Wednesday, December 16, 2009

SAR #9351

Panics start small and spread rapidly.

TRAP:   Now that even the deathly ill big banks are paying back the TARP funds it's time to ask what just happened. We gave the failing banks literally trillions of dollars both directly and in guarantees. In return they played charades for a few months, bought back their freedom to loot and now everything is back where we started. They are still too big to fail and still unregulated and unreformed. Anybody know what we got out of this? (Screwed is right, but I was looking for a more elegant explanation.)

The Silenced Majority:   In the US, where the majority has no political impact, 38% oppose and 55% of Americans would support a legally enforceable global treaty requiring the US to significantly reduce greenhouse gas emissions. These are the same folks who want universal single-payer healthcare, regulation of banks, and the lesser half of the country to learn to read and write.

Another Series:   Where does the US rank on a list of countries likely to default in 2010?

Panic Predicted:   The Peterson-Pew Commission on Budget Reform predicts that if the US does not get its ballooning debt under control there will be panic in the financial markets, driving down the dollar and forcing up interest rates. Guess we're in for higher interest rates.

More of a Bad Idea:   Various of our betters are trying to figure out how to 'save' Fannie and Freddie. They are on government-sponsored life support and need more of it, but the pundits say we must set them free. But only a little free for there must be “enough government involvement to ensure that 30-year fixed mortgages remain available to most Americans.” When is it going to sink in that “most Americans” shouldn't get 30-year mortgages until they get jobs, that not everyone should own a home, or that a house is a place to live, neither a castle nor an investment? But most of the discussion acknowledges that the American housing market cannot stand on its own without massive overt and covert government subsidies.

Another Paradox:   I'd just got the concept of the Paradox of Thrift down (individual saving is good, individuals saving is bad – never mind that saving is supposed to build capital....) when along comes the Paradox of Toil, where lowering taxes makes more people want to work and this increased competition lowers the wages and reduces the desire to work. Economists sit around and think these things up – when they have jobs. If they don't have jobs, they take the work and to hell with the taxes.

Happy Days:   We have replaced over-leveraged banks with over-leveraged governments. Everyone fears the collapse of Greece because its deficit is a whopping 10.9% of GDP. The US is looking at a deficit that will be 11.2% of GDP, making some of the graybeards worry about “catastrophic budget failure".

Civics Lesson:   In the US, corporations have pooled together to run two political parties. The Republican Party, which advocates turning our lives and fortunes directly over to Wall Street, and the Democrats, who advocate tuning our lives and fortunes over to them so they can turn them over to Wall Street.

Acid Indigestion:   The world's oceans are 36% more acidic today than at the beginning of the industrial revolution, and are becoming more acidic at a faster rate than at any time in the last 55 million years. This threatens a collapse of marine life and the food supplies drawn from the oceans. And it is happening because the oceans are absorbing part of the ever more abundant CO2 from the atmosphere.

Lisbon Rules:   Those few, those happy few who remember the Magna Carta have awoken to find that in the new Europe, the system is rules in favor of those who control the system, and whatever rights the citizen may have are on loan and not inherent to free men. Just like on this side of the Atlantic.

On a Dime: 1  2,800 years ago the northern hemisphere went from warm and sunny like today to an ice age – in six months. When climate scientists talk about 'tipping points', this is what they have in mind. It was caused by a sudden slowdown in the Gulf Stream. It is possible (just barely?) that the melting of the Greenland glaciers and Arctic Ice could do the same thing again. Be funny if global warming lead to global cooling.

Porn O'Graph:   The slip between cup and lip.


fajensen said...

The Circle of Fraud: Banks leave TARP, Pays out Huge Bonuses, then "lose" more money and go back into TARP-II next year, around March probably, then transfer the next tranche of TARP loot to the bonus account, out of TARP-II, pay huge bonuses ... e.t.c.

lineside said...


re "trapped" and other items touching on the financial crisis/bailout:

we should have let the banks' shareholders, creditors and management take the pain, as is supposed to happen when businesses fail. instead, we have taxpayers taking the pain and bankers borrowing from the fed for 0% and lending it back to the taxpayer at interest, making billions in the process!!

our elected representatives, in both parties, are either stupid or corrupt in letting this happen. i believe they are both. it is indeed a ripoff unlike any seen in modern history.

and ck you should know that those of us that lean somewhat to the right are as disgusted by this and as hopping mad as anyone on the left.-


Rolandovich said...


This financial fiasco (I don't know what we should be calling it these days--thoughts CKM?) draws the disgust of the entire political spectrum.

In my darker hours, it doesn't matter because my own personal nihilism precludes hope altogether. However, in the few moments when perhaps the Christmas lights brighten an otherwise dreary northwestern evening, I can imagine it uniting those silly rationalistas into doing something about it. It certainly has become a unifying set of events for those who are paying attention and avoiding the hyperbolic political grandstanding on the 24 hour cable news cycle.

It may yet become even more so--especially given that government at all levels have certainly decided to throw in their lot against their constituents.

Eric Hacker said...

Re: On a dime

If the gulf stream is slowed by the melting of Greenland, it will not cause global cooling. The cooling would be the most in western Europe. All that heat that the gulf stream moves now will still be in the biosphere; it will just be somewhere else.

The only way the globe would cool more is if snowfall increased dramatically to reflect more sunlight. Given that the existing warming and the black carbon are fighting strong deterrents to lots of snow, that it unlikely.

CKMichaelson said...

EH - I knew better when I wrote the damned thing, but "global warming to global cooling" just balanced so much better than "global warming to a disruption in the Northern Hemisphere's heat distribution networks." Style over substance, just like in Washington...

TulsaTime said...

I do believe that the plutocrats have bought in to the end of expansion as the natural order. In an expanding world, profit, or rather the illusion of, can be used as a preferred method of plunder. A steady or contracting state of affairs means that gains for some have to be losses for others.

tarp trap crap: we 'got' our social contract downsized and outsourced, we got our eyes opened to the way the game is really played,and we got a new set of acronyms

Steven said...

The government has thrown so much money at the problems that it has temporarily stabilized the economy. But this comes with a lot of consequences, and the current expansion of the money supply is not sustainable because it will kill the value of the dollar and create a big inflation problem in a few years. That is why I feel gold is one of the best asset classes to invest in currently given its safe haven status and that it is denominated in dollars. Here is a further discussion on these issues and its potential effects on the Gold Price Wobbles Under $1,130 But U.S. Dollar Future Bleak, which analyzes the relationship between the dollar, the gold price, and gold mining companies as a result of the Federal Reserve's monetary policies. I thought it was especially helpful for investors to read to get a better sense of the inter-connectedness between these asset classes given all the uncertainty in the economy.