Market dudnt seem to mind. In fact, you could intone that they akshully like it. And since my 401K is wrapped up in Wall St., I care not a whit what Nobelly Krug says.
What we need is for the government to take control of the major industries -- the commanding heights, if you will -- to make sure they are run in the public interest. Hand over control of the economy to our best and brightest economists, like Krugman, and have them produce and update a master Plan at regular intervals. I suggest five years.
While I hate fabian socialism, the reality is that an obscured, oligopolic crony "capitalism" based system does no better. We have to seriously question our assumptions about the best mix of systems to balance our inherent human behaviors in the current world.
In other words we should do exactly what we've been doing since the early 80s?
I wish he would give more justification for simply doing more of the same especially given the apparent decrease in the marginal utility of debt as an instrument of generating economic activity.
So Geithner is really smart but try not to focus on the fact that he's been asleep for the last few years. These guys are such clowns. Nice rally today. Fun stuff
"The banking system, the way we have it, is a monstrous giant built on feet of clay. And if that topples, we're gone."
- Nasim Nicholas Taleb author of The Black Swa
Geithner's autobiography is already in the works: "When Genius Was Promoted: The story of incompetence at the NY Fed and How It Helped Me Get a better job."
Well, that was helpful (not): ElliotWave (subscriber only) said just now that Friday marked the bottom of wave 5 (i.e., the short-term down leg ended on Friday).
I should have listened to my wife, instead, who said on Friday morning, 'Good enough, Dear, cover our shorts!
I guess an interesting question is if (a big if, that I accept as true) a bailout of some form was necessary for Citi, and quickly, does a badly negotiated but still necessary bailout turn into something that shouldn't have been done at all?
If Citi went into bankruptcy or counterparties stopped interacting, surely all can agree (right?) this would be very bad for the world's economy - not just the US.
I don't think the rest of Wall Street (GS, JPM, et. al) could survive the lack of confidence that a Citi bankruptcy would bring.
While I hate fabian socialism, the reality is that an obscured, oligopolic crony "capitalism" based system does no better. We have to seriously question our assumptions about the best mix of systems to balance our inherent human behaviors in the current world.
It seems to me that our failure was not learning from history and taking the appropriate action to preserve a system that did appear to be working reasonably well overall.
Given the things that our system has done for people in the past (at least its own citizens) I have a hard time being critical of it on the whole, except for more recently as circumstance seems to merit.
According to the interpretations I have read, the fall of Rome in many ways seems to have been a story of complacency and a loss of interest and respect for the very social and economic mechanisms that originally brought about that success.
Is it conceivable that something like this is happening now in the US?
For example, are we suffering now simply because we have recently forsaken attitudes about debt that served us well in the past?
I don't think the rest of Wall Street (GS, JPM, et. al) could survive the lack of confidence that a Citi bankruptcy would bring.
JimPortlandOR
Probably true, but then why not announce that they're working on a solid solution and take the necessary time, unless the goal is merely to transfer the burden to the government? What do they gain by this hurried solution that puts the burden on the taxpayer?
So the $500b is new jobs and job retention? Thank gawd we are getting away from the whole, "Mail them a check" wishful thinking plan.
I am of the opinion that people with jobs and some sense of security will actually foster a decent, if more tame, economy. Do nothing and it will just get ugly. Interestingly, Greg Mankiw has something to say about the stimulus, if any follow his ite.
They are not going to survive anyway, at least not without their own explicit bailouts/backstops. The idiots in Washington are only prolonging the now inevitable collapse of all the big banks.
Dante Alighieri: Citi ran out of time when their stock got below $5. This foreclosed further capital stock sales and probably scared their note holders greatly. Time was not available under these circumstances.
I think a government seizure of the bank (intact, ala 1930's banks) might have worked, but a bankruptcy takes a long time in a complicated-structure firm. Them markets would not wait.
What y'all think about GRZZX? haven't bought any but I don't like those inverse ETF's short or long. They don't reflect the true price of the indexes. Is there any ultra bull funds left?
Correction "bankers are gonna end up in incinerators before this is over"
The problem is that bakers have no real power in a fiat currency based consumer economy. They used to have real power in mercantile and gold standard based economies. Today we can replace them with trained monkeys and the system will still work, as long as we have electronic systems and printing presses.
"The banking system, the way we have it, is a monstrous giant built on feet of clay. And if that topples, we're gone."
- Nasim Nicholas Taleb author of The Black Swa
True, but this failure didn't happen over night. I suppose Citi (and many others) are hiding their true condition until they can't anymore, then they run to the government when things get out of hand. But the government does employ regulators tasked with policing these institutions. They are close to useless.
I am of the opinion that people with jobs and some sense of security will actually foster a decent, if more tame, economy. Do nothing and it will just get ugly.
No doubt it will get ugly if we do nothing. That's never been the real issue.
The real question IMO is will it get even uglier down the road when people realize the government has made massive obligations that it can't keep and/or that they are working in exchange for something of fictional value.
There is a history of fiscal crises and political collapse in the real world that suggest there are perhaps worse types of ugly than simply doing nothing.
That's not quite the same thing as saying doing nothing is the best option. But if we don't have some reasonable framework for believing that something we do won't make things substantially worse, then perhaps doing nothing is the best option.
Krugman, Setser, etc. are apparently all educated in the same economic schools as the ruling financial gurus to whom they offer up their advice. I don't think there's a lick of common sense in any of them...only mathematical-model induced hubris that leads them to believe that wealth can be created (or preserved) by scheming and paper-shuffling.
"when people realize the government has made massive obligations that it can't keep and/or that they are working in exchange for something of fictional value."
That light bulb should have came on about 5 years ago. It's a great time to be a bum.
OMG, what have the bankers and wallstreeters done and when will we see some perp walks? Is this ever going to end?
moreorlessly
They'll reach down to middle management for some scapegoats. There won't be any Enron-style convictions (or even official scrutiny) of top level people though, IMO.
What we need is for the government to take control of the major industries -- the commanding heights, if you will -- to make sure they are run in the public interest. Hand over control of the economy to our best and brightest economists, like Krugman, and have them produce and update a master Plan at regular intervals. I suggest five years.
Yep. And as we all know, the age of madmen like Stalin and Hitler is long past so there's absolutely no chance somebody like that will stumble along and turn this apparatus of centralized economic control into a devastating super-weapon used to wage a delusional megalomaniacal war.
Stuff like that never happens in the course of human history.
Ever wonder why the US economy flourished (1940s-1970s)under a top income tax bracket of upto 95% and various financial restrictions.
WW2 was only one reason behind that prosperity. The three, often ignored, bigger reasons were demographic profile, job security and a clampdown on financial shysters who stole money from the real economy.
// I am of the opinion that people with jobs and some sense of security will actually foster a decent, if more tame, economy. Do nothing and it will just get ugly.//
What is interesting is that all this debt is being rolled by the Government, it has to, in theory, be paid back.
These companies have driven themselves this far into a hole and the Government seems to think they can get back out of it AND repay these loans.
Given the current conditions we will not see any improvement for a year, maybe two, in the real economy, and that is looking at it right now without any other bailouts, etc.
So how can these banks correct the course, bail out the water, and get back under steam?
satan, the economy flourished in the twentieth century under restrictions that have been abandoned, forgotten and outright overturned.
First were legal restrictions. The twin pillars of new deal regulation were transparency and separation. Disclosure was paramount, which is why secretaries and printers went to federal prison for violating 10-b5 if they traded on inside knowledge. Separation was enshrined in Glass-Steagall, so that nothing could be "too big to fail" and an institutional collapse could not bring down the financial system.
There were also moral restrictions, believe it or not. Or maybe I'm talking about mores rather than morals. In either case, no CEO in 1970 would have had the balls to ask for a fraction of today's executive pay. The mere question itself would have been career-ending.
There were also restrictions that were both moral and legal. It used to be considered highly immoral for anybody to earn an excessive amount of money, and even more so to pass it on. Believe it. The public policy rationale behind certain tax code provisions was specifically to prevent the establishment of large powerful estates, which were considered not only to be bad for the economy but dangerous to democracy.
We forgot all those lessons that came out of the Depression; now we get to repeat them.
Ever wonder why the US economy flourished (1940s-1970s)under a top income tax bracket of upto 95% and various financial restrictions.
WW2 was only one reason behind that prosperity. The three, often ignored, bigger reasons were demographic profile, job security and a clampdown on financial shysters who stole money from the real economy.
I think this is a critical part of the process:
Asking the question "Why did things appear to be working then but not now?"
IMO the problem with advocating progressive ideas and new types of thinking in the current environment is at this point we don't even have the credibility our predecessors did.
We want to build a better mousetrap despite the fact that we failed miserably in trying to build an ordinary one despite having the blueprints and time tested instructions in hand.
Seems like we don't have the proper measure of ourselves.
This morning Bloomberg said the Fed had $7.4 trillion in vaporous future taxpayer debt lined up on the helicopter pad, and by early afternoon it was already revised up to 7.7 trillion.
Does anyone know which President's face is going to be on the new $1000 and $10,000 bills?
Excerpt:
Mechanics liens the canary in the coal mine for the homebuilding industry are on the rise, and one of the hardest hit builders in Santa Clara County is Pinn Brothers Fine Homes.
With 63 liens filed by subcontractors seeking payment, the venerable San Jose-based builder was the leader among the 497 liens filed in the county in 2008 as of Nov. 7. Subcontractors including CKL Construction, ADM Painting and JC Heating and Air Conditioning have filed liens in amounts ranging from $10,500 to $264,000. The liens, most of which were filed in September and October, total $3 million. The records dont show if any of the liens have been paid.
Krugman, and Robbie Reich as well, with their feigned moral outrage over the bailout of C - as they laud the choice of Guithner and pine for hundreds of billions in stimulus
There is a history of fiscal crises and political collapse in the real world that suggest there are perhaps worse types of ugly than simply doing nothing.
AC,
More often than not, doing nothing IS indeed the best option. But, most people don't have the patience. For some reason they feel the NEED to do SOMETHING.
Me, I've been doing almost nothing when it comes to investing since late 1996. Treasury investing. Real boring stuff until recently. What did I miss?
Morocco Bama writes:
Reporter: "so, if it's a bad deal for taxpayers, why do it?"
Krug: "...the financial system could collapse if they don't.."
Do it but drive a better bargain. If you are playing stud poker, and are holding a straight flush, and the other guy is showing a 2 of clubs, a five of spades and a 9 of hearts, you dont throw in your hand. HP/BB/TG threw in our hand on this deal, although it is ever so slightly better than the first TARP capital injection.
"What we need is for the government to take control of the major industries -- the commanding heights, if you will -- to make sure they are run in the public interest."
satan, the economy flourished in the twentieth century under restrictions that have been abandoned, forgotten and outright overturned.
I would also argue that we used more judgment and were less arrogant. At least with regard to financial matters.
As someone who still has depression-era family members, I notice a strikingly different attitude toward money and debt than what would be considered "normal" in recent years.
One might think certain people in my family would have lived in an unnecessary state of deprivation due to their extreme reluctance to take on debt or to make risky investments.
And yet the reality is the opposite - it is these seemingly risk averse members of my family that appear to have accumulated the most wealth, have the most stability, and live comfortably retired in the big nice houses with the big nice cars.
WW2 was only one reason behind that prosperity. The three, often ignored, bigger reasons were demographic profile, job security and a clampdown on financial shysters who stole money from the real economy.
I think you are missing the most important reason of all:
Household debt levels after WW2 were are historic lows < 25% of GDP if memory serves. Consider that level against today's household debt levels (~135% of GDP).
It really is different this time. Hence the massive move towards globalization.
It's been said, but the bargainers were not playing for our side. They made the bargain that was in their interests short term. Long term, they may see the cost of public anger. I hope.
Over the weekend, the government decided to guarantee over $300 billion in Citigroup, Inc. (C) assets -- and let me assure you that those are the most worthless assets on Cs books -- for up to 10 years in the case of residential backed assets and five years for non residential backed assets. Citi is on the hook for the first $29 billion, and after that the government absorbs 90% of the losses.
In return, the government gets $7 billion of preferred stock which pays 8%, and gets warrants for $2.7 billion of common stock. However, the strike price on the warrants is so high that Citigroups stock price has to rise 281% from Fridays close before they are in the money.
We finally get some real restriction on the payment of common dividends (no more than $0.01 per quarter for three years). Taxpayers get no real voting rights, unless Citigroup misses dividend payments on the preferred for six quarters. Oh, and all those geniuses running Citi that got it into this mess get to keep their jobs. The same cannot be said of the 52,000 tellers and back-office folks who are really responsible for this mess.
The amount of cash that the taxpayers have thrown into the money pit that is Citigroup, Inc. exceeds its current market value. If by some miracle the economy manages to pull through this mess and Citi survives, the taxpayers get a very limited reward (but the Saudi prince makes a fortune).
The "Citi" never sleeps, and it doesnt let anyone else sleep peacefully either. The bounce in the market today is a sucker's rally.
Yes, we needed to save the institution that is Citigroup; its failure would make the failure of Lehman Brothers look like a little bit of market indigestion rather than the massive heart attack that it was. However, why, when bankers come hat-in-hand, cant we have somebody negotiate on behalf of the taxpayers? Why does the auto industry get raked over the coals (they should be, but the double standard here is glaring) in congressional hearings, while bankers get sweetheart deals over the weekend with no scrutiny.
It should not be that hard to negotiate with these people. This is your kids' money here, folks -- yours was gone a long time ago. Furthermore, the involvement of Tim Geithner (Obamas pick for Treasury Secretary) in crafting the package does not leave me feeling good about the future.
"What most people dont seem to realize is that there is just as much money to be made out of the wreckage of a civilization as from the upbuilding of one."
Margaret Mitchell
That is what I meant by clamping down on financial shysters!
//First were legal restrictions. The twin pillars of new deal regulation were transparency and separation. Disclosure was paramount, which is why secretaries and printers went to federal prison for violating 10-b5 if they traded on inside knowledge. Separation was enshrined in Glass-Steagall, so that nothing could be "too big to fail" and an institutional collapse could not bring down the financial system.
There were also moral restrictions, believe it or not. Or maybe I'm talking about mores rather than morals. In either case, no CEO in 1970 would have had the balls to ask for a fraction of today's executive pay. The mere question itself would have been career-ending.
There were also restrictions that were both moral and legal. It used to be considered highly immoral for anybody to earn an excessive amount of money, and even more so to pass it on. Believe it. The public policy rationale behind certain tax code provisions was specifically to prevent the establishment of large powerful estates, which were considered not only to be bad for the economy but dangerous to democracy.//
"What we need is for the government to take control of the major industries -- the commanding heights, if you will -- to make sure they are run in the public interest."
It doesn't work. Nobody knows how to do it.
Yep. A bureaucrat in Washington can never effectively manage a shoe shop in Kansas City, never mind all the others. And yet it is the aggregate of all these businesses that are the economy.
The government simply doesn't have the man power or the instrumentation to manage all these individual businesses because there's no way to aggregate them into larger abstract entities in order for central management to work.
The government simply can't take the place of the individual in the economy. And despite the fact that it is the collective decisions of all these individuals that make the economy good or bad the government still routinely makes the claim that they're the ones with that power.
They only have the ability to remove obstacles or create them. They can attempt to provide goals for the economy to pursue. But the government can never ultimately make the economy "good" unless they can manage every household and every business in the country.
Anyone catch Doug Deshields (sp) on Bloomberg's Taking Stock in regards to how the Fed is really the only bank now?
That the other banks are mere lending
brokers for the FED in that they make
loans in name but simply present the loan to the FED and collect payments on the loan to pay the Fed back.
To the extent that that is what is happening do we really need all these
banks and their payroll to handle the commercial banking needs of the country. As Doug and Pim remarked why
not let people open checking accounts with the Federal Reserve and have the banks do nothing more than process loan applications.
from that free lakota bank website: "Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion...when you see that in order to produce, you need to obtain permission from men who produce nothing...when you see your laws don't protect you against them, but protect them against you...when you see corruption being rewarded and honesty becoming a self-sacrifice...you may know that your society is doomed." "Atlas Shrugged"
As Doug and Pim remarked why
not let people open checking accounts with the Federal Reserve and have the banks do nothing more than process loan applications.
Unit472 |
Intriguing thought however; do we really want to put them in charge of processing loans? They did such a bang up job last time...just sayi
"Yep. A bureaucrat in Washington can never effectively manage a shoe shop in Kansas City, never mind all the others."
I know of a woman who emigrated from socialist Bulgaria because her lucrative roasted peanut stand in the center of Sofia was taken over by a government ministry, and she was changed overnight from a successful small retail businesswoman to a government employee.
I once watched the tobacco shop at the Hotel Moskva in Moscow close for three days for a government inventory by three functionaries. The shop was the size of a large broom closet, and the stock could not have been more than a few hundred packs of cigarettes. No cigarettes were sold in that hotel for three days.
A bitter comedy. Meat for satirists. Watching these things happen one feels as if one is going mad - or the world is.
Basel Too writes:
"Katrina doctrine: not doing anything is no longer an option."
Yes, I'm afraid we learned the wrong lesson from that. When the next big one heads for NO, they're going call in Moses to part the sea, since they are rebuilding below water again.
This looks an awful lot like the way things work now, doesn't it?
--------quote---------
The Free Lakota Bank is presenting our Inital Currency Offering. This is an opportunity for you to access our silver currency at a discount from the face value. During the ICO, the exchange rate varies based on the number of pieces requested. The scale is as follows:
Number Of Pieces USD per Pieces
1 - 5 Coins $ 40
6 - 10 Coins $ 35
11 - 20 Coins $ 30
21 - 50 Coins $ 25
51 - 100 Coins $ 18.50
101 - 500 Coins $ 16.50
500 - 1000 Coins $ 14.50
And the price of silver is how much per ounce these days? Ummm ....
between $10 and $10.70/ounce today.
Soooooo ... the Lakota offer you almost face value if you buy in bulk.
Apropos moral, a so called democratic and technically advanced civilization that failed to make clear the time needed for the 3 buildings of 9/11 to collapse points to a more sinister truth, and as a whole collective, managed to silence that truth, well, no longer deserves those attributes.
People in the US failed to realize the lost of trust of the world as the result of that massive scale of lying.
Krugman is one of those elitists who believes that he "knows what is good for the plebs". The sad reality is that "liberal" social conscience is the fascade of control and oppression.
The left want to dictate one set of "values", the right prefers another set of "values". I think the world will be better place when we strangle the last "big city educated internationalist elitist" with the intestines of the last "small time american values" promoter.
I dont care for Krugman, but the sad thing is that we will all start hearing a lot less pessisimism....as the new administration and the media romance each other.
US economic dominance would have been quite impossible without cheap energy.
"Indeed, as late as 1952, U.S. crude oil production (44 percent of which was in Texas) still accounted for more than half of the world total. However, that historical role came to an end in 1971, when excess crude oil capacity in the United States was finally absorbed by rising demand."
The left want to dictate one set of "values", the right prefers another set of "values". I think the world will be better place when we strangle the last "big city educated internationalist elitist" with the intestines of the last "small time american values" promoter.
...the left has had it's hand in the ny times bra for some time.
The Left is quickly becoming the new Right. Murdoch has his sights on the NYT. Don't be surprised if the Sulzbergers don't hand it over in several years. Murdoch wants a piece of this new Right.
"It should not be that hard to negotiate with these people. This is your kids' money here, folks -- yours was gone a long time ago. Furthermore, the involvement of Tim Geithner (Obamas pick for Treasury Secretary) in crafting the package does not leave me feeling good about the future."
Dirk van Dijk | 11.24.08 - 6:13 pm | #
If Hank Paulson is worth over $700 million I don't think he is too worried about his children's or grandchildren's future.
I think Geithner has an obligation to clarify the extent to which he is on
board with the current arrangement on Citi. Either go public on your disagreements with Paulson & Co, or accept shared responsibility.
Did I hear Mr. Krugman say: "you just have to put all your notions of what is prudent aside, being cautious right now is really a foolish thing right now..."???
Very good advice, I, myself, have always encouraged imprudent recklessness...perhaps the good professor would consider sharing his Nobel with me?
Yikes, most of these comments are ridiculous. Geithner was in on the discussions, but he was NOT in a position to make the calls on the TARP, Citi bailout, etc. The point man on all of these has apparently been Paulson, who in turn serves at the will of "free-market" G. W. Bush.
People in Geithner's current position are expected to be team players and not publicly question the decisions of their superiors. Thus a smart, pragmatic guy like Geithner might be as worthless as Paulson if he was reporting to Bush. On the other hand, he could be a dramatic improvement given that he'll be reporting to another smart pragmatist, which I hope will be the case with Obama.
emo
I feel the need for speed
But not enough need.
USD/JPY 97.30 and climbing. Pump up the volume!
In my day, they called it Fraud
"...put prudence aside".
Um.... yeah. So, we should be imprudent?
Or simply impudent?
he sucks so bad.
Reporter: "so, if it's a bad deal for taxpayers, why do it?"
Krug: "...the financial system could collapse if they don't.."
Nothing about Rubin. He knows it....just can't say it. No one can speak the truth when it comes to that.
Good Luck General Motors: Get In LIne Behind The Rest of the Grovellers.
Cordially,
K. Trout
Market dudnt seem to mind. In fact, you could intone that they akshully like it. And since my 401K is wrapped up in Wall St., I care not a whit what Nobelly Krug says.
I love this Keynesian stuff.
What we need is for the government to take control of the major industries -- the commanding heights, if you will -- to make sure they are run in the public interest. Hand over control of the economy to our best and brightest economists, like Krugman, and have them produce and update a master Plan at regular intervals. I suggest five years.
I find myself disageeing with him on a regular basis these days.
He's harping on stimulus and warning against caution.
Haste makes waste....and that's exactly what we're going to get....we're going to get shit on...again and again.
Krug on the "Early Show"...how mainstream of him.
MP from previous thread, I may disagree on price, but I definitely agree that this is a long way from being over.
The wave continues to head our way.
Time to Re-Leverage
I agree with him on the bad deal for taxpayers. I disagree with everything else he said.
Nemo,
While I hate fabian socialism, the reality is that an obscured, oligopolic crony "capitalism" based system does no better. We have to seriously question our assumptions about the best mix of systems to balance our inherent human behaviors in the current world.
And the best part is, he is worried that $500 billion will not be enough.
So no matter how much money they spend, if it doesn't work, the apologists will explain that they just didn't spend enough.
This would be more fun to watch if I were outside of it.
Try 7.4 Trillion, rinse, repeat, rinse and repeat.
"...put prudence aside".
Um.... yeah. So, we should be imprudent?
In other words we should do exactly what we've been doing since the early 80s?
I wish he would give more justification for simply doing more of the same especially given the apparent decrease in the marginal utility of debt as an instrument of generating economic activity.
So Geithner is really smart but try not to focus on the fact that he's been asleep for the last few years. These guys are such clowns. Nice rally today. Fun stuff
So long as China, Japan and Saudi Arabia continue to fund us, it will continue. We are their customer, afterall.
Can I haz Nobel Preiz?
Morocco Bama writes:
So long as China, Japan and Saudi Arabia continue to fund us, it will continue. We are their customer, afterall.
True, but it turns out that sometimes financing your customers comes back to haunt you. Even those with great credit.
I think Geithner was chosen because he has a great head of hair compared to Baldson and Krispy Kash Kreme.
Days like this, it is trying being a long-term short.
Lloyd writes:
So Geithner is really smart but try not to focus on the fact that he's been asleep for the last few years.
Further, being smart does not imply he has a solution, or that he even wants one.
I think what we're seeing is The Solution.
"The banking system, the way we have it, is a monstrous giant built on feet of clay. And if that topples, we're gone."
- Nasim Nicholas Taleb author of The Black Swa
Geithner's autobiography is already in the works: "When Genius Was Promoted: The story of incompetence at the NY Fed and How It Helped Me Get a better job."
I wonder how Spitzer feels about Geithner? They took that boy out, didn't they?
You'll recall that Rome was not burnt in a day. So it's damn the torpedoes and full speed ahead without prudence.
Morocco Bama writes:
I think what we're seeing is The Solution.
I suppose one group's problem is anothers solution. People are getting rich.
Well, that was helpful (not): ElliotWave (subscriber only) said just now that Friday marked the bottom of wave 5 (i.e., the short-term down leg ended on Friday).
I should have listened to my wife, instead, who said on Friday morning, 'Good enough, Dear, cover our shorts!
I guess an interesting question is if (a big if, that I accept as true) a bailout of some form was necessary for Citi, and quickly, does a badly negotiated but still necessary bailout turn into something that shouldn't have been done at all?
If Citi went into bankruptcy or counterparties stopped interacting, surely all can agree (right?) this would be very bad for the world's economy - not just the US.
I don't think the rest of Wall Street (GS, JPM, et. al) could survive the lack of confidence that a Citi bankruptcy would bring.
Krugman siphons off the genius of the bloggers.
satan writes:
Nemo,
While I hate fabian socialism, the reality is that an obscured, oligopolic crony "capitalism" based system does no better. We have to seriously question our assumptions about the best mix of systems to balance our inherent human behaviors in the current world.
It seems to me that our failure was not learning from history and taking the appropriate action to preserve a system that did appear to be working reasonably well overall.
Given the things that our system has done for people in the past (at least its own citizens) I have a hard time being critical of it on the whole, except for more recently as circumstance seems to merit.
According to the interpretations I have read, the fall of Rome in many ways seems to have been a story of complacency and a loss of interest and respect for the very social and economic mechanisms that originally brought about that success.
Is it conceivable that something like this is happening now in the US?
For example, are we suffering now simply because we have recently forsaken attitudes about debt that served us well in the past?
I don't think the rest of Wall Street (GS, JPM, et. al) could survive the lack of confidence that a Citi bankruptcy would bring.
JimPortlandOR
Probably true, but then why not announce that they're working on a solid solution and take the necessary time, unless the goal is merely to transfer the burden to the government? What do they gain by this hurried solution that puts the burden on the taxpayer?
I mean, aside from shifting the risk, of course.
So the $500b is new jobs and job retention? Thank gawd we are getting away from the whole, "Mail them a check" wishful thinking plan.
I am of the opinion that people with jobs and some sense of security will actually foster a decent, if more tame, economy. Do nothing and it will just get ugly. Interestingly, Greg Mankiw has something to say about the stimulus, if any follow his ite.
Can I haz Nobel Preiz?
Hey, if neutron bomb hedge fund managers can haz, why not u?
Jim,
They are not going to survive anyway, at least not without their own explicit bailouts/backstops. The idiots in Washington are only prolonging the now inevitable collapse of all the big banks.
Did everybody go 100% long today?
Dante Alighieri: Citi ran out of time when their stock got below $5. This foreclosed further capital stock sales and probably scared their note holders greatly. Time was not available under these circumstances.
I think a government seizure of the bank (intact, ala 1930's banks) might have worked, but a bankruptcy takes a long time in a complicated-structure firm. Them markets would not wait.
What y'all think about GRZZX? haven't bought any but I don't like those inverse ETF's short or long. They don't reflect the true price of the indexes. Is there any ultra bull funds left?
Correction "bankers are gonna end up in incinerators before this is over"
The problem is that bakers have no real power in a fiat currency based consumer economy. They used to have real power in mercantile and gold standard based economies. Today we can replace them with trained monkeys and the system will still work, as long as we have electronic systems and printing presses.
"The banking system, the way we have it, is a monstrous giant built on feet of clay. And if that topples, we're gone."
- Nasim Nicholas Taleb author of The Black Swa
safe_as_apartments writes:
Did everybody go 100% long today
I've been 25% long (only one here) since Oct27 and it has been Brutal. Can't imagine what it was like to ride down from the top.
JimPortlandOR,
True, but this failure didn't happen over night. I suppose Citi (and many others) are hiding their true condition until they can't anymore, then they run to the government when things get out of hand. But the government does employ regulators tasked with policing these institutions. They are close to useless.
I am of the opinion that people with jobs and some sense of security will actually foster a decent, if more tame, economy. Do nothing and it will just get ugly.
No doubt it will get ugly if we do nothing. That's never been the real issue.
The real question IMO is will it get even uglier down the road when people realize the government has made massive obligations that it can't keep and/or that they are working in exchange for something of fictional value.
There is a history of fiscal crises and political collapse in the real world that suggest there are perhaps worse types of ugly than simply doing nothing.
That's not quite the same thing as saying doing nothing is the best option. But if we don't have some reasonable framework for believing that something we do won't make things substantially worse, then perhaps doing nothing is the best option.
Krugman, Setser, etc. are apparently all educated in the same economic schools as the ruling financial gurus to whom they offer up their advice. I don't think there's a lick of common sense in any of them...only mathematical-model induced hubris that leads them to believe that wealth can be created (or preserved) by scheming and paper-shuffling.
"when people realize the government has made massive obligations that it can't keep and/or that they are working in exchange for something of fictional value."
That light bulb should have came on about 5 years ago. It's a great time to be a bum.
only mathematical-model induced hubris that leads them to believe that wealth can be created (or preserved) by scheming and paper-shuffling.
ShortCourage
Sad but true.
OMG, what have the bankers and wallstreeters done and when will we see some perp walks? Is this ever going to end?
OMG, what have the bankers and wallstreeters done and when will we see some perp walks? Is this ever going to end?
moreorlessly
They'll reach down to middle management for some scapegoats. There won't be any Enron-style convictions (or even official scrutiny) of top level people though, IMO.
I love this Keynesian stuff.
What we need is for the government to take control of the major industries -- the commanding heights, if you will -- to make sure they are run in the public interest. Hand over control of the economy to our best and brightest economists, like Krugman, and have them produce and update a master Plan at regular intervals. I suggest five years.
Yep. And as we all know, the age of madmen like Stalin and Hitler is long past so there's absolutely no chance somebody like that will stumble along and turn this apparatus of centralized economic control into a devastating super-weapon used to wage a delusional megalomaniacal war.
Stuff like that never happens in the course of human history.
ac,
Ever wonder why the US economy flourished (1940s-1970s)under a top income tax bracket of upto 95% and various financial restrictions.
WW2 was only one reason behind that prosperity. The three, often ignored, bigger reasons were demographic profile, job security and a clampdown on financial shysters who stole money from the real economy.
// I am of the opinion that people with jobs and some sense of security will actually foster a decent, if more tame, economy. Do nothing and it will just get ugly.//
"So no matter how much money they spend, if it doesn't work, the apologists will explain that they just didn't spend enough."
You can apply this statement to any failed social program.
EX....We have doubled the Education budget in the last 8 years, but we still have to "invest more"
I think we should get signs made up like the ones they have on freeways to put on every citi property.
"Your Tax Dollars at Work - $300,000,000,000.00 Backstop provided by the US Taxpayers"
"Did everybody go 100% long today?"
--safe_as_apartments
No but I stayed in a Holiday Inn last night, and this morning I played Russian Roulette.
What is interesting is that all this debt is being rolled by the Government, it has to, in theory, be paid back.
These companies have driven themselves this far into a hole and the Government seems to think they can get back out of it AND repay these loans.
Given the current conditions we will not see any improvement for a year, maybe two, in the real economy, and that is looking at it right now without any other bailouts, etc.
So how can these banks correct the course, bail out the water, and get back under steam?
By soaking us for every penny they can...
mp: Thanks for the FBR report link.
satan, the economy flourished in the twentieth century under restrictions that have been abandoned, forgotten and outright overturned.
First were legal restrictions. The twin pillars of new deal regulation were transparency and separation. Disclosure was paramount, which is why secretaries and printers went to federal prison for violating 10-b5 if they traded on inside knowledge. Separation was enshrined in Glass-Steagall, so that nothing could be "too big to fail" and an institutional collapse could not bring down the financial system.
There were also moral restrictions, believe it or not. Or maybe I'm talking about mores rather than morals. In either case, no CEO in 1970 would have had the balls to ask for a fraction of today's executive pay. The mere question itself would have been career-ending.
There were also restrictions that were both moral and legal. It used to be considered highly immoral for anybody to earn an excessive amount of money, and even more so to pass it on. Believe it. The public policy rationale behind certain tax code provisions was specifically to prevent the establishment of large powerful estates, which were considered not only to be bad for the economy but dangerous to democracy.
We forgot all those lessons that came out of the Depression; now we get to repeat them.
ac,
Ever wonder why the US economy flourished (1940s-1970s)under a top income tax bracket of upto 95% and various financial restrictions.
WW2 was only one reason behind that prosperity. The three, often ignored, bigger reasons were demographic profile, job security and a clampdown on financial shysters who stole money from the real economy.
I think this is a critical part of the process:
Asking the question "Why did things appear to be working then but not now?"
IMO the problem with advocating progressive ideas and new types of thinking in the current environment is at this point we don't even have the credibility our predecessors did.
We want to build a better mousetrap despite the fact that we failed miserably in trying to build an ordinary one despite having the blueprints and time tested instructions in hand.
Seems like we don't have the proper measure of ourselves.
Looks like the Lakotah Indians have created their own non-fractional-reserve central banking system that is based on gold and silver
Free Lakota Bank
god bless 'em
This morning Bloomberg said the Fed had $7.4 trillion in vaporous future taxpayer debt lined up on the helicopter pad, and by early afternoon it was already revised up to 7.7 trillion.
Does anyone know which President's face is going to be on the new $1000 and $10,000 bills?
"Does anyone know which President's face is going to be on the new $1000 and $10,000 bills?"
--Comrade Benhanke Mugabe
$1000 bill: Nixon
$10000 bill: FDR
Mechanic's liens on the rise in Silicon Valley
http://sanjose.bizjournals.com/sanjose/stories/2008/11/24/story1.html?b=1227502800^1736727
Excerpt:
Mechanics liens the canary in the coal mine for the homebuilding industry are on the rise, and one of the hardest hit builders in Santa Clara County is Pinn Brothers Fine Homes.
With 63 liens filed by subcontractors seeking payment, the venerable San Jose-based builder was the leader among the 497 liens filed in the county in 2008 as of Nov. 7. Subcontractors including CKL Construction, ADM Painting and JC Heating and Air Conditioning have filed liens in amounts ranging from $10,500 to $264,000. The liens, most of which were filed in September and October, total $3 million. The records dont show if any of the liens have been paid.
Got a feeling those Somali pirates were helping Citi in the negotiations.
"Why did things appear to be working then but not now?"
Who was pretty much the only country with the industrial capacity to rebuild Asia and Europe post-WWII?
What about now?
Krugman, and Robbie Reich as well, with their feigned moral outrage over the bailout of C - as they laud the choice of Guithner and pine for hundreds of billions in stimulus
There is a history of fiscal crises and political collapse in the real world that suggest there are perhaps worse types of ugly than simply doing nothing.
AC,
More often than not, doing nothing IS indeed the best option. But, most people don't have the patience. For some reason they feel the NEED to do SOMETHING.
Me, I've been doing almost nothing when it comes to investing since late 1996. Treasury investing. Real boring stuff until recently. What did I miss?
I'm pretty sure it's time to move on though.
Morocco Bama writes:
Reporter: "so, if it's a bad deal for taxpayers, why do it?"
Krug: "...the financial system could collapse if they don't.."
Do it but drive a better bargain. If you are playing stud poker, and are holding a straight flush, and the other guy is showing a 2 of clubs, a five of spades and a 9 of hearts, you dont throw in your hand. HP/BB/TG threw in our hand on this deal, although it is ever so slightly better than the first TARP capital injection.
doing nothing IS indeed the best option. But, most people don't have the patience. For some reason they feel the NEED to do SOMETHING.
Katrina doctrine: not doing anything is no longer an option.
You always know the result ex poste of not doing something. Conversely, you always claim that things would have been worse without the action.
"What we need is for the government to take control of the major industries -- the commanding heights, if you will -- to make sure they are run in the public interest."
It doesn't work. Nobody knows how to do it.
satan, the economy flourished in the twentieth century under restrictions that have been abandoned, forgotten and outright overturned.
I would also argue that we used more judgment and were less arrogant. At least with regard to financial matters.
As someone who still has depression-era family members, I notice a strikingly different attitude toward money and debt than what would be considered "normal" in recent years.
One might think certain people in my family would have lived in an unnecessary state of deprivation due to their extreme reluctance to take on debt or to make risky investments.
And yet the reality is the opposite - it is these seemingly risk averse members of my family that appear to have accumulated the most wealth, have the most stability, and live comfortably retired in the big nice houses with the big nice cars.
Well, here's a $586 billion solution offered.
In China. This scholar is talking at USC on 12/2.
Makes you wonder if anyone is paying attention here to what China is doing.
WW2 was only one reason behind that prosperity. The three, often ignored, bigger reasons were demographic profile, job security and a clampdown on financial shysters who stole money from the real economy.
I think you are missing the most important reason of all:
Household debt levels after WW2 were are historic lows < 25% of GDP if memory serves. Consider that level against today's household debt levels (~135% of GDP).
It really is different this time. Hence the massive move towards globalization.
re Do it but drive a better bargain.
It's been said, but the bargainers were not playing for our side. They made the bargain that was in their interests short term. Long term, they may see the cost of public anger. I hope.
Who was pretty much the only country with the industrial capacity to rebuild Asia and Europe post-WWII?
What about now?
Well that in part explains our post WWII dominance, but that's not really what's at issue here is it?
What about the "economic miracle" (as it was called) of post WWII Japan despite the fact that they lost the war and were the ones rebuilding?
Didn't their miracle end once they started abusing credit?
here is what I posted to Zacks.com:
Over the weekend, the government decided to guarantee over $300 billion in Citigroup, Inc. (C) assets -- and let me assure you that those are the most worthless assets on Cs books -- for up to 10 years in the case of residential backed assets and five years for non residential backed assets. Citi is on the hook for the first $29 billion, and after that the government absorbs 90% of the losses.
In return, the government gets $7 billion of preferred stock which pays 8%, and gets warrants for $2.7 billion of common stock. However, the strike price on the warrants is so high that Citigroups stock price has to rise 281% from Fridays close before they are in the money.
We finally get some real restriction on the payment of common dividends (no more than $0.01 per quarter for three years). Taxpayers get no real voting rights, unless Citigroup misses dividend payments on the preferred for six quarters. Oh, and all those geniuses running Citi that got it into this mess get to keep their jobs. The same cannot be said of the 52,000 tellers and back-office folks who are really responsible for this mess.
The amount of cash that the taxpayers have thrown into the money pit that is Citigroup, Inc. exceeds its current market value. If by some miracle the economy manages to pull through this mess and Citi survives, the taxpayers get a very limited reward (but the Saudi prince makes a fortune).
The "Citi" never sleeps, and it doesnt let anyone else sleep peacefully either. The bounce in the market today is a sucker's rally.
Yes, we needed to save the institution that is Citigroup; its failure would make the failure of Lehman Brothers look like a little bit of market indigestion rather than the massive heart attack that it was. However, why, when bankers come hat-in-hand, cant we have somebody negotiate on behalf of the taxpayers? Why does the auto industry get raked over the coals (they should be, but the double standard here is glaring) in congressional hearings, while bankers get sweetheart deals over the weekend with no scrutiny.
It should not be that hard to negotiate with these people. This is your kids' money here, folks -- yours was gone a long time ago. Furthermore, the involvement of Tim Geithner (Obamas pick for Treasury Secretary) in crafting the package does not leave me feeling good about the future.
"What most people dont seem to realize is that there is just as much money to be made out of the wreckage of a civilization as from the upbuilding of one."
Margaret Mitchell
That is what I meant by clamping down on financial shysters!
//First were legal restrictions. The twin pillars of new deal regulation were transparency and separation. Disclosure was paramount, which is why secretaries and printers went to federal prison for violating 10-b5 if they traded on inside knowledge. Separation was enshrined in Glass-Steagall, so that nothing could be "too big to fail" and an institutional collapse could not bring down the financial system.
There were also moral restrictions, believe it or not. Or maybe I'm talking about mores rather than morals. In either case, no CEO in 1970 would have had the balls to ask for a fraction of today's executive pay. The mere question itself would have been career-ending.
There were also restrictions that were both moral and legal. It used to be considered highly immoral for anybody to earn an excessive amount of money, and even more so to pass it on. Believe it. The public policy rationale behind certain tax code provisions was specifically to prevent the establishment of large powerful estates, which were considered not only to be bad for the economy but dangerous to democracy.//
Bush pardons 14 and commutes 2 prison sentences
The Associated Press
"What we need is for the government to take control of the major industries -- the commanding heights, if you will -- to make sure they are run in the public interest."
It doesn't work. Nobody knows how to do it.
Yep. A bureaucrat in Washington can never effectively manage a shoe shop in Kansas City, never mind all the others. And yet it is the aggregate of all these businesses that are the economy.
The government simply doesn't have the man power or the instrumentation to manage all these individual businesses because there's no way to aggregate them into larger abstract entities in order for central management to work.
The government simply can't take the place of the individual in the economy. And despite the fact that it is the collective decisions of all these individuals that make the economy good or bad the government still routinely makes the claim that they're the ones with that power.
They only have the ability to remove obstacles or create them. They can attempt to provide goals for the economy to pursue. But the government can never ultimately make the economy "good" unless they can manage every household and every business in the country.
This they cannot currently do.
Bingo!!
The decline of the dutch in the 18th century and the brits in the late 19th century can also be traced to creating a large financial sector!
//What about the "economic miracle" (as it was called) of post WWII Japan despite the fact that they lost the war and were the ones rebuilding?
Didn't their miracle end once they started abusing credit?
ac | 11.24.08 - 6:10 pm | #//
Anyone catch Doug Deshields (sp) on Bloomberg's Taking Stock in regards to how the Fed is really the only bank now?
That the other banks are mere lending
brokers for the FED in that they make
loans in name but simply present the loan to the FED and collect payments on the loan to pay the Fed back.
To the extent that that is what is happening do we really need all these
banks and their payroll to handle the commercial banking needs of the country. As Doug and Pim remarked why
not let people open checking accounts with the Federal Reserve and have the banks do nothing more than process loan applications.
You cannot build a virtual financial economy while ignoring the real economy!
hoopajoops:
from that free lakota bank website:
"Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion...when you see that in order to produce, you need to obtain permission from men who produce nothing...when you see your laws don't protect you against them, but protect them against you...when you see corruption being rewarded and honesty becoming a self-sacrifice...you may know that your society is doomed." "Atlas Shrugged"
oddly appropriate, no?
As Doug and Pim remarked why
not let people open checking accounts with the Federal Reserve and have the banks do nothing more than process loan applications.
Unit472 |
Intriguing thought however; do we really want to put them in charge of processing loans? They did such a bang up job last time...just sayi
"Yep. A bureaucrat in Washington can never effectively manage a shoe shop in Kansas City, never mind all the others."
I know of a woman who emigrated from socialist Bulgaria because her lucrative roasted peanut stand in the center of Sofia was taken over by a government ministry, and she was changed overnight from a successful small retail businesswoman to a government employee.
I once watched the tobacco shop at the Hotel Moskva in Moscow close for three days for a government inventory by three functionaries. The shop was the size of a large broom closet, and the stock could not have been more than a few hundred packs of cigarettes. No cigarettes were sold in that hotel for three days.
A bitter comedy. Meat for satirists. Watching these things happen one feels as if one is going mad - or the world is.
Basel Too writes:
"Katrina doctrine: not doing anything is no longer an option."
Yes, I'm afraid we learned the wrong lesson from that. When the next big one heads for NO, they're going call in Moses to part the sea, since they are rebuilding below water again.
More Seawalls! More Cowbell!
This looks an awful lot like the way things work now, doesn't it?
--------quote---------
The Free Lakota Bank is presenting our Inital Currency Offering. This is an opportunity for you to access our silver currency at a discount from the face value. During the ICO, the exchange rate varies based on the number of pieces requested. The scale is as follows:
Number Of Pieces USD per Pieces
1 - 5 Coins $ 40
6 - 10 Coins $ 35
11 - 20 Coins $ 30
21 - 50 Coins $ 25
51 - 100 Coins $ 18.50
101 - 500 Coins $ 16.50
500 - 1000 Coins $ 14.50
And the price of silver is how much per ounce these days? Ummm ....
between $10 and $10.70/ounce today.
Soooooo ... the Lakota offer you almost face value if you buy in bulk.
Well, no doubt they're collectibles, eh?
"What you mean we, Kemo Sabe?"
No but I stayed in a Holiday Inn last night, and this morning I played Russian Roulette.
sm_landlord | Homepage | 11.24.08 - 5:45 pm | #
LMFAO!!!!
Krugman may have a Nobel, be remember he was one of those idiots saying that oil at $147/barrel was "not a bubble".
These academics may have what it takes to earn a Phd, but they certainly lack common sense.
Hilarious - home prices in US at 40 YEAR LOW!!!!
FT.com / US & Canada - US house prices suffer record fall
The FT is so pathetic now that they cant even get headlines straight, and dont even bother fixing them after they screw it up.
Apropos moral, a so called democratic and technically advanced civilization that failed to make clear the time needed for the 3 buildings of 9/11 to collapse points to a more sinister truth, and as a whole collective, managed to silence that truth, well, no longer deserves those attributes.
People in the US failed to realize the lost of trust of the world as the result of that massive scale of lying.
....."nothing exceeds, like excess".
Krugman is one of those elitists who believes that he "knows what is good for the plebs". The sad reality is that "liberal" social conscience is the fascade of control and oppression.
The left want to dictate one set of "values", the right prefers another set of "values". I think the world will be better place when we strangle the last "big city educated internationalist elitist" with the intestines of the last "small time american values" promoter.
Most people who are strangled receive that treatment in police dungeons. Never mind.
I dont care for Krugman, but the sad thing is that we will all start hearing a lot less pessisimism....as the new administration and the media romance each other.
...the left has had it's hand in the ny times bra for some time.
US economic dominance would have been quite impossible without cheap energy.
"Indeed, as late as 1952, U.S. crude oil production (44 percent of which was in Texas) still accounted for more than half of the world total. However, that historical role came to an end in 1971, when excess crude oil capacity in the United States was finally absorbed by rising demand."
Alan Greenspan 2004
The left want to dictate one set of "values", the right prefers another set of "values". I think the world will be better place when we strangle the last "big city educated internationalist elitist" with the intestines of the last "small time american values" promoter.
Amen, my Lord.
...the left has had it's hand in the ny times bra for some time.
The Left is quickly becoming the new Right. Murdoch has his sights on the NYT. Don't be surprised if the Sulzbergers don't hand it over in several years. Murdoch wants a piece of this new Right.
Why should Murdoch buy it...it already is on the same page.
He likes to own things.
schnell schnell. caution schmaution.
He's just so.... awful.
The way we need to solve this problem of huge crack addiction is to ram more crack down the throat of the addict!
Wheeeeeeeeeeee!
Why bother driving a hard bargain with Citi? Citi would call for a mulligan just like AIG.
"It should not be that hard to negotiate with these people. This is your kids' money here, folks -- yours was gone a long time ago. Furthermore, the involvement of Tim Geithner (Obamas pick for Treasury Secretary) in crafting the package does not leave me feeling good about the future."
Dirk van Dijk | 11.24.08 - 6:13 pm | #
If Hank Paulson is worth over $700 million I don't think he is too worried about his children's or grandchildren's future.
I think Geithner has an obligation to clarify the extent to which he is on
board with the current arrangement on Citi. Either go public on your disagreements with Paulson & Co, or accept shared responsibility.
Whoooaa!
Did I hear Mr. Krugman say: "you just have to put all your notions of what is prudent aside, being cautious right now is really a foolish thing right now..."???
Very good advice, I, myself, have always encouraged imprudent recklessness...perhaps the good professor would consider sharing his Nobel with me?
Yikes, most of these comments are ridiculous. Geithner was in on the discussions, but he was NOT in a position to make the calls on the TARP, Citi bailout, etc. The point man on all of these has apparently been Paulson, who in turn serves at the will of "free-market" G. W. Bush.
People in Geithner's current position are expected to be team players and not publicly question the decisions of their superiors. Thus a smart, pragmatic guy like Geithner might be as worthless as Paulson if he was reporting to Bush. On the other hand, he could be a dramatic improvement given that he'll be reporting to another smart pragmatist, which I hope will be the case with Obama.