Archive for December, 2008

The Big Swap (December 29, 2008)

Posted in Economics on December 29, 2008 by e-commentary.org

. . .

“Have you ever read the Master Agreement of 2002?”

“Not exactly.”

“The International Swaps and Derivatives Association Master Agreement of 2002.  It is a masterpiece of dishonesty and deception.”

“He said over and over that we could not lose.”

“The proposed Agreement is an integrated contract.  That does not mean that Blacks and Whites can swim in the same pool.  The Agreement states that any and all verbal agreements are superseded by the written terms of the Agreement.”

“He said there is no risk.”

“You are playing in the big league.  Who are these guys?  They don’t have any understanding of the market for left-handed rutabagas.”

“He says that they don’t need to know anything about the industry.”

“This is an airtight agreement, you aren’t allowed to breath.  The forum selection clause clearly states that any action must be brought in the courts of New York.  The choice of law section states that New York law applies without regard to its choice of law provisions.  You are the away team.  The Agreement might as well say that the home boys in New York win. ”

“That’s what they require us to sign.”

“Even if you can find a local boy with enough experience and connections, you won’t encounter merely ‘home cooking,’ you will encounter ‘home boiling.’”

“If it works, we make a small fortune.  I make more in this one deal than I have made in five years.”

“It’s a bad idea.”

“We can’t lose.”

“This is way too risky for me.  I must back away.  This thing will collapse on someone.”

. . .

Bumper sticker of the week:

Greed = God

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P & P (& P) (December 22, 2008)

Posted in Society on December 22, 2008 by e-commentary.org

Prosperidad y Paz y Prosperidad

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Invest or Invade? (December 15, 2008)

Posted in China, Foreign Policy, Russia on December 15, 2008 by e-commentary.org

World War II involved a skirmish between and among the world’s Type A personalities (USA, Britain, France, Russia, Germany, Japan).  One of the central messages of that War is that it is much easier to take by investment than by invasion.  The Germans and the Japanese learned that lesson well.  The Chinese seem to be embracing the “invasion by investment” strategy and may find the need to invade the USA mooted if they can acquire this country in the open market or in Bankruptcy Court.

The Russians have come full circle and won a few battles in the continuing Cold War because their natural gas heats European homes.  Russia has successfully invaded Europe by investment.  Pipelines are mightier that troop lines.  Russia owns part of Europe.  The Russians, however, are reverting to the old paradigm.  They want to invade.  They may want to invade because the US has been quietly antagonizing Russia.  Bush/Cheney/Rumsfeld broke the military that may not be able to respond.  American is sliding into “second world super power” status.  Problems are on the horizon.

Bumper sticker of the week:

Invasion by investment

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Bankrupt Auto Companies? (December 8, 2008)

Posted in Automobile Bailout, Automobiles/Automobile Industry, Bailout/Bribe, Bankruptcy on December 8, 2008 by e-commentary.org

Congress recently rejected the request by the “Big 3” (GM, Chrysler and Ford) auto companies who came in with their palms out and instead asked them to go out and come back with a plan in hand.  Congress already passed a Plan.  The Plan is part of Chapter 11 of Title 11, the reorganization chapter of the Bankruptcy Code.  The Code, in particular Section 365, provides the debtor with the power to avoid contracts and leases when necessary.  This provision is discussed in previous “e-ssays.”

Roam an auto show.  Kick the tires.  Open the doors.  Sit on the seats.  Turn the buttons.  Toggle the switches.  Slam the doors.  Look under the hood.  Peek in the trunk.  Check the workmanship.  Read the specs.  Scrutinize the consumer reviews.  Check recall notices.  Repeat.

Georgetown, Princeton and Cambridge make better cars.  In Kentucky, Indiana and Ontario (Canada), three of the Toyota plants in North America.  The management in Detroit has designed and manufactured lousy and energy-inefficient vehicles for decades and made Detroit irrelevant.  The trio from Detroit did not propose real compensation concessions to match the pay packages of their far more successful counterparts in Tokyo and Munich and elsewhere.

Southern Republican senators smell an opportunity to bust a union, the United Autoworkers of America (UAW), and support the non-union plants in their states.  However, the employees in the non-union states only receive the wages they receive because they can point to the higher wages possible if they were to unionize like their brethren in the North.  Cripple the UAW and undermine wages.  The Civil War, the War Between the States, the War between the Red States and the Blue States, the War between the North and the South continues unabated.

The Bankruptcy Code still provides the most promising legal mechanism to reorganize (organize?) the automobile companies.  The logic of Chapter 11 is that a going concern has additional value that should be preserved.  The problem seems to be that Chapter 11 may be inadequate under the circumstances.  The amount of the proposed bailout is squandered by the U.S. in a few days in Iraq.

The Trillion Dollar Bailout/Bribe of Wall Street was and is a travesty.  Is a bailout of the Big 3 necessary or appropriate?

Bumper sticker of the week:

See the USA owning Chevrolet?

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Printing Electrons? (December 1, 2008)

Posted in Economics, Federal Reserve, Inflation on December 1, 2008 by e-commentary.org

The Federal Reserve is running the “printing presses” 24/7.  The Fed. issues regular press releases announcing:

Federal Reserve will offer $150 billion in 28-day credit through Term Auction facility [yesterday].

Federal Reserve announces results of auction of $150 billion in 28-day credit held on [yesterday].

Federal Reserve will offer $150 billion in 28-day credit through Term Auction facility today.

Federal Reserve announces results of auction of $150 billion in 28-day credit held today.

Federal Reserve will offer $150 billion in 28-day credit through Term Auction facility [tomorrow].

Federal Reserve announces results of auction of $150 billion in 28-day credit held on [tomorrow].

. . . . . . . . . .

The amount raised and the term may vary, yet the country is burrowing in deeper at a faster rate.

Bumper stickers of the week:

The Trillion is the new Billion.

“A billion [Trillion] here, a billion [Trillion] there, and pretty soon you’re talking real money.”                                        Attributed (perhaps incorrectly) to Everett Dirksen

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