...news, moderately offensive commentary, f-bombs...

Wednesday, December 31, 2008

currency strategists

The euro turned 10 this year, just in time to watch the dollar die. The Financial Times reminds us of one of the most important milestones in the euro's adolescence, when Jay-Z flashed euro notes in some retarded video.

Comprehensive solutions

Israel's offensive against Hamas and whatever else gets in the way in Gaza enters its 6th day! Poor Israel is running out of things to bomb already and will probably have to invade outright, but at least we can be sure that the current operation will finally solve everything forever.

Israel and Hamas had largely observed a 6-month ceasefire up until a few days ago. Hamas, having nothing else to do since Gaza was already a Haiti-like paradise, decided to start launching more bottle rockets at Israeli towns on the border. For all they know a child is on the receiving end of every one of these, since Qassam rockets can only be aimed insofar as they are pointed, in a direction. They occasionally manage to kill people, usually civilians. This is called "resistance."

Israel on the other hand faces this horrible existential threat and cannot sit idly while things in Gaza go unbombed. Here I've compiled a chart of just what they're up against. As you can see, anyone who suggests not bombing Gaza several geological layers further into the earth is a pussy and probably an anti-Semite.

If you weren't impressed by the moderation of Israel's response thus far, then let me crush your dreams further. Kadima, the party leading the current coalition government in Israel, composed of slightly less insane former Likud people, is almost certainly set to lose to Likud in the upcoming elections, making known douchebag Benjamin Netanyahu your next Israeli prime minister.

...AND Netanyahu's allies in Likud recently did poorly in Likud primaries because he wasn't right-wing enough. Allies of Moshe Feiglin, who advocates ethnic cleansing and annexing all the Palestinian territories, did great.

...AND Likud will probably be beholden to the nutcases in Yisrael Beiteinu, among others, to form a government, because Israel has a ridiculously dysfunctional parliamentary system where any number of tiny parties can bring down a government for fun.

So okay, here's the thing, given this wonderful outlook. Israel remains one of the few countries that, in the most literal sense of the term, colonizes territory that doesn't belong to it. (No, I haven't forgotten about you dicks in Morocco.) Israel can build a 40ft high fortified wall along the 1967 borders for all I care, but until it dismantles Jewish settlements, then hey, let's not shovel money to it? How 'bout not as much? Is this even an option? Will Barack Obama put his calm, steady hand on the $3bn anti-Semite lever of doom?

Ha, no. And we'll be reading about this shit forever.

Shorter Hank Paulson

US lacked the tools to tackle crisis
This whole thing would have been a lot easier if you assholes made me dictator of America. Eh, fuck it. Twenty more days bitches!

Business update!

Italian business actually had confidence somehow but its okay because now it doesn't.

Sunday, December 28, 2008

Ho fucking ho

In The Economist's super special holiday issue there's an item on Viktor Bout, the former Soviet intelligence officer who became the world's most (only) famous international arms dealer. Otherwise known as the "merchant of death", the "sanctions buster", and the "UPS guy of doom", he was recently dealt the perennial embarrassment of having Nicolas Cage play him in a movie. Also he was arrested in Thailand for trying sell surface-to-air missiles to the FARC, the Bad News Bears of Latin America's left-wing rebel groups, who still end up losing in the end. The FARC representatives turned out to be DEA agents. Oops.

Still, Viktor Bout is the closest thing the planet has ever had to Santa Claus. He managed to fly around the world the world to deliver toys, coal, and AK47s to all of the world's needy child soldiers. When an American marine in Baghdad needed vomit-inducing MREs, he was there. When a UN peacekeeper needed bullets for the gun he wasn't allowed to fire, he was there. When the FARC needed missiles to shoot down DynCorp coca spraying aircraft, he...D'OH!

Even so, Viktor Bout is still better than sitting through an hour and a half of Nicolas Cage doing anything. I encourage everyone to sign my petition to make City of Angels a war crime.

Friday, December 26, 2008

spring break options

Welcome to Turkmenistan, the North Korea of Central Asia. Other than being desperately poor and blessed with huge natural gas fields, it is known for taking state repression to comically absurd proportions just like North Korea, the North Korea of Asia.

Until 2006 it was run by Suparmarat Niyazov, the Rod Blagojevich of Turkmenistan, with the hair and everything. He was famous for building gold statues of himself and himself as a baby, and systematically gutting the health and education systems of the country. Primary schools taught nothing but the Ruhnama, the idiotic book he wrote, so people could grow up to be idiots, just like their hero, him, because they had to. This would be like Barack Obama ordering school children to read nothing but The Audacity of Hope, but not nearly as funny. Hospitals for a time were closed based on the reasoning that Turkmens don't get ill. God finally called his bluff on that and killed him.

The political system was so hardwired to his personality cult it was unclear who would take over, whether they would make attempts to open to the outside world, or just generally be less insane. Two years on, people are starting to get an idea, and its not all good. The new president, former health minister and dentist Gurbanguly Berdymukhamedov, turns out to like the whole dictator thing, and continues to punish political prisoners by making them brush three times a day and remember his name. He seems to be settling in nicely just as the price of his primary export collapses, though optimists point out schools have started teaching letters and numbers again.


[above]: som
eone didn't floss

Thursday, December 25, 2008

Credit Suisse's Christmas miracle

Credit Suisse just managed to come up with the single greatest Christmas gift in history, all while solving the financial crisis and saving capitalism forever. They would be true American heroes if they weren't foreigners.

Most lauded the Swiss bank’s ingenuity in devising a scheme to rid itself of leveraged loans and commercial mortgage backed securities (CMBS) by transferring them into its so-called Partner Asset Facility.

The PAF will form an extra component in the mix of cash and Credit Suisse shares used to reward managing directors and directors – roughly the top 2,000 employees – in the group’s investment bank.

Some $5bn of illiquid assets will be shifted into the PAF, eligible staff will be granted equity in the special vehicle, and share in any upside. According to bank officials, the investment is attractive, as the assets have been marked down heavily and should benefit as markets stabilise.

That's right douchebag! You remember those things, the ones trading at a fraction of their face value, that you structured while you were on your Blackberry arranging to get head from some skank in marketing, that are stuck on your balance sheet because Earth ran out of suckers to buy them, because of capitalism? Hah, you will now be fucking PAID with those.












[above]: still better than CMBSs

This should be a model for compensation everywhere. I want Chris Dodd and Barney Frank drafting the Executive Reach-Around Act (ERAA) of 2009 right fucking now. The accuracy of value-at-risk models will skyrocket when people realize they might get paid with the shit they make. And if we're going to pay bankers in collaterallized debt obligations, we might as well pay auto executives with their own shitty cars, so they can try to sell them and learn about markets.

Of course, detractors are arguing that this is undue punishment for people who weren't intimately involved in crafting these wonderful shitballs, to which my imaginary girlfriend Aline van Duyn at the Financial Times responds:
[T]here have been the predictable complaints from bankers who say they had no role in creating the toxic asset mess but are now left holding the result.

Such an attitude is worrying, and it highlights the fact that there remain large pockets of Wall Street that still do not understand that the entire business has changed. Frankly, there are plenty of people (including policymakers) who are very disturbed that bonuses at large banks are being paid at all, considering the hundreds of billions of dollars that are being forked out by taxpayers as a result of the financial meltdown.

Even those bankers who had nothing to do with securitisation or leveraged lending directly, benefited from the massive increase in profits these businesses generated in the last decade. Indeed, most people, across Main Street and Wall Street, reaped rewards, either through high returns on investments or the ability to borrow cheaply.

The only other argument people can muster against is that it may cause talented people to leave. Threatening to go stand in line at the unemployment office with the tens of thousands of your coworkers already there is not very threatening.

Wednesday, December 24, 2008

Legacies

Ok, sick of this legacy stuff. George Bush's legacy is to have made a large segment of the population totally cool with having a know-nothing retard in public office, so much so that they wanted another one. There is no denying how genuinely impressive this is.

Shorter Philip Stephens

Advice for the seasonal seers: future is not in the stars
With all the horrible crazy fucked up shit that happened this year, at least we still know we can't count on George Bush, the missing rudder on the ship of America, that was hijacked by Somalis.

blatantly obvious things

Standard & Poor's has an emergency newsflash:
Eleven of the world's biggest banks were yesterday downgraded by Standard & Poor's after the ratings agency said the current downturn could be longer and deeper than previously thought.
Holy fucking shit no!

Credit ratings agencies (CRA) seriously have the sweetest business model in the history of people. In an upswing they get paid by companies to tell them how awesome they and their products are. It doesn't matter if anyone understands them or that they were structured by cows. If the cows are payin' up then moo bitches. And the best part is that the CRAs are not liable for any of this 'analysis' when people find out cows can't read or add. This is because of something called 'freedom of speech', which I gather is in the Constitution somewhere, probably because of hippies.

In a downturn CRAs have even more fun because they get paid to tell companies that they suck, as in the tremendously useful observation above that hey, maybe you shouldn't buy bank debt in the middle of the worst financial crisis you've been alive for. So for the reasons above, I'm downgrading S&P two notches to worthless fucks.













[above]: rigorous analysis

Monday, December 22, 2008

Fail...

Ha, oh Pakistan:
Fears grow over Pakistan terror resolve

The [Pakistani] government said it had lost track of one of India’s most wanted militants following his supposed arrest only a few days ago.

Shah Mahmood Qureshi, Pakistan’s foreign minister, said Masood Azhar, the leader of Jaish-e-Mohammad, a militant group, was not under arrest, contradicting his government’s previous claim that he was in custody.
So far everyone has been impressed that India hasn't really gone nuts over the terrorist attacks in Mumbai. They've already fought three full-blown wars with Pakistan, and even the acquisition of nuclear weapons on both sides has never gotten in the way of playing soldier. India and Pakistan remain the only two belligerents ever to insist on killing each other over a fucking glacier*.

So India is going about this all wrong so far. If it really wants to be a global superpower, it needs to learn from the master and invade Nepal for no reason because fuck you thats why.

*The Siachen glacier is also the only glacier with its own horribly formatted website.

Can you watch my billions while I go pee? thanks...

Aline van Duyn, resident hottie at the Financial Times, has a fun column about how outsourcing isn't just for getting Filipinos to do your boring administrative work, hell no. Plenty of investors have instead outsourced their entire brains to people who so clearly needed them.
Who's afraid of thinking for themselves on investments?

...

The economic system is now plagued by a lack of independent or critical thinking, and the role this absence
has played in the global financial crisis is becoming clearer by the day. The idea that professional investors apply rigorous independent analysis to everything they do has already taken a harsh beating this year. Some do, but many do not.
She then speaks with former consultant Campbell Harvey, who drops this gem about vetting superfraud Bernard Madoff "about six years [ago]":
He said in the case of the Madoff fund, he looked at it very briefly and rejected it out of hand because the consistent returns on equity investments it touted “did not make any sense”. He said it was not credible because the risk of fluctuating returns which are common in equity investments (stocks are riskier than other types of capital-like bonds) had apparently completely disappeared.
Resident not-so-hottie John Gapper, also at the FT, has a theory about why people kept shoveling money to Madoff, despite suspiciously steady returns on everything:
With hindsight, the whole affair seems deeply implausible. We know that nobody produces rock-steady returns of 15 per cent or more, year in and year out, unless he or she is either a genius or a crook.

...

No one thought that Mr Madoff was operating a Ponzi scheme but plenty of people thought he had an unfair advantage. He was a former Nasdaq chairman and one of Wall Street’s biggest marketmakers. Enough said.
That is, everyone thought he was getting information illegally somehow and most people were cool with that.

No one could have predicted...

Hilarious chart from The Economist.....from 2004.














I hope everyone is enjoying reverting to the mean.

Niall Ferguson caves and asks God for help

In the ancient times, when everyone was poor(er), God used to celebrate every seven or fifty years by canceling everyone's debts and wiping out moneylenders, because he loves you and hates Jews. This was called Jubilee. Coincidence!? God obviously failed out of his community college economics course but that's alright. Since the average lifespan was probably 25 or something, moral hazard was limited since everyone was going to die soon anyway.

Niall Ferguson at the FT resurrects the Jubilee option to help solve the US's massive debt problem. The reasoning is that, hey, there's too much debt, so let's not have it anymore. This is less insane than it sounds. The US has become massively over-leveraged* (or 'geared', for you wankers). The public and private sectors of the US have a massive debt stock, and as Fergusson points out, our 'solutions' thus far seem to be merely adding to public sector debt (see sexy charts).

Equally massive deleveraging would 'solve' the problem in that everyone tries to save and pay off their debts at the same time, condemning the country to Great Depression 2: The Reckoning, which wont be as good as the first. This is called the "paradox of thrift", which means that if you're still paying your credit card bills then you hate America.

Ferguson says there are basically four options to reduce the debt:
outright default - "haha, fuck you."
restructuring - "ok, we'll only break one leg."
inflation - "can I pay in lira?"
conversion - "cmon, give me a fuckin' break dude!"
Ferguson opts for conversion, roughly along the lines of plans that tolerable Republicans Sheila Bear and Martin Feldstein have been shopping around forever now. Whenever Obama finishes making out with Rick Warren on inauguration day he needs to just fucking pick one of these already.

This gets to the heart of why this crisis has dragged on for well over a year now. Someone needs to suck it up and actually start realizing losses on their mortgage-backed securities. But they're not going to until they have a general idea of what the bottom of the housing market is going to look like. The two housing plans above would at least throw some predictability into a situation utterly lacking it. Niall Ferguson and God are waiting.

* "Leverage" means indebtedness but sounds hotter and less awful.

Sunday, December 21, 2008

Naomi Klein gets a whiff of something...

(Watch as I shamelessly provoke Kleintards to get people to read my blog)

Naomi Klein is the hotter Noam Chomsky. She writes big thinky books on big thinky subjects to make people who aren't thinky feel smart. Here's a helpful formula to explain her latest work The Shock Doctrine:
socialism ---> 'shock' ---> ((Milton Friedman + neoliberalism) (y) / University of Chicago) = Chilean dissidents thrown off helicopters

let y = quantity of underpants gnomes required for this to make sense
You see, a 'shock' happens, (you know, 'anything') which evil Milton and friends then use to push their neoliberal agenda because they hate people with jobs, especially good ones. While Klein was researching this book, Friedman even went ahead and pussed out and died, obviously to avoid having to answer her scathing criticisms.


[above]: coward

So yea, Klein and her fans like to pretend her arguments aren't taken seriously because she speaks uncomfortable truths or whatever, but as progressive econonerds Brad DeLong and Dani Rodrik have tried to hint politely, she just doesn't seem to know shit about economics or finance, which her educational background seems to verify. I can't imagine why anyone would seek out authoritative analysis on evolution from a creationist, which is the same reason why no one cares what she says about financial crises in developing countries, much less her remedies. Rodrik highlights this bizarre passage from a profile in The New Yorker:

Some things are very hard to understand

For instance, how Naomi Klein was able to feel good about Argentina in 2002:

The only time she has ever felt a whiff of utopia was in Buenos Aires, in 2002, when the political system had virtually disintegrated—during the time that she and Lewis were filming “The Take.” “That moment in Argentina was an incredible time because a vacuum opened up,” she says. “They had thrown out four Presidents in two weeks, and they had no idea what to do. Every institution was in crisis. The politicians were hiding in their homes. When they came out, housewives attacked them with brooms. And, walking around Buenos Aires at night, there were meetings on every other street corner. Every plaza where there was a streetlight, people were meeting under it and talking about what to do about the external debt, I swear to God. Groups of one hundred or five hundred people. And organizing buying groceries together because they could get cheaper prices, setting up barters because the currency was worthless. It was the most inspiring thing I’ve ever seen.”

This is also about the time in Buenos Aires when people started picking through trash for food, which presumably they gathered to talk about later, for solidarity, which was inspiring. (?)

But, as everyone who reads Naomi Klein already knows, Argentines kicked out their evil political leaders, the peso was replaced with Hershey kisses, and workers took over idle factories, managing to churn out enough rainbow gumdrops to pay off the debt forever yay!

Except that, oh hey, no. Argentina is still dysfunctional. Despite a massive spurt of growth since the 2001 meltdown, thanks to the commodity boom and Hugo Chavez's generosity (retarditude), Argentina will struggle to pay its debts in the coming years, which is even more amazing still since its been virtually locked out of capital markets since the default. Christina Fernandez de Kirchner, the wife of the last president, just nationalized everyone's pensions, which she will of course use prudently to pay debts she couldn't otherwise. Fernandez has roughly 15% of all the makeup in Argentina on her face at any given time.

....anyway, the point of all this is why wont Naomi Klein go out with me?

Thursday, December 18, 2008

Invading Somalia is so 90s

Ethiopia, which invaded Somalia in 2006 so it could be like its hero, America, is pulling out its troops, to be like its other hero, Obama. The African Union has a tiny peacekeeping force of Ugandans and Burundians which will also likely pull out, because they'd rather get blown up by rebels in their own damn country thank you very much.

Somalia's internationally recognized government, which only controls whichever building it occupies, is a complete disaster. No one knows what the fuck to do. The Islamist militias, which Ethiopia intially rolled right over, have reconstituted and control much of the country again. The most powerful is the Shabaab, which sounds like a shitty 80s band. They have at least pledged to end the swashbucklery off the Somali coast, if everyone would just leave them alone to stone adulterers and women who don't behave properly.

Fucking Thailand

Thailand's opposition has finally weaseled its way into power so we all get to remember some other guy's name no one can pronounce. Abhisit Vejajjiva is a UK-born economist and the third prime minister in four months.

Basically what happened is in 2006 the country's monarchy, elite, middle-class, and army hated it that poor people kept electing zillionaire mogul Thaksin Shinawatra, Thailand's Silvio Berlusconi, and decided to have a superfun army coup with tanks and everything. Thaksin's Thai Rak Thai party was banned, but reconstituted under another another name, the PPP, and won the elections organized by the coup leaders. Pwned! The army finally said screw it after getting sick of politicking and let the PPP under Thaksin's friend Samak Sundaravej take power. Samak was then ousted, not kidding, because he was paid to appear on a cooking show, so he was banned by the election commission. Somchai Wongsawat, Thaksin's half-brother, then took over for the PPP. He was the one finally canned after the opposition found enough votes to secure a majority in parliament, after Australians began complaining that the political crisis was getting in the way of their sex tourism.

The most disturbing part of this mess has been the role of the People's Alliance for Democracy (PAD) and King Bhumibol.

The PAD's yellow-shirts had been leading the rallies to have Thaksin's allies ousted from power, blocking parliamentary buildings and the country's airports, trapping helpless sex tourists in Thailand, where they were forced to continue sex-touring. The PAD argues, literally, that poor Thais are too dumb to vote correctly and that a third of parliament should be appointed directly by the king, which is, uh, totally "for Democracy".

King Bhumibol gave a nod to the 2006 coup and the PAD's antics, though he is legally beyond criticism thanks to a harsh lèse majesté law which prevents Thai's from saying the following without going to jail.
  1. "Hey, King Bhumibol, I heard you like to dress up in girl's clothes and have an extensive Bratz doll collection."
  2. "Hey, King Bhumibol, your hat looks fucking retarded."
  3. "Hey, King Bhumibol, I don't think its a good idea in a healthy democracy to have a king that's above criticism and is friendly with coup-leaders who like overthrowing democratically elected whatnots."

Spain banks harder than you

Spain's big international Banco Santander has won plaudits for not collapsing into a smelly pile of taxpayer-funded awfulness, like every other bank. Spain, like the US, UK, Ireland, and wherever else, suffered a huge housing-fueled boom which has since imploded. Santander's secret then was to have been regulated by the Bank of Spain, which, unlike other regulators and central banks, decided to skip siesta.
“What they have on other countries is that the accounting and regulatory framework has been awesome,” says one senior foreign banker in Madrid.
He later added, "dude, and their counter-cyclical generic loan-loss provisions were totally killer."

The Bank of Spain, ever the overbearing parent, made it prohibitively expensive for Santander to experiment with off-balance sheet gateway drugs like SIVs. SIVs were the main vehicles through which shitty banks invested in other shitty banks' mortgage backed securities like CDOs. They didn't have capital requirements, because they're not on-balance sheet, unless of course, oops, their funding dries up and their shittiness does in fact end up on-balance sheet, which is exactly what happened. And since no one held capital against them, their losses caused everyone to raise capital by selling into a falling market yay! If this doesn't make sense to you on any level, that's exactly the correct response. How these fucking things were legal in the first place I have no idea.

[above]: "Hey, it's cool, man. Standard and Poor's gave it AAA."

So while all the cool kids were out shooting up CDOs, Santander was at home doing homework and practicing clarinet like a loser.

Now, ironically enough, Santander is whining because all of their competition is on welfare, which leaves them at a disadvantage. Banker dude explains:
[T]he emergency nationalisations of US, UK and other European institutions – accompanied by capital injections – have had the perverse effect of making healthy Spanish banks appear short of capital when lists are drawn up and capital ratios compared by analysts. “What’s happening in Europe is that the shittiest banks got saved first,” says the foreign banker.
Trouble is also lurking at Spain's regional banks, the cajas del ahorros (which means "banks of the whore-ohs", I think), which invested in NOTHING BUT property. If they can weather this shitstorm, Spain will be well-placed to retake the colonies it lost in the Spanish-American War.

ha, what!?

The first huge, utterly tone-deaf, political error of Barack Obama's presidency with occur on, ha, day 1, giving Barry a fighting chance at alienating everyone but his retarded change-hugging base, just like his hero, George Bush. Rick Warren, who hates teh gays and agrees with Sean Hannity on everything, will give the invocation on inauguration day.

Ha, oh Obama, what the fuck are you doing? You won, you don't have to suck up to God anymore, or build bridges to nowhere to scumbags.

Watching them get booed by gays and their gay-loving friends on inauguration day will be hilarious.

Wednesday, December 17, 2008

Shorter Wolfgang Manchau

Complacency rules as time slips away
You're not freaking out nearly hard enough.

Douchebags

Former president of Cyprus Tassos Papadopoulos has died. He was famous for encouraging Greek Cypriots to vote "no" on a UN unification plan with the Turkish-controlled half of the island just before Cyprus joined the European Union. Everyone was behind this plan, which would have ended a conflict that has been frozen in place since 1974 and awarded the island with a big fat EU membership.

But no. Greek Cypriots voted 2/3 against the unification plan, leaving the Turkish half out of the EU when Cyprus joined in 2004. This complicated Turkey's membership talks with the EU, since it refused to open its ports to Greek Cyprus after it rejected the deal. Greek Cyprus can now block anything in doesn't like about Turkey in the EU, which is everything. Turkey likewises blocks anything Cyprus-related in NATO.

Greek Cyprus has since elected a Turkey-hugging socialist president, and things are slowly moving again, but the amount of damage left over from the Papadopoulos' "no" vote is immense. Everyone hates Cyprus because of him.

Strings, pushing on

Oh geez. The Fed shot its wad half way through the scene. Production on the set of Liquidity Traps #5 has ground to a halt. Gross.

For people who were awake during their introductory financial markets class, this is what the old boring person was getting at when he/she/it talked about "pushing on strings", the point at which conventional monetary becomes impotent (pff!). He then made a joke no one laughed at because we were all hungover and it wasn't funny.

Actually the effective Fed funds rate has been hovering just above zero for two months already, and we're already well into unconventional monetary policy territory. The Fed's balance sheet has exploded in size, which does matter.

But none of this means you still shouldn't pee your pants. Here's a(n) (un)helpful chart showing what the Fed is up against, comparing borrowing costs in the US with that of Japan during its embarrassing period of monetary inadequacy. If Japan was pushing on a string, the Fed is pushing on a string which will then strangle you and tie up your family.

Anyway, production of the latest Fed feature, Quantitative Easing #7, is set to begin shortly, where money will be printed and shoved in places you never thought possible.

Parallel universes

Known Senator Bob Corker (R-TN) demands to know when President Bush will stop letting unions, um, run the White House! Okay, um, what?
"The Bush administration has a historic opportunity over the next few days..." "The president has to decide: is he still running the White House or is the United Auto Workers?"
We've of course all been wondering the same, and finally someone with the stature of Mr. Corker has been bold enough to say it. When will Bush stop kowtowing to communosocioredistributizationalist unions, like he always does, because he's a pussy.

Everyone looks forward to hearing Mr. Corker's opinions on executive compensation structures, specifically the idea of bonus clawbacks, where not only will you not get a bonus for losing money, but you'll lose money from the previous bonus, because hey it turns out you didn't deserve it.

Republicans hate socialism when they're no longer in charge of it. Personal responsibility!

Redemptions

Hedge funds continue to refuse to let people have their money. They reason that for a small (large) fee, they can lose way more money than you can on your own, so deal with it.

John Authers' tales of dumbfuckery

John has a holiday roundup of your four biggest policymaking errors of 2008! uh, only four?
  1. Ben Bernanke and the Fed for totally wigging out in January and cutting interest rates too much after fears of the systemic consequences of a collapse of the monoline insurers (holy shit, remember those?). These cheap monies scared teh markets and led to a final wave of commodity speculation, because the BRICs were going to save us, remember. This was much like double-bouncing your little brother directly off of the trampoline.
  2. Jean-Claude Trichet and the ECB for actually raising interest rates 25bp in July, because its not like there was a credit crisis going on. The ECB hates inflation so much.
  3. Everyone in the US for letting Lehman collapse. I remember being in favor of this at the time, because, you know, capitalism. But then creative destruction immediately turned into regular destruction, with money and commercial paper markets seizing and all sorts of fun CDS contracts being breached that no one was ready for. The Fed has had the entire financial system on an intravenous drip ever since. The point is I'm dumb. More morphine please!
  4. The last d'oh! goes to the Bush administration, who else, for their impeccably designed rescue plans. The TARP bailout dealie was originally meant to recapitalize banks by having the Treasury buy their toxic (shitty) assets. Academic nerds said um hey, just give them the money then. So they did. But Treasury still said it was going to buy the shit, for price discovery, even though the price had long since been discovered at zero. Treasury then waited forever and finally said haha fuck it, not buying! This was all meant to calm teh markets which totally worked.
Mr. Authers rounds out the list with 2008's "most dramatic admission of error" from serial bubble-blower Alan Greenspan who said
"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself especially, are in a state of shocked disbelief."
This of course is not an admission of error at all.

We all remain in a state of shocked disbelief that a libertarian was in charge of the federally mandated institution designed to control our monied populations' baser instincts. Markets!

Shorter Goldman Sachs

Goldman predicts oil to hit $30 a barrel
Hey. Remember a few months ago when we were an investment bank and predicted that oil is going straight to $200 a barrel, because of decoupling? Ha, yea, well now we're not and no it isn't.

Auditing!

The auditing firm employed by superfraud Bill Madoff, to monitor his $50bn frauds, had exactly one room. Oversight!

Shorter Financial Times

Source of concern
In order to comply with arbitrary fair trade standards, garment manufacturers in huge labor-surplus countries have needlessly automated production, securing factory compliance and also that no one works there anymore. Hippies!

Tuesday, December 16, 2008

Ingrates

Juan Williams is upset the sand people don't appreciate how awesome the US occupation of Iraq has been for everyone there. Juan Williams is the liberal on Fox who balances out the conservatives, fairly.

Below is a helpful chart of the worst things that have ever happened to Iraq:
  1. Mongol invasion, 1258
  2. Iran-Iraq War, 1980-88
  3. US invasion/occupation, 2003-fuck knows
  4. Hans Blix, 2003
As you can see, the US invasion ranks third on the list of most horrible things ever, coming in just below the Iran-Iraq war which killed a million people or so, but far shy of the Mongol invasion, which killed everybody. Hans Blix of course killed only a few thousand, single-handedly, with boredom.

The point is you're not allowed to call people ingrates if the event they're ungrateful for has killed hundreds of thousands of them.

Dutch cut aid to Rwanda

Uh oh, no more ecstasy for you Rwanda. A UN report finds evidence of Rwandan government backing of Tutsi warlord Laurent Nkunda, which everyone knew already. Nkunda is a Tutsi warlord in eastern Congo and former intelligence officer in the RPF, the rebel group-turned political party that controls Rwanda. Nkunda's men have for years now been battling other warlords, former genocidaires, Indian peacekeepers, and Congo's make-believe army, in addition to committing horrible atrocities that are impossible to make fun of.

Rwanda's government will now bear the wrath of the Netherlands, which cannot stand idly by in the face of such effrontery, unless its at Srebrenica. More importantly, Laurent Nkunda, who insists on holding that stupid cane all the time, is a huge douchebag.

Rafael Correa has enough friends

Ecuadorian President Rafael Correa, the smarter, less ridiculous version of Hugo Chavez, has decided to send his creditors the sovereign debt equivalent of jingle mail, because fuck it why not.
Ecuador's refusal to meet the $30.6m payment on the country's Global 2012 bond, despite the fact that it has $5.65bn in cash reserves sent dollar-denominated debt prices down sharply.
Also Correa doesn't like the fact Ecuador uses the US dollar as its currency, which it adopted in 2000 under another administration. Even though Ecuador effectively imports US monetary policy, this apparently is not loose enough, so he wants a new shitty currency so people can run screaming from it. Correa has a Ph.D. in economics.

Countercyclicality, and other big words

The Economist has another fun article that NGO hippies should read. I know you all hate the IMF and bitch that it makes poorer countries enact austerity measures in a crisis, whereas rich countries can throw money at the problem til it goes away because why not. This is sort of true. But pretending like this is some sort of horrible injustice ignores the fact that these countries and their circumstances are, uh, TOTALLY DIFFERENT.

Counter-cyclical fiscal and monetary policy in a country suffering capital flight is a sure way to intensify it. Capital controls in an emergency are one option, but they, like your grandparents, are prone to leakage. Rich countries for the most part don't have to worry about any of this because people will keep lending to them, because they're rich assholes, so they can spend and print money like rich assholes because hey, fuck you.

The good news is that many a developing country, having learned this lesson the hard way in the late 90s, have shored up their finances, amassed sizable foreign currency reserves and can now borrow in their own currency thereby reducing the foreign currency debt which proved so destructive last time around. As the article points out, some can now afford to throw money around without provoking the wrath of nervous bond market nellies, just like rich assholes!

Hilariously enough, it looks as if anyone provokes wrath it will be the United States, which is looking to spend approximately one jillion dollars on its super Obama countercyclical whatnots. If I may quote from the renowned epic Hot Shots: Part Duex, "looks like the upper hand is on the other foot."

Frozen assets

The Economist has a super-fun spread on Iceland, which I gather is some sort of bank situated in the North Atlantic.

Iceland offers a kind lesson that developing countries seem to enjoy learning every decade or so, and then leverages up that awfulness several orders of magnitude. A huge current account deficit and lots of foreign currency debt left it looking vulnerable to a rout for years. Meanwhile its top three globe-trotting banks managed to grow to 9 times GDP. With virtually no deposit base and a teeny-weeny government behind them, since Iceland has like 38 people, they of course failed when capital markets seized. The currency, the krona, collapsed. The government then eated the banks and the currency collapsed some more. The total cost of the bailout is estimated to be some 80% of GDP, ensuring Iceland will remain in debt at least until Jesus comes back, who will then put them all in debtors' prison.

Iceland will be the IMF's bitch for the foreseeable future. They predict a 10% contraction in GDP next year. IMF nerds are all over monetary policy and don't want anyone touching it. Some suggest adopting the euro, but Iceland isn't a member of the European Union and unilateral euroization has too many vowels. Faced with this, many (7) Icelanders have already sold their igloos and fled west to Greenland and on to the New World where they will establish new shitty banks.

You'd think this situation would gain some sympathy, but the fact is everyone hates Iceland and is going to sue them for losing their money investing in glaciers or whatever. Landsbanki, desperate to shore up capital, came up with Icesave, which offered high yield savings accounts to idiots in Europe, who, being idiots, gave them all their money. Britain is leading the charge to get their dumb money back. But...
A report in Morgunbladid, a national newspaper, claimed that relative to Iceland’s size, the debt to Icesave depositors is bigger than the reparations demanded of Germany by the Treaty of Versailles.
So if we follow this analogy correctly, we should invade Iceland right now because they're all going to become Nazis.

Saturday, December 13, 2008

why i hate Crooks and Liars sometimes...

Reading the liberal blogs for political news is good. Reading them for the economics, not so much.

"Bamboozled": Fed refuses to disclose recipients of $2 trillion in loans

Who could have predicted that the Federal Reserve would abuse its authority by giving away over $2 trillion in "emergency loans" and then refuse to disclose the recipients of those loans when faced with a FOIA request by Bloomberg?

Bloomberg
:

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC, which oversees $22 billion in assets.

Hmmm... I wonder why they would want to hide from the public who is getting all that money? It's sometimes hard to wrap your head around that huge sum of money, but when all is said and done, that is our money. We deserve to know who's getting it.

Okay, not to deny there are legitimate issues here, but there is in fact such a thing as a stigma for taking part in any number of the Fed's emergency swap and liquidity programs: the TAF, the TALF, the AMLF, the PDCF, the TSLF, the CPFF, the MMIFF, and soon, if god loves us, the MILF. Someone points this out in the Bloomberg article.

The purpose of these is to stop the panic. The Fed has had the entire financial system on life support. Its pretty hard to overstate how insane it is that the Fed has to step in to support commercial paper and money markets which are super short-term. Will it work? Who the fuck knows. The worry though is that if it becomes known a company is backed by one of these programs it will trigger a further credit freeze which will then really piss away taxpayer money, undermining the whole purpose of the program in the first place. Is this true/likely? Super smartypants Willem Buiter actually calls bullshit on the entire stigma argument. But the Fed seems to not want to risk finding out. Central banks everywhere have in fact designed these things to avoid creating a stigma for participants, so at the very least its no idle concern.

It would be nice to acknowledge this stuff instead of doing the snotty "Hmmm... I wonder why they would want to hide?" thing. We can argue over which company accessed the CPFF when we're all hobos dueling over tins of baked beans. Besides, everyone knows they gave the money to Halliburton to renovate Milton Friedman's grave.

German socialist refuses to be socialist

Haha I guess its not cool when everyone else is doing it. Peer Steinbrueck, the SPD finance minister in the coalition government of Germany, refuses to give everyone money like every other country is doing because he's a dick. And its funny because Germany has a huge current account surplus and solid public finances so it would be totally easy to. Aber nein! Even though German factory orders just collapsed and the eurozone is in recession, its still more fun to piss of poser socialists like Hank Paulson and Nicolas Sarkozy yay!

Greece besieged by Underpants Gnomes

A week ago 15 year old boy was killed by Greek police, two of whom were arrested. Not really clear what happened yet, but that is NOT an excuse to postpone the revolution! Somehow this has translated into massive, violent protests against the center-right government, which has been shitty the whole time, even when police weren't massacring children.

As everyone already knows, nothing will speed along social progress like setting fire to a Starbucks or a bank.

Oh fuck! Fitch downgrades Mongolia!

sell yurt futures!

Numbers that dont go where you want, part Eleventy Billion

China's exports fall for the first time in 7 years, down 2.2% on a year earlier. Perhaps more amazing is that this is worse than what the government was expecting. China's economics statistics have a reputation for being given a sensual Asian massage before publication, since you know, China is still a communocapitalist dictatorship sort of. Its all about the social stability, and icky politically sensitive export numbers are not conducive to that, no sir!

So, like every government everywhere, China's will be expected to "do something", which of course means holding the yuan down and giving state aid to exporters, so they can keep selling Americans shit they still cant afford anyway, and Long Beach will sink under the weight of unclaimed Happy Meal toys, the end.

Shorter Congressional TARP Oversight Panel:

Call to step up scrutiny of rescued banks
"hahaha, you guys have no fucking idea what you're doing, do you? pfff."

Our Great Depression Re-Enactment of 2008 is well over a year old now, stumbling around the kitchen and pooping all over itself. Ample opportunities to organize some sort of cohesive, predictable response to the next big-ass bank failure that everyone knows is coming have been squandered, like so many opportunities to smack your disgusting pooping children.

The Citigroup deal (Geithner!) was the latest face-plant. Aside from sparing shareholders, Citi's "bad" (shitty) assets were not "ring-fenced" into a likewise "bad" (shitty) bank, a la Sweden's super-awesome bank restructurings of 1990something, so there' s no guarantee Citi wont be back in Washington in a few months (days) creepily asking to blow everyone walking in or out of the Treasury Dept. for $5. Schnergen!

So everyone is left to deal with same uncertainty post-bailout, and the ultimate question, who will eat the giant CDO shit sandwich?, is no closer to being answered. If (a) bank(s) fail(s) tomorrow, no one can say with any confidence how a rescue will look, or even what sex it is. So everyone will continue peeing their pants, interbank rates will go all Viagra, and the credit crisis will grow into the smelly annoying kid who sucked-ass at kickball.

Gideon Rachman vs. The Internet

hahaha, oh man. Mild-mannered Gideon Rachman at the Financial Times had the temerity to ask in extremely boring non-threatening terms whether it was conceivably possible to maybe think of a sort of world government in the future sort of almost. cuz we already have the European Court of Justice, which was established solely to make Irish people marry gay foreigners.

If you're sane, the correct answer is, "Meh, probably not, but who cares. Where the fuck is Gillian Tett?!"

But if you're not, the argument doesn't matter, because Gideon used the wrong words. You know which ones! His inbox was brutally ambushed that evening by wingtards of all stripes, who united to bravely defend the world against the NAFTA superhighway, which if it existed would traitorously allow people to drive on it.

Well, now that you know these people exist dude, imagine what it's like working with them, i.e. pretty much every ex-military white guy over 40 in the south. Not fun.

pointlessly arguing pointless arguments

I usually like reading John Aravosis, but then he goes and writes stuff like this, which reads like its straight out of wingnut land circa 2003, before Earth exploded forever.
When I read about people like Mugabe in Zimbabwe, I'm hard pressed to find an argument against just killing the guy. Putting geo-political costs and benefits aside (e.g., will the situation truly improve if Mugabe is disposed of (think Iraq post-Saddam, not necessarily better)), the question I'd like us to consider is, morally it is acceptable to simply have Mugabe killed?
Hard pressed? uh, aside from every news story from the middle east you've seen in the last 5 years?
Yes, it's a stark question, but I think it's an important one.
Yes, its a stark question, only if looked at in total isolation. Questions like those are best asked drunk in your dorm room. And no, its not important if you ignore costs and benefits, which he acknowledges, because no one with the power to assassinate Mugabe will ever do so without weighing costs and benefits, regardless of legality.

The post gets worse, contemplating the assassination of former president of South Africa Thabo Mbeki for his retarded AIDS policy. Assassinating someone whose party won roughly a billion percent of the vote in the last election might complicate things.