Links 9/8/10

Sorry for thin posts, have to do a quick turnaround trip to NYC, then back to Maine.

Study slashes estimated rates of ice loss from Greenland, West Antarctica Raw Story (hat tip reader John D)

Fears of a Decline in Bee Pollination Confirmed Science Daily (hat tip reader John M)

AP Begins Crediting Bloggers as News Sources The Next Web (hat tip reader John D)

Overseas Visitors to U.S. Start Paying $14 for Tourism Promotion Bloomberg

Top Democrats Throw Cold Water on Obama’s Jobs Plan Roll Call (hat tip Huffington Post)

NYT Pushes BP’s PR Line on Its Ability to Pay Ryan Chittum

Beggar thy Neighbour Credit Writedowns

Deep Read: ‘Traders, Guns & Money‘ Planet Money. A podcast, but you can also read the transcript if you don’t do podcasts.

Do financial statements tell the truth? Steve Waldman. Eeek, from a few days ago……

In Connection With Steve Lubben, Credit Slips. On Chase/Lehman litigation.

Wall Street Firms to Cut 80,000 Jobs in 18 Months, Whitney Says Bloomberg

Rome is Burning Karl Smith (hat tip reader Michael C). A great rant and a must read.

Antidote du jour:

Picture 14

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  1. attempter

    Rome is Burning:

    Yes, very good rant. It lays bare that “reform” within this system cannot work because the system itself has terminally failed. It’s a terminal kleptocracy.

    The problem is very basic, very simple. The people are perfectly capable of managing their own work, and are of course the owners of their work, including the means of production. Where ownership and management repose in these rightful hands, there can never be capacity underutilization or unemployment. These become impossible.

    On the contrary, underutilization and unemployment are intentional features of a system where criminals have stolen both ownership and manangement of the economy, and where artificially generated scarcity and inefficiency, and intentionally engineered crises like our current one, are simply part of the oligopoly rent-seeking strategy.

    So the answer is clear. If we want a rational, efficient, productive, and moral economy and polity, we simply have to purge the parasites and redeem our stolen property. Take back our economy, into our own hands once and for all, and keep it there. Once our work is again truly our own, there will no longer be any question of underutilization, unemployment, and lost production.

  2. Sundog

    On the face of it, defaulting on their debts and walking away would seem a mad act: all [the] banks would instantly go bankrupt, the country would have no ability to pay for the many necessities it imports (oil, for instance), and the country would be punished for many years in the form of much higher interest rates, if and when it was allowed to borrow again. But the place does not behave as a collective; it lacks the monks’ instincts. It behaves as a collection of atomized particles, each of which has grown accustomed to pursuing its own interest at the expense of the common good. There’s no question that the government is resolved to at least try to re-create Greek civic life. The only question is: Can such a thing, once lost, ever be re-created?

    There’s a lot to be said for a guy who gets out there and grabs for the gold ring. Mexico is staring at *you* Michael Lewis.

    Michael Lewis, “Beware of Greeks Bearing Bonds”

    1. EmilianoZ

      This Michael Lewis piece is a jaw-dropper. It gives an extremely bad image of Greece. After reading it you’ll think they deserve every bit of austerity they get and the EU had better throw out Greece and welcome Turkey.

      Basically Lewis says that the Greeks are a nation of cheaters. Everybody was cheating. Public service employees received unjustifiably bloated salaries. In the private sector nobody was paying any taxes.

      Lewis’ depiction of Greece also makes the populace’s anger, the ferocious riots totally incomprehensible. Don’t they realize they brought all that on themselves?

      Surely Lewis is missing something. You can’t spend one week in a foreign country and declare yourself a specialist of it.

      In a country where everybody cheats it would be unreasonable not to do it. But not all cheaters are equal. If you cheat on a small income your pickings will be slim. The fish always stinks from the head.

      The social contract is breaking down everywhere.

      1. LB

        fwiw, i’ve personally had 2 friends who are Greek nationals give me similar analyses and anecdotes to what Lewis writes in the article.

  3. rjs

    on the pollination decline: i have already written to Dr Thomson who authored that study…
    i think he jumped to the wrong conclusion as to the cause…ive kept bees since the 70s and bee foraging is temperature dependant…they always first fly when the temps go over 45F, and the bumblebees are always out before the honeybees…so climate change would affect the bees as much as it does the glacier lilies…

  4. russell12000

    On the rant:

    Well it seems obvious at the moment that much of our existing physical plant is geared toward property development and we have a lot of that at the moment. Sounds liked the classic malinvestment argument.

    There is also the speculative bubble argument, which would say that people did not get the return on the investment they needed to pay off their debts. So now to many people who might buy are broke.

    I believe both of these arguments follow within the authors allowable argument category. But they still leave a lot open as to what on earth to do about it.

  5. rjs

    on BP’s ability to pay; the administration cut a sweetheart deal with them, a month ago:

    Oil spill claims fund to be backed by BP’s future drilling revenue

    The $20 billion fund for victims of BP Plc’s oil spill will be backed by the company’s U.S. oil and gas production, an arrangement that an advocacy group called a conflict of interest for the Obama administration.

    Provisions of the Deepwater Horizon Oil Spill Trust were released today at the White House. BP agreed to the trust fund, to be administered by Kenneth Feinberg, after a June meeting at the White House with President Barack Obama and BP executives including Chairman Carl-Henric Svanberg.

    Using BP’s production as collateral is “wildly inappropriate” because it may give the administration pause in pursuing criminal charges against the London-based oil company and in cracking down on its safety failings, Public Citizen, a Washington-based advocacy group, said today in a statement.

    “It’s to their advantage to have an upper hand with an open-ended criminal investigation still pending,” Tyson Slocum, director of the group’s energy program, said in a statement. “The upper hand is an agreement that directly links a continued robust presence by BP in the Gulf of Mexico to financing an Obama administration priority, the victims’ fund.”

    A White House spokesman didn’t immediately respond to a request for comment.

  6. Endymion

    Rome is burning:

    Factories are standing idle for lack of workers?

    No, they’re standing idle because there’s no point filling them with workers to make things no-one wants, or can buy at half the price from Chinese factories.

    1. s

      Exactly. Demand cannot keep pace with supply, especially now that jobs (hence income) is outsourced. Our productivity has increased lots since a century ago when the 8-hour day was instituted.

      Only solution is to readjust employment through a worldwide reduction to 6-hour workdays without reduction of pay. Corporate profits will go down, but so will (worldwide) unemployment, with obvious benefits to societies as well.

      Problem is, unemployment means cheap/flexible labor force, which is a boon for the corporations that in turn pay the politicians.

      1. CingRed

        “Only solution is to readjust employment through a worldwide reduction to 6-hour workdays without reduction of pay.” This is not wealth generation. At best it is wealth redistribution and at worst inflation. Quit thinking of money printing as wealth generation. If you think using 100% of the machinery for 6 hours a day is better than using 75% of the machinery for 8 hours a day you had better go back to 2nd grade math class.

        1. s

          Your idea of wealth generation is oblivious to the fact that natural resources are very limited, which leads to stealing other peoples’ resources through coercion/ war and eventually running out of them.

          Redistribution is what is needed; you got that right. It will make for a better balance of supply-demand and less unemployment. A more democratic society.

          BTW I am a math professor; don’t need math lessons.

  7. Bates

    RE: Rome Is Burning…

    “The job of the market is to bring together willing buyers with willing sellers in order to produce value.”

    Bullshit! The job of the market is to DISCOVER A CLEARING PRICE and to DECIDE INTEREST RATES. Neither of these functions are being allowed to take place because of TOO MUCH MEDDLING IN THE MARKETS by the Fed and by gov fiscal policy decisions that are sprung on the public willy nilly. If the fucking government and Fed will get out of the way capitalism will proceed to discover clearing prices and find interest rates that borrowers and lenders are willing to do business at. The Fed has no more idea what interest rates should be set at than I do. Only the collective wisdom of the market can decide that number. Any small group of individuals, like the Fed, that claim they are wiser than Mr Market are simply putting their ignorance on display.

    The author of this post attempts to limit the debate and he does not allow a discussion of what got us here. We are here because of stupid (or fiendish) Fed policy of too low interest rates for too long causing serial credit bubbles in various asset classes. He assumes that a new door can be put on the house and all will return to ‘normal’. Not so. Why bother putting a new door on the house in the middle of a catagory five hurricane?

    The gov and Fed are engaged in the process of taking over the mortgage market in an attempt to bouy housing prices at a higher level than the market clearing price…their attempt will be futile. Mr Market always wins. Their best efforts will bouy the housing markets for a short time at the cost of trillions of dollars. There is no example of a burst bubble that has been reinflated…but they keep throwing money at the current fiasco that they created.

    “The question is how do we end this thing as quickly as possible. How do we stop wasting our basic resources (men and machines), day-after-day, month-after-month, year-after-year.”

    LET THE MARKETS CLEAR! Allow capitalism to work. Get rid of the damned Fed… Who needs an organization that has proven that they did not see this crisis coming (I don’t believe that btw) and now that it’s here they don’t know how to fix it…because fixing it would mean tossing their Wall St buddies under the train of liquidation in order to allow markets to clear.

    “Of those that agree that this is the result of insufficient aggregate demand we can debate the fastest means of spurring such demand: aggressive monetary policy, payroll tax cuts, something else we haven’t thought of – I am all ears.

    However, these are the limits of rational disagreement.”

    He is dead wrong and time will prove that he is dead wrong. Limits to rational disagreement do not exist except in the mind of a peanut brain. The debate will not be limited to more fiscal stimulus or to more QE…these measures have kicked the can down the road a short distance at the expense of wrecking the capitalist markets. What will more QE accomplish? Provide the Wall St banks with another trillion dollars to collect interest on while paying out huge salaries and bonuses to bankers? What will more fiscal stimulus for houses, cars, appliances accomplish? Pull demand forward for a few more months and when it runs out the economic stats, and economy, all tank again?

    The author is proposing to limit the debate to a narrow channel that contains only proven failures. To get the economy back on track the discussion must be widened to include untried fixes (or, fixes that have been untried since the recession of 1920)…including getting rid of the Fed and allowing capitalism to work the way it’s supposed to work…and the only way it can work.

    This is a ‘must read’ only in the sense that it attempts to limit discussion to fixes that have already been proven to be non-fixes! Markets cannot be controlled (micro managed) and free at the same time. It is impossible.

    1. Chris

      @Bates – suuurrre, the markets are God Incarnate when government and The Fed steps out of way. History is replete with examples of this. No rules capitalism is the way to go. Right.

      You’re still repeating the lie that markets are self correcting — they are not and it has been shown time and again.

      1. Bates

        Chris…I did not say ‘markets are self correcting’ in the sense that you mean it…or, the sense that you think capitalism should work.

        Capitalism is self correcting. It self corrects with the normal boom bust cycle. Always has, always will. The market does not care that you think there should not be boom bust cycles…that is simply the way it works. You can’t change it, I can’t change it and the Fed can’t change it.

        In periods of exuberance markets expand and malinvestments are made. When people begin to get nervous about the expansion credit begins to contract and there is a bust cycle…the malinvestments are liquidated. Rinse and repeat. Hell, even Keynes understood this and he reccommended that govs put away surpluses in boom times to spend into the bust times. Unfortunately no gov ever manages to save any money in the good times…much like individuals that find themselves up to their eyeballs in debt now. They blew their money foolishly.

        If you don’t understand this then you don’t understand capitalism.

        1. Ming

          So … Mr bates… What Are you advocating? May I hazard a guess that you advocate 100% pure laissez- faire… No rules no regulation? …. Let the market clearing price occur ? let the invisible hand sort out the supply and demand imbalance and destroy the excess or mis- allocated supply and-or production capacity?

        2. Ming

          There is a beautiful example of ‘laissez faire’ and ‘ market clearing’ price in action. In it the scarce commodity is sold to bidder offering the highest prices…the suppliers allocate labour and resources to the most profitable ventures, the government is conscientious of ” the powerful invisible hand’ and does it’s best not to interfere, and the excess labour migrates to different, more productive industries where demand for labour is highest…. And this wonderful example is …. ‘the Irish Potato Famine’ !!!
          The merchants were able to sell Irish grain to the wealthier English ( to feed the horses of course), instead of selling at low prices to the impoverished Irish farmers who worked the land. Obviously, part of the reason that the farmers could only collect a tiny wage was because of excess labour suppply. Here agains, the market takes care of the problem…. Out of a population of 8 million souls, 1 million left the country searching for better work, and 1 million died…. Excess labour problem solved. =} Laissez faire at it’s finest.

          But seriously….. I do agree that markets are exceptionally powerful, I would support the statement that ‘suppply and demand’ are in fact principles that do govern a huge amount of human interaction and commerce. But the role of society, and government is both to allow the ‘cleansing, waste reducing, destruction of mis- allocated resources and Capitol, but to also insure that the process and outcome is compassionate tolerable for the middle class and the poor, ( the rich have enough resources to take care of themselves).

  8. anan48

    @” Do financial statements tell the truth? Steve Waldman. Eeek, from a few days ago”

    Why “eek”? IMO Waldman does a good job of explaining and rather matter of factly pointing out the two most obvious inherent conflicts when preparing financial statements:

    1)Preparation of a profit and loss statements based upon cost principles applied consistently over time vs. an accurate balance sheet whose assets and liabilities should always be based upon the most current fair values.

    2) The objectivity (and verifiability) of a historical-cost based financial reporting system vs. the subjectivity of the(theoretically) more useful fair value regime.

    The author correctly points out that the cost vs. fair value question is a dilemma that cannot be answered in the universal sense, even for an individual company at the micro level. It is like trying to present a precise “bottom line” objective value of beauty for a famous work of art. Like art appreciation, fair value is a question better answered at the individual financial statement user level.

    Informed users understand better than anyone else their own individual perspectives of how the world works. This tends to lead them to develop their own individual frameworks and models through which they filter, interpret, analyze and evaluate data that are included in any set of financial statement. This implies that since the user’s perspective will be different than that of company management, the financial statement user would be more interested in knowing the various assumptions used by management in arriving at the various numbers contained in the report. The underlying assumptions are important because they explain how management computed the various amounts that are presented therein. The assumptions provide more insight and allow the user to draw his own conclusions about the financial condition of a company and whether his conclusions are consistent with those of management.

    Again as the author correctly points out, these assumptions are generally included in the footnotes to the financial statements. This is where he says that knowledgeable users can drill down and gather the granular information about the company in question . This allows them to make necessary adjustments to the financials to be more consistent with their own view of how the world works.

    Fair value in a perfect world makes the most sense. Unfortunately, because it can be highly subjective it can be easily subject to manipulation. And human nature being what it is, tells us there will always be those who try to game the system. So fair value presentation may not be the most practical approach to real-world financial reporting. However, a really solid and detailed set of footnotes can allow a knowledgeable user to better understand the results of a company’s operations, filter out those conclusions that he believes are not valid, and create a financial picture that is more consistent with his own perspective of how the world really works.

    1. Sungam

      I was going to make that precise point.

      In any case it was a very good link. I’m going to forward it since it clearly lays out all these points.

    2. Yves Smith Post author

      The “eeek is in the phrase referring to the fact that I am late to link to it, hence why I am eeking.

  9. Jim Haygood

    ‘Sept. 8 (Bloomberg) — Visitors to the U.S. will today start paying a $14 fee to promote travel from overseas under a law sought by companies such as Marriott International Inc., Walt Disney Co., American Express Co. and Loews Corp.’

    This is along the lines of the Chinese practice of charging the families of executed prisoners for the bullet.

    Another step down the broken flagstone stairway leading to Third World status, courtesy of our corrupt corpgov.

    Cancel your Amex card, if you haven’t already. Hit the corporate thieves where it hurts.

  10. Jim Haygood

    “Beggar Thy Neighbour’ by Neils Jensen is an excellent summary of the global dilemma. It’s only marred by a silly piece of market advice paraphrased from Michael Hartnett of Bank of America Merrill Lynch:

    From a portfolio allocation point-of-view, the first rate hike will be the pivotal moment – the point in time where investors should shift their focus from bonds to equities.

    Well, let’s test this thesis. On the last go-round, the Fed Funds rate was first raised from 1.0% on 30th June 2004. Not only did this hike occur nearly 21 months after the bear market bottom, but also the S&P 500 already had rallied 46.9% — close to half of the bull market gains it would eventually achieve by October 2007.

    Folks who take market advice from idiot brokers instead of doing their own research, deserve to lose their shirts. If Bank of America hadn’t been bailed out courtesy of our goodselves, the braindead dinosaur mercifully wouldn’t exist anymore. Hopefully the next recession will deliver the coup de grace!

  11. Jim Haygood

    ‘This is not a bad harvest. The problem isn’t that there is less to go around. The problem is that we are creating less, building less, making less.’ — Karl Smith

    When you bleed off 4% of GDP for six decades to run a military empire that doesn’t pay for itself, you end up frickin’ poor.

    The welfare-warfare state is not viable. A culture which can’t see this is not viable either: the anglophone world is a fading intellectual backwater. No jodeme, me voy!

  12. chad

    RE: the rant link

    Is the rate of the upswing in capacity utilization continuing or has it stagnated? Even though it’s only at 75%, the graph infers that capacity utilization is increasing pretty quickly.

    One other question, “capacity” can mean a lot of things. I could be wrong, but the author is assuming that employment and capacity utilization are directly proportional. Is that always the case?

    1. Bates

      “Is the rate of the upswing in capacity utilization continuing or has it stagnated? Even though it’s only at 75%, the graph infers that capacity utilization is increasing pretty quickly.”

      Think this over…A factory that employed 1000 workers closes, remains closed for a year, and is replaced by a new factory that is packed full of robotic machinery and 200 workers.

      How is capacity utilization calculated in this instance? One factory has been closed and 800 employees will never work there again. Another factory has opened employing 200 people but producing twice as many widgets as the old factory. Productivity gains are enormous while a ‘jobless recovery’ is in progress.

  13. Allan Connery

    Sorry for the dead link in my previous. Try this cut-and-paste link:

  14. anonymous

    You make it, I’ll buy it. That seems to be the deal. The recent press reports of the Chinese making nice with Summer et al over poor relations can be seen several ways. I lean heavily towards the notion that the Chinese can read the populist writing on the US wall.

    The post-November environment is going to be highly polarized, with a significant chunk of the population seriously neo-isolationist and angry about cheap imports. My guess is the Chinese see a wave of populism coming over the horizon. Those who can’t swim in the post November waters are going out with the tide.

  15. Bill

    Tourism Promotion
    How can I not be a cynic? Lobbyists, in this case hotels and amusement parks, et al win again. Tourism promotion fee $10 with another $4 to Homeland Security for processing to be charged to foreign visitors. Is there no shame in this world?

  16. kevinearick

    Pop Goes the Weasel:
    Op-Amps, Quantum Rails, & Spring Switching

    So, the nation/state bias gate system controlling the transfer of economic profit from the communities to the multinationals, the pipeline, initially based on productive legacy investments in continued economic growth, is a useful tool, but when the pipeline is shorted in on itself, giving the multinational owners control over local property use, to artificially pump the pipeline with economic activity, steroids, the pipeline is flushed of all productive legacy interests. Left to its own devices, the dc bus shorts itself out every time.

    Giving Wal-Mart property and operating discounts was pretty d— ignorant, but not as ignorant as giving multinational owners tax write offs for hobby farms, or paying people to electively engage the healthcare system with artificial symptoms toward the end of growing the welfare and entitlement system.

    There’s plenty of guilt to go around. The contrived majority voted for these outcomes, along with permanent government, shorting their own future by casting the kids out. Now, they are in a hole they can’t get out of complaining that the kids are stupid.

    When the communities rescind family law, lower rent to $400, lower the cost of unimproved property to $1000/acre, and increase unprotected labor’s percentage of the economy to 53%, the economy will take off again. Until then, it falls, decreasing volume and increasing pressure. Who are they going to throw under the bus next?

    Stay out from underneath those muni bonds.

  17. anon48

    @ Rome is burning

    The last three paragraphs of the rant:

    “My argument is no, this isn’t just another bad experience. Its a failure of our most basic institutions and is leading to pure loss.

    It would be as if the door to your apartment was ripped off and heat was spilling out into the atmosphere and people said “Well you know sometimes you have deal with the cold, lets talk about the ideal size of an apartment. Big ones are draftier you know. No small ones cool down too quickly”

    What! No! Lets fix the fucking door. Do you understand: the door is missing. This is not the time to argue about ideal apartment size, this is the time to keep our heat from spilling out purposelessly.”

    OK, I assume when the author provided the two charts showing the trends of capacity utilization and the civilian unemployment rates he’s telling us the significance of what happened and that it would be the equivalent of the heat spilling out into the atmosphere after the door gets ripped off the apartment. OK got that.

    But where does he try to describe the economic equivalent of the door and the economic dynamics that caused it to blow off its hinges? Nowhere that’s where (other than his feeble attempt at blaming things on “…failure of our basic institutions of production… ”

    No hint of insight provided anywhere about a potential solution. It was just a meaningless rant. Nothing more. No different than if I stood in the surf on a beach in South Jersey and screamed at the ocean to stop pounding the grains of sand into oblivion.

  18. jessica

    Very minor issue, but the $10 fee on foreign tourists is very petty. The $4 service fee to collect the $10 fee is ridiculous.
    This kind of taking advantage of a monopolistic position for low-grade highway robbery is much too common these days.
    “Welcome to the Land of the $39 overdraft fee. That will be $10 plus $4 for the privilege of paying the first $10.”
    Sorry for mentioning it. You can go back to discussion of the big time thievery now.

  19. Demented Chimp

    Hmmmmmm maybe we dont need all the shit being produced by said factories. Huge over production globally of gadgets that go beep, clothes we dont need and knick knacks to fill our mcmansions.
    Keep them closed and find something better to do with your afternoons than watch Judge Judy.
    Lets face it mechanisation ended any real need for most of us to work. Lets face up to that

  20. eric anderson

    Great that NC has noted the reduced estimates for ice sheet melting. Fair and balanced! :thumbs up:

    From the story: “Together, that would account for more than half of the annual three-millimetre (0.2 inch) yearly rise in sea levels, a pace that compares dramatically with 1.8mm (0.07 inches) annually in the early 1960s.”

    Note word “dramatically.” Global temps were cooling from the 1940s through the late 1970s. What was the sea level rise in the warming period from roughly 1910-1940? When you pick this comparison point — 1960s — it makes current sea level rise (3mm/annually — not really very alarming) seem more threatening. Globe has been generally warming since the Little Ice Age. Is current sea level rise so much greater than average for AD 1700-2000 that we should be alarmed? Is it a “dramatic” increase in the context of the larger time span?

  21. Jack Parsons

    A fine fine Afghan. These dogs run with a weird gate that looks clumsy, until you see one running with other dogs and leaving them in the dust.

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