, or 4.7%, to $106.51 on Monday after a Reuters report late in regular trading hours that Mr. Blankfein had hired Mr. Weingarten. The shares continued to fall in after-hours trading.
Title: Re: Global Economics
Post by: Hicks on August 23, 2011, 11:40:43 AM
I'm not gonna hold my breath, but I hope they nail those fuckers to the wall.
Title: Re: Global Economics
Post by: sophist on August 23, 2011, 11:41:47 AM
I'm not gonna hold my breath, but I hope they nail those fuckers to the wall.
dude, just breathe through your nose. 
Title: Re: Global Economics
Post by: runawayjimbo on August 25, 2011, 10:26:02 AM
Maybe there should just be a Taibbi fanboy thread because he's one of the few reporters doing any work. Highlights below, but the whole article is a must read.

http://www.rollingstone.com/politics/blogs/taibblog/obama-goes-all-out-for-dirty-banker-deal-20110824

Quote
Obama Goes All Out For Dirty Banker Deal

A power play is underway in the foreclosure arena, according to the New York Times (http://www.nytimes.com/2011/08/22/business/schneiderman-is-said-to-face-pressure-to-back-bank-deal.html?_r=2&pagewanted=all).

On the one side is Eric Schneiderman, the New York Attorney General, who is conducting his own investigation into the era of securitizations – the practice of chopping up assets like mortgages and converting them into saleable securities – that led up to the financial crisis of 2007-2008.

On the other side is the Obama administration, the banks, and all the other state attorneys general.

This second camp has cooked up a deal that would allow the banks to walk away with just a seriously discounted fine from a generation of fraud that led to millions of people losing their homes.

The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.

This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline. 

...

To give you an indication of how absurdly small a number even $20 billion is relative to the sums of money the banks made unloading worthless crap subprime assets on foreigners, pension funds and other unsuspecting suckers around the world, consider this: in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS.

So this deal being cooked up is the ultimate Papal indulgence. By the time that $20 billion (if it even ends up being that high) gets divvied up between all the major players, the broadest and most destructive fraud scheme in American history, one that makes the S&L crisis look like a cheap liquor store holdup, will be safely reduced to a single painful but eminently survivable one-time line item for all the major perpetrators.

But Schneiderman, who earlier this year launched an investigation into the securitization practices of Goldman, Morgan Stanley, Bank of America and other companies, is screwing up this whole arrangement. Until he lies down, the banks don’t have a deal. They need the certainty of having all 50 states and the federal government on board, or else it’s not worth paying anybody off. To quote the immortal Tony Montana, “How do I know you’re the last cop I’m gonna have to grease?” They need all the dirty cops on board, or else the whole enterprise is FUBAR.

...

Schneiderman apparently listened to those voices instead of the Mellon-Fed-BofA crowd, which infuriated the insiders who struck the actual deal. In a remarkable quote given to the Times, Kathryn Wylde, the Fed board member who ostensibly represents the public, said the following about Schneiderman:
Quote
It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.

This, again, is coming not from a Bank of America attorney, but from the person on the Fed board who is supposedly representing the public!

This quote leads one to wonder just what Wylde would consider “indefensible,” given that stealing is pretty much the worst thing that a bank can do — and these banks just finished the longest and most orgiastic campaign of stealing in the history of money. Is Wylde waiting for Goldman and Citi to blow up a skyscraper? Dump dioxin into an orphanage? It’s really an incredible quote.

...

What is most amazing about Wylde’s quote is the clear implication that even a law enforcement official like Schneiderman should view it as his job to “do everything we can to support” Wall Street. That would be astonishing interpretation of what a prosecutor's duties are, were it not for the fact that 49 other Attorneys General apparently agree with her.

In Schneiderman we have at least one honest investigator who doesn’t agree, which is to his great credit. But everyone else is on Wylde’s side now. The Times story claims that HUD Secretary Shaun Donovan and various Justice Department officials have been leaning on the New York AG to cave, which tells you that reining in this last rogue cop is now an urgent priority for Barack Obama.

Why? My theory is that the Obama administration is trying to secure its 2012 campaign war chest with this settlement deal. If Barry can make this foreclosure thing go away for the banks, you can bet he’ll win the contributions battle against the Republicans next summer.

Which is good for him, I guess. But it seems to me that it might be time to wonder if is this the most disappointing president we’ve ever had.
Title: Re: Global Economics
Post by: jedifunk on August 25, 2011, 11:06:43 AM
interesting read.  and that quote is just crazy
Title: Re: Global Economics
Post by: runawayjimbo on September 02, 2011, 09:37:05 AM
Zero jobs. None.

(http://i2.cdn.turner.com/money/2011/09/02/news/economy/jobs_report_unemployment/chart-jobs-090111.top.gif)

http://www.bloomberg.com/news/2011-09-02/employment-in-u-s-unexpectedly-stagnated-in-august-jobless-rate-at-9-1-.html

Quote
Employment in U.S. Stagnated in August; Jobless Rate at 9.1%

Employment in the U.S. unexpectedly stagnated in August and the jobless rate held at 9.1 percent as American employers became less confident in the strength of the recovery.

Payrolls were unchanged last month, the weakest reading since September 2010, after an 85,000 gain in July that was less than initially estimated, Labor Department data showed today in Washington. The median forecast in a Bloomberg News survey called for a rise of 65,000. Hourly earnings and hours worked both declined. The August data included a 48,000 drop in information industry jobs, mostly reflecting striking Verizon Communications Inc. (VZ) workers.

Political squabbling over the budget and mounting fear of a default in Europe caused the Standard & Poor’s 500 Index to plummet 17 percent from July 22 to Aug. 8, prompting companies and consumers to cut back. The lack of hiring is one reason Federal Reserve Chairman Ben S. Bernanke last week said the central bank still has tools available to stimulate growth.

...

Obama this week agreed to delay by one day to Sept. 8 a presentation of his jobs agenda to a joint session of Congress after House Speaker John Boehner, a Republican, delivered an unprecedented rebuff to his request to speak a day earlier, when a Republican presidential debate is scheduled. The bickering may foreshadow further gridlock when a joint deficit-cutting committee begins meeting this month.

...

Among the provisions Obama has been considering for his jobs agenda are more infrastructure spending, tax incentives to spur hiring, a reduction in the employer portion of the payroll tax and changes to unemployment insurance to subsidize worker retraining, according to people familiar with discussions.
Title: Re: Global Economics
Post by: gah on September 02, 2011, 10:36:25 AM
^^^  Are you surprised?
Title: Re: Global Economics
Post by: gah on September 03, 2011, 01:53:35 PM
Zero jobs. None.


It's beyond ridiculous at this point.

http://www.washingtonpost.com/politics/no-new-jobs-as-washington-remains-divided/2011/09/01/gIQA4tS4wJ_story.html

Quote
Instead, Republicans argued for less spending. Democrats argued for stimulating the economy. Congress agreed on almost nothing.

---

This week, in anticipation of Congress’s return from its August recess, both parties have laid out new plans for increasing U.S. employment. For now, the new plans look a great deal like the old plans — the ones that Congress has fought about for eight months already.

---

“I’m not going to be able to work with the progressive liberals. I’m just not,” Rep. Michael Grimm (R-N.Y.), a freshman from New York’s outer boroughs, when asked about the upcoming jobs debate. Grimm said would not work with Democrats who believe increased government spending is the solution to the jobs problem. “I’m so diametrically opposed to their views,” Grimm said in a telephone interview. “I can’t compromise with what I consider to be a lack of reality.”

---

But the simple math of divided government is this: It will take both sides to make any solution work, and the prospect of that kind of effective cooperation seems as distant now as it did the first 1,236 times somebody said “create jobs” on Capitol Hill.

For instance, on Thursday freshman Rep. Joe Walsh (R-Ill.) said he wouldn’t even attend Obama’s speech — which was rescheduled from Wednesday after a tiff with Boehner.

“I don’t want to participate in that. I don’t want to be a prop,” Walsh said. Walsh said he would hold a town-hall meeting in that night in Illinois, believing Obama was not likely to unveil any substantive new ideas. “I know I’m going to get some flak for it. But I refuse to let him deliver another one of these speeches. We’re past speeches.”


 :frustrated: (<- doesn't even come close to expressing how frustrating this sort of thing is)
Title: Re: Global Economics
Post by: Guyute on September 15, 2011, 10:55:05 PM
The jobs bill that was just proposed is really, really poor.   It gives the appearance of creating jobs at $460 billion, but in reality it is a band aid to lower unemployment until the election.

Here is some analysis:
Most of the job creation is in infrastructure.    This is actually good for us as a country because the infrastructure needs some desperate help.  What it does not do is help the economy other than short term.   These are short to mid-term jobs.  Once the govt stops spending these jobs go away, hence the band aid.  These jobs also are just a reallocation of tax dollars so no new wealth is being created, again, not lasting effect.

The bill will require a tax increase.  There has never been a time when a tax increase has helped the economy, why would it now when investment is so far down.  You want these people making $200k to invest that money in corporations who will create jobs which grow the economy and create wealth through corporate growth.  Private industry has always been much more efficient at this than the govt.

The tax cut isn't.   There is a tax cut for small companies who add jobs.  The problem is that the income limit is so low that all but the smallest of companies are not included.

The whole thing feels like another Obama miss, just like Obamacare, it is will create more of a drain on the economy than the good.

I am really upset, I had very high hoped for Obama and I feel like he continuously lets me down.

Title: Re: Global Economics
Post by: runawayjimbo on September 16, 2011, 11:32:47 AM
Nice analysis, Guyute. If I may add...

Most of the job creation is in infrastructure.    This is actually good for us as a country because the infrastructure needs some desperate help.  What it does not do is help the economy other than short term.   These are short to mid-term jobs.  Once the govt stops spending these jobs go away, hence the band aid.  These jobs also are just a reallocation of tax dollars so no new wealth is being created, again, not lasting effect.

Not only that, but only $21.8B of the original stimulus (less than 0.5%) has actually been spent on infrastructure. Obama himself has admitted that shovel-ready projects were harder to come by than they thought. Why will it be different this time?

Further, a preliminary study from 2 George Mason economists (http://mercatus.org/sites/default/files/publication/No_such_thing_as_shovel_ready_WP1118.pdf) paints a very different picture of what Stimulus 1.0 actually did. Interviews with businesses who received stimulus dollars reveal the actual amount of jobs "created or saved" is likely very different than what the gov't reports. Also, it did little to increase economic output because oftentimes workers hired for stimulus-related projects were not the unemployed but workers who switched jobs from other firms. Then there's this funny little story:

Quote
Sometimes it was hard for recipients to put a finger on just what was wrong, but their years of experience told them something was amiss. One federal contractor who installed tile in government buildings said that he had planned to install some typical four-inch white tile, the kind he had used in countless government projects beforehand—the very tiles specified in the architectural renderings. But a revised project specification issued by the contracting agency required him to use a smaller, more intricate set of colored tiles. The contractor told our team that installing the smaller tiles would increase his labor costs alone by 50 percent and the only reason he could see for using the smaller tiles was to move the money out the door on the ARRA schedule.

In other words, the value added is less than the billions of dollars spent.

The bill will require a tax increase.  There has never been a time when a tax increase has helped the economy, why would it now when investment is so far down.  You want these people making $200k to invest that money in corporations who will create jobs which grow the economy and create wealth through corporate growth.  Private industry has always been much more efficient at this than the govt.

Wait, you mean aggregate demand won't increase if people have less money to spend? How can that be? (Although if I have to hear the GOP say "job creators" one more time I might punch a kitten)

The whole thing feels like another Obama miss, just like Obamacare, it is will create more of a drain on the economy than the good.

I am really upset, I had very high hoped for Obama and I feel like he continuously lets me down.

The jobs bill is not a bill. He knows it is DOA in its current form. Even Democrats are even coming out against it (http://www.nytimes.com/2011/09/15/us/politics/democrats-in-congress-balking-at-obamas-jobs-bill.html): Mary Landrieu refuses to vote for a bill that ends tax breaks for oil companies; Bob Casey thinks the one-size-fits-all approach is a mistake; Peter DeFazio says no more tax cuts. The bill is simply a strategical play to give Obama some soundbites for his re-election campaign.

But don't worry, Bernanke will announce QE3 soon which will continue to temporarily support over-inflated asset prices and provide a short term fix to our long term problem. Lost decade here we come!
Title: Re: Global Economics
Post by: slslbs on September 16, 2011, 12:47:54 PM
I've heard lots of experts come on TV and explain why this bill won't work.
ok.

I've yet to hear one person explain what will work. Lowering taxes alone won't do much beside raising the deficit. We already have had historically low tax rates for the past 10 years.

Investing in infrastructure sounds good, but how (or when) will be pay for it?
Title: Re: Global Economics
Post by: runawayjimbo on September 16, 2011, 02:44:09 PM
Actually, lowering taxes would make a difference due to a very simple concept: if people and corporations have more of their money, they will spend/invest more of that money. And let's not pretend lower taxes created this recession; the tax rates had absolutely zero relation to the housing bubble that was intentionally created to replace the dot-com bubble.

You're right it would explode the deficit, further undermining confidence in the dollar and pushing out foreign investment. Which is why spending also needs to be drastically cut, starting with the war/defense budget.

Other unlikely/unpopular alternatives:

Repeal ObamaCare - employers simply cannot bring on more permanent workers because they have no idea what the costs of these new (and existing) workers will be. The law will do very little to "bend the cost curve" as Obama was so fond of saying so premiums for providing healthcare to workers will continue to increase. Will it be cheaper to dump the healthcare and just pay the taxes? No one knows because HHS has yet to spell out the regulations they were supposed to roll out in April (shocking). This can be extended to other over reaching and ineffective regulation (e.g., Dodd-Frank, Sarbanes-Oxley, etc.)

Lower or eliminate capital gains tax - ok, you pay taxes on your income. You pay taxes when you buy things. You pay taxes for using your cell phone and to get a marriage license and for a permit if you want to put in a new bathroom in your home that you "own". After all that, you save some money and make the responsible decision to invest it to save for the future and then if your investment has any gains during the year you have to pay more taxes on that?! (BTW, cap gains are more than just investments, e.g., house) Soon they'll be taxing us to die (oh wait...). Also, it would facilitate the elimination of the carried interest loophole that is so flagrantly abused. (In fact, revamping the entire tax code is long overdue, but I'm not holding my breath on that one)

Reduce corporate tax rate - what happened in Ireland when the corporate tax rate was reduced? The economy surged as companies poured money into the country. They've obviously had problems since then due to over promising on benefits (sounds familiar) but a lower corporate tax rate would encourage investment to flow into the country. The cost of this could be offset by closing loopholes granted by various administrations to favored industries. This would still result in a net tax decrease, allowing companies to invest and grow. That's the real multiplier effect. It would also reduce costs for business paying an army of accountants to comply with or circumvent the letter of the law while reducing their tax burdens as much as possible. They could then reallocate their skills to a more productive line of work.

Unemployment benefits - while we shouldn't be blind to the misfortunes of others, extending unemployment benefits to 3 yrs make no sense to me whatsoever. Don't we want people to find a job? Simple changes to the program would remove the disincentive for people to work. The formula could be scaled back over time, putting more pressure on the unemployed to find something. It could be block granted to the states, allowing each state to determine the best way to temporarily provide support to the unemployed. Jonathan Alter had an interesting idea (a liberal? gasp!) that you could convert a portion of the benefits to vouchers to companies who hire workers. The fact is there are jobs people can find, but they don't want to accept anything less than what their prior salary was. If you try to sell your house or car or anything else and don't have any takers, you eventually realize you have to lower your asking price. People need to extend this basic methodology to the price of their labor.

Gov't cannot create jobs/growth, only the conditions to allow the private sector to flourish.
Title: Re: Global Economics
Post by: runawayjimbo on September 16, 2011, 02:49:01 PM
More greatness from Taibbi on the UBS "rogue trader"

http://www.rollingstone.com/politics/blogs/taibblog/the-2-billion-ubs-incident-rogue-trader-my-ass-20110915

Quote
The $2 Billion UBS Incident: 'Rogue Trader' My Ass

The news that a "rogue trader" (I hate that term – more on that in a moment) has soaked the Swiss banking giant UBS for $2 billion has rocked the international financial community and threatened to drive a stake through any chance Europe had of averting economic disaster. There is much hand-wringing in the financial press today as the UBS incident has reminded the whole world that all of the banks were almost certainly lying their asses off over the last three years, when they all pledged to pull back from risky prop trading. Here’s how the WSJ put it (http://online.wsj.com/article/SB10001424053111904060604576572214077312174.html):
Quote
The Swiss banking giant has been struggling to rebuild trust after running up vast losses in the original financial crisis. Under Chief Executive Oswald Grubel, the bank claimed to have put in place new risk management practices, pulled back from proprietary trading and focused on a low-risk client-driven model.

...

But the reality is, the brains of investment bankers by nature are not wired for "client-based" thinking. This is the reason why the Glass-Steagall Act, which kept investment banks and commercial banks separate, was originally passed back in 1933: it just defies common sense to have professional gamblers in charge of stewarding commercial bank accounts.

...

Nonetheless, thanks to the Gramm-Leach-Bliley Act passed in 1998 with the help of Bob Rubin, Larry Summers, Bill Clinton, Alan Greenspan, Phil Gramm and a host of other short-sighted politicians, we now have a situation where trillions in federally-insured commercial bank deposits have been wedded at the end of a shotgun to exactly such career investment bankers from places like Salomon Brothers (now part of Citi), Merrill Lynch (Bank of America), Bear Stearns (Chase), and so on.

These marriages have been a disaster. The influx of i-banking types into the once-boring worlds of commercial bank accounts, home mortgages, and consumer credit has helped turn every part of the financial universe into a casino. That’s why I can’t stand the term "rogue trader," which is always tossed out there when some investment-banker asshole loses a billion dollars betting with someone else’s money.

They’re not "rogue" for the simple reason that making insanely irresponsible decisions with other peoples’ money is exactly the job description of a lot of people on Wall Street. Hell, they don’t call these guys "rogue traders" when they make a billion dollars gambling.

The only thing that differentiates a "rogue" trader like Barings villain Nick Leeson from a Lloyd Blankfein, Dick Fuld, John Thain, or someone like AIG’s Joe Cassano, is that those other guys are more senior and their lunatic, catastrophic decisions were authorized (and yes, I know that Cassano wasn’t an investment banker, technically – but he was in financial services).

In the financial press you're called a "rogue trader" if you're some overperspired 28 year-old newbie who bypasses internal audits and quality control to make a disastrous trade that could sink the company. But if you're a well-groomed 60 year-old CEO who uses his authority to ignore quality control and internal audits in order to make disastrous trades that could sink the company, you get a bailout, a bonus, and heroic treatment in an Andrew Ross Sorkin book.

In other words, "rogue traders" are treated like bad accidents and condemned everywhere from the front pages to Ewan McGregor films. But rogue companies are protected at every level of the regulatory structure and continually empowered by dergulatory legislation giving them access to our bank accounts.

...
Title: Re: Global Economics
Post by: qop24 on September 16, 2011, 03:20:57 PM
Actually, lowering taxes would make a difference due to a very simple concept: if people and corporations have more of their money, they will spend/invest more of that money.
......................

You're right it would explode the deficit, further undermining confidence in the dollar and pushing out foreign investment. Which is why spending also needs to be drastically cut, starting with the war/defense budget.

..............................

Gov't cannot create jobs/growth, only the conditions to allow the private sector to flourish.


First, it's pretty absurdly obvious that lower corporate taxes (for the huge companies) leads to the higher-ups pocketing the savings. I'm sorry but that's the flat out truth and don't even try to say that doesn't happen nearly everywhere. Them's the facts.


I totally agree with the second thing I quoted up there, especially that we need to do some SERIOUS war/defense budget work.

And for the last part, yeah you are mostly right, infrastructure is 100% necessary and I think it should be done, but it is only a temporary fix (which is still way fucking better than doing nothing, so why not do it godammit).


My stance is that tax cuts on corporations backfires horribly when applied to large companies (why the fuck doesn't exxon pay taxes?????)

Focus on the small business sector since they tend to be more honest people who will actually use tax savings to hire employees, not fucking Wall Street, Oil, and countless other sectors/companies.
Title: Re: Global Economics
Post by: Hicks on September 16, 2011, 03:58:11 PM
Holding up Ireland as an example of what we should do. . .



LOL

Stop the handouts to douchebags who are sitting on all of the money.

/fucking duh
Title: Re: Global Economics
Post by: runawayjimbo on September 16, 2011, 04:56:07 PM
First, it's pretty absurdly obvious that lower corporate taxes (for the huge companies) leads to the higher-ups pocketing the savings. I'm sorry but that's the flat out truth and don't even try to say that doesn't happen nearly everywhere. Them's the facts.

Do you have any evidence to support this claim or do you expect to make an argument based on "them's the facts"?

My stance is that tax cuts on corporations backfires horribly when applied to large companies (why the fuck doesn't exxon pay taxes?????)

A common misconception. Exxon actually does pay taxes: their avg effective income tax over the past 6 yrs is 29% (http://money.cnn.com/2011/05/04/news/companies/exxon_oil_taxes/index.htm). The reason it is lower than the 35% corporate rate is because it is lowered through deductions and other provisions granted by the feds.
Title: Re: Global Economics
Post by: qop24 on September 16, 2011, 05:05:36 PM
First, it's pretty absurdly obvious that lower corporate taxes (for the huge companies) leads to the higher-ups pocketing the savings. I'm sorry but that's the flat out truth and don't even try to say that doesn't happen nearly everywhere. Them's the facts.

Do you have any evidence to support this claim or do you expect to make an argument based on "them's the facts"?

My stance is that tax cuts on corporations backfires horribly when applied to large companies (why the fuck doesn't exxon pay taxes?????)

I work very closely with these guys - save save save is the motto, not "oh look we can use our tax savings to spend and hire people."

And no, I'm not going to waste my time posting a spreadsheet, I'm almost certain that this point was made earlier in this or a similar thread - something to the effect of BUSH TAX CUTS HAVENT GIVEN ANYONE A JOB.


I'm done, this is futile. I'm gonna do my part and not be a selfish asshole who loves to oppress the vast majority of the population, think nothing of it, and claim they are saving the world by hiring people ,which doesn't happen.
Title: Re: Global Economics
Post by: twatts on September 16, 2011, 06:43:14 PM
Actually, lowering taxes would make a difference due to a very simple concept: if people and corporations have more of their money, they will spend/invest more of that money.

First, it's pretty absurdly obvious that lower corporate taxes (for the huge companies) leads to the higher-ups pocketing the savings. I'm sorry but that's the flat out truth and don't even try to say that doesn't happen nearly everywhere. Them's the facts.

Do you have any evidence to support this claim or do you expect to make an argument based on "them's the facts"?



His statement has as much merit as yours, in that both are true, to an extent.

Gov't cannot create jobs/growth, only the conditions to allow the private sector to flourish.

Of course Gov't can create jobs.  NCDOT is preparing to lay-off 400 workers.  Those jobs must have had to been created at some point. 

YMMV,

Terry
Title: Re: Global Economics
Post by: Guyute on September 18, 2011, 11:28:26 PM
Probably a good time to explain the whole corporate tax rate and companies not paying taxes thing as there is a huge misconception.

It is ACCURATE that many companies pay almost no corporate tax or a greatly reduced tax rate.  It is not accurate that they aren't paying those taxes at all, they are just paying them to someone else.  That is why the Ireland example is actually a good one.  You think Ireland is bad now you should see what it could be like.

The U.S. has the second highest corporate tax rate of any industrialized nation in the world.  The problem is that these companies all over the world don't have such high tax rates.  Many of them are in the 12-17% range rather than 35% like the U.S.   U.S. companies recognize this and moved large parts of their companies to other nations and in many cases made them the final shipping point for products or the housing point for computer code.  They then declare that headquarters.   Since the products are actually from another nation the U.S. govt can't tax the profits on them and these companies enjoy the lower tax rate of the other nation and that county enjoys the tax dollars and the increase in employment.

Go to Ireland and see the Microsoft office, Cisco, EMC, Google, Oracle, Yahoo, and many others.  Go to Switzerland and see oil giants, consulting firms (create all final docs there), investment firms, etc.  I have seen estimates from $1.3-1.8 trillion dollars currently offshore in corporate profits.  That doesn't account for the jobs that needed to be established with them.

Interviews with Chambers from Cisco and Balmar from Microsoft have them both saying that the corporate tax rate is the reason those jobs and tax dollars are in those 2 nations.  That if the rate was even close they would have them in the U.S. because of the reduction in overhead of the oversea locations (management, travel, time loss due to time zones).   

You tell me, would it make more sense to tax a lot more money at a lower rate or tax much less at a higher rate?  By lowering the rates and offering an amnesty to onshore the money in the mid to long term tax revenue would increase and you would help employment.  The problem is that the sound of lowering corporate tax rate will create such a frenzy with the Dems base that they could never support it, despite the logic.

On ObamaCare.   Interesting side effect.   Microsoft had a cadillac plan that gets a surecharge on it under ObamaCare because a company has chosen to provide top of the line health care for employees.  Some amazing logic here, a company is willing to spend more money to ensure their employees get the best healthcare possible so they are required to pay a fee for doing so.  Oh, and did I mention that Microsoft takes $0 out of employees checks to cover it.  MS picks up the whole tab. What is the net effect of the surcharge?  There are 2 ways this is playing out.  Companies like Microsoft are now going to pass that on to the employees and they will need to contribute to the healthcare costs.  Others are waiting for the ObamaCare base plan and will drop their coverage and buy into that plan or a lesser plan to avoid the fee.  Holy sh#t, he actually found a way to provide healthcare and either lower disposable income in a faltering economy or create a health plan that will decrease the healthcare some people receive and the plan has such holes in it that many will still be left with no coverage as they make too much money.
I am fortunate, my employer does the same thing, my family has the best healthcare available and nothing comes out of my check for it.  Mine hasn't decided how they will handle the surcharge, but I can say that if I starting having a couple hundred a month out of my paycheck that is simply money that I won't be spending to boost the economy.

I am baffled at the level of economic stupidity I am seeing right now.
Title: Re: Global Economics
Post by: runawayjimbo on September 19, 2011, 11:52:46 AM
Guytue with another solid analysis. The only issue I take with it is that you seem to assume logic and politics are symbiotic, when we all know they are diametrically opposed to each other. +k

Also, a higher tax rate encourages political corruption as powerful corporations and individuals lobby control politicians to write in more and more loopholes in an increasingly complex tax code. So not only does it restrict investment in this country, but it also perpetuates the political back scratching and abuse that everyone acknowledges is a major part of the problem.

Re Microsoft's cadillac tax, I'd imagine they got a waiver along with the unions and other allies favored by Dems, right?

Of course Gov't can create jobs.  NCDOT is preparing to lay-off 400 workers.  Those jobs must have had to been created at some point. 

Since 1940, the split public to private employment split has averaged 80%/20%; before the current recession, that was closer 90%/10%. Of course gov't can create jobs, just not enough to sustain an economic recovery and certainly not enough to provide the growth that would increase standards of living for all.

Title: Re: Global Economics
Post by: slslbs on September 20, 2011, 06:59:03 AM

On ObamaCare.   Interesting side effect.   Microsoft had a cadillac plan that gets a surecharge on it under ObamaCare because a company has chosen to provide top of the line health care for employees.  Some amazing logic here, a company is willing to spend more money to ensure their employees get the best healthcare possible so they are required to pay a fee for doing so.  Oh, and did I mention that Microsoft takes $0 out of employees checks to cover it.  MS picks up the whole tab. What is the net effect of the surcharge?  There are 2 ways this is playing out.  Companies like Microsoft are now going to pass that on to the employees and they will need to contribute to the healthcare costs.  Others are waiting for the ObamaCare base plan and will drop their coverage and buy into that plan or a lesser plan to avoid the fee.  Holy sh#t, he actually found a way to provide healthcare and either lower disposable income in a faltering economy or create a health plan that will decrease the healthcare some people receive and the plan has such holes in it that many will still be left with no coverage as they make too much money.
I am fortunate, my employer does the same thing, my family has the best healthcare available and nothing comes out of my check for it.  Mine hasn't decided how they will handle the surcharge, but I can say that if I starting having a couple hundred a month out of my paycheck that is simply money that I won't be spending to boost the economy.

I am baffled at the level of economic stupidity I am seeing right now.
one of the paradoxes of the health care debate is that some people have great coverage (which doesn't guarantee great health care) and some people have none. In order to pay for everyone's coverage, those with the best coverage (no out of pocket costs) will have to pay for some. I'm not defending the situation, just pointing out the reality.

Remember though, health insurance is a tax free benefit. Will the companies that start making employees pay a share of the cost because of the new law change the money spent on the benefit into salary? doubt it. If they did, that of course would be taxed, but then the employee can set up a HSA and shelter the money from taxes anyway. Depending on the numbers, it might not work out that much differently.

Also, there are "executive" programs that pay for "screening tests" that clearly aren't needed. Unnecessary stress tests, cat scans, and other imaging studies are being done - the only indication is an "executive health plan" that pays for such nonsense. Other than wasting someone's money, false positives can lead to more testing, and more unnecessary care (with the chance of complications).

one of the many problems is that we're stuck with a system that health insurance is employer based (thanks to union negotiations years ago). If someone was going to devise a system from scratch, I don't think anyone would pick the way we do it in the US.
Title: Re: Global Economics
Post by: gah on September 20, 2011, 12:05:38 PM
Not that the IMF isn't evil, but here's their latest report

http://www.washingtonpost.com/business/economy/imf-warns-global-economic-slowdown-entering-dangerous-new-phase/2011/09/20/gIQAovGxhK_story.html

Quote
The world economy is entering a “dangerous new phase” of slowing growth and eroding confidence that threatens to undermine economic activity even further, the International Monetary Fund warned Tuesday in its primary annual forecast.

“Global activity has weakened and become more uneven; confidence has fallen sharply recently; and downside risks are growing,” the fund said in its World Economic Outlook, published ahead of this week’s annual meetings.
Title: Re: Global Economics
Post by: Guyute on September 20, 2011, 11:22:13 PM

On ObamaCare.   Interesting side effect.   Microsoft had a cadillac plan that gets a surecharge on it under ObamaCare because a company has chosen to provide top of the line health care for employees.  Some amazing logic here, a company is willing to spend more money to ensure their employees get the best healthcare possible so they are required to pay a fee for doing so.  Oh, and did I mention that Microsoft takes $0 out of employees checks to cover it.  MS picks up the whole tab. What is the net effect of the surcharge?  There are 2 ways this is playing out.  Companies like Microsoft are now going to pass that on to the employees and they will need to contribute to the healthcare costs.  Others are waiting for the ObamaCare base plan and will drop their coverage and buy into that plan or a lesser plan to avoid the fee.  Holy sh#t, he actually found a way to provide healthcare and either lower disposable income in a faltering economy or create a health plan that will decrease the healthcare some people receive and the plan has such holes in it that many will still be left with no coverage as they make too much money.
I am fortunate, my employer does the same thing, my family has the best healthcare available and nothing comes out of my check for it.  Mine hasn't decided how they will handle the surcharge, but I can say that if I starting having a couple hundred a month out of my paycheck that is simply money that I won't be spending to boost the economy.

I am baffled at the level of economic stupidity I am seeing right now.
one of the paradoxes of the health care debate is that some people have great coverage (which doesn't guarantee great health care) and some people have none. In order to pay for everyone's coverage, those with the best coverage (no out of pocket costs) will have to pay for some. I'm not defending the situation, just pointing out the reality.

Remember though, health insurance is a tax free benefit. Will the companies that start making employees pay a share of the cost because of the new law change the money spent on the benefit into salary? doubt it. If they did, that of course would be taxed, but then the employee can set up a HSA and shelter the money from taxes anyway. Depending on the numbers, it might not work out that much differently.

Also, there are "executive" programs that pay for "screening tests" that clearly aren't needed. Unnecessary stress tests, cat scans, and other imaging studies are being done - the only indication is an "executive health plan" that pays for such nonsense. Other than wasting someone's money, false positives can lead to more testing, and more unnecessary care (with the chance of complications).

one of the many problems is that we're stuck with a system that health insurance is employer based (thanks to union negotiations years ago). If someone was going to devise a system from scratch, I don't think anyone would pick the way we do it in the US.

Just want to understand.  Are you saying that it is right that because I have good healthcare I should have to pay more for that insurance to provide for those that don't?  I can understand say a tax increase across the board to cover, but not making those willing to pay a lot for good coverage pay even more becuase others are not.

I know I am a fortunate one and am thankful every day.   I know my family is covered, I know that I have good insurance there, I know what my max out of pocket is every year.  I also have the benefit that should anything real serious happen my employer will go beyond the insurance coverage and actually make sure that I or my family are getting care from the best doctors and facilities possible including and independent assessment of the care being received and covering the cost to make changes if needed. (I work for a really amazing person that believes this is the greatest gift they can give their extended family)

I also know from my childhood and early adulthood what it is like to not have insurance.   To not know what you are going to do should something happen. So I feel like I am someone that can see and has lived the extremes.
Title: Re: Global Economics
Post by: slslbs on September 22, 2011, 11:07:17 PM
No - there is no "right".
We have a weird system that health insurance is a "pre-tax' benefit. So, in effect, I pay less for my health insurance that my staff, because the tax implications are greater for me, being in a higher tax bracket.
The bossman pays just as much for my insurance as for the assistant in the office. If they gave us the cash instead, I would pay more in taxes than she would. I'm getting a better value.
Is that right? I don't know - that is just how it is.
So, to level the playing field, this bill is "taxing" upper level insurance plans.

the points being-
1)If we had to devise a health insurance system from scratch, I don't know what it would look like, but I doubt it would be an employer / pre tax benefit like we have now.

2)There is a fine line between personal responsibility and giving back / helping others get ahead. that line moves all the time, and we all put it in a different place.

so, what is reasonable replaces what is right, imo.

the problem is health care is expensive. "socialized" programs in Europe are running out of $ for the same reason we are (yes, our health care system, private and public are both running out of $. ask anyone who pays for part of their insurance premium) - not because their plan is predominantly govt run and ours is not, but because health care is expensive, and getting more so. The challenges are to figure out a way to make health care more efficient and to find a way to cover everyone, at least more people. In a world where resources are not infinite, covering more people on the lower end will come at the expense of those on the upper end. Unless we can find the $ somewhere else -which, we can't at the moment
Title: Re: Global Economics
Post by: gah on September 23, 2011, 10:35:18 AM
The health care debate keeps popping up in the wrong thread!  :-P

http://www.cnbc.com/id/44574537

Quote
European central banks have become net buyers of gold for the first time in more than two decades, the latest sign of how the turbulence in the currency and debt markets has revolutionized the bullion market.

When central banks start buying up commodities, a sign of things to come?

Title: Re: Global Economics
Post by: jedifunk on September 23, 2011, 09:52:08 PM
yeah, a sign that the economic world is going to shit, and maybe equality will be restored?
Title: Re: Global Economics
Post by: runawayjimbo on September 23, 2011, 10:36:19 PM
I'd say it's more a sign that Europe is fucked, but they realize the dollar is just as worthless. It also highlights to me just how slow central banks are relative to their private counterparts: JP Morgan began accepting gold as collateral 9 months ago (http://online.wsj.com/article/SB10001424052748704422204576130192457252596.html)

Also, Solyndra execs plead the Fifth before a Congressional panel (http://www.npr.org/templates/story/story.php?storyId=140730887).

(http://www.bokbluster.com/wordpress/wp-content/uploads/2011/09/110916boklores1.jpg)
Title: Re: Global Economics
Post by: Guyute on September 24, 2011, 08:00:52 AM
No - there is no "right".
We have a weird system that health insurance is a "pre-tax' benefit. So, in effect, I pay less for my health insurance that my staff, because the tax implications are greater for me, being in a higher tax bracket.
The bossman pays just as much for my insurance as for the assistant in the office. If they gave us the cash instead, I would pay more in taxes than she would. I'm getting a better value.
Is that right? I don't know - that is just how it is.
So, to level the playing field, this bill is "taxing" upper level insurance plans.

the points being-
1)If we had to devise a health insurance system from scratch, I don't know what it would look like, but I doubt it would be an employer / pre tax benefit like we have now.

2)There is a fine line between personal responsibility and giving back / helping others get ahead. that line moves all the time, and we all put it in a different place.

so, what is reasonable replaces what is right, imo.

the problem is health care is expensive. "socialized" programs in Europe are running out of $ for the same reason we are (yes, our health care system, private and public are both running out of $. ask anyone who pays for part of their insurance premium) - not because their plan is predominantly govt run and ours is not, but because health care is expensive, and getting more so. The challenges are to figure out a way to make health care more efficient and to find a way to cover everyone, at least more people. In a world where resources are not infinite, covering more people on the lower end will come at the expense of those on the upper end. Unless we can find the $ somewhere else -which, we can't at the moment

Logical and I see where you are coming from.  I think we are going to disagree here, but at least I can respect where you are coming from.
Title: Re: Global Economics
Post by: slslbs on September 24, 2011, 03:59:25 PM
fair enough
same here
Title: Re: Global Economics
Post by: Guyute on September 25, 2011, 05:18:15 AM
fair enough
same here

Maybe we should run for office.  This is the thing our officials can't do.  Have an open discussion of ideas, not a fight of their personal Utopia.

On to the next topic,  yeah, Europe is in a really bad way.   Now you have multiple countries trying to figure out if they can get out of the Euro and bring back their currencies.   

The real problem here is that no one thought well into the future about what it truly means to have your currencies as one.  They lost the ability to solve their own economic problems.   Ireland doesn't have a central back that can do economic easing and must rely on the ECB who is looking more macro and can't do what is best for a single nation.   Also, as the Euro falls, they all go with it so there is a much larger effect.  Germany sees this and really wants out; they want to control their own destiny.

Title: Re: Global Economics
Post by: runawayjimbo on October 10, 2011, 02:14:51 PM
It really is this simple

http://www.businessinsider.com/how-to-explain-greece-to-a-complete-idiot--politician-2011-10

Quote
How to explain Greece to a complete idiot / politician

Let’s pretend for a moment that Greece is a human being. I’ll call him George.

George is a hairdresser and makes $40,000 per year. George has limited assets. He has zero savings, no precious metals, and is way underwater on his mortgage. His credit card debt is over $100,000, and his bare minimum living expenses are $45,000 annually, over 10% more than he makes. George’s credit is pitiful, and he cannot obtain any more new loans.

George’s neighbor Hans has a big family. All the kids work hard and contribute to the family savings. Hans sees George’s plight and decides the neighborhood has to stick together; he starts loaning George some money out of his family’s savings, and eventually begins to take on more and more of George’s personal debts.

Many of the other neighbors– Luciano, Seamus, and Juan– are in the same boat as George: drowning in debt with massive personal expenses and no hope to pay them back.

Everyone is looking to Hans for help.  He’s the responsible one in the neighborhood. Now, Hans doesn’t want them all to go bust because he knows it would be bad for the neighborhood property values… but Hans’s children are balking at the prospect of working hard on their newspaper routes just so that George can keep his plasma screen TV.

Very soon, George is going to run out of options and will have to have a difficult conversation with his credit card companies. In the real world, there is no other choice.

In the pretend world of politics, however, European leaders have been able to convince everyone that it’s all under control. Never mind that the whole situation has completely fractured capital markets; traditional valuation metrics have taken a back seat to rumors of secret meetings and loud talk of bailout plans.

Think about it: Dexia passed summer bank stress tests with flying colors. A couple of months later it’s going bust. How can markets function without confidence in balance sheet accuracy? Or whether a government will even be around tomorrow? This is kind of a problem when sovereign debt is the cornerstone of the financial system…

And yet, stock markets worldwide surged today on the news of a European ‘pledge’ to help banks.

Do yourself a favor and stop watching their lips move. These ‘plans’ are nothing more than lies and misdirection. Just like our friend George, a Greek default has to happen.  Politicians can pretend whatever they want, but in the real world where we live, financial deadbeats have no other options.
Title: Re: Global Economics
Post by: runawayjimbo on October 21, 2011, 09:56:51 PM
A phenomenal article about why the economy has not been allowed to rebound, how central banking and market intervention creates malinvestment and other unintended consequences, and the delusion and danger inherent in complex models. It's a little long and somewhat technical, but the entire article is well worth the read IMO. It's also pretty timely since the vice chairman of the Fed was planting the seeds for the forthcoming QE3 (http://www.bloomberg.com/news/2011-10-21/fed-s-yellen-says-qe3-may-be-warranted-if-more-easing-needed-for-stimulus.html).

Selected highlights below.

http://www.realclearmarkets.com/articles/2011/10/21/we_have_reached_a_potential_inflection_point_99320.html

Quote
We Have Reached a Potential Inflection Point

We have once again reached a potential inflection point for the markets. While the debate rages about the possible solution to the European banking problem, the truth is that the actual need for a solution simply underscores the economic realities we face. None of these banking problems would exist had a true, self-sustaining global recovery been present. The entire administration of global fiscal and monetary responses has been geared toward bridging the divide between contraction and growth, as if the latter was a given.

A typical economic recovery is characterized first and foremost by the expansion of risk taking. The willingness and the ability of a broadening proportion of investors, households and businesses to take on additional risks is where a true recovery begins. In the systemic reset that a contraction represents, the equalization between prices and values (often overshot) gets the process started.

In 2011, however, prices are not being allowed to reset. Systemic risk is being priced by central bank interventions, not considerations of risk/reward from private investors. That monetary bridge to a cyclical recovery involves "managing" the public perception of risk through prices. Allowing even a fleeting thought that the current economic condition is not cyclical would invalidate every artificially low risk price in existence, so the psychology of "deflation" is both feared and persecuted.


...

The role of interest rates in the economy is not simply to advertise the cost of credit at different maturities. In many ways interest rates are supposed to signal the price of systemic risk, enforcing scarcity upon the financial world. Yet we all know explicitly that interest rates throughout the world today signal nothing of the sort. Instead of displaying true risk pricing, they simply signal what central banks want investors to believe where risk should be priced.

...

Today's financial system is not just a case of simple fractional reserve lending; it is fractional lending to the nth degree. Individual institutions are not just multiplying base money to some safe multiple in the form of loans, resulting in a simple maturity mismatch between assets and liabilities (the basic weakness expressed in traditional bank runs). Rather, firms within the financial system today are leveraging themselves into the maximum amplification of equity capital without ever having to clearly define or even adequately understand that maximum. This is such a profound change that it cannot be understated.

...

It is one thing to be a bank experiencing a run because the public worries about the quality of your assets and your ability to repay liabilities. It is something far worse for you to be insolvent simply because the mathematical formulation of risk through price discovery has changed today. In that case you were always technically bankrupt, you just had the veil of complexity to hide it while you stayed in business far longer than you should have. In other words, a bank can load up on Greek and Italian bonds and appear solvent simply because the true risk of owning those bonds is offset by the more ephemeral calculus of hedging (as it is calculated right at this moment anyway, deltas are not static). Does it really matter for anything other than appearances if your large PIIGS exposure is hedged by counterparties that have identical or larger PIIGS exposure?

...

The problem was that [AIG] determined its own margin of safety, largely accomplishing that because the price of risk was set by something artificial (though its mathematical origins gave it the veneer of science and acceptability). Because of this artificial system, the company never even knew it was in mortal danger, blinded by its own belief that risk had been, and would continue to be, accurately priced by the past data series. And in that respect, the central banks were similarly behind the curve since they use the same math and models, meaning that they will never be able to actively control prices and conditions enough to offset changing perceptions that occur outside of those mathematical tolerances.

Banks, including central banks, view risk as a number that defines operations. Real risk is the hubris such thinking engenders. The outsourcing of common sense into models is where the financial system ran aground.

Bank managers may feel safe leveraging themselves to the moon, or taking on trillions in derivatives because they are supposedly netted, but the rest of the world pauses over the same actions. While it is easy to dismiss this lack of sophistication in the rest of us, the very fact such sophistication needs to exist simply defines it as risky in the first place. If something requires a heavy element of complexity and a questionable need for mathematical certainty, it is without qualification inherently and intrinsically risky. All the hedging and the rest is just window dressing.

...

The answer to a broken system of manipulated markets is not to manipulate and break them further. Given the lack of functioning financial system and the more distinct and apparent lack of real economic results, the status quo should no longer be acceptable to the vast majority - it is not too hard to connect the dots between monetarism's artificial and uncontrolled notions of risk and the lack of sustainable rewards (both financial and economic).
Title: Re: Global Economics
Post by: runawayjimbo on October 30, 2011, 10:44:58 PM
http://www.aaronklein.com/2011/10/what-caused-the-great-recession

Quote
What Caused the Great Recession?

A politician in Washington DC decided that if neighborhoods with high unemployment just had more entertainment opportunities, people would gather, rouse their spirits and gain the motivation to look for work again.

So he creates a new government-backed loan program to encourage banks to lend money to small businesses that want to entertain the unemployed. The politician calls this “free market principles at work.”

Heidi is the proprietor of a bar in Detroit.

She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with an ingenious new marketing plan that allows her customers to drink now, but pay later. Her local bank taps the government-backed loan program and gives her an interest-free line of credit that she doesn’t have to make any payments on for three years.

Heidi keeps track of the drinks consumed on a ledger and all of her patrons heartily agree that they will start paying back the money “soon” when they find jobs and things improve.

Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon she has the largest sales volume for any bar in Detroit.

By providing her customers freedom from immediate payment demands, Heidi sees no resistance when she increases the price of wine and beer to $18 a glass. Her sales volume spikes tremendously, and her profit margins are incredible. It almost seems too good to be true.

Back at the bank’s corporate headquarters, expert traders figure out a way to make huge commissions by packaging up the loans to Heidi as “Drink Bonds” which are then bundled, rated AAA by the ratings agencies, and sold to investors on the international securities market.

Because the drink bonds have such wonderful returns – I mean, who knew you could get blue-collar folks to pay $18 for a glass of beer? – naive investors everywhere generate incredible demand for the bonds, driving up their prices.

A couple of years later, even though the drink bonds are still rising, a risk manager at the local bank notifies Heidi that it’s time for her to start paying down her line of credit, so the bank can pay back the bondholders.

Heidi then pulls out her ledgers and demands payment from her patrons, but being unemployed alcoholics, they are somehow incapable of paying back their drinking debts. Heidi is forced into bankruptcy. The bar closes and Heidi’s 11 employees lose their jobs.

Overnight, the value of Drink Bonds fall by 90%.

The collapsed value of the bonds destroys the bank’s liquidity, and prevents it from issuing new loans, freezing credit in the community.

The suppliers for Heidi’s bar had granted her generous payment terms, as well as investing their pension fund into Drink Bonds, so they claim bankruptcy too and lay off 150 workers.

The default on the Drink Bonds throws the entire economy into chaos, as investors become fearful that other bonds may be equally “safe.” The markets plunge, lose half their value, and many companies begin laying off workers.

Fortunately, the bank, the brokerage houses and all of their respective executives are bailed out by a multi-billion dollar cash infusion from the government, because as the President says, “we need to help the people who need help.” The government also announces a series of regulations to “fix” the problem.

The funds required for the bailout are obtained by new taxes levied on employed, middle class, non-drinkers who have never set foot in Heidi’s bar.

And that, my friends, is pretty close to what caused the Great Recession.

(Edited and adapted by me, original author unknown.)
Title: Re: Global Economics
Post by: gah on October 31, 2011, 09:46:17 AM
I don't understand how you still believe less regulation is the answer? I understand your thoughts on less gov't, etc, but do you honestly believe unregulated free market capitalism is going to get us out of this mess?
Title: Re: Global Economics
Post by: runawayjimbo on October 31, 2011, 11:10:14 AM
I don't understand how you still believe less regulation is the answer? I understand your thoughts on less gov't, etc, but do you honestly believe unregulated free market capitalism is going to get us out of this mess?

I don't remember ever saying anything about having no regulations. There should be mechanisms in place that increase transparency and encourage productive investment and appropriate risk-reward trade-offs rather than speculative mania. But that's not what happens most of the time. Most regulation is a reaction to a crisis that already occurred, not a forward looking system for preventing new ones. Why? Because nobody, not a regulator or a Wall St. exec, can foresee what future crises will look like. Financial crises are borne from people taking advantage of holes in existing regulations, not because of a lack of them.

I do believe that free markets are the only way we will regain economic stability in this country (and globally as well). I understand that politicians have no choice but to look like they are doing something to make things better. But for any measurable benefit they introduce they create multiples of harm as their interference in the free market inevitably leads to unintended consequences. It also breeds the corruption that we all acknowledge as those in charge put their favored interests at the front of the line. OWS (rightly) complains that financial companies dominate elections, but politicians couldn't be bought if they weren't in the unique position of influencing "free" markets.

So, to answer your question: unregulated? no; free market? absolutely.
Title: Re: Global Economics
Post by: runawayjimbo on November 03, 2011, 12:13:52 PM
slslbs often says that the sub-prime loans that led to the financial crisis should have never been approved. He is absolutely correct. Here's why they were.

http://news.investors.com/Article/589858/201110310805/Housing-Crisis-Obama-Clinton-Subprime.htm

(http://www.investors.com/image/WEBhud1101_345.jpg.cms)
Quote
Smoking-Gun Document Ties Policy To Housing Crisis

President Obama says the Occupy Wall Street protests show a "broad-based frustration" among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis.

"You're seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place," he complained earlier this month.

But what if government encouraged, even invented, those "abusive practices"?

Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history.

At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

...

The regulatory missive, which had the effect of law, advised lenders to bend "customary" underwriting standards for minority homebuyers with poor credit.

"Applying different lending standards to applicants who are members of a protected class is permissible," it said. "In addition, providing different treatment to applicants to address past discrimination would be permissible."

To that end, lenders were directed to "make changes in marketing strategy or loan products to better serve minority segments of the market." They were also advised to "change commission structures" to encourage brokers and loan officers to "lend in minority and low-income neighborhoods" — a practice Countrywide Financial, the poster boy of the subprime scandal, perfected. The government now condemns the practice it once encouraged as "predatory."

...

HUD also pushed Fannie and Freddie, which in effect set industry underwriting standards, to buy subprime mortgages, freeing lenders to originate even more high-risk loans.

"Lenders should ensure that their loan processors and underwriters are aware of the provisions of the secondary market guidelines that provide various alternative and flexible means by which applicants may demonstrate their ability and willingness to repay their loans," the policy statement decreed.

"Fannie Mae and Freddie Mac not infrequently purchase mortgages exceeding the suggested ratios" of monthly housing expense to income (28%) and total obligations to income (36%).
Title: Re: Global Economics
Post by: slslbs on November 04, 2011, 09:02:24 AM
true. another example of a well meaning policy gone bad. In this case, very bad.

It's interesting that the financial lobby didn't block this initiative. could it be because they knew that they would come out ahead?

It also doesn't forgive the industry for packaging junk in "AAA" rated portfolios, derivatives, and credit default swaps.
I still don't get how people made commission and received bonuses on deals that eventually went bad - The fact that you can get paid as much for a bad deal as a good deal defies common sense.

Bad regulation is bad.
It doesn't mean all regulation is bad.
ex Sherman Anti Trust Act ( see PieGuy's post), Glass-Steagle (since repealed) are prominent examples of good regulation.
Some regulation is bad because it isn't thought out.
some is bad because the people being regulated twist it to their advantage and squash the little guy in the process.
 We should strive for good, responsible regulation, when needed.
Title: Re: Global Economics
Post by: PIE-GUY on November 04, 2011, 09:47:50 AM
Has anyone read the book "Good to Great?" One of the companies profiled is Fanny Mae. It was written well before the crisis, obviously. But it talks about how Fanny became immensely profitable for the first time ever by embracing the sub-prime market. The book paints this as a great move. It does not mention any government "push" towards it.

That's not to say that the Clinton administration didn't push for greater home-ownership. There is no doubt that they did. But so did W. That was a very popular policy for a long time and it screwed us in so many ways.

It's still screwing up our job markets. Unemployment would be significantly lower right now if a higher percentage of lower-middle class people were renters who could move more easily for a new job. Home ownership stifles the natural ebb and flow of changing regional employment needs. There was a piece in that first episode of Rock Center with Brian Williams about a town somewhere in North or South Dakota (I can't remember which) that cannot find enough employees. They're ready to pay any truck driver willing to move there $80K a year. If some truck driver in Phoenix can't move there because he's upside down on his house and has no job, then we have stymied growth.
Title: Re: Global Economics
Post by: runawayjimbo on November 04, 2011, 10:28:13 AM
We should strive for good, responsible regulation, when needed.

sls - I agree with you, especially this part. Responsible regulation is a essential component of a functioning free market. But like I've said before, we should not be focusing on reactionary measures which can hamper businesses (e.g., Sarbanes-Oxley) or politically motivated policies (as mentioned in the article above). When politicians interfere in the market, it leads to the exacerbated cycle of booms and busts as companies greedily exploit holes in the regulations and it breeds corruption as firms do whatever they can to get a leg up.

Pie Guy - I haven't read that one, but I'd imagine the author would likely retract Fannie/Freddie's plunge into sub-prime as a great move. There's a book that's been on my list for a while (Guaranteed to Fail (http://www.amazon.com/Guaranteed-Fail-Freddie-Debacle-Mortgage/dp/0691150788/ref=sr_1_1?s=books&ie=UTF8&qid=1320414844&sr=1-1)) that details how Fannie/Freddie got swept away in the events that led to the crash.

This is another example of why I oppose gov't interference in the markets. I have no doubt that the policies were well-intentioned (and you're right, it was promoted both by Clinton and Bush's "Ownership Society"). But the unintended consequences and perverse incentives that are created far outweigh any positive benefit IMO.
Title: Re: Global Economics
Post by: runawayjimbo on November 04, 2011, 10:31:37 AM
Also, job growth continues to struggle: 80,000 jobs added; unemployment basically unchanged

http://www.bloomberg.com/news/2011-11-04/u-s-payrolls-increased-by-80-000-in-october-as-jobless-rate-falls-to-9-.html

Quote
U.S. Payrolls Rose in October; Jobless Rate 9%

U.S. employment climbed in October at the slowest pace in four months, illustrating the “frustratingly slow” progress cited by Federal Reserve Chairman Ben S. Bernanke this week.

The 80,000 increase in payrolls was less than forecast and followed gains in the prior two months that were revised up by 102,000, Labor Department figures showed today in Washington. The unemployment rate fell to a six-month low of 9 percent from 9.1 percent even as the labor force expanded.

The crisis in Europe and looming deadline on U.S. budget talks may be prompting companies to hold back on concern failure to reach resolutions will put the global recovery at risk. Fed policy makers project the jobless rate won’t drop under 8 percent until 2013 at the earliest, one reason why Bernanke this week said additional stimulus “remains on the table.”

“We’re making progress at a very slow pace,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected an 85,000 gain in payrolls. “It indicates continued consumer spending, getting a little better over time. The labor market is consistent with moderate economic growth.”

The median estimate in a Bloomberg News survey was for a gain of 95,000. Payroll estimates of 91 economists ranged from increases of 50,000 to 150,000.

Stock-index futures trimmed earlier losses and Treasuries fell after the report. The contract on the Standard & Poor’s 500 Index expiring next month fell 0.2 percent to 1,252.8 at 8:46 a.m. in New York. The yield on the benchmark 10-year note climbed to 2.10 percent from 2.07 percent late yesterday.

...
Title: Re: Global Economics
Post by: rowjimmy on November 21, 2011, 10:59:53 AM
Picture money (epic infographic):
http://bit.ly/uZPemk
Title: Re: Global Economics
Post by: UncleEbinezer on November 21, 2011, 12:10:28 PM
^^^ Very informative graphic.  There are definitely some very interesting facts in here.


(said tongue in cheek)-> Since Apple has 76 billion cash on hand, they should get us started on the free degrees and education.  I can see it now...iPhones for iDegrees!  (I'm really just being a smartass, no need to judge)
Title: Re: Global Economics
Post by: gah on November 21, 2011, 12:25:00 PM
Picture money (epic infographic):
http://bit.ly/uZPemk

WOW! Lots of good info in there!
Title: Re: Global Economics
Post by: runawayjimbo on November 29, 2011, 12:21:52 PM
This was rich: the NY Fed put up a blog post on 6pm the Friday after Thanksgiving that basically says "we don't really know what we are doing." That kinda begs the question of why should a select group of people who don't know how to accurately forecast be entrusted with the awesome power of setting interest rates and manipulating the money supply? And how can they be expected to control the myriad of consequences that extend from those powers? (hint: they can't)

They also make a point to say "like most economists" throughout the post, because why take responsibility for your own fuckups when you can say "Everybody else was doing it!" The comments are also thoroughly entertaining as well.

http://libertystreeteconomics.newyorkfed.org/2011/11/the-failure-to-forecast-the-great-recession.html

Quote
The Failure to Forecast the Great Recession

The economics profession has been appropriately criticized for its failure to forecast the large fall in U.S. house prices and the subsequent propagation first into an unprecedented financial crisis and then into the Great Recession. In this post, I examine the performance of the forecasts produced by the economic research staff of the Federal Reserve Bank of New York (New York Fed) over the period 2007-10 and consider some of the reasons why we, like most private sector forecasters, failed to predict the Great Recession. This spreadsheet contains staff forecasts, the outcomes, and a standard measure of private sector forecasts—the Blue Chip consensus. In addition, staff material prepared for bi-annual meetings of the New York Fed Economic Advisory Panel provide some further insights into the evolution of the staff outlook.

The staff forecasts of real activity (unemployment and real GDP growth) for 2008-09 had unusually large forecast errors relative to the forecasts’ historical performance, while the forecasts for inflation were in line with past performance. Moreover, although the risks to the staff outlook were to the downside throughout this period, it wasn’t until fall 2008 that a recession as deep as the Great Recession was given more than 15 percent weight in the staff assessment.

...

Looking through our briefing materials and other sources such as New York Fed staff reports reveals that the Bank’s economic research staff, like most other economists, were behind the curve as the financial crisis developed, even though many of our economists made important contributions to the understanding of the crisis. Three main failures in our real-time forecasting stand out:

1. Misunderstanding of the housing boom. Staff analysis of the increase in house prices did not find convincing evidence of overvaluation (see, for example, McCarthy and Peach [2004] and Himmelberg, Mayer, and Sinai [2005]). Thus, we downplayed the risk of a substantial fall in house prices. A robust approach would have put the bar much lower than convincing evidence.

2. A lack of analysis of the rapid growth of new forms of mortgage finance. Here the reliance on the assumption of efficient markets appears to have dulled our awareness of many of the risks building in financial markets in 2005-07. However, a March 2008 New York Fed staff report by Ashcraft and Schuermann provided a detailed analysis of how incentives were misaligned throughout the securitization process of subprime mortgages—meaning that the market was not functioning efficiently.

3. Insufficient weight given to the powerful adverse feedback loops between the financial system and the real economy. Despite a good understanding of the risk of a financial crisis from mid-2007 onward, we were unable to fully connect the dots to real activity until 2008. Eventually, by building on the insights of Adrian and Shin (2008), we gained a better grasp of the power of these feedback loops.

However, the biggest failure was the complacency resulting from the apparent ease of maintaining financial and economic stability during the Great Moderation. Perhaps most important, as noted by some analysts as early as the 1990s, these adverse consequences of the Great Moderation were most likely to arise from the actions, judgments, and decisions of financial market participants:

Longer stretches of economic growth imply greater leverage and complacency and thus, greater financial problems when recessions do occur.
--William Dudley and Edward McKelvey
Title: Re: Global Economics
Post by: slslbs on November 29, 2011, 01:21:57 PM
Quote
1. Misunderstanding of the housing boom. Staff analysis of the increase in house prices did not find convincing evidence of overvaluation (see, for example, McCarthy and Peach [2004] and Himmelberg, Mayer, and Sinai [2005]). Thus, we downplayed the risk of a substantial fall in house prices. A robust approach would have put the bar much lower than convincing evidence.

2. A lack of analysis of the rapid growth of new forms of mortgage finance. Here the reliance on the assumption of efficient markets appears to have dulled our awareness of many of the risks building in financial markets in 2005-07. However, a March 2008 New York Fed staff report by Ashcraft and Schuermann provided a detailed analysis of how incentives were misaligned throughout the securitization process of subprime mortgages—meaning that the market was not functioning efficiently.

in other words, they didn't know WTF they were doing. They were buying and selling real estate securities, with new, recently "invented" methods of speculation without understanding the method. they were taking risks without understanding what the risks were.
why?
"incentives were misaligned", which can be restated as they all had serious conflicts of interest.

and - what wasn't stated, is that the regulators couldn't see the forest from the trees because they were connected to, or part of, the industry that caused the mess.
Imagine a world in which the cops and judges came from a rotating pool of people that included bank robbers, hit men, and the like. That's what our system of financial regulation and management it.
Title: Re: Global Economics
Post by: runawayjimbo on January 18, 2012, 04:08:02 PM
Someone please tell me this is just a bad dream

http://www.bloomberg.com/news/2012-01-18/summers-under-consideration-to-lead-world-bank-when-zoellick-s-term-ends.html

Quote
Obama Considering Summers for World Bank

President Barack Obama is considering nominating Lawrence Summers, his former National Economic Council director, to lead the World Bank when Robert Zoellick’s term expires later this year, according to two people familiar with the matter.

Summers has expressed his interest in the job to White House officials and has backers inside the administration, including Treasury Secretary Timothy Geithner and the current NEC Director, Gene Sperling, said one of the people. Secretary of State Hillary Clinton is also being considered, along with other candidates, said the other person. Both spoke on condition of anonymity to discuss internal White House deliberations.

Lael Brainard, the under secretary of Treasury for international affairs, is compiling a list of potential candidates to replace Zoellick, who was nominated to a five-year term that began in July of 2007 by then-President George W. Bush. By tradition, the U.S. president chooses the leader of the World Bank while the head of the International Monetary Fund is selected by European leaders. The nomination is subject to approval by the World Bank’s executive board.

White House press secretary Jay Carney declined to comment. Summers’ assistant, Julie Shample, said he was unavailable. Philippe Reines, a spokesman for Clinton, did not respond to a request for comment.

Scrutiny of Record

A nomination of Summers would bring scrutiny of his previous stints in government, both as former President Bill Clinton’s Treasury Secretary and Obama’s NEC director, as well as his tenure as the president of Harvard University.

“Larry is controversial,” said Erskine Bowles, who served as Clinton’s chief of staff. “Anything you appoint Larry to, you know there are going to be some people who are going to take shots at him. But you know he’s a brilliant economist, which I think everybody recognizes.”

Bowles said he had no information on the White House deliberations.

“He performed well in some difficult markets,” Bowles said. “I think it’s been a passion of his for a long, long time and I am confident that he will do a good job.”

Summers also may come under fire for some of his previous work at the bank, as well as the commercial relationships he has forged since leaving the White House in December of 2010.

In 1991, at the World Bank, he signed off on a memo that argued that less-developed countries might benefit from accepting pollution from first world countries.

Return to Harvard

After leaving the Obama administration at the end of 2010, Summers, 57, returned to Harvard University, where he once served as president and is now a professor at the John F. Kennedy School of Government.

Summers earned his doctorate in economics at Harvard in Cambridge, Massachusetts, and at 28 was granted tenure, the youngest age anyone had gained tenure at the time. He spent time on the staff of the White House Council of Economic Advisers in the 1980s before joining the World Bank as chief economist.

He was Clinton’s Treasury secretary from 1999 to 2001, after which he became president of Harvard. Summers quit that post in 2006 after a series of battles with the Faculty of Arts and Sciences, which teaches most of the undergraduate courses, and following a controversy over comments he made at a conference, in which he suggested women lacked an aptitude for science.

Period of Upheaval

Jared Bernstein, former chief economist for Vice President Joe Biden, said Summers would be a good choice for the World Bank.

“Larry has a deep understanding of global economics and is particularly tuned in to this moment in time, with all the upheaval in the system,” Bernstein said.

Under a long-standing unwritten agreement, the IMF has always been led by a European while the World Bank has been headed by an American. The U.S. in June backed then-French Finance Minister Christine Lagarde to take the head of the IMF.

Emerging market leaders such as Brazilian Finance Minister Guido Mantega have questioned the division of leadership posts at the two institutions, saying the choice should be made on the basis of merit, not nationality.

The World Bank, which was established to rebuild Europe after World War II, offers financial and technical assistance to countries. Under Zoellick, shareholders approved a capital increase providing the institution with $5.1 billion in cash and enhancing China’s clout at the lender.
Title: Re: Global Economics
Post by: slslbs on January 18, 2012, 05:12:43 PM
 :frustrated:
Title: Re: Global Economics
Post by: gah on January 19, 2012, 11:41:01 AM
Someone please tell me this is just a bad dream

http://www.bloomberg.com/news/2012-01-18/summers-under-consideration-to-lead-world-bank-when-zoellick-s-term-ends.html

Quote
Obama Considering Summers for World Bank


Under a long-standing unwritten agreement, the IMF has always been led by a European while the World Bank has been headed by an American. The U.S. in June backed then-French Finance Minister Christine Lagarde to take the head of the IMF.

Emerging market leaders such as Brazilian Finance Minister Guido Mantega have questioned the division of leadership posts at the two institutions, saying the choice should be made on the basis of merit, not nationality.


Agreed completely.
Title: Re: Global Economics
Post by: runawayjimbo on March 14, 2012, 10:15:35 AM
Former executive director at Goldman tells them just how badly they suck.

http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=1

Quote
Why I Am Leaving Goldman Sachs

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn't matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn't know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.
Title: Re: Global Economics
Post by: VDB on March 14, 2012, 12:40:44 PM
Hey, those are the job creators we're talking about here!
Title: Re: Global Economics
Post by: slslbs on March 23, 2012, 05:11:34 PM
Someone please tell me this is just a bad dream

http://www.bloomberg.com/news/2012-01-18/summers-under-consideration-to-lead-world-bank-when-zoellick-s-term-ends.html

Quote
Obama Considering Summers for World Bank

President Barack Obama is considering nominating Lawrence Summers, his former National Economic Council director, to lead the World Bank when Robert Zoellick’s term expires later this year, according to two people familiar with the matter.

Summers has expressed his interest in the job to White House officials and has backers inside the administration, including Treasury Secretary Timothy Geithner and the current NEC Director, Gene Sperling, said one of the people. Secretary of State Hillary Clinton is also being considered, along with other candidates, said the other person. Both spoke on condition of anonymity to discuss internal White House deliberations.

Lael Brainard, the under secretary of Treasury for international affairs, is compiling a list of potential candidates to replace Zoellick, who was nominated to a five-year term that began in July of 2007 by then-President George W. Bush. By tradition, the U.S. president chooses the leader of the World Bank while the head of the International Monetary Fund is selected by European leaders. The nomination is subject to approval by the World Bank’s executive board.

White House press secretary Jay Carney declined to comment. Summers’ assistant, Julie Shample, said he was unavailable. Philippe Reines, a spokesman for Clinton, did not respond to a request for comment.

Scrutiny of Record

A nomination of Summers would bring scrutiny of his previous stints in government, both as former President Bill Clinton’s Treasury Secretary and Obama’s NEC director, as well as his tenure as the president of Harvard University.

“Larry is controversial,” said Erskine Bowles, who served as Clinton’s chief of staff. “Anything you appoint Larry to, you know there are going to be some people who are going to take shots at him. But you know he’s a brilliant economist, which I think everybody recognizes.”

Bowles said he had no information on the White House deliberations.

“He performed well in some difficult markets,” Bowles said. “I think it’s been a passion of his for a long, long time and I am confident that he will do a good job.”

Summers also may come under fire for some of his previous work at the bank, as well as the commercial relationships he has forged since leaving the White House in December of 2010.

In 1991, at the World Bank, he signed off on a memo that argued that less-developed countries might benefit from accepting pollution from first world countries.

Return to Harvard

After leaving the Obama administration at the end of 2010, Summers, 57, returned to Harvard University, where he once served as president and is now a professor at the John F. Kennedy School of Government.

Summers earned his doctorate in economics at Harvard in Cambridge, Massachusetts, and at 28 was granted tenure, the youngest age anyone had gained tenure at the time. He spent time on the staff of the White House Council of Economic Advisers in the 1980s before joining the World Bank as chief economist.

He was Clinton’s Treasury secretary from 1999 to 2001, after which he became president of Harvard. Summers quit that post in 2006 after a series of battles with the Faculty of Arts and Sciences, which teaches most of the undergraduate courses, and following a controversy over comments he made at a conference, in which he suggested women lacked an aptitude for science.

Period of Upheaval

Jared Bernstein, former chief economist for Vice President Joe Biden, said Summers would be a good choice for the World Bank.

“Larry has a deep understanding of global economics and is particularly tuned in to this moment in time, with all the upheaval in the system,” Bernstein said.

Under a long-standing unwritten agreement, the IMF has always been led by a European while the World Bank has been headed by an American. The U.S. in June backed then-French Finance Minister Christine Lagarde to take the head of the IMF.

Emerging market leaders such as Brazilian Finance Minister Guido Mantega have questioned the division of leadership posts at the two institutions, saying the choice should be made on the basis of merit, not nationality.

The World Bank, which was established to rebuild Europe after World War II, offers financial and technical assistance to countries. Under Zoellick, shareholders approved a capital increase providing the institution with $5.1 billion in cash and enhancing China’s clout at the lender.

follow up
http://www.boston.com/Boston/metrodesk/2012/03/choice-jim-kim-lead-world-bank-draws-praise-but-unsettles-dartmouth/aqv5KpkmSox82rCLkiubNK/index.html?p1=News_links

Quote
Choice of Jim Kim to lead World Bank draws praise but unsettles Dartmouth By Mary Carmichael, Globe Staff


President Obama’s nomination of Dartmouth College President Jim Kim to lead the World Bank rippled throughout political and higher education circles today, leaving many surprised though approving of the choice.

Political leaders had widespread praise for the nomination, noting Kim’s sterling public health resume and his years of experience at international agencies, including the World Health Organization.

Timothy F. Geithner, the Treasury secretary and a Dartmouth alumnus, praised Dr. Kim’s lifetime commitment and passion for development.

“In a world with so much potential to improve living standards, we have a unique opportunity to harness that passion and experience at the helm of the World Bank,” Geithner said in a statement.

But the news left many at Dartmouth feeling unsettled. Kim, 52, has been president for only two years and nine months, and if he leaves his term would be one of the shortest ever for an Ivy League president.

Many Dartmouth faculty members said they did not expect Kim to stay long.

“It’s not clear whether he and Dartmouth were a great match,” said David Blanchflower, a professor of economics. “The scuttlebutt has been that he was using the school as a stepping stone to something bigger and greater. Maybe this is better for both places.”

Kim, born in South Korea but raised largely in the United States, has impeccable credentials. They include a MacArthur “genius” grant, an MD and PhD degrees from Harvard, and a stint directing the World Health Organization’s HIV/AIDS program.

He is “willing to go out on a limb and take important and calculated risks,” said Ophelia Dahl, who along with Kim was one of five co-founders of the international global health organization Partners in Health. “The qualities he brought to Partners in Health that will be translatable in this job are a real boldness of vision and a tenacity. He sways and woos people and brings unlikely partners together. That will be important, because some of these institutions are quite staid in the way they do things.”

During his time at Partners in Health, Kim frequently spoke of how his mother, a neo-Confucian philosopher, had shaped his tendency “to question assumptions and lift barriers,” Dahl said. “If someone says something isn’t possible, he says, ‘Tell me why?’ And then he finds out more.”

Kim’s nomination itself represents a lifting of barriers, given that he is the first Asian-American tapped to lead the World Bank.

Among other candidates reportedly considered by the White House were former White House adviser and Harvard president Larry Summers, UN ambassador Susan Rice, and Pepsi chief executive Indra Nooyi. The prominent economist Jeffrey Sachs, of Columbia University, also became a potential nominee after he broke with tradition and openly lobbied for the job.

Blanchflower said Kim’s nomination was actually “not a surprise” in some respects, given his well-developed connections with powerful national and global leaders and his recent visit to the White House for a state dinner honoring the president of South Korea.

“Clearly the White House is going to push the line – and I sort of share this – that politically this is an astute appointment, since he’s the first nominee who’s actually got development experience,” said Blanchflower.

Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, echoed that sentiment, describing Kim in a statement as “the first qualified [World Bank] president in 68 years.”

The bank -- created in 1944 toward the end of World War II to finance post-war reconstruction -- is a multinational institution headquartered in Washington that gives financial and technical assistance to developing countries. In 2011, its investments in those developing countries totaled $57.4 billion, a spokesman said.

Kim’s appointment at Dartmouth, in Hanover, N.H., was in many ways more surprising because he had no experience as a college administrator.

During a recent interview, gazing at a group portrait of the 16 previous Dartmouth presidents, Kim joked that he differed from his predecessors “in so many ways.”

He did share their major challenge: bringing a tradition-bound campus into line with modern norms.

Kim immediately put his public health credentials to work on that front, establishing a 31-campus collective to study the longstanding problem of binge drinking – a move that earned him nationwide praise.

But in the last two months, student-life issues have severely tested his leadership skills.

In January, a student went public with graphic accusations of alcohol-soaked hazing in a popular fraternity at Dartmouth. Professors were so horrified by the allegations that within weeks a fourth of the faculty had called on Kim to dissolve single-sex fraternities altogether -- a proposal that constitutes the third rail of academic politics at Dartmouth.

Kim rejected the idea, telling the Globe earlier this month that “the minute you think as an administrator that by fiat you can institute culture change, the only thing you’ll get is mocking and ridicule” -- a result he added would be “well-deserved.”

He added: “I can’t lead on everything.”

Those comments left some faculty members cold.

English professor Ivy Schweitzer said they showed a “severe failure of leadership on addressing the deleterious effects of the Greek system,” though she said Kim has shown leadership on other issues at Dartmouth.

Some faculty have also criticized Kim for spending little time on campus.

Many university presidents travel frequently, typically in the service of fund-raising, and from the outset Kim made clear that a large part of his job would be restoring the university’s finances to health after they took a hit in the economic crisis.

But his absence was sorely felt, said Michael Bronski, a professor of women’s and gender studies.

“There were often many, many times when faculty and students wondered if Kim was on campus and he was not -- as opposed to [previous president James Wright], who made it a point to be seen almost every day walking around campus,” he said. “Many people felt that Jim Kim was conspicuously absent a great deal of time.”

Kim sent out a campus-wide letter today saying he will stay on as Dartmouth president while the confirmation process plays out, despite the fact that he is expected to embark on a world tour to raise support for his nomination. “If I am elected, our board will take appropriate steps to ensure continuity of leadership and determine the timing of a search,” it read. “For now, I remain president of Dartmouth.”

A final decision on the World Bank job will be made next month.

College presidential searches typically take much longer than that, lasting anywhere from six to 18 months, and the effort to replace Kim could be complicated by the fact that several other prestigious university presidencies are currently open.

Title: Re: Global Economics
Post by: runawayjimbo on March 23, 2012, 08:04:26 PM
Yeah, I saw that. I don't know much about him but he seems like just another establishment guy who's going to go along with the bubble inflating monetary scam. Still, Obama didn't pick Summers so in that respect it's a win.

Also, this Corzine bit is getting funnier by the day too. Now we can add perjury to embezzlement and fraud. I'd love to see them nail him to the wall but of course he's in the club (several of them actually: Senator, Gov., banker, all-around dooshbag) so I'm sure he'll walk. Or, more likely, someone will get paid off to take the fall for him.

http://www.bloomberg.com/news/2012-03-23/mf-global-s-corzine-ordered-funds-moved-to-jpmorgan-memo-says.html

Quote
MF Global’s Corzine Ordered Funds Moved to JPMorgan, Memo Says

Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. (JPM) accounts in London, according to an e-mail sent by a firm executive.

Edith O’Brien, a treasurer for the firm, said in an e-mail sent the afternoon of Oct. 28, three days before the company collapsed, that the transfer of the funds was “Per JC’s direct instructions,” according to a copy of a memo drafted by congressional investigators and obtained by Bloomberg News.

O’Brien’s internal e-mail came as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify after being subpoenaed this week.

“Over the course of that week, MF Global (MFGLQ)’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’ segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.

Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that said JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account, which had to be “fully funded ASAP,” according to the memo.

O’Brien Letter

Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was never returned to JPMorgan, the memo said.

The money transferred came from a segregated customer account, according to congressional investigators. Segregated accounts can include customer money and excess company funds.

Corzine testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.

“I did not instruct anyone to lend customer funds to anyone,” Corzine told lawmakers in December.

Steven Goldberg, a spokesman for Corzine, declined immediate comment.

$1.6-Billion Shortfall

The bankruptcy trustee overseeing the liquidation of the company’s brokerage subsidiary has estimated a $1.6-billion shortfall between customer claims and assets available.

Lawmakers and investigators from the Commodity Futures Trading Commission, Securities and Exchange Commission and Department of Justice have been reviewing events leading up to MF Global’s bankruptcy filing. Executives including Corzine, a Democrat who served in the Senate before he was elected governor of New Jersey, gave testimony on the collapse at three congressional hearings last year.

Representative Randy Neugebauer, a Texas Republican, will hold the third in a series of hearings into the firm’s failure. Neugebauer, the chairman of the Financial Services oversight and investigations subcommittee, will release a final report on his investigation into the firm’s failure.

MF Global and its brokerage, MF Global Inc., sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Corzine quit MF Global Nov. 4.

O’Brien, who was subpoenaed by lawmakers this week to testify at the hearing on the final week before the New York- based futures brokerage’s failure, was identified by Corzine as someone with knowledge of a transfer of funds from customer accounts before the firm sought bankruptcy protection Oct. 31.

CME Audit

Reid H. Weingarten, O’Brien’s lawyer, did not immediately respond to a phone call and e-mail seeking comment.

The memo’s account of the e-mail exchanges aligns with what Terrence Duffy, the executive chairman at CME Group Inc. (CME), told lawmakers during a December congressional hearing. Auditors at CME, which had authority to oversee MF Global, learned from an employee of the brokerage that Corzine knew about the loans involving a European affiliate, Duffy told committee members.

O’Brien is scheduled to appear before lawmakers with Christine Serwinski and Laurie Ferber, two other MF Global executives named by Corzine as being involved in the transaction, according to the memo. Henri Steenkamp, the firm’s chief financial officer, is also scheduled to testify, as is a representative from JPMorgan who has not yet been identified.
Title: Re: Global Economics
Post by: runawayjimbo on April 19, 2012, 03:38:50 PM
If you thought you hated banks before, check this shit out. It's an infographic and corresponding commentary regarding the derivative exposure of the 9 largest banks, which combined equals $229 trillion or 3x the GDP of the world. In other words, we are so screwed.

http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html

Here's what the derivative exposure at Hicks' favorite bank, Goldman Sachs, looks like. Those stacks of money represent $2T (each) in $100 bills which would amount to a tower of money 930 ft high. Oh, and there's 20 of them.
(http://demonocracy.info/infographics/usa/derivatives/images/demonocracy-derivatives-goldman_sachs.jpg)
Title: Re: Global Economics
Post by: Hicks on April 19, 2012, 04:00:10 PM
Hey Wall Street, kick your gambling habit and start investing in our country's future.

k thnx bai.
Title: Re: Global Economics
Post by: runawayjimbo on April 19, 2012, 04:05:41 PM
Hey Wall Street, kick your gambling habit and start investing in our country's future.

k thnx bai.

As long as they have the explicit backing of the Federal Reserve and the US Gov't, that will never happen. This is the inherent problem with bailouts: once you prove to the assholes they are untouchable they will continue exploiting you until you're left with nothing.
Title: Re: Global Economics
Post by: gah on April 19, 2012, 04:06:25 PM
Hey Wall Street, kick your gambling habit and start investing in our country's future. self in the nuts, get fucked, and die.

k thnx bai.

fyp.
Title: Re: Global Economics
Post by: Hicks on April 19, 2012, 05:11:27 PM
Hey Wall Street, kick your gambling habit and start investing in our country's future.

k thnx bai.

As long as they have the explicit backing of the Federal Reserve and the US Gov't, that will never happen. This is the inherent problem with bailouts: once you prove to the assholes they are untouchable they will continue exploiting you until you're left with nothing.

On that we can agree, start making these douchebags accountable for their shitty decisions regardless of the supposed economic fallout which may or may not happen.
Title: Re: Global Economics
Post by: VDB on April 19, 2012, 05:46:56 PM
If you thought you hated banks before, check this shit out. It's an infographic and corresponding commentary regarding the derivative exposure of the 9 largest banks, which combined equals $229 trillion or 3x the GDP of the world. In other words, we are so screwed.

http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html

Well that article was thoroughly depressing and scary. Like this excerpt:

Quote
Since there is literally no economist in the world that knows exactly how the derivative money flows or how the system works, while derivatives are traded in microseconds by computers, we really don't know what will trigger the crash, or when it will happen, but considering the global financial crisis this system is in for tough times, that will be catastrophic for the world financial system...

Now, this reminds me of this guy at my gym, a real pompous blowhard who's always eager to air his opinions all over the place whether you want to hear them or not. One of his favorite pastimes is blaming Obama for everything. You name it, he can tie it back to The Great Satan Obama. He believes that Obama (and all Democrats for that matter) is deliberately trying to devalue the dollar, destroy the world economy, and collapse the government. (Supposedly this is all so that Obama can hang on to power, which I guess could prove hard to do if you've collapsed the government.) Anyway, this guy sounds like he watches way too much Glenn Beck. Big fan of all those right-wing conspiracy theories, especially if they involve George Soros or Saul Alinksy.

So my point is, here we have a rather chilling description of how fucked up the financial system is, how it could possibly go down at any moment and take the entire world economy with it, and how it's not so much of a stretch to say that greedy bankers and corrupt/inept government officials would deserve a big old slice of the blame, and this guy at my gym will be convinced that it all happened because Obama deliberately orchestrated the complete ruin of civilization as we know it solely for the sake of his own personal socialist-authoritarian designs.
Title: Re: Global Economics
Post by: runawayjimbo on April 19, 2012, 08:08:15 PM
Hey Wall Street, kick your gambling habit and start investing in our country's future. 

k thnx bai.

As long as they have the explicit backing of the Federal Reserve and the US Gov't, that will never happen. This is the inherent problem with bailouts: once you prove to the assholes they are untouchable they will continue exploiting you until you're left with nothing.

On that we can agree, start making these douchebags accountable for their shitty decisions regardless of the supposed economic fallout which may or may not happen.

Yep. It's this moral hazard component of bailouts that is far more difficult to quantify but also far more dangerous to the very system that (albeit well intiontioned) people are trying to "save". BTW, this applies to the auto bailouts too (but I suspect we may part ways there :wink:).

Well that article was thoroughly depressing and scary.

 :hereitisyousentimentalbastard

Oh yeah, I meant to mention that. And if you think that's scary, don't go anywhere near this (somewhat technical) primer on shadow banking (http://www.zerohedge.com/article/gary-gorton-shadow-banking-system-run-and-interplay-shadow-and-traditional-banking).

The funniest part is that the banks justify these unfathomable derivative exposures by saying "Well we hedge virtually the entire position so our net exposure is closer to $0." How the hell do the regulators let them get away with this shit? (hint: because they work for the banks)

As for dude at the gym, he's the kind of moron that gives people like me a bad name. He bastardizes concepts that he has no clue about and then tries to spin them against his political opponents. The good news is that a tool like that will never understand things enough to actually have any influence over anyone else. He'll just go on in his sheltered little world convinced of his own righteousness trying to pin every problem in the world on somebody else. What a dick.

If I never hear Saul Alinsky's name again it'll be too soon.
Title: Re: Global Economics
Post by: Hicks on April 19, 2012, 08:24:29 PM
So my point is, here we have a rather chilling description of how fucked up the financial system is, how it could possibly go down at any moment and take the entire world economy with it, and how it's not so much of a stretch to say that greedy bankers and corrupt/inept government officials would deserve a big old slice of the blame, and this guy at my gym will be convinced that it all happened because Obama deliberately orchestrated the complete ruin of civilization as we know it solely for the sake of his own personal socialist-authoritarian designs.

It's guys like that almost make me wish that Obama will lose so when things really go in the shitter they'll have no one but themselves to blame.

But then I remember that they are so delusional that it will still be Obama's fault, or Clinton's for that matter.    :frustrated:

As for the auto bailouts at least some working class people in the factories got to keep their jobs, so yeah that makes it different for me.  Not to mention that at least they contribute to our GDP rather than making money off of basically nothing. 
Title: Re: Global Economics
Post by: runawayjimbo on April 20, 2012, 12:05:27 AM
As for the auto bailouts at least some working class people in the factories got to keep their jobs, so yeah that makes it different for me.  Not to mention that at least they contribute to our GDP rather than making money off of basically nothing.

No doubt it's a more difficult leap to make, but the principles are the same, right? A poorly managed company gets handed a wad of taxpayer cash to (temporarily) stave off bankruptcy and in the process is rewarded for their bad decisions. Meanwhile, competitors who didn't engage in such horrendous lapses in judgment/leadership are penalized for refusing to engage in the same self-destructive practices. And the shitty companies are validated that they don't have to worry about righting the ship because they know they will be thrown a lifeline the next time they are in trouble.

GM is clearly doing a better job than the bankers in giving the appearance that they give a shit, but how long will it be before they are in need of some more support? When/how do you cut them off? And as far as middle class goes, far more working people would have been affected in terms of jobs, retirement funds, etc. by a financial meltdown than if GM was allowed to fail. Add to that the fact that it was, IMO, such obvious pandering to the UAW to placate one of the most important factions of the Democratic base and it is nearly as enraging to me as the financial bailout. So, while I hear you that it's different (and I know many people who would agree with you), I think you're being a little inconsistent in wanting to nail the bankers to the wall while giving GM a pass.
Title: Re: Global Economics
Post by: runawayjimbo on May 05, 2012, 12:16:36 AM
A phenomenal look on why the Fed's indefinite zero interest rate policy is hampering, not aiding, the recovery. Selected highlights below but the whole thing, complete with an extended Simpsons allegory, really is worth a read.

http://www.huffingtonpost.com/david-einhorn/fed-interest-rates_b_1472509.html

Quote
The Fed's Jelly Donut Policy

A Jelly Donut is a yummy mid-afternoon energy boost.

Two Jelly Donuts are an indulgent breakfast.

Three Jelly Donuts may induce a tummy ache.

Six Jelly Donuts -- that's an eating disorder.

Twelve Jelly Donuts is fraternity pledge hazing.

My point is that you can have too much of a good thing and overdoses are destructive. Chairman Bernanke is presently force-feeding us what seems like the 36th Jelly Donut of easy money and wondering why it isn't giving us energy or making us feel better. Instead of a robust recovery, the economy continues to be sluggish. Last year, when asked why his measures weren't working, he suggested it was "bad luck."

I don't think luck has anything to do with it. The blame lies in his misunderstanding of human nature. The textbooks presume that easier money will always result in a stronger economy, but that's a bad assumption.

...

Everyone agrees that low interest rates are a good way to stimulate a stalled economy. The Fed takes this logic a step further. It believes that if low interest rates are good, then zero-interest rates must be even better. As a brief emergency measure, such drastic behavior is reasonable and can even be necessary. In 2008, Chairman Bernanke had near unanimous support for his decision to drop rates to near zero. At the peak of the crisis, it made sense. But that was four long years and many jelly donuts ago. In the 2012 economy, a zero rate policy not only adds no benefit, it's actually harmful.

...

Zero-rate policy makes traditional riskless investments, such as CDs and Money Markets, unattractive to savers. Rather than view this as an unfortunate consequence of policy, Chairman Bernanke sees this as a benefit. He subscribes to the philosophy that rising stock prices will contribute to a 'virtuous cycle' of economic growth. He's hoping that those approaching retirement, and even the retired, will abandon the idea of making safe returns, and put their savings into equities instead.

...


Some will argue that if the Fed raises rates, it will cause deflation. Just the word 'deflation' makes Chairman Bernanke break into a cold sweat and reach for the Jelly Donuts. Fear of deflation should depend on what, exactly, is deflating.

The sort of deflation that puts pressure on wages is a clear negative, as it leads to a lower standard of living. On the other hand, lower prices caused by scientific progress and higher efficiency are unambiguously positive.

Apple's newest iPhone has twice the memory, a better camera, and other small improvements and carries the same price as the prior version. Government statisticians see an improved product at the same price and count it as a price cut, or deflation.

There is no reason for the Fed to conduct monetary policy to offset advances that improve our standard of living, in particular when it results in driving up the price of something else, like oil.

Yet, while the Fed seems compelled to respond to innovation as if it were a bad thing, it throws up its hands when confronted with rising oil prices. Unfortunately, when the Fed sets policy with a goal of driving prices higher, it doesn't get to choose which prices are most affected.

...

The household sector balance sheet has a negative duration gap, meaning that it holds proportionately more short-term floating assets like bank deposits and money markets compared to its liabilities, which are disproportionately long-term fixed obligations including mortgages.

Raising rates would directly transmit income to families, enabling them to spend more freely and boost the economy -- a stimulus so to speak.

Unfortunately, it appears that Chairman Bernanke is more focused on financial institution balance sheets. While the Fed recently declared most of the largest banks to be healthy, and approved programs to reduce bank capital, continuing with zero rates several years into the recovery reveals a focus to support banks rather than households.

Zero rates allow the banks to carry non-performing and other questionable assets indefinitely. When the cost of money is nearly zero, dead beat borrowers can appear current by making nominal payments. When banks can finance their non-performers for free, they have little incentive to work them out. This lengthening of the work-out process supports banking profits and defers needed pain for some underwater borrowers. But, it also prevents the markets -- particularly the real estate market -- from clearing. This in turn delays the economic recovery and postpones job creation.

Income inequality remains a headline issue. Democrats argue for higher taxes for top earners, and increased transfer payments to those on the other end of the spectrum. Republicans remain opposed to any redistributive policies. Ending the Jelly Donut monetary policy would do more to alleviate income inequality than any of the widely debated changes in the tax code.

For the super wealthy, zero rates supported by a Bernanke put on the bond market encourage outsized income through leveraged speculation. For everyone else, zero rates reduce the standard of living because greater food and energy costs soak up income. Ironically, it is some Republicans that are beginning to question the Jelly Donut monetary policy, while Democrats generally support it. Democrats who sincerely care about income inequality should speak out against the Fed's policies.
Title: Re: Global Economics
Post by: VDB on May 05, 2012, 10:45:35 AM
Thanks for that fright and frustration to start my weekend Jimbo.

Does anyone out there actually have anything good to say about Ben Bernanke? And if not, how is this guy still allowed to do what he's doing?

If it's true that he cares more about banks than households, does Obama know about this? Does he agree with him? (Obama's public persona would suggest not, at least.) If not, is Obama just oblivious to what's going on? Has he been hoodwinked? Would a tycoon like Romney be any more sympathetic to "Main Street"? What the fuck is happening to our economy??
Title: Re: Global Economics
Post by: runawayjimbo on May 05, 2012, 10:56:14 PM
Thanks for that fright and frustration to start my weekend Jimbo.

Does anyone out there actually have anything good to say about Ben Bernanke? And if not, how is this guy still allowed to do what he's doing?

If it's true that he cares more about banks than households, does Obama know about this? Does he agree with him? (Obama's public persona would suggest not, at least.) If not, is Obama just oblivious to what's going on? Has he been hoodwinked? Would a tycoon like Romney be any more sympathetic to "Main Street"? What the fuck is happening to our economy??

Well, if you want to hear the other side, you can read this puff piece from the April edition of The Atlantic (http://www.theatlantic.com/magazine/archive/2012/04/the-villain/8901/?single_page=true). I wasn't able to make it through the entire 8,000+ word lovefest because it just regurgitates the points that Einhorn rebuts in the original article: Bernanke did what he had to to avoid the next depression, he has no other option but to continue the unprecedented intervention to keep us from falling off a cliff, anyone who questions the legitimacy of the Fed is a crackpot. It's a shame because I really liked Roger Lowenstein who wrote one of my favorite financial books, When Genius Failed about the collapse of the original "we're too smart for our own good" club, Long Term Capital Management. But, to answer your question, here's someone saying something good about him.

The point about caring more about banks isn't that it's an evil scheme for the benefit of the banks (although some would argue it's intentional), it's that keeping rates so low for so long (and promising to do so at least until 2014) ultimately benefits the banks even though it is ostensibly for the benefit of Main St. But when you look at the results, isn't it obvious who is benefitting from the easy money policies? Banks have been posting record profits. Bonuses are basically back to pre-crisis levels. The five largest banks are BIGGER now than they were before Lehman failed. And (this one's my favorite), there was a stretch of a couple quarters during '10-'11 where Goldman and JPMorgan made a trading profit every single day. Seriously, not one off day that the firms finished in the red no matter what the overall market was doing (which was mostly, but not always, going up). Meanwhile we have the longest sustained period of unemployment over 8% in history (a threshold the administration promised would not even be reached if the stimulus was passed, BTW). Wages are stagnant. Since 2009, people are more likely to give up looking for work than finding a job. And more of people's income is being eaten up by rising food and energy prices. So to me, it doesn't matter what the intentions or motivations are, when you look at the results, there is little question that the Fed's easy money policies are benefitting the banks (which really shouldn't come as that much of a surprise since the banks are the Fed's customers; Jamie Dimon sits on the NY Fed's board for fucks sake). Not understanding and focusing on this incestuous relationship was one of OWS' biggest failings, IMO.

And while the right hates Bernanke because he is working for a Democrat, they'd be extolling his genius if McCain had won and they were using the newly printed money to finance their wars in Iran. But it's the criticisms from the left from people like Krugman and Brad DeLong who are bitching that he should be even more accommodating with monetary policy that get me going. They simply have no other answer on how to respond to any downturn, mild or severe, but to reduce interest rates and print more money. Krugman is now actively calling for raising the Fed's inflation target from 2% to 4%, as if inflation is something policy makers can turn off like a faucet before it gets out of control. There is now some momentum building on the left for adding a third pillar to the Fed's mandate for nominal GDP targeting, which is just a blank check to print as much money as possible to make GDP hit a level that an unelected group of people deem acceptable. To Bernanke's credit he's stood up to these calls (Krugman and Bernanke, old Princeton buddies, actually have a mini-feud going on) but who knows for how long.

All the Republicans made a big show during the debates about how they'd fire Bernanke, but (shocker!) that was really just campaign rhetoric since I'm fairly certain the President can't fire the Fed Chairman. What they really meant is they wouldn't nominate him for a third term when his current one ends in January 2014. Clearly Romney wouldn't nominate someone more sympathetic to Main St. But the important point is that even if Obama wins and nominates someone new (which he most likely will, possibly at Bernanke's request), the person he nominates will take the exact same approach as Romney's nominee. Sure, Obama's guy will say different things ("we need to keep interest rates at zero for the foreseeable future because if we don't people will lose their homes"), but, as Einhorn points out, the outcomes are exactly the same. That's the most important thing to remember. No one would explicitly come out and say "Fuck you little guys, this one's for my homies at B-to-the-O-to-the-muthafuckin-A!" (well, maybe, Romney's guy would). But the results would be such that when you assume the Fed can solve all the world's economic ills by reducing interest rates (although they can't do that since the rate is 0%) or by expanding it's balance sheet (i.e., printing more money), you are inherently endorsing a policy that helps the people at the top at the expense of people who just want to make a decent and safe return because they don't have access to a trading desk of arrogant coked up dooshbags.

Anyway, the best thing to me is that words like Einhorn's are even making it into the mainstream and being published at places like HuffPo. If you take a look at the comments, you see there's still a long way to go (people just accuse him of being a right wing hack and shouting off the same defenses you would see in the Atlantic's article). But the fact that more people are beginning to question these policies gives my free market loving heart some hope that we could be closing out the chapter where the Fed is seen as the only path to prosperity and the only bulwark from economic collapse.

/rant

PS - this Atlantic cover makes me puke in my mouth:
(http://static5.businessinsider.com/image/4f608c2569bedd8e3700006a-900/atlantic-april-2012-cover-ben-bernanke.jpg)
Title: Re: Global Economics
Post by: VDB on May 06, 2012, 12:56:29 PM
Tell us how you really feel, Jimbo!

So yesterday, I'm out at this festival getting saucy and, newly armed with some Einhorn knowledge, I went on a mini-rant about the Fed to this friend of mine and her coworker who I'd not met before... they both kind of looked at me like "what is this idiot blathering about?" Good times.
Title: Re: Global Economics
Post by: runawayjimbo on May 08, 2012, 09:35:41 AM
So yesterday, I'm out at this festival getting saucy and, newly armed with some Einhorn knowledge, I went on a mini-rant about the Fed to this friend of mine and her coworker who I'd not met before... they both kind of looked at me like "what is this idiot blathering about?" Good times.

That's fucking awesome. And it gets to my point that word is (slowly) getting out. Even if they thought you were crazy, it's important that the message is heard and is gaining acceptance because of the obvious failures of "established" doctrine.
+k
Title: Re: Global Economics
Post by: Hicks on May 09, 2012, 12:42:23 PM
I'm fine with them raising interest rates. . .






















after I buy a house, k thnx bai.
Title: Re: Global Economics
Post by: runawayjimbo on May 09, 2012, 02:38:31 PM
I'm fine with them raising interest rates. . .


after I buy a house, k thnx bai.

Maybe no one person/group should have the awesome responsibility of dictating interest rates? Then you could always be assured that you would be getting the "right" rate.
Title: Re: Global Economics
Post by: PIE-GUY on May 09, 2012, 04:20:33 PM
I'm fine with them raising interest rates. . .






















after I buy a house, k thnx bai.

As a home-owner locked in at 4.0% for 30 years, I'll go ahead and say start raising rates any time!!
Title: Re: Global Economics
Post by: runawayjimbo on May 11, 2012, 11:35:16 AM
::insert Nelson Muntz "HA-HA" pic here::

http://www.bloomberg.com/news/2012-05-11/jpmorgan-loses-2-billion-as-mistakes-trounce-hedges.html

Quote
JPMorgan Loses $2 Billion as ‘Mistakes’ Trounce Hedges

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said the firm suffered a $2 billion trading loss after an “egregious” failure in a unit managing risks, jeopardizing Wall Street banks’ efforts to loosen a federal ban on bets with their own money.

The firm’s chief investment office, run by Ina Drew, 55, took flawed positions on synthetic credit securities that remain volatile and may cost an additional $1 billion this quarter or next, Dimon told analysts yesterday. Losses mounted as JPMorgan tried to mitigate transactions designed to hedge credit exposure.

“There were many errors, sloppiness and bad judgment,” Dimon said as the company’s stock fell in extended trading. “These were egregious mistakes, they were self-inflicted.”

The chief investment office was thrust into the debate over U.S. efforts to ban proprietary trading when Bloomberg News reported last month that the unit had taken bets so big that JPMorgan, the largest and most profitable U.S. bank, probably couldn’t unwind them without losing money or roiling financial markets. Dimon, 56, had transformed the unit in recent years to make bigger and riskier speculative trades with the bank’s money, five former employees said.

...

‘Bunch of Pundits’

Yesterday, he said the timing of the trading blunders “plays right into the hands of a bunch of pundits out there” who are pushing for a strict version of the proprietary trading ban named for former Federal Reserve Chairman Paul Volcker.

Given Dimon’s resistance to the ban and new regulations, “he’s got a lot of egg on his face right now,” said Craig Pirrong, a finance professor at the University of Houston. “Any chance they had of getting a relative loosening of Volcker rule, anything of that nature, that’s out the window.

The chief investment office’s push into risk-taking was led by Achilles Macris, 50, according to three former employees, Bloomberg News reported on April 13. He was hired in 2006 as its top executive in London and led an expansion into corporate and mortgage-debt investments with a mandate to generate profits for the New York-based bank, they said. Dimon closely supervised the transition from its previous focus on protecting JPMorgan from risks inherent in its banking business, such as interest-rate and currency movements, they said.

‘Talented People’

“I wouldn’t call it ‘more aggressive,’ I would call it ‘better,’” Dimon told analysts yesterday. “We added different types of people, talented people and stuff like that.” Until recently, they were careful and successful, he said.

“It’s classic Wall Street hubris, which we’ve seen so many times before,” said Simon Johnson, a former chief economist at the International Monetary Fund who now teaches at the Massachusetts Institute of Technology. “What’s particularly ironic here is that Jamie presents himself, and is believed by others to be, the king of risk management.

Bloomberg News first reported April 5 that London-based JPMorgan trader Bruno Iksil had amassed positions linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market.

...

Sharks to Blood

“When there’s blood in the water, the sharks are going to attack that animal,” said Peabody, who downgraded his recommendation on the stock in March to sector perform. “It could make it very difficult for them to unwind a trade.”


...

Credit Risks

Dimon declined on the call to discuss the specific transactions or people involved. Synthetic credit products are derivatives that generate gains and losses tied to credit performance without the owner buying or selling actual debt. JPMorgan used the instruments to hedge exposure on loans and other credit risks to corporations, banks and sovereign governments. The losses emerged after the firm tried to reduce that position and unwind the portfolio, Dimon said.

The bank said losses were partly offset by gains from the sales from its available-for-sale credit portfolio, resulting in a net loss for the firm’s corporate division, which includes the CIO, of about $800 million after taxes. Dimon said losses could widen or narrow in coming weeks and months, and that he can’t estimate potential costs.

...

“It’s a major event that confirms a lot of investors’ worst fears about bank risk,” said Frank Partnoy, a former derivatives trader who’s now a law and finance professor at the University of San Diego. Concern is “that at a large, supposedly sophisticated institution, even something called a ‘hedge’ can contain all kinds of hidden risks that the senior people don’t understand.”

...

Satyajit Das, the author of “Extreme Money: Masters of the Universe and the Cult of Risk,” compared the publicity around JPMorgan’s situation to losses that spiraled at hedge funds like Long-Term Capital Management in 1998 and Amaranth Advisors LLC in 2006.

“A $2 billion loss suggests a position of considerable size,” Das said. “I think you remember LTCM and a few other people like Amaranth that have had the exact same problem and have learned it’s a bit like hell -- easy to get into, not so easy to get out of.”
Title: Re: Global Economics
Post by: Guyute on May 30, 2012, 11:14:27 PM
$2 billion and what really amounted to $800 million isn't as big as it sounds.    When you think about them having $1.8 trillion in assets and a net income of around $12billion, they won't even take a loss for the year on this.    Even the private bank has $250 billion under management.    This is just a blip that shouldn't be hard to recover.   Just the size of the $ amount sounds large to most people.
Title: Re: Global Economics
Post by: runawayjimbo on May 31, 2012, 12:11:15 AM
$2 billion and what really amounted to $800 million isn't as big as it sounds.    When you think about them having $1.8 trillion in assets and a net income of around $12billion, they won't even take a loss for the year on this.    Even the private bank has $250 billion under management.    This is just a blip that shouldn't be hard to recover.   Just the size of the $ amount sounds large to most people.

But it's not the ultimate size of the loss that matters (which will likely be closer to $4B; they still haven't closed out the position as far as I know). It's the insanity that an institution with the expressed full faith and credit of the US gov't can put almost their entire tangible book value in the hands of their prop trading desk. Now it's coming out that the CIO and the investment bank were marking trades using different prices (http://www.bloomberg.com/news/2012-05-30/jpmorgan-cio-swaps-pricing-said-to-differ-from-investment-bank.html). And St. Jaime either (a) intentionally mischaracterized the CIO as a risk management function so he could get around proposed rules that he was simultaneously lobbying to ease or (b) actually believes the position was "hedging," in which he case he hasn't the slightest idea of what a hedge is supposed to do (I'm not sure which is scarier). Meanwhile, the bank has grown larger since the financial crisis and has up to $70 TRILLION, i.e., the entire world GDP, in notional derivative exposure (but don't worry, it all nets to almost nothing with other banks that also have trillions of dollars in notional).

This is the true cost of moral hazard that was instilled with the bailouts and codified in Dodd-Frank. The incentives are now for a bank to prove it is so big it qualifies for the money printing tree know as the federal gov't. They have no reason to de-risk their portfolios and there is so much malinvestment from years of direct manipulation and intervention from the Fed that arbitrage opportunities abound. So they will try to maximize profits in the short term and if they're wrong they'll maybe have to accept a bailout. But they know the worst thing that will happen to them is that they'll be thrown out with an enormous parting gift. They won't be prosecuted for falsifying financial statements or defrauding investors. There is zero consequence for their behavior so I see no reason to expect different results. And that's the bullshit in all this, not how much JPM's bonus pool is affected.
Title: Re: Global Economics
Post by: Guyute on May 31, 2012, 01:01:59 AM
My point was more that this was a blip rather than some large loss of capital.

I don't agree with your point that this is feeding a moral hazard and there is no consequence and they are relying on the bailout.   That assumes you know the decisions they are making and the reason behind them.  It also lumps a lot of people together rather than dealing with each as an individual.  I am not saying that is not what JPM is doing, I just don't like generalities which lump entities together.  There is obviously something fishy or just plain poor management which should not happen given what we have just gone through.

It is interesting to be on the other side of this issue, don't worry I'm not with JPM, an to see what really goes on behind the scenes and just how much of a gamble all of this truly is.  Just 1 big game of porker with everyone trying to calculate how to get the biggest pot.
Title: Re: Global Economics
Post by: runawayjimbo on May 31, 2012, 10:30:49 AM
I don't need to know their decisions or the reasons they make them to draw a conclusion about their strategy; their actions make it perfectly clear to me that they continue to operate with a complete disregard for anything other than maximizing short term profits.

Now, I don't think that an investment bank needs to have some altruistic purpose for being like promoting the greater good. In fact, I have argued quite often that allowing firms to innovate and take risks and make profit (even for profit's sake) can benefit society and not just the "greedy" bankers. What bothers me is that we are 4 yrs out from the worst financial crisis since the Depression - a crisis brought about by (among many other things) excessive risk taking, countless misrepresentations (of financial statements and product design), and a culture of zero accountability - and these assholes haven't learned a goddamned thing. And this is Jamie fucking Dimon we're talking about, the patron saint of financial risk management. If JPM could have such an absolute failure in controls, what are the chances that other, less "well managed" banks could suffer from a similar break down? I don't know the decisions that other banks are making either, but that doesn't stop me from believing that the chances are pretty friggin good.

I agree with you that in the scheme of JPM's B/S, a $2-4B loss is pretty immaterial and that they will likely still make billions in profit this qtr. The problem is when JPM's blip and BoA's blip and Citi's blip and MS and GS blips all start popping at the same time.

And I hear you on the impropriety of making broad generalizations. I fully understand that not all bankers are bad and not everyone who works at JPM is scheming to defraud investors and taxpayers. Shit, Jamie Dimon might not actually be a bad dude (he is a Democrat, Hicks). But I do think there is still a culture at most large financial firms to act first and ask questions later and I believe that mentality has only been made worse by the unlimited supply of funds these institutions have been given access to. Until there is any attempt to hold people accountable (the SEC just announced they would not recommend either criminal or civil charges against Lehman (http://www.bloomberg.com/news/2012-05-24/sec-staff-said-to-end-lehman-probe-without-recommending-action.html)) and until the banks have an incentive to protect their capital instead of allowing a single trader to risk their entire tangible book, I can only assume that the banking industry is (generally) either (a) actively operating on TBTF or (b) are stupid. I don't believe they are stupid.
Title: Re: Global Economics
Post by: runawayjimbo on June 01, 2012, 01:13:01 PM
Couple more months like this and "President Romney" won't sound like such a far fetched concept.

http://www.bloomberg.com/news/2012-06-01/employment-in-u-s-increased-69-000-in-may.html

Quote
U.S. Employers Add 69,000 Jobs, Fewer Than Forecast

The American jobs engine sputtered in May as employers added the fewest workers in a year and the unemployment rate rose, dealing a blow to President Barack Obama’s re-election prospects and raising the odds the Federal Reserve will step in to boost growth.

Payrolls climbed by 69,000 last month, less than the most- pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labor Department figures showed today in Washington. The median projection called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent.

“The picture is getting more worrisome,” Bruce Kasman, chief economist for JPMorgan Chase & Co. in New York, said on a conference call with clients. “The U.S. economy is going to be somewhat softer over the next couple of quarters.”

Stocks tumbled, erasing the 2012 advance in the Dow Jones Industrial Average, and Treasury yields fell as the data reinforced concern that global growth is heading for a third mid-year lull. Other reports today showed manufacturing output shrank in Europe and slowed in China, the world’s second-largest economy.

...
Title: Re: Global Economics
Post by: VDB on June 01, 2012, 01:41:36 PM
Though I think Obama was prescient and cunning in preemptively taking the jobs fight to congress those months back; this way he can deflect some criticism for poor jobs numbers by claiming that congress refuses to enact the solutions he offers.
Title: Re: Global Economics
Post by: runawayjimbo on June 01, 2012, 02:10:23 PM
Though I think Obama was prescient and cunning in preemptively taking the jobs fight to congress those months back; this way he can deflect some criticism for poor jobs numbers by claiming that congress refuses to enact the solutions he offers.

Of course, they can counter with "Your stimulus didn't work the first time (remember when you said unemployment would stay under 8% if we passed it? Lulz); why would we want to do that again?"
Title: Re: Global Economics
Post by: runawayjimbo on June 11, 2012, 09:50:45 PM
A really interesting take by Peter Schiff on why money as we know it is worthless.

http://lewrockwell.com/schiff/schiff166.html

Quote
What Is Money?

Today, we're accustomed to thinking of small greenish paper rectangles as the definition of money, and we think of the US government as the only source of money. To honestly discuss sound money, we need to realize where our current money customs came from.

At first, it was every man for himself. You ate or wore what you could pick or catch.

Barter was the first advance. If you had some extra meat, and your neighbor had an extra fur, you might make a direct exchange. If food, water, clothing, and simple tools are the only goods on the market, barter is fine – you can always find someone who has what you want and wants what you have.

But as soon as there's basic manufacturing and prosperity begins increasing, barter becomes inadequate. Say you're a hunter and you want a bed, but the only bedmaker in town is a vegetarian. What do you do then? You would have to figure out what the bedmaker wanted (maybe tofu), and then find someone who had tofu and wanted meat. If you couldn't find that person, you would have to find a fourth person (someone who wanted meat, and had the hats that the tofu maker wanted), or try to convince the vegetarian bedmaker to take the meat and trade it for something else.

Meat, however, spoils, and so the bedmaker would have to unload it pretty quickly. So, unable to get your hands on anything the bedmaker wants to consume, you trade your meat for some salt and approach the bedmaker.

"Look, I know you don't want salt, but think of all the people who do. They use it to preserve their meat and flavor their soup. And this stuff is nonperishable, so you can hold it as long as you want. And if, when the tofu dealer comes through town, he doesn't want salt, you can explain to him what I've explained to you – he can use it to buy something he wants."

If you and the bedmaker agree, you've just created money. Organically, more people in your community begin taking salt for payment, even if they have no intention to use it, because they know others will accept it.

But – and this is important – the value of salt money is not entirely dependent on other people accepting it as payment. If, for some reason, folks stopped taking salt as payment, you could use it as, well, salt.

Salt was a pretty good currency, especially before refrigeration, because it was widely demanded, divisible down to the grain, very portable, easy to weigh, and could easily be tested for counterfeit by tasting it. Romans used salt for money.

But just because salt served as money didn't mean there would be no other form of money in circulation. Tobacco leaves might be widely accepted as payment. So might gold or silver.

The Greatest Invention Ever?

The point is that money arises naturally in society, as a way of aiding in voluntary economic transactions. It was one of the greatest inventions ever. Money not only made it easier for people to buy what they wanted, it also made saving much more possible – you could accumulate excess money to spend at a later point.

While saving is frowned upon by the elites today, it's an essential element in economic progress. By making it easier for people to save, money did two crucial things. First, it inspired more industriousness: there was now incentive to work harder to earn more in a day than you could spend in a day. Second, savings enabled ambitious entrepreneurs to make big capital investments: labor-saving machines, warehouses, transportation.

If the saver didn't have any big plans in mind for his money, he could still make it productive by lending it out. Finance was nearly impossible without money. Sure, you could give your neighbor a pig this year in exchange for a pig and a chicken next year, but there would be a lot more opportunity for squabbling ("this pig isn't as healthy as the pig I gave you last year").

With a commodity money, where there is little or no deviation in quality, and using universal, objective measures, like weight, you can lend with the confidence that what you get back will be of the same quality as what you loaned out.

Money also made specialization more practical. If you were really good at one thing – manufacturing nails (to borrow Adam Smith's famous example) – you could make a living just by making nails. Without money, someone who spent his whole day making nails would have to find (a) someone with excess food who wanted nails, (b) someone with excess shelter who wanted nails, (c) someone with clothes to spare who also wanted nails at that moment, and so on.

Once money is introduced, the nail seller only needs to find (a) people with money who want nails, and (b) different people with everything the nail seller needs who want money. Facilitating specialization creates efficiencies, as folks get to divide up labor according to skill and interest. In countless ways, money improves society.

Competing Currencies

In the past, different types of commodity money competed. Salt had its advantages, but also disadvantages – you had to keep it dry, it was easy to spill. In Rome, rising sea levels made it much harder to get salt over the years.

Meanwhile, gold had a lot going for it. It's fairly easy to store. Like salt, it's easy to divide, but also easy to combine: you can make blocks, or coins of different weights or denominations, which can be standardized. It doesn't rust. It doesn't tarnish or undergo other unpleasant reactions with chemicals.

Like any money, gold has underlying value. Mostly, we think of its decorative value – across nearly every culture, gold is considered beautiful. Women love it, and pleasing women's fancies is universally considered a good thing. It has industrial uses due to its resistance to corrosion and how thin it can be hammered.

Gold is also rare enough to be valuable, but plentiful enough that it can be widely circulated. Its supply grows, but never very quickly.

No authority had to declare gold to be money. It arose as a good medium of exchange, and in many cases it won out in competition against other moneys. It didn't always win out to the exclusion of other types of money, but it was probably the most successful money ever, thanks not to some order from above, but thanks to gold's own attributes.

This is very important: money doesn't come from government; it comes from civil society.

Peter Schiff CEO of Euro Pacific Precious Metals, a gold and silver dealer selling reputable, well-known bullion coins and bars at competitive prices. He is author of The Little Book of Bull Moves in Bear Markets and Crash Proof: How to Profit from the Coming Economic Collapse. His latest book is The Real Crash: America's Coming Bankruptcy, How to Save Yourself and Your Country.
Title: Re: Global Economics
Post by: VDB on June 12, 2012, 10:35:20 PM
So I'm guessing this guy would like us to buy gold?
Title: Re: Global Economics
Post by: rowjimmy on June 13, 2012, 08:44:53 PM
So I'm guessing this guy would like us to buy gold?

Of course.
It would be good for his business.
Title: Re: Global Economics
Post by: runawayjimbo on June 15, 2012, 11:55:56 PM
So I'm guessing this guy would like us to buy gold?

Of course.
It would be good for his business.

Well, I did leave the disclaimer there for a reason. :wink:

I think the key point that most people miss about those who support sound money is that it's not about gold or salt or whatever is backing the money. It's that fiat money, money that derives its value solely because the gov't declares it to be so, is inherently worthless and that competition among many currencies would facilitate a more stable (not to mention more equitable) economy because people's perceptions of the value of goods and services they buy would be more aligned with the intrinsic value of them. Transactions would be inherently more voluntary (thus, more "fair") because the means of exchange is something that people themselves value not just because the gov't says it is so.
Title: Re: Global Economics
Post by: runawayjimbo on June 17, 2012, 10:27:23 PM
The pro-bailout party, New Democracy, wins the Greek re-election. Kinda interesting that Syriza, who opposed the bailout, would be likened to the Tea Party except they were the far left-wing party.

This was a big story, but the real fireworks will come at 2pm on Wednesday when Ben announces (or doesn't) QE3.

http://www.nytimes.com/2012/06/18/world/europe/greek-elections.html?pagewanted=all

Quote
Supporters of Bailout Claim Victory in Greek Election

ATHENS — Greek voters on Sunday gave a narrow victory in parliamentary elections to a party that had supported a bailout for the country’s failed economy. The vote was widely seen as a last chance for Greece to remain in the euro zone, and the results had an early rallying effect on world markets.

Greece’s choice was also welcomed by the finance ministers of the euro zone countries, who in a statement on Sunday night in Brussels said the outcome of the vote “should allow for the formation of a government that will carry the support of the electorate to bring Greece back on a path of sustainable growth.”

While the election afforded Greece a brief respite from a rapid downward spiral, it is not likely to prevent a showdown between the next government and the country’s so-called troika of foreign creditors — the European Commission, the European Central Bank and the International Monetary Fund — over the terms of a bailout agreement. Even the most pro-Europe of Greece’s political parties, the conservative New Democracy, which came in first, has said that a less austere agreement is crucial to a country where the unemployment rate is 22 percent and the prospect of social unrest is rising.

The euro zone ministers pledged to help Greece transform its economy and said continued fiscal and structural changes were the best way for Athens to cope with its economic challenges. “The Eurogroup reiterates its commitment to assist Greece in its adjustment effort in order to address the many challenges the economy is facing,” the statement said.

The ministers added that representatives of Greece’s creditors would return to Athens to discuss emergency loans and changes as soon as a government was in place.

Official projections showed New Democracy with 30 percent of the vote and 128 seats in the 300-seat Parliament. The Syriza party, which had surged on a wave of anti-austerity sentiment and spooked Europe with its talk of tearing up Greece’s loan agreement with its foreign creditors, was in second place, with 27 percent of the vote and 72 seats. Syriza officials had rejected calls for a coalition, ensuring its role as a vocal opposition bloc to whatever government emerges.

But unlike in the May 6 election, when New Democracy placed first but was unable to form a government, this time intense international pressure — and the fact that the Greek government is quickly running out of money — made it likely there would be a coalition with New Democracy’s longtime rival, the socialist Pasok party. Pasok placed third in the voting, with 12 percent of the vote and 33 seats. The extreme right Golden Dawn party got 18 seats.

...

In a victory statement on Sunday evening, the New Democracy leader, Antonis Samaras, called for the formation of a government of national unity aimed at keeping Greece in the euro zone and renegotiating the loan agreement. “There is no time for political games. The country must be governed,” he said, adding, “We will cooperate with our European partners to boost growth and tackle the torturous problem of unemployment.”

Alexis Tsipras, the 37-year-old leader of Syriza, conceded defeat. “We fought against blackmail to put an end to memorandum,” he said, referring to the loan agreement. “We’re proud of our fight.”

He added that Syriza would be “present in developments from the position of the main opposition party.”

Any new leader will face an uphill battle to inject confidence into a paralyzed Greek economy that depends heavily on the continued infusion of money from its only remaining lifeline, the European Central Bank. The Greek economy and a deficit-ridden government have lost most of their ability to raise new revenues or borrow money to continue operations.

But political analysts said no matter what government was formed, it would be weak and likely short-lived, lacking deep popular support and the broader confidence of Europe. And it was unlikely that the election results would persuade Greece’s European lenders to extend loans without economic reforms and drastic spending cuts.

Mr. Samaras “won a Pyrrhic victory,” said Harry Papasotiriou, a political-science professor at Panteion University in Athens. “New Democracy will try to renegotiate part of the memorandum agreement, but they won’t get far, and then they will have to implement within 100 days a very difficult program of reforms. And the unions of the public sector, supported by the radical left, will give him a hard time.”

The fact that Syriza did not place first may make European leaders more likely to grant some concessions to Greece, but they also have to consider the larger economies of Spain and Italy, which are also under intense pressure,

Asked what the election results change, Daniel Gros, the director of the Centre for European Policy Studies, which is based in Brussels, said, “Unfortunately nothing.” He said the government would most likely not be strong enough to enact the structural changes needed to turn around Greece’s uncompetitive economy.

...
Title: Re: Global Economics
Post by: VDB on July 18, 2012, 11:29:39 AM
100 mind-blowing facts about the economy (via (http://www.fool.com/investing/general/2012/07/17/100-mind-blowing-facts-about-the-economy-.aspx?source=ihpsitota0000001&lidx=2#.UAbSYOye7Rs))

In no particular order...

1. The unemployment rate for men is 8.4%. For married men, it's 4.9%.

2. The unemployment rate for college graduates is 3.9%. For high school dropouts, it's 13%.

3. According to The Wall Street Journal, in 2010, "for every 1% decrease in shareholder return, the average CEO was paid 0.02% more."

4. According to The New York Times: "From 2001 to 2011, state and local financing per student declined by 24 percent nationally."

5. Transparency International’s Corruption Perceptions Index ranks the United States as the 24th least-corrupt country in the world, just behind Qatar and ahead of Uruguay.

6. Since the recession began in 2007, the number of Americans receiving disability benefits has risen by 1.6 million, and the number of Americans employed has fallen by 4.8 million.

7. China's labor force grew by 145 million from 1990 to 2008. The entire U.S. labor force today is 156 million.

8. In 1998, oil industry executives told Congress that oil would average $10 a barrel for the following decade. In reality, it averaged $44.9 a barrel. Most people are terrible at predicting the future -- even (or especially) experts.

9. In 1999, one of the best years for the market ever, more than half of stocks in the S&P 500 declined. Two companies, Microsoft (Nasdaq: MSFT ) and Cisco, accounted for one-fifth of the index's return.

10. From 1929 to 1932, the total amount of money paid out in wages fell by 60%, according to historian Frederick Lewis Allen. By contrast, from 2007-2009, total American wages fell less than 5%. What we experienced in recent years was nothing close to the Great Depression.

11. A Honda Civic hybrid starts at $24,200 and gets 44 miles per gallon. A Civic with a normal gas engine starts at $16,000 and gets 39 MPG. If you drive 15,000 miles a year and gas averages $4 a gallon, it will take 47 years for the hybrid to justify its cost over the traditional model.

12. China's working-age population is expected to shrink by more than 200 million between now and 2050. The U.S.' is expected to rise by 47 million.

13. According to author Charles Murray, just 3% of American couples both had a college degree in 1960. By 2010, 25% did.

14. At the height of his success, Andrew Carnegie's annual income was 20,000 times the average American's wage, according to historian Frederick Lewis Allen. That's the equivalent of about $720 million in today's economy. In 2010, hedge fund manager John Paulson earned $4.9 billion, or nearly seven times what Carnegie earned in his prime. The key difference: Carnegie made steel to construct buildings. Paulson bought derivatives to bet against them.

15. If state, local, and federal employment followed the same trend from 2008 through today as it did from 2005-2008, the unemployment rate would be 6.5% instead of 8.2%.

16. In Russia, 0.00007% of the population (100 people) controls 20% of the wealth.

17. According to the International Energy Agency, global governments spent $409 billion on fossil- fuel-industry subsidies in 2010. That's nearly double the annual GDP of Ireland.

18. According to a 2007 Gallup poll, Americans give Hugo Chavez a 9% approval rating -- the exact same as they gave Congress last fall.

19. For the 2012-2013 fiscal year, California will spend $8.7 billion on prisons and $4.8 billion on its UC and state college systems.

20. Boeing (NYSE: BA ) accounts for almost 2% of all U.S. exports.

21. North Dakota has 0.7 unemployed people for each available job opening.

22. Because of its one-child policy, China's labor force will start to decline in 2016.

23. A rare 1-cent coin from 1793 recently sold for $1.38 million. That sounds amazing until you realize it's an annual return of less than 9%, or about the same as stocks have produced historically.

24. The U.S. makes up less than 5% of the world's population, but a third of the world's spending on pharmaceuticals, according to the IMS Institute for Healthcare.

25. Average monthly rent in New York City ($2,935) is about the same as the nationwide average monthly income ($3,052).

26. Since December 2007, male employment has fallen 4.7%. Female employment fell just about half that amount, 2.7%

27. In 1929 -- the golden year before the Great Depression-- 60% of American households earned a wage below what Brookings Institution economists classified as "sufficient to supply only basic necessities." Well over half the country lived in poverty, in other words. One-fifth of households earned half the poverty wage.

28. According to writer Dan Gross: "The United States produced about as much output in the third quarter of 2011 as it did in the third quarter of 2007, albeit with about 6 million fewer workers on the payroll."

29. According to the Department of Agriculture, one-third of the calories Americans consume come from restaurants, almost double what it was three decades ago.

30. Since 1994, stock market returns are flat if the three days before the Federal Reserve announces interest-rate policy are removed.

31. PCs outsold Macs by nearly 60-to-1 in 2004. Last year, the ratio was closer to 20-to-1, according to analyst Horace Dediu.

32. Apple (Nasdaq: AAPL ) earned more in net income last quarter than its entire market cap was in 2004.

33. If you earn minimum wage, you'll need to work 923 hours to pay for a year at an average public four-year college. In 1980, it took 254 hours.

34. According to a study by the Dallas Federal Reserve, foreign-born citizens made up 14% of the labor force in 2002, yet accounted for 51% of total jobs growth from 1996-2002.

35. Forty percent of kids raised in a family in the top income quintile stay there as adults, and 40% of those born into the lowest quintile remain there. Only 8% of those raised in the top quintile drop to the lowest quintile as adults, according to the Pew Economic Mobility Project.

36. According to a report by the Harvard Graduate School of Education, just over half of students who enroll in a four-year college receive a bachelor's degree within six years.

37. Federal government spending declined year over year in the third quarter of 2011 for the first time since 1955.

38. In 1914, Henry Ford made the unprecedented move of paying line workers $5 for an eight- hour shift -- double the going rate. Adjusted for inflation, that works out to around $13 an hour in today's dollars. By contrast, a New York Times article broke down an average auto worker's 2008 salary, including insurance and paid vacation, and came to $45 to $55 an hour.

39. Five of every six American families earn more than their respective parents did, according to the Pew Economic Mobility Project.

40. Federal Reserve economist Bhashkar Mazumder has shown that incomes among brothers are more correlated than height or weight.

41. According to David Wessel of The Wall Street Journal, "the share of insured workers with deductibles of $1,000 or more rose to 31% in 2011 from 18% in 2008."

42. A composite hedge fund index has returned 1.3% year to date as of July 11. The S&P 500 returned 8.3% during that time. People call the former "smart money."

43. Ten percent of Medicare recipients who received hospital care made up 64% of the program's hospital spending in 2009, according to The Wall Street Journal.

44. According to a Rutgers survey based on a nationwide sampling, only 51% of those who have graduated college since 2006 are now employed full time. Twenty percent are in graduate school. The rest...

45. As a percentage of GDP, government spending was higher in 1983 under President Ronald Reagan than it will be this fiscal year (23.5% vs. 23.3%, respectively), according to data by the Tax Policy Center.

46. More government jobs were eliminated on net in 2010 than in any other year since at least 1939. As a percentage of government workers, the decline was the largest since 1947.

47. According to Sheldon Jacobson of the University of Illinois, the added weight carried by vehicles due to obesity in America consumes an additional 938 million gallons of gasoline a year.

48. The median American family's net worth fell to $77,300 in 2010 from $126,400 in 2007, according to the Federal Reserve's Survey of Consumer Finance. That erased nearly two decades of accumulated wealth.

49. According to UCLA: "Only 3.1 percent of the world's children live in the United States, but U.S. families buy more than 40 percent of the toys consumed globally."

50. Delaware, a famous business haven, has more corporations than people -- 945,000 to 897,000, according to The New York Times. One office building in Wilmington is home to more than a quarter-million registered businesses.

51. A study of retired investors between 1999 and 2009 showed those who hired a stockbroker underperformed those managing their own money by 1.5% a year. "Fees accounted for only about half the gap," writes Jason Zweig of The Wall Street Journal.

52. According to Manpower's 2012 Talent Shortage Survey, 49% of U.S. businesses report difficulty filling available job openings.

53. According to U.S. News & World Report, the average law student graduates with more than $100,000 in student loans. According to the American Bar Association, just over half of those who graduated law school in 2011 have full-time jobs that require a law degree.

54. Researchers from the London School of Hygiene and Tropical Medicine estimate the world is overweight by a collective 17 million tons, or the equivalent of 226 million people weighing 150 pounds.

55. Only 52% of American families say they were able to save anything in 2010, according to the Federal Reserve's Survey of Consumer Finance.

56. Adjusted for inflation, the median average hourly wage was lower in 2011 than it was in 2001.

57. "In 2010, 6.0 percent of families reported that their spending usually exceeds their income,"
according to the Federal Reserve's Survey of Consumer Finance.

58. Five years ago, coal provided about half the nation's electricity. Today, it's about one-third. Natural gas' share during that time rose from 21% to 30%, according to the Energy Information Agency.

59. According to research by Demos, the average American couple will pay $155,000 in 401(k) fees over their careers. That reduces the average account size by about a third.

60. Since 1968, the U.S. population has increased from 200 million to 314 million, and federal government employees have declined from 2.9 million to 2.8 million.

61. According to the Boston Consulting Group, manufacturing wages, benefits and taxes are $22.30 an hour in America, compared with $2 an hour in China. But since American factory workers are more productive, China's effective labor costs are only 55% lower than Americans, and may drop to less than a third later this decade.

62. From 2002 to 2008, 12 congressional incumbents lost in primary elections. During that time, 13 members died in office. So the odds of losing a primary are lower than the odds of dying in office.

63. According to the Economist, "The average life expectancy of public companies shrank from 65 years in the 1920s to less than ten in the 1990s."

64. According to The New York Times: "In the last five years, the United States and Canada combined have become the fastest-growing sources of new oil supplies around the world, overtaking producers like Russia and Saudi Arabia."

65. As of June 2011, 32% of American homes were cellphone only, up from 17.5% in 2008, according to the National Center for Health Statistics.

66. Solar panel prices have plunged 82% since 2009, according to Bloomberg.

67. According to writer Tim Noah, average stock options granted to CEOs between 1992 and 2000
rose from $800,000 to $7 million, and average total compensation quadrupled.

68. According to analyst JW Mason: "In 2007, [nonfinancial corporate] earnings were $750 billion, dividends were $480 billion, and netstock repurchases were $790 billion." In other words, businesses paid shareholders nearly double what they earned.

69. Americans drove 85 billion fewer miles over the last 12 months than they did in 2008, according to the Department of Transportation.

70. Oil production at America's Eagle Ford was 787 barrels in 2004, 308,000 barrels in 2009, and 36.6 million barrels last year.

71. In 1989, the CEOs of the seven largest U.S. banks earned an average of 100 times what a typical household made. By 2007, more than 500 times.

72. In 1990, the three largest U.S. banks held 10% of the industry's assets. By 2008, the top three controlled 40% of the assets.

73. Clean water and sewers were voted "the greatest medical advance" since 1840 by readers of the British Journal of Medicine.

74. Americans will inherit $27 trillion over the next four decades, according to the Center on Wealth and Philanthropy at Boston College.

75. America is home to less than 5% of the world's population, but nearly a quarter of its prisoners.

76. According Dartmouth political scientist Dean Lacy, states that receive more federal government spending than they contribute in tax revenue tend to support Republican candidates, who typically vow to cut spending.

77. According to economists from the International Monetary Fund and analysis by Bloomberg, implicit government subsidies to large U.S. banks roughly equal their annual profits.

78. Ten years ago, people were stunned when overnight lending rates plunged to 2.5%. Today, that's the yield on 30-year bonds.

79. In May this year, the Dow fell 18 days and rose four days -- the worst combination since 1903. It never posted two consecutive gains, likely for the first time ever.

80. After new bank regulations go into effect, JPMorgan Chase (NYSE: JPM ) says 70% of customers with less than $100,000 in deposits or investments will be unprofitable for the bank.

81. According to John Cawley of Cornell and Chad Meyerhoefer of Lehigh University, obese people incur annual medical costs $2,741 higher than non-obese people, or almost $200 billion

82. According to economist Christina Romer, real GDP per capita in American grew 0.58% a year from 1800-1840; 1.44% from 1840-1880; 1.78% from 1880-1920; 1.68% from 1920-1960, and 1.82% from 1960-1991. We not only grew richer, but at an increasing rate.

83. In 2007, the Congressional Budget Office estimated federal tax receipts would be $3.4 trillion in 2012. In reality, they'll be around $2.5 trillion. Again, the future is unpredictable. Always.

84. Many talk about how much we import from China, but few discuss how much we sell to them. Exports from the U.S. to China were $19.2 billion in 2001, and $104 billion in 2011.

85. As recently as 1975, China wasn't one of American's top 10 trading partners. The world changes fast.

86. According to economists Thomas Piketty and Emmanuel Saez, 80% of all income growth from 1980 to 2005 went to the top 1% of wage earners.

87. From 1970 to 2012, median household income increased at one-tenth the rate it did from 1949-1979.

88. If you're fed up with unemployment caused by offshoring, you'll love this: According to a 2006 Government Accountability Organization study, the processing of unemployment insurance claims are partially offshored in several states.

89. Among high school seniors who scored more than 700 on the math and verbal portions of the SATs (a very high score), 87% have at least one parent with a college degree. Fifty-six percent have a parent with a graduate degree, according to author Charles Murray.

90. We tend to underestimate how powerful the agriculture boom has been in the last century. The 1952 book The Big Change describes life in America in the year 1900: "In most parts of the United States people were virtually without fresh fruit and green vegetables from late autumn to late spring."

91. The first American hotel to offer every guest a private bathroom didn't open until 1907.

92. According to biographer Ron Chernow, John D. Rockefeller's net worth peaked at $900 million in 1913. That equaled 2.3% of the U.S. economy. A comparable net worth today would be $340 billion, or eight times richer than Warren Buffett.

93. Some people don't see progress coming. In 1906, future President Woodrow Wilson said the automobile offered "a picture of the arrogance of wealth."

94. According to Morgan Stanley, 9% of all S&P trading volume is in Apple stock. One in 25 of all hedge funds has more than 10% of their fund in Apple.

95. Housing may be turning faster than you think. According to David Wessel, "The fraction of homes that are vacant is at its lowest level since 2006."

96. America is aging. Older workers (age 55+) are about to overtake younger workers (age 25-34) for the first time.

97. According to the Pew Research Center, every one of the eight largest EU nations ranks Germany as the hardest working -- except for Greece, which ranks itself as the hardest working. Five of the eight rank Greece as the least hardworking.

98. In 1900, the standard American workweek was 10 hours a day, six days week. Historian Frederick Lewis Allen notes in a 1952 essay: "If anybody had suggested a five-day week he would have been considered demented."

99. Facebook (Nasdaq: FB ) claims 100 billion friend connections have been made on its social network. That's about the same number of humans that have ever lived since 50,000 B.C., according to the Population Reference Bureau.
100. According to Bankrate.com, nearly half of Americans don't have enough savings to cover three months expenses. Worth noting: The average duration of unemployment is now 10 months.
Title: Re: Global Economics
Post by: slslbs on July 18, 2012, 12:50:45 PM
interesting.

lots of good potential soundbites in there
Title: Re: Global Economics
Post by: runawayjimbo on August 12, 2012, 10:20:33 PM
A great piece on a rarely discussed reason why the economy can't get it's shit together: too much debt weighs down everything. And the solution from today's most noted thinkers and policy makers? Don't allow the deleveraging to occur because it would cause short term pain; instead, lower the cost of debt more so people can take on more debt and start spending. Fucking brilliant.

http://reason.com/archives/2012/08/09/private-debt-is-crippling-the-economy

Quote
Private Debt Is Crippling the Economy
There won't be a recovery until credit card and household debt levels come down.


America’s economic pundits are not very creative. For the past several years, their gripes about economic growth have fallen into several staid categories: Monetary policy (“the Fed should do less” vs. “the Fed should do more”); the struggling housing market (“let housing bottom out” vs. “we must save housing”); income inequality (“it doesn’t matter” vs. “it does matter”); and the federal deficit (“lower taxes, pretend to lower spending a lot” vs. “raise taxes, pretend to lower spending a little”).

While most of these are legitimate causes of economic stagnation, there is another category that is having an outsized negative impact on growth: privately held debt.

The housing bubble should have been the warning needed to correct American thinking on debt, but the media’s positive spin on reports that borrowing is “coming back” suggest the lessons have not been learned.

The concept of debt has a troubled history. Historically when debts accumulate to a breaking point, the associated social unrest can lead to revolution and insurrection. This sociological trend gave rise to the Occupy Wall Street movement, particularly regarding debt from student loans.

However, debt isn’t inherently a bad thing. Innovation in the past three centuries has sped up societal evolution and technological breakthroughs at breakneck speed compared to the last 5,000 years, and much of this has been built on borrowing and lending.

Entrepreneurs with ideas often don’t have the capital to launch their business, and organizations with capital often don’t have the ideas to grow that money on their own. The beauty of finance is that we have developed tools to connect these two groups so that the entrepreneurs and capital investors have mutual benefit.

The biggest challenges of debt come when loans are taken out irresponsibly (like no income, no job mortgages), when money is borrowed for consumption rather than investment (like excessive credit card debt), and when lenders are guaranteed a return of their money by law even in the case of bankruptcy (like student loans that are not discharged in bankruptcy, one of the leading reasons for the Occupy complaints).   

Unfortunately, all of those examples of irresponsible borrowing and lending are from the past few decades in America. Since the mid-1990s, privately held debt has soared to record highs. Promises that housing prices would rise forever deluded households into taking out big mortgages. At the same time a bull market in equities and low interest rates for several years made the costs of borrowing appear inconsequential.

Many borrowers believed their debt was for a good investment (and therefore “good” debt), or weren't concerned about taking on a high mortgage or big credit card balances because perpetual economic growth would solve all the problems. But the bursting of the housing bubble left households with high levels of debt to deleverage or to take into bankruptcy court.

This part of the story is well known in towns across the country, but what is not widely recognized is that this debt level is also preventing the private sector from rebounding after the recession.

For those who believe that the problem in the economy is aggregate demand, high debt levels mean households are limited in what they can contribute to consumption. Even if stimulus was able to build a bridge through a recession, the historically high levels of debt have years of deleveraging ahead of them, keeping consumption off the table as a way of spurring recovery.

For those who believe that aggregate supply could boost growth, small businesses too are saddled with having to pay the bill for decades of fun since many are linked to individuals and households, and therefore don’t have the capacity to invest at levels needed for a robust recovery.

Washington has tried to solve this problem by encouraging more borrowing to get the music going again. Public support for more quantitative easing is primarily focused on pushing down interest rates so that businesses and households will borrow again. The Federal Reserve’s purchases of housing debt are about lowering mortgage prices so households will borrow again to buy homes.

This has led to the media buying into the idea that if only Americans could borrow again, aggregate demand and supply would bounce back. An article from Businessweek on Monday referenced recently increased bank lending as “supporting” economic growth.

This is totally backward thinking. Literally.

Recovery should not be defined as moving backward to the way the economy used to be structured. That was a bubble, built primarily on cheap credit and not long-term investments.

Moreover, much of the recent borrowing increases have been in revolving credit, primarily credit card debt, in order to meet basic needs. That is not the kind of consumption that will generate a recovery, especially since the costs of credit card debt are high and will weigh back down on household balance sheets in the months and years to come. A recovery built solely on expanding consumer credit and mortgage credit is simply another bubble and unstable economic foundation.

America had started the process of household balance sheet deleveraging after the bubble burst. Mortgage debt levels have fallen sharply. And consumer credit—all debt other than mortgage debt—was declining as well. But in the summer of 2010, as the post-recession faux-recovery created false hope that the good times were back and as savings decimated by the bursting bubble began to hit zero in the midst of a weak economy, consumer credit levels (led by credit card purchases) began to rise again.

The figure below shows that consumer credit fell 7.1 percent from June 2008 to June 2010, but since then has grown 6.9 percent to June 2012 (according to data released this month by the Fed).

(http://media.reason.com/mc/arandazzo/2012_08/Consumer_Credit_Debt_080912.jpg?h=394&w=505)

The rising aggregate consumer credit level means that household balance sheets are not shedding debt like they need to in order to contribute substantively to economic growth. Unless this changes, we’re pretty much screwed.

High household debt means less economic and labor mobility. Families cannot move to better employment if they are stuck in a house they cannot sell or have credit card bills crushing their credit score and making it harder to move. Private sector debt also means fewer family vacations, no upgrades on household appliances, and less investment.

Perhaps most damning is that households deep in debt mean downward pressure on entrepreneurial expansion. Many small businesses are family run, or are financed from household balance sheets. As long as entrepreneurism is stagnant, the U.S. economy is not going to see real growth.

Rather than public policy seeking to make borrowing cheaper, American leaders need to allow for household balance sheets to deleverage. That will mean short-term economic pain in exchange for a more robust economic growth period on the other side. And since the economy is in stall mode currently, the directly-associated pain will be muted anyway. Both President Barack Obama and his Republican opponent Mitt Romney are kidding themselves if they think they can inspire a recovery in the next several years without consumer credit levels falling and household debt levels coming down.
Title: Re: Global Economics
Post by: runawayjimbo on September 03, 2012, 12:08:32 AM
Why do central banks fail? Because you can't manage something that is undefinable.

This is easily one of the best things I've ever read.

http://azizonomics.com/2012/09/01/the-shape-of-40-years-of-inflation/

Quote
The Shape of 40 Years of Inflation

I have written before that there is no single rate of inflation, and that different individuals experience their own rate dependent on their own individual spending preferences. This — among other reasons — is why I find the notion of single uniform rate of inflation — as central banks attempt to influence via their price stability mandates — problematic.

While many claim that inflation is at historic lows, those who spend a large share of their income on necessities might disagree. Inflation for those who spend a large proportion of their income on things like medical services, food, transport, clothing and energy never really went away. And that was also true during the mid 2000s — while headline inflation levels remained low, these numbers masked significant increases in necessities; certainly never to the extent of the 1970s, but not as slight as the CPI rate — pushed downward by deflation in things like consumer electronics imports from Asia — suggested.

This biflationary (or polyflationary?) reality is totally ignored by a single CPI figure. To get a true comprehension of the shape of prices, we must look at a much broader set of data [see Chart 1].

Yet the low level of headline inflation has given central banks carte blanche to engage in quantitative easing, and various ultra-loose monetary policies like zero-interest rates — programs that tend to benefit the rich far more than anyone else. Certainly, lots of goods and services — especially things like foreign-made consumer goods and repossessed real estate — are deflating in price. But you can’t eat an iPad or a $1 burnt-out house in Detroit. Any serious discussion of monetary policy must not only consider the effects on creditors and debtors, but also the effects on those who spend a larger-than-average proportion of their income on necessities.

Another issue is that CPI leaves out both house prices as well as equity prices.
Below is CPI contrasted against equities and housing [see Chart 2].

It is clear from this record that a central bank focused upon a price index that fails to include important factors like stock prices and house prices can easily let a housing or stocks bubble get out of hand. CPI can — as happened in both the 1990s as well as the early 2000s — remain low, while huge gains are accrued in housing and stocks. Meanwhile, central bankers can use low CPI rates as an excuse to keep interest rates low — keeping the easy money flowing into stocks and housing, and accruing even larger gains. However, because such markets are driven by leverage instead of underlying productivity, eventually the ability to accrue new debt is wiped out by debt costs,  hope turns to panic, and the bubble bursts.

Both of the above examples indicate that the contemporary headline price index measures of inflation are deeply inadequate. Attempts to measure the rate of inflation that ignore data like house or stock prices will lead to flawed conclusions (rendering any such notions of “price stability” as meaningless), which has tended to lead to failed policy decisions such as those which led to the bust of 2008.

Chart 1

(http://azizonomics.files.wordpress.com/2012/09/cpivsnecessities3.png)
                                                      Chart 2

(http://azizonomics.files.wordpress.com/2012/09/cpivshousingvssp1.png)

Title: Re: Global Economics
Post by: runawayjimbo on September 12, 2012, 09:41:27 AM
A German court allows ratification of the 2nd Euro bailout fund but limits Germany's contribution to €190B (unless Germany legislatively allows further contributions). This seems like a punt in every sense of the word to me, as Europe continues to try to "calm" the markets while they figure out how to fund years of profligate spending through further insolvency.
 
But like I said a couple of months ago, the bigger decision will come at 2pm tomorrow with the Fed's announcement (or lack thereof) of MOAR QE.
 
http://www.bloomberg.com/news/2012-09-12/germany-can-ratify-esm-bailout-fund-with-conditions-court-rules.html
 
Quote
Germany Can Ratify ESM Fund With Conditions, Court Rules

Germany’s top constitutional court rejected efforts to block a permanent euro-area rescue fund, handing a victory to Chancellor Angela Merkel, who championed the 500 billion-euro ($646 billion) bailout.

The Federal Constitutional Court in Karlsruhe dismissed motions that sought to block the European Stability Mechanism, while ruling Germany’s 190 billion-euro contribution can’t be increased without legislative approval. The court said Germany can ratify the ESM if it includes binding caveats it won’t be forced to assume higher liabilities without its consent.

“We are an important step closer to our goal of stabilizing the euro,” German Economy Minister and Vice Chancellor Philipp Roesler told reporters in Berlin after the ruling today. “It has always been the goal of this government” to establish a “clear limit and to include parliament in all important decisions.”

The legal challenge delayed efforts by Merkel and other euro-area policy makers to stem the region’s debt crisis. In the neighboring Netherlands, Prime Minister Mark Rutte, a Merkel ally, is seeking re-election today. Stocks and the euro rose after the ruling. The single currency gained 0.5 percent to $1.2916 at 12:13 p.m. in London, while the Stoxx Europe 600 Index rose 0.8 percent.

Spain, Italy

Much of the effort to resolve the crisis hinges on the permanent ESM, which is designed to go into operation when the temporary European Financial Stability Facility is phased-out next year. The bailout fund would work in tandem with the European Central Bank’s bond buying to lower yields for states such as Spain and Italy.

Last week, ECB President Mario Draghi said the ECB was ready to buy unlimited quantities of short-dated government bonds of nations signed up to rescues from the ESM or EFSF. While rejecting a last-minute request for an emergency injunction over the Draghi announcement, the court said it would review a challenge to the ECB bond-buying programs during additional hearings in the case.

Today’s cases were filed after German lawmakers approved the ESM and the fiscal pact, a deficit-control treaty designed to impose budget discipline on European Union members. About 37,000 people signed up to endorse a constitutional complaint filed by political group “Mehr Demokratie e.V.” Other plaintiffs included opposition party Die Linke as well as Peter Gauweiler, a lawmaker from Merkel’s CSU Bavarian sister party.

Transferred Power

The challengers, which sought an injunction against the bailouts while the court reviewed the cases in detail, argued the crisis-fighting legislation transfers constitutionally mandated authority from German lawmakers and undermines democratic rule.

The court ruled the ESM treaty must be interpreted in a way that bans it from borrowing from the ECB, since this would violate EU law. The ESM also can’t be allowed to deposit bonds, including those acquired on the secondary market, with the ECB as collateral for loans, according to the judgment.

“Some uncertainties” about the limit on Germany’s contribution to the ESM and the scope of the German parliament’s say over the fund were reviewed as part of the ruling, Chief Justice Andreas Vosskuhle said when delivering the ruling. The judges also said Germany must make clear when ratifying that it won’t be bound by the treaty unless these conditions are met.

“The relevant factor for adherence to the principles of democracy is whether the Bundestag remains the place in which autonomous decisions on revenue and expenditure are made,” according to the unanimous judgment.

National Goals

Lawmakers must not allow Germany to shoulder an amount it can’t control or that would result in it being unable to determine its political agenda, the court said.

“No permanent mechanisms may be created under international treaties which are tantamount to accepting liability for decisions by the will of other states, above all if they entail consequences which are hard to calculate,” the eight judges wrote.

For today’s ruling, the court chose six cases. The judges only had to decide whether to halt ratification of the treaties while reviewing the suits more closely. The German judges heard oral arguments on July 10 from groups challenging the viability of the EU’s fiscal pact and the ESM, which both houses of parliament approved with two-thirds majorities on June 29.

Previously, the court cleared each step of European integration. Last year, the judges cleared the Greek bailout and the EFSF, while saying Germany may not agree to take over unlimited future liabilities incurred by other EU member states.
Title: Re: Global Economics
Post by: slslbs on September 12, 2012, 04:28:39 PM
I'm not in favor of continuing the practice of govt bailouts, but this is interesting

http://bottomline.nbcnews.com/_news/2012/09/11/13810129-aig-bailout-earns-the-government-another-27b?lite

Quote
By Associated Press
WASHINGTON -- The Treasury Department says it has received an additional $2.7 billion from the sale of American International Group stock. The sale comes one day after the government reported a profit on its four-year investment in the bailed-out financial firm.

Treasury says the banks underwriting the sale have exercised their option to buy 83.1 million additional AIG shares at $32.50. Together with Monday's $18 billion in stock sales, Treasury says the government has recovered a total $197.4 billion from the company. That's all of its original investment of $182.3 billion plus a return of $15.1 billion to taxpayers.
The sales cut the government's stake in AIG to less than 16 percent. At the height of the financial crisis, the government held a 53.4 percent stake in the company.
Title: Re: Global Economics
Post by: runawayjimbo on September 12, 2012, 10:34:11 PM
I'm not in favor of continuing the practice of govt bailouts, but this is interesting

http://bottomline.nbcnews.com/_news/2012/09/11/13810129-aig-bailout-earns-the-government-another-27b?lite

Quote
By Associated Press
WASHINGTON -- The Treasury Department says it has received an additional $2.7 billion from the sale of American International Group stock. The sale comes one day after the government reported a profit on its four-year investment in the bailed-out financial firm.

Treasury says the banks underwriting the sale have exercised their option to buy 83.1 million additional AIG shares at $32.50. Together with Monday's $18 billion in stock sales, Treasury says the government has recovered a total $197.4 billion from the company. That's all of its original investment of $182.3 billion plus a return of $15.1 billion to taxpayers.
The sales cut the government's stake in AIG to less than 16 percent. At the height of the financial crisis, the government held a 53.4 percent stake in the company.

The thing about the "profit" is it depends on how you count it. $85 of the $182 billion was the Fed's "investment" (and of course by "investment" I mean "money created out of thin air and given to a failed company for the sole purpose of paying back Goldman Sachs at 100¢ on the dollar"). If you only count the TARP portion of the bailout (since the Fed's stake came at no direct cost to Treasury), the break even price is around $43/share, so Treasury is still looking at a loss (currently $33.80). And of course as you point out, that doesn't even begin to capture the unseen costs borne from the nationalization of the financial system.

Still, it's unquestionably a good thing that the US gov't is no longer the majority shareholder of AIG.
Title: Re: Global Economics
Post by: VDB on September 13, 2012, 12:38:57 PM
Paging runawayjimbo ...  the Fed just announced QE3.
Title: Re: Global Economics
Post by: runawayjimbo on September 13, 2012, 12:43:01 PM
Paging runawayjimbo ...  the Fed just announced QE3.

Open ended MBS buying of $40B/month

Zero interst rate policy extended into 2015

Operation Twist extension

"Keep policy stimulative for considerable time"

Congrats on your re-election, Mr President
Title: Re: Global Economics
Post by: VDB on September 13, 2012, 05:02:25 PM
Congrats on your re-election, Mr President

So you calling nanners?
Title: Re: Global Economics
Post by: runawayjimbo on September 13, 2012, 09:03:49 PM
Congrats on your re-election, Mr President

So you calling nanners?

What that the Fed, a supposedly independent body would embark on an unlimited round of monetary easing in coordination with the central banks in Europe, England, and Japan just 2 months before an election in an attempt to influence the outcome? No, I don't think it's (necessarily) political; I think the banksters just had enough of all this whipsawing and speculation and finally got their way. But I do think Obama won his second term today.

Also, I was joking with tet the other day about how QE/Keynesian stimulus is about one thing: making people feel like they're richer so that they'll hopefully go out and spend more money. Now, I had believed this was the Fed's strategy for some time, but when Bernanke said the quote below in the press conference today I almost shit a goddamned brick. I never thought he would have the balls to come out and say "No, really, we're just trying to pull one over on all you sheep."

One more thing: a lot of talk from the Dems about not going back to the policies that got us into this mess, yet this kind of monetary policy is unquestionably more responsible than anything a dumbass politician could ever dream up.

Quote
QUESTION: My question is -- I want to go back to the  transmission mechanism, because speaking to people on the sidelines of the Jackson Hole conference, that seemed to be the concern about the remarks that you made, is that they could clearly see the effect on rates and they could see the effect on the stock market, but they couldn't see how that had helped the economy.
 
So I think there's a fear that over time this has been a policy that's helping Wall Street, but not doing that much for Main Street. So could you describe in some detail, how does it really different -- differ from trickle-down economics, where you just pump money into the banks and hope that they lend?
 
BERNANKE: Well, we are -- this is a Main Street policy, because what we're about here is trying to get jobs going. We're trying to create more employment. We're trying to meet our maximum employment mandate, so that's the objective. Our tools involve -- I mean, the tools we have involve affecting financial asset prices, and that's -- those are the tools of monetary policy.
 
There are a number of different channels -- mortgage rates, I mentioned other interest rates, corporate bond rates, but also the prices of various assets, like, for example, the prices of homes. To the extent that home prices begin to rise, consumers will feel wealthier, they'll feel more -- more disposed to spend. If house prices are rising, people may be more willing to buy homes because they think that they'll, you know, make a better return on that purchase. So house prices is one vehicle.
 
Stock prices -- many people own stocks directly or indirectly. The issue here is whether or not improving asset prices generally will make people more willing to spend.
 
One of the main concerns that firms have is there's not enough demand. There are not enough people coming and demanding their products. And if people feel that their financial situation is better because their 401(k) looks better or for whatever reason -- their house is worth more -- they're more willing to go out and spend, and that's going to provide the demand that firms need in order to be willing  to hire and to invest.
Title: Re: Global Economics
Post by: slslbs on October 25, 2012, 03:52:40 PM
From the NYT
Business Leaders Urge Deficit Deal Even With More Taxes

http://www.nytimes.com/2012/10/26/us/politics/business-leaders-urge-deficit-deal-even-with-more-taxes.html?_r=1&hp

Quote
The partisan rift over taxes has blocked a deficit reduction deal for two years and has spilled into the 2012 campaigns. Yet as Republicans and Democrats continue to brawl, business leaders are stepping up pressure on Washington to reach a deal, even if it calls for more revenue — including higher tax bills for themselves.
Related

Obama's Remark Aside, No Imminent Deal on 'Fiscal Cliff' (October 23, 2012)

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On Thursday morning, more than 80 executives of leading American corporations signed a statement calling for a debt reduction compromise that would “include comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit.” Several members of the group — which includes highly paid chief executives of financial and industrial corporations who will stand to pay more if President Obama succeeds in his effort to raise taxes on the wealthy — then helped ring the opening bell at the New York Stock Exchange to draw attention to their coalition, Fix the Debt. The group has raised $37 million for a nationwide education and lobbying effort.

Alarmed last year by Washington’s brinkmanship over raising the nation’s debt ceiling, these executives are now mobilizing to avert another such crisis at the turn of this year. After the election, they plan to press the two parties to compromise on a long-term substitute for the “fiscal cliff” — the immediate across-the-board spending cuts and tax increases that would hit nearly all Americans on Jan. 1, potentially adding substantial strain to the economy.

The business leaders’ goal contrasts with the campaign messages of both parties. While the executives seem to answer Mr. Obama’s call for “economic patriotism” by their tentative embrace of higher personal taxes, in interviews many of them have rejected his “pay your fair share” talk as class warfare, and a good number oppose his re-election.

But the business leaders’ position also contradicts the stand of Mitt Romney and other Republicans, who say that all tax increases are “job killers,” that the federal budget can be balanced with spending cuts alone and that any overhaul of the tax code should be “revenue neutral,” neither raising nor lowering the government’s total tax collection.

“To say that you can solve this without increases in taxes is ludicrous,” said David M. Cote, the chief executive of Honeywell, a Republican and a member of Mr. Obama’s Bowles-Simpson fiscal commission in 2010. He added: “Most wealthy people get it. They just don’t want to be put in the position, though, where you pay more in the taxes and the profligate spending continues.”

The Wall Street event on Thursday was just the latest, if the most high-profile, of near daily developments in recent weeks in which prominent figures have stepped out of corporate suites to back a deal that would generate more revenue and, by implication, raise taxes on themselves — if those moves are part of a bipartisan compromise that also reduces the long-term costs of the social programs, chiefly Medicare and Medicaid, that are the biggest factors driving projections of unsustainable federal debt.

“The people, including myself, who are willing to give more revenue don’t want to take on the moral hazard” of sending more money to Washington unless the White House and Congress “deal with the pressing need to cut the budget,” said Lloyd C. Blankfein, the chief executive of Goldman Sachs, who is a Democrat.

On Monday, Jamie Dimon of JPMorgan Chase hosted a Wall Street lunch for about 75 other chief executives to hear from budget experts, including Senator Mark Warner of Virginia, a Democrat, and Senator Lamar Alexander of Tennessee, a Republican, about what the business leaders could do to promote a bipartisan deal. How, for example, could they persuade Republicans to drop their antitax position?

Business leaders “think it’s just really important that we fix this,” said Mr. Dimon, an early backer of Mr. Obama whose relationship with him later frayed. “They’re not into whether the tax rate for higher-paid individuals is 35 percent or 39.6 percent.” He was referring first to the top Bush-era tax rate, which high-income taxpayers now pay, and then to the Clinton-era rate, which they face after Dec. 31 if the Bush tax cuts expire as scheduled, as Mr. Obama supports for high incomes and Republicans oppose.

On Tuesday, attendees at the national conference of the Securities Industry and Financial Markets Association met in New York with Mr. Warner and Senator Saxby Chambliss, Republican of Georgia. The two belong to the Senate’s “Gang of Eight,” which has struggled for nearly two years to draft a spending-and-taxes deal.

“I’m talking to everybody in this room,” Mr. Chambliss told his audience. “If you like the package that we ultimately come up with, then we haven’t done our job — because everybody is going to have to ultimately pay a price in this.”

Like others who have privately lobbied lawmakers, Mr. Blankfein and Mr. Cote reject suggestions that the philosophical chasm between the parties is unbridgeable.

“There are very conservative Republicans in the House who sit there and say, ‘I would agree to a revenue increase if there was significant entitlement reform,’ ” Mr. Cote said. “And then you’ll run into Democrats who say there won’t be any entitlement reform unless there’s revenue increases. For most of us in the business community, we say: ‘It sounds to us like you’ve got a deal. You just need to sit down and flesh out the details.’ ”

That, as the Simpson-Bowles commission can attest, is easier said than done.

The panel’s dissenters, who opposed the majority’s recommendations of a $4 trillion, 10-year package to reduce annual deficits with a combination of spending cuts and new revenue, included all three House Republican members. Among them were Representative Paul D. Ryan of Wisconsin, the House Budget Committee chairman, who is now Mr. Romney’s running mate.

After decades in which both parties have complained that business too often sits on the sidelines of budget battles, the Fix the Debt campaign could be among the most muscular interventions by corporate America in memory. More than 100 leaders have signed on, including more than 80 chief executives and some foundation heads.

The campaign’s inspiration is the dormant Simpson-Bowles framework, and the group’s formation is due in large measure to nonstop proselytizing of business leaders by the commission’s chairmen, Erskine Bowles, a businessman who was the White House chief of staff to President Bill Clinton, and Alan K. Simpson, a former Senate Republican leader from Wyoming.

“The business community gets it,” Mr. Bowles said. “They absolutely get that it has to be a balanced package with revenues and spending cuts both.”

According to the group’s president, Maya MacGuineas, the money raised is paying for a growing staff of about 35 at a Washington “war room,” chapters in up to 35 states and, ultimately, perhaps, television ads and other help for politicians — members of Congress or even the president — who need support in taking unpopular positions on tax increases or spending cuts. Some in the group say Republicans are especially fearful of drawing a Tea Party opponent in a party primary if they support higher taxes.

Mr. Dimon, speaking for JPMorgan Chase, said: “You know, we’re in 1,900 hamlets in America. I’d — we’d — be calling them all up, literally we’d start flying people in. It would be a whole different ballgame, I think, if we had something to support, and with the president supporting it.”
Title: Re: Global Economics
Post by: slslbs on November 01, 2012, 04:47:07 PM
http://www.nytimes.com/2012/11/02/business/questions-raised-on-withdrawal-of-congressional-research-services-report-on-tax-rates.html?hp

Quote
Nonpartisan Tax Report Withdrawn After G.O.P. Protest
By JONATHAN WEISMAN
Published: November 1, 2012
WASHINGTON — The Congressional Research Service has withdrawn an economic report that found no correlation between top tax rates and economic growth, a central tenet of conservative economy theory, after Senate Republicans raised concerns about the paper’s findings and wording.

Mitch McConnell, the Senate Republican leader, center, and other Republicans raised concerns with an economic report that questions a central tenet of conservative economic theory.
The decision, made in late September against the advice of the agency’s economic team leadership, drew almost no notice at the time. Senator Charles E. Schumer, Democrat of New York, cited the study a week and a half after it was withdrawn in a speech on tax policy at the National Press Club.

But it could actually draw new attention to the report, which questions the premise that lowering the top marginal tax rate stimulates economic growth and job creation.

“This has hues of a banana republic,” Mr. Schumer said. “They didn’t like a report, and instead of rebutting it, they had them take it down.”

Republicans did not say whether they had asked the research service, a nonpartisan arm of the Library of Congress, to take the report out of circulation, but they were clear that they protested its tone and findings.

Don Stewart, a spokesman for the Senate Republican leader, Mitch McConnell of Kentucky, said Mr. McConnell and other senators “raised concerns about the methodology and other flaws.” Mr. Stewart added that people outside of Congress had also criticized the study and that officials at the research service “decided, on their own, to pull the study pending further review.”

Senate Republican aides said they protested both the tone of the report and its findings. Aides to Mr. McConnell presented a bill of particulars to the research service that included objections to the use of the term “Bush tax cuts” and the report’s reference to “tax cuts for the rich,” which Republicans contended was politically freighted.

They also protested on economic grounds, saying that the author, Thomas L. Hungerford, was looking for a macroeconomic response to tax cuts within the first year of the policy change without sufficiently taking into account the time lag of economic policies. Further, they complained that his analysis did not take into account other policies affecting growth, such as the Federal Reserve’s decisions on interest rates.

“There were a lot of problems with the report from a real, legitimate economic analysis perspective,” said Antonia Ferrier, a spokeswoman for the Senate Finance Committee’s Republicans. “We relayed them to C.R.S. It was a good discussion. We have a good, constructive relationship with them. Then it was pulled.”

The pressure applied to the research service comes amid a broader Republican effort to raise questions about research and statistics that were once trusted as nonpartisan and apolitical.

The Bureau of Labor Statistics on Friday will release unemployment figures for October, a month after some conservatives denounced its last report as politically tinged to abet President Obama’s re-election. When the bureau suggested its October report might be delayed by Hurricane Sandy, some conservatives immediately suggested politics were at play.

Republicans have also tried to discredit the private Tax Policy Center ever since the research organization declared that Mitt Romney’s proposal to cut tax rates by 20 percent while protecting the middle class and not increasing the deficit was mathematically impossible. For years, conservatives have pressed the nonpartisan Congressional Budget Office to factor in robust economic growth when it is asked to calculate that cost of tax cuts to the federal budget.

Congressional aides and outside economists said they were not aware of previous efforts to discredit a study from the research service.

“When their math doesn’t add up, Republicans claim that their vague version of economic growth will somehow magically make up the difference. And when that is refuted, they’re left with nothing more to lean on than charges of bias against nonpartisan experts,” said Representative Sander Levin of Michigan, the ranking Democrat on the House Ways and Means Committee.

Jared Bernstein, a former economist for Vice President Joseph R. Biden Jr., conceded that “tax cuts for the rich” was “not exactly academic prose,” but he said the analysis did examine policy time lags and controlled for several outside factors, including monetary policy.

“This sounds to me like a complete political hit job and another example of people who don’t like the results and try to use backdoor ways to suppress them,” he said. “I’ve never seen anything like this, and frankly, it makes me worried.”

Janine D’Addario, a spokeswoman for the Congressional Research Service, would not comment on internal deliberations over the decision. She confirmed that the report was no longer in official circulation.

A person with knowledge of the deliberations, who requested anonymity, said the Sept. 28 decision to withdraw the report was made against the advice of the research service’s economics division, and that Mr. Hungerford stood by its findings.

The report received wide notice from media outlets and liberals and conservative policy analysts when it was released on Sept. 14. It examined the historical fluctuations of the top income tax rates and the rates on capital gains since World War II, and concluded that those fluctuations did not appear to affect the nation’s economic growth.

“The reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie,” the report said. “However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.”

The Congressional Research Service does such reports at the request of lawmakers, and the research is considered private. Although the reports are posted on the service’s Web site, they are available only to members and staff. Their public release is subject to lawmakers’ discretion.

But the Hungerford study was bound to be widely circulated. It emerged in the final months of a presidential campaign in which tax policy has been a central focus. Mitt Romney, the Republican nominee, strongly maintains that any increase in the top tax rates on income and capital gains would slow economic growth and crush the job market’s tentative recovery.

President Obama has promised to allow cuts on the top two income tax rates to expire in January, lifting the rates from 33 and 35 percent, their level during most of George W. Bush’s presidency, to 36 percent and 39.6 percent, where they were during most of the Clinton administration. Mr. Obama maintains the increases would not hurt the economy and are the fairest way to reduce the deficit.

Mr. Hungerford, a specialist in public finance who earned his economic doctorate from the University of Michigan, has contributed at least $5,000 this election cycle to a combination of Mr. Obama’s campaign, the Democratic National Committee, the Democratic Senatorial Campaign Committee and the Democratic Congressional Campaign Committee.
Title: Re: Global Economics
Post by: twatts on November 01, 2012, 04:59:59 PM
http://www.nytimes.com/2012/11/02/business/questions-raised-on-withdrawal-of-congressional-research-services-report-on-tax-rates.html?hp


Saw that this afternoon...

http://www.huffingtonpost.com/2012/11/01/congressional-research-service_n_2059156.html
Title: Re: Global Economics
Post by: runawayjimbo on November 02, 2012, 07:35:05 PM
I don't always rarely agree with Matt Yglesias, but here he shows that he does in fact understand the importance of price signals (it's the incentives, stupid). But don't take his word for it, ask the people in NY/NJ waiting 3 hrs in line for gas.

http://www.slate.com/articles/business/moneybox/2012/10/sandy_price_gouging_anti_gouging_laws_make_natural_disasters_worse.html

Quote
The Case for Price Gouging
Trying to prevent merchants from hiking prices during disasters is futile and counterproductive.

Even in these polarized times, there are some things politicians of both parties can agree. Price gouging, for example, is wrong. New York Attorney General Eric Scheiderman, a Democrat, wants you to know it. But this isn’t just for soft-hearted liberals. New Jersey’s notoriously tough conservative governor, Chris Christie, also put out a weekend press release warning that “price gouging during a state of emergency is illegal” and that complaints would be investigated by the attorney general. Specifically, Garden State merchants are barred from raising prices more than 10 percent over their normal level during emergency conditions (New York’s anti-gouging law sets a less precise definition, barring “unconscionably extreme” increases).

The bipartisan indignation is heartening, but there’s one problem. These laws are hideously misguided. Stopping price hikes during disasters may sound like a way to help people, but all it does is exacerbate shortages and complicate preparedness.

The basic imperative to allocate goods efficiently doesn’t vanish in a storm or other crisis. If anything, it becomes more important. And price controls in an emergency have the same results as they do any other time:  They lead to shortages and overconsumption. Letting merchants raise prices if they think customers will be willing to pay more isn’t a concession to greed. Rather, it creates much-needed incentives for people to think harder about what they really need and appropriately rewards vendors who manage their inventories well.

Consider the case of poor Thakur Gas of Branchville, N.J., which was hit with a $50,000 fine in late September for price gouging charges arising out of Tropical Storm Irene. Christie specifically cited the case over the weekend as a cautionary tale of what awaits New Jersey retailers who try to adjust prices to shifting supply and demand conditions. Thakur’s crime, according to court papers, was raising the prices 17 percent when the storm hit, causing the store’s gross margins to spike.

This seems like a straightforward violation of New Jersey law, but what Thakur did also make perfect business sense. If there’s elevated demand for your product, you try to sell more of it. But if you can’t sell more volume because supplies have been disrupted by a storm, you raise prices. Customers aren’t going to like it (and the need to maintain good will with your customers should be a factor in any business’s decision-making) but they’re also not going to like it if you run out of gasoline by 2 p.m. because it has all been bought up by earlier, stockpiling drivers.

What Branchville, N.J., drivers ought to fear isn’t a few days of high gasoline prices, it’s the risk that station owners might not bother to open the station at all. For customers to suffer from a gasoline shortage even while gasoline sat idle in the storage tanks of local businesses would be absurd. If higher operating margins are what it takes to tempt people to brave difficult driving conditions for the sake of opening the store on a day when customers are likely to be scarce, that’s a small price to pay.

Indeed, many of the problems associated with weather emergencies are precisely caused by the fact that we can’t count on shops to “gouge” their customers. I live in a neighborhood with buried power lines in a building that contains a supermarket on the ground floor. But I nonetheless found myself stuck in line Sunday evening at the Safeway stockpiling emergency supplies just in case something went badly wrong and knocked power out throughout the city. The issue wasn’t that I wouldn’t be able to get to the store in a worst-case scenario, as that I was afraid other people would already have bought up all the stuff. And indeed, by the time I made it, the shelves had been largely denuded of essentials such as bottled water, canned soup, batteries, and Diet Coke. Greater flexibility to raise prices would not only tend to curb overconsumption directly by encouraging people to buy less, it would inspire confidence that shortages wouldn’t arise, reducing the tendency toward panicky preemptive hoarding.

Last but by no means least, more price gouging would greatly improve inventory management. There is a large class of goods—flashlights, snow shovels, sand bags—for which demand is highly irregular. Maintaining large inventories of these items is, on most days, a costly misuse of storage space. If retailers can earn windfall profits when demand for them spikes, that creates a situation in which it makes financial sense to keep them on hand. Trying to curtail price gouging does the reverse.

None of which is to say that people should be greedy all the time. Disasters really are times when people pull together and we see large and small acts of kindness that rightly inspire us. But consider that declining to raise prices in the face of spiking demand and inelastic supply is a very odd form of charity: It doesn’t create any new resources, just allocates them arbitrarily to whoever shows up first. If you feel bad about the idea of earning windfall profits off the misfortunes of others, then donate the money to charity. If that seems too impersonal, give your employees a bonus for showing up under difficult circumstances. But storm or no storm, the best practice is to try to set prices that balance supply with demand. State governments shouldn’t be trying to stop you.
Title: Re: Global Economics
Post by: runawayjimbo on December 12, 2012, 08:28:51 AM
Happy QE4 Day!!!

No go refi your house and go out and stimulate the economy. To do otherwise is downright un-Amurican.
Title: Re: Global Economics
Post by: runawayjimbo on January 12, 2013, 10:11:54 PM
Thank fucking Jeebus. Every time I heard "trillion dollar coin" I died a little.

http://www.huffingtonpost.com/2013/01/12/platinum-coin-dismissed_n_2464170.html?1358025670

Quote
Platinum Coin Dismissed: White House Ratchets Up Pressure On GOP To Deal With Debt Ceiling

WASHINGTON -- In the wake of news that both the Treasury Department and the Federal Reserve rejected the minting of a trillion dollar coin as a solution to help raise the debt ceiling, the White House issued the following statement to The Huffington Post.

"There are only two options to deal with the debt limit: Congress can pay its bills or they can fail to act and put the nation into default," said Press Secretary Jay Carney. "When Congressional Republicans played politics with this issue last time putting us at the edge of default, it was a blow to our economic recovery, causing our nation to be downgraded. The President and the American people won't tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy. Congress needs to do its job."

If there were any lingering doubts about how the Obama administration will handle the debt-ceiling issue, Saturday's pronouncements put them to rest. Moments before Carney offered his statement, Treasury spokesman Anthony Coley offered one of his own, declaring that "neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit."

And so, there will be no coin minted to assist Treasury with its efforts to help the country meet its financial obligations. The politics of the debt ceiling standoff are now a bit simpler.
it won't negotiate over raising the debt ceiling. On the other hand congressional Republicans have threatened to default unless they receive a significant amount of spending cuts or entitlement reforms first. There are no outs for either side. And while that makes the showdown far riskier, the administration also thinks it helps its hand in negotiations.

"This now puts all the pressure back where we believe it belongs: on the Republicans," a senior administration official told the Huffington Post. "There are no magic coins. There is no way to get out of this. We feel fine about the politics of it. We think we are in a stronger position if Republicans realize there is no out."
Title: Re: Global Economics
Post by: twatts on January 13, 2013, 12:41:07 AM
Thank fucking Jeebus. Every time I heard "trillion dollar coin" I died a little.

I want a Trillion Dollar Coin...  Someone one EBAY will make one out of scrap steel and sell it for $2 per and get rich...  watch...

Terry
Title: Re: Global Economics
Post by: mbw on January 13, 2013, 01:00:53 AM
I don't always rarely agree with Matt Yglesias, but here he shows that he does in fact understand the importance of price signals (it's the incentives, stupid). But don't take his word for it, ask the people in NY/NJ waiting 3 hrs in line for gas.

http://www.slate.com/articles/business/moneybox/2012/10/sandy_price_gouging_anti_gouging_laws_make_natural_disasters_worse.html

Quote
The Case for Price Gouging
Trying to prevent merchants from hiking prices during disasters is futile and counterproductive.

Even in these polarized times, there are some things politicians of both parties can agree. Price gouging, for example, is wrong. New York Attorney General Eric Scheiderman, a Democrat, wants you to know it. But this isn’t just for soft-hearted liberals. New Jersey’s notoriously tough conservative governor, Chris Christie, also put out a weekend press release warning that “price gouging during a state of emergency is illegal” and that complaints would be investigated by the attorney general. Specifically, Garden State merchants are barred from raising prices more than 10 percent over their normal level during emergency conditions (New York’s anti-gouging law sets a less precise definition, barring “unconscionably extreme” increases).

The bipartisan indignation is heartening, but there’s one problem. These laws are hideously misguided. Stopping price hikes during disasters may sound like a way to help people, but all it does is exacerbate shortages and complicate preparedness.

The basic imperative to allocate goods efficiently doesn’t vanish in a storm or other crisis. If anything, it becomes more important. And price controls in an emergency have the same results as they do any other time:  They lead to shortages and overconsumption. Letting merchants raise prices if they think customers will be willing to pay more isn’t a concession to greed. Rather, it creates much-needed incentives for people to think harder about what they really need and appropriately rewards vendors who manage their inventories well.

Consider the case of poor Thakur Gas of Branchville, N.J., which was hit with a $50,000 fine in late September for price gouging charges arising out of Tropical Storm Irene. Christie specifically cited the case over the weekend as a cautionary tale of what awaits New Jersey retailers who try to adjust prices to shifting supply and demand conditions. Thakur’s crime, according to court papers, was raising the prices 17 percent when the storm hit, causing the store’s gross margins to spike.

This seems like a straightforward violation of New Jersey law, but what Thakur did also make perfect business sense. If there’s elevated demand for your product, you try to sell more of it. But if you can’t sell more volume because supplies have been disrupted by a storm, you raise prices. Customers aren’t going to like it (and the need to maintain good will with your customers should be a factor in any business’s decision-making) but they’re also not going to like it if you run out of gasoline by 2 p.m. because it has all been bought up by earlier, stockpiling drivers.

What Branchville, N.J., drivers ought to fear isn’t a few days of high gasoline prices, it’s the risk that station owners might not bother to open the station at all. For customers to suffer from a gasoline shortage even while gasoline sat idle in the storage tanks of local businesses would be absurd. If higher operating margins are what it takes to tempt people to brave difficult driving conditions for the sake of opening the store on a day when customers are likely to be scarce, that’s a small price to pay.

Indeed, many of the problems associated with weather emergencies are precisely caused by the fact that we can’t count on shops to “gouge” their customers. I live in a neighborhood with buried power lines in a building that contains a supermarket on the ground floor. But I nonetheless found myself stuck in line Sunday evening at the Safeway stockpiling emergency supplies just in case something went badly wrong and knocked power out throughout the city. The issue wasn’t that I wouldn’t be able to get to the store in a worst-case scenario, as that I was afraid other people would already have bought up all the stuff. And indeed, by the time I made it, the shelves had been largely denuded of essentials such as bottled water, canned soup, batteries, and Diet Coke. Greater flexibility to raise prices would not only tend to curb overconsumption directly by encouraging people to buy less, it would inspire confidence that shortages wouldn’t arise, reducing the tendency toward panicky preemptive hoarding.

Last but by no means least, more price gouging would greatly improve inventory management. There is a large class of goods—flashlights, snow shovels, sand bags—for which demand is highly irregular. Maintaining large inventories of these items is, on most days, a costly misuse of storage space. If retailers can earn windfall profits when demand for them spikes, that creates a situation in which it makes financial sense to keep them on hand. Trying to curtail price gouging does the reverse.

None of which is to say that people should be greedy all the time. Disasters really are times when people pull together and we see large and small acts of kindness that rightly inspire us. But consider that declining to raise prices in the face of spiking demand and inelastic supply is a very odd form of charity: It doesn’t create any new resources, just allocates them arbitrarily to whoever shows up first. If you feel bad about the idea of earning windfall profits off the misfortunes of others, then donate the money to charity. If that seems too impersonal, give your employees a bonus for showing up under difficult circumstances. But storm or no storm, the best practice is to try to set prices that balance supply with demand. State governments shouldn’t be trying to stop you.

 :shakehead:

no one profits from other people's misery.
Title: Re: Global Economics
Post by: runawayjimbo on January 13, 2013, 10:19:16 PM
We agree, MBW: charging people $4/gal after making them wait in line for 4 hrs is definitely profiting off their misery.
Title: Re: Global Economics
Post by: runawayjimbo on January 23, 2013, 09:43:12 PM
A day after being exposed as the fraudulent bankster shill that he is (http://www.pbs.org/wgbh/pages/frontline/untouchables/), Assistant AG Lanny Breuer announces he is stepping down at DoJ. He actually admitted, on camera, that he was fearful of prosecuting bank execs because of the potential "ripple" effects on the economy instead of actually, you know, pursuing justice. This has to be up there as one of Frontline's crowning achievements.

Gee, I wonder where he'll end up?

http://www.washingtonpost.com/business/economy/doj-criminal-division-chief-stepping-down/2013/01/23/e4331e32-64e0-11e2-b84d-21c7b65985ee_story.html

Quote
Lanny Breuer, Justice Department criminal division chief, is stepping down

Lanny A. Breuer is leaving the Justice Department after leading the agency’s efforts to clamp down on public corruption and financial fraud at the nation’s largest banks, according to several people familiar with the matter.

As one of the longest-serving heads of the criminal division, Breuer’s tenure has been filled with controversy and high-profile prosecutions. He was admonished for his role in the agency’s botched attempt to infiltrate weapon-smuggling rings in the operation dubbed Fast and Furious. And he has been accused of being soft on Wall Street for failing to throw senior bank executives behind bars for their role in the financial crisis.

Yet Breuer is widely credited with aggressively going after white-collar crime in the aftermath of the crisis. He also stepped up the division’s involvement in money laundering cases, launching a series of criminal investigations that have resulted in multimillion-dollar settlements.

It is not clear when Breuer intends to leave, nor what he plans to do once he departs, but it is certain that the prosecutor’s days in office are winding down, according to people who were not authorized to speak publicly about the matter.

Officials at the Justice Department, including Breuer, declined to comment for this article.

When Breuer was confirmed as assistant attorney general for the criminal division in April 2009, the agency was tainted by allegations of political interference in prosecutions and unprofessional conduct during the George W. Bush administration. The department continues to be mired in controversy stemming from the Bush years.

During Senate hearings in 2011, Breuer admitted that he failed to alert other Justice Department officials that federal agents had allowed guns to illegally flow into Mexico and onto U.S. streets between 2006 and 2007. The practice, known as “gun walking,” was also a key part of the Obama administration’s Phoenix gun trafficking operation, Fast and Furious.

The operation came under fire when many of the weapons later turned up at crime scenes in Mexico and the United States, including two where a U.S. Border Patrol agent was killed.

Several officials at the Justice Department resigned in connection with the operation, including Jason Weinstein, a deputy assistant attorney general in the criminal division. Breuer later apologized for his inaction, when the tactics first came to his attention. Sen. Charles E. Grassely (R-Iowa) called for his resignation, but Attorney General Eric H. Holder Jr. stood behind Breuer.

A former prosecutor in the Manhattan district attorney’s office, Breuer came to the Justice Department well versed in white-collar crime. He has been a driving force behind the prosecution of banks involved in rigging the global interest rate known as Libor. His efforts helped produce a $1.5 billion settlement with UBS AG and led to criminal indictments against two of the bank’s former traders in December.

But Breuer and his team were blasted for not indicting the parent company and more of its executives given the broad scope of problems at UBS.

Critics have also decried Breuer’s routine use of deferred prosecution, which gives the agency the right to go after a company in the future if it fails to comply with the terms of the agreement. They say the use of such tactics amounts to a slap on the wrists of companies that have engaged in egregious behavior. Breuer, however, has argued that the agreements result in greater accountability for corporate wrongdoing.

Breuer made a name for himself as special counsel to President Bill Clinton, whom he represented in the 1998 impeachment hearings and the Whitewater investigation.

Prior to his appointment at the Justice Department, Breuer worked at the Washington office of the Covington & Burling law firm, alongside Holder. While there, Breuer defended former Clinton national security adviser Samuel R. “Sandy” Berger, who was being investigated for tampering with presidential documents at the National Archives. He also represented baseball pitcher Roger Clemens in proceedings before House Committee on Oversight and Government Reform about the use of steroids.
Title: Re: Global Economics
Post by: mbw on February 18, 2013, 02:57:43 PM
I was reading this article (http://www.guardian.co.uk/science/2013/feb/18/hunt-russian-meteorite-fragments-comet) about the Russian meteorite, and lol'd at the last paragraph.  These former commie bastards really got this capitalism thing down.  Jimbo will be proud.

Quote
One woman was transferred to Moscow for treatment over the weekend and about 50 people remained in hospital. With night-time temperatures hovering around -20C, glass prices jumped as people rushed to replace broken panes.
Title: Re: Global Economics
Post by: runawayjimbo on February 18, 2013, 09:40:29 PM
I was reading this article (http://www.guardian.co.uk/science/2013/feb/18/hunt-russian-meteorite-fragments-comet) about the Russian meteorite, and lol'd at the last paragraph.  These former commie bastards really got this capitalism thing down.  Jimbo will be proud.

Quote
One woman was transferred to Moscow for treatment over the weekend and about 50 people remained in hospital. With night-time temperatures hovering around -20C, glass prices jumped as people rushed to replace broken panes.

Yes, because if anyone should be held up as a model for the efficiency of capitalism and the morality of free markets, surely it's those "former commie bastards".
Title: Re: Global Economics
Post by: VDB on June 18, 2013, 08:10:48 AM
Britain charges ex-Citigroup trader in Libor scandal

http://usat.ly/11WcE4K (http://usat.ly/11WcE4K)
Title: Re: Global Economics
Post by: runawayjimbo on July 23, 2013, 10:26:37 PM
Fuck fuck FUCK

On the bright side, Summers as Fed Chair would finally end the debate about who Obama works for.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/23/right-now-larry-summers-is-the-front-runner-for-fed-chair/

Quote
Right now, Larry Summers is the front-runner for Fed chair
By Ezra Klein

The word among Federal Reserve watchers right now is that the choice is down to Janet Yellen or Larry Summers as Ben Bernanke’s replacement. I can’t find anyone who really thinks it’ll be Roger Ferguson, Tim Geithner, Alan Blinder, or some other dark horse.

People dismissed Summers’s chances a month or two ago, but he’s increasingly viewed as the leading candidate today — and opinions on this, for reasons I don’t fully understand (though I suspect have to do with a bunch of elite trial balloons going up at the same time), have really hardened in the last 72 hours. So after conversations with plugged-in sources both inside and outside the process, here’s what’s behind the changing odds:

1) President Obama really likes Summers. And he’s surrounded by Summers’s longtime colleagues and friends. Conversely, Obama doesn’t really know Yellen, and nor do any of the White House’s economic principals.

2) The Obama administration’s top concern is choosing someone who cares about the Federal Reserve’s mandate to maintain full employment as well as its mandate to keep inflation low. Yellen and Summers are both seen as clearing that bar. So the choice is defaulting to other considerations.

3) This White House, more so than any other in modern memory, knows in its bones that the economy can fall apart at any second. China could suffer a hard landing, Europe could fall apart again. Some London Whale-like trader could blow a hole in JP Morgan Chase. If that happens — particularly given Washington’s dysfunction — the Fed is really the first responder. This White House is very comfortable with how Summers handles a crisis.

4) There’s also a feeling that the chair of the Federal Reserve can do more if he or she is truly trusted by markets. Rightly or wrongly, there’s a sense that Summers has the market’s trust in a way Yellen doesn’t.

5) The big open question is Summers’s ability to manage the Federal Reserve’s Open Markets Committee. Here, Summers’s reputation for being difficult to work with is a big issue. But inside the White House, that reputation is considered overblown, or at least outdated — after all, they worked with him, and enjoyed working with him, and there’s some sense that maybe a more aggressive Fed chair wouldn’t be the worst thing in the world.

That’s not to say Summers is anywhere near a sure thing. His confirmation would be far tougher than Yellen’s, as Republicans will make him answer for the stimulus and the bailouts, and progressive Democrats have a list of grievances going back to financial deregulation in the Clinton-era. There’s also the simple fact that appointing Yellen would break a significant glass ceiling — and do so in an administration that hasn’t always been great about appointing women to top economic positions. And Summers continues to be a polarizing figure: Those who like him love him, but those who don’t like him really don’t like him.

Against all that, the conventional wisdom — which I fully bought into — a month or two ago was that Summers had little real chance. The politics of it just didn’t make sense. But if Obama feels strongly about Summers and his qualifications, the Fed job is more than important enough for him to fight through the politics. And so, though I’m a bit surprised to be saying this, at this point my reporting says Summers is the front-runner.

For more on this, here’s Paul Krugman’s endorsement of Yellen (http://krugman.blogs.nytimes.com/2013/07/19/the-fed-succession/), and Paul Krugman’s endorsement of Yellen (http://marginalrevolution.com/marginalrevolution/2013/07/larry-summers-vs-janet-yellen.html)Tyler Cowen’s endorsement of Summers. I’ll just say, for the record, that I really don’t know who should run the Federal Reserve, and this post isn’t an endorsement of either candidate.

Title: Re: Global Economics
Post by: Hicks on July 24, 2013, 11:22:47 AM
Fuck fuck FUCK

On the bright side, Summers as Fed Chair would finally end the debate about who Obama works for.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/23/right-now-larry-summers-is-the-front-runner-for-fed-chair/

Quote
Right now, Larry Summers is the front-runner for Fed chair
By Ezra Klein

The word among Federal Reserve watchers right now is that the choice is down to Janet Yellen or Larry Summers as Ben Bernanke’s replacement. I can’t find anyone who really thinks it’ll be Roger Ferguson, Tim Geithner, Alan Blinder, or some other dark horse.

People dismissed Summers’s chances a month or two ago, but he’s increasingly viewed as the leading candidate today — and opinions on this, for reasons I don’t fully understand (though I suspect have to do with a bunch of elite trial balloons going up at the same time), have really hardened in the last 72 hours. So after conversations with plugged-in sources both inside and outside the process, here’s what’s behind the changing odds:

1) President Obama really likes Summers. And he’s surrounded by Summers’s longtime colleagues and friends. Conversely, Obama doesn’t really know Yellen, and nor do any of the White House’s economic principals.

2) The Obama administration’s top concern is choosing someone who cares about the Federal Reserve’s mandate to maintain full employment as well as its mandate to keep inflation low. Yellen and Summers are both seen as clearing that bar. So the choice is defaulting to other considerations.

3) This White House, more so than any other in modern memory, knows in its bones that the economy can fall apart at any second. China could suffer a hard landing, Europe could fall apart again. Some London Whale-like trader could blow a hole in JP Morgan Chase. If that happens — particularly given Washington’s dysfunction — the Fed is really the first responder. This White House is very comfortable with how Summers handles a crisis.

4) There’s also a feeling that the chair of the Federal Reserve can do more if he or she is truly trusted by markets. Rightly or wrongly, there’s a sense that Summers has the market’s trust in a way Yellen doesn’t.

5) The big open question is Summers’s ability to manage the Federal Reserve’s Open Markets Committee. Here, Summers’s reputation for being difficult to work with is a big issue. But inside the White House, that reputation is considered overblown, or at least outdated — after all, they worked with him, and enjoyed working with him, and there’s some sense that maybe a more aggressive Fed chair wouldn’t be the worst thing in the world.

That’s not to say Summers is anywhere near a sure thing. His confirmation would be far tougher than Yellen’s, as Republicans will make him answer for the stimulus and the bailouts, and progressive Democrats have a list of grievances going back to financial deregulation in the Clinton-era. There’s also the simple fact that appointing Yellen would break a significant glass ceiling — and do so in an administration that hasn’t always been great about appointing women to top economic positions. And Summers continues to be a polarizing figure: Those who like him love him, but those who don’t like him really don’t like him.

Against all that, the conventional wisdom — which I fully bought into — a month or two ago was that Summers had little real chance. The politics of it just didn’t make sense. But if Obama feels strongly about Summers and his qualifications, the Fed job is more than important enough for him to fight through the politics. And so, though I’m a bit surprised to be saying this, at this point my reporting says Summers is the front-runner.

For more on this, here’s Paul Krugman’s endorsement of Yellen (http://krugman.blogs.nytimes.com/2013/07/19/the-fed-succession/), and Paul Krugman’s endorsement of Yellen (http://marginalrevolution.com/marginalrevolution/2013/07/larry-summers-vs-janet-yellen.html)Tyler Cowen’s endorsement of Summers. I’ll just say, for the record, that I really don’t know who should run the Federal Reserve, and this post isn’t an endorsement of either candidate.


Bill Clinton?  Harvard?
Title: Re: Global Economics
Post by: runawayjimbo on July 25, 2013, 11:31:40 PM
Fuck fuck FUCK

On the bright side, Summers as Fed Chair would finally end the debate about who Obama works for.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/23/right-now-larry-summers-is-the-front-runner-for-fed-chair/

Quote
Right now, Larry Summers is the front-runner for Fed chair
By Ezra Klein

Bill Clinton?  Harvard?

The financial elite. The status quo. Monied interests. Pretty much everything we agree should be eradicated from a bullshit system that rewards those in power with more power at the expense of everyone else.

I still can't believe it will be Summers. I would image the political consequences would be pretty harsh. He's already being attacked from the left about his sexist comments as president of Harvard and for killing Glass-Steagall (next to Greenspan, Summers was the face of Gramm-Leach-Bliley, aka the Citigroup Legalization Act of 1999) and from the right because Obama is nominating him. So if they try to push him through, it tells me the administration is getting increasingly desperate about the fragility of the current economy.

For the record, I don't think Yellen would be any better. But her confirmation would be way easier. Plus, the historical significance of the first female Fed chair screams Obama to me.
Title: Re: Global Economics
Post by: runawayjimbo on October 03, 2013, 10:01:45 AM
Hilarious clip of Matt Taibbi and Sam Seder of The Majority Report destroying CNBC's love affair with Jamie Dimon. The financial press echo chamber just can't understand why anyone would think poorly of St. Jamie.

http://youtu.be/EuXf9GmQln4
Title: Re: Global Economics
Post by: runawayjimbo on October 08, 2013, 09:00:10 PM
For the record, I don't think Yellen would be any better. But her confirmation would be way easier. Plus, the historical significance of the first female Fed chair screams Obama to me.

Not trying to say I told you so, but...

http://www.bloomberg.com/news/2013-10-08/yellen-to-be-named-fed-chairman-as-obama-taps-first-female-chief.html

Quote
Yellen to Be Named Fed Chairman, First Female Chief

President Barack Obama will nominate Janet Yellen as chairman of the Federal Reserve, which would put the world’s most powerful central bank in the hands of a key architect of its unprecedented stimulus program and the first female leader in its 100-year history.

Obama will announce the nomination at 3 p.m. tomorrow, a White House official said in an e-mailed statement. Yellen, 67, would succeed Ben S. Bernanke, whose term expires on Jan. 31.

Obama turned to Yellen, vice chairman of the Fed since 2010, after the other leading candidate, former Treasury secretary and White House economic adviser Lawrence Summers, withdrew from consideration amid mounting opposition from Democrats on the Senate Banking Committee.

Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, pledged to work with the committee “to move her nomination forward in a timely manner.”

“She has a depth of experience that is second to none,” Johnson said in a statement. He also thanked Bernanke for “his incredible service our country” during “one of the most turbulent economic times in our nation’s history.”

U.S. index futures climbed, signaling stocks may rebound from the biggest loss since August, and Australia’s dollar strengthened after the announcement.

Standard & Poor’s 500 Index futures added 0.4 percent by 8:27 a.m. in Tokyo, after the gauge slumped 1.2 percent in its biggest decline since Aug. 27 in New York. The Australian and New Zealand currencies rallied at least 0.2 percent versus the greenback and the Swiss franc also gained.

Public Contest

The president’s choice followed a polarizing and unprecedented public contest for a nomination that Obama described in August as one of the most important decisions of his presidency.

Yellen was the favorite in surveys of economists and had the backing of 20 members of the Senate Democratic caucus who signed a July 26 letter to Obama.

As a top deputy to Bernanke, Yellen supported the central bank’s unprecedented bond buying programs and was a driving force behind a new strategy adopted in 2012 to commit the central bank to goals on inflation and unemployment.

As the Fed’s No. 2 official, she has articulated the case for maintaining highly accommodative monetary policy. In a series of 2012 speeches, she outlined why interest rates could remain near zero into late 2015, and in a 2011 speech she justified the Fed’s first two rounds of large-scale asset purchases with an estimate that the programs would create 3 million jobs.

Range of Experience

“She’s even more of a dove than Bernanke is, but there’s nobody who can say she’s not credentialed because of the range of experience she’s got,” said J. Alfred Broaddus, a former president of the Federal Reserve Bank of Richmond who debated Yellen over the Fed’s mandates during the 1990s. “She has experience that almost nobody else can bring to the table at this point.”

Among Yellen’s tasks, if confirmed, will be to execute the unwinding of the Fed’s record monetary stimulus. Bernanke has said the central bank won’t end monthly bond purchases until the labor market shows sign of substantial improvement.

The Fed has also announced plans to hold short-term interest rates near zero until the unemployment rate reaches at least 6.5 percent.

San Francisco

A member of the Fed’s board of governors and chairman of the White House Council of Economic Advisers during the Clinton administration, Yellen later was president of the Federal Reserve Bank of San Francisco before Obama nominated her to the No. 2 job at the Fed in 2010.

As Fed vice chairman, Yellen’s attentiveness to the district Fed presidents proved invaluable in building consensus on policy issues.

When the Federal Open Market Committee gathers in Washington for monetary policy decisions, Yellen often has breakfast with one district bank president, then sits down with another, before the meeting starts in the morning, her appointment calendars show. That familiarity with her colleagues would probably make her an adept manager of the central bank, said Robert Eisenbeis, a former Atlanta Fed research director.

“She’s steeped in the culture,” said Eisenbeis, now chief monetary economist at Cumberland Advisors in Sarasota, Florida. “Nobody understands the culture from the many perspectives that she’s had.”

Inflation Goal

She took control of a subcommittee focused on the Fed’s communication challenges. For years, policy makers on the FOMC had been unable to agree to holding press conferences or spelling out goals for inflation and unemployment.

Yellen’s subcommittee met almost as often as the FOMC -- 15 times in person and via telephone in 2011 and 2012 -- according to her calendars. The meetings culminated in a breakthrough in policy: A January 2012 statement that committed the central bank to achieving inflation of 2 percent in the longer term and spelled out a goal of 5.2 percent to 6 percent for the unemployment rate.

Yellen earned her Ph.D. in economics at Yale University in New Haven, Connecticut, studying under future Nobel laureates James Tobin and Joseph Stiglitz. She graduated in 1971 and became an assistant professor at Harvard University in Cambridge, Massachusetts.

Her road to the top of the central bank began in 1976 after she failed to get tenure at Harvard. She moved to Washington and took a job as a staff economist in the Fed’s division of international affairs.

London, Berkeley

There she met her husband, George Akerlof, and together they went to the London School of Economics and then the University of California at Berkeley.

They specialized in the labor market and were co-authors of more than a dozen papers that delved into the mechanics of how people switch jobs and what it means when workers perceive their wages as unfair.

In 1994, Yellen and Akerlof’s career paths diverged. While he went on to win the Nobel Prize in Economics, Yellen was appointed by President Bill Clinton to the Fed’s board of governors.

She served as the chairman of Clinton’s Council of Economic Advisers from 1997 to 1999, a period of economic boom when the unemployment rate was under 5 percent, the U.S. was running budget surpluses and Yellen was making speeches on a strategy to use the savings to help shore up Social Security.

Yellen returned to Berkeley in 1999, leaving again in 2004 to become president of the San Francisco Fed.

Broad Credentials

“She assures continuity on the one hand and on the other hand is exquisitely qualified,” said Nathan Sheets, chief international economist at Citigroup Inc. in New York, who previously served as the top international economist at the Fed. “I don’t know if there’s ever been a Federal Reserve chairman with a broader set of credentials.”

When Yellen became vice chairman of the Fed in 2010, she passed the Senate Banking Committee with a vote of 17-6, providing a preview of what her confirmation process could look like. There are 12 Democrats and 10 Republicans on the Banking Committee.

Senator Bob Corker, one of the top Republicans on the banking committee, said Yellen’s record will come under scrutiny.

‘Dovish’ Views

“I voted against Vice Chairman Yellen’s original nomination to the Fed in 2010 because of her dovish views on monetary policy,” Corker, of Tennessee, said in a statement today. “We will closely examine her record since that time, but I am not aware of anything that demonstrates her views have changed.”

Yellen became San Francisco Fed president in June 2004, well before house prices collapsed. Home prices were rising at an annual pace of more than 15 percent from May 2004 to December 2005, according to the Case-Shiller (SPCS20Y%) index of home prices in 20 cities.

Transcripts from meetings of the central bank in 2007, not released until earlier this year, show that Yellen was among the first Fed policy makers to warn how severe the housing situation was becoming.

At the May 2007 FOMC meeting, Yellen expressed concern that the Fed staff’s forecast was too optimistic on home prices. The forecast “assumes that national house prices are flat going forward,” she said. “I am worried that they may actually fall.”

At the next meeting, on June 27-28, Yellen said the biggest risk to economic growth was housing, which she called the “600-pound gorilla in the room.”

“The risk for further significant deterioration in the housing market, with house prices falling and mortgage delinquencies rising further, causes me appreciable angst,” Yellen said.

“Rising defaults in subprime could spread to other sectors of the mortgage market and could trigger a vicious cycle.”
Title: Re: Global Economics
Post by: runawayjimbo on November 15, 2013, 01:07:44 PM
Why is the global financial system so fucked? Try following this "map" which illustrates the evolution of credit markets and the crises inherent in a system that relies on ever increasing leverage and systemic interdependence.

More readable version here (http://www.nytimes.com/interactive/2013/11/12/business/dealbook/where-credit-is-due.html?_r=2&)

(http://graphics8.nytimes.com/newsgraphics/2013/11/11/history-of-debt/c56dd2d749ef821c2070ebe3508db5b07c365cae/debt-1440.png)
Title: Re: Global Economics
Post by: slslbs on November 15, 2013, 01:15:28 PM
I think just looking at that map for 3 seconds provides the answer
Title: Re: Global Economics
Post by: sophist on November 15, 2013, 01:16:24 PM
short answer: greedy assholes
Title: Re: Global Economics
Post by: runawayjimbo on November 15, 2013, 01:21:53 PM
short answer: greedy assholes

Meh. Greed is inescapable (although the culture of Wall St is most certainly one that rewards the greediest). I think the answer lies more in people believing they can beat the system through their own "genius".
Title: Re: Global Economics
Post by: runawayjimbo on April 02, 2014, 01:08:31 PM
So, Michael Lewis has a new book out, Flash Boys (http://amzn.com/0393244660), about the scourge that is High Frequency Trading and how it has distorted equity markets. I haven't read it yet, but I am really looking forward to it. If you read The Big Short (http://amzn.com/0393072231) or Liar's Poker (http://amzn.com/039333869X) (and if you haven't read either of those, I recommend you do) you know how good Lewis is at making technical concepts easy to understand, which is good, because explaining HFT is pretty goddamned technical.

Anyway, he has been making the rounds, so here's a couple of interviews with him and the protagonist (Brad Katsuyama) that give a great primer on HFT.

60 Minutes (http://www.cbsnews.com/news/is-the-us-stock-market-rigged/)

Daily Show Part 1 (http://thedailyshow.cc.com/videos/fuw7tu/michael-lewis-pt--1)

Daily Show Part 2 (http://thedailyshow.cc.com/videos/58a3az/michael-lewis-pt--2)

Daily Show Part 3 (http://thedailyshow.cc.com/videos/3efna8/exclusive---michael-lewis-extended-interview-pt--3) (my favorite as they get into what regulation can and cannot do and why IEX is providing a true market-based solution to the problem)

Also, Lewis and Katsuyama were on CNBC yesterday with the president of the BATS exchange and an unabashed HFT proponent (http://www.cnbc.com/id/101544772). It was one of the most entertaining/dooshchilling exchanges I've ever seen on financial news.
Title: Re: Global Economics
Post by: runawayjimbo on September 26, 2014, 09:50:08 AM
Michael Lewis on how the Fed takes its marching orders from Goldman. But please, tell me again about the Fed's independence.

http://bv.ms/1xp8WBe

Quote
The Secret Goldman Sachs Tapes

Probably most people would agree that the people paid by the U.S. government to regulate Wall Street have had their difficulties. Most people would probably also agree on two reasons those difficulties seem only to be growing: an ever-more complex financial system that regulators must have explained to them by the financiers who create it, and the ever-more common practice among regulators of leaving their government jobs for much higher paying jobs at the very banks they were once meant to regulate. Wall Street's regulators are people who are paid by Wall Street to accept Wall Street's explanations of itself, and who have little ability to defend themselves from those explanations.

Our financial regulatory system is obviously dysfunctional. But because the subject is so tedious, and the details so complicated, the public doesn't pay it much attention.

That may very well change today, for today -- Friday, Sept. 26 --- the radio program "This American Life" will air a jaw-dropping story about Wall Street regulation, and the public will have no trouble at all understanding it.

The reporter, Jake Bernstein, has obtained 47½ hours of tape recordings, made secretly by a Federal Reserve employee, of conversations within the Fed, and between the Fed and Goldman Sachs. The Ray Rice video for the financial sector has arrived.

First, a bit of background -- which you might get equally well from today's broadcast. After the 2008 financial crisis, the New York Fed, now the chief U.S. bank regulator, commissioned a study of itself. This study, which the Fed also intended to keep to itself, set out to understand why the Fed hadn't spotted the insane and destructive behavior inside the big banks, and stopped it before it got out of control. The "discussion draft" of the Fed's internal study, led by a Columbia Business School professor and former banker named David Beim, was sent to the Fed on Aug. 18, 2009.

It's an extraordinary document. There is not space here to do it justice, but the gist is this: The Fed failed to regulate the banks because it did not encourage its employees to ask questions, to speak their minds or to point out problems.

Just the opposite: The Fed encourages its employees to keep their heads down, to obey their managers and to appease the banks. That is, bank regulators failed to do their jobs properly not because they lacked the tools but because they were discouraged from using them.


The report quotes Fed employees saying things like, "until I know what my boss thinks I don't want to tell you," and "no one feels individually accountable for financial crisis mistakes because management is through consensus." Beim was himself surprised that what he thought was going to be an investigation of financial failure was actually a story of cultural failure.

Any Fed manager who read the Beim report, and who wanted to fix his institution, or merely cover his ass, would instantly have set out to hire strong-willed, independent-minded people who were willing to speak their minds, and set them loose on our financial sector. The Fed does not appear to have done this, at least not intentionally. But in late 2011, as those managers staffed up to take on the greater bank regulatory role given to them by the Dodd-Frank legislation, they hired a bunch of new people and one of them was a strong-willed, independent-minded woman named Carmen Segarra.

I've never met Segarra, but she comes across on the broadcast as a likable combination of good-humored and principled. "This American Life" also interviewed people who had worked with her, before she arrived at the Fed, who describe her as smart and occasionally blunt, but never unprofessional. She is obviously bright and inquisitive: speaks four languages, holds degrees from Harvard, Cornell and Columbia. She is also obviously knowledgeable: Before going to work at the Fed, she worked directly, and successfully, for the legal and compliance departments of big banks. She went to work for the Fed after the financial crisis, she says, only because she thought she had the ability to help the Fed to fix the system.

In early 2012, Segarra was assigned to regulate Goldman Sachs, and so was installed inside Goldman. (The people who regulate banks for the Fed are physically stationed inside the banks.)

The job right from the start seems to have been different from what she had imagined: In meetings, Fed employees would defer to the Goldman people; if one of the Goldman people said something revealing or even alarming, the other Fed employees in the meeting would either ignore or downplay it. For instance, in one meeting a Goldman employee expressed the view that "once clients are wealthy enough certain consumer laws don't apply to them." After that meeting, Segarra turned to a fellow Fed regulator and said how surprised she was by that statement -- to which the regulator replied, "You didn't hear that."

This sort of thing occurred often enough -- Fed regulators denying what had been said in meetings, Fed managers asking her to alter minutes of meetings after the fact -- that Segarra decided she needed to record what actually had been said. So she went to the Spy Store and bought a tiny tape recorder, then began to record her meetings at Goldman Sachs, until she was fired.

(How Segarra got herself fired by the Fed is interesting. In 2012, Goldman was rebuked by a Delaware judge for its behavior during a corporate acquisition. Goldman had advised one energy company, El Paso Corp., as it sold itself to another energy company, Kinder Morgan, in which Goldman actually owned a $4 billion stake, and a Goldman banker had a big personal investment. The incident forced the Fed to ask Goldman to see its conflict of interest policy. It turned out that Goldman had no conflict of interest policy -- but when Segarra insisted on saying as much in her report, her bosses tried to get her to change her report. Under pressure, she finally agreed to change the language in her report, but she couldn't resist telling her boss that she wouldn't be changing her mind. Shortly after that encounter, she was fired.)

I don't want to spoil the revelations of "This American Life": It's far better to hear the actual sounds on the radio, as so much of the meaning of the piece is in the tones of the voices -- and, especially, in the breathtaking wussiness of the people at the Fed charged with regulating Goldman Sachs. But once you have listened to it -- as when you were faced with the newly unignorable truth of what actually happened to that NFL running back's fiancee in that elevator -- consider the following:

1. You sort of knew that the regulators were more or less controlled by the banks. Now you know.

2. The only reason you know is that one woman, Carmen Segarra, has been brave enough to fight the system. She has paid a great price to inform us all of the obvious. She has lost her job, undermined her career, and will no doubt also endure a lifetime of lawsuits and slander.

So what are you going to do about it? At this moment the Fed is probably telling itself that, like the financial crisis, this, too, will blow over. It shouldn't.
Title: Re: Global Economics
Post by: runawayjimbo on July 23, 2015, 09:53:29 AM
Cool chart, bruh

(https://pbs.twimg.com/media/CKkFyQ2W8AAyAiX.jpg)
Title: Re: Global Economics
Post by: jedifunk on July 23, 2015, 11:33:57 AM
not sure how to read this chart ... seems to say that the US is a consumer economy that produces nothing and buys 23% of the rest of the worlds goods
Title: Re: Global Economics
Post by: jedifunk on July 23, 2015, 11:35:02 AM
also, how is india with all those billions of people only 3%????
Title: Re: Global Economics
Post by: PIE-GUY on July 23, 2015, 11:42:31 AM
also, how is india with all those billions of people only 3%????

If the chart is based on the US Dollar, then India is 3% because of the strong Dollar. Services in the US are exponentially more expensive in the US than services in India.
Title: Re: Global Economics
Post by: runawayjimbo on July 23, 2015, 03:08:39 PM
not sure how to read this chart ... seems to say that the US is a consumer economy that produces nothing and buys 23% of the rest of the worlds goods

I think the biggest thing is that it's GDP, so there's more to it than just consumption. Y = C + I + G + (X − M). Now, you're right, Consumption (C) usually is the biggest for sure, but the other components are increasingly becoming more important in our low growth world. US probably dwarfs most of the world in Investment (I) and gov't spending (G) and countries who are net importers - exports (X) - imports (M) - like India (and the US to a far lesser extent) also see a drag on their total contribution to global GDP. Also, just because the US is a service economy doesn't mean we don't produce wealth. And that fuels C and I, furthering our contribution to the total. Finally, as PG said, there's probably some FX effect attributable to a strong dollar which is a drag on developing economies and shrinks the relative size of countries like Brazil and India (and Rest of World for that matter). The flip side of that is that a weaker currency in emerging economies helps them boost their exports because their goods become cheaper in places like the US, so their GDP is increased due to an increase in X - M. Hard to say how much that interaction offsets each other, but I'd guess it probably is a net drag on weaker currencies resulting in some shrinkage.

Here's the full description of the chart (although there's not a whole lot of detail)

http://howmuch.net/articles/one-diagram-that-will-change-the-way-you-look-at-the-us-economy
Quote
One Diagram That Will Change the Way You Look At the US Economy

The US is by far the largest economy in the World, with a nominal GDP of $17.4 trillion in 2014. However, it is not the World leader in all economic sectors: the US is a service-based economy, with a smaller focus on agriculture and industry than other countries (though its industrial and agricultural sectors are still the second- and third-largest in the World due to the sheer size of the US economy).

The graphic above (Voroni diagram) represents the relative size of each country’s economy in terms of nominal GDP: the larger the area, the larger the size of the economy. The areas are further divided into three sectors: services, industrial, and agricultural. The US economy is mostly composed of companies engaged in providing services (79.7% compared to the global average of 63.6%), while agriculture and industry make up smaller-than-average of portions of the economy (1.12% and 19.1% compared to averages of 5.9% and 30.5%).

The next largest economy, China, is roughly balanced between industry and services (though the service sector is growing at a faster rate), with a 9.1% contribution from agriculture. In this sense, China is a bit of an anomaly: other rich countries have service sectors that greatly outweigh both industry and agriculture. Over the past several decades, China has leveraged its competitive advantage and designed industrial policies to incent manufacturing in the country. But as China grows, it will continue to transition to a service-based economy. Similarly, India will see a decrease in agriculture’s contribution to its GDP and an increase in the size of the service sector.

Over time, the service sectors of developed nations have tended to grow relative to the other sectors. But are there limits to this trend? What is the natural size of each sector?
Title: Re: Global Economics
Post by: jedifunk on July 24, 2015, 10:35:44 AM
very well written response jimbo!

its less that i don't understand indias position, as much as i wasn't 100% sure what this chart was showing me ... no context really... thanks for the full article!
Title: Re: Global Economics
Post by: slslbs on July 24, 2015, 11:21:40 PM
the other thing about India, is that even though to some degree their economy is booming, there is a MUCH higher percentage of extremely, extremely poor there. The contrasts are striking.
(yes, the inequality here is disgusting and getting worse, but India is another story entirely)
Title: Re: Global Economics
Post by: runawayjimbo on November 10, 2015, 12:58:26 PM
Federal Reserve Bank of Minneapolis named a replacement for its President today. To absolutely no one's surprise, he is a former Goldmanite. For those keeping score, that makes 4 out of 12 Fed Presidents to come from Goldman. Shocker, I know.

PS - he was also the guy who oversaw TARP and said, "No, it's cool, AIG, you can take the $150B we gave you and use $500M for bonuses. NBD."

http://www.wsj.com/articles/neel-kashkari-to-be-named-new-minneapolis-fed-president-1447170684?mod=djemCentralBanksAlertPro&alg=y

Quote
Neel Kashkari to be Named New Minneapolis Fed President
Ex-TARP chief brings experience as an engineer, banker, government official and politician to the position

The Federal Reserve Bank of Minneapolis has named former banker, government official and unsuccessful California gubernatorial candidate Neel Kashkari to become its new president and chief executive officer.

He’ll succeed Narayana Kocherlakota, who leaves office at the end of the year. Mr. Kashkari, 42, is slated to take office on Jan. 1, 2016, the bank plans to announce Tuesday.

Mr. Kashkari’s views on central bank interest-rate policy are not publicly known. He’s not an economist, beginning his career as an aerospace engineer working on space missions before earning an M.B.A. at the University of Pennsylvania’s Wharton School. He’s an alumni of investment bank Goldman Sachs and investment fund Pacific Investment Management Co., or Pimco.

Mr. Kashkari rose to public prominence as a member of President George W. Bush’s administration by running the government’s $700 billion Troubled Asset Relief Program—a controversial effort aimed at stabilizing the financial system by pumping capital into banks during the 2008 financial crisis. Critics called the program an improper intrusion by the government into private enterprise and an unfair bailout of big banks.

The U.S. Treasury has recovered $442.04 billion from the TARP rescues, after disbursing $430.06 billion—making a profit. The effort injected taxpayer funds into 707 financial institutions; all but 19 of which have paid the money back.

Mr. Kashkari—taking a job that paid $339,000 a year, according to the Fed’s most recent annual report—said in an interview with the Wall Street Journal that his diverse resume provides a critical foundation for his new role. He also offered broad praise for how the Fed has conducted policy, even as he declined to offer his views about the monetary policy outlook.

The Fed’s regional banks “can be and should be some of the most important economic policy thought leaders in the country,” Mr. Kashkari said in the interview. He sees his new job as “a continuation of a lot of the policy work I’ve already done” in government and the private sector. He said he also sees the regional Fed banks as an antidote to the “group-think” that can take hold of Washington-based policy makers.

In his new job, Mr. Kashkari will participate in meetings of the Federal Reserve’s policy committee, though he will not be a voting member next year. The voting seats rotate annually among 11 of the 12 regional banks and Minneapolis’s president will next gain one in 2017. The announcement comes at a time when the central bank is considering raising short-term interest rates from near zero, where they have been for seven years.

He also will oversee the Minneapolis Fed’s 1,100 employees, who conduct economic research and supervise financial institutions, among other things.

In the interview, Mr. Kashkari offered broad praise for how the Fed has conducted monetary policy.

“I think the Fed is doing the right things with the levers the Fed can control,” he said. He added he was not surprised that inflation is currently as low as it is, given that there remain signs of underlying softness in the job market.

While he declined to say anything about when the Fed should raise rates, he countered critics of the central bank’s policy by saying “the Fed had hasn’t caused inflation, hasn’t devalued the dollar.”

“Right now, everyone is laser focused on when is the Fed going to raise interest rates and start the normalization process, for good reason. But there are a whole host of economic challenges we face as a country, and I want to pay attention to all of that,” Mr. Kashkari said.

Mr. Kashkari worked for the Treasury Department in 2006 as a senior advisor before becoming an assistant secretary between 2008 and 2009. After leaving the administration, Mr. Kashkari worked as a money manager for Pimco between 2009 and 2013.

Mr. Kashkari said his experience had led him away from ideological views on complex problems and towards a pragmatic, inclusive and data-driven way of approaching policy issues.

Before the financial crisis, Mr. Kashkari described himself as a “free-market guy.” But he added “I learned the limits of free markets in the intensity” of the 2008 financial crisis. “I still lean in that direction but I’m also more humble,” believing “ideology is great, but data is better”

Pimco began a push into stocks in 2009 when it hired Mr. Kashkari to help turn the bond-fund company into a player in stock funds. But the performance of funds Mr. Kashkari launched was spotty. He left in 2013 and the firm has since closed some of its stock funds.

Mr. Kashkari left Pimco to run for governor of California in 2014. A political rookie and son of Indian immigrants, he won a Republican primary against an assemblyman, Tim Donnelly, a leader in the movement to stop illegal immigration.

During the campaign, he presented himself as a moderate focused on economics with centrist social views. He identified himself as a fiscal conservative, supported abortion rights and gay marriage and said he voted for President Barack Obama in 2008. He touted his ability to work with politicians regardless of party. He lost to incumbent Gov. Jerry Brown , a Democrat, garnering 40% of the vote.

“My entire agenda was economic opportunity. It was 100% focused on economic issues,” which means there’s “great continuity” between what he hoped to do in California and what he’ll do at the Minneapolis Fed, Mr. Kashkari said.

An Ohio native, Mr. Kashkari moved to California in 1997. He’s in the process of relocating to the Minneapolis area. He said he’s a big fan of outdoor activities and a lifelong Michael Jackson enthusiast. Mr. Kashkari said he had two Newfoundland dogs named for players on the Cleveland Browns football team.

Mr. Kashkari worked at Goldman Sachs in San Francisco from 2002 to 2006 on technology financing issues. The presidents of the New York, Dallas and Philadelphia Fed banks— William C. Dudley, Robert Steven Kaplan and Patrick T. Harker, respectively—also worked for the firm. Mr. Kashkari’s first job at Treasury was working as a senior advisor to then-Treasury Secretary Henry Paulson, the former chairman and CEO of Goldman.

Mr. Kashkari’s political profile makes him an unusual selection for the central bank, which in recent years has seen only one other aspirant for elected office among its ranks. That was former Dallas Fed President Richard Fisher, who ran unsuccessfully for a U.S. Senate seat from Texas in 1993 as a Democrat. The Fed seeks to maintain independence from the political process so it can set interest rate policies for the economy free from partisan pressures.

Mr. Kashkari said, in some ways, his first job could be the most important to his new role as a central banker.

“Policy making is problem solving,” he said. While he managed the TARP program, “the fact that I had went to Wharton and got my MBA and worked at Goldman are all fine, but I really relied on my engineering skills as a research engineer working on NASA missions,” he said, because that experience was all about solving problems with limited tools.

He earned bachelor’s and master’s degrees in mechanical engineering from the University of Illinois at Urbana-Champaign.

Mr. Kashkari takes office at a time of transition at the regional Fed banks, after new presidents took office in Dallas and Philadelphia this year.

Regional Fed bank presidents are selected by their respective boards of directors, although representatives from the financial industry do not participate in the process.

In an unusual move for a process frequently criticized for too much secrecy, the Minneapolis Fed released the criteria it was seeking in a leader, and as part of the planned announcement of Mr. Kashkari’s appointment, the bank also will offer a detailed timeline of the search. It will not reveal the names of other candidates.

Mr. Kashkari succeeds the Fed’s most aggressive supporter of taking strong action to support the economy. Mr. Kocherlakota recently called for the Fed to lower its benchmark short-term interest rate target, which is now between zero and a quarter-percentage point.

Mr. Kocherlakota became Minneapolis Fed president in 2009 and announced in December 2014 that he would not seek reappointment.
Title: Re: Global Economics
Post by: Buffalo Budd on November 10, 2015, 01:41:55 PM
So... Kashkari is not just a clever name.

(http://i.imgur.com/BbgL7x3.gif?noredirect)
Title: Re: Global Economics
Post by: runawayjimbo on July 15, 2016, 05:17:03 PM
Absolutely savage Taibbi on Eric Holder's last (latest?) SUCK IT to the American people. Teaser below but the whole thing is great if you're looking to get yourself all kinds of heated on a Friday

http://www.rollingstone.com/politics/news/eric-holder-wall-street-double-agent-comes-in-from-the-cold-20150708

Quote
Eric Holder, Wall Street Double Agent, Comes in From the Cold
Barack Obama's former top cop cashes in after six years of letting banks run wild

Eric Holder has gone back to work for his old firm, the white-collar defense heavyweight Covington & Burling. The former attorney general decided against going for a judgeship, saying he's not ready for the ivory tower yet. "I want to be a player," he told the National Law Journal, one would have to say ominously.

Holder will reassume his lucrative partnership (he made $2.5 million the last year he worked there) and take his seat in an office that reportedly – this is no joke – was kept empty for him in his absence.

The office thing might have been improper, but at this point, who cares? More at issue is the extraordinary run Holder just completed as one of history's great double agents. For six years, while brilliantly disguised as the attorney general of the United States, he was actually working deep undercover, DiCaprio in The Departed-style, as the best defense lawyer Wall Street ever had.

Holder denied there was anything weird about returning to one of Wall Street's favorite defense firms after six years of letting one banker after another skate on monstrous cases of fraud, tax evasion, market manipulation, money laundering, bribery and other offenses.

"Just because I'm at Covington doesn't mean I will abandon the public interest work," he told CNN. He added to the National Law Journal that a big part of the reason he was going back to private practice was because he wanted to give back to the community.

"The firm's emphasis on pro bono work and being engaged in the civic life of this country is consistent with my worldview that lawyers need to be socially active," he said.

Right. He's going back to Covington & Burling because of the firm's emphasis on pro bono work.

Here's a man who just spent six years handing out soft-touch settlements to practically every Too Big to Fail bank in the world. Now he returns to a firm that represents many of those same companies: Morgan Stanley, Wells Fargo, Chase, Bank of America and Citigroup, to name a few.
Collectively, the decisions he made while in office saved those firms a sum that is impossible to calculate with exactitude. But even going by the massive rises in share price observed after he handed out these deals, his service was certainly worth many billions of dollars to Wall Street.
Now he will presumably collect assloads of money from those very same bankers. It's one of the biggest quid pro quo deals in the history of government service. Congressman Billy Tauzin once took a $2 million-a-year job lobbying for the pharmaceutical industry just a few weeks after helping to pass the revolting Prescription Drug Benefit Bill, but what Holder just did makes Tauzin look like a guy who once took a couple of Redskins tickets.

In this light, telling reporters that you're going back to Covington & Burling to be "engaged in the civic life of this country" seems like a joke for us all to suck on, like announcing that he's going back to get a doctorate at the University of Blow Me.

...
Title: Re: Global Economics
Post by: Buffalo Budd on October 18, 2017, 02:01:06 PM
I know this may be common knowledge to most, I still think it bares repeating. If for no other reason than to give us a dose of reality with Christmas on the horizon.

http://www.monbiot.com/2012/12/10/the-gift-of-death/#.WePZA64vkwI.facebook (http://www.monbiot.com/2012/12/10/the-gift-of-death/#.WePZA64vkwI.facebook)

Quote
They seem amusing on the first day of Christmas, daft on the second, embarrassing on the third. By the twelfth they’re in landfill. For thirty seconds of dubious entertainment, or a hedonic stimulus that lasts no longer than a nicotine hit, we commission the use of materials whose impacts will ramify for generations.
Title: Re: Global Economics
Post by: gah on October 18, 2017, 02:32:19 PM
I know this may be common knowledge to most, I still think it bares repeating. If for no other reason than to give us a dose of reality with Christmas on the horizon.

http://www.monbiot.com/2012/12/10/the-gift-of-death/#.WePZA64vkwI.facebook (http://www.monbiot.com/2012/12/10/the-gift-of-death/#.WePZA64vkwI.facebook)

Quote
They seem amusing on the first day of Christmas, daft on the second, embarrassing on the third. By the twelfth they’re in landfill. For thirty seconds of dubious entertainment, or a hedonic stimulus that lasts no longer than a nicotine hit, we commission the use of materials whose impacts will ramify for generations.

minimalism is where it's at.
Title: Re: Global Economics
Post by: mattstick on October 18, 2017, 02:38:22 PM
minimalism is where it's at.

Except for record collections.
Title: Re: Global Economics
Post by: rowjimmy on October 18, 2017, 02:57:21 PM
minimalism is where it's at.

Except for record collections.

Precisely.
Title: Re: Global Economics
Post by: Buffalo Budd on October 18, 2017, 03:10:50 PM
minimalism is where it's at.

Except for record collections.

Precisely.

I feel justified in that hobby as they stand the test of time and are not discarded like most of the gadgets today.
Title: Re: Global Economics
Post by: Hicks on October 18, 2017, 03:33:23 PM
https://youtu.be/jA1wB9uLG_Y