Nice CR, you, like EHP, have a talent for writing about complicated subjects and making them easier to understand. All this without leaving the reader feeling like an ignorant slut.
It was obvious that the excitement of Mr. ... was triggered when mention was made of the nation's industry.
"We have been successful in dividing society against itself by pitting labor against management. (The social-labor movement, employing labor unions, a manipulation of wages and prices, and government regulation of business, was the brainchild of ---s such as Karl Marx and Samuel Gompers. The result was a destruction of free enterprise.) This perhaps has been one of our greatest feats, since in reality it is a triangle, though only two points ever seem to occur. In modern industry where exists capital, which force we represent, is the apex. Both management and labor are on the base of this triangle. They continually stand opposed to each other and their attention is never directed to the head of their problem. Management is forced to raise prices since we are ever increasing the cost of capital. Labor must have increasing wages and management must have higher prices, thus creating a vicious cycle. We are never called to task for our role which is the real reason for inflation, since the conflict between management and labor is so severe that neither has time to observe our activities. It is our increase in the cost of capital that causes the inflation cycle. We do not labor or manage, and yet we receive the profits. Through our money manipulation, the capital that we supply industry costs us nothing. Through our national bank, the Federal Reserve, we extend book credit, which we create from nothing, to all local banks who are member banks. They in turn extend book credit to industry. Thus, we do more than God, for all of our wealth is created from nothing. You look shocked! Don't be! It's true, we actually do more than God. With this supposed capital we bring industry, management and labor into our debt, which debt only increases and is never liquidated. Through this continual increase, we are able to pit management against labor so they will never unite and attack us and usher in a debt-free industrial utopia.
"We are the necessary element since we expend nothing. Management can create its own capital -- the profits. Its business would grow and profits increase. Labor would prosper as well, while the price of the product would remain constant, the prosperity of industry, labor and management would continually increase. We ---s glory in the fact that the stupid goy have never realized that we are the parasites consuming an increasing portion of production while the producers are continually receiving less and less."
"We have been taught that our current economic practices are benevolent therefore Christian. These pulpit parrots extol our goodness for loaning them the money to build their temples, never realizing that their own holy book condemns all usury. They are eager to pay our exorbitant interest rates. They have led society into our control through the same practice. Politically, they hail the blessings of democracy and never understand that through democracy we have gained control of their nation. Their book (Notice that Mr. ... always refers to the Bible as their book) again teaches a benevolent despotic form of government in accordance with the laws of that book, while a democracy is mob rule which we control through their Churches, our news media and economic institutions. Their religion is only another channel through which we can direct the power of our propaganda. These religious puppets' stupidity is only exceeded by their cowardice, for they are ruled easily."
CR, have you heard Bill Ackman's approach to the bank solvency/liquidity crisis? He thinks the problem can be solved by converting bank holding debt to equity. Of course that means the bondholders take a big haircut.
Check out the April 24th, 2009 Charlie Rose interview with Ackman, Kate Kelly, Andew Ross Sorkin, and Joseph Stiglitz.
I'd be interested in your take on Ackman's suggestions.
You are confusing equity with capital. For regulatory purposes, some long term debt is considered capital. It is clear from the text that your diagrams should be labelled with equity instead of capital. Note that most banks do not issue commercial paper, generally, as they can get cheaper rates from certificate of deposits (which are theoretically covered by FDIC insurance.)
The USA is not a pure democracy, it is a democratic republic. A pure democracy would be everyone voting on every decision - in a republic we only vote to elect the decision makers. Democracy only becomes mob rule when the citizens misbehave.
Nomenclature Debate: Is the phrase, " 'L'-shaped Recovery" an easily-addicted-to misnomer?
Folks, it does not represent or signal any "Recovery"...the ‘L’ shape signals and represents a long traversing of the bumpy floor of a crater of unknown diameter.
I'd suggest we say 'L'-Shaped Descent instead. Or ‘L’-shaped Descent-then-Grope.
How apropos the uncertainty of the ‘L’.
This debt-fueled economic re-structuring we’ve entered, kicking & screaming, has yet to signal what could replace the expired 25-yr experiment of a 300+ million-person nation attempting to operate on a GDP that is 70% driven by debt-enabled consumer spending. Therefore, the uncertainty signaled by the ‘L’-shaped Descent-then-Grope is perfect!
Rajesh, I expected objections. The purpose here is to make a complicated issue as simple as possible - if I overcomplicate it, only a few people will read it.
Tell Lehman they didn't issue CP -ROFLOL. The more CP a bank issued - the worse the liquidity crisis.
volker, sorry for snapping at you last thread. I have had little sleep. And I fucking hate my job, which involves providing essential legal services to bailout recipients whose very financial oligarchy make me have to do this job providing essential legal services to bailout recipients rather than other, more useful endeavors. Anything useful or good is "crowded out" because it's not as profitable. Maybe because it's not a recipient of government dollars!
Credit losses have nothing to do with bank runs. Note that Northern Rock had a bank run without having credit losses (housing not having crashed in Britain at the the time of the run.) Perfectly solvent banks can be hit but runs. Also the item you have labelled as Federal Reserve Liquidity should be labelled Federal Reserve Discount Window Loans or simply Federal Reserve Loans. The liquidity (in the form of Reserve deposits) is on the assets side not the liability side.
Ken isn't going to be working on the filter until he finishes coding my post securitization and syndication resale plugin, which is far more profitable than something unsexy and basic and essential like ignore. The plugin will allow me to repackage and process your posts into a new securitized information product I'm offering to main stream media outlets. As you can see here, a very small percentage of problematic posts can become marketable if they are bundled with other, funnier posts, such as this one right here.
Note that most banks do not issue commercial paper
There was over $600 billion of "financial commercial paper" outstanding as of last week. Are you saying that number is negligible, or do I misunderstand what it represents?
I wonder if the lawyers on the other side have thought of sabotage. It wouldn't surprise me. It's funny how when smart people are unhappy, things start to break down in subtle, undetectable ways. Everything takes longer, too.
Lehman wasn't a commercial bank when it issued Commercial Paper. We need to distinguish between commercial banks and investment banks. Most of the bailouts have gone to investment banks (or the investment side of hybrid companies like CitiGroup.) Any entity that takes deposits has to follow different (much stricter rules) than the investment banks.
I see a lot of people who say look at all the bail-out of banks, we need to regulate them more. But the big problems where in the investment banks, particularly the five big bulge-bracket banks, not in the commercial banks which have become the whipping boys for this crisis.
Most of the financial commercial paper is issued by non-bank financial companies, GE Credit or CIT. Without easy access to deposits, they have been heavily dependent on commercial paper.
This is not a bad presentation, but a naïve (yet thoughtful) reader would wonder why it is a problem for a bank's liabilities to run (or "amble") away. Aren't fewer liabilities a good thing?
I think you need to make it more clear that every liability gets created and destroyed with a corresponding asset. In particular, when the CP holders or depositors leave, the bank loses not just those liabilities, but also CASH from its assets.
This would also distinguish liquid assets from illiquid assets, which are at the heart of the "bank run" problem. In short, I think it would be instructive to add just as much "color" to the assets side as you have now on the liabilities side. It is important to illustrate that the bank's liabilities can be short-term or long-term, and that its assets can be liquid (e.g., cash) or illiquid (e.g., loans), and seeing how these things line up on each side of the balance sheet is key to understanding what the "liquidity problem" is.
Loans, in turn, can be either "good" or "bad", and this is at the heart of the "solvency problem".
It doesn't take fear of credit losses to start a bank run. Just fifty friends and a local TV camera crew. That same video clip will be shown thousands of times and people will wonder if they need to get in line as well.
Note that people lined up to pull their money out of IndyMac after the FDIC took over the bank. And what did people do with the money pull out of IndyMac? Deposit it in another FDIC insured bank.
Rajesh, yes. I'm trying to make this simple and I'm mixing various financial institutions to make several points - if you find that confusing, please step back at look at the bigger picture. If a bank had no need for Fed liquidity, then the FDIC stopped the bank run by upping the FDIC insurance. For investment banks with no FDIC deposits, the Fed stopped the "bank run" by replacing essentially replacing CP.
I think CR is trying to illustrate the difference between Liquidity problem & Solvency problem. Those two problems have to be approached with different solutions. If a bank has a liquidity problem, you can solve it by providing a cash infusion. However if a bank has a solvency problem, cash infusions will just prolong and mask the pain but won't solve anything.
Excellent job CR!!! Thanks.
Liquidity - bank run fears or money supply shocks.
Solvency - very bad loans based on poor judgement, etc.
Solvency issues are trivial to fix. Just issue Treasuries and give the proceeds to the banks.
You can also raise taxes and give the proceeds to the banks. And you can liquidate manufacturing companies and farmers and give the proceeds to the banks. You can inflate the money supply and give the new money proceeds to the banks. You can guarantee the assets of banks so they take few losses. When it is all done, bank profits!
Also it would illustrate that what "Fed liquidity" does is to replace illiquid assets with liquid cash... But at a discount.
The more I think about it, the more I think you simplified the wrong side. The presentation would actually be clearer with more details on the asset side and fewer details on the liabilities side. Then add the details on the liabilities side when you start to talk about solvency...
good post. One item that is slightly incorrect is that NIM is almost universally defined as Net Interest Income / average total earning assets. (earning assets being assets that produce interest income).
In common usage, bank refers to commercial bank. Goldman Sachs is a stock broker, not a bank, to most people.
One issue we face is that our strategy for handling the failure of an investment bank is to find a bigger investment bank to buy up the failed investment bank. When we got down to five big investment banks, we had to find a new game, bringing in commercial banks (J. P. Morgan) to keep the system running. That lasted until CitiGroup got into trouble because we ran out of bigger banks. What we need is a special chapter of the bankruptcy code that allows the restructuring of investment banks without disrupting it's day to day operations; a legally sanctioned good bank/bad bank transition.
You can apply to the FDIC to become a bank, but I understand that they have not approved any new banks in many months. Probably busy visiting existing banks and saying howdy.
If the Fed buys treasury bonds, and the cash from those bonds goes into government spending programs, then we should get inflation... If the Fed buys treasury bonds and the cash goes into bank capital, and the bank doesnt lend the money out, then we should get no inflation...
So I repeat my previous question - Is there any limit to the Fed balance sheet expansion, as long as there is no inflation?
This back-and-forth above my post illuminates a nice point in this national discussion. (And I'm tempted to state the obvious in terms of how the disctinction between IB and commercial bank is a bit silly, in terms of exactly how much changed in that weekend 5 or 6 months ago when most of our remaining large IBs magically became regular 'banks' while attending Sunday services... And how earnings at the moneycenter banks seem to be driven by trading more than anything.)
The real problems here stem from the fact that a 'bank' could be involved in almost any financial activity, and that the scope and diversity of these activities not only precluded effective management but made any kind of regulation impossible. Combined with our current incentive-option-based executive compensation scheme, all of these problems are going to be exploited to the maximum effect in terms of a complete neglect of the long-term consequences of an abandonment of Tanta's traditional three Cs. The climate of moral hazard promulgated by the Fed, Treasury, and vaporous nature of the currency itself only makes these things much worse.
These platonic images of 'banks' are interesting, but I don't think they come close to describing the kind of institutions which have already cost the taxpayer trillions. Perhaps a business structure of the standard casino business model would be better (not to insult casino operators, of course).
"Solvency issues are trivial to fix. Just issue Treasuries and give the proceeds to the banks."
I can only think of two ways to fix the solvency issue.
a) Better way: kill off none performing banks, break down too big to fall banks and kill them off as well. Do it in a systematic and disciplined manner. Come up with the five year plan (ah the irony of 5 year...) to clean up the mess. While cleaning the mess create a temporary federal landing facility for corporate (exempt financials) paper, etc.
b) Not so good solution: nationalize none performing banks (equity is wiped out, bond holders lose majority), and systematic sell off of nationalized assets to private parties.
For those who haven't seen it yet, the Bill Moyers interview on 4/24 with Michael Perino and Simon Johnson is quite enlightening.
The gist seems to be the need for Congressional hearings not unlike what Pecora did in the 1930s, the power of the banksters today and then, and the need for some serious investigation and necessary regulation. Taxing future generations in order to hand cash to banksters isn't the answer, especially if it also leaves the current systemic problems intact.
A little too much history in the first part, but a lot of good ideas in the second part.
There is no limit to Fed balance sheet expansion, regardless of inflation. The difference between what the Fed can do and what the Fed will do keeps people awake at night.
"What we need is a special chapter of the bankruptcy code that allows the restructuring of investment banks without disrupting it's day to day operations; a legally sanctioned good bank/bad bank transition."
Rajesh, this is where your cogent insights enter the world of public policy and begin to fail miserably.
These institutions need to be liquidated, not restructured, and the miscreants who led them need to spend a few years in orange pajamas.
Their was a swiss banker named Paul Something, who got in trouble in the 80s, and then wrote some successful mystery novels, who said all bankers had one foot in a quagmire all the time.
These days, in common usage "bank" refers to any entity that has received any of those hundreds of billions of dollars of support from the Treasury and Fed.
Rajesh, CR is trying to explain to non-experts what a "liquidity problem" is and what a "solvency problem" is. Changing the word "bank" to "financial institution" might make it more technically correct, but it would not serve to clarify the presentation in any way. (Most of your criticisms fall into this category.)
The goal is to explain the issues without the clutter of irrelevant detail.
Investment banks are like trees. Different branches do their separate things. If the capital markets groups lends too much to Chrylser, the bank is insolvent but the retail brokerage division is still bringing in a steady income. HollywoodHack, your statement is equivilent to saying, That tree has one rotten branch, so we should burn the entire tree down.
The stockholders of the bank need to lose all their money, but the customers and counter-parties should not suffer because one division lost a lot of money.
Just because AIG FP lost hundreds of billions of dollars, should people with life insurance with AIG lose their benefits.
The motto of a lot of people seem to be "It is too complicated to figure out. Punish them all, innocent or guilty. Let God sort it out."
The rules for liquidity and solvency are different for deposit taking banks versus all other companies. In some cases, the rules are stricter and in other, they are looser. It is hard to gloss over these differences and present a general case.
"HollywoodHack, your statement is equivilent to saying, That tree has one rotten branch, so we should burn the entire tree down."
Actually, in the ideal world, we would take the Fed and the nature of the "Federal Reserve Note" itself and remove that at as well. So I'm really suggesting shredding the stump, ripping out every last root, and placing a small amount of TNT in the hole left when the job is done.
But what can I say, Rajesh, I believe in free markets, accountability for businesses and individuals regardless of the size of their activities, and sound money. I guess that makes me some kind of a nut.
I would argue that you believe in giving endless transfusions to a patient with vicious late-stage diabetes and progressively rotting limbs... that, and plenty of candy bars.
Rajesh, I buy that, but the culpable parties have also figured that out too, and so have actively lashed themselves to every single part of the tree, knowing that action against them is impossible without destroying the entire system. If we can get away with having our economy burdened like that but still function, fine; letting bad guys get rich isn't a life-ending event. But if we can't get away with it, if the burden they lay on the entire tree-system is too much for the tree to bear, we shouldn't succumb to any illusions they spin about giving them even more money to save what has essentially become a doomed system. The tree is going down, whether we pay them or not.
I liken the current situation to a tobacco executive taking a hostage and telling us to let him live or the hostage gets it, while the hostage is discovered to be a lung cancer patient who is on the verge of keeling over from tobacco use. We could let the exec go, but the hostage will die anyway, and he'll just run off and infect someone else with cancer. Or we can kill them both.
Basically I was looking for an analogy that involved shooting the infirm. Thank you for your time.
It's amazing that the dollar is still the world's reserve currency... If the masses lose faith in the currency then we are truly back in the 30's - in Germany... We can only pray that the Fed's liquidity does not escape from the banks into the spendthrift hands of the ignorant...
From the Toronto sun article about a release of live avian flu virus in Austria
"....He said he couldn’t reveal more information because it would give away proprietary information about Baxter’s production process.
Andraghetti said Friday the four investigating governments are co-operating closely with the WHO and the European Centre for Disease Control in Stockholm, Sweden.
“We are in very close contact with Austrian authorities to understand what the circumstances of the incident in their laboratory were,” she said.
“And the reason for us wishing to know what has happened is to prevent similar events in the future and to share lessons that can be learned from this event with others to prevent similar events. ... This is very important.”
The scumbags want to know what has happened to prevent future similar events and share lessons... but that doesn't overcome the need to keep secret proprietary information about the company's processes. I hope they wind up in jail.
CR - I wanted to comment that in practical terms, at the conceptual level you are working at here, every single individual can think of him/herself as a bank too.
In a typical case:
Liabilities = Mortgage and other Debt
Assets = Home, 401k, Investments, and yourself (the economic value of yourself/your job)
Capital = Assets - Liabilities
Many individuals have had their balance sheets destroyed just as the banks have. Assets are no longer priced at their bubble values, and unemployment is rising as well.
Why is it that the banks get all the attention here? It might seem that a better approach would be to bail out the individuals (e.g. provide WPA-style employment for the unemployed), and let them decide how to allocate their fresh capital. The well-run banks will pick up capital as individuals pay down debts.
However, banks without capital cannot renew loans, much less make new loans. Households whose assets are only sufficient to pay the interest on their liabilities ("speculatively financed") are in great danger from a bankers' credit crunch, because when the debt cannot be paid off and it cannot be rolled over either, assets must be sold to make the interest payments. But the resulting firestorm of asset sales at depressed prices (what we saw last September-November) doesn't raise enough capital to actually pay off the debt. It just makes it that much more difficult for those who sold the assets to continue to service their debts...
1) Few banks rely on deposits as the only source of their liquidity. Even big deposit taking banks like Citi or JPM or WFC or BAC critically depend on capital markets to finance their business, and on the CP market in particular. Without the liquidity support from the Fed/Treasury last year, most of the large deposit taking institutions in this country would have gone bust.
2) The fundamental problem is always solvency. Liquidity is a problem when insolvency is anticipated or solvency situation is unclear.
For example, many banks stopped placing their money with Citi because of the fear of its insolvency. They do not know for a fact if the Citi is indeed insolvent. However, because of the market perception as reflected in Citi's stock price, bonds spreads, CDS, they view Citi as too much risk and given very low returns on placements they prefer not to take this risk. This is how fear of insolvency translates into liquidity problems. If the government had not stepped in, Citi would have been out of business just like Lehman.
The only real way to deal with liquidity problems is to provide reassurance about solvency - transparent, reliable information about the balance sheet and earnings. You do not do that, you end up propping zombies with taxpayer money.
Using the grassy knoll to illustrate paranoid conspiracy theories is not effective. Even the "official" US Government position is currently that there was probably a conspiracy in the JFK Assassination. Progress was made under Carter (House Assassinations Committee), stopped dead under Reagan, revived under Clinton (when the Oliver Stone hype came out), cut back under W. All the intelligence documents have still not been made public.
I would take reinvestigation as an Obama distraction of the public any day.
"The only real way to deal with liquidity problems is to provide reassurance about solvency"
Golly, you could also have a business model where profits create enough reserves to absorb the occasional shock. Perhaps businesses incapable of generating these profits shouldn't survive. And perhaps these 'lifeblood of the economy too big to fail' institutions shouldn't be in private hands if the inevitable losses are going to be socialized.
@Rajesh: Investment banks are like trees. Different branches do their separate things. If the capital markets groups lends too much to Chrysler, the bank is insolvent but the retail brokerage division is still bringing in a steady income.
All these "branches" get financed from the same Treasury pool of a given bank (at least for a given market).
When/If Chrysler goes BK, will you try to separate its divisions because not all of them are bad? Hey, they do produce good designs. Other companies will pick up good divisions and good teams, just like other banks picked up good pieces of Lehman. Nothing complicated to that.
AIG insurance is a red herring - it is regulated and policyholders are not in danger of losing their benefits.
I don't think that ignoring those accounting issues is such a good idea- one idea I have thought of recently is for a bank to do a stealth recapitalization using those huge treasury bucks to lever purchasing their own long term liabilities at a discount on the open market.
It would not surprise me in the least to see long term bonds bought back at 30 to 70 cents on the dollar are being sucked up by spe's to replace crappy debt that is not accretive to the mother balance sheet.
Now, how about that for a very sneaky way to profit from this, without raising much attention.
Further, CR also misses that commercial short term paper guarantee that pretty much allows short rolls as long as uncle sam is happy with you- this issue with regards to GM is probably a major loss exposure to the US Treasury- how much GM paper do you think we guarantee implicitly or explicitly?
"The stockholders of the bank need to lose all their money, but the customers and counter-parties should not suffer because one division lost a lot of money."
I doubt that. Counter parties usually are sophisticated investors and SHOULD be aware of the default risks. It's all about legal priority in claiming the remaining assets. The priority of customers who lend their assets are much higher than a priority of someone who signed a legal contract. The role of bankruptcy is to get a firm out of its contract obligations and reimburse remaining parties based on the priority weight of their holdings.
The counter party SHOULD suffer because any derivative is just an OTC contract! (a promise to deliver)
p.s. PLEASE .... let's not make out of derivatives more than they are - contract obligations that go into the toilet in case of default. Now if there are any assets left after debt holders got their $, then counter party can claim remaining assets.
Also the branch analogy, if GM has a RE branch that provides positive cash flows and the rest of the firm bleeds money, should any be saved? If you believe in SOCIALISM the answer is YES, if you don't the answer is ... the survival of the firms that make money. It's rather simple.
Rajesh say "Just because AIG FP lost hundreds of billions of dollars, should people with life insurance with AIG lose their benefits."
Why do we have to stick life insurance holders in the forefront of every pro-bailout argument? What percent of AIG's 200B bailout went towards saving life insurance policy holders versus Investment banks. Please don't give Timmay's, it's too complicated to decipher story.
By the way, the one branch is not rotten. The branch has Cancer and it is spreading fast . The only treatment for this advanced cancer (like any other) is a system reboot.
I agree with almost everything in that post, but that is just retarded. Even an isolationist, hard-money guy like myself accepts that institutions like SS are necessary and the Randian revolution is just not happening. Injecting Rush-style knucklehead ideology into the affair really doesn't help the job at hand, which is taking out the trash before these zombie banks ensure our decline with the worst aspects of late 90s Japanese policy amplifying the worst effects of 1930s-style evaporation of business conditions.
OT back to pig story: U.S. Declares Health Emergency As Cases of Swine Flu Emerge - NY Times
U.S. Declares Public Health Emergency Over Swine Flu
American health officials on Sunday declared a public health emergency over increasing cases of swine flu, saying that they had confirmed 20 cases of the disease in the United States and expected to see more as investigators track down the path of the outbreak.
Social Security is not necessary socialist idea. Certain public goods like defense, environment, etc cannot be provided by market forces hence the government must step in. That's why they are called public goods.
Social security is a public good designed to benefit all. However it is not direct wealth re-distribution because the size of individual payments depends on the size of initial INDIVIDUAL contribution.
And that's why the political right has been completely impotent in this process, totally unable to defend the most basic concepts of free markets, fiscal responsibility, a culture of accountability... an instant retreat into semantics at the merest whiff of an actual problem.
Guess what - an automatic 15% tax on the self-employed which is held in a mystical, magical opaque 'lockbox' for decades is the very essence of socialism as an ideological choice. And troops stationed in over 100 different countries is not a 'public good'.
The problem with terms like "socialism" is that they mean too many different things to too many different people. The Orwellian politcal and marketing types find it profitable to expend enormous amounts of money and bandwidth scrambling the English Language, and as a result it becomes very difficult to have an intelligent conversation about many subjects.
The problem I have with Rajesh is that he seems to have missed the repeal of Glass-Steagall and doesn't realize that all the larger financial institutions are involved in a very wide range of businesses, which makes them ALL effectively both investment banks, deposit/commercial banks, and in many cases insurance companies as well. There's no point in splitting hairs at the level of "what kind of liabilities are at risk of a bank run" when the essential truth is that basically the only liabilities that haven't run from these institutions are the federally-insured ones.
Finally, I'd like to point out that with every "not-too-big-to-fail" institution, you don't even need a corrupt "branch" (division, whatever) to bring down the company. You just need a single rogue trader or one bad strategy that blows up. Remember LTCM, Barings PLC, the Sumitomo trader, or the Amaranth hedge fund?
There is a reason why wise nations impose principles of collective responsibility upon single-body financial entities (the definition of "corporation" is that it's a single legal entity!). That is that unless everyone is forced to watch everyone else, sooner or later it is INEVITABLE that someone is going to blow up the firm -- and the collateral socio-economic damage is not limited to the firm.
Agreed. That line item really confuses (audited) bank balance sheets. Goodwill IMO represents some proprietary process, the value of some contracts, patents... WTF could bank goodwill be and in the case of WFC how could it measure 22.6BILLION ?
Then there's OBS entities. Another jerk-around. And America has the most legitmate transparent financial markets in the world. LMAO.
No, at least not in the US. Symptoms here seem to be mild, and there has been no reported mortality. Still, assiduous hand-washing and keeping one's distance from people who are obviously in respiratory distress is a good idea. If you have been in contact with such people try to avoid touching your face until you have had the chance to thoroughly wash your hands. When you use a public rest room touch spigots, handles etc. with a hand towel if possible. A supply of sterile hand-wipes is often helpful.
Pork is OK. Make sure it's well-done, as always. No pork tatar, please. : )
"Please do more research on the Bilderbergers, there's plenty of more information out there on them."
Michael, I'm becoming increasingly bored by your obsession with secret societies and conspiracy theories.
Why? Conspiracies are a fact of life. Ask any prosecuting attorney.
If your newly found knowledge--realization, or whatever the hell it is--is a revelation to you, I'd have to ask where you've been living all of your life.
Either the flu scare is being overblown or the national governments involved have become exceptionally good about squelching the mainstream media, because the factual content of e.g. the Reuters headline article hasn't had any real new numbers in it for the past 24 hours.
Unfortunately, after the past 8 years, I no longer believe in the former.
Are there really still only 80 dead in Mexico?
Thanks to Wolf for the BBC link:
I'm a specialist doctor in respiratory diseases and intensive care at the Mexican National Institute of Health. There is a severe emergency over the swine flu here. More and more patients are being admitted to the intensive care unit. Despite the heroic efforts of all staff (doctors, nurses, specialists, etc) patients continue to inevitably die. The truth is that anti-viral treatments and vaccines are not expected to have any effect, even at high doses. It is a great fear among the staff. The infection risk is very high among the doctors and health staff.
There is a sense of chaos in the other hospitals and we do not know what to do. Staff are starting to leave and many are opting to retire or apply for holidays. The truth is that mortality is even higher than what is being reported by the authorities, at least in the hospital where I work it. It is killing three to four patients daily, and it has been going on for more than three weeks. It is a shame and there is great fear here. Increasingly younger patients aged 20 to 30 years are dying before our helpless eyes and there is great sadness among health professionals here.
Antonio Chavez, Mexico City
I am a doctor and I work in the State of Mexico. I don't work in the shock team; I am in the echocardiography team, but I do get some news from my colleagues in the hospital. There have been some cases of young people dying from respiratory infections, but this happened before the alert and they were not reported because the necessary tests weren't done. We doctors knew this was happening a week before the alert was issued and were told to get vaccinated. I went to buy some anti-virals for my husband, who is also a doctor, because he had contact with a young patient who presented influenza symptoms and died. I don't think pharmacies stock enough anti-virals.
I understand the government doesn't want to generate panic, but my personal opinion is that they issued the alert too late. Still now, the population is not getting the information they need. We have been out in the street and some people are not wearing face masks and are not taking any preventive measures.
Guadalupe, Mexico City
Friends working in hospitals say that the situation is really bad, they are talking about 19 people dead in Oaxaca, including a doctor and a nurse
Alvaro Ricardez, Oaxaca City
I think there is a real lack of information and sadly, preventative action. In the capital of my state, Oaxaca, there is a hospital closed because of a death related to the porcine influenza. In the papers they recognise only two people dead for that cause. Many friends working in hospitals or related fields say that the situation is really bad, they are talking about 19 people dead in Oaxaca, including a doctor and a nurse. They say they got shots but they were told not to talk about the real situation. Our authorities say nothing. Life goes on as usual here.
Here's another great quote from the BBC: "It does seem as though the unprecedented actions being taken by the government to contain the virus don't match with the statistics being provided, however, so there is some doubt as to whether they're just being overly cautious or whether things are a lot worse than what they're telling the public.
Randal Sheppard, Mexico City"
Social Security is a reasonable Socialist program gone bad. First, the return determines how much you get back until you hit maximum benefit return. You still continue to pay into the system and receive no additional benefits. Currently 40 Max paid quarters receive max pay back. I paid 80+ max quarters and get nothing for the excess. I am paying for others who did not earn or contribute into the system.
Second, ALL employees pay about 15% SS and Medicare now if view properly. Employers pay zero for you. It is a play on words most employees believe.
Simply look at GM UAW night mare and that is the path the US government is on. Clinton and Bush where bad but Obama has the accelerator mashed through the floor!
Pavel, there's no need to cook pork 'well done' in this country. That has been the case for many, many years, but old habits persist.
Of course, that run of "many, many years" was before the peanuts contained salmonella and were distributed worldwide, and before produce grown in unsanitary conditions abroad was imported without adequate review...
It was not just the banksters that figured out how to break the profit-limiting constraints of aging regulatory systems with new business practices...
Not saying the food supply is unsafe, just that it doesn't seem quite as safe as it used to be!
Asun (profile) wrote (in reply to...) on Sun, 4/26/2009 - 1:34 pm
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Yes, but those are accounts from Mexico. Now US has joined in declaring emergency. When are we going to see quarantine, curfew and martial law?
Well, I took a nap. I hope someone else did too. If not, just watch some golf. Out like a light every time.
As to this epidemic thingie, if any here believe you are getting anything within a nuclear detonation of the truth, raise your hand. Or take a nap. The truly incompetent and overly made up Janet Napolitano has declared an emergency, cracked the safe on antivirals and left a humongous dump in the ladies room. The cases are mild, there's people dying by the score, there's nothing to worry about, there's martial law imminent, the churches are filling up with people who only recently have been introduced to a frightful possibility. sheesh...... more golf for me. Later, I'm gonna duct tape my windows and down several handfuls of homeopathic shit guaranteed to ward off mold, colds and sore assholes.
Lobbyist Ben Dover (profile) wrote on Sun, 4/26/2009 - 3:50 pm
Currently 40 Max paid quarters receive max pay back. I paid 80+ max quarters and get nothing for the excess. I am paying for others who did not earn or contribute into the system.
And I, who manage my income each year to be no higher than the lowest taxable bracket, thank you for that! Good for you.
"The cases are mild, there's people dying by the score, there's nothing to worry about, there's martial law imminent..."
I haven't read of a single mortality anywhere but in Mexico. If the authorities are concealing something worse it would be an immensely stupid thing to do, as, for one thing, no one would believe them afterwards. Then there really would be a panic.
"If the authorities are concealing something worse it would be an immensely stupid thing to do, as, for one thing, no one would believe them afterwards."
Pavel, no disrespect intended, but on what planet have you been living?
I am sure that many of you will not like to hear this..
All western news agencies report news with the following template-
1] Those people are pathetic.
2] But we are not.
3] Many of them were killed
4] But we are safe.
5] We know..
6] They are stupid.
7] There is more dissension that they say.
8] What we say is more accurate than what those guys say..
9] Are you not lucky to be white or a slave to a white
@Lucifer - Point well taken. But in the absence of hard factual information, the tea leaves must do!
The way that these eyewitness accounts are in such violent disagreement with the official press releases is beginning to smell like New Orleans after Katrina.
And there is a glaring discrepancy between the steps the government is taking (particularly the Mexican government) and the nature of the information they are releasing...
Since this is potentially a huge market-mover, it's an appropriate subject to think about, even here.
"Pavel, no disrespect intended, but on what planet have you been living?"
I would expect the authorities in some circumstances to be cavalier with the truth. Not in the case of a domestic emergency. That truly would be destructive, and futile. However, I do recall that in the first day or so of the Chernobyl disaster that government lied. But that government collapsed some years later, and there are people who will tell you that Chernobyl was the beginning of the end.
I was sitting in the lobby of a Soviet diplomatic premises, watching the faces of the personnel watching reports of Chernobyl. There were pale, solemn, quietly fearful expressions on those faces.
April 24 (Bloomberg) -- Finance chiefs from the Group of Seven predict the world economy will start to rebound later this year as evidence mounts that the worst of the recession is over, according to the draft of a statement to be released after talks in Washington today.
“Economic activity should begin to recover later this year amid a continued weak outlook, and downside risks persist,” the G-7 finance ministers and central bankers said in the draft communique obtained by Bloomberg News. “Recent data suggest that the pace of decline in our economies has slowed, and some signs of stabilization are emerging.”
.. The G-7 said it will “act as needed” to restore lending, provide liquidity support, inject capital into financial institutions, protect savings and address stressed assets, according to the draft statement. It repeated that it will “ensure the soundness” of major financial companies
Yet, they indisputably are. According to a study prepared for Bloomberg by Washington Service, a research outfit, directors, officers and the like have sold $353 million worth of stock in this fading month, or 8.3 times the total bought. As a matter of fact, according to the firm, insider purchases of $42.5 million are on track to make April the skimpiest month for such buying since July 1992.
The pace of selling in the first three weeks of this month, incidentally, was the swiftest since the market peaked and the bear came out of hibernation with a vengeance in October '07.
broward, I thought that was Alki. Lived in Seattle years ago, and couldn't place Avila. Cool pic. Next best thing to being there. Keep'em coming. Maybe the skyline from one of the piers on Alaskan Way, or a panorama from the top of Queen Anne. TIA.
The wave of refinancings also showed in mortgage bonds issued by Freddie. The company sold $57.68 billion of guaranteed mortgage bonds in March, up sharply from $29.8 billion. Meanwhile, the mortgage company also saw its single-family delinquency rate continue to go up under the dual impact of its foreclosure program being suspended and the broader economic slowdown.
Over the past couple of months, the role of Freddie and sibling Fannie Mae (FNM) have diminished in the mortgage market as both the U.S. Treasury and the Federal Reserve have emerged as backstop buyers with deep pockets.
The U.S. Treasury, so far, has bought nearly $125 billion of agency mortgage-backed securities, while the Federal Reserve has bought $381.185 billion and announced that it would buy up to $1.25 trillion worth of these bonds this y
The problem with epidemics is that they create hysteria and fake reports.. always!
I am not denying that this flu virus is nastier than usual. But the biggest issues with treating influenza are always 1. inadequate nursing and 2. lack of aggressive treatment for secondary bacterial infections.
The authorities will err on the side of doing too much rather than too little, because as a public official, only one of those can result in you losing your job. On the other hand, they do not want to create a panic.
So discrepancies between the (modest) official numbers and the (extreme) official reaction are not particularly mysterious.
The flu story is interesting. I wonder if there is comorbid factor causing such bad outcomes in Mexico versus what we're seeing here.
Summers is quoted on Marketwatch claiming that a Chrysler chapter 11 filing did not mean the company is not necessarily heading for liquidation. When the original viability plans were rejected I remember the administration line was that if Chrysler did not meet the deadline there would be no more money and the business would be liquidated. Sounds like the bluff has been called.
"Pavel, I respectfully suggest that expediency almost always trumps truth."
To lie about something happening in front of people's faces is not expedient. It's a species of hysteria, denial and escapism. But in this case the truth, if it is being concealed, will not be concealed for long.
The cases in Mexico are essentially all from hospitals, of people with very serious symptoms. The Mexican authorities have not looked for the incidence in the general population (I suspect they're not even equipped to). So there's no discrepancy between the low virulence in the US and the high virulence in Mexico; the Mexican cases are only the tip of the iceberg there in terms of incidence. For every reported case there's probably tens, hundreds, or perhaps even thousands of cases which were indistinguishable clinically from ordinary flu.
The Mexican authorities aren't "hiding" anything; they don't know the incidence. It might be better if they said so, I suppose.
So we're not looking at an apocalyptic event here, although the deaths in young adults indicate were are looking at a nasty flu probably much worse than the ordinary flu. Hygienic measures are of course well-justified as avoiding even an ordinary flu justifies paranoid handwashing, minimizing group contact, and using masks for a few weeks. Flu sucks, even if it's not fatal.
"I wonder if there is comorbid factor causing such bad outcomes in Mexico versus what we're seeing here."
That possibility has been raised. Also, that fewer mild cases have been detected in Mexico, skewing the figures. But one would expect to see at least some mortality, then, in other countries.
the factual content of e.g. the Reuters headline article hasn't had any real new numbers in it for the past 24 hours.
interesting, no?
I guess we'll have to wait for the weekend to end...
"The Mexican authorities have not looked for the incidence in the general population (I suspect they're not even equipped to). So there's no discrepancy between the low virulence in the US and the high virulence in Mexico; the Mexican cases are only the tip of the iceberg there in terms of incidence. For every reported case there's probably tens, hundreds, or perhaps even thousands of cases which were indistinguishable clinically from ordinary flu."
What you say, FE, makes sense. But I'm still not convinced that's the compete answer. Of course, I'm just a layman, not a public health statistician.
I attended a Mass in DC, in the Palisades section, this morning. I tried to see if anyone was showing obvious symptoms, but couldn't detect any from casual observation. DC is international if anything, and one would expect the virus to be filtering in. We shall see.
Mexican authorities have not looked for the incidence in the general population (I suspect they're not even equipped to).
Mexico (and LatAm) have an interesting system of semi-official pharmacies (OT: IMO better in some respects than the US healthcare system!)
The Mex gov should be able to get a pretty good read on the general population by querying the pharmacies.
pavel - no, we don't know for sure. But it's also consistent with the Mexican eyewitness reports, which have a lot of people with flu symptoms who are not going to hospitals. Having two novel transpecies recombination flus at the same time in the same place would be quite the coincidence, so I think we should assume the US version (infectious but mild in the vast majority of cases) is the same as the Mexican (very severe in a few hundred people out of a population of 20 million), and the obvious way is for there to be a lot of mild cases in Mexico. The other possibility would be a genetic susceptibility much more common in Mexican than in Americans, a la SARS, which could pretty much infect only a smallish subset of East Asians.
The Mex gov should be able to get a pretty good read on the general population by querying the pharmacies.
No, because mild cases are not distinguishable from pre-existing flus. There are a lot of people in Mexico City who've had flu recently, as is always true towards the end of flu season. The Mex gov can know that; but they can't know what proportion are pre-existing human flus and what proportion are swine flu.
FE - well, no government in the world is going to know about all the mild cases in their population.
But they should be able to figure out an approximate number of people who are going from mild to moderate to severe, in relatively real time.
MP,
I'd just rather talk about the proven conspiracies and facts surrounding them rather than all the mundane news stories about nothing significant like the human interest stories.
One of my favorite proven conspiracies to talk about is the chemical spray poisoning being dumped on our heads by our government.
«the return determines how much you get back until you hit maximum benefit return. You still continue to pay into the system and receive no additional benefits. Currently 40 Max paid quarters receive max pay back. I paid 80+ max quarters and get nothing for the excess. I am paying for others who did not earn or contribute into the system.»
OASDI IS NOT AN INVESTMENT/RETIREMENT PROGRAMME.
IT IS INSURANCE: insurance against the risk of becoming too poor be able to save for retirement (with a small saving/investment component).
In every insurance scheme most people pay far more than the benefits they receive, as the adverse event does not happen. The few who suffer the risk get far more than then put in. The others are usually very happy to have paid but not suffered the happening of the risk.
Sure, you may want to say that you don't want to pay insurance against the risk of becoming extremely poor in your retirement -- you are willing to bet that you will remain rich, and to die in the gutter of cold and hunger if you are wrong. But for very good reasons a mandatory insurance scheme has been setup in the
You might legitimately question the actuarial basis of the system, and complain that your premiums are too high, and the payout in case of the risk happening too generous, but that is quite difficult to argue with a straight face.
"Sure, you may want to say that you don't want to pay insurance against the risk of becoming extremely poor in your retirement -- you are willing to bet that you will remain rich, and to die in the gutter of cold and hunger if you are wrong. But for very good reasons a mandatory insurance scheme has been setup in the"
The government will be broke before me. I truly expect the government to rob me of my SS benefits to support the mass Baby Bummers who pissed away their opportunity to save and build a proper retirement. It is a socialist way to allow stupidity to run wild by not properly educating them of the expense and the hazard of not preparing ones self. Instead we have liberals crying about those who are 30 days from BK. Sorry most have dealt themselves that hand. Us who really did the right thing do not need to reward those of stupidity.
nice understatement CR.
Solvency issues are trivial to fix. Just issue Treasuries and give the proceeds to the banks.
water, water, everywhere and not a drop to drink...
You can't build a house on liquidity.
The real issue is - When can the Fed no longer print money by expanding their balance sheet? Is there a limit? Why?
Nice CR, you, like EHP, have a talent for writing about complicated subjects and making them easier to understand. All this without leaving the reader feeling like an ignorant slut.
It was obvious that the excitement of Mr. ... was triggered when mention was made of the nation's industry.
"We have been successful in dividing society against itself by pitting labor against management. (The social-labor movement, employing labor unions, a manipulation of wages and prices, and government regulation of business, was the brainchild of ---s such as Karl Marx and Samuel Gompers. The result was a destruction of free enterprise.) This perhaps has been one of our greatest feats, since in reality it is a triangle, though only two points ever seem to occur. In modern industry where exists capital, which force we represent, is the apex. Both management and labor are on the base of this triangle. They continually stand opposed to each other and their attention is never directed to the head of their problem. Management is forced to raise prices since we are ever increasing the cost of capital. Labor must have increasing wages and management must have higher prices, thus creating a vicious cycle. We are never called to task for our role which is the real reason for inflation, since the conflict between management and labor is so severe that neither has time to observe our activities. It is our increase in the cost of capital that causes the inflation cycle. We do not labor or manage, and yet we receive the profits. Through our money manipulation, the capital that we supply industry costs us nothing. Through our national bank, the Federal Reserve, we extend book credit, which we create from nothing, to all local banks who are member banks. They in turn extend book credit to industry. Thus, we do more than God, for all of our wealth is created from nothing. You look shocked! Don't be! It's true, we actually do more than God. With this supposed capital we bring industry, management and labor into our debt, which debt only increases and is never liquidated. Through this continual increase, we are able to pit management against labor so they will never unite and attack us and usher in a debt-free industrial utopia.
"We are the necessary element since we expend nothing. Management can create its own capital -- the profits. Its business would grow and profits increase. Labor would prosper as well, while the price of the product would remain constant, the prosperity of industry, labor and management would continually increase. We ---s glory in the fact that the stupid goy have never realized that we are the parasites consuming an increasing portion of production while the producers are continually receiving less and less."
Nova is right.
I feel like a well-informed slut. A slut who is equipped to make complex financial decisions. A business-slut.
"We have been taught that our current economic practices are benevolent therefore Christian. These pulpit parrots extol our goodness for loaning them the money to build their temples, never realizing that their own holy book condemns all usury. They are eager to pay our exorbitant interest rates. They have led society into our control through the same practice. Politically, they hail the blessings of democracy and never understand that through democracy we have gained control of their nation. Their book (Notice that Mr. ... always refers to the Bible as their book) again teaches a benevolent despotic form of government in accordance with the laws of that book, while a democracy is mob rule which we control through their Churches, our news media and economic institutions. Their religion is only another channel through which we can direct the power of our propaganda. These religious puppets' stupidity is only exceeded by their cowardice, for they are ruled easily."
insightful post, well done
I can't wait for Part 2. This is like watching one of those two-part disaster mini-series.
Volker,
Sorry my lazy spell checker, try this,
Secret Societies: The Bilderberg Group
Secret Societies: The Bilderberg Group - Video
Please do more research on the Bilderbergers, there's plenty of more information out there on them.
CR, have you heard Bill Ackman's approach to the bank solvency/liquidity crisis? He thinks the problem can be solved by converting bank holding debt to equity. Of course that means the bondholders take a big haircut.
Check out the April 24th, 2009 Charlie Rose interview with Ackman, Kate Kelly, Andew Ross Sorkin, and Joseph Stiglitz.
I'd be interested in your take on Ackman's suggestions.
Michael isn't picking up on my sarcasm.
You are confusing equity with capital. For regulatory purposes, some long term debt is considered capital. It is clear from the text that your diagrams should be labelled with equity instead of capital. Note that most banks do not issue commercial paper, generally, as they can get cheaper rates from certificate of deposits (which are theoretically covered by FDIC insurance.)
The USA is not a pure democracy, it is a democratic republic. A pure democracy would be everyone voting on every decision - in a republic we only vote to elect the decision makers. Democracy only becomes mob rule when the citizens misbehave.
I do not deny that humans are stupid enough to create secret societies, it is just that the universe does not seem to care about our beliefs.
The sad reality is that a group of very smart and powerful humans have no more effect on the universe than a few ants.
//Secret Societies: The Bilderberg Group//
Slight Subject Change:
Nomenclature Debate: Is the phrase, " 'L'-shaped Recovery" an easily-addicted-to misnomer?
Folks, it does not represent or signal any "Recovery"...the ‘L’ shape signals and represents a long traversing of the bumpy floor of a crater of unknown diameter.
I'd suggest we say 'L'-Shaped Descent instead. Or ‘L’-shaped Descent-then-Grope.
How apropos the uncertainty of the ‘L’.
This debt-fueled economic re-structuring we’ve entered, kicking & screaming, has yet to signal what could replace the expired 25-yr experiment of a 300+ million-person nation attempting to operate on a GDP that is 70% driven by debt-enabled consumer spending. Therefore, the uncertainty signaled by the ‘L’-shaped Descent-then-Grope is perfect!
Ackman is a profiteer and surfaces only at those times when he thinks he is on to a way to make some money. He is part of the problem.
Rajesh, I expected objections. The purpose here is to make a complicated issue as simple as possible - if I overcomplicate it, only a few people will read it.
Tell Lehman they didn't issue CP -ROFLOL. The more CP a bank issued - the worse the liquidity crisis.
best wishes.
volker, sorry for snapping at you last thread. I have had little sleep. And I fucking hate my job, which involves providing essential legal services to bailout recipients whose very financial oligarchy make me have to do this job providing essential legal services to bailout recipients rather than other, more useful endeavors. Anything useful or good is "crowded out" because it's not as profitable. Maybe because it's not a recipient of government dollars!
Credit losses have nothing to do with bank runs. Note that Northern Rock had a bank run without having credit losses (housing not having crashed in Britain at the the time of the run.) Perfectly solvent banks can be hit but runs. Also the item you have labelled as Federal Reserve Liquidity should be labelled Federal Reserve Discount Window Loans or simply Federal Reserve Loans. The liquidity (in the form of Reserve deposits) is on the assets side not the liability side.
Rajesh, do you get the runs in a liquidity crisis?
Ken, are you making progress on the filter?
[Edited for spelling.]
Ken isn't going to be working on the filter until he finishes coding my post securitization and syndication resale plugin, which is far more profitable than something unsexy and basic and essential like ignore. The plugin will allow me to repackage and process your posts into a new securitized information product I'm offering to main stream media outlets. As you can see here, a very small percentage of problematic posts can become marketable if they are bundled with other, funnier posts, such as this one right here.
Hmmm, hoops, have you thought of sabotage?
Perhaps the spores have gotten you.
lawyerliz, no comment.
Rajesh, as noted in the post, it doesn't take credit losses- just a fear of credit losses - for a liquidity crisis and a bank run.
I thought that was clear.
As far as Discount window, I'm just using that as an example for the various Fed facilities.
Best to all.
Rajesh --
Note that most banks do not issue commercial paper
There was over $600 billion of "financial commercial paper" outstanding as of last week
. Are you saying that number is negligible, or do I misunderstand what it represents?
I wonder if the lawyers on the other side have thought of sabotage. It wouldn't surprise me. It's funny how when smart people are unhappy, things start to break down in subtle, undetectable ways. Everything takes longer, too.
Lehman wasn't a commercial bank when it issued Commercial Paper. We need to distinguish between commercial banks and investment banks. Most of the bailouts have gone to investment banks (or the investment side of hybrid companies like CitiGroup.) Any entity that takes deposits has to follow different (much stricter rules) than the investment banks.
I see a lot of people who say look at all the bail-out of banks, we need to regulate them more. But the big problems where in the investment banks, particularly the five big bulge-bracket banks, not in the commercial banks which have become the whipping boys for this crisis.
Perhaps just a little creative incompetence?
Liz checks hoops' brow.
Fever!!! Definitely a touch of the flu.
Can't do best work when you are sick, right?
Most of the financial commercial paper is issued by non-bank financial companies, GE Credit or CIT. Without easy access to deposits, they have been heavily dependent on commercial paper.
The edit feature sure helps me come back later and add more funny to my posts.
Jusa,
Whose writings are you quoting?
Link please.
Hoops: no need, no offense taken. It's impossible to offend me, I'm in sales.
And Ackman is never to be trusted. Smarmy weasel.
return for more funny: You just need a little nap.
Calculated Risk --
This is not a bad presentation, but a naïve (yet thoughtful) reader would wonder why it is a problem for a bank's liabilities to run (or "amble") away. Aren't fewer liabilities a good thing?
I think you need to make it more clear that every liability gets created and destroyed with a corresponding asset. In particular, when the CP holders or depositors leave, the bank loses not just those liabilities, but also CASH from its assets.
This would also distinguish liquid assets from illiquid assets, which are at the heart of the "bank run" problem. In short, I think it would be instructive to add just as much "color" to the assets side as you have now on the liabilities side. It is important to illustrate that the bank's liabilities can be short-term or long-term, and that its assets can be liquid (e.g., cash) or illiquid (e.g., loans), and seeing how these things line up on each side of the balance sheet is key to understanding what the "liquidity problem" is.
Loans, in turn, can be either "good" or "bad", and this is at the heart of the "solvency problem".
It doesn't take fear of credit losses to start a bank run. Just fifty friends and a local TV camera crew. That same video clip will be shown thousands of times and people will wonder if they need to get in line as well.
Note that people lined up to pull their money out of IndyMac after the FDIC took over the bank. And what did people do with the money pull out of IndyMac? Deposit it in another FDIC insured bank.
Rajesh, yes. I'm trying to make this simple and I'm mixing various financial institutions to make several points - if you find that confusing, please step back at look at the bigger picture. If a bank had no need for Fed liquidity, then the FDIC stopped the bank run by upping the FDIC insurance. For investment banks with no FDIC deposits, the Fed stopped the "bank run" by replacing essentially replacing CP.
best wishes.
Don't forget intangible assets. Goodwill hunting.
I think CR is trying to illustrate the difference between Liquidity problem & Solvency problem. Those two problems have to be approached with different solutions. If a bank has a liquidity problem, you can solve it by providing a cash infusion. However if a bank has a solvency problem, cash infusions will just prolong and mask the pain but won't solve anything.
Excellent job CR!!! Thanks.
Liquidity - bank run fears or money supply shocks.
Solvency - very bad loans based on poor judgement, etc.
I could sure use a drink of water right about now.
Solvency issues are trivial to fix. Just issue Treasuries and give the proceeds to the banks.
You can also raise taxes and give the proceeds to the banks. And you can liquidate manufacturing companies and farmers and give the proceeds to the banks. You can inflate the money supply and give the new money proceeds to the banks. You can guarantee the assets of banks so they take few losses. When it is all done, bank profits!
Also it would illustrate that what "Fed liquidity" does is to replace illiquid assets with liquid cash... But at a discount.
The more I think about it, the more I think you simplified the wrong side. The presentation would actually be clearer with more details on the asset side and fewer details on the liabilities side. Then add the details on the liabilities side when you start to talk about solvency...
I wanna be a bank. Can I be a bank?
"I wanna be a bank. Can I be a bank?"
x 100,
That was an interesting edit, Hoops.
good post. One item that is slightly incorrect is that NIM is almost universally defined as Net Interest Income / average total earning assets. (earning assets being assets that produce interest income).
In common usage, bank refers to commercial bank. Goldman Sachs is a stock broker, not a bank, to most people.
One issue we face is that our strategy for handling the failure of an investment bank is to find a bigger investment bank to buy up the failed investment bank. When we got down to five big investment banks, we had to find a new game, bringing in commercial banks (J. P. Morgan) to keep the system running. That lasted until CitiGroup got into trouble because we ran out of bigger banks. What we need is a special chapter of the bankruptcy code that allows the restructuring of investment banks without disrupting it's day to day operations; a legally sanctioned good bank/bad bank transition.
You can apply to the FDIC to become a bank, but I understand that they have not approved any new banks in many months. Probably busy visiting existing banks and saying howdy.
If the Fed buys treasury bonds, and the cash from those bonds goes into government spending programs, then we should get inflation... If the Fed buys treasury bonds and the cash goes into bank capital, and the bank doesnt lend the money out, then we should get no inflation...
So I repeat my previous question - Is there any limit to the Fed balance sheet expansion, as long as there is no inflation?
This back-and-forth above my post illuminates a nice point in this national discussion. (And I'm tempted to state the obvious in terms of how the disctinction between IB and commercial bank is a bit silly, in terms of exactly how much changed in that weekend 5 or 6 months ago when most of our remaining large IBs magically became regular 'banks' while attending Sunday services... And how earnings at the moneycenter banks seem to be driven by trading more than anything.)
The real problems here stem from the fact that a 'bank' could be involved in almost any financial activity, and that the scope and diversity of these activities not only precluded effective management but made any kind of regulation impossible. Combined with our current incentive-option-based executive compensation scheme, all of these problems are going to be exploited to the maximum effect in terms of a complete neglect of the long-term consequences of an abandonment of Tanta's traditional three Cs. The climate of moral hazard promulgated by the Fed, Treasury, and vaporous nature of the currency itself only makes these things much worse.
These platonic images of 'banks' are interesting, but I don't think they come close to describing the kind of institutions which have already cost the taxpayer trillions. Perhaps a business structure of the standard casino business model would be better (not to insult casino operators, of course).
"Solvency issues are trivial to fix. Just issue Treasuries and give the proceeds to the banks."
I can only think of two ways to fix the solvency issue.
a) Better way: kill off none performing banks, break down too big to fall banks and kill them off as well. Do it in a systematic and disciplined manner. Come up with the five year plan (ah the irony of 5 year...) to clean up the mess. While cleaning the mess create a temporary federal landing facility for corporate (exempt financials) paper, etc.
b) Not so good solution: nationalize none performing banks (equity is wiped out, bond holders lose majority), and systematic sell off of nationalized assets to private parties.
That'll be $5.
For those who haven't seen it yet, the Bill Moyers interview on 4/24 with Michael Perino and Simon Johnson is quite enlightening.
The gist seems to be the need for Congressional hearings not unlike what Pecora did in the 1930s, the power of the banksters today and then, and the need for some serious investigation and necessary regulation. Taxing future generations in order to hand cash to banksters isn't the answer, especially if it also leaves the current systemic problems intact.
A little too much history in the first part, but a lot of good ideas in the second part.
Bill Moyers Journal . Watch & Listen | PBS
There is no limit to Fed balance sheet expansion, regardless of inflation. The difference between what the Fed can do and what the Fed will do keeps people awake at night.
"What we need is a special chapter of the bankruptcy code that allows the restructuring of investment banks without disrupting it's day to day operations; a legally sanctioned good bank/bad bank transition."
Rajesh, this is where your cogent insights enter the world of public policy and begin to fail miserably.
These institutions need to be liquidated, not restructured, and the miscreants who led them need to spend a few years in orange pajamas.
There is no normal bank!! Or, normal banking.
Their was a swiss banker named Paul Something, who got in trouble in the 80s, and then wrote some successful mystery novels, who said all bankers had one foot in a quagmire all the time.
These days, in common usage "bank" refers to any entity that has received any of those hundreds of billions of dollars of support from the Treasury and Fed.
Rajesh, CR is trying to explain to non-experts what a "liquidity problem" is and what a "solvency problem" is. Changing the word "bank" to "financial institution" might make it more technically correct, but it would not serve to clarify the presentation in any way. (Most of your criticisms fall into this category.)
The goal is to explain the issues without the clutter of irrelevant detail.
The goal is to explain the issues without the clutter of irrelevant detail.
Absolutely. The asteroid was approaching Earth at the end of Part I. There's little need to be weeding the garden right now.
Investment banks are like trees. Different branches do their separate things. If the capital markets groups lends too much to Chrylser, the bank is insolvent but the retail brokerage division is still bringing in a steady income. HollywoodHack, your statement is equivilent to saying, That tree has one rotten branch, so we should burn the entire tree down.
The stockholders of the bank need to lose all their money, but the customers and counter-parties should not suffer because one division lost a lot of money.
Just because AIG FP lost hundreds of billions of dollars, should people with life insurance with AIG lose their benefits.
The motto of a lot of people seem to be "It is too complicated to figure out. Punish them all, innocent or guilty. Let God sort it out."
The rules for liquidity and solvency are different for deposit taking banks versus all other companies. In some cases, the rules are stricter and in other, they are looser. It is hard to gloss over these differences and present a general case.
"HollywoodHack, your statement is equivilent to saying, That tree has one rotten branch, so we should burn the entire tree down."
Actually, in the ideal world, we would take the Fed and the nature of the "Federal Reserve Note" itself and remove that at as well. So I'm really suggesting shredding the stump, ripping out every last root, and placing a small amount of TNT in the hole left when the job is done.
But what can I say, Rajesh, I believe in free markets, accountability for businesses and individuals regardless of the size of their activities, and sound money. I guess that makes me some kind of a nut.
I would argue that you believe in giving endless transfusions to a patient with vicious late-stage diabetes and progressively rotting limbs... that, and plenty of candy bars.
-from prior thread:
blonderengel, my humility knows no bounds- thank you.
nova, glad you liked the link.
Rajesh, I buy that, but the culpable parties have also figured that out too, and so have actively lashed themselves to every single part of the tree, knowing that action against them is impossible without destroying the entire system. If we can get away with having our economy burdened like that but still function, fine; letting bad guys get rich isn't a life-ending event. But if we can't get away with it, if the burden they lay on the entire tree-system is too much for the tree to bear, we shouldn't succumb to any illusions they spin about giving them even more money to save what has essentially become a doomed system. The tree is going down, whether we pay them or not.
I liken the current situation to a tobacco executive taking a hostage and telling us to let him live or the hostage gets it, while the hostage is discovered to be a lung cancer patient who is on the verge of keeling over from tobacco use. We could let the exec go, but the hostage will die anyway, and he'll just run off and infect someone else with cancer. Or we can kill them both.
Basically I was looking for an analogy that involved shooting the infirm. Thank you for your time.
It's amazing that the dollar is still the world's reserve currency... If the masses lose faith in the currency then we are truly back in the 30's - in Germany... We can only pray that the Fed's liquidity does not escape from the banks into the spendthrift hands of the ignorant...
CR,
Thanks for a much appreciated, good job.
"L" (as in L-shaped recovery/recession/whatever) is for losers, which we are.
I have to admit, the swine flu is a nice touch, a nice diversionary tactic.
SARS, bird flu, Y2K--doom, disaster, death--it's always something.
A poem I wrote nearly 15 years ago:
grinnell_unsuitable
...
OT (I need time to digest this post)
From the Toronto sun article about a release of live avian flu virus in Austria
"....He said he couldn’t reveal more information because it would give away proprietary information about Baxter’s production process.
Andraghetti said Friday the four investigating governments are co-operating closely with the WHO and the European Centre for Disease Control in Stockholm, Sweden.
“We are in very close contact with Austrian authorities to understand what the circumstances of the incident in their laboratory were,” she said.
“And the reason for us wishing to know what has happened is to prevent similar events in the future and to share lessons that can be learned from this event with others to prevent similar events. ... This is very important.”
The scumbags want to know what has happened to prevent future similar events and share lessons... but that doesn't overcome the need to keep secret proprietary information about the company's processes. I hope they wind up in jail.
Hoops - Go take a nap!
CR - I wanted to comment that in practical terms, at the conceptual level you are working at here, every single individual can think of him/herself as a bank too.
In a typical case:
Many individuals have had their balance sheets destroyed just as the banks have. Assets are no longer priced at their bubble values, and unemployment is rising as well.
Why is it that the banks get all the attention here? It might seem that a better approach would be to bail out the individuals (e.g. provide WPA-style employment for the unemployed), and let them decide how to allocate their fresh capital. The well-run banks will pick up capital as individuals pay down debts.
However, banks without capital cannot renew loans, much less make new loans. Households whose assets are only sufficient to pay the interest on their liabilities ("speculatively financed") are in great danger from a bankers' credit crunch, because when the debt cannot be paid off and it cannot be rolled over either, assets must be sold to make the interest payments. But the resulting firestorm of asset sales at depressed prices (what we saw last September-November) doesn't raise enough capital to actually pay off the debt. It just makes it that much more difficult for those who sold the assets to continue to service their debts...
1) Few banks rely on deposits as the only source of their liquidity. Even big deposit taking banks like Citi or JPM or WFC or BAC critically depend on capital markets to finance their business, and on the CP market in particular. Without the liquidity support from the Fed/Treasury last year, most of the large deposit taking institutions in this country would have gone bust.
2) The fundamental problem is always solvency. Liquidity is a problem when insolvency is anticipated or solvency situation is unclear.
For example, many banks stopped placing their money with Citi because of the fear of its insolvency. They do not know for a fact if the Citi is indeed insolvent. However, because of the market perception as reflected in Citi's stock price, bonds spreads, CDS, they view Citi as too much risk and given very low returns on placements they prefer not to take this risk. This is how fear of insolvency translates into liquidity problems. If the government had not stepped in, Citi would have been out of business just like Lehman.
The only real way to deal with liquidity problems is to provide reassurance about solvency - transparent, reliable information about the balance sheet and earnings. You do not do that, you end up propping zombies with taxpayer money.
Lawyerliz,
His name is Paul Erdman and he wrote "The Billion Dollar Sure thing" while being held in a Swiss Prison. His obit in the Times Online is here:
Paul Erdman | Times Online Obituary
OT Lawyerliz:
Using the grassy knoll to illustrate paranoid conspiracy theories is not effective. Even the "official" US Government position is currently that there was probably a conspiracy in the JFK Assassination. Progress was made under Carter (House Assassinations Committee), stopped dead under Reagan, revived under Clinton (when the Oliver Stone hype came out), cut back under W. All the intelligence documents have still not been made public.
I would take reinvestigation as an Obama distraction of the public any day.
"The only real way to deal with liquidity problems is to provide reassurance about solvency"
Golly, you could also have a business model where profits create enough reserves to absorb the occasional shock. Perhaps businesses incapable of generating these profits shouldn't survive. And perhaps these 'lifeblood of the economy too big to fail' institutions shouldn't be in private hands if the inevitable losses are going to be socialized.
@Rajesh: Investment banks are like trees. Different branches do their separate things. If the capital markets groups lends too much to Chrysler, the bank is insolvent but the retail brokerage division is still bringing in a steady income.
All these "branches" get financed from the same Treasury pool of a given bank (at least for a given market).
When/If Chrysler goes BK, will you try to separate its divisions because not all of them are bad? Hey, they do produce good designs. Other companies will pick up good divisions and good teams, just like other banks picked up good pieces of Lehman. Nothing complicated to that.
AIG insurance is a red herring - it is regulated and policyholders are not in danger of losing their benefits.
Golly, you could also have a business model where profits create enough reserves to absorb the occasional shock.
This is why solvency depends on both the balance sheet and the earnings outlook
The Obama Deception HQ Full length version
YouTube - The Obama Deception HQ Full length version
I don't think that ignoring those accounting issues is such a good idea- one idea I have thought of recently is for a bank to do a stealth recapitalization using those huge treasury bucks to lever purchasing their own long term liabilities at a discount on the open market.
It would not surprise me in the least to see long term bonds bought back at 30 to 70 cents on the dollar are being sucked up by spe's to replace crappy debt that is not accretive to the mother balance sheet.
Now, how about that for a very sneaky way to profit from this, without raising much attention.
Further, CR also misses that commercial short term paper guarantee that pretty much allows short rolls as long as uncle sam is happy with you- this issue with regards to GM is probably a major loss exposure to the US Treasury- how much GM paper do you think we guarantee implicitly or explicitly?
"The stockholders of the bank need to lose all their money, but the customers and counter-parties should not suffer because one division lost a lot of money."
I doubt that. Counter parties usually are sophisticated investors and SHOULD be aware of the default risks. It's all about legal priority in claiming the remaining assets. The priority of customers who lend their assets are much higher than a priority of someone who signed a legal contract. The role of bankruptcy is to get a firm out of its contract obligations and reimburse remaining parties based on the priority weight of their holdings.
The counter party SHOULD suffer because any derivative is just an OTC contract! (a promise to deliver)
p.s. PLEASE .... let's not make out of derivatives more than they are - contract obligations that go into the toilet in case of default. Now if there are any assets left after debt holders got their $, then counter party can claim remaining assets.
Also the branch analogy, if GM has a RE branch that provides positive cash flows and the rest of the firm bleeds money, should any be saved? If you believe in SOCIALISM the answer is YES, if you don't the answer is ... the survival of the firms that make money. It's rather simple.
Rajesh say "Just because AIG FP lost hundreds of billions of dollars, should people with life insurance with AIG lose their benefits."
Why do we have to stick life insurance holders in the forefront of every pro-bailout argument? What percent of AIG's 200B bailout went towards saving life insurance policy holders versus Investment banks. Please don't give Timmay's, it's too complicated to decipher story.
By the way, the one branch is not rotten. The branch has Cancer and it is spreading fast . The only treatment for this advanced cancer (like any other) is a system reboot.
"If you believe in SOCIALISM the answer is YES"
I agree with almost everything in that post, but that is just retarded. Even an isolationist, hard-money guy like myself accepts that institutions like SS are necessary and the Randian revolution is just not happening. Injecting Rush-style knucklehead ideology into the affair really doesn't help the job at hand, which is taking out the trash before these zombie banks ensure our decline with the worst aspects of late 90s Japanese policy amplifying the worst effects of 1930s-style evaporation of business conditions.
OT back to pig story:
U.S. Declares Health Emergency As Cases of Swine Flu Emerge - NY Times
U.S. Declares Public Health Emergency Over Swine Flu
American health officials on Sunday declared a public health emergency over increasing cases of swine flu, saying that they had confirmed 20 cases of the disease in the United States and expected to see more as investigators track down the path of the outbreak.
Is it okay to panic yet?
Social Security is not necessary socialist idea. Certain public goods like defense, environment, etc cannot be provided by market forces hence the government must step in. That's why they are called public goods.
Social security is a public good designed to benefit all. However it is not direct wealth re-distribution because the size of individual payments depends on the size of initial INDIVIDUAL contribution.
And that's why the political right has been completely impotent in this process, totally unable to defend the most basic concepts of free markets, fiscal responsibility, a culture of accountability... an instant retreat into semantics at the merest whiff of an actual problem.
Guess what - an automatic 15% tax on the self-employed which is held in a mystical, magical opaque 'lockbox' for decades is the very essence of socialism as an ideological choice. And troops stationed in over 100 different countries is not a 'public good'.
Heckuva job, Reaganites.
Asun: Is it okay to panic yet?
Take a look at accounts mailed to BBC by folks in Mexico about the flu situation.
Yes, but those are accounts from Mexico. Now US has joined in declaring emergency. When are we going to see quarantine, curfew and martial law?
The problem with terms like "socialism" is that they mean too many different things to too many different people. The Orwellian politcal and marketing types find it profitable to expend enormous amounts of money and bandwidth scrambling the English Language, and as a result it becomes very difficult to have an intelligent conversation about many subjects.
The problem I have with Rajesh is that he seems to have missed the repeal of Glass-Steagall and doesn't realize that all the larger financial institutions are involved in a very wide range of businesses, which makes them ALL effectively both investment banks, deposit/commercial banks, and in many cases insurance companies as well. There's no point in splitting hairs at the level of "what kind of liabilities are at risk of a bank run" when the essential truth is that basically the only liabilities that haven't run from these institutions are the federally-insured ones.
Finally, I'd like to point out that with every "not-too-big-to-fail" institution, you don't even need a corrupt "branch" (division, whatever) to bring down the company. You just need a single rogue trader or one bad strategy that blows up. Remember LTCM, Barings PLC, the Sumitomo trader, or the Amaranth hedge fund?
There is a reason why wise nations impose principles of collective responsibility upon single-body financial entities (the definition of "corporation" is that it's a single legal entity!). That is that unless everyone is forced to watch everyone else, sooner or later it is INEVITABLE that someone is going to blow up the firm -- and the collateral socio-economic damage is not limited to the firm.
[Don't forget intangible assets. Goodwill hunting]
Agreed. That line item really confuses (audited) bank balance sheets. Goodwill IMO represents some proprietary process, the value of some contracts, patents... WTF could bank goodwill be and in the case of WFC how could it measure 22.6BILLION ?
Then there's OBS entities. Another jerk-around. And America has the most legitmate transparent financial markets in the world. LMAO.
"Is it okay to panic yet?"
No, at least not in the US. Symptoms here seem to be mild, and there has been no reported mortality. Still, assiduous hand-washing and keeping one's distance from people who are obviously in respiratory distress is a good idea. If you have been in contact with such people try to avoid touching your face until you have had the chance to thoroughly wash your hands. When you use a public rest room touch spigots, handles etc. with a hand towel if possible. A supply of sterile hand-wipes is often helpful.
Pork is OK. Make sure it's well-done, as always. No pork tatar, please. : )
"Please do more research on the Bilderbergers, there's plenty of more information out there on them."
Michael, I'm becoming increasingly bored by your obsession with secret societies and conspiracy theories.
Why? Conspiracies are a fact of life. Ask any prosecuting attorney.
If your newly found knowledge--realization, or whatever the hell it is--is a revelation to you, I'd have to ask where you've been living all of your life.
In other words, deal with it.
Either the flu scare is being overblown or the national governments involved have become exceptionally good about squelching the mainstream media, because the factual content of e.g. the Reuters headline article hasn't had any real new numbers in it for the past 24 hours.
Unfortunately, after the past 8 years, I no longer believe in the former.
Are there really still only 80 dead in Mexico?
Thanks to Wolf for the BBC link:
I'm a specialist doctor in respiratory diseases and intensive care at the Mexican National Institute of Health. There is a severe emergency over the swine flu here. More and more patients are being admitted to the intensive care unit. Despite the heroic efforts of all staff (doctors, nurses, specialists, etc) patients continue to inevitably die. The truth is that anti-viral treatments and vaccines are not expected to have any effect, even at high doses. It is a great fear among the staff. The infection risk is very high among the doctors and health staff.
There is a sense of chaos in the other hospitals and we do not know what to do. Staff are starting to leave and many are opting to retire or apply for holidays. The truth is that mortality is even higher than what is being reported by the authorities, at least in the hospital where I work it. It is killing three to four patients daily, and it has been going on for more than three weeks. It is a shame and there is great fear here. Increasingly younger patients aged 20 to 30 years are dying before our helpless eyes and there is great sadness among health professionals here.
Antonio Chavez, Mexico City
I am a doctor and I work in the State of Mexico. I don't work in the shock team; I am in the echocardiography team, but I do get some news from my colleagues in the hospital. There have been some cases of young people dying from respiratory infections, but this happened before the alert and they were not reported because the necessary tests weren't done. We doctors knew this was happening a week before the alert was issued and were told to get vaccinated. I went to buy some anti-virals for my husband, who is also a doctor, because he had contact with a young patient who presented influenza symptoms and died. I don't think pharmacies stock enough anti-virals.
I understand the government doesn't want to generate panic, but my personal opinion is that they issued the alert too late. Still now, the population is not getting the information they need. We have been out in the street and some people are not wearing face masks and are not taking any preventive measures.
Guadalupe, Mexico City
Friends working in hospitals say that the situation is really bad, they are talking about 19 people dead in Oaxaca, including a doctor and a nurse
Alvaro Ricardez, Oaxaca City
I think there is a real lack of information and sadly, preventative action. In the capital of my state, Oaxaca, there is a hospital closed because of a death related to the porcine influenza. In the papers they recognise only two people dead for that cause. Many friends working in hospitals or related fields say that the situation is really bad, they are talking about 19 people dead in Oaxaca, including a doctor and a nurse. They say they got shots but they were told not to talk about the real situation. Our authorities say nothing. Life goes on as usual here.
Here's another great quote from the BBC: "It does seem as though the unprecedented actions being taken by the government to contain the virus don't match with the statistics being provided, however, so there is some doubt as to whether they're just being overly cautious or whether things are a lot worse than what they're telling the public.
Randal Sheppard, Mexico City"
Social Security is a reasonable Socialist program gone bad. First, the return determines how much you get back until you hit maximum benefit return. You still continue to pay into the system and receive no additional benefits. Currently 40 Max paid quarters receive max pay back. I paid 80+ max quarters and get nothing for the excess. I am paying for others who did not earn or contribute into the system.
Second, ALL employees pay about 15% SS and Medicare now if view properly. Employers pay zero for you. It is a play on words most employees believe.
Simply look at GM UAW night mare and that is the path the US government is on. Clinton and Bush where bad but Obama has the accelerator mashed through the floor!
"Make sure it's well-done, as always."
Pavel, there's no need to cook pork 'well done' in this country. That has been the case for many, many years, but old habits persist.
Pavel, there's no need to cook pork 'well done' in this country. That has been the case for many, many years, but old habits persist.
Of course, that run of "many, many years" was before the peanuts contained salmonella and were distributed worldwide, and before produce grown in unsanitary conditions abroad was imported without adequate review...
It was not just the banksters that figured out how to break the profit-limiting constraints of aging regulatory systems with new business practices...
Not saying the food supply is unsafe, just that it doesn't seem quite as safe as it used to be!
Asun (profile) wrote (in reply to...) on Sun, 4/26/2009 - 1:34 pm
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Yes, but those are accounts from Mexico. Now US has joined in declaring emergency. When are we going to see quarantine, curfew and martial law?
Well, I took a nap. I hope someone else did too. If not, just watch some golf. Out like a light every time.
As to this epidemic thingie, if any here believe you are getting anything within a nuclear detonation of the truth, raise your hand. Or take a nap. The truly incompetent and overly made up Janet Napolitano has declared an emergency, cracked the safe on antivirals and left a humongous dump in the ladies room. The cases are mild, there's people dying by the score, there's nothing to worry about, there's martial law imminent, the churches are filling up with people who only recently have been introduced to a frightful possibility. sheesh...... more golf for me. Later, I'm gonna duct tape my windows and down several handfuls of homeopathic shit guaranteed to ward off mold, colds and sore assholes.
CR
Will there be a point where the FED will run out of bullets. Are returns diminishing on their "market interventions".
Lobbyist Ben Dover (profile) wrote on Sun, 4/26/2009 - 3:50 pm
Currently 40 Max paid quarters receive max pay back. I paid 80+ max quarters and get nothing for the excess. I am paying for others who did not earn or contribute into the system.
And I, who manage my income each year to be no higher than the lowest taxable bracket, thank you for that! Good for you.
It may be a fast acting virus. I was in a store this morning. Someone nearby coughed. Within an hour I was sneezing and feeling woozy.
Global trade 'will shrink by 9%'
Global trade flows are set to shrink by 9% during 2009, according to a forecast by the World Trade Organization (WTO).
BBC NEWS | Business | Global trade 'will shrink by 9%'
"The cases are mild, there's people dying by the score, there's nothing to worry about, there's martial law imminent..."
I haven't read of a single mortality anywhere but in Mexico. If the authorities are concealing something worse it would be an immensely stupid thing to do, as, for one thing, no one would believe them afterwards. Then there really would be a panic.
Wisdom Speaker,
I do not believe BBC to be any more truthful than Pravda or NYT. All the news is not fake, but a lot of it functionally fake.
VtV, a friend reports that CDC has ordered San Antonio schools closed for the week. This from her little brother.
No, I've no earthly idea if it's true or not. No link, it was via e-mail. Now you know as much as I do. Please don't shoot the messenger.
[Edited to add the following:]
One high school has had two students diagnosed with 'swine flu', and that high school will be closed for a week.
"If the authorities are concealing something worse it would be an immensely stupid thing to do, as, for one thing, no one would believe them afterwards."
Pavel, no disrespect intended, but on what planet have you been living?
I am sure that many of you will not like to hear this..
All western news agencies report news with the following template-
1] Those people are pathetic.
2] But we are not.
3] Many of them were killed
4] But we are safe.
5] We know..
6] They are stupid.
7] There is more dissension that they say.
8] What we say is more accurate than what those guys say..
9] Are you not lucky to be white or a slave to a white
One word comes to mind.. Hubris..
", I'm gonna duct tape my windows"
You must have missed the end of the movie.
Taping the windows does NOT end well.
Michael, any word yet on connections between Mortgage Pig & sudden appearance of Swine flu?
for anyone that cares, the panorama picture was Alki beach, not Avila.
My mind did a reset to 1982
I suggest that you read newspaper archives and compare them with the best known facts about an incident.
@Lucifer - Point well taken. But in the absence of hard factual information, the tea leaves must do!
The way that these eyewitness accounts are in such violent disagreement with the official press releases is beginning to smell like New Orleans after Katrina.
And there is a glaring discrepancy between the steps the government is taking (particularly the Mexican government) and the nature of the information they are releasing...
Since this is potentially a huge market-mover, it's an appropriate subject to think about, even here.
"Pavel, no disrespect intended, but on what planet have you been living?"
I would expect the authorities in some circumstances to be cavalier with the truth. Not in the case of a domestic emergency. That truly would be destructive, and futile. However, I do recall that in the first day or so of the Chernobyl disaster that government lied. But that government collapsed some years later, and there are people who will tell you that Chernobyl was the beginning of the end.
I was sitting in the lobby of a Soviet diplomatic premises, watching the faces of the personnel watching reports of Chernobyl. There were pale, solemn, quietly fearful expressions on those faces.
Other things happened later. It was ugly.
G-7 Draft Says Recovery Should Begin Later This Year (Update1)
G-7 Draft Says Recovery Should Begin Later This Year (Update1) - Bloomberg.com
By Rainer Buergin and Simon Kennedy
April 24 (Bloomberg) -- Finance chiefs from the Group of Seven predict the world economy will start to rebound later this year as evidence mounts that the worst of the recession is over, according to the draft of a statement to be released after talks in Washington today.
“Economic activity should begin to recover later this year amid a continued weak outlook, and downside risks persist,” the G-7 finance ministers and central bankers said in the draft communique obtained by Bloomberg News. “Recent data suggest that the pace of decline in our economies has slowed, and some signs of stabilization are emerging.”
..
The G-7 said it will “act as needed” to restore lending, provide liquidity support, inject capital into financial institutions, protect savings and address stressed assets, according to the draft statement. It repeated that it will “ensure the soundness” of major financial companies
broward: what movie, tell me quick, my wife has me starting the tape up within minutes, was it a documentary????!!!!
"And I, who manage my income each year to be no higher than the lowest taxable bracket, thank you for that"
$7200 puts you over that here in the Golden State...
My little bankt (American Southern in GA) went Friday . I wonder if (or more when) my bigger bank BB&T will go down .
Insider Selling on BAC
Yet, they indisputably are. According to a study prepared for Bloomberg by Washington Service, a research outfit, directors, officers and the like have sold $353 million worth of stock in this fading month, or 8.3 times the total bought. As a matter of fact, according to the firm, insider purchases of $42.5 million are on track to make April the skimpiest month for such buying since July 1992.
The pace of selling in the first three weeks of this month, incidentally, was the swiftest since the market peaked and the bear came out of hibernation with a vengeance in October '07.
broward, I thought that was Alki. Lived in Seattle years ago, and couldn't place Avila. Cool pic. Next best thing to being there. Keep'em coming. Maybe the skyline from one of the piers on Alaskan Way, or a panorama from the top of Queen Anne. TIA.
Freddie Total Mtge Portfolio Rose Annualized 21%
The wave of refinancings also showed in mortgage bonds issued by Freddie. The company sold $57.68 billion of guaranteed mortgage bonds in March, up sharply from $29.8 billion. Meanwhile, the mortgage company also saw its single-family delinquency rate continue to go up under the dual impact of its foreclosure program being suspended and the broader economic slowdown.
Over the past couple of months, the role of Freddie and sibling Fannie Mae (FNM) have diminished in the mortgage market as both the U.S. Treasury and the Federal Reserve have emerged as backstop buyers with deep pockets.
The U.S. Treasury, so far, has bought nearly $125 billion of agency mortgage-backed securities, while the Federal Reserve has bought $381.185 billion and announced that it would buy up to $1.25 trillion worth of these bonds this y
Wisdom Speaker,
The problem with epidemics is that they create hysteria and fake reports.. always!
I am not denying that this flu virus is nastier than usual. But the biggest issues with treating influenza are always 1. inadequate nursing and 2. lack of aggressive treatment for secondary bacterial infections.
Pavel, I respectfully suggest that expediency almost always trumps truth.
Sorry, V, my memory, connection and battery are not up to your question
Movie is "right at your door"
The authorities will err on the side of doing too much rather than too little, because as a public official, only one of those can result in you losing your job. On the other hand, they do not want to create a panic.
So discrepancies between the (modest) official numbers and the (extreme) official reaction are not particularly mysterious.
Upside Down Homes go a little deeper in the zeitgeist
The flu story is interesting. I wonder if there is comorbid factor causing such bad outcomes in Mexico versus what we're seeing here.
Summers is quoted on Marketwatch claiming that a Chrysler chapter 11 filing did not mean the company is not necessarily heading for liquidation. When the original viability plans were rejected I remember the administration line was that if Chrysler did not meet the deadline there would be no more money and the business would be liquidated. Sounds like the bluff has been called.
"Pavel, I respectfully suggest that expediency almost always trumps truth."
To lie about something happening in front of people's faces is not expedient. It's a species of hysteria, denial and escapism. But in this case the truth, if it is being concealed, will not be concealed for long.
Good night and good luck.
The cases in Mexico are essentially all from hospitals, of people with very serious symptoms. The Mexican authorities have not looked for the incidence in the general population (I suspect they're not even equipped to). So there's no discrepancy between the low virulence in the US and the high virulence in Mexico; the Mexican cases are only the tip of the iceberg there in terms of incidence. For every reported case there's probably tens, hundreds, or perhaps even thousands of cases which were indistinguishable clinically from ordinary flu.
The Mexican authorities aren't "hiding" anything; they don't know the incidence. It might be better if they said so, I suppose.
So we're not looking at an apocalyptic event here, although the deaths in young adults indicate were are looking at a nasty flu probably much worse than the ordinary flu. Hygienic measures are of course well-justified as avoiding even an ordinary flu justifies paranoid handwashing, minimizing group contact, and using masks for a few weeks. Flu sucks, even if it's not fatal.
mp (profile) wrote on Sun, 4/26/2009 - 5:07 pm
Pavel, no disrespect intended, but on what planet have you been living?
I gather this is quite serious from the scarcity of information.
"I wonder if there is comorbid factor causing such bad outcomes in Mexico versus what we're seeing here."
That possibility has been raised. Also, that fewer mild cases have been detected in Mexico, skewing the figures. But one would expect to see at least some mortality, then, in other countries.
the factual content of e.g. the Reuters headline article hasn't had any real new numbers in it for the past 24 hours.
interesting, no?
I guess we'll have to wait for the weekend to end...
Here's a UK flu blog. It has a CDC video link and other things.
Swine flu: panic spreads worldwide |
World news |
guardian.co.uk
"The Mexican authorities have not looked for the incidence in the general population (I suspect they're not even equipped to). So there's no discrepancy between the low virulence in the US and the high virulence in Mexico; the Mexican cases are only the tip of the iceberg there in terms of incidence. For every reported case there's probably tens, hundreds, or perhaps even thousands of cases which were indistinguishable clinically from ordinary flu."
What you say, FE, makes sense. But I'm still not convinced that's the compete answer. Of course, I'm just a layman, not a public health statistician.
I attended a Mass in DC, in the Palisades section, this morning. I tried to see if anyone was showing obvious symptoms, but couldn't detect any from casual observation. DC is international if anything, and one would expect the virus to be filtering in. We shall see.
Mexican authorities have not looked for the incidence in the general population (I suspect they're not even equipped to).
Mexico (and LatAm) have an interesting system of semi-official pharmacies (OT: IMO better in some respects than the US healthcare system!)
The Mex gov should be able to get a pretty good read on the general population by querying the pharmacies.
pavel - no, we don't know for sure. But it's also consistent with the Mexican eyewitness reports, which have a lot of people with flu symptoms who are not going to hospitals. Having two novel transpecies recombination flus at the same time in the same place would be quite the coincidence, so I think we should assume the US version (infectious but mild in the vast majority of cases) is the same as the Mexican (very severe in a few hundred people out of a population of 20 million), and the obvious way is for there to be a lot of mild cases in Mexico. The other possibility would be a genetic susceptibility much more common in Mexican than in Americans, a la SARS, which could pretty much infect only a smallish subset of East Asians.
The Mex gov should be able to get a pretty good read on the general population by querying the pharmacies.
No, because mild cases are not distinguishable from pre-existing flus. There are a lot of people in Mexico City who've had flu recently, as is always true towards the end of flu season. The Mex gov can know that; but they can't know what proportion are pre-existing human flus and what proportion are swine flu.
FE - well, no government in the world is going to know about all the mild cases in their population.
But they should be able to figure out an approximate number of people who are going from mild to moderate to severe, in relatively real time.
MP,
I'd just rather talk about the proven conspiracies and facts surrounding them rather than all the mundane news stories about nothing significant like the human interest stories.
One of my favorite proven conspiracies to talk about is the chemical spray poisoning being dumped on our heads by our government.
Toxic Sky part 2- CHEMTRAILS (NBC4.TV)
YouTube - Toxic Sky part 2- CHEMTRAILS (NBC4.TV)
«the return determines how much you get back until you hit maximum benefit return. You still continue to pay into the system and receive no additional benefits. Currently 40 Max paid quarters receive max pay back. I paid 80+ max quarters and get nothing for the excess. I am paying for others who did not earn or contribute into the system.»
OASDI IS NOT AN INVESTMENT/RETIREMENT PROGRAMME.
IT IS INSURANCE: insurance against the risk of becoming too poor be able to save for retirement (with a small saving/investment component).
In every insurance scheme most people pay far more than the benefits they receive, as the adverse event does not happen. The few who suffer the risk get far more than then put in. The others are usually very happy to have paid but not suffered the happening of the risk.
Sure, you may want to say that you don't want to pay insurance against the risk of becoming extremely poor in your retirement -- you are willing to bet that you will remain rich, and to die in the gutter of cold and hunger if you are wrong. But for very good reasons a mandatory insurance scheme has been setup in the
You might legitimately question the actuarial basis of the system, and complain that your premiums are too high, and the payout in case of the risk happening too generous, but that is quite difficult to argue with a straight face.
"Sure, you may want to say that you don't want to pay insurance against the risk of becoming extremely poor in your retirement -- you are willing to bet that you will remain rich, and to die in the gutter of cold and hunger if you are wrong. But for very good reasons a mandatory insurance scheme has been setup in the"
The government will be broke before me. I truly expect the government to rob me of my SS benefits to support the mass Baby Bummers who pissed away their opportunity to save and build a proper retirement. It is a socialist way to allow stupidity to run wild by not properly educating them of the expense and the hazard of not preparing ones self. Instead we have liberals crying about those who are 30 days from BK. Sorry most have dealt themselves that hand. Us who really did the right thing do not need to reward those of stupidity.