Wednesday, October 29, 2008

Blog seldom

There will be light or nonexistent blogging through the weekend. Keep your tinfoil hats on tight, and your powder dry.

Who's next?

Pakistan today summoned the US ambassador to protest missile strikes on their territory and to demand that the strikes should be 'stopped immediately'.

Syria went to the UN to protest the attack on their soil and killing of civilians. The US said the attack was a 'warning'. Syria pointed out that the US also finds it difficult to control its borders.

In fact, while the US spends a ton of money to unsuccessfully prevent people crossing into the US, in Iraq there is no presence of US (or Iraqi) troops at that border, but the US expects Syria to keep people from crossing into Iraq. It's like the US removes all the fences, border patrols, troops, electronic sensors, etc. and tells Mexico to stop people from crossing. Then when they don't, bomb them.

Whether the attack on Syria spurred the Pakistani protest, or it was just the increase in attacks, it will be interesting to see what happens after the next one. The US seems to have just set up a new doctrine of preemptive bombing of anyone it deems threatening, so we can assume that the protests will be ignored.

Other likely targets include Iran and Lebanon. Somalia is still a war zone for the US, so it doesn't count. Iran remains the big enchilada, the same justification used against Syria could be turned against Iran at any time, even tomorrow.

Tuesday, October 28, 2008

Call out the dogs

The realization that banks are not lending out the money that the US has just given them has clearly enraged the administration. They're so enraged, they called out the fiercest and most frightening spokesperson in their arsenal, Dana Perino. Just listen and tremble, ye mighty:

"Banks exist to lend money -- that's how they make money," White House spokeswoman Dana Perino said as the Treasury prepared to deliver the first round of infusions of a 250-billion-dollar recapitalization plan.

"So we think that one of the things that we have to do is help recapitalize them so that they have a capital base, so that they are willing to lend money."

Perino said the government cannot force the banks to lend money but pointed out that "the banks are regulated by the Treasury Department ... they have every incentive to move forward and start using this money."

Banks, up to now, seem to want to use the money to buy up other banks, presumably those not fortunate enough to have received the blessings of Sec. Paulson's magnanimity.

But now Ms. Perino has reminded them that, while they cannot be forced to load out the money, they are indeed regulated by the Treasury Department. So there!

Sunday, October 26, 2008

October Surprise?

Or mere persiflage?

Ha'aretz is reporting that Syria says that four US copters crossed into Syria:
The eyewitness accounts said that four helicopters were involved in the operation, with two of the helicopters landing in the town and eight American soldiers disembarking. The eyewitnesses said that the seven killed men were supposedly construction workers.
This should be an exciting week in any case, bubulas.

Friday, October 24, 2008

Where will it stop?

Bailout expanding to insurers
The Treasury Department is dramatically expanding the scope of its bailout of the financial system with a plan to take ownership stakes in the nation's insurance companies, signaling new concerns about a sector of the economy whose troubles until now have been overshadowed by the banking industry, government and industry sources said.

Insurers, including The Hartford, Prudential and MetLife, have pushed the Bush administration to include them in the plan. Many firms have taken losses from mortgage-related securities and other investments and are struggling to replenish their coffers.

Free money! We want free money for bloggers too! Here too the coffers are empty, here too we had mortgage-related securities and other investments with unforeseen losses. Emergency! Calling Paulson on the BatPhone.... HELP!!!1!

The bright side: insurance companies are a great investment. We will all definately make a profit in the long run.

Thursday, October 23, 2008

Alice in Iceland

Whenever we do a little research into the story about the Icelandic financial shipwreck, comedy gold ensues.

The Times of London tells us that the IMF is waiting to pass some cash to Iceland until they placate the Brits and their unfortunate savers, who put their little all into Icesave. Could this have anything to do with the anti-terrorism laws invoked by Junior Caesar (aka Gordon Brown)?

Many local governments and other organizations seem to have lost hefty sums of money:
About 300,000 British savers had accounts worth about £4 billion in Icesave, which suspended operations on October 7 and stopped customers from both depositing and withdrawing money.
But they're not the only ones that lost their shirt (link to a WSJ paywalled article):

German banks have bled billions of euros in the U.S. subprime-mortgage debacle. Now they face another potentially big bill from a costly misadventure in Iceland.

The Icelandic bet is the latest illustration of how German banks -- including once-sleepy regional lenders -- ranged far and wide in recent years in search of yield to escape stiff competition and low profit margins on their home soil.

By June of this year, before Iceland's spectacular financial meltdown, German financial institutions had lent $21.3 billion to Icelandic borrowers, according to the Bank for International Settlements.
My goodness, $21.3 billion. That makes the British loss look pitiful. Germany must now own a shit load of glaciers, volcanoes, and maybe cod.

Back in the good old days, when proto-Blog-Simple lived in Yrp, German banks were thought of as the most stable, conservative, dull, drab and dependable organizations that could ever exist. They made the Swiss look like anarchists. It does some credit to the filthy liars and thieves of Wall Street that they were able to seduce a nation's economic integrity, just with the promise of a little more money. Funny, huh?


Greenspan Concedes Error on Regulation
“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Wednesday, October 22, 2008

We'll have fun, fun, fun...

Our own Feckless Leader is evidently going to host the first round of economic 'summits' on Nov. 15 in New York. According to this IHT article, Sarkozy wanted a meeting of the G8, but Bush 'insisted' that other nations were included. The article is remarkable for its fawning tone and puffing up the importance of a dead duck president:
By convening the meeting in Washington, his home turf, and by insisting that leaders from developing as well as developed nations attend, Mr. Bush appeared to be putting himself firmly in charge.

White House officials have said that the president is especially concerned that an attempt to rewrite global financial rules could hurt capitalism and free trade; in her statement, Ms. Perino said the summit agenda would include "an opportunity for leaders to strengthen the underpinnings of capitalism by discussing how they can enhance their commitment to open, competitive economies, as well as trade and investment liberalization."
I'm surprised the article didn't use the adjective 'bold'.

You'd think it was five years ago, when Feckless One sat atop the world in his flight suit. I guess it just hasn't filtered into the brains of NTY reporters like Sheryl Gay Stolberg that the world has changed from those days, and that a reporter can be more than just a White House stenographer. I mean, just take a look at his final report card.

Tuesday, October 21, 2008

Reconstruction Finace Corporation

Harper's goes to the archives, and digs out a piece on the R.F.C. from 1933 that could have been written today, the names may have changed, but Paulson didn't even bother to write a new plot. As for the outcome... this spider and this moonlight...

Change of course?

China Hand, who usually writes at the blog China Matters, has a long, must read article at Japan Focus on the new strategies of the various players in the war in Afghanistan.

It looks like, once again, Pakistan is going to be given the short end of the stick. Faced with the current reality, "no energy, no money, no government", Zardari went to China to see if they would help out, but seems to have been turned down. Saudi Arabia would probably help if their guy Sharif was put in a position of power, but the US has vetoed Sharif. Their own war against the Pashtun Taliban seems to be sputtering, and expensive to boot, and India is not only launching moon rockets, they've just finished their road in Afghanistan that bypasses Pakistan and hooks up with a port in Iran.

Petraeus seems to be running with the fact that both presidential candidates want a larger presence in Afghanistan, so he is setting up the new policies that they will be impelled to follow, like it or not. The US now has, to use an old fashioned term, a war lord in charge of Central Asia. Obama will not have the political chops to impose his own policies (think of him trying to replace Petraeus!), so policy for the foreseeable future is going to be set by a general with his own agenda.

The quiet, firm step of the Caesarism to come? You betcha!

Paulson's transparency

Kinda' says it all, don't it? That's a a major bailout-related contract with Bank of New York Mellon Corp.
(h/t The Sideshow)

Sunday, October 19, 2008

Bend over again, please

It's good to know that not all of the $700bn bailout rescue ripoff is not going to be frittered away trying to save a bunch of banks that are probably going under anyway. According to the Guardian, 10% of it, that's $70bn for you that don't have your calculators handy, is going directly to the bankers and financial workers in the form of bonuses.

It's no wonder that every time we see of photo of execs from Morgan Stanley and Citibank after a meeting with Paulson, they look positively gleeful:
At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.
But why bother to buy it, they've gutted it already, and now their getting their millions directly from Joe the Plumber Taxpayer Schmuck. Just hope that the trickle down effect from these guys spending sprees will help put your kids through school, and pay your mortgage rent.

As for the Presidential candidates, Congress, and the US media, they're happy you don't know or think about such matters. It might make you cranky, and there is nothing more boring than a cranky public.
(h/t Chris Floyd)

Friday, October 17, 2008


(h/t BAGnewsNotes)

Thursday, October 16, 2008

Under the Glacier

There's a set of Op-Eds at the NYT giving different perspectives of the current financial woes as seen from different European countries. The article from Iceland is especially poignant, things there are a tad bleak:
When the Reykjavik stock exchange reopened on Tuesday after three days of suspended trading, its index, dominated by bankrupt financial institutions, had lost 75 percent of its value.
Plus, their currency is almost worthless. And they've had to learn that their so-called friends are no longer clustering around:
We thought we had friends, in Europe and in the United States. They were sought in the hour of need and found to be busy with their own problems; only the Scandinavians were prepared to extend a helping hand, and then, all of a sudden, Russia — somehow the world has changed. The disappointment with our old “friends” is great and people ask, did we really behave any worse than the others?
Never having been there, my vision of Iceland is shaped by the wonderful 'Under the Glacier', by Halldór Laxness. This article reminds me of the good embi, the narrator of the novel, and his bemused resignation to the strange problems one can be faced with up there.

Wednesday, October 15, 2008

Best friends

Pakistan's president, Zardari, used his first trip in office to visit China. Besides the usual trade agreements, and perhaps some direct aid from China, the big question about the visit is whether a civil nuclear deal might be signed.

China has been very cautious in nuclear matters, but the US/India deal might spur them to be less circumspect. Pakistan government desperately needs to show their people that they can keep up with the Jones (India), and the US seems to be doing its best to push them into China's arms.

'Friendship' with the US has led Pakistan well down the road of being a failed state. Their military's enthusiasm for F16 fighters, useful only in case of an all out war with India, keeps them coming back to the US. But such frivolities are becoming more expensive as Pakistan spirals down economically and politically, and the US war continues to rile up the Pashtuns. No wonder Zardari went to China before Washington.


They may not be as malevolent as Fox, but they lead the way in pure idiocy:
New polls suggest John McCain is having a tough time in states that once were reliably Republican. The polls show Obama has a 10-point lead over McCain in Virginia, a state that hasn't backed a Democrat in a presidential election since 1964. McCain also has a battle on his hands in Colorado, Florida and Missouri -- states that have been shoo-ins for Republicans in the past.

This blurb is from their front page on the web that updates all the time, so no link.

Grand Canyon

TomDispatch has an article by Mike Davis on our new horizon. As he points out, the presidential candidates, up to now, seem so blinded by current events that they are unable to speak to them in any meaningful way. He says of Obama:

With baffling courtesy to the Bush administration, he failed to highlight any of the other weak links in the economic system: the dangerous overhang of credit-default swap obligations left over from the fall of Lehman Brothers; the trillion-dollar black hole of consumer credit-card debt that may threaten the solvency of JPMorgan Chase and Bank of America; the implacable decline of General Motors and the American auto industry; the crumbling foundations of municipal and state finance; the massacre of tech equity and venture capital in Silicon Valley; and, most unexpectedly, sudden fissures in the financial solidity of even General Electric.

In addition, both Obama and his vice presidential partner Joe Biden, in their support for Secretary of the Treasury Paulson's plan, avoid any discussion of the inevitable result of cataclysmic restructuring and government bailouts: not "socialism," but ultra-capitalism -- one that is likely to concentrate control of credit in a few leviathan banks, controlled in large part by sovereign wealth funds but subsidized by generations of public debt and domestic austerity.

It's hard to believe that tonight's debate will be any different. While McCain lives his 'To Ayers, or not to Ayers' moment, and try to look ready to defend us from ACORN, Obama will keep trying to prove that he's just like the rest of the Beltway, just black and better looking.

The Grand Canyon that lies in front of the country is not even admitted to exist by the news media. Whether or not they and the candidates will be forced to confront it before the election, its presence can't be hidden much longer. And read the whole article.

Monday, October 13, 2008


The latest farce is being played out with mind numbing unanimity in the press, just as they've done every step of the way on our merry road to hell.

The harsh Hank Paulson has just manhandled the banks into accepting $250bn in low interest paying preferred shares that give no control over future actions of the banks. What a deal for the US. What moral dilemma for our capitalist system, forced, at the point of a gun, to take money from the government. In the words of the NTY, bold.

Despite the party atmosphere in the markets today, we're not sanguine that the good times will continue to roll, even up to election. But Hank's got another $500bn to 'invest', he will try to use it in a timely manner. But it still may not be enough.

Saturday, October 11, 2008

It's OK now

So now Paulson says it's OK for the Treasury to buy shares in the banks. The auctioned buy up of toxic waste, which was the strategery that was presented with the bailout bill, has now been superseded. But the underlying philosophy remains the same, the government provides the money but the power in the banks remains with their management.

As far as I can tell, only Britain's move will give them the power to actually force banks to loan to each other, which is the point all these interventions. Merkel and Sarkozy seem to have agreed to the US strategy of hoping that the sheer weight of the dollars being dumped into the banks coffers will make them start loaning.

All the measures used so far have been totally inadequate to the problem. The next measures seem to fit into the same pattern, unqualified optimism that 'doing something' (dumping liquidity) is going to make it all OK. But it didn't and it won't. The tens of trillions still out there in the CDS are going to have to be dealt with first (which can't be done except by cancelling them), or the governments are going to have to take control of the banks, which they'll have to do anyway if the CDS are declared null and void. Not much of a choice, the sooner it's faced up to, the better.

Times change

Remember when the big news out of Treasury was when they were busy throwing wrenches into the six-party talks. How times do change.

The big news this morning is the unlisting of N. Korea from the 'state sponsor of terrorism' list. This follows a trip by Christopher Hill to Pyongyang. Despite this being a climb down by the US and thus a feather in the cap for the DPRK, its main effect will be allowing N. Korea access to the world banking system.

Yes, that system that is now melting before our eyes.

The Japanese are pissed, supposedly, since they still want more info about past kidnappings, but that doesn't fit with fact that they did sign off on the agreement back when it was originally struck. Unless they knew that the US was going to raise the inspection issue at the time, a possibility.

But one diplomatic success for Condi and Feckless Leader is a zillion times more than zero diplomatic successes. Hurrah!

Oh wait, I forgot Libia. Two! But only a 100% increase.

Thursday, October 09, 2008

More Gloomy Gus

Roubini, towards the end of his post full of gloom and doom predictions, which in the past have been uncannily accurate:

At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:

- another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;

- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;

- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;

- massive and unlimited provision of liquidity to solvent financial institutions;

- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;

- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;

- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;

- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.

The problem is that there is no political power to perform actions of this nature. The US is ready to clamp down martial law if a terror attack takes out a shopping mall, but see the financial system go up in smoke and it finds itself woefully unprepared. As for the Europeans, the EU is showing itself to be in finance what it has been to the US in foreign affairs, a bunch of cowardly wankers hoping that they can do the minimum to get by.

Feeling better?

Time to feel better:

President Bush, who has said little publicly during this week's prolonged market dive, will make a statement about the crisis tomorrow morning in the Rose Garden, the White House said late today.

Press secretary Dana M. Perino said Bush will "assure the American people that they should be confident that economic officials are aggressively taking every action to stabilize our financial system."

Bush will say that his administration has "the necessary tools to address the problem" and that Treasury is "moving quickly to use new tools to improve liquidity, which is the root cause of this problem," Perino said.

"Americans should be confident that every effort is being taken to stabilize our markets," Perino said.

Despite the American's need of Presidential reassurance in these trying times, the WaPo hid this inspirational article from their front web page. For shame!

Yikes, Icelandic Terrorists!

The last and largest of the Icelandic banks was 'nationalized' today, meaning that Iceland is now bankrupt. Its markets have been closed, and soon its currency can be tried out on the toilet as a substitute for the more conventional 'Quilted Northerner'.

Lots of Brits had their little all deposited in said banks, they offered better interest rates than the stogy British ones, and it looks like Iceland is not going to guarantee the deposits. Guarantee with what? Inquiring minds would like to know.

Anyway, this state of affairs does not sit well with Junior Caesar, aka Gordon Brown:

Gordon Brown last night branded Iceland's failure to guarantee British savings in its failed banks as "totally unacceptable and illegal", amid warnings that more than 100 local councils, police authorities and fire services have up to £1bn lost in its bankrupted system.

Charities, including children's hospices, warned they were at risk of losing £25m.

In unusually aggressive terms, the prime minister said he was willing to use anti-terrorism legislation to freeze the assets of other Icelandic companies operating in Britain in an effort to recoup the lost money. The extent of the potential difficulties for councils and other bodies began to emerge yesterday as more and more said they had invested money in Iceland's high-yielding savers' accounts.

Sure it might be unsettling to see Icelanders renditioned off to Gitmo, them being so pale and all, but that just shows that well designed anti-terrorism legislation can skin more than one cat. Iceland was bemused by Brown's ranting:

Referring to the move, Haarde said: "I told the chancellor that we consider this to be a completely unfriendly act."

Asked if the financial crisis engulfing Iceland had become a diplomatic crisis with Britain, Haarde added: "I thought so for a few minutes this morning when I realised that a terrorist law was being applied against us. That was not very pleasant. I'm afraid not many governments would have taken that very kindly, to be put into that category."

Mr. Haarde, like Obama, needs to learn that terrorism is flexible. Certain special people such as Brown can see at a glance who's a terrorist, and who not. Take our money, says Brown, and you're just like Bin Laden, maybe worse. Stay tuned.

UPDATE: I have to emphasize that the shear bizzaria of Brown calling out the anti-terrorism laws in this case is a sure sign of the utter cluelessness of his government and himself. What a clown.
Sometimes sarcasm, especially in uncertain hands, is not enough.

Wednesday, October 08, 2008

Getting worse

Bernanke, Cox and Paulson are all on the record as opposing regulating derivatives, though that is not what they are saying now. Leaving these clowns in charge of fixing things is making things worse, expeditiously. In Europe, things are no better, as Wolfgang Münchau describes in his cheerily entitled 'The depression of 2009':
Everybody knows the mistakes of the banks, the regulators, or the rating agencies. Now governments on both sides of the Atlantic are committing perhaps even bigger mistakes. It seems that even in times of severe crisis, their main priorities are about short term political gain. The US administration’s TARP proposal is a case in point. It has lambasted by almost every economist, including those who normally disagree with each other on most things. Buying up toxic securities at above market prices is simultaneously the most expensive and unfairest way to recapitalise the banking system. It is very difficult to believe that the US treasury secretary can possibly be driven by a motive other than a wish to benefit the investment banks he once chaired, and which stands gain handsomely from such a package, and which would never dream of accepting any government capital infusions. The only alternative explanation for his behaviour is immense stupidity – and I know that he is not a stupid man.
Münchau concludes his must read article with this:
The whole gist of the German government’s policy consists of a bet that the wider public remains infinitely stupid and ignorant. This bet it will lose.
We might say that the US government's policy is making the same bet. Certainly the two presidential candidates statements about this are infinitely stupid and ignorant, helping to keep the public in the same position. So it looks like a bet the US will win, for all the good it will do them.
(h/t naked capitalism and Cursor)

Tribal areas

I found the following explanation of the status of Pakistan's 'tribal areas' by Ashley Trellis at AFFCA Intelligence both clear and rather remarkable, in that what is describe is so very different from what is presented in the news media. Anyway, here it is:
The seven tribal agencies are constitutionally independent states co-equal with Pakistan, not component parts of Pakistan. Their status was negotiated by formal state-to-state treaties, very similar to those negotiated between the United States and various American Indian tribes.

The quintessential agreement that the colonial power, the United Kingdom, reached with the tribes it could not conquer was a grant of total internal government autonomy, but with defense and foreign affairs managed by the central government.

Pakistan as the power that inherited the rights and obligations of the United Kingdom chose, wisely, to honor the colonial agreements. It had less military power than the British to force a legal change, making necessity the mother of invention. The tribes are under no obligation to respect the Afghanistan border, according to the Pakistan constitution, and also are exempt from border controls and taxation, except as they prescribe for themselves.

Law enforcement and border enforcement are the responsibility of the tribal agencies. This means the Frontier Corps and Constabulary and the tribal lashkars, all of which are locally recruited in all seven agencies. The Pakistan Army has no legal basis for operating in the tribal agencies, except in support of the Frontier Corps. This is how Pakistan was created. The Army’s sole constitutionally authorized mission is to defend the agencies from outside aggression, not invade or occupy them or to enforce Pakistan’s laws and orders. Juridically, the seven agencies are sovereign.

Thus, most conventional theories about international law founder on the two other sources of international law: bilateral agreements or conventions and local laws that relate to international practices.

As for bilateral law and local practices, Afghan governments have accepted in practice the cross-border trade and movements of the Pashtuns in eastern Afghanistan and Pakistan’s tribal agencies. This is, in part, an acknowledgement of a lack of Afghan capability to enforce border controls. However, long before a modern state emerged, governments in Kabul tolerated Pashtun customs that ignored colonial artifices, namely the Durand Line, which Sir Mortimer Durand drew on a map in London in 1893. This remains contested, controversial and never accepted by either modern Pakistan or Afghanistan.

Modern international law, such as the theory of national control, is fundamentally irrelevant to the solution to the Afghanistan and the Pakistan border security problems. Moreover, cross border trade and smuggling have benefited both Afghanistan and Pakistan. Under Pakistan’s constitution, the Pakistan Army has no legal authority to operate in the tribal agencies, which are de jure independent states within the Pakistan federation.
Thus it would seem that current Pakistan army activities in Bajaur are illegal. Doubtless the local population is aware of this, even if we are not.

Tuesday, October 07, 2008

More Iceland

Iceland took control Tuesday of one of its largest banks, pegged its currency to a basket of other units and said that it was seeking a €4 billion-emergency loan from Russia as it struggles to keep its economy afloat.
Russia? I wonder what they'll want in return? Why would Iceland turn to them? Bloomberg reports:
Prime Minister Geir Haarde said at a press conference he was ``disappointed'' that ``we have not received the kind of support we requested from our friends.'' He declined to name countries Iceland may have approached for a loan, adding that the nation ``will absolutely not default on its foreign debt.''
I fear PM Haarde might be fibbing about not defaulting, there is just too much foreign debt. Nationalizing the banks just makes a nation of 300,000 responsible for $138,340,000,000 in foreign debt. I doubt most of those 300,000 were sharing the bounty back in the good ol' days, now they get saddled with the debt. Neo-liberalism is at its finest when it screws the pooch from both ends.

Sunday, October 05, 2008


There was an interesting article about Iceland in the last Harper's. Part of it described the triumph there of private capital in transforming the country. Rivers are all being dammed to provide power to aluminum smelters that are polluting the air, generally, despite all the supposed prosperity, the quality of life is heading south.

It seems that now they have other problems:
Icelandic banks expanded rapidly after deregulation of the domestic financial market in the 1990s and now have combined foreign liabilities in excess of $138.34 billion -- dwarfing the tiny country's gross domestic product of $19.37 billion.
That comes out to be about $460,000 for each and every one of Iceland's 300,000 inhabitants. Ouch!


After Caesar's death, the triumvirate exchanged these pleasantries, according to W.S.:
These many, then, shall die. Their names are pricked.

Your brother too must die. Consent you, Lepidus?

I do consent—

Prick him down, Antony.

Upon condition Publius shall not live,
Who is your sister's son, Mark Antony.

He shall not live. Look, with a spot I damn him.
In these gentler times, at least for the rich and powerful, we tend not to assassinate individuals and take their homes, treasures and slaves, rather we rub out the private institutions that hold wealth. Lehman Bros. was pricked, Merrill Lynch was pricked, over in Europe they're just getting started pricking.

We're seeing one of the greatest redistribution of wealth (and thus power) of all times.

Who gets to live, and who will die? Paulson is just the hit man, the equivalent of the triumvirate is still hidden, but their hands are at work, pricking away.

Saturday, October 04, 2008

Once in a lifetime


Friday, October 03, 2008


To no one's surprise, the House passed the rescue bill today, so all will be well, despite the nattering nabobs of negativity like Roubini, who continues to insist that we are on a twelve step staircase down to financial hell, and we've just reached the final step:

Situation Report: So far as I can tell by working the telephones this morning:

  • LIBOR bid only, no offer.
  • Commercial paper market shut down, little trading and no issuance.
  • Corporations have no access to long or short term credit markets -- hence they face massive rollover problems.
  • Brokers are increasingly not dealing with each other.
  • Even the inter-bank market is ceasing up.

This cannot continue for more than a few days. This is the economic equivalent to cardiac arrest.

Now we know this cannot be true, all our leaders have assured us that the $700bn is going to set us back on the road to financial wellness, could they all be wrong? There's even another $150bn in pork stimulus attached to it to make it even more wondrously bipartisan.

Roubini, from the black depths of his pessimism, dares to disagree with Bush, McCain, Palin, Obama, Biden, Paulson, Bernanke, et. al., and predicts another rescue bailout handout in a few days:
I believe that the government will do another Hail Mary pass, with massive guarantees to the short-term commercial credit system and wide open short-term lending by the Fed (2 or 3 times expansion of the Fed balance sheet). If done on a sufficient scale this action will probably work for a while. But none of these financial measures affects the accelerating recession -- which will in turn place more pressure on the financial sector.
Roubini claims that we are facing the following scenario:

- a silent run on the huge mass of uninsured deposits of the banking system and even a run on some insured deposits are small depositors are scared;

- a run on most of the shadow banking system: over 300 non bank mortgage lenders are now bust; the SIVs and conduits are now all bust; the five major brokers dealers are now bust (Bear and Lehman) or still under severe stress even after they have been converted into banks (Merrill, Morgan, Goldman); a run on money market funds; a serious run on hedge funds; a looming refinancing crisis for private equity firms and LBOs);

- a run on the short term liabilities of the corporate sector as the commercial paper market has totally frozen (and experiencing a roll-off) while access to medium terms and long term financings for corporations is frozen at a time when hundreds of billions of dollars of maturing debts need to be rolled over;

- a total seizure of the interbank and money markets.

This is indeed a cardiac arrest for the shadow and non-shadow banking system and for the system of financing of the corporate sector. The shutdown of financing for the corporate system is particularly scary: solvent but illiquid corporations that cannot roll over their maturing debt may now face massive defaults due to this illiquidity. And if the financing of the corporate sectors shuts down and remains shut down the risk of an economic collapse similar to the Great Depression becomes highly likely.

But this cannot be true, because surely we would have read about it in the NYT and other distinguished news sources.

So buck up America, you may be out of work, out of your home, and out of luck, but the system endures. There may not be enough money for healthcare, education, and infrastructure, but there is plenty for CEO salaries, prisons, and endless war. To paraphrase the immortal words of Phil Gramm, "Stop your whining!"

Thursday, October 02, 2008

Time for panic?

Or a time for action?
And we're not talking about the financial markets.
(h/t Rigorous Intuition)

The Republic is saved!

Thanks to this item in the Senate bailout rescue bill:

‘(B) EXEMPTION FOR CERTAIN WOODEN ARROW SHAFTS.-Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly- ‘‘(i) measures 5⁄16 of an inch or less in diameter, and ‘‘(ii) is not suitable for use with a bow described in paragraph (1)(A).''.
Truly those with their hands upon the levers of power are wiser then we.

(h/t naked capitalism)

Wednesday, October 01, 2008


John Robb at Global Guerrillas has been saying for a long time that the world's systems and infrastructures are in decline, and for that reason power is being co opted by local groups.

Looking at the current financial situation, he makes some good points about the inability of governments to stop the breakdown, and its consequences:
The inevitable outcome of systemic shocks at this magnitude will be an inevitable delegitimization of the nation-state as our trust in the ability of leaders to take effective corrective action evaporates. Further, nation-states will expend the majority of their resources on hasty and relatively ineffective corrective actions, which will make them collectively more prone to damage in the future and which will preclude the investments required to mitigate future crises. The cycle of delegitimization and resource depletion will continue until the nation-state is unable to respond at all to future calamity (the scale of this financial crisis is such, we may as well forget about any chance of early action to delay or prevent global warming, peak oil, water scarcity, food shortfalls, pandemics, etc.). In short, we will see a proliferation of hollow states.
I suggest reading the entire post.

The coming of Caesarism will be a consequence of this breakdown of the nation state. As we've seen in the US, the public and institutions will allow more and more power to be accumulated by individuals, until it is too late to reassert the rule of law and other such frivolities.