Links 2/17/10

Former Mexican foreign minister calls for ‘North American union’, unified currency Raw Story (hat tip reader John D). I think Canadians are too smart to go along with this one..

Who Has the Longer Pipeline? Der Spiegel (hat tip DoctoRx)

US banks take hit to clear home loan books Financial Times

China Sells Treasuries… or Did They? EconomPic Data

Goldman Tennessee Mall Loan Shows CMBS Stirring: Credit Markets Bloomberg. One robin does not make a spring. The subprime market also had a brief resurgence (March-April 2007) and the bulls argued the bad days were over.

NYT Invents “Broad Agreement” About Budget Problem Dean Baker. This article was clearly a plant, and Baker whacked it before I could.

Just What Is The Real Level Of Government Debt In Europe? A Fistful of Euros

The new normal Jim Hamilton, Econbrowser

JPMorgan Bombing: Bomb Explodes At Bank Offices In Athens Huffington Post. In case you missed it…

Mr. President, no *Real* Democrat is “agnostic” about Social Security Daily Kos. Goes through the record of what Obama said he would do with Social Security vs. the path he is on now. Key takeaway: those who say that people who are disappointed re Obama weren’t listening closely enough are overstating their case. This is a clear example of bait and switch.

The Federal Reserve’s Exit Strategy: Unlegislated Bailout of Fannie and Freddie John Hussman. Why is it that Willem Buiter, a Dutch economist/sometime central banker and self styled citoyen du monde got more upset at Fed-Treasury circumvention of Constitutionally-stipulated budgetary processes than anyone in the US has (except a few bloggers here and there)? This piece included a section, “How to spend (up to) $1.5 trillion without Congressional approval.”

Niall Ferguson is wrong on the US and Greece Martin Wolf, Financial Times

Antidote du jour (hat tip reader Jojo):


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  1. John

    Off-topic, but is Reuters a news organization or Monsanto’s own private PR firm? The link to the article and some PR-puff-excerpts-posing-as-facts below:


    A genetically modified version of eggplant, a staple in fiery curries, was slated to be the first GM food introduced into India in a bid to stabilise food prices and mitigate some of the effects of climate change on Indian food crop yields.


    But while those from the camp that opposed GM foods are celebrating, there are concerns that rising food prices will be a major problem for Indian policymakers in the future unless the country starts embracing genetically-modified food crops.


    Thanks to genetically modified cotton, India has become the world’s second largest cotton producer and exporter after China, with about 5 million farmers growing Bt cotton.

    “Our experience with Bt cotton has showed the technology has benefited the farmer, the consumer and the states’ economies,” said Bhagirath Choudhary, head of the International Service for the Acquisition of Agri-biotech Applications (ISAAA) in Delhi.

    “We have a solid case in Bt cotton, with higher yields, double the output and less use of insecticide. But the technology is so sophisticated, the general public is ignorant about it.” India is among the top biotech crop growing countries, trailing only Argentina, Brazil and the United States.


    Finally, after all that bullshit, they print three lines of truth followed by more bullshit:

    Even though the GM seeds for the vegetable would likely cost three times the price and farmers would need to purchase seeds for every sowing rather than reusing crop seeds, proponents say the extra expenses would be compensated by lower pesticide costs and less devastating crop loses.

    /end excerpt

    I can’t stand the MSM. Thank God for blogs.

    1. MyLessThanPrimeBeef

      I thought there was a Bollywood anime, or maybe I was just dreaming, about Mutant Yogis who went about fighting gianormous multinational chemical corporations and who got that way from eating GM eggplant curries, no?

  2. Richard Smith

    Two biggies today

    – The Euro story (debt manipulation via PFI).
    – The Hussman piece on the potential role of Fannie and Freddie (to which one might add FHA, I think) in transforming another trillion or two of dodgy mortgage debt into taxpayer liabilities.

    The link I suppose is Big-4 accountants and dodgy pols. And some future generations that might feel they’ve been gypped.

  3. Hubert

    re: Social Security
    Look, after Harvard Law, I could have gone directly to Wall Street and made a lot of money. But not so. At first I felt some responsibility to serve 4 years as President of the United States.

  4. a

    Martin Wolf is usually sensible, but he shows his hand in the article linked to. He writes:

    “Prof Ferguson stated that, according to the White House projections, gross federal debt will exceed 100 per cent of gross domestic product by 2012; that the US is forecast never to run a balanced budget again; that monetary policy, not deficits, saved the economy; that higher interest rates are on the way; and, not least, that high fiscal debt is damaging.

    “Brad DeLong of the University of California, Berkeley, responded that parts of this argument are wrong or misleading: White House projections are for federal debt held by the public to be 71 per cent of GDP in 2012 and not to exceed 77 per cent by 2020; monetary policy would not have delivered even the limited recovery we have had on its own; and higher interest rates may indeed be on the way, but there is nothing in current yield curves to suggest it. Moreover, there is no reason to balance budgets in a country whose nominal GDP grows at up to 5 per cent a year in normal times.”

    So Ferguson talks about debt being above 100% of GDP, and Wolf responds by saying that “debt held by the public” is only 71%. But who is being misleading? The difference between the two percentages are those IOUs held by the Social Security trust fund. Sure, don’t count them if you plan on welching on future retirees. But if those IOUs are to be paid, then they count just as surely as Treasury bonds held by Pimco. Wolf makes it clear lower down (can’t quote it now, have exceeded my FT limit) that he thinks long-term budget problems are because of entitlements, so he’s all for welching, I guess. But *he*, not Ferguson, is being misleading, and he should just underline up front that he thinks that retirees have no claim to future benefits.

    1. DownSouth

      After the hatchet job Niall Ferguson did on history in his PBS special The Ascent of Money, in which he totally butchered the history of Pinochet’s rise to power in Chile in the 70s so that neoliberalism, neoconservatism and neo-imperialism would be cast in a favorable light, it is difficult to take anything he says very seriously.

      1. a

        Having seen it. And I imagine I wouldn’t like the reasons why Ferguson happens to be saying what he is saying about debt (neoliberalist and all). But, in this matter, IMHO *what* he’s saying is right.

        1. sam hampster

          I like it, too, because it is completely amoral, reminding me of how the world really works.

          By Ferguson’s logic, if Hitler had won, his ensuing economic success would have defined the Holocaust as simply the inevitable cost of the rising bond market.

          1. ozajh

            I think a was snarking there.

            Do not confuse The Ascent of Man (Jakob Bronowski, IIRC) with The Ascent of Money (Niall Ferguson).

    2. carol

      a: “Sure, don’t count them if you plan on welching on future retirees. ”

      Recall the statement by Bernanke (last December?) to Congress:
      out of the blue he advised Congress, quoting a famous bank robber, to go after Social Security “because that is where the money is”.
      Obama and the Senate knew full well whom (and what) they voted for.

    3. charles

      Actually, it is worse. The BIS paper Wolf HIMSELF references in his article exhibits a projection of Debt/GDP ratio for the US at a level of 100% ! (Actually, BIS sees it in 2011, not 2012 !).

      Apparently, he dislikes being confronted to his own contradictions : he destroyed my comment in the discussion session where I was referring to this.

  5. DoctoRx

    Agree w “a” 8:34 AM.

    A bigger point is the canard that govt debt:GDP is an appropriate ratio.

    It really should be both aggregate debt and debt servicing costs to tax revenue.

    A country that stably collects 50% of GDP in tax can have more debt relative to GDP, because it has more income.

    The US Fed govt only claims about 20% of GDP as income and thus a 60% debt:GDP ratio is still a 3:1 aggregate debt to income load.

    Unfortunately, Mr. Wolf’s argument ignores the vastly larger unfunded liabilities of the US Federal Govt. We can argue about adjustments in Medicare, but Soc Security benefits have been delineated, promised in writing, and for now by law have to receive inflation adjustments.

    Sorry Mr Wolf, deficit spending was OK when the US was a financial powerhouse in the 1930s. We’re at the other end of the spectrum now. Time to suck it up and put up with sluggish growth. It’s good for the environment, anyway.

    1. carol

      That’s why Reinhart/Rogoff’s 800 years fin crisis study came up with 2 metric for danger:
      1) >= 90% debt/GDP
      2) >= 40% deficit/government spending

    1. MyLessThanPrimeBeef

      I was thinking, ‘Food for Vampire Squids.’

      It’s interesting that jumbo squids are cannibals and a male jumbo squid can pretend to be a female to get past the guardian male squid to mate with a real female jumbo squid. The squid and its relative, the octopussy and the cuttlefish, all are cameleons who can use the remarkable skin to mimic the envirnoment they are in and when they hunt, they can produce a strobe light effect by alternating, back and forth, the skin color from red to white to mesmerize their prey.

      Hmmm, familiar you say, cannibalism, all that pretending & cloaking, and the fancy PR show before the kill…

      1. TomOfTheNorth

        It never ceases to amaze me the lengths some will go to to get the word ‘octopussy’ into print, inventing all manner of obscure ‘facts’ on biological and societal norms & functions.

        When all I really wanted to know is: does the turtle like it?


  6. Rickster

    I am shocked, shocked, that a politician likes Obama shaded his position to win a primary against an opponent. And yes, I still think you overstate your case that Obama baited and switched any major way from his campaign to President. By the way, I do disagree with his policies, but I can’t say I am surprisesd as I was reading Paul Krugman at the time and Krugman nailed him dead on. Nevertheless, as Bill Haher said last night, given the alternatives I certainly think we are better off with Obama then McCain. I do wonder about Clinton. She certainly started connecting with blue collar whites the last 3 months of the primary and if winner take all rules had applied, she would have been the nominee and the President and Obama the VP (maybe). But she was also in thick with Robert Rubin and Larry Summers. I expect her policies would have started the same as Obama’s. But she may have been more quick to change then he has been.

    From Angry Bear

    Further fleshing out the truth regarding Obama and SS and…
    Posted by Divorced one like Bush | 2/17/2010 06:30:00 AM entitlements, Obama, social security
    5 comments by Daniel J. Becker

    Back in June of ’08 I asked regarding Jason Furman’s appointment by Obama:

    Is this the concession the Clinton/Blue Dog group was looking for? The DLC still keeps control of the money issues?
    I asked because of his connection to the Hamilton Project at the Brookings Institute: Hamilton Project, a small think tank created by Robert E. Rubin, Bill Clinton’s Treasury secretary and key economic adviser, and former Treasury deputy secretary Roger C. Altman…

    Bruce posted a response by Furman regarding Obama’s SS plans:

    As president, he would work with Congress on a bipartisan basis to design the details of such a change, including the tax rate, how it is phased in over time, the linkage between these tax payments and benefits and other critical design elements of this plan.
    We have known what Obama’s position is since his campaigning. Unfortunately, many have ignored it even blaming the victim (the voter) for his lack of left leaning action. But, just to bolster the smacking up side the head Bruce is offering via NewDealDemocrat, I went digging further on Mr. Furman and found this from 2005 via Center on Budget and Policy Priorities:

    By contrast, under traditional reform plans like that proposed by economists Peter Diamond and Peter Orszag, the debt would be reduced immediately, and by 2050, the amount of debt reduction would be substantial.
    Mr. NewDeal stated:

    In short, only a month into his Administration, Candidate Obama’s insistence on tax hikes as the method of long term Social Security budget balancing was replaced by President Obama’s embrace of the Diamond-Orszag plan…
    I was certain with Hillary we were getting the DLC and all the Chicago School Econ we could handle. I was resisting the temptation of conspiracy thought when I asked if Furman was a concession to the Clinton power block, but I feel confident now that this is exactly what happened. Hillary conceded on June 7th, Furman was appointed on June 9th.

    Remember the 60’s and the warnings about how the “Man” was messing with our heads? The message wasn’t to be paranoid, the message was to be aware.

  7. charcad

    r.e. “JPMorgan Bombing: Bomb Explodes At Bank Offices In Athens Huffington Post.”

    This didn’t take long. Comments, Swedish Lex?

    In case you missed it…”

    Soon this will be, “In case they missed you…”

    1. EmilianoZ

      What the world needs now is the metaphysics of the Kalashnikov, the geometry of the RPG, the epistemology of Molotov cocktail!

      Athens, February 16 2010, the resistance movement against corporate greed started.

      Eimai ellenikos!

  8. kevinearick

    Constitutional Design:

    Increasingly, I’m getting requests for a piece on constitutional design, largely from people who want to fast-forward to the endgame. On the one hand, it’s nice to have some idea where you are going before you start building the bridge. On the other, humanity is largely about exploration, not knowing where you are going, collecting tools/skills along the way, until old age, when we want to settle down. Having said that …

    The economic relationships are size of agency inverse to amount of liberty to scientific inquiry to economic profit. The greater the relative size of agency, the less liberty, the less effective scientific inquiry, the less economic profit, greater economic loss. Agency is the brake, democracy is the steering wheel, and the market is the accelerator.

    The market makers captured agency, redirecting its energy to acceleration and growing it to reduce liberty, like closing your eyes, holding the steering wheel tightly, and jamming on the gas. It’s fun for the crazy person, for a short period, but it’s badness for everyone over time. Wall Street is like a perpetual teenager, great energy, great output, but in need of a little guidance and some braking.

    It defies logic and common sense to put pension money in the hands of a teenager, especially one you do not know. So how did it happen? The “founding fathers” mythology had to gain the consent of a robust, mobile, intuitive population, that was acutely aware of economic relationships. A constitution is an agreement in which the People, a collection of individuals seeking liberty, grant limited agency power, the collection of power in the hands of a few, to make redundant decisions efficiently, to place a brake on the market when it is moving faster than it can be steered by net individual liberty.

    As the culture aged, market makers successively jumped the safeguards in the US Constitution to breed a governable population, to replace the system of government working for the people. The living constitution, designed to address system errors, was systematically replaced, on the argument of expediency, with a static constitution, designed to assign systemic errors to individuals, ensuring the outcome. As a result we now have corporations treated as private individuals and children treated as the property of agency, the looking glass. That is fascism, the forced reintroduction of feudalism as the guiding hand.

    Fortunately, both the planet and the universe have vested interests in democracy; it’s the forward gate threshold bias. If democracy is excessively limited, if feudalism, a bimodal distribution, brings the reverse threshold bias, resistance to change, down below the forward gate threshold, environmental demand for change, the recognized economy is cut off from the primary planetary voltage source. It is cut off from resources, consumes everything that remains, in viral replication, collapses, and is recycled back into the system by symbiotic circuits.

    The articulating mechanism between the planetary circuit and the human circuit is natural new family formation – effective durable, durable goods orders, efficiently delivered by the market, if the constitution is working properly. The financial pyramid ponzi scheme of wage arbitrage, that separates producers from consumers, to artificially increase returns to the pyramid, implemented through family law banking & credit preferences, has disabled that mechanism.

    Democracy is not a function of government power. It is a function of liberty, a retained power of the People. Democracy is a function of diverse children learning for themselves how to play together, taking the lessons learned into their adult lives. The real job is parenting. If that is not done effectively, growing both diversity and interactivity, then everything between those clock punches ends up being a freak show, which you are now observing in the workplace.

    $ labor, serving machines, impractical managers, holding worthless pieces of paper, and corrupt politicians, held captive by global pyramid cartels, does not an economy make. Democracy requires a distribution of independent, self-sufficient economies, trading surplus, which are now being built in virtual space, because the nation/state geographic, demographic acceleration, ponzi scheme economy, controlled by global financial pyramids, is discharging to 0 volts.

    In a functioning circuit/economy, voltage potential is created by the difference between small labor, on the leading edge of evolution, and Big Capital, completely protected from evolution, as the magnetic field seeks to exist just outside of control from the gravitational field. The semi-neutral middle-class capacitor between them stabilizes the voltage, creating a multiplier effect by opening the NPV window, to increase financial leverage.

    The universe is a fulcrum of fulcrums, with supra-fulcrums monitoring sub-fulcrums, prepared to pull down the sub-fulcrums if they exceed error tolerances. The people, who are mobile, grant capital, which is otherwise immobile, government, in the interest of all parties, to balance development. Everywhere in the universe, the actual fulcrum mechanism supporting the platform become smaller over time, until the sub-fulcrum orbits into self-regulation. Otherwise the sub-fulcrum is collapsed for recycling. Government is moving in the exact wrong direction, for those becoming increasingly dependent, in a cancerous reproductive cycle.

    The Constitution has become a growing set of stacks, individually growing out of control, as a government jobs program, because the means to pop laws off the stacks has been systematically eliminated, creating a labyrinth of recursive paths to enslave the people to agency. As legal doctrines develop with legal experience, examining the SYSTEM for correction, each horizontal legal doctrine developed should pop all unnecessary laws off all the stacks.

    Small labor prefers to grow the fulcrum, by increasing the environmental tap, but must be prepared to restart from scratch. That is an evolutionary requirement, which capital cannot understand, because it is protected from evolution, passing mythology down from generation to generation, toward self-degeneration.

    Glass-Steagal was the last stable system, but it reached its limit. The Internet was doing its job, increasing self-governance through increased communication, to pop parts of it off the stack over time, until the Internet was capitalized to serve the interests of the few. Wall Street accelerated the dismantling of Glass-Steagal, while simultaneously increasing dependence on government, now a lackey to the global pyramid cartels.

    There you are. There are reasons why small labor is willing to give Paul Volcker the benefit of the doubt, and no one else. He has been to the big show, he is motivated to correct previous errors, and he presents a good balance to the perpetual teenagers on Wall Street. Along with the bloggers to keep everyone’s feet to the fire, there is some justification for the extra work to preserve the thread of History across the ac half-cycle changeover.

    By the way, if deficits don’t matter, why can’t individuals print their own money? Could they do any worse than the Treasury-Fed-Bank-Wall Street infinite loop?

  9. Don

    It seem like it is Niall Ferguson and Ambrose Evans Pritchard vs. Paul Krugman and Martin Wolf. The Keynesians say more debt is necessary and good, but Ferguson and AEP say, along with Mohammed El-Erian, that there is a real and growing sovereign debt crisis out there. While Martin Wolf may have read Rogoff & Reinhardt [& liked it], I’m not sure he understands what R & R were really saying about the negative implications of excessive debt. The current Keynesians are trying to use a prescription that may have been valid for the 1930’s, but not today, after decades of central bank and political mismanagement. As John Mauldin says, there are no good answers left to solve our economic problems, and trying to use more and more debt issuance as a way to avoid the pain that excessive debt has helped to create is not the way to solve the problem.

  10. MarcoPolo


    I’ve been thinking about this book that I want to read and the rumors that there is a web site coming where it can be ordered, and that there might be bookplate editions, and having to count how many copies I need for all of those nice people who don’t know anything about finance but have given me those Ann Coulter books in the past; or whether I should just pre-order now from one of the majors. 

    But mostly I was just thinking about the web site and how intensely boring promotional sites like that can be… and so it occurred to me… Why not open it up to it’s own Special Purpose Off Balance Sheet Blog (SPOBSB) and let anyone who wanted – other than Ann Coulter – say anything about the book he or she wanted?  Humm?  Then all of us who have been watching from a distance would be given a chance to see just how really obnoxious we could be. Humm?  Sound like fun?

    And not only that but we could run a contest.  Say, who could write the best ad hominem attack? And there could be catagories – Ben Bernanke, Turbo Timmay; we can surely just ignore Barack Obama.  And give prizes, say maybe a free copy of ECONNED. 

    Now here’s the deal; I’d be happy to sponser one of the prizes with the single condition that MarcoPolo doesn’t become one of the catagories. What do you all say?  Humm?

  11. charles

    “Why is it that Willem Buiter, a Dutch economist/sometime central banker and self styled citoyen du monde got more upset…”

    If I am not mistaken, Pr Buiter is also an American Citizen, who, thanks to the long arm of the IRS, is liable for US Treasury liabilities wherever he lives in the world.

  12. alex black

    I saw the Antidote du Jour and thought for a moment that I was accidentally on Jesse’s Cafe Americain blog, looking at another of his French appetizers. Bon appetit!

  13. Sundog

    Caltech Scientists Hit New Solar Conversion Efficiency

    PASADENA, Calif.—Using arrays of long, thin silicon wires embedded in a polymer substrate, a team of scientists from the California Institute of Technology (Caltech) has created a new type of flexible solar cell that enhances the absorption of sunlight and efficiently converts its photons into electrons. The solar cell does all this using only a fraction of the expensive semiconductor materials required by conventional solar cells.

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