A lighthearted look at the American tragedy
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.
"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.
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.
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.
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):
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.
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.
“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.”
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.I'm surprised the article didn't use the adjective 'bold'.
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."
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!
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
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.
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.Right.
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 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.
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.
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!
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:
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.
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."
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.
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.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.
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.
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.
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!
ANTONYIn 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.
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.
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
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:
But this cannot be true, because surely we would have read about it in the NYT and other distinguished news sources.
- 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.
SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN.Truly those with their hands upon the levers of power are wiser then we.
‘(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).''.
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.