The TARP Is A Trap (January 19, 2009)

Posted in Bailout/Bribe, Economics, TARP on January 19, 2009 by e-commentary.org

No one has offered a plausible explanation of or justification for the continuing Bailout/Bribe know as TARP (Troubled Asset Relief Program).  [See the e-ssay dated October 6, 2008 entitled “A Bleak Day: The Trillions Dollar Tragedy”].  What was the problem in September, 2008 that had not been there for years and continues unabated today?  A “credit crunch”?  For the first time in years, the availability of credit was at a rational level.  Those who were creditworthy were able to obtain credit; those who were not were not.  We burned more money and more daylight while the underlying conflagration continued to rage.

Bumper sticker of the week:

Pouring water into a watering can does not water the plant; pouring water around the roots of the plant waters the plant.

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The Odd Couple – China & The U. of S.A. (January 12, 2009)

Posted in China, Economics, Foreign Policy on January 12, 2009 by e-commentary.org

Felix “China” Unger and Oscar “Uncle Sam” Madison are living together in a symbiotic/parasitic relationship.  In recent years, some pundit types said that the economies of the world are “decoupled” from the United States.  Some other types were skeptical.  The economies always seemed “coupled.”

Those who argued that the U.S. no longer produces any goods for export do not recognize the toxic commercial instruments foisted on the world over the last half dozen years.  And the world bought it.  And bought them.

China produces the goods and the money to buy the goods.  The U.S. consumes the goods and the money to acquire the goods.  Projections about the Trillion dollar domestic bailouts spurring enough economic activity to drive the American economy and begin satisfying the growing national Debt are delusional.  The U.S. will never pay off its national Debt.  [See the e-ssay dated January 17, 2005 entitled “America the Bankrupt:  Economics 210 in the Land of the Freeway and the Home of the Wave.”]

How will China (and Japan, England, and other creditor countries) respond?  Is the U.S. “too big to fail” or more subtly “too intertwined to fail.”  What if no other country or consortium of countries is in an economic position to rescue the U.S. economy or forgive its debt in later years?

Bumper stickers of the week:

We are all in this alone together

China – Shop (and let your currency float)

USA – Stop (shopping despite what others command)

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The Millennium To Date (January 5, 2009)

Posted in Congress, Presidency, Supreme Court on January 5, 2009 by e-commentary.org

When presented with a defining challenge this Millennium, each branch of government failed.

2000 – Judicial.  Eight years ago, the Supreme Court in Bush v. Gore decided that it not the voters will decide who is to be President.  The Supreme Court elected to appoint the President and preempt the voters.  The court issued a special decision to benefit one person.  An unprecedented decision has set a bad precedent.  The composition and ideology of the Supreme Court is even worse today.

2001 – 2003 (and continuing) – Executive.  Bush and Cheney came into office committed to invading Iraq.  After being warned in a daily briefing in August, 2001 that “Bin Laden Determined To Strike In U.S.,” no one thought to interpret the report to suggest that Bin Laden was determined to strike in U.S.  Bush left for Crawford to clear bush and brush.  When 9/11 occurred, the pretext for invasion arose even though neither Iraq nor any Iraqis were involved in the planning, implementation or funding of the 9/11 attacks.  His decision to invade lit a fuse that will be seen to have triggered the start of World War III.  Now Bush/Cheney are seeking to rewrite history to suggest that the intelligence that they and others actively distorted was provided by others.  For its part, Congress cravenly went along enough to provide Bush with political cover.

2007 – Legislative.  The Bailout/Bribe Bill was predictable and predicted.  Scare the public and you can get anything.  Paulson appointed himself King, raided the fisc, and gave money to fiends and former colleagues.  The Debt is exacerbating intermediate and long term economic problems in ways that the business and economic commentators do not seem to understand.  Bush more than any other person is responsible for the “Bush/Greenspan/Gramm Depression.”  Nonetheless, Congress has been a co-conspirator and an economic enabler.

One hopes that Clio is taking careful notes.

Bumper sticker of the week:

Blind faith in bad leaders is not patriotism.

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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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Deflation? (November 24, 2008)

Posted in Depression, Economics, Gas/Fossil Fuel, Inflation on November 24, 2008 by e-commentary.org

Deflation seems to be the current concern.  Oil, copper and aluminium prices are down dramatically.  When the raw materials go down in price, the finished products should go down in price.  In theory, sort of.  The price of a 250 foot section of Romex wire is now almost what a 100 foot section cost a year ago.  However, prices often are sticky and ratchet down slowly.  Lower prices sound appealing, although deflation does create economic problems among debtors and consumers.

However, the old economic models may not work.  Demand is down because no one has any real money and no one will loan any real or unreal money.  However, credible reports indicate that people need to eat, house, drive, acquire plasma tvs, etc.  The system is awash in unreal money.  However, those who produce goods and provide services are not standing by ready to respond.  They are collapsing.  The world‘s economies and the world Economy are splintered and increasingly disconnected.  If you build it, they may not come.

Gas did not hit $6 a gallon by Halloween; it hit $3 a gallon.  [See the e-ssay dated May 26, 2008 entitled “$4 in June, $5 in July, ….”.]  The momentum for fuel-efficient vehicles has abated and investment in oil-producing equipment and fields has declined.  When the demand for aluminium declines, bauxite is not mined.  In the near future, everyone will compete with pockets full of unreal dollars for scarce goods and services.  Bread at $100 a loaf?  Inflation still seems to be the hidden monster.  The new Weimer Republic writ large.

Bumper sticker of the week:

WIL

Whip Inflation Later

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The Virtual Horserace (November 17, 2008)

Posted in Economics, Greenspan, Housing on November 17, 2008 by e-commentary.org

During the dot.com bubble, a small number of affluent investors (consultants, dentists, consultants to consultants, public employee retirement funds, consultants to consultants to consultants, candle stick makers, etc.) anteed up large bets in cash up front; few horses crossed the finish line a few years later; everyone absorbed the losses with little intermediate-term damage.  Okay, they will retire later and perhaps with less money.  Life went on.  [See the e-ssay dated December 4, 2006 entitled “When the Bubbles Burst”]

During the “Greenspan Bubble,” however, the seeds of the Depression were sown democratically across the land.  (Almost) everyone in the populace placed huge bets on credit; few horses will ever complete even the first stretch of a 30-year race (mortgage term); the negative consequences are predictable and devastating.  The intermediate-term loses may be 3 to 5 to 7 Trillion in the US and a few Trillion overseas.

Astute observers knew that something evil was going on behind the scenes during “Hurricane Al,” but the contours of the corruption did not emerge until recently.  The Wall Street Boys devised something noxious known as a “Credit Default Swap” that involves a “virtual horserace” without real money that jeopardizes the economy and the American economic and political system.  The real nightmares are the bets placed on bets placed on bets placed on bets placed on bets placed on bets placed on bets in this virtual and unregulated gambling casino using CDSs as tokens.  These players were betting on outcomes in the horse race and then insuring the outcomes without any money, margin or reserve.  The winners (who may need to lose in order to win) of the game want to be paid; the losers cannot pay and never intended to pay.

No one will say that these gamers are “domestic economic terrorists.”  Saying something that true and stark is deemed to be impolite and impolitic.  The CDSs are a cancer on the country.  The losses may be 25 to 50 Trillion or more.  The Economy cannot absorb the losses.

Bumper stickers of the week:

We will get fooled again.

“All you need in this life is a tremendous sex drive and a great ego.  Brains don’t mean a shit.”

Mayor Anthony “Captain Tony” Tarracino (1916 – 2008)

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