Chimps use geometry to navigate the jungle New Scientist
Anti-Dollar Contagion Gains Pace Huffington Post
Successful bank rescue still far away Martin Wolf, Financial Times
10 Headlines You Won’t Read After Obama’s Press Conference Clusterstock
The Ridiculous Marks Of Toxic Assets Tyler Durden
Why a second best bailout may not be good enough The Compulsive Theorist (hat tip Steve Waldman)
Antidote du jour:
Anonymous says: I agree with Simpson.
but I also agree with Krugman. I can’t imagine why this plan inspires any confidence in market participants.
pigeon says: Buiter: “So stop ‘leveraging’ the tax payers’ money. Stop using the Fed as an opaque SPV of the Treasury. Tell the people the truth. Ask for more resources and pay for them by raising taxes or cutting public spending.”
Buiter makes a great analysis but in this last sentence I believe he is way too optimistic. Is the truth that more resources could be raised and paid for later? No, I think the truth is, that the US is insolvent due to years of imbalanced economy. This cannot be fixed by raising taxes and cut spending. It can only be restarted via managed bankrupcy. IMHO this is what QE is all about and it also applies to the PPPIP since in the end the Fed must provide the money.
Anonymous says: That Clusterstock link is below NC.. snarky and uncreative (it even includes the “not born here” nonsense.. I thought we were trying to operate at some level beyond the conspiracy theorists grasp.)
Anonymous says: On the anti-dollar article, and NC posts from the last couple days…
So we’re seeing..
1. Taxpayer wealth/debt being fed into the banking industry to make imaginary wealth materialize (after a decade or two of incredible wealth transfer and polarization.)
2. Administration proposals to increase Govt power over financial institutions to “regulate” (read: increased ability to bail them out.)
3. A potential tanking of the dollar through this plan.
4. Calls to replace the USD with an supranational currency issued by the IMF or central banks.
If I was a conspiracy fan, I’d bet that the dollar was being purposefully crushed and wealth utterly concentrated in the big financial institutions… to what?
Do we really want to give all the worlds wealth to these parties, then give them the power to control the money supply as well. Even if this isn’t intentional, it sounds like a recipe for corruption and disaster.
Simpson says: Yeah, the dollar is the world’s worst reserve currency – except for all the others.
This stuff makes me laugh. The Japanese creating a single currency for Asia? Good luck! The IMF creating a new currency without support from the US? Hah.
Timo says: “This stuff makes me laugh. The Japanese creating a single currency for Asia? Good luck! The IMF creating a new currency without support from the US?”
I’d bet you said that about EURO too, cannot possible work, gonna break apart any minute now.
American exceptioTnalism again and again and again. he rest of us are just stupid idiots compared to you bright bulbs, right?
Simpson says: @Timo -
I didn’t say that about the Euro.
There is a mechanism in place in Europe to agree on policies and a structure to implement those policies. Asia is different. Nothing like that exists in Asia.
Oh by the way, it took the Europeans about 35 years to put that structure in place and to integrate sufficiently to have the Euro and even then Denmark, Sweden and the UK stayed out of monetary union.
Maybe the Asians will have a common currency in 35 years too. But until then, it is the USD. It is not exceptionalism. It is reality.
Timo says: “There is a mechanism in place in Europe to agree on policies and a structure to implement those policies. Asia is different. Nothing like that exists in Asia.”
The system could be different, they might keep their national currencies but cross-border trading done in Asia wide common currency.
Anonymous says: Simpson might be right that the PPIP is just a feint. The most immediately curious part of the plan is the “role” of the FDIC. Buiter makes the following comment: “It must be recognised that the FDIC is in this picture only for cosmetic, window-dressing reasons. The FDIC has no resources of its own to spend on leveraging the PPIP.” If this is the case why put the FDIC in the picture? Why not create some other entity for this placeholder role. There are two possibilities in my mind. (1) The administration really want to sell the plan and the FDIC is currently the most (the only) credible government financial institution left. (2) This is, as suggested by Simpson, a feint and the inclusion of the FDIC is purposely to make the plan politically toxic. After all, how hard is it going to be spin this a putting the government guarantee of bank deposits at risk. That’s going to popular on main street.
Anonymous says: Its amazing how system shills Krugman and Buiter keep the marks focused on the rigged game and not the corruption and scam ‘rule of law’ — owned and controlled by the gangster wealthy elite — that has created the rigged game.
Its not a financial crisis, its a corruption crisis. You can bleat on all you want about what you want your favorite puppet to do, but until you gain control of the electoral process, and reset the system, its just more bleating. Welcome to the middle class free ruler and ruled world.
The dollar and euro are both white western gang currencies (used by the gangster wealthy elite in a good cop bad cop fashion to exploit and extract wealth) that reflect the on going development of their gang alliances. Asia is in the process of being co-opted and gang leader affiliates are being selected and sorted out. If a new Asia currency is needed to divide the marks so as to set them one upon the other and solidify global gang power it will be created. The utility function in currency pales in comparison to its value as a tool of dominance. That tool of dominance function (enslavement) is created and controlled by the various (and similar) scam ‘rules of law’ which have been purchased by the gangster wealthy elite.
Deception is the strongest political force on the planet.
i on the ball patriot
Timo says: One thing good about American workforce is that they are quite quick to seize new business opportunities. So that might alleviate a little bit some of the problems. Big IF whether there will be those opportunities..
What I see all around is that anger is rising quite rapidly. Europeans and Americans are more and more pissed off. Asians not so much or are better hiding their anger. Next summer will be “interesting”.
a says: And in news today, the UK just had a failed Gilts auction – first of many, I guess, and what lies in store for Treasuries.
Steve R. Barbour says: Simpson
If it fails, the team will blame the private sector and say: guys, we tried but now you leave us no option. It has the added advantage of maybe getting a bit of price discovery as well.
There’s also the potential upside that if a market is established, and even if that market is overvalued, that the price on the market of these assets will be so low that the insolvency of these banks will be unquestionable.
(Keep in mind, that banks like Citigroup count as ‘well capitalized’ under current regulation, making nationalizing/sending them receivership difficult and potentially illegal).
Making this truth apparent to all would alone be worth swallowing a $50 billion taxpayer loss in my opinion.
—
On a larger note, while the Geithner plan is dishonest to the taxpayers, so have been the arguments against it. Every argument including Krugman’s and Nemo’s has started with the implicit assumption that:
The FDIC fails to properly gauge the downside risk of the asset, and guarantees too much.
Recall that the 6:1 leverage is the maximum limit, not a legal obligation.
If we instead assumed the FDIC does a ‘perfect job’, then we’d conclude the FDIC would lose no money.
Of course, that isn’t realistic either. Reality deems that there will be economic and political pressures in addition to mistakes and buddy-buddy dealing. The FDIC wholesale offering itself up as a political sacrifice is, however, unrealistic. As such, I’d imagine they’ll at least make some effort to do their job.
As an interesting note, we’ll probably be able to deduce if this is indeed a wholesale taxpayer giveaway by the distribution of the FDIC’s guarantees. If the average guarantee is in the upper seventy, lower eighty percent it will be unquestionable that the FDIC is stealth funneling large sums of the taxpayer money to the banks. Visa versa, if the FDIC’s guarantees are on the lower side, then it’ll be a clear clue that it is taking its duties seriously.
This is of course, assuming that the markets don’t value these assets so lowly that ’subsidy’ or not, that the banks will refuse to sell them outright.
… Which is what I suspect will happen.
lineup32 says: “So stop ‘leveraging’ the tax payers’ money. Stop using the Fed as an opaque SPV of the Treasury. Tell the people the truth. Ask for more resources and pay for them by raising taxes or cutting public spending.”
American political system is not ready for anything close to telling the truth and raising taxes!
john c. halasz says: Well, I guess it’s not a matter of the dark mutterings of us subaltern blog commenters with our wild conspiratorial suspicions anymore. With this article, it’s straight from the horse’s mouth:
http://www.reuters.com/article/newsOne/idUSTRE52N72R20090324
john c. halasz says: Oops! The last two missing digits are 24.
MyLessThanPrimeBeef says: What’s so special about chimps using geometry to navigate?
We already know they are smarter than college students (just google under news, chimps, college kids, year 2008).
And my cat, he uses syllogism everyday. No kdding. This is how. It works in his mind like this:
A. Everytime the servant opens the fridge door, there is tuna for me.
B. Servant is now opening the fridge door.
C. Therefore, tuna is coming! Happy days are here again! Tuna in every cat’s pot. Thanks FDR! What depression?!?!
Thus, my cat is probably as smart as Aristotles.
And you see why science is leading us nowhere. It can’t comprehend simple things. It just occupies itself with complicated things.
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I agree with Buiter’s analysis from an economic perspective, but I think he is entirely missing the political dimension.
I think the plan all along has been receivership for the big insolvent banks (Citi for sure and probably BofA as well). But the Obama team rightly feels that this must be an option of last resort. This means that they must try everything else first.
The toxic asset buyback plan is perfect because it puts very little USG money on the hook, requires private sector involvement and requires voluntary participation by the bad actors.
If it fails, the team will blame the private sector and say: guys, we tried but now you leave us no option. It has the added advantage of maybe getting a bit of price discovery as well.
It is bad economics but good politics.