Saturday, July 24, 2010

SAR #10205

Whatever theory they're using isn't working.

Deconstruction:  Fannie and Freddie are a bad idea that didn't – couldn't – work.   They're going to cost the taxpayers a half-trillion dollars as they flounder into failure.  But no one knows what comes next. They are the entire US housing market.  They don't work, but US housing doesn't work without them.  Your move.

Oil on Troubled Waters:  American academics are shocked to learn that BP is buying up scientific experts ahead of years of lawsuits.  Research into freeze-dried water continues.

Missing Data:  How can economists model the economy if they do not consider the limits placed on economic systems by declining energy resources?  If the economy runs on oil and oil is running out, don't you think there's going to be some deleterious effects along the way?  But no, their answer is that higher prices for oil will make more oil appear. Shazam!

Healthy Insurers:  Blue Cross/Blue Shield insurers are sitting on piles of cash more than three times the amount they need – yet they keep raising our rates 20% a year.

Freedom From Information:  The Australian government redacted 90% of a document outlining its plan to monitor citizens' use of the internet, claiming they did so to “prevent premature unnecessary debate.”  As opposed to timely unnecessary debate.

On the Border:  Venezuela, acting “out of dignity” has broken off diplomatic relations with Colombia.  Why do I suspect the US is involved in this in some way?

Smoke and Mirrors:  Just as pension management used to pretend solvency by “assuming” 20 consecutive years of whatever rate of return was necessary to keep up the charade, banks are now making useful adjustments to their anticipated loss rates.  Neither approach should be confused with events in the real world.

Nothing Left to Lose:  “We don’t know how well the plan would actually work — but there’s no harm in trying...” Paul Krugman.

Go Away!  Population growth is the biggest problem facing us.  The resources do not exist to raise the current poor to a decent level of existence and we're adding 220,000 a day.  The only way the earth can support mankind is for there to be a lot fewer of us.  If we can't feed 11 billion, there won't be 11 billion very long.

More Non-Evidence:  Everywhere the US Army goes it sprays depleted uranium projectiles.  Later on when the birth deformities and cancer rates skyrocket, there's never any connection. Fallujah is just the latest iteration, where the people of Fallujah are experiencing higher rates of cancer, leukemia, infant mortality, and sexual mutations than those recorded among survivors in Hiroshima and Nagasaki.

Over There:  Chinese banks will be lucky to get back 27% of the $1.1 trillion they've lent to local governments for infrastructure projects. What's 'bailout' in Mandarin?

In Outline:  Atmospheric CO2, after being stable for several hundred thousand years, began rising with the Industrial Revolution, has now increased by 40%, and is still rising.  Temperature, too, follows the same trend. (Increasing CO2 leads to increased temperature.)  Long term factors cannot explain short term effects.  The penalties for continuing 'business as usual' are immense, nearly infinite.  Vested interest in the carbon economy are short-sighted, self-centered, and well-funded.  And greedy, very, very greedy.

Asked & Answered:  Were the HAMP mortgage modifications worth all the hype, did they accomplish anything?   Nope.

Porn O'Graph:  Fever, we give us fever.


Vitus said...

"Fannie and Freddie...are the entire housing market... US housing doesn't work without them."

A true fact, as we used to say in sixth grade. If you want to pick a salient idea to discuss to illustrate the "new normal" this is it.

Pet peeve: The why banks aren't lending issue. They haven't "lent: for years. Since the late 80's, it's been originate and sell. It's still the mode, except the only buyer is the government, ie, Fannie/Freddie.

Rumor has it that there is a bank somewhere in North Dakota which does keep loans on it's books.

Charles Kingsley Michaelson, III said...

Vitus - Good point. I hadn't realized it until just now, but banks don't actually loan (their) money these days, all they do is act as a broker between the borrower and the buyer of the note.

And I know a bank in Upstate New York that keeps 100% of its mortgages. Makes them real careful about the ones they write, gives them few if any losses. They may not make as much money as the churn/brokers, but they don't lose as much, either.


ibilln said...

Ok, that's two known banks who keep their loans on their books.

Why is it that all such banks are out "in the sticks"? Random blather about this stuff at

Anonymous said...

We're out fiddling, the world teeters toward conflagration on multiple fronts, and this lil' Kim "mini-me" fellah threatens to take the entire doomer punchbowl away in one go:

"North Korea Vows Nuclear Response If US-Seoul Drills Happen This Weekend"

Jes' when I had my heart set on whimper he blows his l'il whistle and orders everyone outta the pool...


Charles Kingsley Michaelson, III said...

Vitus - Long story: The general myth is that the Great Depression was ended by WWII, but in many rural areas – certainly the one I grew up in – the Depression was only interrupted, not ended by WWII. When 'the boys' came home” they came home to the same general situation they left. Farms were farms, small towns were small towns. The few factory jobs that sprang up in the local area had been war production related and went away quickly.

There was a bit more money around, but most of it was spent buying stuff made elsewhere – and rural America continued to be rural America. The rural America that was still living the lessons of the Great Depression.

Children who grew up there, then, tended to learn the same lessons their parents had in the 1930's – about credit, about fiscal responsibility. And those few (born in the 50's more or less) who got a job at the local bank grew up to become conservative bankers with depression era scars. If their bank was not gobbled up by Engulf & Devour Bankholders, Inc. of Atlanta, they are still at it today, making careful loans and happy to be comfortably rewarded for providing a community service.

Sounds like science fiction, except I'm talking about – among others – my brother-in-law.


ibilln said...

CKM - Wonderful note.

OSR said...

The fact that the planet is reaching its carrying capacity, with respect to humans, is starting to become painfully obvious. A sobering exercise is to treat the world population as a dependent function of aggregate petroleum consumption, which it ultimately is. As we slide down the oil peak, the required decline in population is dramatic. Barring a new green revolution or a reversion of the first world to third world consumption patterns, this rough estimate will likely prove itself out.

Now, if you buy the above, remember, the gov't, the oil companies, and banks have been looking at the real oil consumption/production numbers for years. How much of their behavior and policy today is dictated by the knowledge of what's coming tomorrow? Quite a bit, I'm afraid.