Links Valentine’s Day

‘CO2 reduction treaties useless’ BBC

Orange County Register: End of the Rainbow Knight Science Journalism Tracker (hat tip reader Krishna)

Toyota Seeks To Shed U.S. Workers Forbes (hat tip reader Tim)

Congressional Offices Don’t Have the Stimulus Bill, Lobbyists Do Washington Whispers (hat tip reader Dwight) and Democratic Senator Predicts None of His Colleagues ‘Will Have the Chance’ to Read Final Stimulus Bill Before Vote CNS News In case you had any doubts about how our system works.

How We Can Restore Confidence Charles Munger, Washington Post

Why the U.S. Stimulus Package is Bound To Fail David Harvey (hat tip reader Anthony). Explains why, even if you are a die-hard Keynesian, the US will prove unable to mount an effective stimulus program.

How To Make TARP II Work Lucian Bebchuk

Eurozone slump worst in 50 years Financial Times

Bankers Face Strict New Pay Cap Wall Street Journal. I’m surprised the article dignifies the “oh, make the banks comply, and they’ll give the TARP money back.” Ahem. Now that Goldman and Morgan Stanley are bank holding companies, they are wildly out of compliance with regulatory capital requirements (investment bank, under SEC jurisdiction, were permitted much higher levels of gearing). And do you think any of the big bank recipients could give the dough back and not be in violation of regulatory requirements? And that’s before we get to what the newly vigilant rating agencies would do to them.

Morgan Stanley, Citigroup to Give Brokers Big Retention Fees Wall Street Journal. These bonuses are necessary to stop poaching. I’ve worked in countries with tough regulators, and this could be stopped in a nanosecond if the authorities here had any will. But on this and the issue above, clearly the regulators here are craven and/or corrupt.

Mortgage Subsidies – Arguably Useless But Definitely Expensive Tyler Durden. A very good analysis, and I have only one minor quibble. Durden contends that, for most types of stressed borrowers, principal reductions are more likely to succeed than payment reductions. Mortgage counsellors have been telling me the same thing for a year and a half. Durden argues that the improvement results from the borrower having more equity in the home. The mortgage counsellors tell me that payment reduction without principal reduction does not lead to enough of a change in the actual payments made to help borrowers enough (as in the shortfall is added in part or whole to the mortgage balance, and the borrower understands that, which means they expect payments to increase down the road). The mortgage counsellors contend that the cost of foreclosure (hard costs plus loss on sale) are so great that lenders can afford considerable principal reductions and still come out ahead.

Antidote du jour:

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  1. Anonymous

    Just watched McNeil Lear hour and my main man Jared Diamond was interviewed on the market mess, well his recommendation is more pain for politicians and nasty investment bankers, as this would create better incentives for beneficial behaver on their part toward the rest of us.

    The Kings and Priests have been very naughty and all we have to do is stick just a few heads on pikes or roving gangs with torches late at night on high end st should send the message. If they have lost the fear of us then we are doomed. Rule of Law must be applied in accordance with the Constitution or all bets are off.

    Its easy folks, make them obey the same law as the rest of us, Doc Holiday is alway showing us the way, pointing out the transgression. Call, shout, bang on your elected official door and spam the MSM with there visual impairment en mass. I do every day.

    Skippy….doc wish I had your optics on my Barret scope.

  2. Anonymous

    In regards to the CNS story.

    The Boehner performance on the House floor today has become YouTube hit. The comments of support were so nauseating that I ended up spamming a comment, which I’ll relay here.

    1100 pages.

    The opposition party has 198 members. That’s 5.5 pages per Member to be reviewed. Legislative aides specializing in certain issues can be solicited for expert analysis.

    This isn’t even taking into account the fact that most members have a team of 10 legislative aides at minumum. If even half of them are put on the task, that is 1000 aides, with the assistance and oversight of their Members, to analyze 1.1 pages in 12 hours.

    That’s assuming none of them picked up the original Bill that has been sitting around for over a week.

    (The bill could be written in Spanish and still be easily deciphered and analyzed in that amount of time.)

    Ambushing Members in the halls of Congress with “Did you read it?,” is just fishing for provocative headlines.

    The GOP knows exactly what is in this Bill. If they had an alternative plan, they would have been pushing it in the media. They don’t however, so they’re attempting to prop up their party’s image w/ a phony show of dissent on the behalf of taxpayers. When the economy declines as it inevitably will, the GOP can point the finger at Obama and the dems.

    This is all at our expense. The reason they are promoting their ideas in private instead of presenting it to the public, is so that their flavor of incompetence wont be on record.

    We’re watching the campaign primaries to the 2010 election right now. Just ask Arlen Specter, he’s comments today back it up.

  3. Anonymous

    Big banks won’t be able to give the money back. The bank I work for probably will. We were never in trouble, not poorly managed, profitable … but utterly plagued by the issues at big banks, their conspiring regulators, negative press about the industry, and politicians who wanted everyone to play ball. We took the money because there were too many land-mines involved in NOT taking it. But there is no way we will take the oversight and beatings meant for firms who should have already failed. It’s executive comp today – who knows what politically expeditious agenda will be added to the mix next week.

  4. Anonymous

    Why do you link to a hatemongering neomarxist crackpot like David Harvey? He is unworthy of your otherwise execellent blog, Yves.

  5. Richard Kline

    So Anon of 4:57, Harvey’s piece is pure substance from end to end. You do not engage with that analysis, which says everything for your aptitude and intent. Neomarxist is a perjorative in your small-minded world—but not most anywhere else. His political analysis elsewhere is dense; I wouldn’t say that I buy all of it by any means. Crackpot is simple guff. I am clear, having looked at his work, that his scholarship _overall_ is superior to anything you appear capable of advancing. Not that you bother to advance an argument yourself as opposed to expectorating invective. Hatemonger? You’d better prove THAT one, fella. To me in the absence of substance on that claim, he’s rubber and you’re glue. And one more point: David Harvey puts his name to his opinions and analyses, whereas you do not. I think I know who’s got more to offer on the issue he speaks to.

  6. jmd

    It’s true, it’s true; Linda Thomsen at the SEC had a reputation as “Let’em go Linda” during her tenure as Chief of Enforcement there…all it took was a call from a key partner at one of the big firms (such as Cleary, Davis Polk, Simpson) and investigations were dropped and the matter taken off the table. And the current Chair Mary (‘hair on fire’) Schapiro probably made several such calls herself over the years in her various iterations; you cannot teach these dogs to do the right thing. No surprise that broker retention bonuses are flying high…it’s the same-old, same-old. All it would take is some of that tracking software to tie phone calls that went through to Thomsen during investigations which were subsequently dropped, and there would be wet pants at all the white-shoe law firms. Or what is left of them. I hear that Alberto Gonzalez is having trouble finding a [suitable] job. If there is ANY justice in this world, then so will Cox and Thomsen and someone will find a way to ‘ease’ former SEC- now industry tools such as Stephen Cutler (JPMorgan) and Gary Lynch (CSFB) out to pasture.

  7. Anonymous

    The David Harvey piece should have been entitled; “Why the U.S. Stimulus Package is MEANT To Fail”, not bound to fail.

    Marxism, like software, needs an upgrade. Marx and Engels were brilliant for their time but off the mark in framing history as a class struggle between ruling class bourgeoisie and the working class or proletariat. The history of all hitherto existing society is really the history of deception pitted against integrity.

    Harvey, steeped in out of date Marx language, is still fighting non existent decoys; capitalism, free markets, and private property, none of which exist anywhere in the world today, and in so doing helps perpetuate the suited gangsters now global scams and deflects from the real mover and shaker – deception. I do admire his passion and quest for fairness.

    The assumption that decoy capitalism and profit is a driving force in the current intentional global financial coup is wrong headed. Control is the driving force. Profit is in the back seat now. Deception, the strongest political force on the planet, is the means.

    i on the ball patriot

  8. Anonymous

    “When the economy declines as it inevitably will, the GOP can point the finger at Obama and the Dems.”

    Uh, like the Democrats pointed the finger at Bush and the Republicans?

    You’re living in America dumbass. Neither of these parties are worth ten cents and both will blame the other if it helps them get power.

  9. Anonymous

    The combination of republican outliers who see themselves as having nothing in common with ordinary Americans with politically correct speech (nationalization is a dirty word) is suicide.

    Republicans have proven beyond any reasonable doubt (indeed offered irrefutable proof) that they represent no one but themselves, those worth more than let’s say about $2 million, because of course you can’t live a decent life on that and have to have at least $10 million.

    Their only reason for being is to hoard enough for their own survival while pushing us into further crises -hyper inflation, deflation, or both -either way continuing financial disparity with the masses in desperate circumstances.

    Congress is so captive to the corporate globalism cabal, (casino owners who rob from their own customers -no need for a gun. When the going gets rough, they have the military), have proven themselves to be untrustworthy -traitors such that they represent the destruction of American leadership in the world.

    They seem so secure in their defiance of a majority of Americans that I wonder, do they have absolute control of the military?

    We can’t expect reform as long as mainstream media remains captive to the Republican agenda.

    That’s the importance of this blog.
    Thank you Yves.


  10. Anonymous

    Re: the David Harvey piece…

    “And if that means socialism, nationalizations, strong state direction, binding international collaborations, and a new and far more inclusive (dare I say “democratic”) international financial architecture, then so be it.”

    Strong state direction in the USA is typically achieved by going through a period of conventional, “hot” wartime footing. China is on the list, get ready for a wild ride.

  11. Dave Raithel

    Mr. Kline has already sufficiently castigated Anon of 4:57, so I can move on to say to “I On The Ball Patriot” (Anon of 8:56): Harvey adds more detail to a point which Yves Smith has earlier broadcast (sorry, no link, but we’ve traded email about it) on the problem of the Keynesian “solution”: America of the 1930’s was a net creditor and a net exporter, and we ain’t that no more. China is. Those facts are not dependent upon his theoretical framework, but just the facts employed within his framework…

    I too recall the good old days when Francis Fukuyama declared the end of history and people celebrated the end of class struggle. But here’s a fact: The size of the international proletariat class has doubled in much less than a generation. China’s become the “zoned industrial” of Planet Earth. There are days when I’d like to think that it all comes down to “integrity versus deception”, but as a theoretical construct, it just doesn’t have much explanatory power. To say things happen to good people because bad people have the power to do it may describe a lot of what we see, but the questions are: Who’s got the power, how do they get it, how do they keep it, and what do they do with it? Frankly, I don’t know what you mean if you don’t acknowledge that some people own things, and some people don’t, and those who don’t are dependent upon those who do. Markets may not conform to standards you identify as “free”, but even Adam Smith observed that rarely do business people gather together and a scheme against the consumers not be conspired. They are in it, afterall, for the money.

    If I though mandatory ethics courses and exile to Sunday Schools would address the facts Harvey observes and puts into his theoretical reference, I’d be all for it – provided I’ve selected the texts and Sunday School lessons, of course …

    Maybe, and this is to document that I don’t mean to be uncharitable in my reading your points, your concerns have to do with the role of the “New Class” in international commerce and politics – those people who neither own capital but neither directly produce goods, or provide services of measurable exchange (like a haircut – I mean literally, not financial argot) – but who make their living running the state and litigating the disputes between the haves, and supressing the have nots for reasons both legitimate (murder) and not (smoking dope.) I’ll grant you, some of those people are the most duplictious, deceitful, corruptible and ill-principled people one can ever meet – but again, you have to remember for whom they primarily work – those who don’t work for the bourgeoisie are dismissed as, oh, “community organizers”. If THAT is your point, then the strain of Marxism running from the Frankfurt School to Habermas, Karl Otto Appel, Alvin Gouldner, etc. are the “upgrades” you seek. But what is that eventually about but the means and problems of a dominant class reproducing the ideological environment which sustains it…?

    There is no more harmful deceit than the self-deception of false consciousness.

  12. lambert strether

    On restoring confidence:

    I’ve offered to donate a kidney to the first bankster I meet on the street. I really don’t know what more I can do.

  13. Anonymous

    I really appreciate the link to the David Harvey piece. It is a very well argued, sober assessment of the economic and political limits to the implementation of a true Keynesian solution to the crisis in the US and China. I learned a lot from it.

    I frankly don’t understand some of the commenter’s nasty knee-jerk reactions to the fact that the guy has been teaching a graduate level course on Marx’s Capital for a long time. I thought McCarthyism was long dead and buried.

  14. mft

    We’re all interested in reports on the direct effects of the economic breakdown – gives a better perspective. Some months ago I said we’d know when we were hitting depression times when well-off parents have to take their children out of those expensive fee-paying elite private schools and send them to the state school in the neighbourhood. Well, that’s happening in England now:

    Any similar reports in the USA?

  15. The last few days’ dramatic rise in Irish government CDS spreads show this trend in microcosm. They’ve reached over 350 b.p. at five years, by far the widest of the Eurozone governments, as the Irish government injected further capital into Anglo-Irish bank and the Bank of Ireland. The markets are calling into question the sustainability of Ireland’s policy of underwriting all its banks’ deposits.

    How Likely Is Bank Default?

  16. Brad

    NY Times is reporting harsh bank exec limits in the stimulus bill… Is this for real? I’m cynically interested to see hints that Obama will go to the mat for the 8 bank Nazgûl (Tolkein reference borrowed from Kedrosky).

  17. Anonymous

    Hey all,

    If you read today’s FT (Lex column) and Barrons (cover), you’ll see proposals for addressing the financial crisis. They seem to assume the only outcomes are either stagnation like Japan or gifting the bankers with enough trillions to make them whole. They do not address — in any way shape or form — the possibility of forcing haircuts on bondholders.

    Someone should write in to the FT and Barrons recommending Martin Wolfe’s or Chris Whalen’s or Eugene Fama’s suggestion of forcing insolvent banks to reorganize by wiping out the shareholders and giving creditors stock in exchange for their debt claims. And maybe 1 step further, of separating the assets into a good bank (with liquid assets) and a bad bank (with junky assets), and giving creditors a combination of equity in the 2 banks.

    This only hurts bondholders and counterparties.

  18. Anonymous


    What’s your opinion about this:

    I’m again very surprised by the data in this piece. Mr Pritchard writes: “Germany contracted at an annual rate of 8.4pc in the fourth quarter. If Deutsche Bank is correct, the economy will have shrunk by nearly 9pc before the end of this year.”

    I believe that Germany contracted 2.1 pc only in the fourth quarter, that German economic growth slowed to 1.3 percent in year 2008 and that analysts fear the German economy could contract as much as 2.2 in 2009.

    What about those 9%?

  19. Anonymous

    My ferret was pretty close to being the perfect pet. It’s unfortunate though that they still need a few thousand years of additional domestication to properly introduce kitty box training. Aside from that (oh man!), a wonderful pet.

  20. Anonymous

    Unique, cogent, to the point, and not found any place else…

    Please do yourself a favor and have today’s (Feb. 14, 2009) blog stories, comments, links etc. bronzed for posterity, and for your future reference of a contributory life well spent. Kudos my dear, you are the best!
    Happy Valentines Day,

  21. Richard

    One brief comment on the Harvey piece. One can kind of appreciate Harvey’s view that the “contemporary crisis is a surface eruption generated out of deep tectonic shifts…” But why the limitation to “the spatio-temporal disposition of capitalist development.”

    And later he says: “Shifts of this sort have occurred before in the long history of capitalism. In Giovanni Arrighi’s thorough account in The Long Twentieth Century, we see hegemony shifting from the city states of Genoa and Venice in the sixteenth century to Amsterdam and the Low Countries in the seventeenth before concentrating in Britain from the late eighteenth century until the United States eventually took control after 1945.”

    16th Century Genoa, capitalist? Sort of, I suppose. They did trade and they bought and sold and had early bank-type institutions. But capitalist? Harvey ought cut himself out of his Marxist straightjacket. The best parts of his analysis would be more persuasive if they weren’t encumbered by antique cant.

  22. Anonymous

    Dave Raithel said; “There are days when I’d like to think that it all comes down to “integrity versus deception”, but as a theoretical construct, it just doesn’t have much explanatory power.”

    I disagree. It has the power to explain the deceptive constructs of ‘capitalism’, ‘free markets’, ‘private property’, the scamerican ‘rule of law’ with its selective enforcement, the farcical scamerica electoral process, etc. It has the power to reveal that they all stand as deflective illusions, decoys if you will, that mask and legitimize the machinations of the gangsters that through aggregate generational deception have purchased the government and the culture so as to create these exploitive illusions, and yes, sustain them.
    The marxist focus on capitalism as the enemy inadvertently aids, abets,validates and gives credibility to those decoy illusions. If Marx were alive he would call it scam decoy capitalism.

    And I agree with your assessment that it is more of a have and have not world than in the past. But framing that as a struggle between ruling class bourgeoisie and the working class or proletariat creates a black and white world stage that creates blameless victims on the bottom. This may be more true in third world countries, but in western nations there are shades of gray in the crumbunist pecking ordered system. We need to look at our own complicity. Our own denial. Our own self deception. The plantation model of master, overseer class, and slave class of old has morphed into that new present day crumbunist model where some pigs are more equal than others. We have to look at our own exploitation footprint.

    Looking at the deception and integrity struggle might cause one to see that overseer class extension in the present day, and to maybe even consider that those working in the financial industry are in reality not fashioning credit products but rather chains for themselves and their fellow citizens. Chains of exploitation owned and controlled by the master. Interest is slavery. The right to impose it on others was gained through deception. Like the slaves of the past born into a system of slavery believed that their slavery was the norm and for the most part accepted it, we too accept that interest slavery as the norm. It is not.

    Deception is the strongest political force on the planet.

    i on the ball patriot

  23. Anonymous

    FDIC intervention now please, to those that will get a haircut investment is a risk, not a guaranty of future wealth.

    Jogging or mountain biking in the high country is a lot of fun, but you can become a meal too, just simple consequences vs decisions.
    Don’t do a drowning man on the rest of us.


  24. Anonymous

    skippy says “FDIC intervention now please, to those that will get a haircut investment is a risk, not a guaranty of future wealth.”

    Amen, brudda. There is no god given right to return of principal.

  25. Anonymous

    Anon 9:55, I wasn’t assigning blame, I was explaining the political calculations at play right now.

  26. john c. halasz

    As to the question posed above, as to why David Harvey places so much emphasis on spatial relations/distributions, er, he’s a geographer, not an economist.

  27. Richard Kline

    So john c. halasz, just so.

    I loved Shedlock’s koala post; he’s channeling Yves, fershure. We’ll get ol’ stoneface Mish to crack a big grin yet. That’s the first step to anarchism; laugh in the face of power.

  28. artichoke

    The level of thought in this thread, and the last day or so on this blog, is stunningly high. Thank you all!

  29. Anonymous

    The capitalists came to this country and stay here because of the security it offers them, the insulation from the working class. I know it, I knew some of those rich people from overseas in my last WS job.

    If this country lowers those barriers, things could get very exciting for them. The recent pro-American trend in Congress is bad news for them as well.

  30. Anonymous

    DeLong does not sound mature or confident. Imagine that he’s tenured at Berkeley and he has so little respect for ideas as to write like that!

    It’s a shame for Berkeley.

  31. Juan

    not only a geographer but, for whatever its worth, the world’s most cited geographer…have to say that his ‘accumulation through dispossession’ paper was, imo, more interesting.
    so far as limits, much prefer grossman and, later, mattick’s ‘the limits of the mixed economy’.

    anon, materialist dialectics are exactly contrary to any notion of ‘straight jacket’ which more appropriately applies to the entire neoclassical enterprise from its mid-19th c origins to the present moment…

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