naked capitalism

Anonymous says:

The ‘Great Bond Crash’ link is incorrect, I think?

a says:

From the prudentbear link:

“Next time, perhaps we can stick to the old rule that assets don’t get marked up in value until they are sold, but that clear impairment in value results in a markdown. “

Just to be clear, in my neck of the woods it was the regulators who forced the mark-to-market rule on the IBs. We had a time honored tradition of putting money under the pillow in case of bad times, by being conservative on parameters. The regulators forced us to have coherent “market-observed” parameters. Put money in reserves? Couldn’t do that either, without writing a two-page long memo justifying it (and how do you justify, “just in case”?).

Jojo says:

This past Sunday 60 minutes story is worthy of a LINKS entry!

++++++++++++++++++
Following The Trail Of Toxic E-Waste
Nov. 9, 2008

http://www.cbsnews.com/stories/2008/11/06/60minutes/main4579229.shtml

Chris says:

Re: Buiter.
In former, more normal times, it could be assumed that heads of state and/or government were pretty much figure-heads, that financial policy was run by finance ministers and central bankers without interference, and that finance ministers and central bankers were run in their turn by economists trained in schools and apprenticed to whatever. Thus in normal times the professors of the economists who ran the finance ministers were really in charge.

But this crisis seems to have blown this business as usual approach right out the window and the economic professors look like the best candidates for last to recognize this.

Politics with a big “P” is back, sooner that’s recognized the more sense will be brought to discussions about the Transition.

After all this is the biggest crisis in a century or so, and no one really expects the people whose ideas contributed to it to be the ones to solve it. Do they?

River says:

Here is another take on bond market dislocation. It is more dire than the Prudent Bear op/ed by Hutchinson.

This is a reading of yield curve plus increasing cost of CDS (a subject recently brought to our attention by Yves…thank you) on government debt in tandem and what it might mean. Not for the faint of heart…

‘Uncle Sam’s Credit Line Running Out?’

…snip…’The steepening of the Treasury yield curve has been accompanied by an increase in the cost of insuring against default by the U.S. Treasury. It may come as a shock, but there are credit default swaps on the U.S. government and they have become more expensive — in tandem with an increase in the spread between two- and 10-year notes.

This link has been brought to light by Tim Backshall, the chief analyst of Credit Derivatives Research. The attraction of investors to the short end of the Treasury market is “juxtaposed with the massive oversupply and inflationary expectations of the longer end,” he writes.

Backshall is not alone in this dire assessment. Scott Minerd, the chief investment officer for fixed income at Guggenheim Partners, a Los

Angeles money manager, estimates that total Treasury borrowing for fiscal 2009 will total $1.5 trillion-$2 trillion. That was based on $700 billion for TARP, a $500 billion-$750 billion “cyclical deficit,” an additional $500 billion stimulus program and some uncertain amount for the Federal Deposit Insurance Corp.

Minerd doubts that private savings in the U.S. and foreign purchases of Treasury debt will be sufficient to meet those government cash. That leaves the Fed to take up the slack; that is, monetization of the debt.

However it comes about, Backshall’s charts of the yield curve and the spread on U.S. Treasury CDS paint a dramatic picture. Both the yield spread and the cost of insuring debt moved up sharply together starting in September.’…snip…

http://jessescrossroadscafe.blogspot.com/

Bob_in_MA says:

I definitely wouldn’t want to get into a verbal row with Willem Buiter. I think his point about the size of the legal profession here is obvious and well taken. It’s not an opinion on lawyers, but the absurdity and inefficiency of having such a huge number of them.

Did anyone notice that latest trade stats from China show imports falling faster than exports? So much for that engine of growth…

lineup32 says:

Re: Buiter

Both political parties stand for status quo. Political advertising uses the word CHANGE like Exxon uses clean energy-its only a word.
I am not saying Obama is a fake rather he and his adminstration will operate within the scope of what they know and feel confortable with which is 98% within the box thinking. As Buiter has pointed out so well nobody on the team Obama stands for new ideas or change all of them are ingrained into both the political and economic system that has provided well for each one of them, clearly they don’t want any challenge to their own family wealth.

The youth of American that elected Obama is going to get a good lesson in American political theater as the Democratic Congress lumbers about the political landscape talking change and ruling from the middle.

Anonymous says:

Well put by lineup32

Meanwhile, let’s expand on Buiter’s point that there are too many lawyers. So many, that lawyers have destroyed the rule of law.

Also: Way too many economists wedded to rational man and other orthodox economic theory. Result: they’ve destroyed the economy.

Too many journalists who compete for attention through celebrity and ‘narrative’ instead of reporting, accuracy and skepticism. Result: They’ve destroyed journalism.

Way too many politicians far more interested in power than governance. Result: They have destroyed politics and government.

Way too many investment bankers and related flora and fauna. Result: They have destroyed the financial sector.

Too many medical administrators as well as specialized medical practitioners. Result: They’ve destroyed medicine.

… and so on and so on

Peripheral Visionary says:

The advantage the QE2 will have over other hotels is that it can be shipped (literally) back where it came from when–not if–the Dubai market crashes.

On Buiter, he is premature in calling the Obama transition team “no change, no hope”, but the criticism of the legal profession in the U.S. is long, long overdue.

anon 2:24 has solid comments, which I would summarize simply as: too many queen bees and not enough worker bees.