Wednesday, April 30, 2008
Tuesday, April 29, 2008
Monday, April 28, 2008
Sunday, April 27, 2008
"Securities regulators refused a congressional request to disclose why they dropped an investigation into whether Bear Stearns Cos. harmed investors by improperly valuing complex debt securities. The [SEC] cited confidentiality in its decision involving the late-stage probe of the Wall Street firm. At issue is a move by the SEC to abort an enforcement case into activities at Bear Stearns several months before the firm imploded in March. ... 'The Commission does not disclose the existence or nonexistence of an investigation or information generated in any investigation unless the matter is made a matter of public record in proceedings brought before the Commission or the Courts,' SEC Chairman Christopher Cox said in an April 16 letter to Sen. Charles Grassley. ... Legislators also could argue that the SEC wouldn't be releasing data to the public, but rather to Congress. Meantime, the SEC's inspector general is investigating circumstances related to the dropped Bear Stearns case, following a request by Sen. Grassley", WSJ, 23 April 2008.
Saturday, April 26, 2008
Friday, April 25, 2008
"Mexicans feel the pain of record corn prices every day when they buy a staple of the national diet, the corn tortilla. Tortilla inflation has been severe enough to send citizens to the streets in protest. ... While corn farmers elsewhere welcome the surging prices, Mexican farmers are absorbing higher costs to feed corn to cattle, hogs and chickens. That means higher prices for milk, eggs and meat. ... 'The days of cheap food have ended,' said Juan Antonio Pedroza, president of a trade association of Mexican food producers. 'The social impact will be tremendous'," Houston Chronicle, 20 April 2008.
I agree with Lewis. I don't expect to see grain costs drop for years.
Thursday, April 24, 2008
Wednesday, April 23, 2008
Tuesday, April 22, 2008
Welcome aboard MF. You should have said this months ago. I think the recent world-wide riots scare MF. I wonder what Thais, Egyptians, Vietnamese, etc., "marginal propensity" with respect to the price of rice is to hang Fed chairmen ?
Monday, April 21, 2008
Sunday, April 20, 2008
"No doubt nearly all bankers want the broad foundations of the existing banking system to be maintained. That system is their bread and butter and it has served them well. ... Who owns the ... Fed? ... The Fed's incorporation or very existence is a form of capital to it, and that's due to its being a creature of Congress. However, Congress makes no appropriations for it and lacks effective day-to-day control. The Fed's actions are largely independent of Congressional direction. ... Loeys said ... 'This was a run on the securitized world. The bank regulation and the structure of the supervisory system was created for a banking world of taking deposits and making loans. The world has moved towards capital markets, which were regulated from the point of view of consumer protection, but not from a systemic stability point of view.' ... 'Central banks' extension of liquidity to broker-dealers and (the) securitized world is permanent, and will be followed by regulatory control,' the [JP Morgan] analysts wrote. Notice the heavily bank-oriented (and slanted) world-view in these statements. To paraphrase them, the financial markets caused the recession, not the Fed, and not the banking system. The capital markets, although regulated for consumer protection, are not regulated enough. They are subject to excesses. They threaten the banking system's stability, so they need to be controlled. The banks cannot do this, so the Fed must. The Fed is the good guy. ... The banks, including the central bank, have clean hands. They were passive players in this disaster. The capital markets were the bad guys. The good guys will now have greater power over the bad buys. The good guys will save the system. ... Well, maybe the banking system will be saved so that it may continue to profit bankers for another cycle or two. ... Our current banking system ... produces economic instability ... a continuing loss in purchasing power of the dollar ... [and] support to ill-conceived and destructive spending policies of the state. ... Our banking system serves the interests of the bankers and the politicians very well. ... It is an interesting fact that the banking system is heavily regulated. This regulation provides the appearance that the banks are under public control. ... We will hear about reform ... It will be reform ... designed to prolong and enlarge the privileged position of the bankers. ... The fact is that the system cannot be reformed by any piecemeal regulation or deregulation, because the regulators are part of the system and help keep it alive. ... There is an optimal rate of inflation so as to hold up bank profits while ensuring the survival of various interests including the government itself. ... The Fed's current rescue operation is buying time so that banks can obtain more capital and liquidate bad loans or ship them off to the Fed in return for Treasury bills. ... The best solution to the financial problems brought about by the Fed's past bubblenomics is analagous to a 'big bath': write the old system off and start a new one with sound fundamentals. That means eliminating legal tender laws, doing away with monopoly government fiat money, and making institutions that claim to be depositories for money actually hold that money. ... Central banking must be destroyed before it totally destroys us", my emphasis, Michael Rozeff (MR) at http://www.lewrockwell.com/, 16 April 2008.
Saturday, April 19, 2008
Friday, April 18, 2008
Thursday, April 17, 2008
Note: GS is concerned about perceptions, not substance.
Wednesday, April 16, 2008
"China's government allowed the country's currency to rise to its highest level against the dollar in more than a decade, despite weakening global growth, an indication that Beijing views rising inflation as a bigger danger than the risk of an economic slowdown. ... The yuan has now gained more than 18% against the dollar in less than three years, although it has been flat or even down against other major currencies, such as the euro. ... 'It's going to go a lot higher,' says Jim Rogers, a U.S. investor and self-described China bull. Mr. Rogers says the Chinese currency has the potential to strengthen to just two yuan to the U.S. dollar--a 2 1/2-times rise from current levels. ... Inflation is a social-security issue in China. Rising prices of cooking oil and meat were cited last month by residents of Lhasa, the capital of Tibet, as helping foment anger that resulted in riots. ... Already, inflation has clocked in at the fastest pace in 12 years in recent months, including the February rise in the consumer price index of 8.7% from the year before", WSJ, 11 April 2008.
"Finance ministers gathered this weekend to grapple with the global financial crisis also struggled with a problem that has plauged the world periodicially since before the time of the Pharaohs: food shortages. Surging commodity prices have pushed up global food prices 83% in the past three years, according to the World Bank. .. World Bank President Robert Zoellick warned in a recent speech that 33 countries are at risk of social upheaval because of rising food prices. ... Among other targets, [the IMF and World Bank] signaled out U.S. policies pushing corn-based ethanol and other biofuels as deepening the woes. 'When millions of people are going hungry, it's a crime against humanity that food should be diverted to biofuels,' said India's finance minister, Palaniappan Chidambaram, in an interview. ... Recently at least a dozen of 58 countries surveyed by the World Bank have reduced tarriffs to food imports and erected barriers to exports in hopes of restraining food prices domestically and moving toward 'self-sufficiency.' ... The global effect of export barriers, however, is to drive food prices even higher than they would be otherwise. ... About 18 of the countries sampled by the World Bank also are boosting consumer subsidies and instituting price controls. That prompted a warning from U.S. Treasury Secretary Henry Paulson to 'resist the temptation of price controls and consumption subsidies that are generally not effective and efficient methods of protecting vulnerable groups.' He said, 'They tend to create fiscal burdens and economic distortions while often providing aid to higher-income consumers or commercial interests other than the intended beneficiaries'," WSJ, 14 April 2008.
The Chinese, Arabs and others will eventually wake up and decrease their dollar reserves. That they still support US domestic consumption to the detriment of their own people, astounds me. The Chinese should be particularly aware of their "inverse" socialism in taking from poor Chinese peasants, to give to rich Americans. Wild.
China's domestic stability is more important to it than maintaining a large trade surplus. I expect the yuan to continue to rise over the next 3-5 years.
Amazing, I agree with Paulson about the undesireability of price controls and subsidies. Now if he would only apply that logic to US interest rates and potential homeowner bailouts.
"As the credit crisis has slowly expanded and worsened, there has been a flurry of activity in Washington to reduce the damage from it. There are bailouts and tax breaks, and even checks to parents of school-age children. But there is remarkably little action aimed at getting the credit system functioning again. In part, that is because there is a scarcity of ideas. Paul Volker [former Fed head] ... was right this week when he said the financial engineers had created a 'demonstrably fragile financial system that has produced unimaginable wealth for some, while repeatedly risking a cascading breakdown of the system as a whole.' ... For the time being, the solutions being pushed would not seem unreasonable to an old-fashioned socialist. ... The Basel II capital rules for commerical and investment banks clearly need to be strengthened, and regulators need to develop the ability to do their own risk assessments, rather than leaving the task to the banks and the credit rating agencies. That will take time and cost a lot of money, and it will require the derivative markets to be much more transparent. ... Most of the critics--myself included--did not anticipate the severity of the credit collapse, and we should not act as if the executives and regulators who failed to prevent it were blind or stupid. ... Volker, who knows how inflation can get out of hand, said the current situation reminds him of the early 1970's when inflation began to accelerate", my emphasis, Floyd Norris (FN) at http://www.nytimes.com/, 11 April 2008.
Right on EP!. What does, "ensure the stability" mean? Why is stability good? "Meltdown" sounds frightening. What does it mean? I only know who gains and who loses. In today's America responsible savers lose, irresponsible bankers and borrowers gain. The regulators' job is to ensure politically favored classes have the public bear their losses. If we want to prevent this, shut down the regulators! Let investment banks fail! No, no, no! That might mean Lloyd Blankfein of Goldman Sachs might have to find a real job. Like shining shoes in Grand Central Station. See my 12 December 2007 post. Alcoholics Anonyomous (AA) has a concept, "hitting bottom". AA preaches an alcoholic won't sober up until he hits bottom. Similarly, bankruptcies may make our investment banker overlords hit bottom. I read terms like "meltdown" and think of Andrew Jackson's (AJ) war with Nicholas Biddle (NB) over the Second Bank of the US recharter. NB threatened to plunge the US into a depression unless the bank was rechartered. AJ was not dissauded. He launched his pet banks program and eventually killed the "moster". See my 24 December 2007 post.
I largely disagree with FN. First, the damage is, now! The "activity" intends to redirect the damage to politically disfavored classes. As for socialism, I agree, noting Karl Marx favored creating a central bank, see my 17 September 2007 post. The financial engineers were either fools or knaves, but created a system to redistribute wealth. The idea of regulators doing risk assessments is laughable. Why not have CPAs do it? Supposedly we should under Generally Accepted Auditing Standards. "Stuff and nonsense" said Alice. What does Mark Olson think about this? CPAs can't do it, even if they publish documents like that Francine McKenna cited at http://www.retheauditors.com/, 8 April 2008.
Why not think the executives and regulators were "blind or stupid"? I saw the collapse coming. So did others. So? Will FN suggest making me say, Comptroller of the Currency? I agree with FN, the executives and regulators were neither blind nor stupid: they knew what they were doing and planned to "cry wolf" to Congress all along if and when the credit markets blew up in their perennial game of "financial chicken" played with the real economy! Well, FN, fools or knaves? My vote: knaves.
Tuesday, April 15, 2008
"The Bush adminstration has a well-known aversion to regulating big business. As it turns out, it is also reluctant to prosecute corporations that break the law. Federal prosecutors have been regularly offering settlements to companies for wrongdoing that, in previous administrations, would likely have led to criminal charges. It is another disturbing element of how this adminstration has taken the justice out of the Justice Department. ... If corporations believe they can negotiate their way out of a prosecution, the deterrent effect of the criminal law will inevitably be weakened. The deals also leave a clear impression that an administration that prides itself on being pro-law-and-order--and on appointing federal judges who are tough on ordinary criminals--is tilting the justice system in favor of the wealthy and powerful. There also are worrying signs that some prosecutors may be using these agreements for political patronage", Editorial at http://www.nytimes.com/, 10 April 2008.
No, the signal was intended. "A man is presumed to intend the natural and probable consequences of his acts", sayeth the Supremes. Even (In)Justice Department employees! "Allowing the government"? Are corporations sovereigns with armies to protect them from Uncle Sam? What's going on here? Isn't this nice? The Bush administration is more concerned about not destroying corporations than with incarcerating peons for decades over minor drug offenses. Artificial entities are more important than people to Bush & Co. "Fundamental misapprehension"? Please McNulty, stop insulting everyone's intelligence. That's exactly what they are. If they were anything else, the corporations in question would not agree to them! I agree with Intriago, $65 million is peanuts to Amex. Look at what's going on with BP and its proposed $50 million fine. Similarly, peanuts. Amen, EL. The current DOJ is so bad, you can almost want to see Hillary as our next President.
The Bush DOJ goes easy on "Extraordinary" as opposed to "ordinary" criminals. Makes sense.