03
Mar
THE BLOG IS BACK: POLITICS HOT, ECONOMY COLD
THE SIXTIES STRIKE BACK: CHICAGO TEN OPENS IN THEATERS, JAGGER DEATH PLOT OUT
LONDON (AP) — Rolling Stones singer Mick Jagger escaped an assassination plot hatched in 1969 by the Hells Angels, a new British Broadcasting Corp. documentary has claimed.
ECONOMIC EARTHQUAKE STILL SHAKING
PRIMARIES SAID TO BE IN “DEAD HEAT”
DISSECTOR: “I’M BACK AND I’M PROUD”
All’s right with the world. Prince Harry is safely home. The New York Philarmonic arrived in North Korea for a juche minute. Israel killed another 54 Palestinians in retaliation for earlier retaliations. An Israeli leader “misspoke” in threatening another holocaust there as the Palestinian economy is near collapse. Iran is now trying to make peace even though Condi is on her way back to the holy land in what will likely be another futile mission. The Iranian leader recently visited Iraq which is becoming another theocratic state thanks to US support for the Shia clerics.
Possibly the only consolation for them is that our economy is heading in the same direction. Just the other day, President Bush reassured one and all that the economy is in a “slowdown” but not, heaven forbid, a recession. The markets reacted to this upbeat “jawboning” by plunging the next day. When will his handlers realize that it is now in our national interest for him to seal those lips. Every time he opens them, the brings on the very outcomes he is clearly trying to avoid. Wall Street listens, smiles and then panics.
Its not surprising that both Clinton and Obama are speaking out more about economic issues as the public feels the squeeze. The race is said to be tight in Ohio and Texas and the party divided. I watched Obama in great form before a packed and enthusiastic crowd on Saturday night speaking at Valley Forge High School in Ohio. The School’s team is known as the Patriots. Their Battle Cry:
Onward to victory,
move on to the fight.
Show them the spirit of the Blue and the White
Come on and cheer for the Patriots,
our Colors hold high!
Victory for Valley Forge is our Battle Cry!
Obama seems to be gaining ground, especially in the Texas. The Washington Post reported: “A generational rift defines the Democratic race among Latinos in the Rio Grande Valley, where Clinton once enjoyed almost complete support. Obama introduced himself here two weeks ago, and he has since generated enough momentum with young voters to threaten Clinton’s Latino support base. Polls indicate that Clinton’s lead has evaporated in Texas, a state that her husband has said she must win Tuesday.”
Yet with all the fanfare and media focus on every bump and burp, you can’t help thinking that they like the rest of us are in a volatile environment that politicians can’t really impact.
I am talking about the economy where very few insiders are saying “Yes We Can” these days. Read any newspaper. I read the Times:
“The drumbeat of economic news has been unrelentingly bad,” said Edward Yardeni, a normally upbeat investment strategist. “The recession scenario is looking more and more credible.”
Like so many days since the credit troubles erupted in August, Friday dawned on the East Coast with ominous financial signals. A.I.G., the large insurer, had reported its worst loss ever the evening before. Reports out of London overnight suggested that a large hedge fund, Peloton Partners, was being forced to sell nearly $2 billion in mortgage-related securities after it lost the backing of its lenders.
By the time traders in New York were at their desks, economic reports issued in Washington showed consumer spending was flat in January after adjusting for inflation. Then a bellwether report on Midwestern business activity unexpectedly fell to its lowest level in more than six years, and a survey showed consumer confidence declined to a 16-year low.
If that was not pessimistic enough, Wall Street’s attention was soon riveted by a report from analysts at UBS that estimated losses to the financial system from securities backed by mortgages and other debts would total $600 billion. Until recently, many analysts had been forecasting losses in the neighborhood of $400 billion — a figure that the dwindling band of optimists in the financial markets once dismissed as vastly overblown.”
I am repeating this “old news” because the disaster is in the details.
HERD BEHAVIOR?
So far we have heard mostly generalizations about all this but as the bad news hits home—for those who still have homes—and gas goes up to $4 a gallon, whimpers will turn to screams. How come so fear of the wise men on Wall Street, the pundits on CNBC, the politicians in both parties, and so many activists are shocked by all this?
Simply put, few were paying attention because its easier to be mesmerized by the horse race and the partisan war than look at what’s happening in economic power centers.. The New York Times reached for a psychological explanation of what’s called “herd” behavior. Maybe they have been spending too much time watching HBO’s “In Treatment,”
“The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world. If people do not see any risk, and see only the prospect of outsized investment returns, they will pursue those returns with disregard for the risks.
Were all these people stupid? It can’t be. We have to consider the possibility that perfectly rational people can get caught up in a bubble. In this connection, it is helpful to refer to an important bit of economic theory about herd behavior.
Furthermore, these people are being influenced by agencies like the National Association of Realtors, which is conducting a public-relations campaign intended to show that putting money into housing is a reliable way to build wealth. Under these circumstances, it’s easy to understand how even experts could come to believe that housing is a spectacular investment.”
Oh sure, how convenient and simplistic Sorry, but these herds of the greedy knew exactly what they were doing but just didn’t think the roof would fall on their heads too.
Here’s are some more stories that fill in some of the blanks in
THE DETAILS OF MARKETS DROPPING
CREDIT CRUNCH NOW SQUEEZES MUNICIPAL BONDS AND LOCAL GOVERNMENTS
US NEWS: CREDIT CARD DEBT IS A $915 BILLION DISASTER IN WAITING FOR BANKS
VIEW FROM THE UK: FINANCIAL TIMES: THE MOTHER OF ALL MELTDOWNS
VIEW FROM DOWN UNDER: FINANCIAL TSUNMAI APPROACHING
Global financial stability has been shaken and America is facing a growing economic crisis that could make the 1930s look like “good times.” The U.S. banking system is on the verge of disaster, as banks have recorded over $100 billion in losses, with hundreds of billions more forecasted.
VIEW FROM DOWN UNDER: America’s subprime mortgage losses have swelled into a full-blown financial crisis—and banks and citizens alike are bracing for the “perfect storm.”
WHAT TO DO; WHAT WOULD YOU DO IF YOU WERE BERNANKE
Economist Eric Janszen, who runs the iTulip.com website responds to that question:
Q: “What would EJ do it he were Ben Bernanke?”
A: The easy answer is: I wouldn’t be Ben Bernanke. I said when he started: “With a storm of credit collapse hitting US shores, Ben Bernanke has stepped into the biggest goat job in central banking history.” (see Ka-Poom is a Rhyme not a Repeat of History). But that’s too easy.
Or right after I got the job I could go to Congress and say, “This central banking institution is so broken we’re better off getting rid of it and coming up with something else.” While that approach certainly lets me off the hook, it’s not realistic. Where would Congress get the money to fulfill every election promise made if not the Fed’s digital printing press? Besides, if the Fed were abolished tomorrow a private institution will step in to fill the role. Which one? I’d put my money on Goldman Sachs. That might be an improvement – at least GS had the good sense to avoid the worst of the housing bubble whereas the Fed made it happen. For all I know if GS were acting as the central bank in 2001 it might have tried to protect itself from losses later and seen to it that lending laws were not broken and crazy securitized debt products not sold.
If I was unable to avoid the Fed Chairman’s job or get out of it by convincing Congress to abolish the Fed, what can I do when faced as Bernanke is with the choice between a deflation spiral and an inflation spiral as the debt deflation progresses? Anything I do to cure one just makes the other worse.
The first thing I’d get my head around is the fact that no matter what I do if I do the right thing I’m going to be unpopular. Never have so many been promised so much by leaders with so little intention to pay up. The Fed has promised both “no recessions” and “price stability.” As it turns out, policies employed to fulfill this misguided political mandate are resulting in both recession and inflation.
WHAT THE MEDIA IS COVERING UP
Dean Baker writes on whats missing in the coverage in the American Prospect
Federal Reserve Board Chairman Ben Bernanke told Congress yesterday that he didn’t think that the economy would experience a recession. He also claimed that the collapse of the housing market could fuel inflation by pushing up rents. It would have been useful if the media had provided some background for these assertions.
As far as Mr. Bernanke’s assessment of the risk of a recession due to the collapse of the housing bubble, it is worth reminding readers that Mr. Bernanke consistently denied that there was a housing bubble. Even when the bubble began to collapse last year, and the write-offs in the subprime market first began to hit bank’s balance sheets, Bernanke insisted that the problems in the housing market would only cause minor problems in financial markets. In short, Mr. Bernanke completely overlooked the housing bubble as a potential source of instability and consistently underestimated the risks it posed even as it began to collapse. Readers would find this background useful in assessing Mr. Bernanke’s most recent reassurances.
WHATS HAPPENING WITH THE BANKS?
Ben Bernanke said he expects some to fail. Rather vague. Here’s a site to track their collapse:
CITIGROUP BLUES
This article was in the Las Vegas Review Journal.
MORE CREDIT CARD ABUSES
“Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren’t behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America is hiking rates based on no apparent deterioration in their credit scores at all.”
