Links 9/12/10

Apologies for the lack of new posts this weekend. I didn’t find material that struck me as juicy, and truth be told, I’m in face plant mode.

Are Scanners Worth the Risk? New York Times

Food figures need a pinch of salt BBC

The REAL ‘Stuff White People Like’ OKCupid (hat tip Richard Smith). Hah, I already see problems in study design. I would have put “Japanese” or “sushi” as a favorite food, when I eat sashimi, not sushi. And I the “what women like” list is doofus. But marketing types love this sort of thing. Wonder what the demographics of each sample group is.

Pentagon aims to buy up book Washington Post

The Afghanistan Study Group Report: An Exercise in Determined Ignorance Joshua Foust (hat tip reader Sundog, who adds,

Foust links to a Foreign Affairs piece by Barnett Rubin and Ahmed Rashid, which is behind a paywall. The gist of their thoughts can be accessed via as a podcast via the following link. If you’re interested in knowledgeable people making an attempt at confronting the Af/Pak mess in its entirety, without shirking the difficult bits, this is essential.

Podcast: From Great Game to Grand Bargain

Scientists Find Thick Layer Of Oil On Seafloor NPR (hat tip reader John D)

Overseas Investors & the Commonwealth Bank Steve Keen (hat tip KT)


Imagine If NYT Columnists Like Thomas Friedman Had to Know About the Great Recession? Dean Baker

Is Newer Better? Not Always New York Times

Housing Doesn’t Need a Crash. It Needs Bold Ideas Gretchen Morgenson New York Times

Four are dead in Megabus crash on Onondaga Lake Parkway Syracuse Post Standard. OK, this is a bit O/T, but this is the sort of small scale, local issue (where this is germane) where lives are being lost for lousy reasons. You may be in a community where this sort of thing happens. More awareness might lead to pressure and action. Per reader John L:

There are several low railroad bridges around here. They are constantly being hit by trucks that are too high. Now, four people are dead. The response? Put the driver in jail.

This is idiocy, plain and simple. The old story about putting and ambulance at the bottom of the cliff or a fence at the top comes to mind.

This particular bridge is one of two that lead from mainlines in the US to canada. The railroad has never even considered raising them, and digging deeper under them would undermine the foundation of the bridge. I can’t tell you how many new signage schemes, lights etc have been put into this over my life time(over 30 years). More money has been lost to trying to prevent the unpreventable than it would have cost to raise the god damn bridge to begin with. Now the crowd wants to put the driver, who obviously made a mistake in jail. How much does that cost the tax payers?

How can the railroads get away with this?

What do the “good” trade numbers tell us? Michael Pettis

Antidote du jour:

Picture 21

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  1. attempter

    It looks like Morgenson’s another who thinks the hosuing bubble wasn’t all that much of a bubble (not to mention that oil is infinite), so that to reflate or not to reflate is simply a policy choice, while deflation would just be something that happens by default if policy makers are lazy.

    The other day I used two of her NYT colleagues, Streitfeld and Leonhardt, as well as the prior GSE rumors and ongoing call for this “refinancing” scam (which Morgenson now also endorses) as the occasion for a piece about this.

    Morgenson’s right that we need “bold ideas”, but what she wrote ain’t it. It’s just more of the same “We need to prop up the banks and the existing land distribution and use model, so how do we do that? I don’t want to hear about reality, practicality, or equitability.”

    1. Doug Terpstra

      Exactly right. Morgenson says we need to do something entirely different from bailing out the predators … and then … proposes to do just that.

      She says, “Banks’ refusal to write down these loans has made it harder for average borrowers to reduce their mortgage obligations…”

      Uh-huh. So what’s her bold new idea? Forcing banks to report real losses and possibly risk failure? Au contraire! Hers is the ‘novel’ idea of having the government buy more suprime debt, the remnant third still (barely) paying, thru Fannie/Freddie and lowering interest rates.

      “The only downside to the government”, she says sagely, “would be if some loans it purchased went bad.” (The ONLY downside!)

      “The benefits of the plan could easily outweigh the risks. Institutions holding these loans would be fully repaid…”

      Aha! Eureka! Morgenson’s refreshingly [b]old new idea distilled: “socialize the risk, privatize the profits, and keep people on the debt squirrel cage.” Brilliant! Why hasn’t anyone thought of that yet?

      Your housing divided link, on the other hand, is revolutionary:

      “Underwater housedebtors can’t be removed from their predicament by any top-down policy short of cramming down the principal, which would directly contradict the reflation imperative of policy. They can remove themselves by walking away from the self-destructive debt. Or if they surrender to their plight and wait for policy to help them, that’s simply committing fiscal suicide, since sooner or later policy will be overwhelmed by reality. But in the meantime their passivity just enables the Bailout, just enables their own debt enslavement, and portends the enslavement of us all. In that sense underwater debtors who don’t jubilate are a kind of scab.”

      “So however painful in the short term jubilation and capitulation to deflation may be, it’s the only way…”

      1. Punch My Ticket

        The Morgenson piece shows no thought whatsoever. Here are the two critical paragraphs …

        “That means one-third of the borrowers in these pools are paying their mortgages. But it is likely that many of these people owe more on their loans than their homes are worth and would benefit greatly from an interest-rate cut.

        If Fannie and Freddie bought these loans out of the pools at par and reduced their interest rates, additional foreclosures might be avoided. The only downside to the government would be if some loans it purchased went bad.”

        If some loans it purchased went bad? If??? 2/3 of the loans are already delinquent.

        How asleep do you have to be to write juxtaposed paragraphs like that?

      2. Kevin de Bruxelles

        I have to agree with Attempter’s idea of going with the deflation. Almost all loans in America are functionally non-recourse so it would be in most people’s interest to simply walk away. With people feeling deflation in their wages. the last thing they need is for the government to fight to retain their house’s bubble-induced inflationary pricing, and the huge monthly payments that go with it. People have to get over the social stigma involved in losing their houses. Sit out two or three years in an apartment and then buy the same type of house you had been living in for at 40% less. This way the housing portion of the typical family’s budget will decrease and help make up for the lower or stagnant pay checks that the people lucky enough to have a job will be getting.

        The more the government gets captured by the rentier class, the more the libertarian argument of less government makes sense. And of course the more the government gets captured by the rentier class, the less any of our opinions matter.

        1. Doug Terpstra

          “The more the government gets captured by the rentier class, the more the libertarian argument of less government makes sense.”

          It’s the Chamber of Commerce’s dream come true: “less government in business; more business in government.” Progressives will then take up Grover Norquist’s mission “to reduce [government] to the size where I can … drown it in the bathtub.”

          “And of course the more the government gets captured by the rentier class, the less any of our opinions matter.”

          Hence, Attempter’s central idea of a massive housedebtor’s strike is key, maybe the only key, to an effective, peaceful revolution. Every underwater housedebtor should be strongly encouraged, as a matter of civic responsibility, to stop payment, which would bring the kleptocracy to its knees faster than any other effort of petitioning, demonstrating, or civil disobedience.

      3. MyLessThanPrimeBeef

        Exactly right. Morgenson says we need to do something entirely different from bailing out the predators … and then … proposes to do just that.


        I think that’s called parrehsia.

      4. lark

        All the libertarian jerking off here is pretty nauseating.

        My view is, this is a sensible idea.

        These folks are paying their loans at interest rates much higher than the going rate. That means, if they can’t afford their current payment, there is a good chance they could afford a lower one.

        My sister’s house is underwater. There is no way they’ll give up the house unless they have to, because they love it. But they can’t refinance, because they are underwater. They might have to walk.

        Many folks are like her. It does not come easily to many to walk away from their homes and their obligations. If the payments come down, they’ll stay even if the homes are underwater. It gives stability to our rocking, sinking ship, and that’s a good thing.

        The truth is, the whole bailout package, top to bottom, was structured to shove it to the taxpayer, and restore profits to our corporate masters. Time to do it the other way.

        1. Andrew Bissell

          If you want to stop shoving it to taxpayers, bailing out subprime lenders with taxpayer money is probably not the best way to start. And that’s all this proposal is.

          Without continued taxpayer bailouts these lenders would eventually be forced to eat the principal losses which their imprudent lending has caused. And as a side benefit, people like your sister could be spared a lifetime of debt slavery to pay off underwater mortgage balances.

          1. Skippy

            To me its *bond holders squared plus bonus babies* telling everyone else to get in the pit…I say sure_but_*your* coming with me mate.

            Skippy…yeah mate you earned it…rrrright, by cutting someone else’s grass then tossing the clippings over their neighbors fence and leaving a invoice in the letter box…have a nice day…hope you liked our premium service.

        2. attempter

          Um, no “libertarians” here. That sounds more like you. Unearned gains are your “property”, while if you take a loss someone else should bail you out, is that it?

          You sound like one of the dead-enders still throwing in the substanceless, contentless propaganda term “obligation”. Exactly how would anyone not of the elites ever have the tiniest shread of any moral obligation to the elites or to the “stability” of their criminal system, for which you’re so fatuously concerned? The very system which according to you wants to reduce people in your family to permanent debt slavery. And like good little sheep the lot of you are conforming and even attacking those who want to break the system.

          And as we all know, in the case of a non-recourse mortgage there’s not even a pseudo-legal obligation. Walking away is a provision of the contract.

          We do indeed have a moral obligation to resist and fight back against the finance tyranny. As I said, continuing to pay where there’s not even a legal obligation in a vain fantasy that miraculous “growth” will come back and these asset prices will be rise again (in which case you’d be back claiming the unearned gain is your god-given “property”; it’s always either loutish aggression or cringing, cowardly whining with “libertarian” types, there’s no middle ground) is both self-destructive and anti-social.

          Today most examples are like this one. Our individual interest is aligned with the common good. But of course the “American Dream” propaganda was only ever about maximizing individual greed, under the fraudulent promise that once you could grab a piece of property its “value” would rise forever.

          And now that the scam has been exposed, the same greedheads who bought into it are demanding, not that the predatory lenders be smashed, but that they get individual bailouts as well. And they call that the “stability of the system”. Of course: because they always cherished the crimes of the system. They just thought of themselves as among the Randian elite, and now that they see how they were among the saps, they’re bitter. But they have nothing against bailouts, oh no. They’re just squealing, “Where’s my bailout?”

          When you see signs with that slogan, most of those people mean that literally, not sarcastically.

    2. Ron

      “but where are the buyers going to come from”?So many borrowers are underwater and they’re stuck:they can’t buy another home” Marron added”

      The article is a waste of ink and paper not to mention digital storage space but it points to what the MSM considers the big problem and that is the RE ponzi industry that has been the backbone of the American banking and credit industry isn’t going to provide free money to the participants, the horror!!! America might actually consider putting money into productive manufacturing not the silly fake component assembly we currently have but a full blown return to making stuff from the grown up here in America.
      Oh well think I will watch some football today!

      1. attempter

        It can easily happen that asset prices and wages go down while commodity prices go up, driving up the cost of living. That’s what’s happening now, and will likely be the phenomenon going forward.

        By “wages go down” I don’t mean some phony BLS number which doesn’t take into account unemployment, underemployment, the destruction of benefits and pensions, eroding worker safety, and everything else which combines to the general economic erosion of the workers’ position. We can throw in the health racket mandate and the increasing number of toll booths and extortion points all over the economy. That all has to be included.

  2. koshem Bos

    Thomas Friedman is one of several NYT columnists who are utterly clueless. Friedman is not the worst, Dowd, Cohen and Rich are even worse. Why does a major paper such as the NYT employ clueless columnists is beyond my understanding. After all, this country has ample supply of very capable people.

    1. Richard Kline

      Do koshem, Friedman isn’t clueless, he’s bought. When you read him as propaganda for certain economic and diplomatic set-ups, he makes perfect sense as a shill and obfuscator for the man. He only seems clueless if you’re reading him in search of actual content.

    2. Voltron

      Remember when the NYT put up a paywall? The news was free but they tried to make you pay for a subscription to their in-depth analysis and editorials. They should have done it the other way around.

  3. Richard Kline

    I read Foust’s take on the report of the Afghanistan Study Group and came away somewhat . . . puzzled. I haven’t read him before, and don’t had a sense of his perspective, which is part of that, I suppose. Most of his remarks amount to hairsplitting or know-better-ism. He just doesn’t seem to like those who put out the report, for reasons he doesn’t make clear. I’d have been far happier with him simply saying, “Here is a better plan, in contrast to x, y, and z in the report.” [This is not a criticism of the link to his blog post btw.]

    I think Foust must know that the function of a report of this kind is not in its analysis but in its locus in policy debate. That is, it’s not the content but the audience. Despite that, Foust wants to parse minituae in analysis which he feels he has better command of than the authors. (And perhaps he does given that what he does say strikes me as sound in its disagreements.) The function of this report by the ASG is to give ‘substantive cover’ to those who want to at least build down a US presence/committment in Afghanistan. It doesn’t seem (to the authors) politically possible either to meaningfully negotiate or leave, so they come up with a Third Way. I’m not endorsing that Third Way; there are definitely problems with it. And I suspect that I’d agree with Foust on most of his (undeveloped here) objections with that policy brief. The important thing, to me, is that there is an effort to shift policy away from Up the Surge. —And curiously Foust doesn’t even engage with that aspect. . . . Which seems to me the point of his remarks, somehow. I get the sense he thinks nation-building can be done there, just not at gunpoint. To which I would say, “And not by an occupying power in any way, shape, or form.”

    The US occupation of Aghanistan is a straight-forward imperialist punitive action of prerogative. It never had any other stratetic objective than to punish distant indigenees which those in power here didn’t like, nor does it have any now. ‘Nation-building’ was not, is not, and won’t be on any substantive agenda _ever_; what has been done there amounts to Potemkin clinics to give foreign media shills photo-ops and talking points. I could say more in that vein, but I’ll spare all today. —But it’s all gone south(west). It is of vast significance, for example, that a substantial _Uzbek_ insurgency has flared up against the US occupation. This is touched on by Foust, and has been ‘kinda-sorta’ mentioned in the US and UK press without really being pursued. Because this is an imperialist venture, it is not presently conceivable that the US will be willing to _substantively_ negotiate with the insurgency; just too humiliating to actually discuss terms with ‘those brown people.’ And just leaving would look, too, too . . . Russian; too humiliating. So that’s not on anytime soon. That would leave, in effect, a policy direction very nearly like what is proposed in the ASG report, a snuff-and-puff overwatch while pulling most of the boots out; sort of like Iraq presently, with 50k+ US troops in ‘select in-country bases.’ Sort of like the US policy to Haiti between the World Wars; own you and kill you when we feel like it, but wouldn’t live in a shithole like that. Sort of.

    The illusion to me in this policy suggestion is that it will be _the US_ who will dictate the shape of the outcome, that outcome or any other. The success of the insurgency in Afghanistan, and it is an increasing success, has huge implications for Pakistan. Which potentiality/probability makes any plan for Afghanistan likely worth less than the pixels its postulated with. The most realistic ‘realist’ assessment of prospects in this region is, to me, a containment strategy. We’d get a better deal if we’d eat enough crow to actually negotiate, but I don’t think we’re that smart. Or for that matter that interested in putative success. Our only real goal has been to show ‘those brown people’ we can kill them if we feel like it, and we can keep doing that whether we’re on the ground, winning anywhere, or not. We won’t get a better outcome until we change our attitude, over here. And even defeat is unlikely to do that for us. Unless it’s a massive defeat on a scale we are rather unlikely to experience in our AfPak adventure as presently constituted.

  4. Nonexplicable

    Regarding the Megabus crash on Onondaga Lake Parkway and “How can the railroads get away with this?” This particular railroad “gets away with it” because it was there first.

    It is up to the owner of the road to either put the road further below the railroad line (apparently the groundwater is high at this location) or to build an expensive bridge above the railroad. The road owner must accommodate (or, if it has the power, very expensively condemn) the railroad. The railroad is not required to build a state-of-the-art crossing for whoever wants to cross its real property.

    For some additional local discussion:

    The real question is “Why don’t the road users want to pay for a safer undercrossing?” I suppose the safest and cheapest approach would be to close the road. I won’t hold my breath for that one.

    1. rd

      In this area, the railroad is tracking the edge of Onondaga Lake. Raising the bridge would require recontructing a mile or more of railroad track in order to raise the grades in a way that trains could still use it.

      Depressing the road to an elevation at the bridge where tractor-trailers and double-decker tour buses could use it would require building the road at an elevation where it would be flooded frequently in the sptringtime, rendering it both dangerous and unusable during the spring melt season.

      The roadway was built for local use mainly for cars. Tractor-trailers and other large trucks avoid it. The road itself is virtually surrounded by interstates but is difficult to get to from an interstate, so it is actually difficult to get onto it from an interestate unless you really know where you are going or you are totally lost.

      There is a lot of signage along the road and on the bridge itself. There are lots of intersections that go on regular roads with no overhead restrictions that then lead to interstate ramps. Clearly the driver was not paying attention or did not realize that his bus was taller than 10’9″.

      Apparently break away bars have been tried but truck drivers still hit the bridge:

      A couple of interesting stories in the same edition of the Psot-Standard. The first is a good story on a succeddful small manufacturing firm in Syracuse:

      Small firms like this are one of the reasons this area only has a 7.5% unemployment rate. CNY went through its own depression over the past 20 years, so it id not have a housing boom and now has a relatively diverse economy despite the best efforts of state and local government to impede it as the next story shows:

      Our governments are failing us miserably at all levels. It is time to vote for real change around the country.

    2. bob

      Because it was there first? This isn’t recess rules. People have died. There is nothing that has been done that will change the possibility of it happening again.

      Dropping the road won’t work. Raising the bridge will. Making the crossing at grade will work. Shutting the road down will cost even more, for the people who use the road. All of the costs are borne by the taxpayers, and all of the consideration is given to the private entity, the railroad, who get subsidized by that same government.

      Heads I win, tails you loose.

  5. Bates


    The US Gov already attempted to boost consumer spending by sending checks to every taxpayer. The result was that those receiving the checks used the money (debt of zero maturity or Federeral Reserve Notes better known as dollars) to pay down existing debts. (humorusly…with some being spent on porn sites and bars).

    This experiment had the exact opposite effect that the Fed and Gov desired. Paying down existing debt decreases the monetary base which is not what the action was aimed to accomplish. The goal was to get consumer spending restarted but failed to take into account the mood of the citizens…fear…which is causing more citizens to save or pay down existing debt.

    Let’s suppose that the Fed/gov decided to do a real ‘helicopter drop’ of dollars. What would happen to those dollars? Based on what happened the first time, described above, I would guess that the dollars would be used to 1) pay down existing debt, 2) any excess after existing debt had been paid down would be split among savings and consumer purchases…and based on the mood of consumers I would guess that most of consumer purchases would be for necessities.

    For every action there is a reaction. What would be the reaction to a helicopter drop? Much would depend on the size of the money drop…if enough money were dropped for all underwater mortgage holders to pay off their mortgages I would guess that the dollar would be viewed with a new skepticisim at home and definitely abroad.

    Since hyperinflation, unlike normal inflation, is a psychological event, based on a general loss of faith in a currency, it is entirely possible that a helicopter drop of money could induce hyperinflation and a general stampede out of dollars and all dollar denominated assets. At minimum the move to get rid of the dollar as the world reserve currency would be sped up.

    I believe it is better to allow all that want to exit their underwater mortgages and other debts to declare bankruptcy than to completely destroy the dollar. Individual bk causes some pain for some citizens…a destruction of the dollar would cause a lot of pain for almost all the citizens.

    BTW, in this article the author uses the terms ‘money’ and ‘debt’ as if they were two different beasts…they are not. Even the dollar is a debt based on faith that future tax revenues will make it usable to purchaes goods and services.

    The American Citizens are already frightened by the lack of political leadership and the level of outright theft going on in DC and Wall St. What effect would a sudden ‘helicopter drop’ of money have on the American Citizens? Certainly, there would be an initial euphoria at the opportunity to pay off debts with ‘sky dollars’… but what would be the result a year after the sky dollars arrived on the lawn? After all, those with no debt but receiving a more or less equal amount of sky dollars could use their newly found ‘wealth’ to drive the prices of assets to the moon.

    Meanwhile, those citizens that used all their sky dollars to pay off existing debt would be forced to put more purchases on plastic to simply exist…while all dollar denominated assets would be rising rapidly.

    To use a simple analogy…how much would flawless 3 carat diamonds be worth in dollars if flawless 3 carat diamonds were dropped from helicopters over ever hamlet in the US?

  6. wunsacon

    I am very tired of security theater. I will not fly again in the continental US. And if I want to vacation in Europe again, I will take a transatlantic repositioning cruise for one of the legs.

      1. Yves Smith Post author

        When ships go from set of port to another across an ocean, that’s a repositioning cruise. They are priced much cheaper on a per day basis because you spend so many days at sea.

  7. fog Horn Leg Horn

    Here is a concept, what IF, there were a law suit that exposed the fact that the big banks, and their “securitized loans” didn’t really belong to anybody? And that forced them to “mark to market” all of the mortgages out there – in order to stave off the other option – complete mortgage melt down?

    Just daydreaming, but what if? I mean, what is half a trillion? Isn’t that about the size of the too-bog-to-fail bailout? How might that affect the economy if that figure ended up on Main St. vs. Wall St.?

    1. Glen

      Hard to tell about bailout size, but it’s MUCH BIGGER than half a trillion. Here’s some estimates:

      We MIGHT get some clarity with the audit the Fed bill, but maybe not. As for getting the money back? Don’t hold your breath. It’s fair to say the average American will pay for a one year bailout for the rest of their life.

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