Wednesday, June 29, 2011
Various items that I have been reading...
Is debt suffocating the recovery? Yes. Mostly, we have transferred it from the private sector to governments, all around the world. We -- meaning just about everybody everywhere -- need to repay a good bit of it before we can turn around our standard of living. Let's get cracking.
Contra: Are rising sales of beach badges on the Jersey Shore a favorable leading indicator?
Old news, but I've been busy. Quite an accomplishment, especially in New Jersey.
For the first time in memory, a Republican is contending for mayor of the Borough of Princeton.
Annals of climate hysteria: A prediction (from 1969) that the Arctic would be free of ice in 1989. And so it goes.
Clash of cultures? Last year, every identified rapist in Norway was Muslim. Some cultures are more prone to violence than others, and it is usually ugly when they collide.
Notes from the Blago trial:
It is dreamland stuff. Crazy stuff. Like when in his sometimes tearful, sometimes bold, and often bizarre self-defense from the witness stand, Blago tells the bewildered jury, "I had a man-crush on Alexander Hamilton." This was certainly one of the odder statements made in the history of jurisprudence, to say nothing of the history of Alexander Hamilton.
I, too, have a man-crush on Alexander Hamilton, but struggle to see how that would help me in my defense.
Should we dig up William Shakespeare to see if he smoked weed?
The bad news: Japanese researchers have detected radiation in all the people who lived near the Fukushima plant. The good news: In every case, the detected levels were "minute" and not a threat to human health.
John Lennon: Reagan supporter.
"Mostly, we have transferred it from the private sector to governments, all around the world. We -- meaning just about everybody everywhere -- need to repay a good bit of it before we can turn around our standard of living. Let's get cracking."
Sometimes you baffle me, TH.
I can think of no legitimate theory of governance to support the argument that debt accumulated by the private sector to enrich private citizens, then transferred onto the government's balance sheet by dubious means, should be repaid.
The debts transferred from the private sector to the public balance sheet are illegitimate. They need to be repudiated, not paid back. Only then will the real economy begin to recover.
I second what Anon just said.
The restructurings in Greece and the other PIIGS are really about avoiding write-downs on sovereign debt that could topple many European banks. Greece contagion alone could actually bring them down.
Now I read this from a WSJ op-ed this past Monday: "Half the assets in US prime money market funds were invested in European banks as of the end of May, according to Fitch Ratings." I can't believe this is true, but I copied it word for word. WTF???? This happened while our bank regulators have spent the last two years worried about definitions for Dodd-Frank? Double WTF???
So if Greece falls, European banks will falter or fail, and we'll have a run on US money markets ... or will Ben just guaranty it all.
Don't forget that Goldman Sachs used swaps to enable Greece to fool the EU over its debt levels. Lately, even Jon Stewart has been making jokes about exactly this. Doing God's work.
Re: Lennon becoming a Reagan fan before he got shot. A lot of hippies would find a home in the True Tea Party.
But when you talk about destruction
Don't you know that you can count me out
You say you got a real solution
Well, you know
We'd all love to see the plan
Anon 10:29 -- The U.S. government assumed massive obligations of the private sector over the last three years (for example, home mortgages that individuals could not repay). Should the U.S. government repudiate its obligations?
I have a radical proposal, and posting here on a Tiger blgo seems as good a place as any to start the ball rolling: Princeton should pay income and property taxes. Like our esteemed GOP candidate for Mayor I believe that Princeton contributes mightily to our community, and well beyond the contribution in lieu of taxes the University pays to the borough. Perhaps an argument can be made that the University pays/contributes well beyond what it's obligation might otherwise be. But that point can't be made, because the University is exempt from income and most property taxes. The University uses all the same services any other resident of the Borough uses, is heavily invested in promoting the life and culture of the town, as are all the rest of us living there, and should pay as much as it owes. No more, no less.
1. Your post appears to imply that the U.S. Government assumed mortgage obligations on behalf of homeowners at risk of default. This is not accurate. The U.S. Government (or its proxies Fannie/Freddie and the Fed) assumed mortgage obligations in the sense that the U.S. Government stupidly bought massive amounts of mortgage backed securities and even derivatives thereof from the banks and institutions holding them. This was a bank bailout, not a homeowner bailout.
2. Yes, the U.S. Government should repudiate these obligations.
3. If you can devise a theory of governance that justifies privatizing gains whilst socializing losses, which is what happened here, I'd love to hear it.
4. I enjoy your blog and you're a hell of a good guy, but your opinions personify everything that is wrong with the Establishment Republican Party. Corporate welfare for the rich seems to be a good thing in your eyes, or at least something that taxpayers need to grudgingly accept as they write their tax checks.
I'm a registered independent and it will be a cold day in Hell before I would vote for a Democrat, but the Republican Party is dangerously awry.
1. Only meant to say that we did not much reduce debt in the economy, just transferred it from the private sector to the public. Now, on the mortgage thing, I do believe that as a general matter the borrowers who lost their minds during the bubble were and are irresponsible. Banks lent to them on such ridiculous terms because there was too much competition among lenders brought about by a serious oversupply of credit at the behest of the Fed. Banks can make plenty of money when credit is tight, and are often delighted to do so, but tight credit does not usually meet the objectives of politicians. So while the government bailed out investors in mortgage-backed securities (many of whom were borrowers from big banks), it was government policies that led to the bubble in the first place, and individual debtors who took advantage of savage competition among lenders stimulated by that very government policy. But that was not my point, which was simply to say that we did not get rid of debt so much as move it around, and that the debt is weighing us down no matter who is the holder in the first instance.
2. Yeah, that would be an "interesting" experiment. It could go badly wrong in a way that creates a lot of human misery, and not just among corporate tools.
3. I have no such theory. I have long been opposed even to deposit insurance, and do not much care whether American banks can "compete" with their more socialized competitors. As a customer, I really don't care whether I borrow from JP Morgan or Deutsche Bank.
4. I do not think that corporate welfare is a good thing, nor bail outs for the rich. However, I do think that most people in business, even big business, are doing more to make the world a better place than most people in government, and I bridle against "guilt by association" for businessmen but not for other occupations. If a few bad businessmen is reason for massive condemnation, political attack, and regulation, then the same should be true for lawyers, doctors, artists, professors, and certainly politicians. If you do not believe in condemning all professors for the sins of a few, then don't condemn all executives, either. But I would much rather have a tiny federal government with much less regulation, even if that means that all the corporations who get government business have to find it elsewhere.
re "I do not think that corporate welfare is a good thing, nor bail outs for the rich.
As a customer, I really don't care whether I borrow from JP Morgan or Deutsche Bank.
I would much rather have a tiny federal government with much less regulation, even if that means that all the corporations who get government business have to find it elsewhere.'
OTOH you were for the Bush bailout of Wall St in October 2008.
Exceedingly hard me to understand the logic required to get from your above comments to spending 780 billion bailing Wall St out.
My day job has gotten me deep into the mortgage mess. I could write a book about how wrong TH is in his conclusions. There’s a reason that BAC settled yesterday just one of several litigation fronts it faces for $8.5B.
Here’s one example: People wonder why no banker has gone to jail over the financial crisis. Here’s just one reason why: In late 2008, then NYAG Andy Cuomo had already started a criminal investigation. Unlike the SEC, the NYAG’s office can actually run a real investigation. But then Cuomo had a private meeting with Tim Geithner.
But TH wants my kids to work a second job for life to pay for this? Blow me.
As soon as enough Americans see it the same way, we’ll have some really interesting politics.
1. I'm pretty astounded at the manner in which you trivialize the socialization of losses and assumption of debt by the Government and its agencies in a single sentence. We agree that debt overhang is an anchor on the economy. But let's be very clear about this: the trillions of dollars in debt now hanging on the taxpayers' neck would have been discharged had it not been assumed by the Government. Banks would have failed for pursing failed business policies, precisely as they should have in a capitalist economy. The fact is that the U.S. financial system is no longer a capitalist enterprise. It is a fascist oligopoly that rides on the back of the Treasury. You and other establishment Republicans seem to support this state of affairs. This is not the Republican Party to which I adhered.
2. There are only two alternatives to repudiation. The first is massive tax increases coupled with massive cuts in government. This will not happen, nor should it at a time when our government has just committed trillions of taxpayer dollars to rescue banking interests from the failure they created. The second is to continue the downward spiral of deficit spending, adding new debt to pay down old. Reference Greece to see how that game ends. Make no mistake, the US will default, either explicitly or implicitly via currency devaluation. The only questions is when.
3. I agree there is no such legitimate theory of governance. This was the biggest heist ever executed on the U.S. Treasury--banana republic, third world kleptocracy right here in the U.S. and with predictable, tragic consequences.
4. I agree we would do well with much less government. Again, what baffles me about you is that you espouse libertarian/small government views, but then toss them aside when matters of finance arise. For me, this was where the rubber met the road. I left the Republican Party over Bush's TARP bailout. You supported it. I don't get it.
Again, you're a hell of a good guy, TH. Love your blog and agree with most of what you write, but I can't square your continued support for bailouts to the finance industry with your libertarian views.
I wasn't ready to accept the "every identified rapist in Norway was Muslim" line until I found the usual "thoughtful debunker" comment that most posts like this have. I had to read 39 comments to get to it:
This is old news (http://gatesofvienna.blogspot.com/2011/05/religion-of-rape.html – May 26, 2011) and slightly inaccurate. All rapes by strangers in the past five years in Norway have been by non-Whites (Muslim and/or African immigrants) victimizing White Norwegian women. There have been other rapes where the rapist was known to the victim, and both were White Norwegians.
I didn't check that out but it sounds more plausible and less frothy (and still a bad thing).