Links 10/19/08

Passports will be needed to buy mobile phones Times Online

Peggy Noonan Tells the Truth About Sarah Palin Brad DeLong

We’ll Rescue You on Four Conditions Gretchen Morgenson, New York Times. A workman-like piece on the executive comp restrictions in the bank bailout plan.

Retailers fear worst Christmas for a generation Independent

Where is my swap line? And will the diffusion of financial power Balkanize the global response to a broadening crisis? Brad Setser. A must read post on the implications of emerging economies not being included in the Fed’s dollar swap lines.

More Bailout Obscenity EconoSpeak. Be prepared to become even more annoyed.

Bernanke Is Fighting the Last War The Wall Street Journal. Anna Schwartz. co-author with Milton Friedman of “A Monetary History of the United States”, argues that the remedy that she and Friedman argued for in the Great Depression (more liquidity) is the wrong medicine now.

Antidote du jour:

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  1. ruetheday

    Re: Tne ‘Bernanke Is Fighting The Last War’ piece in the WSJ:

    A few things really ticked me off about this piece. There is that certain….well….smugness…..that ‘ole Milton (and Anna, and to a lesser extent Bernanke himself) always displayed. The “if-only” viewpoint. If only the Fed had done this or not done that, the Great Depression would never have happened. It’s all a load of bollocks. The bursting of asset price bubbles (particularly when fueled by stratospheric debt loads) bring about nasty situations that, quite frankly, are not easily solved. Of course, no one wants to admit that there may not be ANY effective solutions.

    The other point that rubbed me the wrong way was her comment about how the appropriate course is to “save the banking system but don’t save the banks”. How, pray tell, does one do that? Look, if you’re going to advocate that the government save the system (which it must, obviously) then you have already abandoned the purity of your free market principles, get over it, and don’t try to revive them halfway through the thought.

    Finally, how anyone can dismiss the “too big to fail” argument as completely invalid, after what just happened with Lehman, is beyond me. This is just her free market demon rearing its head again. If an entity is too big to fail, and one opposes government intervention in all cases, then that entity is too big to exist in the first place. Yet if the free market allows such an entity to form, then a contradiction in the chain of thought is exposed. Rather than dismissing the existence of systemic risk, perhaps Ms. Schwartz ought to take a closer look at her principles.

  2. Anonymous

    “More Bailout Obscenity EconoSpeak. Be prepared to become even more annoyed.”

    Treasury has given over $140 billion worth of tax breaks to industry without legislative authority to do so. Corporate lobbyists have terrorized Treasury into thinking the great depression will happen unless they give extra-legal corporate handouts, like these:

    Treasury gave banks an unauthorized $140 billion handout by purporting to turn off Congress’ restrictions on the use of a bank’s NOLs if there is a change in control of the bank, due to large purchases of stock in the bank. The $140 billion estimate from the law firm Jones Day, who circulated an update to friends and clients.

    Treasury gave handouts to US multinationals by purporting to allow foreign subsidiaries to loan untaxed earnings in tax havens to their parent company for up to 180 days, without a current tax hit. This handout is in the billions.

    Treasury gave handouts to the financial industry by purporting to allow real estate mortgage investment conduits (REMICs) to do workouts without having taxable income.

    Treasury gave handouts to the financial industry by purporting to allow issuers of auction rate securities to add liquidity facilities without treating the issuer and holders as having a taxable exchange of the old instrument for the new. This helps the speculators who bought the auction rate securities from dumb money investors, and now benefit from the addition of the liquidity facility.

    Treasury gave unauthorized handouts by allowing borrowers under securities a 30 day grace period to return borrowed securities without facing a tax hit.

    If Congress had leadership like LBJ, Treasury would have been terrified to do things like this without legislative authority. LBJ would have started issuing subpoenas, having GAO investigations, and worse.

  3. Anonymous

    If Congress had leadership like LBJ, Treasury would have been terrified to do things like this without legislative authority. LBJ would have started issuing subpoenas, having GAO investigations, and worse.

    Speaker Joseph Cannon is probably rolling over in his grave at the liberties the executive branch is taking without Congressional authorization.

  4. doc holiday

    So now even the feline population is going insane as well — and what a great time for that to be happening, when so many farmers are short handed during The Harvest Moon — just great!

    The transformational shift from being an agrarian society to an economy based entirely on illusionary synthetic derivatives, was a whiplash-like impact which essentially crashed modern finance into a brick wall of reality.

    After the failure of The Bush Coup and The Ownership Society, the ultimate outcome will be pet slavery; pets, like the kitty in this picture from Yves, will be forced into the duel role of being pet and tractor operator. This transformation will clearly be the final result of massive labor shortages, which will result from a generalized condition of sloth.

    Many among us will simply drool and then blame The Large Hadron Collider, while others will point fingers directly at believing that the fall in stock values in 2008 were the result of a misunderstood tax proposal presented by Barack Hussein Obama II. Nonetheless, few will place blame on the movement to employ cats as migrant workers. The fallacy of blaming tax increases on this social evolution is obviously mythical, because many of the wealthiest farming corporations were given tax credits for domesticated animal training programs — which they failed to implement, due in large part to sloth.

    IMHO, these cascading social changes are unfortunately, the result of a ubiquitous and omnipresent network of micro-sized black holes that have in some way altered brain cells, e.g, it is my opinion, that Astrocytes, which are star-shaped glia which hold neurons in place like glue, have simply lost bonding ability and thus many of our leaders, both in farming and out of farming, e.g, members in The Senate and Congress are suffering from gliotransmitter dysfunctions which can replicate Alzheimer’s disease-like dysfunctionality, which results in an inability to reason. The chaos we see in society as we have known it, is going from small pockets of attention deficit disease to full blown anarchy. In reality, I don’t see a violent revolution or reign of terror, I envision collective sloth, which will be like everyone around the globe being dosed with lithium, marijuana and a few beers — 24 X 7. While that might sound fun, in general, there may be social and economic consequences which will make us all more dependent on The Animal Right To Work Law, which has been stalled in the lower house for almost a year (WTF is that all about).

    This collective Alzheimer’s condition will result in greater socialized dependencies and the reliance on a service network that could collapse, leaving humans in a very awkward position. FYI: “A feral organism is one that has escaped from domestication and returned, partly or wholly, to its wild state. The introduction of feral animals or plants, like any introduced species, can disrupt ecosystems and may, in some cases, contribute to extinction of indigenous species.”

    Hence, We, as a society will live in a time, when cats may simply decide one night, or one afternoon, to walk away from farming job opportunities — leaving an empty void of labor which could destroy our ability to eat! Who then among us will drive these frightening tractors during The Autumnal Equinox — when we know not where the keys are, or the crops, or the door? As the great Joe Walsh once said, “it’s hard to leave, when you can’t find the floor”.

    The 2008 $777 Billion bailout for banker friends, which made no sense to anyone (ever) — and now, with all that other shit going on lately — this weird stuff will just keep happening, and when The Large Hadron Collider is turned back on next Spring, does anyone really friggn think things will get better? I”ll answer that for you, the answer is no, because no one among us can think now — because your brains are already like mushy putty and the glue that holds together your identity, is gonna go from gloppy putty to jello nailed on a wall!

    In closing on this Sunday morning, I’d like to suggest that We have to just say no to The Large Hadron Collider — so, Please (I wont beg yet) Send Cash to me, so that I can go there myself to Switzerland, Jimmy Bond-like and blow that fuc_er up! Who else will do it… huh?

  5. Anonymous

    “will you please comment on the situation between UK and Iceland? Is Britain a country of laws?”

    Iceland provoked the UK to retaliate by freezing Iceland companies’ assets, or otherwise, when Iceland decided to favor domestic depositors over foreign ones.

    Commentary on Iceland UK Crisis

  6. Anonymous

    Any British readers peruse the article on registering all cell phone users?

    I’m curious as to why the British have embraced the police state in such a profound way. I’m not sure why you all don’t just wear gps trackers and educate your children in secret police ‘informant schools’.

    I’m baffled.

  7. Max

    anon 4:16 PM,

    what claims to the bank property does UK have in case of a default? Not that Iceland didn’t screw up big time, but invoking anti-terrorist legislation to freeze the assets seems like pretty desperate bending of existing laws.

  8. Anonymous

    anonymous @ 6:24

    The UK is a monarchy in which the Crown transcends all three branches of government.

    The people are subjects of the Crown de jure and de facto. They may be elected by ordinary people, but Members of Parliament must swear their oath to “Her Majesty Queen Elizabeth, her heirs and successors” before the Speaker will allow them to take up their seat.

    You cannot commit treason against the people. You can ONLY commit treason against the royal family.

    Maggie Thatcher was a barrister, with a barrister’s take on the law. She knew what she was doing, and she knew for whom she was working.

  9. ubetchaiam

    Even MORE obscenity:
    “Financial workers at Wall Street’s top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year – despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.”

    That’s 10% of the total monies in the bailout legislation !!

    And why does this not get published in a U.S. newspaper?

  10. Chris

    That’s right, another cross species deal. One kitty on top of 17 hp from John Deere. (Tighter trimming circle). Get up to scratch. You want the paw/pound/per sq inch equivalent? Stay where you are and you’ll find out. You heard: just get out of my darn way! Watch out, when I grow up I’m really going to drive this thing. Pedals, brakes, who are you kidding? I can steer the deere right now. I can go where I want, and man just look at that 48″ cutting deck. I’m not playing, I hate those meeces to peeces. I’m one empowered kitty, and the world’s my back-yard.

    This was a great selection of posts today. Thank you very much. And for stimulating such a discussion, one to keep coming back to.

  11. Anonymous

    Re: Bernanke Is Fighting the Last War

    Yves, thanks again for providing such a great site. I go to CR, Big Picture, and many other financial blogs every day, but I start here. You pick up many important thoughts and topics that I would otherwise miss. Please add a tip jar or Amazon wish list–it sure won’t make you rich but would make me feel better about the value I get here for free.

    To me, this was a fascinating read–I never guessed she would speak so openly against Bernanke after the famous speech in which he praised her and Friedman.

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