Saturday, September 19, 2009

SAR #9261/Weekender

This is not the moment of truth; truth has nothing to do with it.

Confusion: The government reports initial unemployment claims fell 12,000 last week, while the number seeking continuing unemployment payments increased 129,000. Did unemployment go up or down? Are things better or worse? Who's on first?

Nose Holding: It is pretty clear that any healthcare bill will be a disappointment, falling far short of meaningful reform. How bad does a bill have to be to make it too bad to vote for? How much money must we give the insurance companies? What's the maximum number of Americans we're willing to let die unnecessarily just because they're unemployed or poor?

Plus ça change, plus c'est la même chose: Yes, the rich still run the United States. And most other places...

Recovery, Oh Boy!: Household debt (mortgages and consumer credit) is down 7% to only 120% of disposable income. The recession may technically be over, but the consumer is in no position to demand anything but relief.

Because I Said So: Taking a very broad reading of its authority to oversee the soundness of the nation's banking system, the Fed is going to place regulators directly inside banks to monitor pay and bonus agreements. And they can, because they say they can. And because they control the money.

Check's in the Mail: The Chinese central bank said the country’s economy surged at an annualized rate of 14.9 percent in the second quarter. Bush said Saddam had WMD.

A Quote: “The government's programs and promises to return the country to 'economic growth' is nothing but a con. And it is every bit in the nature of the government to prolong the con, since the country ceased being a functioning democracy long ago. Indeed, we aren't even a capitalist country anymore.” And there will be no recovery, either.

Wobble: The Arctic ice cap did not shrink as much this year as in the last two years, but was the third smallest minimum in history, 24% smaller than the 1979-2000 average. The reason for the pause in the progressive decline in ice coverage was not yet understood.

Peace Victory in Our Time: US General Petraeus acknowledges that the situation in Afghanistan is getting worse, but says the mission is still “do-able”. British Chief of Staff Richards warns that a failure to prevail ( aka defeat) would have an "enduring grand strategic impact" on Britain's global reputation and would embolden terrorists. He's sure the allies will eventually stumble into a workable strategy. General McChrystal, our man in Afghanistan, wants 30,000 40,000 more soldiers, bringing the total to 100,000. There were only 30,000 in January. Yet McChrystal admits there are no signs of al Qaeda's presence in Afghanistan, even though the Taliban control 80% of the country. Yet we must stay to honor our dead by adding to their number.

Multiple Choice: The future (a) will be, (b) could be, (c) might be, (d) should be, or (e) will not be better than today.

What's In the Bag, Little Girl ? When Wachovia moved in with Wells Fargo after their shotgun marriage, a trunk full of credit default swaps on the weakest parts of Wachovia's commercial mortgage-backed securities was part of the deal. Turns out to be a surprise package, and Wells has no idea yet on how big an exposure it has inherited.

Look Out!: Nobel-winning former World Bank head Joseph Stiglitz didn't get the memo. He says there will be more economic turbulence, that the recession will worsen and will last until at least 2012. He also said bad things about the continued existence of complex derivatives which are not in the public's interest.

Don't Touch That Dial: The unemployment rate, the housing debacle, and the declining consumer economy are inescapably intertwined on a downward spiral, even as those in white shirts and ties declare the recession over. Maybe so, but I'd keep an eye out for the buildup of social tensions between the pain and suffering of the many and the obnoxious bravado of those who want to prevent the government from providing any social assistance. Stay tuned.


K Ackermann said...

There is no evidence of the earnings the market has priced in. Some of that can be accounted for in the ZIRP driving money to the markets, but at some point overbought reaches a level that puts everybody on edge.

If there is still nothing but air under the markets when nerves start fraying, then everyone will be in a hurry to take down profits.

This could have a huge psychological effect on businesses who have been holding out on the hope that real recovery is close. They will dig in for a long slog, and unemployment will spike from an already high level.

There is some point where deflation turns cyclical. I don't know where it is, but I hate the fact that we may be tempting it.

This course of reflation we are on screams danger, IMO. We are still wildly deleveraging. No one is even hinting that the end of foreclosures is near. The list of troubled banks is growing, not shrinking.

To me, it seems obvious that deleveraging has to run its course before any thought of blowing another bubble can happen. They are digging the hole as fast as it can be filled in. This is all for the banks, and their interest happens to coincide with short term political interests too. That is a lousy combination.

CKMichaelson said...

KA - Ah, I wish you'd stop stealling my stuff... But you are quite right in your concers and I'll be beating that drum some more come Monday.

You can snack on this Michael Panzner item in the meantime, especially the stuff from “Breakfast with Dave.” (


Namke von Federlein said...

Hi ckm;

I enjoyed the link to Confusion. I thought about something for a while about a decade or two ago : Why is it that top business people are ignoring the huge warning signs of collapse in just about every form (economic, social, political and even spiritual).

My current working hypothesis is something rather obvious : Armageddon is the desired outcome. It is a huge human emotional desire.

In most religions, faith is all you need to get your 'eternal reward in heaven guarantee' and Armageddon (in whatever form) is the day when all those pesky people you don't personally like get annihilated and you live happily ever after in heaven - forever.

In business this takes the form of 'supply and demand'. Annihilate the supply (by turning useful stuff into completely toxic stuff) and you increase your profit margin and power.

In other words (in business) annihilation of resources (called consumption today) is the desired outcome. It is really hard to increase demand but it is really easy to reduce supply.

Both groups share the same thought - they'll be dead before it gets really horrible so a decent future doesn't matter anyway. They've got their 'heaven guarantee' or 'heaven on Earth guarantee'. If 10 year olds want a better future then they simply have to wrest power out of the hands of the power brokers in business, government, crime and the military. Natural selection.

And current technology is making the poor 'a useless burden'. You used to need the dexterity of masses of poor people to clean your facilities, make stuff and fight wars. Now you need masses of machines. So (their thinking) - why not let the poor become extinct through natural selection? You don't need a lot of humans now. Keep a few poor humans as handy worker-bees and pets and the social justice is perfect - they get food, clothing, shelter and whatever education they need to fulfil your wishes efficiently.

So my big question is - What can anybody do to change the burning emotional desire that most people have - consciously or subconsciously - to help to *make* the world end ASAP?

In my opinion, there is only one way - the butterfly effect. Finding the small input to the system that can produce a large enough reaction to turn an (IMHO) insane process of destruction into a positive and sustainable process with a self-policing feedback loop.

Perhaps sensible people were hoping that President Obama could be this small input to the system. For now at least, it looks like it will be a different 'small input'. We'll see.

Thanks for a great blog!