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Links 4/29/10

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Have Goldman Sachs charges opened floodgates? BBC

Obama the Centrist Brad DeLong, Project Syndicate. Mirabile dictu, DeLong says bad things about Obama!

Election 2010: Can Gordon Brown survive this hurricane? Jonathan Freedland. A rather amazing turn of events….

Random Thoughts on the irony of Minarchism One Salient Oversight

Roubini Says Rising Sovereign Debt Leads to Inflation, Defaults Bloomberg. For more detail, see Milken: Nouriel Roubini and Mike Milken on What’s Next Paul Kedrosky, which has the video.

Who’s exposed to Greece (with Parts II and III) FT Alphaville

Now We Are Talking! Joe Costello

CDO fees flow to ratings agencies Financial Times

European debt crisis: the possible domino effect Guardian (hat tip reader Crocodile Chuck)

Household debt and macroeconomic fluctuations Atif Mian and Amir Sufi, VoxEU

Austerity Tony Judt New York Review of Books

Antidote du jour:

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30 comments

    1. DownSouth

      I thought the one-lone-comment to part III said it all, so will repeat here:

      dell | April 28 5:01pm | Permalink | Options

      Am I severely missing something here–or is this near to meaningless? On the other side of the pond, it turned out that who the nominal mortgage holder was, or who the MBS bondholder was, barely mattered. What really mattered (at least over here) is where (and how many times) the ultimate risk was in the world of CDO’s (probably not relevant in this case) and, much more to the point, CDS’s. And that, how the ultimate risk as to PIIIGS sovereign debt has been reallocated, no one, in the present opaque state of the CDS ‘market’, knows.

      1. vlade

        It was something I pointed out a while ago (including comments here) – the EUR banks can be relatively ok, if they successfull offloaded the risk via CDS on their US/Asian chumps who thought EUR will never fail.
        Of course, that’s assuming that the CDS cpties can carry the risk.

        I’ve heard a rumor that the hedgies stopped buying CDSes on PIIGS around January, and that most of the buyers in the last few months were EUR banks. How much, who’s the seller, and how true it is, I can’t say.

        To an extent, it’s actually true that EUR banks offloaded the risk via CDSes, it may make the situation better as most of the losses would now be already realised via collateral postings – and we haven’t seen anyone to go down in an AIG-like liquidity squeeze (yet).

      2. Cynthia

        DownSouth,

        T recall you mentioning a word or two about the concept of American exceptionalism, so I thought I’d also say a few words about it as well:

        No society can have a viable democracy without also having a thriving middle class. And now that America’s middle class is heading towards extinction, thanks to neoliberal policies first adopted by Reagan, then by Clinton, and now by Obama, American democracy as we know it is also heading towards extinction. To make matters worse, Obama and his fascist enablers in the White House, led by Cass Sunstein and Rahm Emanuel, are doing their damnedest to tighten a noose around our Bill of Rights, essentially cutting off the entire oxygen supply to our already beaten-down democracy. So if this is what American exceptionalism is all about, no one — right, left or center — should want it!

        Read some of Glenn Grennwald’s posts and you’ll know what the hell I’m talking about. And as you read them, keep in mind that Obama is a knuckle dragger compared to Greenwald when it comes to Constitutional law. His understanding of our Constitution and his respect for it outshine Obama’s by several solar masses!

        http://www.salon.com/news/opinion/glenn_greenwald/2010/01/15/sunstein/index.html

        http://www.salon.com/news/opinion/glenn_greenwald/2010/04/28/journalism/index.html

        http://www.salon.com/news/opinion/glenn_greenwald/2010/04/07/assassinations

        2. Tom Crowl

          Excellent points and great links. Thanks!

          Sunstein’s mental paradigm is especially alarming. It bespeaks disgusting elitism and total disregard for the very fundamentals of self-government: a respect for the integrity of the individual citizen and his ability to participate fairly.

          That anyone could believe that such deception would act as a bulwark for faith in government is idiotic. Sure, it could work for a little while. But only till found out. At which time trust is destroyed in the ‘Establishment’ and it’s time to start putting together a new social contract… and a new “Establishment”.

          It’s very difficult for oligarchs to trust that non-oligarchs can handle such controversies without their ‘wise’ guidance.

          You know… like their ‘wisdom’ about banking, finance and trade.

          That’s why they figure we need things like gerrymandering and revolving doors. So we can benefit from their continued kindly and completely selfless superior perceptions of the big picture.

          P.S. I’m not into conspiracy theories. But I AM into having a government that wants an environment that encourages and builds strong citizenship. This government and both parties, for all their hypocritical posturing seem to want your role as citizen to be less of a bother to them.

  2. attempter

    Re “misarchism”:

    But if we limit the government to merely minarchism – military, police, legal system, prison – then we will have a state that is defined only by its ability to enforce punitive punishment.

    The basic scam of economic “libertarians” is how they fraudulently claim to want minimal government and optimal freedom, but it’s all a stalking horse for the dictatorship of big corporations and the limitless aggressive prerogatives of the rich. They really want an extremely big, aggressive government, but only as the goon and sword arm of concentrated wealth, and as a looter to help further concentrate that wealth, as we see with the Bailout, the war, and every other corporatist looting project.

    As the piece says, the real limited government, small government philosophy is anarchism, which opposes all large structures, public and private, since we all know perfectly well that big private structures and concentrated wealth and property can’t exist without big government to aggressively prop them up.

    (The piece is historically incorrect in saying anarchism and syndicalism have never been tried. They have been, and they work. Each time they were working, like in regions of Civil War-era Spain, they were violently destroyed from without.)

    Re Delong:

    I’m glad to see he’s heading in the direction of reality by now calling Obama a “centrist”. But he still has a ways to go in that rightward direction of analysis before he reaches Obama’s actual position: Neoliberal corporatist and chickenhawk by ideology, status quo elitist by personality.

    Re austerity:

    The old material austerity amid community, where people still lived in societies and not Hobbesian free-fire zones, was very different from what they call “austerity” today. Today the word means that the kleptocracy has done all it can in the bubble phase, corporations and rich criminals have looted all they can during the boom. Now that the bubble’s bursting, the looting has to switch to disaster capitalist mode. Now it’s time to inflict all the costs of the crash onto the already-fleeced people, while the gangsters use the same crash to enable new forms of looting.

    “Austerity” is the element of making the people pay the costs of their own enslavement. But it can only work if they let it be done to them.

    I can imagine a different direction for “shock and awe”, a different “austerity”, to be imposed with the utmost severity and rigor on the criminals themselves. All the people have to do is choose the path of real freedom.

    1. NS

      Indeed new market will be utilized and created. I recently saw a video via FT regarding water as a resource to be captured and traded much like oil. The ‘market maker’ said volumes about the new direction. He specifically said developing nations should be avoided as they didn’t have either the ‘physical or legal’ infrastructure to accomplish this.

      Every part of our lives is merely fodder for enrichment. Now that the FIRE sector has been totally exhausted, look to energy (green or otherwise), food, water and those basic elements of life no one can do without.

      The question remains if government will continue to allow this capture of its taxpaying people and those who have been thrust into poverty by the bullies on the international stage who do not provide constructive means for societies to prosper but destructive means for fewer and fewer to become our modern day overlords free from consequences of their crimes against humanity.

      Never mind, their fois gras and excessive lifestyles are insured by AIG, we should all take comfort they cannot lose as we’ll pay for Goldman’s lawyers for any law suits; and we’ll pay AIGs executives, traders, etc. outsized salaries to do it!

      I love being a new shareholder without a vote or even a quarterly report!! ‘Free’ markets are so kewl. snark/

      1. curlydan

        “The question remains if government will continue to allow this capture of its taxpaying people”…

        Yes, government will. As local, state, and fed govts are forced to cut services to relieve budgetary woes, they’ll sell off all their assets to private corporations, including water, sewer, transportation, etc.

        It will all sound so sweet…the govt could not provide water at rates that a private corporation can, so we’re going to let WetCorp take over. The Tea Baggers will love it…at first, then, not so much.

        Resist any attempt by local govts to auction off these services, especially water.

    3. liberal

      “The basic scam of economic “libertarians” is how they fraudulently claim to want minimal government and optimal freedom, but it’s all a stalking horse for the dictatorship of big corporations and the limitless aggressive prerogatives of the rich.

      Actually, the basic scam is that they want to reserve the right of economic rent collectors—particularly landowners—to continue to charge tolls for access to what nature has provided for free. Not to mention that many of them seem pretty fond of other government-granted monopolies like copyrights and patents.

    4. liberal

      Re Delong:

      IIRC BDL has said a number of kind words about Alan Greenspan over the years, which if nothing else should make him a laughingstock.

      Not to mention he’s a real jerk and deletes non-offensive comments on his blog that he disagrees with (from both the left and the right).

    5. sglover

      “Re Delong:

      I’m glad to see he’s heading in the direction of reality by now calling Obama a “centrist”. But he still has a ways to go in that rightward direction of analysis before he reaches Obama’s actual position: Neoliberal corporatist and chickenhawk by ideology, status quo elitist by personality.”

      Have faith! It never takes DeLong more than a decade or so to pick up on the fucking obvious.

  6. Cynthia

    Let’s hope that the SEC’s lawsuit against Goldman opens the floodgates for similar lawsuits against other shadow banks, including crooked hedge funds. Which leads me to say that I don’t think it was a mere coincidence that Eliot Spitzer, one of the most successful prosecutors against Wall Street crimes, got caught soliciting sexual favors from a prostitute just a few months before a fraud-filled bubble burst on Wall Street. Nor, do I think it was a mere coincidence that the news about SEC staffers surfing for porn on government time broke just a few days after the SEC announced that it is suing Goldman Sachs for fraud. Don’t get me wrong, I’m not here to defend the misconduct of either Eliot Spitzer or the porn-surfers at the SEC, but I am here to point out that it looks to me like that the shadow banking industry is trying to pull a “Spitzer sting” on the SEC. After all, the shadow banks have the most to lose if the SEC wins its case against Goldman.

    http://abcnews.go.com/GMA/sec-pornography-employees-spent-hours-surfing-porn-sites/story?id=10452544&page=1

  7. ECONOMISTA NON GRATA

    The issue with Goldman is not that they are too big to fail, or that they are ethical or unethical. Their issue is simply that they were a nickel short. Their execution as an organization had been flawless, up to the point where their success extended beyond delusional expectations, transitioning their ambitions from financial prosperity to the attainment of prestige and status.

    Goldman lost it’s focus and inadvertently walked nakedly into that treacherous path that leads to the VIP lounge where the paparazzi eagerly await, patiently knowing, that sooner or later, Goldman will choke on someone else’s vomit.

    How many times have we seen this before……? There is a “class” of people that simply can’t handle success, they buy third rate ideas with first rate money.

    Goldman is beyond redemption. The only thing that will save them is going private.

    Best regards,

    Econolicious

  8. The Derivative Project

    The CFA’s and Money Managers were also not asking the critical questions of the off-balance sheet relationships between Goldman and AIG and what was inside these synthetic CDO’s. Any equity analyst, (and there were still many in the fall of 2007 recommending AIG as a buy) were not studying the business they were recommending. Here is what needs to go into the proposed Financial Reform bill, that Congress will begin debating today, to ensure this mess does not happen again.

    http://www.thederivativeproject.com/Blog.html

      1. Anonymous Jones

        Nice list, Hugh. I agree with most of it, though as I’m sure you’ll agree, almost none of it will ever see the light of day.

        But if we’re going to engage in the fantasy of how we would set up the system as wannabe philosopher-kings, I would make a few changes to the homeowner and consumer credit categories. I don’t like usury laws. But at the same time, I very much like the Texas maximum 80% LTC regulations on home purchases. Limiting leverage should go quite a way toward limiting interest rates. Education about credit cards and debt should also be widespread, but penalties for those who abuse credit should be severe. In that vein, I think personal bankruptcy laws should be quite onerous, but I would offset that with a serious safety net (like the one that is implied by some of your other suggestions).

        Just my two cents (and it’s definitely not worth even that).

  9. Hugh

    Brad DeLong reminds me of Francis Fukuyama and other Bush supporters. As Iraq shaped up to become a bigger and bigger disaster for the neocons, some of them began putting distance between themselves and Bush. It wasn’t that they became progressives or anything. It was more like avoiding being tarred with Bush’s failures.

    It is also quite funny to hear DeLong describe Obama as a centrist or two steps to the right of center. He has spent his first year in office continuing and in some cases expanding the policies of his predecessor, the most conservative President in a string of conservative Presidents stretching back to Nixon. That is not two steps to the right of center. It is several football fields.

    Much of our political discourse is taken up with pseudo disagreements between Democrats and Republicans. Lots of sound and fury, Sturm und Drang, but at the end of the day it is the same corporatist neocon agenda. DeLong is just continuing this depiction by implying that Obama is seeking a centrist position between factions when the truth is that all the factions are the same faction.

  10. michael

    Brad DeLong actually says Obama should:
    – double the stimulus, for now
    – stop even talking of trying to balance the budget
    – never cut taxes, government knows best what to do with your money
    – listen to his advisors who demanded harsh terms for bailouts (who exactly??)
    – go for a carbon tax
    – speedup closure of Guantánamo Bay (the necessary one thing sprinkled in where most can agree)
    – go for a bigger scheme in healthcare, government knows
    best what is good for you

    Any mention of at least partial use of *free* market forces?
    And this guy is a professor in economics???

  12. Cynthia

    It’s no secret that Goldman owns Congress and the White House, but now it looks like Goldman may soon be owning a piece of the Supreme Court, too:

    http://www.usatoday.com/news/washington/judicial/2010-04-26-kagan_N.htm

    And if it turns out that Elena Kagan is gay, and there’s a pretty good chance that she is, then my prediction is that Obama will throw a bone to the gay and lesbian community by appointing her to the Supreme Court. But because she wants to put a bullet through the head of our civil liberties, no left-wing libertarian, gay or straight, should want her on the Supreme Court. Not only does she want to turn our country into an authoritarian police state, she also wants to keep our country in a never-ending battle against the Muslim World. Read Glenn Greenwald and you’ll know what I’m talking about:

    http://www.salon.com/news/opinion/glenn_greenwald/2010/04/13/kagan/index.html

    http://www.salon.com/news/opinion/glenn_greenwald/2010/04/17/kagan/index.html

    In fact, Kagan is such an enemy to our civil liberties and such a friend to our warmongering neocons that she’s a fascist wet dream come true. Even though most right-wing fascists tend to be staunch opponents of reproductive rights, most of them will be willing to overlook the fact that Kagan is pro-choice and thus won’t object to her appointment to the Supreme Court. Kagan will also be a wet dream come true for Obama in that she’ll support him in his endeavor to keep all of his ill-gotten, unconstitutional powers that he acquired from Bush intact, enabling him to get away with being just as big of a fascist as Bush was!

  13. Stephen Houseknecht

    Yves,

    Recently I was directed to to an article at http://www.truthout.org/about about the proposed dismantling of SUNY written by Dr. Lawrence Wittner, a history professor at SUNY Albany. http://www.truthout.org/dismantling-suny-americas-largest-public-university-system57495.

    In the article Dr. Wittner cites research from the Fiscal Policy Institute looking for new sources of revenue for NYS. I was flabbergasted by the following information regarding the State collecting and then RETURNING the collected stock transfer/sales tax to the brokerage houses.

    “The stock transfer tax is basically a sales tax on the transfer of shares of stock with a number of exemptions including an exemption for the original issuance of stock . This tax has been in effect since 1915 but it is currently handed right back to those who pay it, in the form of a 100% rebate. The rebate started at 30% in 1979 {Gov Hugh Carey}; was increased to 60% in 1980 {Gov Mario Cuomo}and then to 100% in 1981{Cuomo}. The 100% rebate curently costs about $16 billion a year. Temporarily reducing this rebate to 80% would produce approximately $3.2 billion annually in state revenue. In order to discourage speculation, consideration should also be given to tying the underlying tax rate to a person’s trading volume with the lower the trading volume, the lower the tax. This would lessen the frenzied volatility that caused many of Wall Street’s problems in recent decades.”

    Screw them with a “temporary” 20% reduction. For the last twenty nine years New York State has given away every goddamned penny of stock transfer tax collected and this state is currently looking at a nine billion dollar deficit. Not to mention every penny collected from investors worldwide has gone back to these bloodsucking leeches. Where did these billions and billions of dollars go? And they still needed TARP for the too-big-to-fails. WTF. For the hell of it, what’s 16 billion times times 29 years?

    The link for the http://www.fiscalpolicy.org/Chart_BetterChoiceRevenueAndCostOptions_20100222.pdf. Thanks for all of your work so far. Please do something with this.

    Sincerely,

    Buzz Meeks

  14. Luke Lea

    Listened to that long video with Roubini and Milkin. Milkin no longer has much of a brain, sad to say — aging is a bitch — but Roubini is as sharp as ever, even if he does pussy-foot around certain politically incorrect subjects. I would like to see more attention given to the adverse effects of immigration on the poor countries from which immigrants come and less on the putative advantages for the rich countries that receive them. Brain drains are real, witness Haiti. Also a recognition of the fact that creating human capital is very much a function of the quality of the brains being educated. IQ and the wealth of nations has to be faced, as does the need for income redistribution between the low and high skilled workers in any society to increase the general welfare. Otherwise we are just talking about what is good for the few, who are the ones doing all the talking. A graduated consumption tax and across the board wage subsidies are required to make free trade with China work for ordinary Americans. Where are the real economists now that we need them?

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