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Archive for the Economics Category

Is A “Strategic Default” Of A Mortgage Now A Moral Imperative? (February 28, 2011)

Posted in Bailout/Bribe, Banks and Banking System, Courts, Crime/Punishment, Economics, Housing, Kleptocracy, Law, Society, Supreme Court, TARP on February 28, 2011 by e-commentary.org

. . .

S “You have heard of them. A ‘strategic default’ is a default by a person who could make the monthly payments on the mortgage yet elects to cease making the payments because the property is underwater financially.”

D “There are a flood of them today.”

S “A strategic default may be de rigueur today. Look at the law. Start with the indoctrination process in law school. Young law students are taught the theory of ‘efficient breach’ which counsels one to breach a contract if breaching the contract is worth more than performing the contract. That is defined as ‘efficiency.’ The students who answer obediently get on the law review, clerk for the Supreme Court and make millions representing banks, big businesses and insurance companies.”

D “And assist in running them into the ground.”

S “That’s the plan. They don’t even understand ‘efficiency.’ In practice, the party breaching the contract is not spawning a more efficient use of global resources. The breaching party simply does not want to pay or perform and usually has far more money and can overwhelm the non-breaching party in court. The party not receiving payment or performance loses big and usually has little judicial relief.”

D “With a few exceptions, the legal system seems to exist to protect and serve the interests of the wealthy and the well-connected. I’ll take my direction from no one other than the MBAs at the MBA (Mortgage Bankers Association) who recommend defaulting on your mortgage if it is not working for you. The banksters decided not to pay the mortgage on the MBA office building in D.C. (Washington, D.C.), even though the group had the funds to pay. The banksters strategically defaulted.”

S “They are indeed an example for all. When the government bribed and bailed out the banks and other institutions, some contended that the government could not breach the contracts providing for unwarranted and illegal bonuses. How un-American. The government should have disregarded every contract and required the banksters to bring suit. How American.”

D “Allowing the banksters to file suit would allow them to file in a sympathetic Republican Federal District Court and possibly steer the case to a receptive judge.”

S “Always a risk in the legal game. However, before the banksters brought suit, their legion of lawyers would remind them that they could confront defenses and counterclaims. In court, the government could assert a dozen affirmative defenses and also counterclaim for fraud, deceit, perjury, conspiracy, embezzlement, racketeering, misrepresentation, breach of fiduciary duty, obstruction of justice, etc. Some of the banksters would not file suit which is the least expensive and, yes, the most efficient way of reaching a just resolution.”

D “Seems that the courts are stacked against the public. Nonetheless, there is a small chance that an independent judge might hear some of the cases and hold that the bonuses are illegal. An affirmative award against the banksters is improbable but not impossible.”

S “Neither the Republicans nor the Democrats ever intended to bring criminal charges against the criminals. We seem at times to be alone in a lawless world with millions of laws on the books. We in America have moved from a democracy to a kleptocracy.”

D “And no one to throw the book at them. Except that the law and morality are clear. Homeowners are morally obligated to default on the payment of their mortgages if the property is underwater financially. The government is morally obligated to default on the payment of the bankster’s bonuses. In today’s amoral America, a strategic default is both an economic necessity and a moral imperative.”

S “Perhaps a provision should be added to Title 18 of the United States Code making it a crime not to strategically default if the property is underwater financially. Not to strategically default is so un-American. And inefficient. We just can’t have that.”

D “Strategically defaulting immanentizes the eschaton.”

S “Indeed.”

. . .

Mortgage Bankers Association Defaults: http://www.thedailyshow.com/watch/thu-october-7-2010/mortgage-bankers-association-strategic-default

Home Sales Data Is Overstated: http://online.wsj.com/article/SB10001424052748704476604576158452087956150.html

“Three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.” Charles Ferguson upon receiving the Oscar along with Audrey Marrs for the Best Documentary for the movie “Inside Job.”

“Almost everyone counted publicly each and every single day of the event known as the ‘Iran hostage crisis,’ yet no one is counting publicly the days that have passed since September 15, 2008 without a single major criminal indictment of the banksters and their ilk who caused the financial crisis that continues to plague this country today.”

[See the “e-ssay” titled “1000 AUSAs (February 9, 2009).”]

Bumper stickers of the week:

Do as I do not as I say

Mortgage Bankers Association: Strategically Default Today

Free $1000 an hour legal advice: Strategically Default On Your Mortgage Today

Efficiency uber alles

Efficiency is Inefficient

If your property is underwater, should you plant seaweed in the front yard this spring?

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O’Bama Revisited (January 17, 2011)

Posted in "L" Shaped Economy, Bailout/Bribe, Economics, Federal Reserve, Military, O'Bama on January 17, 2011 by e-commentary.org

. . .

F “Cold day on the Mall two years ago. Can’t say that things will be much warmer this week.”

G “It’s still cold and is getting colder. The day will live in infamy. Neville Chamberlin O’Bama.”

F “Not going to throw in Hussein for good measure.”

G “That’s silly. His first name was Arthur. He gets a C-.”

F “Arthur?”

G “Neville C. O’Bama. After the tax sell-out, I called the White House and the delegation and told them that I have had it. I unsubscribed from seven political e-mail lists. My contributions are too miniscule to matter, yet I told them that I am not making any more contributions. No bumper stickers, no canvassing, no money, no more.”

F “No one subscribes to my political views, so I can’t even unsubscribe from e-mail lists. We confronted a Hobson’s choice in 2008. O’Bama was and is a centrist. He’s the better we could do.”

G “He hasn’t challenged the massive continuing transfer of wealth to a small elite who do not contribute to the economy. It is almost as if he got into office and discovered that there are certain unwritten overriding rules that cannot be undermined or even challenged by anyone in the office. The cabal of trolls in the basement of the White House call the shots.”

F “He hasn’t. And you may be right. The economic fundamentals are worse than they were in September, 2008. The poison is still flowing in the financial system. The banksters know that they will be bailed out by both the Republicans and the Democrats and will never need to make bail for their crimes. The recent bailouts have been detailed and delegated to the Fed.”

G “When is someone going to realize that the aggregation of wealth in the hands of a very small group is actually an impediment to economic growth?”

F “When the Nobel Prize Committee signals that it will give a Nobel in Economics for the conclusion.”

G “The expenditures employ yacht builders and polo saddle makers, but not ordinary unemployed butchers, bakers and brick makers.”

F “Yacht builders and polo saddle makers need jobs. Politics is about compromise. Compromise is not pretty.”

G “Compromise is different than capitulation. He has capitulated. Someone said that the country may need a war to pull us out of the economic depression. He and we have two of them going that have not done much positive.”

F “Is the third war a charm.”

G “Just watch. America can be broken.”

. . .

[President Dwight D. Eisenhower delivered his “Military-Industrial Complex” farewell speech/warning 50 years ago about the “unwarranted influence, whether sought or unsought, by the military industrial complex.”]

[MLK Day]

Bumper sticker of the week:

Hope (I hope, hopefully)

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The First Look At The “Second Political Party” (January 3, 2011)

Posted in Abortion, Capital Punishment, Death Penalty, Drugs, Economics, Elections, Gay Politics, Government Regulation, Kleptocracy, Political Parties, Politics, Society on January 3, 2011 by e-commentary.org

. . .

R “I’ve been shut out by the venal and feral nut cases in my party.”

D “I’ve been sold out by the effete and craven fruits in my party.”

R “My team is fraudulent; yours is feckless.”

D “Your team markets fear; mine peddles hope. No one addresses problems or provides answers.”

. . .

D “Your team caters to the very rich; you’re not very rich.”

R “But I can be.”

D “Not any longer. They let you nourish that delusion to string you along.”

R “But I could have been.”

. . .

R “We need a third party.”

D “We already have a third party, but it is a rabid and toxic mix of nuts and fruits. We need a fourth party.”

R “At core, both parties are owned hook, line and over the barrel by the same corporate and financial interests. The Repubocrats and the Demolicans. Maybe we need a second party.”

D “Our country has transformed from a democracy to a kleptocracy. Each party protects and serves the kleptocrats and banksters who keep the public diverted and entertained with frivolous diversions and entertainments.”

R “The Supreme Court decision in Citizens United was designed to promote the interests of my party and also has doomed the prospect of any other party emerging in America.”

. . .

D “We need less government involvement in our personal lives. No government definition of marriage. No government regulation of abortion. No government criminalization of marijuana.”

R “We need government to dictate the definition of marriage. It is what I say it is, between a man and a woman. We need government to invade each bedroom and demand delivery of every conceivable baby. If the little tyke steps out of line, we need capital punishment. Remember that life begins at conception and ends at birth. We need government to imprison people for smoking marijuana when it is still legal to drink all the alcohol they want.”

. . .

D “So now once again what are the essential bedrock policies of the ‘Second Political Party’?”

. . .

Bumper sticker of the week:

TPTB America has abandoned the Middle Class; what is interesting to watch is how the Middle Class abandons TPTB America.

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Practical Price Theory in Practice (December 6, 2010)

Posted in Economics, Journalism, Market Solutions, Society on December 6, 2010 by e-commentary.org

. . .

L “So you want to maximize attendance?”

M “It’s a polemical movie. We want to get as many eyes and ears in the seats as possible. We have already committed the funds to rent the theater and the movie. Student volunteers are running it.”

L “If you offer the movie for free, it may not be worth anything. Only the committed will attend. Why not make the movie valuable. The price of similar movies on campus is three dollars whereas in my day it was one dollar. State that the cost of a ticket is 25 cents and then print ‘SCHOLARSHIPS AVAILABLE’ in a large font on the pamphlet to entice interest.”

M “It could peg the value at a quarter and thus not worth considering.”

L “It might. And you don’t want to dissuade someone who may not care about the money but does not want to be hassled searching for a quarter. When someone asks what must be done to obtain the scholarship, ask him or her to state in 25 or fewer words what the movie means to him or her. Pause and then agree that they are deserving of the scholarship. Call it ‘Two Bits Production’.”

. . .

M “We did attract far more viewers than we expected and made some money. Because of the delay in the line for those seeking scholarships, we set up a second table to conduct the interview, streamlined it to twenty-five seconds and kept the conversation light.”

L “Super. It was raining outside that night which may have kept some at home or, if they left the house, drove them inside. And nothing else was playing in town that night that would appeal to the demographic. Keep up the experiments. And keep up the reports.”

. . .

Bumper stickers of the week:

“A cynic is a man who knows the price of everything and the value of nothing.” Oscar Wilde

“At the usual daily rate, The Wall Street Journal would cost $999 for the entire semester, but you can subscribe today and today only for the low, low rate of 25 cents a semester.”

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Interesting Thing About Interest Rates (November 29, 2010)

Posted in Banks and Banking System, Economics, Federal Reserve, Inflation on November 29, 2010 by e-commentary.org

. . .

K “It really is hard to get rich when they are paying .000000001 percent per annum interest.”

J “Unless it is compounded every second.”

K “We are told that we should save, yet there is no economic incentive. There is no interest when there is no interest. Senior citizens who counted on a five to ten percent interest rate for their money to fund their retirements are being flat lined by the flat line interest rates.”

J “Some of the negative economic impact of the contemporary economic excess is being inflicted on the current generation. Doesn’t seem unfair. Although there is more saving, only a thin sliver of the populace is saving because there is no other safe haven for the money. The money is just parked. Another problem may be brewing. The banks are given free money by the federal government and are loaning it at positive but low rates to a few apparently credit-worthy borrowers. What will happen in three years when interest rates are forced to go up and the rate of return on the current mortgages and deeds of trust is less sexy? Will the banks try to call the loans early? I assume the banks will enforce provisions precluding assignment of the obligations to get them off the books as quickly as possible.”

K “They will find a way. Some astute homeowners will secure a low interest rate mortgage and use the funds to invest in savings accounts that should start paying substantial interest rates. That stratagem may be the only way to ride rising interest rates in the safest investments in a broken economy. With so much money in the system and an unresponsive economy, we will see inflation. Recent purchases of Treasury securities suggest that the smart money anticipates inflation. When bread rises to $100.00 a loaf, the attendant changes in the economy will lead to interest on your bread rising from the current 00.001%.”

J “Inflation will make all the current debt much less of an expense in real economic terms. Inflation will expunge debt.”

K “Anyone who saves is spent.”

. . .

Bumper stickers of the week:

Paying the highest rate allowed by law (but nothing is allowed?)

Anyone who saves is spent

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The Depression is Over!? (September 20, 2010)

Posted in "L" Shaped Economy, Depression, Economics, Recession on September 20, 2010 by e-commentary.org

. . .

E “The Depression is over. So they say. In fact, it was only a recession and has been over since June 2009. So says the National Bureau of Economic Research, the NBER.”

U “How does that work? Can I get a job, go back to work and collect a paycheck retroactive to June, 2009? That is my benchmark.”

E “Call them. The NBER is generally respected as institutions go. They pegged it as just a recession that was over in June 2009.”

U “Praise the Lord and pass the paycheck.”

E “A well-informed citizen should understand the NBER economic model; I don’t. There may not be enough time even late on Saturday night to analyze the economic model. However, I follow every fundamental economic factor. The economic fundamentals are worse than they were two years ago. The NBER conclusion seems wrong.”

U “I don’t understand the economic model, but I know the conclusion is wrong.”

. . .

Bumper stickers of the week:

Recessions are so overrated.

2 + 2 = 5

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U.S.A. 1945 – 2005 R.I.P. (August 16, 2010)

Posted in Economics, Military, Peak Oil, Society on August 16, 2010 by e-commentary.org

. . .

K “The last three score years have been a remarkable run in the history of mankind. Sixty years of unprecedented growth and prosperity in America. The Great Expansion was unique because the bounty was spread widely among the American populace. The Middle Class was created in a young country built by indentured servants, former serfs and slaves. Yet things have been declining particularly during the Decadent Decade.”

J “Look at the score. There are too many strip malls, too many strip mines and too many strip joints.”

K “During that period of time, the America Experiment transitioned from a Republic to an Empire and is now transitioning to a post-Empire nation in a world of other rising powers and the emerging megamonopower in China.”

J “America transitioned from a country to a market and from a search for the public weal to the aggregation of private wealth. More affluence has only lead to more effluence. A new pill that supplants natural processes and possibly saves a few hundred lives is produced in a factory that maims, cripples and kills thousands downstream from the outflow. Prosperity came at a great cost.”

K “We went to the Moon in ’69. Geopolitics aside, that was quite a feat with many ancillary benefits.”

J “And back on Earth the next year we challenged the assumptions and consequences on Earth Day.”

K “Thinking progressed.”

J “We conquered consumption, yet consumption conquered us. We as a society need an antibiotic to protect us against our consuming consumption. Those who say that small is beautiful today are not proclaiming a goal but rather are predicting the future. But we as a country will not voluntarily downsize, we will be downsized.”

K “Americans have not had to deal with any privation and are not emotionally prepared to deal with declining economic opportunity. When we were prosperous, we were generous; as America’s fortunes decline, we are becoming hard-fisted and mean spirited. The next decade will be ugly.”

J “America’s military mission will need to downsize significantly to follow America’s changing role and options. The real battle continues today on the battlefield of global climate change.”

. . .

Bumper stickers of the week:

Reduce, Reuse, Recycle

Question consumption

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A Nerd You Know You Are (June 7, 2010)

Posted in Economics, Law, Society on June 7, 2010 by e-commentary.org

. . .

“Do you know that we are now leaving the Fifth Circuit and entering the Ninth Circuit?”

“Money serves as a medium of exchange and a store of value and a unit of account, all at the same time. Wow. Life will never be the same.”

“Do you think it is an example of a metonym or is it more precisely a synecdoche?”

“I would rather hold and read the decision in one of those musty old United States Reporters in the library rather than on line.”

“This year’s meetings of the Federal Open Market Committee are now available on line.”

“I anticipate using the word ‘paradigm’ three times in one sentence. Something like ‘the new paradigm is the paradigm of all paradigms.’”

“The Minutes of the FOMC are now available on line. . . . Do you ever get the feeling that these economists have a challenging time thinking and writing clearly.”

“Perhaps it cannot be taught, but it seems that it can be conveyed and fostered. Babies do not come into the world crying in iambic pentameter.”

. . .

Bumper stickers of the week:

Ideas have consequences.

I’ve turned to the dork side.

Buddy can you paradigm?

Measure ten times, cut once.

I get up every morning in search of the steepest learning curve.

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The Dow Is The Canary (April 26, 2010)

Posted in Bailout/Bribe, Banks and Banking System, Boycott Series, Economics, Uncategorized with tags Stock Market on April 26, 2010 by e-commentary.org

. . .

“You don’t buy it.”

“I concede the Beige Book presents a rosy picture of the economy. Consumer spending is up. But the rising Dow is not a sign of economic recovery. The rising stock prices are not a function of sound economic fundamentals, they are a result of far too much free money in the hands of a small circle chasing comparatively few stocks backed by an implicit government guarantee in an economic universe without other viable investment options. The stock market is the leading economic indicator of the coming inflation.”

“They call it productivity. Companies/employers are reporting greater earnings resulting from firing more employees. However, the current price/earnings ratios are somewhat more in line with historic averages. Although there may be no one left to buy the products or use the services.”

“Inflated stock prices today, bread at a $100 a loaf in the next few years.”

“However, if there are fewer consumers with less disposable income, the economy should enter a deflationary period.”

“That seems plausible. Consumers always consume even if they don’t have money. The dislocations in the economy may not produce enough goods to meet growing demand from individuals, albeit individuals without the wherewithal in their pockets to fund their demands.”

“So there may be deflationary prices then inflationary prices?”

“Citizens will discover that the market will decline precipitously in due course leading to more now inevitable bribes/bailouts from the government for those at the top. Some say that the American people simply will not tolerate another engineered decline. What will they do if they don’t want to tolerate a decline?”

“Vote out the incumbents?”

“Or self-medicate? The economic performance this summer will significantly impact the outcome of the elections this fall. If the Wile E. Coyote Economy does not drop for the next six months and those who gave up searching for work also give up voting and drop out of the debate, the Democrats may not drop in the polls. However, there may be a bad turn particularly if the financial virus made in the USA that spread to Europe infects Europe or if the Black Plague in the Gulf of Mexico engulfs the East Coast. This could be a hot summer.”

. . .

Bumper stickers of the week:

Trust me. I’m a banker.

Trust me. I’m an investment banker.

Trust me. I’m an investment adviser.

Drill, baby, drill.

Boycott Arizona

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On The Digital Revolution (March 22, 2010)

Posted in Cyberactivities, Economics, Entitlements, Estate Tax, Kleptocracy, Society, Water on March 22, 2010 by e-commentary.org

. . .

“Most, if not just about all, of the fortunes amassed in the last ten to twenty years were stolen. Nothing was created. Much was destroyed.”

“Jobs created some jobs.”

“And to his credit he is still creating a few. There are a few others who are producing and contributing, yet they are the rare exceptions. Scrutinize the “Forbes 400” list. Some have family money. Some made some contribution. Few of them have done much to produce a product or provide a service. The companies they overleveraged will soon overwhelm the economy. At best they structure affairs to shift risk to others or to the taxpayers. Successful businesses are dismembered and destroyed not created. That is the fundamental difference between the robber barons of olde and the robber barons of new.”

“No dispute here.”

“Taxing some of the stolen money is impossible when the government can be and has been taken over and overtaken by the small cabal that owns and runs the kleptocracy.”

“No dispute here.”

“Today we hold electrons not dollars. For a few seconds one afternoon, my computer indicated that there was nothing in my retirement account. All 000s. All goose eggs. That caught my attention. Seemed like a true harbinger of what will happen in the future. The system refreshed in a few seconds and reported familiar figures. What about a Digital Revolution that simply eliminates from all records ownership of any assets over five million dollars by any one person?”

“Cyberactivities are the real weapons of mass destruction. They are also the weapons of mass creation. Sort of like nuclear technology that is creative when harnessed for positive ends and destructive when deployed for harmful ends. A five million dollar threshold will not impact me.”

“After the Digital Revolution, when you log onto your computer, you discover that you have no more than five million per person and ten million per couple including a personal residence, a vehicle, savings, golf clubs, polo saddles, etc. As a rough gauge of worth or value to the individual, the algorithm will treat assets within a class such as a residence, cabin, car or boat that has been owned the longest as the most valuable and will remain with the individual. The other assets will be randomly assigned to others.”

“No impact here, yet imagine the surprise one morning when someone wakes up to discover that he owns a fractional interest in a fractionally-rigged 76 foot sloop with rod rigging and a full complement of complimentary sails.”

“That only creates another travesty. Individuals who did not create an idea, work late at night or take a risk should not be rewarded gratuitously. The scheme would only contribute to the entitlement mentality that is such a defining part of the problem in contemporary America. No one seems to be producing good goods or undertaking productive activities; no one deserves any reward. However, the Digital Revolution would make a great novel. ‘Coming to a theater near you.’”

“Don’t worry, the Chinese will trigger the Digital Revolution, although the outcome will be far less equitable than your proposal. Perhaps you should worry.”

(World Water Day)

(Stewart Udall 1920 – 2010)

Bumper stickers of the week:

Golden Rule: He who has the gold makes the rules.

Carnegie made steel; today’s barons steal.

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