Links 10/19/10

‘Ten years’ to solve nature loss BBC

Bacteria ‘R’ Us Miller-McCune

Epitaph For An Administration Paul Krugman

China Plans to Reduce Its Exports of Minerals New York Times. So now it’s official. But the actual reductions now appear to be far more significant than those announced as coming into effect next year.

Beyond Being #2 Andy Xie, China International Business ( hat tip Richard Smith, from Paul Kedrosky)

Federal Home Loan Bank of Chicago sues B of A, others Crain’s Business (hat tip reader 1SK)

Felix Rohatyn Looks Back, and Sighs Andrew Ross Sorkin, New York Times

Finance and the Housing Bubble James Kwak

State antiquated property registration cause of foreclosuregate? WAPO says yes? Rdan, Angry Bear. That op-ed is an embarrassment. How can you say you respect property rights and then be willing to ride roughshod over them in the name of dubious efficiency?

Have a look at this post, dated October 12, by Gonzalo Lira, versus this “Market Commentary” by David Kotok, dated October 15. Note that the common material isn’t a few lines, but roughly fifty paragraphs. Oh, but Kotok has now has a disclaimer, but I saw Kotok’s version before he added it, and Lira also has retained and is circulating screenshots of the before and after. And the attempt to cover his tracks isn’t honest. Kotok implies the reproduction is with permission, and to add insult to injury, provides no citation or link back; Lira had in fact posted it three days before. This simply isn’t kosher.

Deleveraging, Deceleration and the Double Dip Steve Keen (hat tip Richard Smith)

Antidote du jour:

Picture 14

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  1. Toby

    Re: ‘Ten years’ to solve nature loss

    “Much hope is being pinned on economic analyses showing the loss of species and ecosystems is costing the global economy trillions of dollars each year.”

    Because unless we assign some dollar-value to life, the universe and everything, no one has a clue why we should value it. Money is value, after all. Economics has proven that beyond a doubt, right?

    What must change is the money system, if we are to have a chance of being long-term in our societal behaviours. We are currently compelled by credit (debt) money to be systemically short-termist. Furthermore, at the trickier and subtler cultural level, we musto learn that there is indeed ‘profit’ in non-money areas, like sustainability, community strength, good universal education, biodiversity etc. These all have ‘value’ in their own right, not intrinsically, but systemically, and without any need to refer to dollars to asses their worth. They have genuine value as preconditions for health and prosperity.On the other hand, money exists as a consequence of these things being in robust health, not as some a priori, god-given, unalterable fact of life that powers everything else. Money does not make the world go around, rather it depends upon the world going around in a particular state of nature for its continuing existence. Not as snappy, but far truer anyway.

    We have the cart before the horse, and the system is breaking down as a consequence.

    1. rene

      “Because unless we assign some dollar-value to life,” we are doomed.

      In our linear, cradle to grave “economy”, externality costs are not factored into consumer prices. This means that profits are privatized and the losses are socialized. Now let some really clever people work on that issue. Anyone not agreeing to take into account externality costs is 100% wrong. Period.

  2. Toby

    I should have looked on before posting:

    “A UN-sponsored project called The Economics of Ecosytems and Biodiversity (TEEB) calculates the cost at $2-5 trillion per year, predominantly in poorer parts of the world.”

    This is upside-down thinking. Saving biodiversity is not a cost, not saving it is. To call it a cost is to say money/debt is more important than biodiversity. Right now we value ‘saving’ money above saving the planet! This is insane, yet hardly anyone notices. Governments, more or less the world over, can spend (not lend at interest) money into existence, money which is in reality merely an enabler of economic (and other) activity, and not a commodity with intrinsic value which must be conserved at all ‘costs.’ Who cares about GDP growth when pursuing it is destroying the life-ground that nurtures us?

    We must do what it takes to stop the erosion of the only thing that matters: life on Earth. Time is running out.

    “However, the bitter politicking that has soured the atmosphere in a number of UN environment processes – most notably at the Copenhagen climate summit – looms over the Nagoya meeting.”

    The reason for the bitter politicking is the crap, boneheaded money system we have.

      1. LeeAnne

        I’d be careful of conflating these reports of shortages being used to shore up Monsanto frankenfood monopoly schemes.

        The FDA approval of secrecy by eliminating the labeling of franken foods is a warning that the FDA has been captured and no longer represents the interests of consumers. Criminals are in charge. The agency has a mandate to protect consumers through labeling.

        We’ve seen this movie before in finance; the gutting of regulation with accompanying propaganda. Are we going to allow it to continue with the gutting the FDA and accompanying propaganda? Its usually not the agency that’s at fault; its the people hi jacking the agency who are the criminals. So, where’s the information on the people at the FDA responsible for this labeling atrocity.

        It would seem to me that recent FTC POM challenge is very likely a back door strategy for gutting FDA authority over food labeling.

        1. skippy

          I hear where your coming from on the supplier side of things, although at this present time we face dire consequences with regards to consumption. Present issues will seem trivial in comparison, it was my hope the present system would get it act togeather….silly me.

          1. LeeAnne

            Would the end of farm subsidies, a minimum wage for all including non-citizen workers and higher food prices do any good?

            Theres something very wrong about a system that abuses farm animals, abuses workers, takes the nutrition and flavor out of foods, etc.

            Because of overly cheap slave labor we are way behind in harvesting technology.

          2. Toby

            I agree with both you guys, but we can’t give up hope; that leads to inaction. As pathetically little as it is, I voice my view as often as time allows, and will never again vote for a mainstream party, always buy organic or fairtrade, and no longer watch TV. This has to happen at mass level, and sites like Naked Cap and the further out Reality Sandwich help get such a groundswell going.

            We need change so deep nothing is left untouched, but the primary battle ground is the bullshit money/economics high priesthood that has humanity under its thumb. That’s where the intellectual, moral, and vitriolic pressure must be brought to bear first. Thereafter the infrastructure, hard and soft, can be restructured to allow education, environment and health to take centre stage.

            And because of technology-related unemployment, I sugest a goal of 100% dignity for mankind (and other life), rather than a goal of 100% employment. At times they may coincide, but often not. Dignity must come before working any old job just to keep GDP swelling…

  3. rjs

    any way you can make your “recent items” longer, yves?

    typically im here once a day and if i dont drill down to the last ive seen ill miss something…

  4. LeeAnne

    Felix Rohatyn’s credibility as a patriot and veteran Wall Street finance guy is unassailable; his honesty and humanity refreshing. He’s the last man standing; there were many others like him in the Wall Street I’m familiar with since the 1950s. They would never have any part of this carrying on. Many retired during the ‘net bubble, because as a professional you couldn’t compete with the crooked -‘earnings no longer matter’ Sandy Weill bucket shop wannabe hustlers on Wall Street.

    So I am happy to see Rohatyn emphasize ‘civility’ -ordinary decency you could say -as missing. Because it infects everyday life, not just business. Just witness the habit of people blocking the entrances and exits of public spaces and blocking those trying to get through to an empty space in the subways and buses; people walking into each other on the street, rarely able to hold the door and stand aside. There’s something wrong with people’s sense of their own space and that of others. Something in the water?

    But I remember Mark Twain commenting on his trip to Europe, how it annoyed him that people eased each other off the sidewalk. That gives me hope that this is all merely a phase. I’m afraid though that its going to take a catastrophe to change people’s consciousness and awareness.

    The lack of civility between people is evident everywhere, and IMO, disparities in incomes and opportunity over the last 30 years is responsible for that. Even children are acutely aware of injustice.

    The idea that civil society could be comprised of literate people fearful for the lousy jobs they have and fearful after they lose them for their survival is as uncivilized as it gets; the rationalization for illegally permitting a peaceful invasion of 30,000,000 uneducated, deprived and politically abused people while destroying American sovereignty for the Mexican and Afghan drug trade.

    You can’t treat people with fear fear fear and expect them to do anything other than take it out on each other, which I suppose, plays into the hands of those skimming off the top and gutting US assets after having accomplished that against its people. This is all CRIMINAL behavior.

    TV elevates incivility to an art form. Rude obnoxious and empty suited TV hosts compromise the very people, their guests, who need to be heard by the public treated like throwaways and encouraged to perform their Public Relations agenda masquerading as debate.

    These TV shows should be boycotted by professionals of every stripe.

    C-Span, I’m afraid, doesn’t cut it; with their emphasis on featuring spokespersons for the status quo. Having listened to it for years before, since the 2008 TARP, I rarely bother. The value of listening to an AARP lobbyist talking about health care reform? Really!

    1. Amit Chokshi

      Why is Felix R unassailable? Cause he’s an old bag that made money from the 70s-90s? Seriously, I get a kick out of these bozos who get religion around 80. It sounds totally disingenuous to at this point in their lives to recognize and highlight societal inequities. Even in your 20s when you’re working on deals and modeling them out for an LBO, u tack on the debt, run the heavy interest expense through and say ok, for the sponsor to pay down the debt and get the IRR they want, we need savings so basically SG&A – where the employees are – is going to be gutted. You know you are destroying a company and that when it comes out from the LBO 5 years later it probably will have a demoralized overworked, underpaid workforce. Hard to believe these masters of the universe never had these thoughts til they made their hundreds of millions and then say so.

      1. craazyman

        Oh don’t be so sentimental. If the employees had any real talent or skill they’d go get new jobs right away and the financiers would go broke without them. That’s what I learned in graduate school anyway, so it must be true, given how much I paid for tuition.

        -John E. Cash, MBA, CFA, LLD, LLC, LP, LTD, CCC-, BYOB, AA

      2. Paul Tioxon

        Not so crazy to believe they did not have these those thoughts, Amit. However, as I recall, Wharton students couldn’t get laid for gas, grass or cash and then, traded up to trophy wives or went nuts with Ukrainian hookers during their mid life crisis which for them arrived at about 30 or 31. I think psychologically their body clocks tick to Q1 Q2 Q3 Q4, hence the rapid maturation process. Because of the resentment to all of the denigration, ostracizing and general contempt and loathing directed at them, they just view this as pay back. It’s too bad, some of those guys and gals were pretty smart.

      3. LeeAnne

        Wall Street and the US Government were not always run by gangsters. The elimination of corporate regulation triggered a race to teh bottom throughout the land babyh.

      4. Mr. E

        Yep – I agree. So the first time he thought his actions would have any downside to stakeholders was in 1985? He was in his 60s already and had negotiated with unions for a long time.

        Sounds like a guy who lived in a moral cave for his entire life.

  5. Paul Tioxon

    The loan notes associated with consumer and commercial mortgages, have in some legal defenses, been shown to be of indeterminate ownership. Certainly, not owned by the entities that stand before the courts pursuing foreclosure. Property that can not be claimed because the owner cannot be contacted is governed by state escheat laws. A modest proposal for the 50 state investigation would be to accept mortgage payments to state treasuries under these laws where the payments can be held until owners can be identified, under the appropriate laws of the state. State treasurers may be able to facilitate this, once foreclosure defense hearings are adjudicated.

    Aside from the obvious fraud of selling 100% interest in an investment 2 or 3 or more times, to various parties, ownership may never be determined and the notes could be sold to the homeowners at a discount. It would be in the public interest to do that in lieu of public auction.

    Banks used to worry about perfecting their position. They made sure that the financial interest that they had when they lent money against real estate was very secure by being in compliance with all of the laws governing the recording of liens by public authorities, usually the county courthouse recorder of deeds. The failure to “perfect the lien position” would result in exposure of the bank to a defense against any future claim that they might have under the terms of the loan note. This lien defeating exposure was virtually written out of existence by most banks based on their volume of experience in dealing with problem loans over time. The mortgage putting the house up as collateral would have to be recorded so the bank would have the hedge if the note went into default for any reason, chief of which would be non payment. A lot of time and energy went into the precision filing all of the right papers, legally, in order to ensure bankers rights. Apparently, not anymore.

    1. wunsacon

      >> A lot of time and energy went into the precision filing all of the right papers, legally, in order to ensure bankers rights. Apparently, not anymore.

      When the insiders know they can instead pull in a few years of fat bonuses, why worry??

      I suspect we’d be better off eliminating the “corporation” as an option for business formation and resurrecting partnerships everywhere, so that the terms “clawback” and “piercing the corporate veil” become part of the “core design” of the structure rather than an “add-on” feature.

  6. DownSouth

    Yves said: “How can you say you respect property rights and then be willing to ride roughshod over them in the name of dubious efficiency?”

    [W]e economists have traditionally made innumerable criticisms of the inefficiency of various policies, criticisms which have often been to their own (and my own) utter satisfaction. The meager success of these criticisms in changing these policies, I am [now] convinced, stems from the fact that more than narrow efficiency has been involved in almost every case—-that inexplicit or incomprehensible goals were served by these policies and served tolerably efficiently.
    –George J. Stigler, “Process and Progress of Economics”

    1. craazyman

      never forget, one man’s inefficiency is another man’s salary. one man’s waste is another man’s treasure. one man’s death is another man’s life. yin and yang, one and zero, absence and presence, forget your angry Gods and transcend saith the running water of the holy river. Send me $50 I am sitting on top of a tree. — Prahandatanam Sengvalanistrtias, PhD in Tree Sitting

  7. Amit Chokshi

    How can one get a screenshot of Kotok pre his disclaimer? I forwarded that link to Bloomberg, I think those guys have some of these guys on waaaay too much, Kotok is a regular, would be good to expose some of these shenanigans.

  8. Ron

    Federal Home Loan Bank: The money moves into position for the assault!

    HOUSTON, Oct. 18 /PRNewswire/ –Today, the holders of over 25% of the Voting Rights in more than $47 billion of Countrywide-issued RMBS sent a Notice of Non-Performance (Notice) to Countrywide Home Loan Servicing, as Master Servicer (“Countrywide Servicing”), and to Bank of New York, as Trustee, identifying specific covenants in 115 Pooling and Servicing Agreements (PSAs) that the Holders allege Countrywide Servicing has failed to perform.
    The Holders’ Notice alleges that each of these failures has materially affected the rights of the Certificateholders under the relevant PSAs. Under Section 7.01 of the PSAs, if any of the cited failures “continues unremedied for a period of 60 days after the date on which written notice of such failure has been given … to the Master Servicer and the Trustee by the Holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates,” that failure constitutes an Event of Default under the PSAs.

  9. eric anderson

    @ Eric
    (I’m the “other Eric.”)

    Nobody around here wants to hear about fiscal discipline. You’re barking up the wrong tree. Preaching to the anti-choir.

    “While some taxes were raised (and, according to the authors, these worked against the recovery), spending cuts were 4 ½ times tax hikes. ”

    Noooooooo! Must print currency wildly! Government must spend, spend, spend. Doesn’t this guy know anything about economics?

    [/snark mode]


    1. Anonymous Jones

      What’s so sad about your comments is not just the failure to appreciate and understand the nuances of your own position but the utter lack of ability to engage with those around you. I think there are many, many people who frequent this site and are interested in fiscal responsibility. In fact, I would love to vote for radically trimming the expenditures involved in trying to rebuild Iraq and Afghanistan. I would love to be able to vote for spending less and spending smarter. I would love to make the government smaller (but yes, also make the wealth redistribution from the top 0.1% to the bottom 50% greater via transfer payments).

      I think a whole lot of the commenting audience here would feel similarly on these issues. You continue to fight so hard against something that doesn’t really exist. For what reason, I don’t know…

      1. attempter

        Because he doesn’t really want what he calls “fiscal responsibility”. For example, I think I saw him say he agrees with Ron Paul on everything except the war and Pentagon spending.

        Bye, bye, fiscal responsibility!

        My definition of fiscal responsbility starts with eradicating every cent of corporate welfare. Do that, and you’re most of the way toward devolving government completely.

    2. Doug Terpstra

      I think everyone here is very concerned about debt and spending—primarily the blatant looting of the commonwealth via crony capitalism and the upward wealth transfer via fraud.

      But just to clarify your sarcasm, since I still don’t understand much about MMT or innovative financialization in general, but is the Fed’s money “printing” really the same as government spending as you imply?

      Yves’ earlier Sitglitz post suggests almost the opposite, that the Fed is a private banking cartel whose counterfeiting is simply a back-door bailout for banksters that (indirectly?) reams savers and taxpayers. It appears to be very different than government spending such stimulus. One is supply-side, a proven failure we have had quite enough of; the other we have barely broached in any meaningful way. Perversely, our only substatntive stimulus to date is eternal war.

  10. Ron

    The money vultures will be picking over the financial carcass of BA and Wells its a race to get whatever is on the table before restructuring!

    conference call from BA:
    ” Customers knew the risks of buying MBS, questions the link between large number of put-back claims and final costs.
    Currently it is impossible for BoA to provide any “reasonable” estimates for eventual mortgage buyback claims.”

  11. DownSouth

    Gonzalo Lira said: “So in the name of “improved efficiencies” (and how many horror stories are we finding out, carried out in the name of “improved efficiencies”), banks digitized the mortgage notes—they didn’t physically endorse them, like they were supposed to by the various state and Federal laws.”

    Robert H. Nelson in Economics as Religion: from Samuelson to Chicago and Beyond gives a textbook review of how efficiency came to dominate American politics and economics. It’s a fascinating story that begins with “the gospel of efficiency” embraced by the Progressive Movement in the 19th century. As Nelson writes:

    The progressive gospel of efficiency in the United States became one of the triumphant denominations in a worldwide “religion of progress” that shaped the dominant secular religions of much of the twentieth century.


    As part of this grand project, Progressives sought to curtail the old political role of the special interests, thereby putting government decision making on an objective scientific basis in the service of the overall interest… [T]he new progressive vision of “scientific politics took technical rationality as the criteria of political action and sought to technically control and engineer social and political processes, with scientists, experts, and professionals as legitimate bearers of such knowledge.” It resulted in a “centralization of power in the hands of political and administrative elites [that] was justified as the science of democracy,” the means by which government would transcend private concerns and act for the benefit of all the people. Technical rationality included as a central preoccupation “the demands for efficiency” in government and society as a whole.

    Paul Samuelson was the economist who rode this utopian vision to its summit. He was also responsible for starting economics down the catastrophic path of reducing complex economic phenomenon to simplistic mathematical formulas. But Samuelson’s ends were pure—-it was all done for the public interest. “Like members of the priesthoods of old,” Nelson observes, economists “actually spend much of their time researching and pronouncing on the moral status of various actions in society, now assessed in terms of economic morality in which efficient and inefficient have replaced the good and evil of old.” And so the old morality was discarded. As Nelson continues:

    To be sure, Samuelson would no doubt acknowledge that the institution of slavery had to be abolished, even if it could have been shown that slavery produced more total economic product—-for slaveholders and slaves combined—-than the economic alternatives. He would probably concede the right of society to ban prostitution or drug use, even if it could be shown that the net willingness to pay minus the social costs of these activities was positive. However, for the vast majority of other cases involving social-value judgments about the manner of production and consumption, Samuelson reserves the right to apply his powerful (secular) religious lens. As a consequence, Samuelson must reject any suggestion that the framework itself of the economic system, the means by which prices are set, the legal definition of property rights, the institutions within which the market mechanism functions, the exact magnitudes of wage rates and interest rates, the degree of individual liberty maintained, the very existence of certain types of economic activities, are legitimate ultimate objects in themselves of the utility functions of the members of society.

    It wasn’t long before special interest began to encroach upon the paradise of innocence. The new priestly class—-scientists, professionals and experts—-proved no more immune to corruption than the old. And it was Frank Knight, the seminal figure of the Chicago School, who heralded the fall from grace. As Nelson explains:

    For Knight, even a priesthood—-of economists or otherwise—-could not be exempt from the general human condition; the professional experts will be sinners as well. Knight marks the beginning of a fundamental break of the Chicago school with the Progressives of Samuelson’s ilk, a new assumption that self-interest will be expressed not only in the marketplace but also in the actions of government and indeed perhaps in every area of society.

    Knight’s reaction to “the ever present and powerful workings of sin in the world” was not unlike that of Augustine, Calvin or the other early Protestants: “Ascetic discipline rather than the pursuit of happiness should guide human conduct.”

    The real sorcerer’s apprentice, therefore, would not appear on the scene until the coming of the second generation of the Chicago School. It was Milton Friedman who sewed the flowers of evil, urging that public interest be abandoned in favor of private interest in the running of the bureaucratic machinery that the progressives had built to serve the public interest. “[I]n disagreement with Knight,” Nelson explains, Friedman “regarded the efficiency of an economic system as the basic criterion of its success.” He “accepted the utilitarian characterization that human beings pursue the maximization of individual happiness.”

    So the state machinery was not dismantled. The heavy reliance on simplistic mathematical modeling was made “standard operating procedure.” But these tools were no longer deployed in the interest of the society, but of the individual. “As a moral philosopher,” Nelson concludes, Friedman’s “efforts perhaps suffer from his peculiar mixture of progressive and libertarian values; it is a difficult combination to sustain.”

  12. Doug Terpstra

    Kotok hides his plagiarism under protecting his source— good catch, Yves. His subsequent concern for decency in the opening alone is a real eye-roller:

    “The original text was laced with expletives and I would not use it in the form I received it. Therefore the text below has had some substantial editing in order to remove that language…The writer shall remain anonymous.”

    Oh, c’mon. Give us raw profanity especially when a vulgar subject warrants it, but please —dump the hypocrisy.

  13. plschwartz

    Many years ago I was in New Delhi having lunch. In front of the cafe on the street three Indian men were turning a piece of Grey sheet steel into a good replica of a file cabinet.
    Were the Chinese still such a third world country then there would be little worry. But China has a new manufacturing base, an increasingly good infrastructure and plenty of Western-educated professionals and managers.
    I expect that they are turning out filing cabinets as efficiently as we are. But at a wage level closer to the Indian one then to the US level. There must be an economic law similar to that of the laws of entropy which will inexorably drop our wage level til an equilibrium point is reached. Unless we create a Maxwells demon.
    As long as the measure of a Man is,in our current society, the size of his home entertainment screen, then we are sure to be drawn toward entropy. The Yuan crisis can be a Maxwells demon. It is a god-given opportunity to use patriotism to pull Americans out of our Jones for Chinese trinkets.

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