You are all blithering idiots that couldn’t form your own opinion to save your life and the folks you rely on to make opinions for you are ”the equivalent of a chimpanzee throwing darts at a board.”
Turns out people firm in their conviction are right less often that those with more pliable world-view. Oh and loud-mouthed pompous asses score the worst. Still these are the people we are innately draw to believe. God really screwed us on that one.
I know that the official line is that the U.S. does not negotiate with terrorists, but these guys at AIG have pieced together one of the most destructive weapons of mass destruction known to man and they say they are the only ones that know how to diffuse it. Also, even though the job market in general is shit right now, it turns out the job market for top executives, who brought about calamitous failure to their companies is still really good. So, let’s just pay them off, because if we don’t someone else will. There is still hope that they give back some of their ill gotten gains later. Sound Good? Also, if they leave they will do everything in their power to work against the government for further ill gotten gains. Maybe we can ask them nicely to save the global economy and then shower them with money for un-fucking what they fucked. It’s just crazy enough to work!
“Listen, what I meant was these people are the scum of the earth. If they show their faces, I will take it upon myself to murder them in the most brutal fashion. I have this book in my house about the Spanish Inquisition - I plan to throw it at them very hard . . . It’s a really big book. Then whatever page it opens to - I will read it to them start to finish. This of course will result in their not being able to stay awake. Which is my opportunity to find the nearest National Science Foundation porn addict. He will have his way with these dishonorable people. Really, I’m saying the only merciful way out for these AIG executives is to kill themselves. Otherwise, I am getting my pitchfork and torch and we will have old fashioned mob rule. That’ll take me back. DIE! DIE! DIE!”
Now excuse me, I have to get to my real job as a public access TV host:
News today is that the iconic Sears Tower in Chicago is being renamed for a new London-based tenant, Willis Group Holdings. The new Willis Group Holdings Tower - wait I’m sorry I guess they are going with Willis Tower, and I already had a nemonic device, W is for Willis, G is for Group, HT is for hot tub - will consolidate several local Willis Group offices, while killing the spirit of all blue collar workers in the entire Midwest.
Moreover, Willis Group Holdings insisted that they did not pay extra for the naming rights, saying “they practically begged us to move in. Half that building’s been empty for a year now. The negotiator was shaking in his shoes so I joking threw out naming rights as a deal breaker. He said he’d change the signs tomorrow. ”
With the death of retail, manufacturing, and real estate in America, financial firms are our last great growth industry. How is that going? Oh, once-in-a-generation meltdown you say? I’m moving to China.
The ordeal of fixing the current financial crisis has fallen on President Obama. He asked for it, he got it, and he will be judged by the results of his solution.
For those no longer in power (Bush, the Republican Congress, laissez-faire economics, conservative ideas in general, and Alan Greenspan) it has become a matter of survival to avoid blame. Solutions are not their problem. Dodging blame splatter is their first and most important concern. Those that make it through to 2010 without much of a blame stain on their shirts will be well situated to point at the other side of the aisle with disgust at their inability to fix this mess (if it is not fixed by then). If it is fixed, then at the very least they can claim to have been a part of the correction process.
Mark my words, if this is not fixed they’ll rail against the Democrats (obviously), if it is fixed they will claim to have “helped.”
This is true of politicians, but not Alan Greenspan. He is covering his ass because he has a memoir to pimp and he doesn’t want “global financial meltdown” on his resume. So what follows is a genuine attempt to cleanse his name and his conscious. The following is from his Wall Street Journal Op-Ed and a translation:
We are in the midst of a global crisis that will unquestionably rank as the most virulent since the 1930s. It will eventually subside and pass into history. But how the interacting and reinforcing causes and effects of this severe contraction are interpreted will shape the reconfiguration of our currently disabled global financial system.
And my book sales.
There are at least two broad and competing explanations of the origins of this crisis. The first is that the “easy money” policies of the Federal Reserve produced the U.S. housing bubble that is at the core of today’s financial mess.
Also know as the “it was Alan’s fault” explanation.
The second, and far more credible, explanation agrees that it was indeed lower interest rates that spawned the speculative euphoria. However, the interest rate that mattered was not the federal-funds rate, but the rate on long-term, fixed-rate mortgages.
That’s right “easy money,” lead to people speculating on mortgages using debt. And by people I mean huge financial institutions. But that speculation lead to a bubble in the housing market not the fed funds rate. The fed funds rate led to people speculating. See?
Between 2002 and 2005, home mortgage rates led U.S. home price change by 11 months. This correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate.
See. Speculation was the cause, not the fed funds rate, which caused speculation.
This should not come as a surprise. After all, the prices of long-lived assets have always been determined by discounting the flow of income (or imputed services) by interest rates of the same maturities as the life of the asset. No one, to my knowledge, employs overnight interest rates — such as the fed-funds rate — to determine the capitalization rate of real estate, whether it be an office building or a single-family residence.
Plus holding the fed funds rate low in a growing economy lead to banks being flush with “easy money” and therefore itching to invest it on something. It just so happened that this time the thing they wanted to invest in was real estate.
The Federal Reserve became acutely aware of the disconnect between monetary policy and mortgage rates when the latter failed to respond as expected to the Fed tightening in mid-2004. Moreover, the data show that home mortgage rates had become gradually decoupled from monetary policy even earlier — in the wake of the emergence, beginning around the turn of this century, of a well arbitraged global market for long-term debt instruments.
I didn’t create the securitization of mortgages, but I did put in place the mise-en-scène that made it look like the right thing to do.
U.S. mortgage rates’ linkage to short-term U.S. rates had been close for decades. Between 1971 and 2002, the fed-funds rate and the mortgage rate moved in lockstep. The correlation between them was a tight 0.85. Between 2002 and 2005, however, the correlation diminished to insignificance.
I didn’t realize the dramatic change in the mortgage market and just let this thing ballon out of control.
As I noted on this page in December 2007, the presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005.
That decline in long-term interest rates across a wide spectrum of countries statistically explains, and is the most likely major cause of, real-estate capitalization rates that declined and converged across the globe, resulting in the global housing price bubble. (The U.S. price bubble was at, or below, the median according to the International Monetary Fund.) By 2006, long-term interest rates and the home mortgage rates driven by them, for all developed and the main developing economies, had declined to single digits — I believe for the first time ever. I would have thought that the weight of such evidence would lead to wide support for this as a global explanation of the current crisis.
You idiots! It’s just not my fault! I’m surrounded by idiots!
However, starting in mid-2007, history began to be rewritten, in large part by my good friend and former colleague, Stanford University Professor John Taylor, with whom I have rarely disagreed. Yet writing in these pages last month, Mr. Taylor unequivocally claimed that had the Federal Reserve from 2003-2005 kept short-term interest rates at the levels implied by his “Taylor Rule,” “it would have prevented this housing boom and bust. “This notion has been cited and repeated so often that it has taken on the aura of conventional wisdom.
Alan can name a rule after himself too. That doesn’t make it true.
[Skipping ahead]
Given the decoupling of monetary policy from long-term mortgage rates, accelerating the path of monetary tightening that the Fed pursued in 2004-2005 could not have “prevented” the housing bubble. All things considered, I personally prefer Milton Friedman’s performance appraisal of the Federal Reserve. In evaluating the period of 1987 to 2005, he wrote on this page in early 2006: “There is no other period of comparable length in which the Federal Reserve System has performed so well. It is more than a difference of degree; it approaches a difference of kind.”
John Taylor is also officially off the invite list for my next water park birthday and Milton Friedman can now bring a friend.
How much does it matter whether the bubble was caused by inappropriate monetary policy, over which policy makers have control, or broader global forces over which their control is limited? A great deal.
The difference between a Nobel Prize and 5 billion kicks in the ass.
If it is monetary policy that is at fault, then that can be corrected in the future, at least in principle. If, however, we are dealing with global forces beyond the control of domestic monetary policy makers, as I strongly suspect is the case, then we are facing a broader issue.
It case you were wondering if I thought this was my fault . . . I don’t.
[Skipping a little more.]
It is now very clear that the levels of complexity to which market practitioners at the height of their euphoria tried to push risk-management techniques and products were too much for even the most sophisticated market players to handle properly and prudently.
I don’t think God himself knows what the fuck these guys were selling.
However, the appropriate policy response is not to bridle financial intermediation with heavy regulation. That would stifle important advances in finance that enhance standards of living. Remember, prior to the crisis, the U.S. economy exhibited an impressive degree of productivity advance. To achieve that with a modest level of combined domestic and borrowed foreign savings (our current account deficit) was a measure of our financial system’s precrisis success.
Yeah. Remember just how BIG that bubble got. That was all me.
[Skip some more.]
If we are to retain a dynamic world economy capable of producing prosperity and future sustainable growth, we cannot rely on governments to intermediate saving and investment flows. Our challenge in the months ahead will be to install a regulatory regime that will ensure responsible risk management on the part of financial institutions, while encouraging them to continue taking the risks necessary and inherent in any successful market economy.
Regulation is still evil. Especially regulation of derivatives. Although we do need to put this one regulation back in place that I took down.
Fox finds itself in another epic struggle with the facts
Fact checking has quickly become a media favorite, but some news outlets with a passing familiarity with facts have struggled with this concept. Fox News put together this admirable effort that uses both hands and a professional train packer to shove words in Obama’s mouth instead of you know, checking the facts. Here’s a taste:
OBAMA: “We have already identified $2 trillion in savings over the next decade.”
THE FACTS: Although 10-year projections are common in government, they don’t mean much. And at times, they are a way for a president to pass on the most painful steps to his successor, by putting off big tax increases or spending cuts until someone else is in the White House.
Obama only has a real say on spending during the four years of his term. He may not be president after that and he certainly won’t be 10 years from now.
What fact did you check exactly? The fact that presidential terms last 4 years. The “fact” that Obama is putting off huge tax increases and painful steps? What about the $2 trillion? Is he pulling it out of his ass? Or has Obama pointed to spending decreases and Fox doesn’t believe him?
OBAMA: “Regulations were gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn’t afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day.”
THE FACTS: This may be so, but it isn’t only Republicans who pushed for deregulation of the financial industries. The Clinton administration championed an easing of banking regulations, including legislation that ended the barrier between regular banks and Wall Street banks. That led to a deregulation that kept regular banks under tight federal regulation but extended lax regulation of Wall Street banks. Clinton Treasury Secretary Robert Rubin, later an economic adviser to candidate Obama, was in the forefront in pushing for this deregulation.
Yes, this is entirely true. It was under the Clinton Administration that the financial regulations and markets were liberalized. It was with a Republican Congress. There’s blame on both sides. So where did Obama say that only Republicans were to blame. To me the overreaction here is more telling than the fact checking. The Republicans were in power for so long that their mantra is well know by all and is clearly being tested today. Therefore, Obama doesn’t even need to accuse them of anything. It’s the old detective trick. Tell the suspect that the victim was brutaly bludgeoned and wait for them to deny vehemently that they even own any bludgeoning tools. ”I don’t even know how to properly throw my wait behind a 10 lb sledgehammer.” To which the detective coyly responds, “I didn’t say anything about Republicans profiting from an economic meltdown.”
Here’s what a real fact check looks like. What do you think? Are you planning on enjoying the right squirm for at least the next 2 years? Hoping that Bobby Jindal makes it to a debate with Obama?
I have here in my hand a speech delivered before Congress, and on the campaign trail, and in Europe, on prime-time TV several times before the election. . .
President Obama’s speech to Congress last night has elicited praise from unlikely sources. Dick Morris heaped plaudits on the speech by the dump truck full - by which I mean he refrained from calling Obama a socialist.
WITH a speech to match the most eloquent os [sic] State of the Union Addresses, with strains of FDR and JFK and a touch of Winston Churchill thrown in, President Obama has clearly staked his presidency on the outcome of the economic crisis.
Really? I was pretty sure his presidency was about socialism - you know the big brother, no freedom, socialism we were scared up to believe was his hidden agenda? The “European Socialist” conspiracy that implicated Gordon Brown? (starts around the 0:50 mark)
Oh wait here it is:
Halfway through the speech, the president got to the minefields of Social Security and health-care reform. He avoided any specifics, but it’s clear that he plans to salvage the former with increases in the payroll tax and implement the latter by government rationing of health care. If you like your HMO, you’ll love Obama’s health plan.
That’s the same clues I picked up on. Like when Obama said “Thank You Madame Speaker,” it was clear that he plans to raise capital gains taxes, while trampling a bible.
But really Dick, in that stimulus bill you hate so much - the major tax cut was a PAYROLL TAX CUT - so the little birdie that told you they are going up was just trying to make you look stupid.
More importantly, Dick’s pissed that his taxes may be on the way up:
And then Obama affirmed that he’ll support big tax increases on the richest 2 percent of American families. Disregarding the fact that these households already pay upward of half of all income taxes, while earning only a quarter of the national income, he has singled out the entrepreneurs, professionals, innovators and businesspeople of America for taxation.
Although I don’t see how he fits into those categories that Obama is singling out (I think professional wind bag needs to be added), Morris is seriously pissed that the top 2 percent ONLY earn 25 percent of the income. Maybe this will cheer him up (Share of Net Worth, 2004, halfway down on the right).
Oh, but he won’t raise taxes until he’s had a few years to stimulate the economy. How many in that 2 percent feel like one of those huge hogs in the Chicago stockyards, being fattened up to slaughter the next year?
It’s the French Revolution all over again! They did eat the aristocracy in the French Revolution, right?
So all this is so scary to Dick because people voted for it, they expect Obama to follow through on his promises and he reaffirmed his commitment to those promises. Right?
This speech will be viewed as his high-water mark - the time before we came to realize how flawed is his understanding of economics and how supreme is his commitment to expanded spending. It will be seen as a sort of age of innocence before we realized what he had in mind.
No, it is a secret socialist conspiracy after all! Whew, I thought for a moment that this “center-right” country voted for an out-and-proud communist. Good to hear that we were simply duped.
Following President’s Obama ambitious outline of national priorities, the Republican response was delivered by Kenneth the Page - I mean Bobby Jindal. In a stiff response delivered following a “something up my butt” walk up to the camera, Kenneth, I mean Bobby, made sure to touch on the important issues of the day - like don’t you think taxes are still too high and the left still thinks America sucks.
In a response so disjoint from the President’s actual speech it seemed to have been recorded last week, Jindal clearly showed that people can’t trust the government because you know Bush fucked up Katrina. He failed to mention that Bush fucked up the war too, but we still have to trust the government to take care of national defense. Or maybe we shouldn’t. The power of Jesus and the Magic of Capitalism will vanquish our enemies for us, Miss Lemon - I mean America.
Thanks to Sadly, No! for the follow through
But let the main point be crystal clear, we can never trust the government to allow us to save our own friends from drownding, without getting insurance companies invloved. Yeah, I don’t really get it either. Anyhow, let’s buy up all the guns in the county and retreat to our bomb shelters. Oh wait, no. He advocated more tax cuts. Shunning the old adage - fool me once shame on . . . shame on you . . . you can’t be fooled again - he retreated back to the old pool of solution on the right that has been drained out to the only popular solution left - paying off voters with tax cuts. I can’t wait for more from Kenneth, er Bobby later.
Speculating that President Obama’s Housing Plan will create a nation-wide false-bottom on the housing market, many entrepreneurs have invested heavily in the false bottom industry that is intended to boom in the near to mid-term. Their money has been funneled into areas as varied as desk drawers with a false bottom to magicians wardrobes with a false bottom.
Dave Profitiy, a venture capitalist from Seattle has poured 70 percent of his capital into false bottom making and utilizing businesses. He insists that the risks are inconsequential, but the potential benefits are astronomical, “You’ve got false bottom wardrobes, tables, stages, hats, pockets, vases, what have you. And that’s only magicians we’re talking about. Then you’ve got your false bottom paranoia, you know for the rich to stow away their valuables. Which leads into home furniture: coffee tables, bookshelves, sections of the flooring. I mean there’s no end to the possiblities. And moreover, in our lifetime the price of false-bottomed things has never gone down. My projections are telling me that this is going to be a $4 trillion dollar business in 3 years. You don’t want to miss out on this!”
Still others are focusing their investments more narrowly. Jacob Moneyton, an investment banker in London, sees the U.S. Housing bailout as creating a whole new industry that didn’t previously exist: “So this housing bill is intended to help those that could be reasonably able to pay their mortgages with a slight decrease in monthly payment, right? Well that still leaves a vast sea of humanity that has no chance of paying off their mortgages as they fall deeper into debt and their mortgages go deeper and deeper underwater. This means the people on the false bottom will have water to float on, which means they will undoubtably want to see the source of the economic meltdown they are living in. That source though is underwater. THEREFORE, the hunger of econo-meltdown tourist for scenes of the meltdown will give rise to what I like to call ‘Why are we fucked?’ tourist. And why we are fucked is underwater mortgages. THEREFORE, we need glass bottom boats to let the tourist see underwater mortgages from the false bottom that they are happily floating on. I can see it now, people lined up around the block waiting to get a glimpse of just how fucked we’d be if there wasn’t this false bottom to float on.
And it doesn’t have to stop there. I’m envisioning underwater hotels with views of the abysmal state of affairs below the false bottom. This is guaranteed to make money risk free. What do you say can I count you in for 10 grand?”
Nicholas D. Kristof investigates experts: 
Still others are focusing their investments more narrowly. Jacob Moneyton, an investment banker in London, sees the U.S. Housing bailout as creating a whole new industry that didn’t previously exist: “So this housing bill is intended to help those that could be reasonably able to pay their mortgages with a slight decrease in monthly payment, right? Well that still leaves a vast sea of humanity that has no chance of paying off their mortgages as they fall deeper into debt and their mortgages go deeper and deeper underwater. This means the people on the false bottom will have water to float on, which means they will undoubtably want to see the source of the economic meltdown they are living in. That source though is underwater. THEREFORE, the hunger of econo-meltdown tourist for scenes of the meltdown will give rise to what I like to call ‘Why are we fucked?’ tourist. And why we are fucked is underwater mortgages. THEREFORE, we need glass bottom boats to let the tourist see underwater mortgages from the false bottom that they are happily floating on. I can see it now, people lined up around the block waiting to get a glimpse of just how fucked we’d be if there wasn’t this false bottom to float on. 
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