The local weatherman says that higher elevations may see some light snow overnight. Light snow. Tonight. Snow. It is October. Enough said.
Hank Paulson - Rock Star
I was home today as the new couch was being delivered. I had CNBC on most of the day. What I saw today was an obscenity. It seems that Hank Paulson had some free time and decided to take a walk along the main trading floor of the NYSE. While I can imagine that the Treasury head should have better things to do with his time, it is a free country.
The response on the floor was silly. Traders were trying to shake Paulson's hand. Many were high fiving each other. Paulson muttered something to a trader about "doing whatever is necessary". Doing whatever to accomplish just what was not covered. CNBC reporter Bob Pisani was almost moved to tears of joy as Hanky made the rounds. Disgusting stuff. The Treasury head is viewed by Wall Street as to be looking out for them, while his real responsibility is to look out for the taxpayer. Once again we see how our tax money will be spent on bailouts: More cash for the traders at the NYSE to waste and lose, all at our expense. It is obvious that Pauslon is viewed as a buddy by traders, and that is very dangerous.
Debt Chandrasekhar Limit Further Explored
Last Friday night I asked if the US has a debt Chandrasekhar Limit, meaning is there a point at which the US will incur so much debt that it will go supernova and explode. This question was attacked at another angle by Mike "Mish" Shedlock in a post tonight:
Mish goes into great detail about the problems with Keynesian economic philosophy. He also goes after Krugman, Roubini, et all with their call for never ending spending binges. The piece is a must read, as Mish's attention to detail and thorough analysis is far superior to anything I can do. I think his piece is a good companion for mine.
In looking at what Bernanke and other economists are saying about the current debacle, I cannot help but think they are making a serious logical thinking error. They are viewing the financial system as a sort of mathematical equation instead of a living, breathing animal.
By this I mean that one cannot view the debt destruction and consumer spending pull back as if it exists in an alternate dimension where everything is great except for a little credit hiccup. I am sure there is some fancy algorithm that can model a "credit crunch". I am sure that this equation is telling Bernanke and crew that they must flood the system with money to make things the way they want it. This is exactly the kind of academic solution that has no mooring in the real world.
Any model that ignores the reality of the overstretched American consumer, disregards the reality of a housing bubble, excludes the total lack of real savings in the US, and cannot calculate the effect of the shadow banking system is by definition useless. One cannot assume facts not in evidence about the economy when applying their models. What may be a textbook fix for the current credit mess only applies if the parameters you are basing the comparison on are good. They are not.
There seems to be a real sense out there that things are getting better. Many bearish types are making turns to a more bullish bent. All the talk today was about the "thawing of the credit markets". I will end asking the same question I always ask:
To whom and for what will the banks be lending money to going forward?
I have yet to get a reasonable answer.
Have a good night.