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Links 3/29/09

Cities switch off for Earth Hour BBC. But not much in the US.

Why Toddlers Don’t Do What They’re Told LiveScience. Now if someone would figure out why adults don’t do what they are told, we’d be making real progress.

Shareholders Who Act Like Owners Gretchen Morgenson, New York Times

Did Goldman Goose Oil? Forbes

CDS Recoveries: Down and Out Seeking Alpha

Will there be blood? Economist

Learning How to Think Nicholas Kristof, New York Times (hat tip reader Don)

Only a united front at the London G20 can save the world from ruin Ambrose Evans-Pritchard, Telegraph

Follow the Bailout Cash Newsweek

US commercial banks lost $9.2bn on derivatives trades in Q4 08 FT Alphaville

Mr. Taleb Goes to Washington Marion Maneker The Big Money (hat tip reader Olaf)

The Quiet Coup Simon Johnson, The Atlantic. Several readers pointed to this. A must read.

Antidote du jour (hat tip reader Scott). Do not try this at home:

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20 comments

  1. Swedish Lex

    “Did Goldman Goose Oil?”

    Should it turn out to be fire here and not only a lot suspiciously looking smoke, then we can expect blood. Will “Goldman” become synonymous with rigging markets at the expense of Herr Schmidt and Monsieur Dupont in the same way that “AIG” has become a battle cry for Americans?

  2. Anonymous

    “Only a united front at the London G20 can save the world from ruin”

    Well, when you crewed up royally, never admit to it, but point to the “global nature” of the problem and tell everyone to line up behind you so that YOU could lead them out of the mess. And if they still don’t listen, solemnly tell them that without you they all perish in flames.

    Read this:

    “Gelb persuasively shows that America’s future power must be based on the principle of mutual indispensability: Washington is the indispensable leader because it alone can galvanize coalitions to solve major international problems (and all nations know this), while other key nations are indispensable partners in getting the job done. The reality is this: succeed together or fail apart. “

    And if they still don’t listen, then kick them with a stick.

    “Washington will also fail if it forgets that power is still, as in the days of Machiavelli, about pressure and coercion, carrots and sticks. Reason, values, and understanding are foreplay, but not the real thing.”

    http://www.cfr.org/publication/18271/

  3. Timo

    Europeans do not do bailouts. That is something those sissy Americans do. We do blowups, really gigantic blowups, like WWI and WWII :)

  4. jbmoore

    I’d have been happier if Kristof had cited studies where the psychologists sent in an actor to impersonate a science prof and give a lecture to a bunch of scientists in the same field he or she was supposedly expert in. To fool a bunch of educators is one thing, to fool people who actually have to create experiments and analyze data is another. Perhaps it depends on what one’s definition of “expert” is, but disciplines that don’t really measure something quantitatively and/or relative to a control tend to follow the most charismatic or convincing proponents despite the flimsiest data, if one is kind enough to call such results data. Facilitated communication of autistic children comes to mind. A Frontline episode where they did a controlled experiment showed that the facilitator was unconsciously moving the austic child’s arm. There was no comprehension by the child of what he saw. That Frontline report won a Peabody for showing that facilitated communication was worthless. It is not always easy to be skeptical, but it usually pays to be skeptical of claims without proof.

  5. Anonymous

    Nice to see the coup word being used in the Atlantic. Giving it more traction will help to sharpen the battle lines, get the discussion in the pie dividing political realm where it belongs, and reveal what a scam, non responsive, ‘rule of law’ we have …

    Deception is the strongest political force on the planet.

    i on the ball patriot

  6. Anonymous

    Reason, values, and understanding are foreplay, but not the real thing.

    I believe the rock-band called “Tenacious D” had some lyrics to that effect.

  7. Anonymous

    Simon J’s analogy of the US oligarchy with “emerging markets” is apt.

    The US Congress, led by the Northeast reps and senators, is frozen in place, desperately hoping the taxpayer will continue to passively lose money. There is no reason to believe it will change soon.

    The systemic problem is corruption and anarchy in financial services, and we as a nation have not even begun to deal with that.

  8. Anonymous

    Why can’t any US politician deliver this type of pointed criticism of Bernanke/Paulson/Geithner/Summers policies? What is wrong with politicians in the USA?

    All politicians in power serve at the pleasure of their financial supporters, their corporate/finance masters.

    It cannot be any other way as long as the price for elected office is cash for TV advertising campaigns.

    While the Supreme Court ruling is left standing, that corporations are ‘persons’ with the civil rights of ‘persons,’ and that money is speech, therefore corporations can’t be limited in their right to finance political campaigns, the public doesn’t have a chance at reform. Not with odds like this.

    LeeAnne

  9. Anonymous

    The program for the G-20 Dustup in the City: The denialists vs protectionists.

    , the biggest deficits are: the US ($673 billion), Spain ($155 billion), Italy ($73 billion), France ($57 billion), Greece ($50 billion), Britain ($46 billion).

    Industrial output has fallen heavily over the last year: by 31 per cent in Japan, 24 per cent in Spain, 19 per cent in Germany, 17 per cent in Brazil, 13 per cent in Russia and by 11 per cent in the UK and US. China ?

  10. Anonymous

    As usual, Johnson pussy-foots. While offering a spendid analysis of how our government has been the object of a coup by an elite that straddles both sides of the political/financial industry divide – and, I would append, the political/foreign policy lobbying divide as well – the solutions he offers, while assumed to be thorough-going, are focused on only half of the problem: The economic. If, in fact, an oligarchy exists, and it most surely does, and its grasp is on both the political and economic spheres, action proposed to be taken by politicians against their paymasters, whether its nationalization and/or that plus accompanying anti-trust legislation allegedly designed to “break” the elites, it has the fatal flaw of having to be brought by there very elite it intends to “break”. It is montrously naive to propose such a solution when the fox is already in the hen house. Any trustworthy solution to the economic/foreign policy crisis will first require that an end be brought to our political system as it is now constituted. We need an end to lobbying and nationalization alright, and we need a focused reindustrialization but we won’t have either until the American people are prepared to banish from government every cotton-pickin’ office holder and bureaucrat who now “serving” or who have ever “served” going back four generations. We literally must shake the filth from our genes before we will effect any lasting solution to this problem. Clearly, Johnson was at the IMF too long.

  11. Anonymous

    This Week: Geithner Ducks Goldman Question

    So Stephanopoulos asked Geithner if Goldman Sachs should return its money. In a response that will likely infuriate those who believe Goldman is getting special favors, Geithner dodged the question. “Return the money?” Geithner repeated after Stephanopoulos’ question.

    Then he changed the subject, pointing out that the “important thing now” is to give the government legal authority to wind don firms like AIG in the future — authority he says Treasury did not have last fall, which hamstrung its response.

    http://www.politico.com/blogs/politicolive/0309/Geithner_gives_Goldman_Sachs_a_pass.html?showall

    ———

    Damn right. Geithner should get the money back from Goldman Sachs. And investigage if they violated legal agreements with Semgroup in order to make money by driving up the price of natural gas.

  12. MyLessThanPrimeBeef

    1) Please don’t compare toddlers with adults. While a toddler may be afraid of the dark, he is never afraid of silence; whereas while an adult is not afraid of the dark (normal adults), he is scared to death of silence – from the moment he wakes up in his house, to his commmute to work or out in the park walking, he’s got his noise known as music on all the time. You tell him to turn off that noise, and he thinks you want to assault him or something. Zen meditation is like death sentence to him. But a toddler is never afraid of silence.

    2) Cities switching off for Earth is fine. People can do more for our planet by refraining from heavy breathing, thereby relasing extra CO2 into the atmosphere, associated with carnal acitivities. Anyone doing it more than once a year is harming this blue dot of the solar system. In this regard, Hollywood sex gods and goddesses are especially guilty. And if you have to go to a green save-the-earth concert, know that all that dancing and singing and excitement also relase extra CO2 that otherwise would not be released into the atmosphere.

  13. Anonymous

    Dave Kotok on why the PPIP is a taxpayer ripoff even without collusion: http://www.ritholtz.com/blog/2009/03/ppip-heads-or-tails/print/

    Collusion between holders of trash to do cross-purchases at inflated prices with taxpayer money or between holders of trash and buyers in a kickback scheme to make inflated purchases obviously make Geithner’s plan even worse. If he plays ostrich and ignores collusion.

    We must stop Geithner’s plan to illegally use Fed and FDIC funds. Write your Senators and Congressmen to object. Write tv and radio talk shows and newspapers. Ask them them to demand to know whether Geithner’s plan amounts to illegal gifts by the Fed and FDIC.

  14. Anonymous

    @12:50PM…

    “As usual, Johnson pussy-foots. While offering a spendid analysis of how our government has been the object of a coup by an elite that straddles both sides…..”

    Hardly pussy-footin. Did you want him to say and still retain credibility with the civil-educated, “String all the bastards up from the nearest lampost?”

    Reread that article again and understand its simplicity and its aim. It is not aimed at the camo club. That is for another author and most importantly a very different venue.

    Better yet pass this article around.

    AM

  15. Anonymous

    There may be something to that Goldman story, but the goosing theory seems a bit thin based on what’s in the Forbes article. It looks from this article like Goldman’s take from the Semgroup transactions was, at most, just under $700 million (350 on options contracts, 420-90 in money retained from spot purchases). And the NYMEX WTI market alone at that time was worth something like $150 _billion_ (1.2 million contracts * ca. $120,000 per contract), not to mention the ICE WTI market, itself with open interest of something like 500,000 contracts, OTC trading, etc..

    So if the implications of the Forbes story are right, it means that Goldman moved a $200,000,000,000+++ market over 20% in a little more than a month, so that it could make (at most) $700,000,000. Or, if we want to hypothesize collusion between Goldman and all the other trading partners of Semgroup, $2.4 billion (the latter’s total trading losses). Still not nearly enough to make (or justify steps needed to make) that kind of impact on such an enormous market.

    Again, maybe there’s more to the story, maybe there are 10 other Semgroups that we just haven’t heard about, but with what we get in the article, the conspiracy theory just doesn’t seem to hold up to the numbers.

  16. Anonymous

    @anonymous:
    “So if the implications of the Forbes story are right, it means that Goldman moved a $200,000,000,000+++ market over 20% in a little more than a month, so that it could make (at most) $700,000,000”

    GS just need to put up the option premium to control the leverage on that $200B market, and the other speculators and legitimate hedgers would follow up. The Forbes’ article and this report by William Engdahl fit the jigsaw puzzle. First, circumvent the world oil future trading regulation and then use it to bet against “trading partners”. GS did this in other investments as well when they use their client’s money to bet against client’s position.

    http://www.atimes.com/atimes/Global_Economy/JE06Dj07.html

  17. Anonymous

    And AIG insures The Congressional Pension Plan. Oh, brother. Can we start the revolution now?

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