Category Archives: economy

Who could have foreseen?

As the Bush Administration winds down, the Big Money Boys have just about finished cleaning us out. Per Think Progress, CNBC has a nice chart detailing all the various bailout monies that’ve been lavished on corporate America… and the total is over 4 trillion dollars:

Financial Crisis Balance Sheet
Government Entity Sum in Billions of Dollars
Federal Reserve
(TAF) Term Auction Facility 900
Discount Window Lending
Commercial Banks 99.2
Investment Banks 56.7
Loans to buy ABCP 76.5
AIG 112.5
Bear Stearns 29.5
(TSLF) Term Securities Lending Facility 225
Swap Lines 613
(MMIFF) Money Market Investor Funding Facility 540
Commercial Paper Funding Facility 257
(TARP) Treasury Asset Relief Program 700
Automakers 25
(FHA) Federal Housing Administration 300
Fannie Mae/Freddie Mac 350
Total 4284.5
Note: Figures as of Nov. 13, 2008

Allow me to ask a rhetorical question or twelve:

How did this happen? Was this economic crisis an accident? The cost of doing business? A simple but inevitable downturn on the great cycle of prosperity? An unfortunate confluence of economic forces, caused by the ripple effects of a far off butterfly, flapping its wings to the (temporary!) detriment of our glorious DOW?

Could this have been avoided? In other words, who the hell can we blame for this mess? Because for something to be avoidable, it must be knowable in advance. And if it was knowable, and there were people sounding the alarm, then it surely follows that there were those who heard that alarm and cynically ignored its warning.

Ladies and Gentlemen, I give you Exhibit A: Peter Schiff. This video is a compilation of Peter’s greatest hits from 2006-2007, before the shit was even near the fan, when various cable outlets would routinely trot him out as the token pessimist to be ridiculed like the town simpleton in a medieval passion play. Watch in amazement as poor Peter’s clear-eyed prescience is rewarded with howls of derision from his fellow Fox News “analysts” (anal-cysts?).

When I saw the length of the video, I figured there was no way I’d watch to the end, and yet there was super genius Ben Stein braying like an ignorant jackass and I couldn’t look away.

Exhibit B is the remarkable true story of Steve Eisman, an investor who for years has been short selling all manner of stocks and bonds related to the the housing market, on the basis that the emperor has no clothes. [Note to you Fantasy Wieners, the article is written by noted Moneyball author, Michael Lewis.]

He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made […]

“You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

Even if you have no idea about any of this (especially if you don’t) I recommend reading the whole piece. You come away with the distinct impression that high finance is nothing more than an elaborate Ponzi scheme.

Kurt Vonnegut wrote about the Money River (God Bless You Mr. Rosewater). How if you were lucky enough or smart enough, you could get one of the guardians to show you the river so that you yourself might “slurp”. I think nowadays the proper metaphor is not a river, but rather a Money Vortex – I’m just not sure if it’s a tornado, funneling money up and out of our pockets… or a swirling eddy, siphoning it down the drain. Nothing about the last 8 years has been an accident. Sure, there has been “collateral damage”, and that’s been regrettable. But in the end, everybody in charge got more or less what they wanted.

The question is, will they get what they deserve?

Baited, hooked and twitching madly

We’re all probably too pissed off to write about the bailout bait and switch right now, but its our job folks, we have to expose these things. Allow me to oversimplify Friday’s hearings like this: the Bush Administration does whatever the hell it wants. Plain and simple. In hindsight I’m surprised they even went through the trouble of getting congress to pass the bailout bill, except for the politics of it. But now that the Democrats went through the painful process of attaching strings, its nice to know that the Administration can just simply ignore them. Nobody’s surprised by these tactics, at least no one that’s been awake for the last 8 years. But this has to get filed away with the many other things that makes every American citizen who cares about, and has even a limited understanding of, our constitutional democracy want to puke their guts out. These people are scum. In the attached link, you’ll read a polite and eloquent rebuttal about buying mortgages. If you were paying attention you would have said, 55 million? That sounds like every mortgage in the entire country. Well, you’d be right, it is. So what kind of evil jackass would twist things around like that? Yes the question was rhetorical…and no there aren’t 55 million foreclosed homes in America. He was actually saying, ‘what do you want us to do, buy every mortgage in America?’. After that statement I’m thinking his balls on a platter would be an appropriate response…well worth the ~$2,500 a person the bailout is costing.

So this Thanksgiving, when my grandmother or uncle start talking about how the bailout is socialism and we’re turning into commies, I’m going off the rails, despite my great love for my unfortunately misguided relatives. I’m sure you have a few yourself. Future posts will add to this list, but for those of us concerned with totalitarianism, please add this to the category ‘ignore the laws passed by congress’. Was there a signing statement I missed?

Reeferendum 2008

Lots of good news at the ballot box last week, as it seems that in addition to all those other wars, we’re now losing the Drug War too.  The reefer reform lobby saw victory on 10 of 11 statewide ballot initiatives, proving once again that the people know better than Uncle Sam when it comes to Aunt Mary.

Congratulations to Massachusetts, which is set to become the 13th state to decriminalize the reef.  Interestingly enough, Michigan became the 13th state to legalize so-called medical marijuana.  I say interestingly, because lucky number 13 has long been the numerical symbol for marijuana…  and Massachusetts and Michigan both begin with “M”, which is the 13th letter of the alphabet…  Don’t get me started on the legend of the G-13… (perhaps Sunshine could chime in on the comments?)

Aw, dude, that cloud has a vein in it… and it’s bleeding on me, man!  The cloud is bleeding on me!  Wait, go back…

Let’s review that list of states that have decriminalized the maryjane (that is to say, possession of small amounts of marijuana is now a fine rather than a jailable offense): Massachusetts, Maine, Minnesota, and Mississippi… what’s missing from that list of “M” states?  God damn right, Maryland.  If Missouri and Montana turn before Maryland, so help me… (The remaining states that round out the 13 are Alaska, California, Colorado, Nebraska, Nevada, New York, North Carolina, Ohio, and Oregon.)

But honestly, why are we just nibbling at these trifling, archaic reefer laws?  Last I checked, we’re staring down the worst economic slump since the Great Depression.  Estimates about the value of the United States’ domestic reefer crop vary anywhere from $4 to $25 billion (source: Reefer Madness, by Eric Schlosser, 2003).  In fact, here’s a nice little passage from that book:

In 1997 the Austrian economist Friedrich Schneider calculated the rise of America’s “shadow economy” by tracing changes in the demand for currency.  According to Schneider, in 1970 the size of the underground  was between 2.6 and 4.6 percent of America’s gross domestic product (GDP).  By 1994 it had reached 9.4 percent of the GDP – about $650 billion.

Granted, reefer only accounts for a small portion of our black market.  But still, let’s get it out in the open!  I find it interesting that in 1933, Congress got the ball rolling to repeal Prohibition just as FDR was coming into office.   That year was dedicated to jump-starting the economy by any means necessary…  Sound familiar?  Don’t forget, booze had been outlawed by the 18th Amendment, so rolling that back with another constitutional amendment required ratification by each state, no small feat.  By comparison, decriminalizing ganja, which is not explicitly outlawed by the Constitution, should be a breeze.

It’s been 36 years since Nixon’s National Commission on Marihuana and Drug Abuse recommended that the funky buddha be decriminalized.  And we’re only now up to 13 states?  Pathetic…

“Lou the Angry Troll” Invokes “Joe the Plumber”

This man is in the hypocrisy hall of fame. Lou supposedly advocates for the middle class and working America, then he manages to twist the facts about all the worthless people who are so poor that they supposedly don’t pay taxes in America. Nevermind the intrinsically illogical doublespeak when you talk about giving a tax break to someone who doesn’t pay taxes. Dobbs is a freaky hypocrite with a soft spot in his heart for the mythical “Joe the Plumber”. By the way, in future discussions I want to make “Joe the Plumber” the new code word for the guy who makes 40K a year and will actually receive a tax break in Obama’s plan, but he is such a dreamer and a moron and an ideaologue that he is more worried about a fantastical plumbing business that he is thinking about buying, that profits 250-280k a year, that would cost a couple million to buy. Meanwhile he has what, a negative $1200 in back taxes in his name. “Joe the Plumber” is an ignorant jerk, just like “Lou the Angry Troll”.

Social Security Hypocrisy

Joe the plumber is not alone. Of course many hypocrites like to talk about how the social security program will never work. Any business that pissed away every profit it ever made wouldn’t last long. Well, it would be self sustaining as FDR proposed if we kept the surplus of workforce bubbles. But we haven’t. Mostly because the people running the government during the baby boomer prime earning years did everything they could to bankrupt every program in sight. The nine most feared words indeed. My new most feared words in the English language: “I’m a Republican and I want to run the government I believe is itself the problem”. If I worked for a company that elected as its president someone who firmly believed my company’s mere existence was an abomination, I’d be looking for another job. Newsflash Joe, Social Security has been one of the most successful and beloved programs in our history, until Reaganomics ushered in the new wave of anti-humanist republican party.. and by the way every advanced country in the first world has a program like it that works just fine.

Joe the Plumber

This is the version where you actually get to hear Obama’s answer to Joe the Plumber. Its a pretty damn good answer too. By the way doesn’t this dude look a bit like that male prostitute that they used to keep in the White House?

On the other hand, if you looked at the Fox news version, they clip out the answer.

* * * Uila Update * * *

I’m having a vision… it’s the future of the GOP… PALIN/PLUMBER 2012

More on blaming poor people

Matt Taibbi is the finest political writer of our time.  He cranks up the outrage and doesn’t hesitate to skewer both sides if they deserve it.  If you haven’t been reading this guy, you should.  I’m throwing a link to his recent articles in the blogroll.  His description of Palin’s unveiling at the convention is a thing of beauty.

However, the post I wanted to highlight today is his head-to-head with some clown at National Review over who’s responsible for the financial meltdown.  He picks up Pinky’s comment about credit default swaps and beats the other guy like a tom tom…

M.T.: You don’t think the unregulated CDS market was a major factor in the current crisis? Were you watching when AIG almost went under? Were you watching the Lehman collapse?

B.Y.: I think that Fannie Mae and Freddie Mac were also major factors. And I believe that many of the problems in the mortgage area can be attributed to the confluence of Democratic and Republican priorities: the Democrats’ desire to give mortgages to people, particularly minorities, who could not afford them, and the Republicans’ desire to achieve an “ownership society,” in part by giving mortgages to people who could not afford them. Again, I believe that if you are suggesting that the financial crisis is a Republican creation, or even more specifically a McCain creation, I think you’re on pretty shaky ground.

M.T.: Oh, come on. Tell me you’re not ashamed to put this gigantic international financial Krakatoa at the feet of a bunch of poor black people who missed their mortgage payments. The CDS market, this market for credit default swaps that was created in 2000 by Phil Gramm’s Commodities Future Modernization Act, this is now a $62 trillion market, up from $900 billion in 2000. That’s like five times the size of the holdings in the NYSE. And it’s all speculation by Wall Street traders. It’s a classic bubble/Ponzi scheme. The effort of people like you to pin this whole thing on minorities, when in fact this whole thing has been caused by greedy traders dealing in unregulated markets, is despicable. Continue reading