Who would have thought one random Thursday could generate so much news and information? I had a late start tonight (traffic was just dumb heavy) so I cannot spend the time really needed on all the latest developments. I will focus on some less reported areas and of course add a heavy dose of sarcasm. Get your Friday night requests in as well all!
While this is an economics blog primarily, it cannot exist in a vacuum. Today brought some sad news.
Sadly Farrah Fawcett died today after a long battle with cancer. I have seen such fights up close and I can only wish that she is in a better place now.
Late news that Michael Jackson died today at the age of 50. The cause of death is listed as cardiac arrest. Whatever you might think of Jackson, his work did touch so many.
Probably Not a Good Idea
Loyal reader Gawain's Ghost tipped me off to this article by Gary North which looks at the writing record of one of my all time favorites, Mike (Mish) Shedlock as it relates to the deflation/inflation debate.
At first I was confused as to why Mr. North decided that Mish's writings were a particular area of focus. I imagine it is because Mish has such a large and loyal following and Mr. North simply wanted to engage Mish in an open debate. After reading and re-reading the article unfortunately I think it may be more than that.
This is an example of what I am so glad does not happen here in the comments or with those that I exchange email correspondence with: confrontation with the aim to make the other's view either irrelevant or suspect.
Mr. North goes as far back as 2005 to target particular articles, or even just passages where Mish seems to have had a gap in logic or a conflicting idea. I can say with total confidence that in the two plus years of this blog I have been ALL OVER THE PLACE, so this is no surprise. I would also add that I have been reading Mish since his site started and his views certainly have evolved as the data has, but his core themes have not. I think Mr. North makes a huge jump in the wrong direction with what he surmises is Mish's end game ideas as well.
Look, Mish does not need little old me to defend him. His writings speak for themselves. I would even advise him not to answer this article because it is a game of "gotcha" we could all do without. To all the bloggers and any writers anywhere, lets keep it clean and impersonal unless Paul Krugman or Bill Gross are involved, then of course full steam ahead!
Winner of the "Most Terrifying" Headline of the Day Award
Today on June 25th 2009 the winner of the "Most Terrifying" headline award is clearly from Naked Capitalism:
Is Bernanke Toast? If He Is, Summers is a Shoo-In
This is like "The Exorcist" kind of scary. I may need a night cap just to sleep tonight. Maybe two.
Change I Could Believe In; No Seriously
Even though I am a inflation oriented future thinker, I actually hate inflation for all it's slow killer ills. Of course if you hate inflation, your superman is Paul Volcker. Not quite "the sausage king of Chicago" (movie very obscure reference, try to guess!) but more the ultimate champion of inflation destruction.
In these troubled times with so many moving parts, leave it to an over 80 year old former FED head to figure out how to fix everything is a few simple steps:
What is it that Volcker wants?
-Impose capital requirements on trading parties, people familiar with his thinking say.
-Make bigger banks smaller
-Reduce the role of an overstretched Fed
-Force Derivatives to be traded on exchanges
-Transparent investor prices of Derivatives;
-More-aggressive capital reserve requirement
-Bigger role for exchanges.
Yes folks, it really is that easy. So what's the problem?
Note to president Obama: Fire the dummies you have, put Volcker in charge, and I may even go door to door for you next election!
Every Little Thing is Gonna be Alright
Sometimes when I scan the headline page at Yahoo Finance I see things that just hit me as either funny or so sad I want to cry. Today was one of those days.
Here is a screen capture from the Yahoo Finance main page at 9:44 am on June 25th 2009:
The leading headline and summary show just how far we have come.
The headline reads:
Economy Dips at Slightly Lower 5.5 Percent Pace
Which is asinine in and of itself. The assumption here is that you have no idea the last reading of 5.7% is not really any different from the new 5.5% number.
Of course this is pretty standard now, and it was not the headline that hit me. It was the first sentence of the summary:
"The economy tumbled at a 5.5 percent pace in the first quarter, but appears to be doing better now."
And really there you have it. We have reached a point where baby talk is now standard fare in the financial media.
One of the millions with no job and benefits running out? No worries, everything is getting better now.
Credit card rate just got jacked up to pay banking employee bonuses after you got hit with paying for their losses? Forget about, its getting better now!
I could go on all night. This kind of wording from a media outlet is disgusting and it makes me sad for where we are right now.
Please note that the very last headline "FED 'Light years' from a rate hike" you would have already known by reading my blog!
Economic Disconnect Exclusive: Extended Bernanke Testimony Before Congress Today
FED head Ben Bernanke was in front of a congressional panel today to answer questions related to the Bank of America purchase of Merril Lynch. The point was to discern whether the FED and/or Treasury threatened Ken Lewis of BAC into staying the course on the deal no matter how bad Merril losses became.
Here is the unreleased final session from congress today, an exclusive satire from Economic Disconnect:
Dan Issa: Mr. Bernanke am I to believe that you basically "do not recall" any dialogue, written or spoken, related to the BAC/MRL merger?
Ben Bernanke: I'm sorry, I forgot the question already. What?
Dan Issa: You mean to tell me that one of the most earth moving episodes in the financial meltdown is lost from your memory?
Ben Bernanke: Sir, I think you are referring to that film "Total Recall" where the California governor lives two lives with different memories. Or something. I cannot remember.
Ron Paul: Mr. Bernanke, do you recall where your car is parked today?
Ben Bernanke: Why do you ask?
Ron Paul: I was just hoping that you would not get lost in this fine city of DC today after this meeting.
Ben Bernanke: Luckily I have a GPS so if I forget where the car is, it leads me right to it. Sometimes the car is in Argentina. Weird huh?
Ron Paul: Mr. Bernake, do you recall where your hairbrush is today?
Ben Bernanke: Trick question! You know I do not use a hair brush, I just pat what is left down in almost pure "Goldman Sachs" style, except I kept my sideburns. Hahaha, nice question, I'm out-of hair, bye bye!
END OF TRANSCRIPT
Have a good night.
17 comments:
GYSC
In all fairness to Gary North, Mish started that a couple of days ago.
Personally I think Gary is wrong and have e-mailed him myself.
I'm not going to help much with the inflation or the taxation, to pay for this mess here is a site that looks pretty good from my point of view.
CLAWS: Creating Livable Alternatives to Wage Slavery
http://www.whywork.org/index.php
LOL
Kevin
Arizona Shutdown Looms as Deadlines Near - Arizona State Credit Union is Prepared to Offer Emergency Financial Assistance to State Employees
http://tinyurl.com/mpphqj
Uh-Oh
Keep your eye on the birdie.
Kevin
Kevin,
Thanks for the heads up on the Mish/North issue. I really hate targeted attacks for anybody.
Nice second link, are credit unions the next stop for a bailout?
Well, it's not like I'm a huge fan of Gary North, you understand. I just happened to see that article over at capitalisthero.com, read it and found it interesting, and thought others might as well.
North has a few valid points, but he has also written some lunatic stuff. Which is probably why he doesn't get the traffic he thinks he deserves. I suppose that was the motivation for his calling Mish out, jealousy.
Anyway, as to the whole inflation-deflation debate, I think Dr. Housing Bubble has it right. Demand destruction will lead to price deflation. I'm certainly seeing that in the repos I deal with. Price cuts of $10,000 at a whack, after only a few weeks on the market. So I'm not seeing inflation on the near horizon.
But I do see inflation in the future. The Fed is simply printing too much money for it to be otherwise. I just don't see it taking effect for another year or so.
Of course, I'm somewhat of a lunatic too. I mean, I don't even believe in atoms, and you don't get much farther out there than that. I live where the weird won't go.
Gawains,
I too am swayed by the DR. housing bubble piece, but know that the US dollar is now tied to "perception" and not a gold standard of 35$ now (as it was in GDI). try to flesh out the differences and you might see what I mean.
sorry for typos, bed time
GawainsGhost
"But I do see inflation in the future. The Fed is simply printing too much money for it to be otherwise. I just don't see it taking effect for another year or so."
LONDON, June 26 (Reuters) - Former U.S. Federal Reserve Chairman Alan Greenspan said on Friday that inflation poses a major threat to long-term economic recovery and its threat must be confronted.
"If political pressures prevent central banks from reining in their inflated balance sheets in a timely manner, statistical analysis suggests the emergence of inflation by 2012.
"For the best chance for worldwide economic growth we must continue to rely on private market forces to allocate capital and other resources," he wrote.
"The alternative of political allocation of resources has been tried; and it failed."
http://tinyurl.com/kswg6x
Personally I think the O-man and crew are going to try and micro manage so I think that second part of Greene's thought is probably the likely outcome, the private sector will basically be destroyed and starved for capital.
You still think your out where the weird don't go now?
Kevin
Well, back when I was studying biology thirty years ago, the two courses I leaned the most in were botany and animal behavior. Fascinating stuff, morphology, life cycles, reproductive strategies.
Did you know there is a plant the flower of which has a reproductive organ that precisely resembles the female of a particular species of wasp? It even emits a fragrant chemical that is structurally identical to the mate attracting pherome the female wasp produces. This to trick the male wasp into trying to mate with the flower, as a means of disseminating pollen.
Talk about disappointment. I mean, really. This poor guy, he's flying around, thinking he's going to get laid, and all he's doing is helping some plant reproduce. Cruel nature.
Anyway, when I started studying chaos and complexity years later, it radically changed my thought processes and how I interpret the world. Because the rules governing complex dynamic systems are fundamentally different from the rules governing the static models most science is based on.
This is why I don't believe in atoms. There is substance, to be sure, but an atom is really only a mathematical model of substance. The map is not the territory, and the model is not the thing it represents.
In a complex system, the component elements self-organize and emerge into a whole that is greater than the sum of its parts, which then operates at a higher level of complexity independent of the rules governing the lower level components. It becomes its own thing and is now capable of interacting and self-organizing with other wholes to emerge into an even greater whole at an even higher level of complexity, and so on.
In order for this to occur, there must be a medium of communication. In a chemical system, for example, that medium would be energy. In an economic system, it's money.
An economy is like an ecosystem, made up of varied species (people) that form ecological niches (businesses). But the only constant is change, so as the environment alters species adapt and new niches are formed.
What has happened over the last decade is that the rules governing the economy changed, due to deregulation, or the total failure of regulation, so-called financial innovation, and let's not leave out corruption and fraud. The global economy that emerged quickly collapsed under the weight of its own complication, and now there is a re-structuring going on as the component elements self-organize in the wake of the systemic self-destruction. A new system will emerge. What it will look like in say ten years is unknowable now, but one would hope it will be more efficient and mutually beneficial to those involved.
When the banks become the flower imitating a female, and the people become the wasp thinking they're going to get something out of going into the flower, only to succeed in disseminating pollen (money) for the banks in order for them to reproduce (make a profit), eventually something has to give. People are not insects, and once they figure out they're being scammed, they get pissed.
I don't see the destruction of the private sector, because the public sector cannot exist without one. I do see radical change in both in the near future, because the American middle class has just about had enough.
Interesting article over at Naked Capitalism this morning, Will the American Middle Class Snap? Yeah, at some point. And since we have guns, it could get ugly.
LONDON, June 26 (Reuters) - The United States' subsidies for failing industries risk "killing" American attempts to discuss trade with China and other developing nations, U.S Federal Trade Commissioner William Kovacic said on Friday.
Subsidies can damage internal competition and undermine efforts to persuade other countries to avoid protectionism during the worst economic crisis in decades, he said.
"The poison in this for the longer term is this is going to kill our efforts in talking with emerging market economies," Kovacic, who chaired the FTC until March, said in a speech to a competition conference at the Chatham House thinktank in London.
"I have trips coming up this year to visit with Chinese officials and I am dreading the question and answer period because they are particularly astute students of what happens in Brussels and Washington," he said.
"They have a keen eye for the contradictions that seem to creep into policy. So you are left there saying 'don't try this at home, we can handle it, we are adults, but it is bad for you'."
http://tinyurl.com/nfml9c
He's probably afraid they'll laugh at him just like they did when Turbo Tax Timmy tried to feed them a line of crap.
LOL
Kevin
America’s biggest oil companies will probably cope with U.S. carbon legislation by closing fuel plants, cutting capital spending and increasing imports.
http://tinyurl.com/lphje6
Ya think?
Kevin
I think money, like water, follows the path of least resistance.
People, who need money like water, become obstinate when government starts building dams, or damns as the case may be.
Any politician can be replaced, any legislation can be repealed, any government can be overthrown.
If the American experiment has proven anything, it's that the people will not be ruled.
This all could end well, or it could end ugly. Either way, the American people will emerge as free.
WASHINGTON, June 26 (Reuters) - The top U.S. accounting rulemaker criticized the "politicization" of accounting standards and said it undermines public confidence in the integrity of financial reporting.
"The investing public expects and deserves unbiased and transparent financial information that is not skewed to favor particular transactions, companies or industries," Robert Herz, chairman of the Financial Accounting Standards Board, said in prepared remarks on Friday.
Herz's FASB was pressured by Congress and the banking industry to modify earlier this year the controversial mark-to-market accounting standard, which had forced banks to report billions of dollars in losses.
Herz did not speak specifically about the mark-to-market rule, which requires assets to be valued at market prices.
But in his speech to the National Press Club, Herz said there have been certain major companies, including ones that had to be rescued by the government, that have sought political intervention into accounting standard setting.
"While that is their right ... politicization of accounting standard setting by special interest risks undermining public confidence," he said.
http://tinyurl.com/mgpf5j
I don't know I'm pretty confident the banks are still insolvent, and this has been the greatest fleecing of the American people by our bought and paid for political leaders by the banking cabal in history.
Kevin
http://blip.tv/file/2289392
Absolutly 100% bang on.
Kevin
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