Category Archives: financial reform

The Chickens Must Eventually Roost

Too many Foghorn Leghorns?

The thing about playing chicken is that fatally high stakes are a prerequisite of the game.

And someone — not excluding, say, an entire country — is going lose.

If you believe market pundits like Jim Rogers (an American trader of some fame who chooses to teach his daughter Mandarin and now lives in Singapore) the U.S. has already lost its triple-A credit rating in all but fact.

“Everyone already knows that the U.S. has lost its ‘AAA’ status,” Rogers said (while alternately lambasting the press for taking seriously what he called the ongoing Washington “charade”).

“Anyone who knows what is going on, already knows that the U.S. is now the
biggest debtor nation in the history of the world. It’s only S&P and Moody’s [the ratings agencies] that haven’t figured out what is going on. The investment world knows that the U.S. is not ‘AAA.’”

The truth is, the ratings agencies have figured out the U.S. is not triple-A. But those entrusted with grading the U.S. debt at the ratings agencies have been on the phone frequently with Washington, which means their allegiances are subject to crushing political pressure. Continue reading The Chickens Must Eventually Roost

The Carnival Is Still In Town

“Concentrated power has always been the enemy of liberty.”  

— Ronald Reagan

Wall Street blames Washington for all the financial crises. And Washington blames Wall Street back. It would be amusing, if it wasn’t so pathetic.

Now we know the truth — that both are taking turns bringing us to the brink, with only their own self-preservation in mind.

As we emerged, rather confused, from the 2008 financial crisis, a posting appeared in the comments section of The Wall Street Journal. It was as prescient as it was disturbing. It appears in my book, but I am re-posting it below.

Whether you are a Democrat, Republican or Independent, it is worth a read. It is also worth considering that while Wall Street bewails any hint of a redistribution of wealth to the unwashed masses, the largest-ever redistribution of wealth occurred right under taxpayers’ noses to the banks by the billion-load   — Wall Street’s greatest coup ever, rubber-stamped by our own elected officials.

“All this goes to show we are now entering the second phase of the world financial crisis. Despite the fact that the anti-social nature of banks has been found out, the corruption of the Fed and the finance committees in the Senate and House are now public, and the solutions to the problems are well known, we still do not possess the political will to carry them out.

“It is clear that a larger problem now looms — the crooks are firmly in power and intend to stay there . . . Americans are again ruled by a plutocracy that has no interest in them other than the money that can be made off them, the same as in 1776 . . . If we cannot kick these people out of power, we are no longer America. And most people sense that. We have become the pleading chickens our founding fathers would have despised.”

Dear The Fed: You Suck

I was cleansing my inbox today and found this friendly letter to the Fed from 2007 written by our comrades at Long or Short Capital (vaguely connected to our own fake hedge fund, Intergalactic Capital). I was all ready to take a whimsical walk down memory lane, since 2007 was the year before our  financial meltdown. Yet strangely, this missive does not seem dated.

To: The Fed
From:
Long or Short Capital
Re:
You suck

Dear the Fed,

You suck.  You don’t have a backbone and as a result you are slowly and very surely making our country and our currency irrelevant.  Usually the masses rebel and bring down great empires but luckily for us democracy fixed that problem.  Unfortunately, democracy can’t fix how lame and fickle you are and so you will be our ruin.

A few things to tell you:

1) Inflation isn’t 2% like your pathetic CPI ex-Food & Energy says it is.

First of all, as far as I can tell food and  energy are the only two items you should NEVER exclude from an inflation index.  Tell your wife and kids they can have everything in the consumer basket except food and energy and you will quickly see that they are actually the two MOST important and indispensable factors in the CPI.

You can find substitutes for, or go without, everything in the basket EXCEPT those two.

Secondly, stop using “Seasonally Adjusted Intervention Analysis” it’s as sketchy as the  Seldom-Accepted-Accounting-Principles (SAAP) we use to cook the books here at LoS.  I mean writing a computer program to automatically remove any items in the basket which deviate meaningfully from the previous year?  Isn’t the point of the data to SHOW the change versus the previous year, not hide it?  Oh, I found the list of items that you’ve adjusted for and it’s embarrassing. Continue reading Dear The Fed: You Suck

Zombies, Freewill and the Inevitable Zombie Apocalypse

A reader requested I write about the inevitable zombie apocalypse.

Very well then.

I do not ascribe zombies to the rise of the Tea Party, the Gang of Six, or today’s call by euro-zone chiefs for a “selective default” on the Greek debt.

Although that would be entirely conceivable.

However, it is worth noting that respectable bastions of academia are taking seriously the zombie question. This has been evidenced by such mounting bodies of work as: Why Zombies Are Inconceivable (Eric Marcus); Zombie Killer (Nigel Thomas); Zombies and the Case of the Phenomenal Pickpocket (Michael Lynch); Zombies Support Biological Theories of Consciousness (Andrew Bailey); and Zombie Mary and the Blue Banana (Tillman Vierkant).

Ordinarily, this might be dismissed as so many starving philosophers jumping on the Max Brooks “Zombie Survival Guide: Complete Protection From the Living Dead” bandwagon and its many spinoffs since the book’s release in 2003.

Except the term “zombie,” it seems, was first introduced and popularized by a philosopher and professor back in 1974. Continue reading Zombies, Freewill and the Inevitable Zombie Apocalypse

Trader Threatens To ‘Kill’ 47 U.S. Officials

‘I was being sued…it upset me.’

A midlife crisis can take many forms. Cheating on your spouse. Purchasing a Maserati. Wearing Billabong. Buying into The Lynx Effect. Just being a jerk. But putting up an “execution” list on your Web site of high-ranking financial and government officials and urging people to buy guns to help you kill them is one I haven’t heard of. Among those on the hit list of the smiling man in the orange tie to your left: the head of the Securities and Exchange Commission Mary Schapiro and the chairman of the Commodity Futures Trading Commission Gary Gensler — both heavyweight Wall Street watchdogs.

“Go buy a gun, and let’s get to work in taking back our country from these criminals,” he wrote on his site, according to prosecutors. “I will be the first one to lead by example.”

The 50-year-old from Long Island is accused of threatening the lives of 47 current and former officials. (Yes, I said 47. You cannot make this stuff up.) Continue reading Trader Threatens To ‘Kill’ 47 U.S. Officials

Minor Wake-Up Call: U.S. Out of Cash By August 2!

This is a little something from back home we like to call the 'Hawaiian kiss-off'

Hold the phone, we run of cash when? In two and a half weeks? Bah, fie and tut-tut. So that’s what’s behind this whole debt-ceiling/deficit talk getting in the way of my “Mad Men” re-runs. But maybe there’s a silver lining. One humble query: If our entire nation can no longer pay its bills and decides to cut little old ladies’ social security checks, will anyone notice — or care — if I don’t pay mine?

Seems if the U.S. Treasury and Congress can’t get it together, then why should I?

During a pivotal summit with Republicans yesterday, Obama rose, looked around and, well, booked it out the door. (Or as The Wall Street Journal more kindly put it, Obama found himself “abruptly walking out of a key meeting.”)

Key meetings, as far as I can tell, are the kind you’re not supposed to walk out of. But the president’s the president, so what can you do? Continue reading Minor Wake-Up Call: U.S. Out of Cash By August 2!

Cash or Credit: A Stuffing Under the Mattress Vs. A Hiding in the Closet

It took longer than usual to take up the pen today. Probably because it was imperative to check out the “Every Single Outfit Catherine Wore on the Royal Tour” feature in the Huffington Post.

Having done that, I now turn to more important matters.

Like this cash-or-credit debate taking place in the papers. Financial vigilantes are urging consumers to cut up their credit cards and throw them away. One article in SmartMoney actually sounded the shibboleth: “I’m going all cash!”

To which readers had a range of emotional responses. Two encapsulating these:

“This is simply an irritating article. I am willing to bet $1000 that the author
is lying and in fact is still using his credit cards and not wandering around
paying for everything with cash. If you’re going to write an article, at least
please be intellectually honest. Do you think we are that stupid?’

And:

“Already living this dream. In fact it is a great reality to know that you owe nothing to anyone. We do not have credit cards either, we have covered that with an emergency fund. We own a house (no mortgage) and we have paid cash for all of our vehicles (no financing). As far as I’m concerned, living within your means and being debt free is the NEW AMERICAN DREAM.”

The most compelling reason for getting rid of your credit cards is obvious: ordinary folk have to pay 14% interest on average for them. Yet banks pay less than 1% whenever they feel like borrowing from the government (yes, that includes JPMorgan Chase, Bank of America — even Goldman Sachs and Morgan Stanley, which received “bank holding company” status during the credit crisis).

Kind of annoying that the Big Banks get to play with money for almost nothing, but not us Little People, isn’t it? Continue reading Cash or Credit: A Stuffing Under the Mattress Vs. A Hiding in the Closet

‘Bogged Down In A Pseudo-Religious, Ideological War Over Whatever’

Not my words, just something an observant Canadian living inside the U.S. had to say today about our country’s death match over the debt ceiling — before remarking that it might be wise to, uh, “back-migrate.”

Instead of an espresso shot this morning, take a gander at our impressive U.S. Debt Clock. If that doesn’t jolt you awake, nothing will.

Remember, no one on this planet even has $1 trillion. Yet, somehow the U.S. has found itself on the hook for more than $54 trillion. Continue reading ‘Bogged Down In A Pseudo-Religious, Ideological War Over Whatever’

Quote from a great piece in this month’s Vanity Fair, penned by the illustrious Mr. S…

“Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest. When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth.”

– Joseph E. Stiglitz, economist and Nobel laureate

The Global Oil Casino Benefits Only Its Players

Originally published in The Financial Times on April 6th, 2011

Tensions in the Middle East and north Africa, we are told, lie behind the recent increase in global fuel prices, which Wednesday hit a 2 ½-year high. Yet while Brent crude this week stayed above $120 a barrel, in Tripoli petrol hovered at around 54 cents a gallon. And that is not a typo. The popular reason for why those closest to the fighting, in this case, suffer less than those farther afield, is Libya’s hefty subsidies. The less popular reason is that world energy markets have been carefully designed to profit from the slightest supply hiccup, even if there is little evidence of actual shortages.

The energy-trading fraternity has never let the facts get in the way of a good supply scare. True, this historically fragile market is vulnerable to price swings as demand threatens to climb faster than production. But there is more to it than that. Indeed, what President Barack Obama did not mention last week in his energy security speech about the faults of the global energy market could fill a Saudi oilfield. Continue reading The Global Oil Casino Benefits Only Its Players