Links 9/27/08

Auction bidding ‘driven by fear’ BBC

Judge: Microsoft documentation unfit for US consumption Ars Technica

Debate Reactions Brad De Long. A good wrap of post-debate polls.

How close were Presidential Elections? Mike Sheppard

Fannie and Freddie Get Flatter Wall Street Journal

The Real Reason for the Rush? Michael Panzner

Asian Central Banks Cut Rates to Counter Impact of U.S. Crisis Bloomberg

Economists not keen on GOP bailout Politico. That’s an understatement.

O Package Where Art Thou? Macro Man. On, among other things, the weird behavior of equities.

Game Theory: Why the Bailout Won’t Work EconomPic. Brilliant, except it assumes that assets sold to the Treasury will be lower than the prices they will later fetch. We think that’s completely wrong; the intent is to overpay relative to current market prices, and with real estate and the economy headed south, these assets are certain to trade at even lower prices for a very long time. Plus banks will sell the stuff where they think Treasury is overpaying the most, and hang on to those assets that they think have the most upside. But more of this sort of reasoning is badly needed.

Why did Friday come early this week? Steve Waldman

An Alternative Plan for Fixing Credit & Housing Barry Ritholtz

Does the TED Spread Really Matter? Felix Salmon. A must read.

Update: Several readers wrote me to complain about the Panzner link, that the piece effectively and incorrectly says the Fed cannot expand its balance sheet, and that complaint is 100% valid. We have written before about what the Fed might do when it runs into its current balance sheet limits. While there are other approaches, the Fed and Treasury announced that the Treasury would raise funds on behalf of the Fed (forgive me for working from memory here, but I do no recall the exact mechanism, and I’m not sure the news stories described it in detail), but it appeared the Treasury would raise more money in its regular funding operations, and I assume the Fed would give the Treasury Fed notes of some sort in exchange for cash.

The reason for including the link nevertheless is pretty much every central bank and bond trader know that expanding the Fed’s balance sheet is inflationary. Now we appear to be in a defaltionary crisis, so crossing that Rubicon might not be a bad move (well, maybe not, the Chinese get plenty mad when the dollar tanks, and that might be the immediate result), but the Fed probably regards that as a move it does not want to make right now. Who knows what reaction that might create in a volatile setting.

Antidote du jour:

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  1. Richard Kline

    Orca: “McCain? Obama? Mugabe? Zuma? Like I care. What I really want to know is, which way did the seals go. And is Carla Bruni coming by in a hollow log to go swimming, say yes?”

  2. Matt Dubuque

    Matt Dubuque

    Salmon’s article on the TED spread left so much ground uncovered that it was not very helpful for me.

    We all agree that banks are freely borrowing from the Fed and that they are HOARDING that money and not even loaning to other banks. Given the size of the Fed funds and ED markets, this is unsustainable.

    He also does not mention the logical consequence of this failure of banks to lend to each other, namely that they are ALSO cutting drastically back on their lending to their blue chip customers.

    And he also fails to address the dramatic effects that the DELIVERY FAILURES in the Treasury RP market are having on risk premia.

    Because of these enormous omissions in his analysis of what some of these elevated spreads signify, it fall short, in my view.

    Matt Dubuque

  3. doc holiday

    I'm so sad that Matt found my lounge …. shit, now I have to modify my metaphors.

    While this wonderful whale is reaching for the sky, breaching the surface of water for air, maybe it takes in a massive gulp of air to blow of stress and release negative energy built up from the grind under the sea — where narcissism collides with evolution …

    See, see, I feel like I'm trying to swim around an oil spill, I wanted to shoot for the narcissism ego thing and try in some way to send a message about restraint — but to feed into this just doesn't work! The negative feedback crap just acts like a vortex which takes all down a deep empty well; why, why, why would we want to go there and risk being caught in hell?

    Matt I love you baby, you remind me of my Mom and people that often piss me off and I know you need love, you need what everyone needs, so I'm with you on that front. Dude, how can Doc help?

    FYI: The male genitals are retracted into cavities of the body during swimming, so as to be streamlined and reduce drag.

    >> See…something went wrong, like some toxic spill … I don't get this???

  4. doc holiday

    This just in from mcCain:

    He says that although he is almost eighty, his choice of an inexperienced, under-educated Mom (who should be changing diapers) for Vice President was made for purposes of National Security.

    Furthermore, should he be given an opportunity to die in office, he wants to keep America safe and thus entrust Palin and her symbolic IQ with the keys to American nukes and The Treasury (among other things un-named). Apparently, Miss Palin, as a symbolic model, represents a wide range spectrum of American IQs, ranging from clinically brain-dead people in mental institutions to those that are now working on The Bailout Plan for Wall Street CEOs.

  5. Yves Smith

    I have made my extreme antipathy for Palin abundantly clear. I suggest you see this:

    The woman is patently unqualified and appears to be unable to think on her feet.

    She has been pulled off line by the Republicans. She was missing in action in the post-debate rebuttals last night, for instance, while Biden was front and center.

    I am not an Obama fan, but the choice of Palin is simply scandalous and for me makes the election choice a no-brainer. Even some Republicans are calling for her to step down.

  6. Independent Accountant

    Suppose the Fed “illegally” expands its balance sheet? Do you expect Helicopter Ben to be indicted? Who in his right mind doubts that the Fed can print whatever it wants whenever it wants and hold as an “asset” anything it wants.

  7. Richard Kline

    Palin is the least qualified, and likely least competent, candidate for the Executive in the modern era, perhaps ever though some of those 19th century stiffs were pretty dim. —And what I found really instructive about Palin was what it said about John McCain’s judgment. As Exhibit A, Point 1 demonstrating _his_ capacity as a public executive, regarding which he has no experience whatsoever be it said, he disqualified HIMSELF from consideration.

    The ‘good bounce from the Palin selection’ we got in the mass media after the Republican Convention was also extremely telling regarding the functional incapacity of the media collectivley. She as at least as terrible a nominee on the day she was announced as now, but the media took a long step back and waited to be told how to play this. They are so Republican spun it’s beyond a disgrace.

    McCain’s only possible chance at a win is to turn out the Republican base en masse, and in that regard his choice of someone _like_ Palin was a necessary, and even sensible move from the campaign perspective. That he chose Palin to play the role is . . . madness. And all this is before the VP debates, unless McCain finds some way to get _those_ canceled. I have no liking for Biden, and he is a classic gasbag who adds zilich to his ticket in terms of net votes (though is reassuring to insiders and the movers and shakers, yes), but he can debate without drooling and reading the wrong cue card.

    Palin will cost McCain mid-single digits at the ballot box, at least, before she is shipped back to the Subarctic for the deserved obscurity that was her destingy before McCain’s Folly. As such, she will be the most damaging choice for VP nominee since Eagleton.

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