Links 8/8/11

Spanish duchess gives away fortune in order to marry civil servant Guardian (hat tip Buzz Potamkin).

Number of sheep thefts doubles in six months as meat prices soar Independent (hat tip Buzz Potamkin)

Learning to Cope With a Mind’s Taunting Voices New York Times (hat tip reader Valissa)

Murdoch Hacked Us Too Frank Rich, New York Magazine. I’m late to this, but still worth reading.

News Corp. Director Leading Hacking Inquiry Has Ties to Murdochs Bloomberg

Belgium’s Surpassingly Strange Political Stalemate: The Ticker Bloomberg

Credibility, Chutzpah And Debt Paul Krugman, New York Times

Second Recession in U.S. Could Be Worse Than First New York Times D’oh! And this is after newly released IRS data revealed that incomes fell 15% from 2007 to 2009. So how much worse does it get?

Obama and S&P Vie for Credibility Wall Street Journal. As much as the Treasury/Administration pushback looks like sour grapes, this account from the WSJ winds up being more favorable to the Administration than I anticipated. It does appear that S&P had not only made up its mind, but was in a huge rush to make the release, despite the fact that after hours on Friday is the same thing as before market opening on Sunday or Monday.

Geithner Will Stay for Now, the Treasury Department Says New York Times. Another negative indicator. The only good thing about this is that Timmie will undeniably own the entire crisis, Phases One and Two.

Markets Fear Gridlock Without Aid Wall Street Journal. Are the true believers losing faith int the Bernanke Put and the PPT?

Pilots Take to the Streets Wall Street Journal

The Bear Necessities (of Silver Life) Screwtape Files (hat tip reader James P). They bury the lead, so skip to the end first and then backtrack if you wonder what this is about.

What Happened to Obama? Drew Westen, New York Times. Many readers pointed to this piece, it seemed to strike a chord. I have to admit I turned off Obama’s inaugural speech precisely because it had a very high noise to signal ratio, and what little signal there was not what needed to be said. But he is far too charitable in his interpretation as to why this Presidency has turned out the way it has.

Antidote du jour (hat tip reader furzy mouse):

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  1. lambert strether

    Yves writes:

    “after hours on Friday is the same thing as before market opening on Sunday or Monday.”

    No, it isn’t. The S&P release after hours on Friday was “a 5:00 horror.” That’s often a tactic to dominate the weekend news cycle and crucially to dominate the Sunday Bobble Head programs, like Meet the Press and Face the Nation.

    1. aet

      Shaping perceptions, not reality – the new media American politics. “It ain’t how you live, it’s how you feel about it.” What nonsense.
      And S&P – didn’t they say all that toz xic debt was triple-AAA mere days before big banks started failing back in 2008? Remember 2008? Try hard – tough to do with all that “fresh news” ever day.

      Some people are going to sell too cheap.
      probably the same guys who bought too dear.

      Don’t people ever stop long enough t to think to get their car out of that gear?

  2. rjs

    you buddy at EOC has a nice S&P takedown, yves:

    On S&P, Downgrades, and Idiots –
    This is not going to be one of those posts that laments S&P’s decision to downgrade the US, but then says that S&P was probably right about our oh-so-dysfunctional political system.
    No, S&P was flat-out wrong — no caveats. They are, to put it very bluntly, idiots, and they deserve every bit of opprobrium coming their way. They were embarrassingly wrong on the basic budget numbers, as everyone knows now, so they were forced to remove that section from their report, and change their rationale for the downgrade. (Always a sign that you’re dealing with hacks.) Look, I know these S&P guys. Back when I was an in-house lawyer for an investment bank, I had extensive interactions with all three rating agencies. We needed to get a lot of deals rated, and I was almost always involved in that process in the deals I worked on. To say that S&P analysts aren’t the sharpest tools in the drawer is a massive understatement. With S&P, it got to the point where we were constantly saying, “that’s a good point, but is S&P smart enough to understand that argument?” I kid you not, that was a hard-limit on our game-plan. With Moody’s and Fitch, we at least were able to assume that the analysts on our deals would have a minimum level of financial competence.

    I’ve seen S&P make far more basic mistakes than the one they made in miscalculating the US’s debt-to-GDP ratio. I’ve seen an S&P managing director who didn’t know the order of operations, and when we pointed it out to him, stopped taking our calls. Despite impressive-sounding titles, these guys personify “amateur hour.” (And my opinion of S&P isn’t just based on a few deals; it’s based on countless deals, meetings, and phone calls over 20 years. It’s also the opinion of practically everyone else who deals with the rating agencies on a semi-regular basis.)

    Treasury has every right to be outraged. S&P mangled the economic argument so badly that they had to abandon it entirely, and then fell back on a political argument which they are in no position to make, and which isn’t even correct.

    1. aet

      If they are making political arguments, they are a political organization, and ought to be treated as such.

      This “downgrade” only reflects on S& P.

    2. psychohistorian

      It certainly sounds like they have been a tool of propaganda rather than provide what use to be a valuable service for quite some time.

  3. Bruce Post

    Reading your links today and also the article “Downgrade is Likely to Add Urgency to Debt-Cutting Panel” in the NYT, I just cannot help but think of the unfortunate Air France pilots over the Atlantic and the Colgan Air pilots approaching Buffalo who pulled up their aircrafts’ nose and contributed to aerodynamic stalls, leading to the very disastrous consequences.

    In creating that so-called super committee, Congress and the President have put our fate into the hands of some very inept pilots and an auto-pilot process that, quite frankly, could lead to a similar disastrous stall. The pilots and those in first class probably have their golden parachutes so that they can bail out and survive the consequences. Those of us in economy class will end up riding it down.

  4. Jim Haygood

    From Dr. John Hussman’s always-informative weekly column:

    Last week, I reviewed the rapidly deteriorating condition of our Recession Warning Composite. While year-over-year GDP growth has dropped to just 1.6% — a rate that has been followed by a new recession in 10 of the 12 times it has occurred since 1950 — I preferred evidence from a wider set of market and economic measures. I noted “we would require only modest deterioration in stock prices and the ISM index to produce serious recession concerns.”

    With the pixels barely dry on that weekly comment, the ISM reported Monday that its Purchasing Managers Index dropped unexpectedly to 50.9, the slowest pace in two years. That report, coupled with an early slide in the S&P 500, completed the remaining holdouts (conditions 2 and 3) of the Composite.

    Coupled with the slowdown in year-over-year GDP growth, the composite of economic and financial evidence we presently observe has always and only been associated with ongoing or immediately impending recessions. This is not an opinion or a viewpoint, but a fact of the data. “Always and only” is the Bayesian equivalent of “certainty.”

    Welcome to the end-of-QEII recession, comrades. Courtesy of the PhD morons of the Federal Reserve.

    MMT rides to the rescue:

    1. aet

      Maybe this time around they’ll actually clear the deadwood rather than trying to fertilize it back to life.

    2. psychohistorian

      Thanks for the QE3 picture, ROFLMAO!

      It doesn’t take a PhD to be a moron but it does take a complete abandonment of human morals and ethics to continually screw the world for the global inherited rich.

  5. Ignim Brites

    What happened to Obama? You expect a compliant press. You get a compliant press. You live the consequences.

  6. ella

    “The timing of a massive bet of nearly $1 Billion dollars on the US losing its AAA+ rating just two weeks before S&P made the call on August 5th is eerily similar to what took place in 1992 on the British Pound. There is no doubt that someone had insider information that a ratings downgrade was coming, and only time will tell if the mystery investor is ever revealed who just made $10 Billion dollars off the investment.

    Continue reading on $1 Billion bet in July of US downgrade brings questions of insider information – National Finance Examiner |

    Does anyone know anything about this????

    1. doom

      Interesting, that front-running business, but why do they go on and on about Soros? Any leak is much more likely to have come out of S&P, and that broadens the range of usual suspects quite a bit.

  7. Foppe

    Trichet Wrote Secret Letter To Italian Govenment

    ROME (Dow Jones)–European Central Bank President Jean-Claude Trichet wrote a secret letter to the Italian government late last week “dictating” what Rome should do by way of economic reforms, Milan daily Corriere della Sera reported Monday.

    Bank of Italy Governor Mario Draghi, who will succeed Trichet later this year at the ECB’s helm, co-signed the letter, Corriere reported, without citing sources and without citing directly from the alleged letter.

    The letter set out to the Italian government what measures it should take and a timetable of their implementation, the paper said, adding that the ECB’s suggestions were tantamount to conditions the bank requires in exchange for its purchase of Italian government bonds.

    The letter asks for rapid privatization of municipal assets, liberalization of various sectors, and offers “detailed” indications on how to loosen Italy’s employment laws, Corriere said.

  8. blah blogger

    Murdoch certainly did hack you. You’ve got so many links
    to the WSJ! And another thing–Frank Rich is never worth

  9. BDBlue

    Arthur Silber (one of the more unique blogosphere voices) offers a partial takedown of the Westen piece here. While you’re at Arthur’s place, you may also want to check out Tell Me Again: Who’s the Stupid/Weak/Incompetent One? Hint: it ain’t Obama.

    Ian Welsh has also been posting a bit more than usual, including offering his Comments on the S&P Downgrade and noting, among other things, that if political elites, including Obama and the Dems really didn’t want it to happen, they could’ve prevented it.

    1. Valissa

      Great links BDBlue, thanks! I haven’t been over to Arthur’s blog for a while. He must be in better health again.

      From the “Tell me again: who’s the stupid…”
      I use “right” and “left” as those terms are commonly used. Let us please skip the onanistic pleasures of analyzing at interminable length what might make up the “true” right or left: most of those who contemplate such matters are only perpetuating the existing system while pretending they aren’t. If you regularly engage with the present political system, you’re perpetuating it. The rest is details.

      I have commented before on the increasingly usless nature of the terms left and right, as have a few others here. However there are still many true believers who don’t seem to understand that it’s important to “refudiate” both parties [yes, I said that for the shock value!]. But it’s so convenient to have a scapegoat. Blame the right wingers, blame the tea partiers… it’s feels so good. On the right they like to blame socialism and marxism, and likewise feel smug about that. Isn’t that all sooooo convenient for the oligarchy/plutocracy.

      1. BDBlue

        Yes, it’s good to see Arthur posting again.

        Re blame the tea party – here’s a link to a recent Ioz post (he’s also recently started posting again) explaining how it’s not the Tea Party, it’s the rich people.

  10. Cathryn Mataga

    Sheep thefts: Yeah, what is going on with the price of lamb meat? I thought it seemed high maybe the last 6 months, but now I see this article, and it rings a bell with me — something is going on here. Lately, I’ve been eating more pork, but I do like lamb now and then.

  11. Doug Terpstra

    Murdoch’s Journal article should read “Obama and S&P *Pretend* to Vie for Credibility”. This public kerfuffle, including teleprompter dramatization, is merely protection-racket pretense for the rubiat as the elite PTB collude and conspire in the robbery of Social Security and the shredding of the social safety net.

    Funny how S&P did not project unfunded militarism into the distant future, or the cost of GE paying zero tax forever hereafter. No, everyone who is anyone agrees: only separately–taxed worker pensions and public health services threaten bankruptcy. Only corporate/billionaire loopholes and funding slaughter in “the graveyard of empires” are conspicuously off the table.

    1. Cynthia

      Doug Terpstra,

      Most economists on the Left like Dean Baker and most financial bloggers on the Left like Yves Smith all believe that what motivated the folks at S&P to downgrade America’s creditworthiness is their desire to see Congress and the White House make significant cuts to middle-class entitlements, i.e., Medicare and Social Security. If they are right on this, then S&P is acting as an enemy of the little people.

      But Gerald A. Epstein is a leftist economist who has an opposite opinion on this. He seems to believe ( listen to link below) that what motivated the folks at S&P to downgrade America’s creditworthiness is their desire to see Congress and the White House put an end to the practice of proprietary trading, which has enabled the Big Banks, especially the ones who have access to the discount window at the Fed, to rake in massive profits for themselves at great cost to the American taxpayer. If he is right on this, then S&P is acting as an enemy of the Big Banks. Let me also mention that many of the folks at Zero Hedge share this opinion. And even though I don’t agree with many of the opinions voiced by Reggie Middleton and others at Zero Hedge, I agree with them on this opinion of theirs.

      I don’t know how you or anyone else here feels about this, but I find myself torn between these two opposing opinions. I’m torn between the opinion held by Yves Smith and others at Naked Capitalism that S&P downgraded the US in order to get US lawmakers to impose austerity measures on America’s middle class and the opinion held by Reggie Middleton and others at Zero Hedge that S&P downgraded the US in order to get US lawmakers to impose austerity measures on America’s biggest banks. I’d like to think that both sides are right on this, but I can’t resolve in my mind how one side can be right without the other side being wrong, and vice versa. :~(

      1. Doug Terpstra

        Cynthia, I hope your optimistic scenario wins out. I’m tired of my own cynicism, really, but it somehow always proves inadequate for current political reality. As Lily Tomlin said, “No matter how cynical you get, it’s impossible to keep up.”

        I don’t know how the S&P even exists at this date without bankster and White House sanction. It doesn’t seem possible. These are, after all, the same fraud whores and pimps that sodomized Main Street via the subprime housing debacle, the most spectacular mis-rating of investment BS in world history and the source of great short profits by connected insiders. How they have MSM airtime instead of solitary supermax accommodations, with exercise on a chain-gang, is astonishing.

        That the president, who owns the SEC, sock-puppet Eric Holder and wields the Dodd-Frank club, holds a live national address to give these discredited felons any credibility at all is baffling. This naked emperor could quite simply pick up the phone and say “look, SEC porn-surfers are coming right over to ogle your subprime books, review all your past rating decisions and current lobbying activities for the RNC—unless you cut the crap and give us a super-duper-quadruple-AAAA+++ rating. Period. BTW, have you ever heard of drones?”

        And now, the fact the the main “fix” to come from this great premature capitulator is nothing more than the extension of the payroll tax holiday is, to me, undeniable proof of collusion. This is the great leader vision thing? The people will surely perish!

        1. Cynthia

          Come to think of it, Doug, if David Beers and others at S&P felt that proprietary trading by America’s largest banks is what’s destroying America’s creditworthiness, then they would have also downgraded the creditworthiness of our largest banks. And since they chose to downgrade the debt held by our country without downgrading the debt held by our largest banks, this indicates me that their primary aim in doing this is to strong-arm Obama and our lawmakers into making significant cuts to Social Security and other middle-class entitlements.

          And apparently Obama is ignoring S&P’s expert opinion that our country can’t restore its creditworthiness until our largest banks restore their creditworthiness. Otherwise, he would have gotten on the air today to tell the American people that he and Congress plan on imposing austerity measures on our largest banks by banning the practice of proprietary trading.

          There’s a war going on between the big banks and the little people. And the big banks are winning this war, largely because Obama, as he made it clear to us today, aims to restore America’s creditworthiness not by taking the punch bowl away from the big banks, but by taking the social safety net away from us little people.

      2. Valissa

        Thanks for your comment Cynthia. It is difficult to know what the truth is in this situation, or whose informed opinion to believe. So I’m taking in all the opinions, staying detached and not taking sides on any of them. I think much more evidence is required before jumping on some bandwagon or other at this early date in the game.

        Although it is convenient to talk about the elites or the rich as a group, that oversimplifies. Within the various cricles of the power elite there are many players with different positions, differing beliefs and different goals. It appears to me that the S&P downgrade reflects some intra-elite battling, but on whose side and to what end remains unknown.

        1. Cedric Regula

          A wise position. I think conspiracy theories are always great fun, but I usually have an enormous amount of difficulty deciding which ones to believe in.

          Like they get complicated. Take for instance the one about this secret banker group called the trilateralists and their insidious goal is to make the world safe for bankers?

          Then there are ones even more complicated than that!

          So the only thing I am sure of at this moment is that both Tim and Ben have cleared their Sunday schedules in anticipation of having more of those emergency bank crisis resolution meetings like they use to have, and be done in time for market open in Asia.

          Oh, yes, the FDIC is invited too now – I only hope they have some money to bring. I think there was that moratorium on collecting fees from banks to re-fill the FDIC insurance pot. That was so banks could shore up bonuses, er, I mean balance sheets.

          But best of luck to all these folks anyways.

    2. Doug Terpstra

      Aha, sure enough, the Telepromptee just reaffirmed what we can all come together on in this shared-and-shared-alike crisis (that is, everyone who counts): the continued bipartisan committment to defunding Social Security, so people can get back to shopping. See how wonderful life can be when we all just get along?

      Oh and BTW, don’t forget to honor the cannon fodder who sacrifice their lives in vain for our imperial ambitions. God bless America.

  12. Hugh

    Re the NYT’s “Second Recession in U.S. Could Be Worse Than First”, d’oh! indeed. It manages to state the obvious, things we have been saying around here for months, and still miss the point. It’s not like I expected an Establishment mouthpiece like the Times to bring up kleptocracy and wealth inequality as the forces that not only crashed our economy but have kept it weak.

    Still there is some zany logic. The reporter Catherine Rampell points out that consumer spending is one of the two main drivers of recovery but that consumers don’t have any money because wages are stagnant and unemployment is high. She then goes on to talk about historically high corporate profits, with feigned total obliviousness about the relationship between the two, that is that even though corporations have outsized profits they are not sharing them with their employees. Then Rampell makes the nutty claim that corporations will use their profits to limit layoffs of their current workers, you know the ones they aren’t sharing their profits with already, and despite the big layoffs last month.

    Call me cynical but I can’t help thinking that the timing of this article is part of a push for QE3. Oh look the economy that has been terrible is terrible so give us the money now!!!

  13. Jessica

    One other parallel between the S&P US downgrade and Y2K that I have noticed: the people I know with the most expertise on the subject are the least worried.

    1. Cedric Regula

      Probably perusing the Iran invasion plan, Desert September. Gotta save something to do for September.

      1. Valissa

        I dunno about that.. war is traditionally a spring thing! kinda like a spring fling only with more firepower.

        1. Cedric Regula

          The Israeli Air Force is going in at 50,000 ft. It’s cooler up there. About 3F/1000 ft of altitude IIRC.

    2. Patricia

      “…47 – or fully half of the freshmen Republicans voted into office in 2010 – making the trip…”

      Get’em young, teach ’em well.

      “Hoyer…said he looked forward to “returning to Israel to continue learning firsthand…the role the US can play in the region during this time of uncertainty.””

      As hundreds of thousands of Israelis are on the streets protesting their government.

      Irremdiable idiocy.

    3. Firean

      in reply to Jim Haygood says :

      They well be in time to experience the next round of street demonstrations. 250,000 people on the streets in Isreal last saturday august 6th ( of a total population of just over 7 million ), and it never got the big news coverage.

  14. dearieme

    People are discussing financial fantasies when they could be discussing Soda Dogs? Where’s your sense of proportion?

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