Friday, February 12, 2010

SAR #10043

There's a difference between 'say' and 'do'.

Exceptionalism:  Why does the US get away with doing the same thing the Greeks are doing?  Because the US has never repudiated a penny of its debts, while the Greeks do so on a regular basis.  The US simply slowly erodes away its debts with relentless inflation.  All governments eventually default, including the United States – but better to do it slowly, so as not to scare the horses.

Back to the Future:  Republicans say they want to start all over and “do healthcare right.”  They said the same thing in 1994.  While 63% of all voters want comprehensive health care reform, the GOP does not.

Arcana:  The Fed has approved membership in the Federal Reserve System for a subsidiary of the Depository Trust & Clearing Corporation – the Trade Information Warehouse – as the legally accepted global repository for over-the-counter credit derivative transactions.  This membership means the Fed will guarantee all CDS transactions through the Warehouse.  That's a “gross notional value of $25 trillion”, and whatever portion of that goes south will be made whole by the taxpayer.

Fact Check: When Obama cited a 4% to 7% savings rate as “high”, he misspoke.  Yes, the administration would like to see the consumer consuming and running up more debt, not saving money, but 4 to 7 percent is not - historically – high. 10% is about average.  It's his way of paraphrasing his predecessor's urging the citizenry to get out there and shop.

Unbiased View: T he head of Russia's Gazprom has advised the UK that plans for thousands of wind farms should be scrapped in favor of building more gas-fired plants.  And he knows where they can get some gas, too.

Ups'n Downs:  While January's foreclosure filings were down 10% m/m from December, the experts say the same thing happened last year and foreclosures will surge this spring as attempts to put off the inevitable phase out.

Complexity and Dependence:  Our ancestors had the knowledge and skills to walk into the forest with an ax, a rifle and some livestock and make a life.  Today, if the power goes off we become nervous, worried that the TV and the Internet might be off for hours.  For most of us, it is the government that makes civilization possible - water, sewers, public health, roads, buses, and yes, even snow plows.  What will we do when the complex interdependent network that makes the whole thing work stops working? How much of it should we let the GOP starve?

Footwork:  Fannie and Freddie are planning to buy back from their mortgage-based securitizations those loans that are 120 days or more delinquent.  They will, of course, pay 100 cents on the dollar and end up sitting on stack of relatively worthless mortgages.  This accomplishes two things – it increases the marketability of their MBS and masks the continuing deterioration of the housing markets.

Up, Up and Away: In the Sierra Nevada, over the last 35 years various butterfly species have moved ever higher up the mountains to escape warmer temperatures in their original habitats.  Those that reach the mountaintops, having done the best they can, have "nowhere else to go but heaven."

Mistaken Identity: The war on terror has actually been a war on the Constitution.  The loss of habeas corpus was bad enough, but it was followed by indefinite incarceration without a trial or even charges.  And torture.  Now it is “defined policy” that the U.S. government can murder its own citizens abroad on the sole basis of some unidentified authority judging them to be a threat to the Constitutive.  No arrest, no trial, no conviction - just execution on suspicion of being a threat.  Previously, citizens (at Waco and Ruby Ridge) were killed by accident.  Now it's policy.

Hide in Plain Sight:  Why is there a large 'shadow inventory' of not-quite foreclosed houses?  Because keeping the house in the owner's name lets the bank duck the taxes, avoid paying the utilities and any homeowner's fees, and skimp on maintenance.  But the biggie is that they don't have to take the loss and if they own other houses in the neighborhood, it helps artificially keep up appearances and prices.  But the gap ( pretty chart) between serious delinquencies (about 6.5%) and foreclosures (at 2.5%) insures that the un-foreclosed cannot stay that way forever.


Cougian said...

If you mail the keys to the bank, can they mail them back to you?

Charles Kingsley Michaelson, III said...

In a sense, yes they can 'mail them back'. It doesn't matter if you're living in the house or not, what matters is whether or not the mortgage holder files the paperwork to foreclose or not. As long as they do not, you own the place and are responsible for the bills, etc.

There's an item out today (Calculated Risk?) about Citi's plan where they end up paying you to live there for another six months, which says something about the backlog of forclosures.


Anonymous said...


A much unexplored side effect of Complexity, is the fact that we develop complex systems only from the viewpoint of how they will benefit us, not how they might be used to do us harm. A perfect example is the 9/11 disaster where complex systems used to transport people were easily and cheaply converted into guided missiles that did incredible damage. The airliner systems were never built to prevent such uses nor were all the possible damaging uses of aircraft ever considered by the designers.

Thus it goes, we continue with our Progress and Complexity only looking at the profit, never considering the Loss and insuring against it. As these systems become even more powerful and complex, they can do greater and greater damage. (See current Financial Disaster aided and abetted by new and improved networked super computers.)

So when biotech and nanotech really get up and running, you will have seen nothing yet as far as damaging Complexity. The Financial Disaster is a forerunner of this, yet none seem to see that.

Anonymous said...


Here is some more complexity to make you shudder. High frequency trading is available in your neighborhood and in your home NOW:
Take a look at the tutorials and see if that does not scare the hell out of you.

Meanwhile, in those biolabs folks now have at home............

kwark said...

RE Back to the Future Uh huh. Just more empty blather. The so-called health care "debate" is actually a huge, multi-act play, enacted to confuse and divide the public. The script allows for "cover" for the Dems (the "well, we tried" line) while simultaneously providing ammunition for the Repugs to blame the Dems for anything and everything. Meanwhile, a totally confused public is left ripe for further empty rhetoric and "fixes" that provide additional slick methods to steal more from the public's pockets and the public coffers.

PeeDee said...

"Because the US has never repudiated a penny of its debts..."

Reinhart & Rogoff, p. 113: The United States refused to pay Panama the annuity in gold that was due to Panama according to a 1903 treaty. The dispute was settled in 1936...

That looks like a default to me...