Tag Archives: Money/Economy/Taxes

Wall Street upset at its “pariah” status, seeing lobbyists to fight “populist overreaction”

Bloomberg News has managed to get its hands on some memos detailing a lobbying push by Wall Street security firms against “populist overreaction.”

Robert Schmidt writes that “the memos provide a glimpse, in often candid language, into how Wall Street is grappling with its pariah status.”

“It is imperative that in this historic period of reform, the industry be recognized as playing a positive role in seeking change and providing solutions to the problems we face,” one of the documents said. “There is currently widespread skepticism about the industry’s commitment to this needed change.”

The great thing about that quote is not how it makes me want to find my pitchfork, but how it perfectly encapsulates exactly why there is “widespread skepticism” raging across the land. Everyone knows exactly what “playing a positive role in seeking change and providing solutions to the problems we face” really means: doing everything we can to weaken proposed regulation of the securities industry and ensure that we can get can back to business as usual as soon as possible.

Populist overreaction? $14 trillion of American wealth has vanished in the last 18 months, and we’re being accused of overreacting? We have not yet even begun to overreact!

(Read more from salon.com)

Cap & Trade Skepticism

“Two weeks after his election as president, Barack Obama said, ‘Few challenges facing America and the world are more urgent than combating climate change. The science is beyond dispute and the facts are clear.’ Shortly thereafter, more than 100 scientists signed a newspaper advertisement responding, ‘With all due respect Mr. President, that is not true.’ The scientists, from places as varied and esteemed as Los Alamos National Laboratory, the American Physical Society, the Intergovernmental Panel on Climate Change, the Massachusetts Institute of Technology, Princeton University, and the University of Pennsylvania, said the ‘case for alarm regarding climate change is grossly overstated.’

But even many who are not skeptical about global warming found things to dislike in ACES. Rep. Dennis Kucinich, who voted against it, said, ‘It won’t address the problem. In fact, it might make the problem worse.’ Kucinich faulted the bill’s ‘Enron-style accounting methods’ and allocation of $60 billion for Carbon Capture and Sequestration, ‘a single technology which may or may not work.’ Kucinich faulted the corporate welfare embedded in the bill, saying that the “trillion dollar carbon derivatives market will help Wall Street investors,’ with any benefits ‘passed through coal companies and other large corporations, on whom we will rely to pass on the savings.’

‘I take climate change seriously,’ libertarian economist Megan McArdle wrote last week. But she said the projections for ACES’s ‘effect on global warming are entirely negligible,’ and any hope that U.S. passage of the bill will ‘persuade China and India to get on board’ is ‘entirely wishful thinking on the part of American environmentalists. China is not going to let its citizens languish in subsistence farming because 30 years from now, some computer models say there will be some not-well-specified bad effects from high temperatures. Nor is India.'” (Read more from campaignforliberty.com)

Taibbi’s Rolling Stone Article

A friend recently called my attention to Matt Taibbi’s Rolling Stone Article, “The Great American Bubble Machine.” Read it here.

Taibbi knows little about economics, and comes down on the wrong side of the most important question raised by our economic crisis – freedom or government?

For example, he writes: “an extremely unfortunate loophole in tbe system of Western democratic capitalism, which never foresaw that in a Society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.”

This is bullshit. We should not condemn free markets until we’ve given them a chance.

His understanding of the causes of the Great Depression is completely anemic (no mention of inflationary monetary policies), and his explanation of how Goldman cheats the world makes no sense.

Matt Taibbi’s worst offense is calling for more regulation to “protect” us from the likes of Goldman. Regulation is exactly what got us here.

Sure, if banks commit fraud we need the government to put them in jail, but beyond that, all we need to do is let the fuckers go bankrupt when they get caught holding loans which should never have been made.

It’s completely schizophrenic for the government to subsidize bad loans (HUD, Freddie, Fannie), then hand the banks billions of tax-payer dollars (TARP), then say the problem is too much freedom. In a free market, irresponsible companies go bankrupt.

So Taibbi fails.

He does deserve praise for a couple things though – demonstrating the pervasiveness of Goldman Sachs alumni throughout our government and the banking world at large, and calling attention to Goldman Sachs, and evil, evil company. His criticism should be directed to their influence over the Federal Reserve, the U.S. Treasury, and policies which transfer our wealth to likes of Goldman.

One very good point he makes, is connecting Goldman to Cap & Trade – the hideous bit of legislation which just passed our Congress in order to “save” us from Global Wharming. It’s another big scam.

See Also: Taibbi responds to Goldman’s criticism of his article.

Bernanke comments on HR 1207 – you can’t handle the truth!

There’s a lot of subtext in Bernanke’s last comment. I think he’s laying some rhetorical ground work. If HR 1207 passes, and we get to actually see the abuses and excesses of the Fed, it may trigger a run on the dollar, or an extreme downturn in the economy. Bernanke will then be able to say “see, I told you so,” as if the cause of the downturn was not the Fed’s crimes, but their revelation.

Fed engaged in “cover-up” of BofA-Merrill deal-lawmaker

WASHINGTON, June 24 (Reuters) – The Federal Reserve sought to hide its extensive involvement and concerns about Bank of America Corp’s (BAC.N) acquisition of Merrill Lynch amid the latter’s worsening financial condition, a top Republican congressman said on Wednesday.

‘The committee has already learned that Ben Bernanke and the Federal Reserve made inappropriate threats to fire Bank of America management unless they went ahead with the “shotgun wedding” that was the Merrill Lynch acquisition,’ Rep. Darrell Issa of the House Oversight and Government Reform Committee said in a statement released to Reuters.

‘The Federal Reserve also engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies,’ the statement said.

The committee has obtained a number of emails and documents from the U.S. central bank about its behind-the-scenes role in the merger, according to sources familiar with documents.” (Read more from reuters.com)

HR 1207?

The College Industrial Complex

I’m a big fan of Lew Rockwell podcasts. I often listen to them while preparing breakfast. These two interviews both touch on what’s a new idea to me: college as government intervention – guaranteeing loans, subsidizing student lending, eliminating free market disciplines on Universities. Suddenly I see in a new light the extravagant cost of tuition, the legions of people devoting thousands of hours to subject which they themselves do not care about.

Peter Schiff: You’re Better Off as a Renter. March 23, 2009.
Peter Schiff talks about the college in the last quarter of the interview, from 11:30 onward.

Gerald Celente: The Fed Has Wounded You. April 26, 2009.
Gerald Celente only touches on it briefly in this great interview, from 9:45 to 12:30.

Obamanomics

Taleb: “Obama’s Attempts to Fight the Financial Crisis with More Cash is like Treating a Bad Tooth with Novocain Instead of a Root Canal”
“In the quote of the day, Nassim Nicholas Taleb told CNBC: The Obama administration’s attempts to fight the financial crisis with more cash is like treating a bad tooth with Novocain instead of a root canal… Do not delay a root canal. Don’t do piecemeal solutions to a problem that is fundamental.

Taleb’s previous one-liners include:
What is fragile should break early while it is still small.
No socialisation of losses and privatisation of gains.
People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.
Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks.
Counter-balance complexity with simplicity.
Do not give children sticks of dynamite, even if they come with a warning .
Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”.
Do not give an addict more drugs if he has withdrawal pains.” (Read more from www.washingtonblog.com)

Nobel Economist: Government’s Response is WORSE than Socialism
“Nobel prize winning economist Joseph Stiglitz says that the government’s response to the financial crisis is worse than socialism:

Some have called this ‘socialism with American characteristics’. But socialism is concerned about ordinary individuals. By contrast, the US has provided little help for the millions of its people who are losing their homes. Workers who lose their jobs receive only 39 weeks of limited unemployment benefits, and are then left on their own. And, when they lose their jobs, most also lose their health insurance.

America has expanded its corporate safety net in unprecedented ways, from commercial banks to investment banks, then to insurance, and now to cars, with no end in sight. In truth, this is not socialism, but an extension of long-standing corporate welfarism. The rich and powerful turn to the Government to help them whenever they can, while needy individuals get little social protection.” (Read more from www.washingtonblog.com)

YES WE CAN!

No wonder Cali has money troubles

SanFran $100k+ earners

The discussion that accompanied this photo in reddit’s business section was interesting. Some immediately recognized this as exploitative by the workers earning the money, evidence that government, unlike private enterprise is rife with inefficiency. Others rushed to the defense of labor – so what if workers are taking advantage of overtime pay to earn more money.

Even if the workers are merely “taking advantage of overtime pay,” this is still an indictment of government. There’s no reason a manager should allow so much time-and-a-half pay that workers get $100k for cleaning transit cars. It’d be more efficient to hire more people. Of course, government isn’t bound by market forces which demand efficiency. When a company is inefficient is loses profit or goes out of business. When a government is inefficient, taxes are increased and its budget goes up.

Iceland’s Banking Crisis: The Meltdown of an Interventionist Financial System

“Regrettably, the current focus on the causes of the crisis continually misidentifies its true source, resulting in prescribed cures that fall short of the necessary actions. Peter Gumbel writing for the December 4th, 2008, edition of Fortune reckons previous Prime Minister Oddsson’s free-market reforms during his 1991-2004 years in office are what ultimately gave rise to the bust. Likewise, the IMF’s mission chief sent to Iceland to survey the nature of the problem, Poul Thomsen, recently commented in an interview that the root problem in Iceland was an unregulated environment that allowed an oversized banking system to develop. Indeed, the post-privatization banking experienced in Iceland resulted in a banking sector that saw assets increase to over 1,400% of GDP!

What analysts and authors commonly miss is the reason the banking sector could expand so rapidly. Indeed, as we shall see, the incentive structure of the Icelandic economy was manipulated through government guarantees, artificially low interest rates, and monetary spigots opened wide, allowing liquidity to be flushed through the economy. In addition, Iceland’s homeowners were offered tantalizingly low interest rates through the ‘Housing Financing Fund’ (HFF), a state agency that enjoyed explicit government guarantees on its debt, resulting in reduced interest charges for homeowners. Interestingly, while the Fund’s merely implicitly guaranteed American counterparts – Freddie Mac and Fannie Mae – have been the center of much controversy, the HFF has remained relatively unscathed.

The policy prescriptions in the wake of the crisis have called for more interventions, which will prove to exacerbate the situation if put into effect. Only by gaining a true understanding of the unsustainable and artificial nature of the boom of the past decade may we arrive at effective solutions to navigate the bust that engulfs the country.” (Read more from mises.org)

Dumping the Dollar – a Case of Government Schizophrenia

Schizophrenia is a euphemism. Hypocrisy and/or idiocy is more apt.

“As Hulsmann explains, the ‘leadership of the U.S. Federal Reserve is aware of this situation.’ (Page 233) OK. That’s reassuring. But if U.S. officials are concerned about the terrible consequences of a POSSIBLE dumping of dollars on the U.S. market, why are they UNCONCERNED about the consequences of their own efforts to stimulate the economy, which involves the same mechanism that they so fear from foreign actions; that is, massive expansion of the money supply?

The government has taken two actions that will expand the money supply every bit as much as possible foreign actions to dump the dollar–expansion of the monetary base by the Federal Reserve Bank and the Obama administration’s spending spree.” (Read more from patrickbarron.blogspot.com)

‘Craven bumlicking ass-goblin’ calls Hank Paulson a national hero

Fantastic catch by trueslant.com:

“

By Evan Newmark

Hank Paulson is a national hero.

I said it last October and I’m sticking by it. And now, there’s actual evidence to back me up. The TARP bailout worked. The Wall Street crisis is over.

via Mean Street: It’s Time to Enshrine Hank Paulson as National Hero – Deal Journal – WSJ.

So here’s the letter I wrote to the Wall Street Journal after reading Evan Newmark’s paean to Hank Paulson last week:

Dear WSJ,

Just out of curiosity — did Evan Newmark ever work for Goldman, Sachs? And if the answer to the question is yes, don’t you think that might have been a good fact to disclose before he fellated Hank Paulson in his “Mean Street” column?

Sincerely,
Matt Taibbi

I didn’t get an answer, which I guess is not surprising. But in the interim I found out that Newmark did, indeed, work for Goldman. I find it funny that a business journalist has to disclose if he’s invested in this or that stock, or short this or that security, before a newspaper will allow him to have an opinion about anything even distantly related to that company — but you don’t need to disclose anything if all you’re doing is kissing your former boss’s ass.

Can you imagine what a craven, bumlicking ass-goblin you’d have to be to get a job working for the Wall Street Journal, not mention up front that you used to be a Goldman, Sachs managing director, and then write a lengthy article calling your former boss a ‘national hero’?”

The power of Economists and Politicians, right or wrong

I found this quote of a quote in Art Carden’s essay on mises.org:

In the late 1940s, a group of classical-liberal scholars formed the Mont Pelerin Society with the goal of carrying the liberal tradition through the storm of post–World War II interventionism, and a speech from their first meeting, in which Friedrich Hayek quotes John Maynard Keynes, suggests an answer:

It is more than likely that from their point of view the practical politicians are right and that in the existing state of public opinion nothing else would be practicable. But what to the politicians are fixed limits of practicability imposed by public opinion must not be similar limits to us. Public opinion on these matters is the work of men like ourselves, the economists and political philosophers of the past few generations, who have created the political climate in which the politicians of our time must move. I do not find myself often agreeing with the late Lord Keynes, but he has never said a truer thing than when he wrote, on a subject on which his own experience has singularly qualified him to speak, that

the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good and evil.

Mr. Carden concludes:

“Thus, I follow the advice of others who have come before me and I try not to get too caught up in or depressed by current events. Things are what they are, and there is little if anything I can do to change them over the very short run. My hope is that today’s political disasters will spark a passion for ideas, a passion for truth, and a passion for justice. These are dark times, but the foundation has been laid for a classical-liberal renaissance. Policy after policy threatens us with short-run malaise, but I for one remain hopeful and optimistic.” (Read more from mises.org”>Read more from mises.org)