The Walk Of Shame: Paulson

It looks like Paulson's greatest career attribute is the ability to beg. Perhaps that is how he got installed as the ineffectual treasury secretary. He got down on one knee to beg Nancy Pelosi to support the $700,000,000,000.00 BBBBBBBBBBillion Bailout, and on Monday he begged the banks not to horde the cash he is handing them. He is doing this while expressly stating that there are no strings attached. Paulson said,

At a time when events naturally make even the most daring investors more risk-averse, the needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.

The free market has been dead since FDR, but the Bush administration has found a way to revive the same trickle down economics that got us into this recession, distract everyone by saying you are resorting to socialism. The awful truth behind that scary buzz word is that they are socializing the financial industry's losses in order to insulate their profits from market forces.

The Ben Franklin Report: The Bailout Settles In

Just in case you need a reference point to how much the bailout was, consider the number to the right, the cost of the War in Iraq thus far. Yes, the bailout that was passed last week surpasses the amount of money spent on that mistake by leaps and bounds. So, when history is written, how should this period be judged? Where were our priorities? Did we ensure that every child in America had access to primary health care? Were we more concerned about finding a cure for cancer, or spending money on making sure that phone calls and emails didn't contain terrorist-related content?



The bailout and its effects in the market place, in a nut shell. Apparently, today the chaos continues as the first market to open after Bush's signature, the Israeli Tel Aviv Stock Exchange tumbled like a rock going down a sheer slope. 

The fundamental source of the entire financial crisis has been the opaque nature of the books of the biggest financial institutions. The fact that they refused to value assets which, if shown in the light of day, would be revealed to have little revenue potential, will probably end up costing the companies billions in dollars is only being papered over by the bill that the various branches of the federal government approved on Friday. This is further reinforced by new rules from the Securities and Exchange Commission stating that corporations no longer have to price these assets on a 'mark-to-market' basis. That is to say, they no longer have to value them at the price they would likely fetch in a free and open market, but rather can just pencil in whatever they want and use these assets as capital, or as collateral for the various short-term lending programs offered by the Federal Reserve. However, the hanging $55 trillion question in the air is what happens when the Credit Default Swaps start becoming unbundled. For instance, you may remember A.I.G. which met its fate and an $85 billion bailout from the Federal Treasury because of these insurance policies, but has yet to sell a single asset, despite blowing through $61 billion of the money provided in the bailout. Yet their executives party like Nero in Rome. Party on, Wayne. Why worry when none of those responsible for the lending practices will ever be prosecuted? 

So, with some banks saying that they won't even participate in the No Bank Left Behind program and banks that will still fail regardless of their participation, what are we left with? A budget problem that will hamstring the domestic and foreign policies of the next President, whoever it may be, an IRS with undercover investigative powers which will be on the prowl to make sure that every dollar Uncle Sam has coming is brought to the Treasury, and good, old-fashioned rage almost everywhere other than Wall Street. 

The Global Food Crisis: Too Much Water

Wisconsin, Iowa, Missouri, And Illinois have all been hit by massive flooding over the last week. Some heroic boyscouts have garnered all the press from this storm but there is another story with wider reaching implications. The flooding has caused damage to farmland across the nation's breadbasket, ruining thousands of acres of fields prior to harvest. These fields are primarily corn and as detailed in a prior posting, corn is the backbone of the U.S. comodoties market. Further, such a huge loss in corn will cause the prices of all foods to rise even more than the international food crisis has caused. The bottom line for you, expect to pay more for all kinds of meat, cerial, grains, milk, and of course, gasoline.

This all brings up the concept of inflation. The general rise in the price of goods as measured by the United States excludes the cost of comodities like food and energy(oil). The standard reason given for this is that even when the economy is stable the costs of oil and food fluctuate wildly and are thusly not directly pinned to the general economy. That reason turnes into a mere excuse to ignore bad news in times like these where inflation is being driven by world crisis level food prise increases and devistating growth in cost of oil. Yet economists will continue to use the old measure and more tellingly the old media will continue to parrot what they are told in their role of controling the public.

Ben Franklin Report: Lists Abound

Because businessmen love lists, here is a list of some of the important stories surrounding the ongoing financial crisis.

• 12 Steps to keep Ben Bernanke awake at night.
  
• As inflation looks more and more probable, the price of oil jumps to a new record high of $100.10, and, of course, the markets react.
• With U.S. Treasuries already near historic lows, analysts are seeing a market at near capacity as the government is forced to sell off billions more in deficit spending. While central banks with large inventories of treasuries and such securities should be the most nervous, every American citizen should probably share their concern.
• The Fed's new Term Auction Facility, created to help inject liquidity into the banking system has been extensively used, to the tune of $50 billion. The only problem is that the collateral behind these short-term, one month loans is collateral that wouldn't be accepted by other parties.
• The credit crunch is threatening to bury Boston's "Big Dig."
• Credit default swaps, according to the Office of the Comptroller of the Currency, now measure more than the amount of U.S. Treasuries outstanding.
• Credit Suisse's CDO headache
  

Bush Sending Mixed Messages on Economy

Its as if Bush believes the economy will do what he says as long as he refuses to admit there are problems. So we get speeches like he delivered today that send mixed messages about the economy.
Compare, http://money.cnn.com/2007/12/04/news/economy/bush/ with, http://hosted.ap.org/dynamic/stories/M/MORTGAGE_CRISIS?SITE=DEWIL&SECTION=HOME&TEMPLATE=DEFAULT

Benjamin Franklin Report: 30 Nov 07

An inevitable feature of the give and take in our economic system is the fact that we have to pay back whatever it is that we use. In simplistic terms, when you spend money, it has to come from somewhere, be it in the form of a trade item or currency. Or, if you really need money, you can spend your future earnings, which has gotten us into a bit of a bind recently, as I previously reported. In summary, the market is looking like it's rebounding nicely. Freddie Mac (NYSE:FRE) and Fannie Mae (NYSE:FNM) managed to issue some short-term debt items to raise enough capital to keep their operations afloat at least for another 90 days. (Wait, what is an S&L again? Why were they so controversial again?) The really big news item of the day, though, is this article. Countrywide Financial is dealing with the private ramifications of the ongoing credit crisis, although there is a whiff of hope in the air that is pushing Countrywide's stock (NYSE:CFC) up by more than 14% at press time. Citigroup (NYSE:C) is also benefiting from what some jackass business correspondent might call headwind generated in the markets by potential government intervention. I guess if Hope is not readily apparent, corporations are not forced to create their own by saddling their duly paid representative to take on their misguided liabilities.

Feeling Sub-Prime?

The thing I want to point out here, that hasnt been mentioned except as denials that it is a consern, is that when the subprime mortgage market is allowed to push off its horrid investments on Fannie May and Freddie Mac this amounts to welfare. This is fucking corporate welfare. These are opportunistic people who took advantage of poor optimistic people who only wanted in on Bush's "ownership society." These subprime lenders were only conserned with making a buck and they all knew they were making a bad investment, which is why they hid these in larger investment packages and passed them off like hot fucking potatoes. Now that the investment has turned out to be a bad one they want to pass the burden of cleaning up the mess on to you and me, the fucking tax payers, and they want to leave the Joe and Jane Doe holding the bag. The poor people that got suckered into these predatory loans are still going to loose their home, while the fucking asshole real estate "flippers" got rich off of over inflated house values.

The big point again is that you and I are going to have to pay for the bad investments of some selfish dickheads. This whole thing strikes me as hypocritical bullshit. the people that wer making these investments are the kind of assholes that bitch and moan about the cost of social services and demand we privatize everything, but as soon as trouble looks their way and they go crying to the government for help. Every aspect of this makes me sick.

This whole thing is made worse because its tied up with the falling dollar, droping consumer confidance, falling manufacturing, inflation, falling wages, increasing unemployment, vastly increasing deficet.

That Sucking Noise

Apparently, the confluence of record oil prices, a financial fallout in our primary sector for economic growth for the past decade or so, and creeping inflation is too much for the U.S. Economy to bear. The main indicator of the turbulence, the poor dollar has in the past day tumbled to a new record low against the Euro, as well as for the most part falling back to pre-Clinton exchange rates against other world currencies, notably the Canadian dollar. The Chairman of the Federal Reserve, Ben Bernake, one of the masterminds behind this rapid currency devaluation, has signaled that he expect the economy to slow for the rest of the year, and regain momentum in the beginning of 2008. What might be slightly worrisome is that he mentioned that they have not even calculated for even the possibility of a recession. The European Central Bank, for their part, are worried about the potential impact of cheap American exports on the world market, with Bush's new best friend Nicholas Sarkozy going so far as to mention the phrase "trade war." All of this makes me wish that the Fed still published statistics about the growth of money supply.

Oil, on the other hand, is not nearly as interesting, it only hit an amazing high just over $96 per barrel, as opposed to actually eclipsing the $100 price range. Between the price of oil being up 42% since August and "I think the market is due for a correction," I would say that we need to start car pooling more, or perhaps look into public transportation.

In other news, the primary builder for expensive homes in the U.S., Toll Brothers announced that their sales are going into tailspin, bringing up the question of whether the leg that is consumer spending is wobbling... Hopefully, it's only wobbling.

The New York Stock Exchange and most other world indices were pushed down today by poor results in the tech sector.

By far the most worrying aspect of all of this is the mention by Cheng Siwei, Vice Chairman of the Standing Committee of the National People's Congress and the other mastermind, that the American dollar is losing its status as a world currency.

I hope the managers at brokerages are telling their people to lay off the coke.