Links 12/22/08

Happiest Man in the World…?!? Cassandra

Tiger moves away from state capital Times of India

Oligarchs Seek $78 Billion as Credit Seizure Empowers Putin Bloomberg

Federal Reserve balance sheet Jim Hamilton, Econbrowser

Let us bend the rules, say organic farmers Times Online

Archbishop of Canterbury warns recession Britain must learn lessons from Nazi Germany Telegraph

Crunch ‘to hasten rise of China to No 1 spot’ Times Online

Women sought as “terriers” for bank boards Telegraph. Not keen about the gender stereotyping, but at least this is better than the kind that keeps women behind dustmops.

Developers Ask U.S. for Bailout as Massive Debt Looms Wall Street Journal. Color me disgusted. The leaders of this effort are Forbes 400 members (if they haven’t been in the last few years, they ought to be, trust me. Forbes has a hard time valuing private companies). So now we are aping Putin, rescuing oligarchs? At least he will get tons of concessions in return for his lifeline.

Chill wind blows on LA’s waterfront Financial Times. Another trade slowdown sighting.

A Trap in Obama’s Spending Plan Louis Uchitelle, New York Times. Warns that if the stimulus plan does not lead the private sector to pick up the ball, we will be back to where we started once the emergency programs end.

Form ADV: Would hedge fund registration have helped Madoff investors? AllAboutAlpha

Antidote du jour:

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  1. Anonymous

    I can understand the dog having a bath, but is that a White Russian or an Egg Nog & Rum there?

    See also: “Japan’s export crash is finally upon us, and this is the worst thing that could happen,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The recession will be very severe as companies adjust investment, production and labor.”

  2. Jojo

    (Winter Wonderland)

    Opening Bells ring, are you listening,
    On the Street, the snow job is glistening
    An ignoble sight,
    We’re happy tonight,
    Working in Wall Street bailout wonderland.

    Gone away is the old bird,
    Here to stay is a new bird
    He sings an opprobrious song,
    As we go along,
    Working in Wall Street bailout wonderland.

    We can go and eulogize a subprime snowman,
    Then pretend that he is Madoff the clown
    He’ll say: What’s my carry?
    We’ll say: None man,
    But you can always do a fleece job
    In Ponzi town.

    Later on, we’ll all conspire,
    As we dream of not being fired
    To face unafraid,
    The new scams that we’ll make,
    Working in Wall Street bailout wonderland.

    In the meadow we can build another financial snowman,
    And pretend that he’s an SEC circus clown
    We’ll have lots of fun shtuping mister snowman,
    Until the markets inevitably knock him down.

    When it snows, ain’t it thrilling,
    To aim the hose while pyramiding
    We’ll frolic and play, the fraudulent way,
    Working in Wall Street bailout wonderland.

    Found in comments at:

  3. Glen

    Came across this absolute clanger from Bloomberg "Stocks in Europe and Asia declined, extending the MSCI World Index’s worst year on record, as concern mounted the deteriorating global economy will curb earnings." Well f**k me, what a revelation. Who would have ever thought. Just when you thought it couldn't get any worse, it did; "“The economic slowdown is being confirmed and it isn’t reassuring,” said Kilian de Kertanguy, a fund manager at Cholet- Dupont Gestion in Paris" Oh dear, it really does get worse. . If this is the sorry state of thinking in the market then we're in a world of hurt.

  4. alan von altendorf

    My reply to Prof. Hamilton:

    With all due respect, textbook explanations are patently absurd.

    “Private sector wealth is unchanged as a result of open-market purchases.”

    False. Sellers no longer have a coupon payment, so the Fed pays a premium greater than remaining PV, incentivizing the seller to part with bonds in exchange for cash. Doing this in a noninflationary environment with short term securities, the premium is small. Sellers are happy to book a small profit. But attempting it in a crisis environment with longer term bonds and hyperinflation on the horizon, there is a possibility of panic selling and total collapse of the bond market. Impairment of Treasury’s ability to float more debt is right in front of our noses, whether the Fed prints more currency deposits or not.

    “We have a careful separation of powers, asking the Fed to take responsibility for inflation and letting the Treasury worry about how to pay its bills.”

    This is disingenuous at best. The bond market sets interest rates, not the FOMC. The only leverage the Fed had was to raise or lower bank reserve requirements — and they’ve been shovelling cash as fast as possible to shore up bank capital, accepting worthless paper as “collateral.” The Bernanke crew is in crisis mode and conspiring with Treasury to explain away the collapse of two primary dealers, insolvency of AIG and the GSEs, collapse of share prices, abrupt conversion of GS and MS to Federal banks, cessation of CP lending and global lockdown on commercial letters of credit. Both the Fed and Treasury were caught flat-footed after a full year of assuring everyone that “subprime” was contained.

    “Historically there [is] really just one big story — the Fed created deposits primarily by buying Treasury securities, and these ultimately ended up as cash held by the public.”

    Worse than wrong, it’s wrong twice. How was the Fed initially capitalized to start buying Treasury securities ?? and if greenbacks have any intrinsic value, are you saying that cash is backed by future tax revenue ?? Nothing could be farther from the truth. In the early 70s when I was at UW Madison, we were lectured by Fed officials that they had an M3 annual monetary expansion target of 3-5%, on the theory that cash in circulation (bank created and multiplied by lending) should mirror (or drive) 3-5% annual GDP growth — all of which was patently false. Treasury borrowing requirements drive Fed policy, the economy and private wealth be damned. We get paper IOUs backed by nothing but mounting deficits. Social Security and Medicare trust funds are nonexistent.

  5. Independent Accountant

    I agree with you. Hamilton doesn’t know what he is talking about. Got gold? Get more. Got bonds? Sell!!!!

  6. lineup32

    ref:LA’s waterfront

    A group that gets little attention is the trader’s from China and other Asia countries living both in LA and SF. Most own property here and in China and other spots around the globe, they are active at the high end golf clubs (played with many) an important source of economic wealth to the West Coast.
    Many are returning home, selling or renting out homes.

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