Perspectives on the global economic meltdown (Jan 26 2010)

Sanjay M · Post by **Sanjay M** » 28 Aug 2010 08:44

Gold's Evangelist
With gold a fashionable hedge against turbulent times, one billionaire is doing everything he can to get his hands on the actual stuff

--

In Gold We Trust?

Singha · Post by **Singha** » 28 Aug 2010 09:17

inch by inch, the old, weak and stragglers will be abandoned on the long retreat from Kaboul to Jalalabad and Peshawar..

high deductible healthcare plans in khanomy
http://www.nytimes.com/2010/08/28/healt ... l?_r=1&hpw

Sanjay M · Post by **Sanjay M** » 28 Aug 2010 09:33

Krauthammer: The Return of Fear

Bade · Post by **Bade** » 28 Aug 2010 09:54

I guess it is just bad karma, having exported low paying jobs since Clinton days to China with no signs of protest from the general populace enjoying Walmart trinkets to fill their homes. All while they were bitterly complaining about a small fraction of IT /HiTech jobs being taken over by H1-B types from India and elsewhere. Most of these immigrant-visitors lived and spent their spoils for the upkeep of the Khanomy, buying big homes and expensive cars and raising a family in massa land. Whereas the money spent by massa people in keeping the trinket makers occupied in faraway China is being entirely spent elsewhere.

Sanjay M · Post by **Sanjay M** » 28 Aug 2010 10:42

India's balance of trade with the US is far better than China's one-sided balance of trade with the US.

Hari Seldon · Post by **Hari Seldon** » 28 Aug 2010 12:09

Public Pensions and Our Fiscal Future (WSJ)

Wow. Didn't know the terminator Sri Ahnold Schwarzenegger could write, much less cogently and forcefully. In case you're wondering where from the balls came to take on the public pensions calamity, here's one good explanation, courtesy Mish:

Now that Schwarzenegger is a certifiable lame duck (dead duck may be a more appropriate term) Schwarzenegger sees fit to take on public unions in a major way. It's too late now (for him) even as he speaks the truth.

Ok, so we know that taking on skynet was far easier than taking on calif's public unions. Here's how things stand, as they are:

Recently some critics have accused me of bullying state employees. Headlines in California papers this month have been screaming "Gov assails state workers" and "Schwarzenegger threatens state workers."

I'm doing no such thing. State employees are hard-working and valuable contributors to our society. But here's the plain truth: California simply cannot solve its budgetary problems without addressing government-employee compensation and benefits.

Sounds more reasonable than forceful, eh? Read on. The force is in the implications of otherwise understated assertions of facts only.

Thanks to huge unfunded pension and retirement health-care promises granted by past governments, and also to deceptive pension-fund accounting that understated liabilities and overstated future investment returns, California is now saddled with $550 billion of retirement debt.

550 bn. Of debt that must be repaid with interest. Ponder that a sec.

The cost of servicing that debt has grown at a rate of more than 15% annually over the last decade.

Wow. breathtaking only. 15% CAGR per yr for 10 yrs. Wow.

This year, retirement benefits—more than $6 billion—will exceed what the state is spending on higher education. Next year, retirement costs will rise another 15%. In fact, they are destined to grow so much faster than state revenues that they threaten to suck up the money for every other program in the state budget.

And on and on it goes. read it all only. And wonder. Poor harburd historian niall bhai's frantic gesturing and alarmism about an impending loss of empire doesn't look so loony suddenly. Eh?

Few Californians in the private sector have $1 million in savings, but that's effectively the retirement account they guarantee to public employees who opt to retire at age 55 and are entitled to a monthly, inflation-protected check of $3,000 for the rest of their lives.

Inflation protected obligations, eh? Wow. Hyperinflation too will have issues solving this one.
The boomers were a happy lucky generation that have grown in luxury and will likely be the last to retire into luxury in quite a while to come, seems like.

At the same time that government-employee costs have been climbing, the private-sector workers whose taxes pay for them have been hurting. Since 2007, one million private jobs have been lost in California. Median incomes of workers in the state's private sector have stagnated for more than a decade. To make matters worse, the retirement accounts of those workers in California have declined. The average 401(k) is down nationally nearly 20% since 2007. Meanwhile, the defined benefit retirement plans of government employees—for which private-sector workers are on the hook—have risen in value.

OMG. Can't bear to read on and on. This will end ugly. No freakin' reason if I were a pvt sector calif employee, I would putup with this kinda BS. Good luck keeping the peace. The national guard may have to be called out in a few yrs if the current trajectory is maintained, I reckon.

enqyoob · Post by **enqyoob** » 28 Aug 2010 15:03

So there are two clear steps to address the problems: Well three, but the third is Vote Enqyoob 4 Dictator-e-Duniya.

1. In other news I see that India slapped a 21% duty/fine/tax whatever u call it, on imports of some sort of equipment, due to pressure from local industry. If that is OK with WTO, then so is a 14.3% tax on all imported goods and services where comparable industry / sources exist in the US. IOW, all off-shored manufacturing that sells to US markets, will also contribute the same as US-based workers and businesses, to the US retirement system. If they are located offshore and don't have PR status, well... sorry la, no entry into the benefits part of the system, just like the tax on imported equipment. OK, make it 21%, why not put a little into infrastructure development?

This one step fixes the SS system Inflow problem, and it gives a 14.3% benefit to US industry/employees to compete. That may not be enough, but it will help a bit in employment.

2. Rising Medicare and Health Insurance costs are the #1 inflationary pressure terrifying retirees. So fix that by opening up the medical system, and bringing doctor income from the present $1M to $10M/year down to reasonable levels like those paid to researchers in other industries. Same smarts, same training level, why the heck are medicos allowed to hold everyone to ransom?

That one step will also greatly increase the oversupply of Investment Portfolio Managers, and reduce the commissions/bonuses to those too, and help to fix Wall Street a bit.

Now to find some good Prez Candidates to take this up. How smart do they have to be, to see these 2 solutions?

And if by some miracle the guvrmand grows a brain, the way to completely fix the Gold Rush is to send a few missions out to capture some Near Earth Objects, and bring back a few million tons of platinum and gold to LEO, then just send it in smaller pieces down through the atmosphere. A Precious Metals Shower. This would send all the gold-diggers rushing out into orbit, good riddance there too, and crash the market price for precious metals ( a completely artificial and manipulated way of counting value, BTW) to reasonable levels. Offhand, there is no reason why gold should cost more than, say, 1.3 times what copper costs, since it is more conductive for use in wires, but less malleable.

It is really cute to see Econopundits screaming and ranting about how everyone else is an idiot, and then arguing to continue the insane association of value with pieces of metal dug up from some hole in the ground - just because some Neanderthal hag spread her legs to get a piece of shiny stuff aeons ago.

Hari Seldon · Post by **Hari Seldon** » 28 Aug 2010 16:12

^^^ Well, if its helps any (and it doesn't one whit), I've long been expecting some sorta protectionism and trade warriorisms to emerge from the woodwork in the emerged tfta khanommies for a while now.

Am surprised why it hasn't happened so far only.

After all, if the solutions are not so difficult to see and comprehend (and I agree they aren't) one wonders why they haven't been implemented already double quick only.

Me no goldbug and all. No idealist even. As always, time will tell, whether we want to hear or not.

enqyoob · Post by **enqyoob** » 28 Aug 2010 18:34

Yes, the H-1 fee scam IMO is just the first shot - and it remains to be seen whether it will be challenged in WTO. But I was quite amazed to see India slapping tariffs on imports: Can't remember where I saw the 21 percent - may have been madarssa reading skills, but here is a recent 10% tax:

India to levy 10 pct import tax on power gear
12 Aug 2010 05:11:40 GMT
Source: Reuters
By Matthias Williams
NEW DELHI, Aug 12 (Reuters) - India will impose a 10 percent import tax on power equipment for big projects within weeks to help level the playing field between domestic and foreign firms jostling in what may soon be the world's biggest market. The tax would reverse a policy of zero import duty on equipment for mega projects introduced to meet India's urgent capacity shortages, said Arun Maira, a member of the government's Planning Commission who led a committee on equipment imports. Without enough local suppliers, India turned to China to help bridge a peak power shortage of 12 percent seen as an obstacle to matching its Asian neighbour's double digit economic growth.

Didn't know these things were doable under WTO, but if this is legit, then I see no reason why Khanate etc. can't follow suit on collecting the equivalent of SS tax from imported services. So far the reason for shyness is the power of Sultan Gates and the other nobility of the Eye-Tee empires, but that may not hold much charm if they think through the dire predictions u guys have been posting above. Something has got to give, and surely the desi Eye Tee sultans are strangling the Goose-e-Golden-Eggs if they refuse.

As for the Gold Standard, Hari, no offence intended, I am just pointing out that there is nothing of sacred value in gold, except that past ppl have also run after gold. Today, supplies of Indium, Selenium, maybe Germanium and lithium are far more precious than gold. So I see no real reason to tie money standard to gold today.
BTW, I saw somewhere that some of new Exoplanets seem to have cores entirely made of diamond. Puts Rock Size for engagement rings in a new light...

Far more drastic step would be what the Gelf states and many others do: They require that
a) X percent of earnings from the country must be spent in-country
b) non-citjens cannot own property and
c) temp workers can't change to PR/citjens.
X is typically 50 to 75%.

This is the prime reason for Gelf ppl trying to ship vast amounts of manufactured goods and booze with them when they travel, and in turn get ripped off by the oiseules at Customs.

Khanate doesn't pull any of these stunts, but the EyeTee moguls of desh have pushed and stretched those freedoms way past the breaking point, and in that sense fully deserve the Congressdummy's declaration that they are "chop shops" rather than "body shops".

Hari Seldon · Post by **Hari Seldon** » 28 Aug 2010 19:25

^^^FWIW, Yindia and cheena are classified as 'emerging economies' in the WTO and hence have some leeway w.r.t. imposing duties etc.

Cheena gets its all ways of course, pretending to be a poor country when expedient and sooperpower when convenient. Only.

As for tariffs etc, the oiros have stiff tariff walls and protectionist rackets ongoing for their agro markets since forever.

Sure, it is about time unkil imposed its services tariffs and all and cut the flab in the desi itvity outsourcers etc. A shakeup is overdue, some say.

Besides, unkil has to live with its dollah as the international reserve currency - which means it has to print and issue enough USD IOUs for it to be omnipresent onlee. Often times, the needs of the domestic constituency in the US clash with its international reserve currency maintenance obligations (which boils down to the need to run trade deficits only).

We'll see where this goes. Not that we have any other choice anyway.

Hari Seldon · Post by **Hari Seldon** » 28 Aug 2010 19:54

One admirable thing about the khanateis that however bad things get there (and they'll never get as desperately poor and obscene like us woeful SDREs with 80% of our popn earnng less than $2 a day and so on), there are always constitutional methods available to block the more egregious excesses - like a competent, honest and elected judiciary.

Sample this:
Permission to Encroach the Bench

For a down-ballot category that even well-intentioned voters pay little attention to, judicial races are astonishingly expensive. In 2004, $9.3 million was spent in the race for a single seat (pdf) on the Illinois Supreme Court. That’s higher than the price tag of more than half the US Senate races in the nation that year. In 2006, three candidates for chief justice in Alabama raised $8.2 million combined.

But those sums could look paltry compared to the spending likely to be unleashed in the wake of the Supreme Court’s Citizens United ruling. In all, 39 states elect judges—and with the stakes including everything from major class actions to zoning and contract cases to consumer protection, workplace, and environmental issues, corporations have always taken a major interest in those races. The US Chamber of Commerce, Forbes reported in 2003, has devoted at least $100 million to electing judges sympathetic to its agenda. “No organization has had more success in the past 10 years of judicial elections,” says James Sample, a professor at Hofstra University who studies judicial reform issues. “Its winning percentage would be the envy of any sports franchise.” Citizens United has essentially wiped out not just federal restrictions on campaign spending, but many state-level regulations as well, Sample notes, and that’s “going to increase the ability of corporations, and to a much lesser extent unions, to engage in electioneering that is basically aimed at winning particular cases.” And given the low profile of these races, it may not take that much to sway that outcome, notes Bert Brandenburg, executive director of the advocacy group Justice at Stake. “A judicial election is a better investment for anyone spending money” than, say, a congressional campaign.

Somehow, I doubt sri rahul mehta would be very proud.

abhischekcc · Post by **abhischekcc** » 28 Aug 2010 21:19

The reason why western economies are not imposing trade barriers is very simple - they are no longer the drivers of global economic growth. They NEED to keep developing markets open for their goods, need our cooperation for the recognition of their patents, need access to natural/human resources that we have.

If they impose sanctions on us, we won't have to follow the rules (that overwhelmingly favour the west now). Sanctioning us would be equal to sanctioning their own companies.

enqyoob · Post by **enqyoob** » 28 Aug 2010 21:23

abcc: The gist of this thread seems to be:

LOOK HOW STUPID OUR CUSTOMERS ARE! THEY BUY FROM US, AND THEY ARE GOING BROKE!

So is India imposing a 10% tax on imported power equipment a "sanction" imposed by India on China? Awesome! Whoever said the UPA govt has no balls when it comes to standing up to China?

SwamyG · Post by **SwamyG** » 28 Aug 2010 21:32

Krauthammer, and other shills of the Republican party, no doubt are crying the economy is going down the tubes. They same folks who thought it was doing good in 2008 fall. Anybody quoting or posting Fox News video is actually screeching discussions to an immediate halt

I gotta run, need to see how Glenn is taking back the "civil rights movement" and the country.

Neshant · Post by **Neshant** » 28 Aug 2010 21:52

No deep space mission is required to crash the price of gold. Gold would crash to $250/oz tommorrow if there was a return of honesty & trust in the system.

Ever since the idea of researching, developing, manufacturing and marketting real goods went out the window along with the notion of living within one's means, trust in the system began to erode. It accelerated with banking & financing middle men showing up to sell snake oil under various get-rich-quick schemes.

The sillyness has reached a point where crooks are playing around with trillions of the people's money and claiming nobody has a right to know what they are doing behind the curtains.

Despite all the above, gold has but a miniscule market share given the blizzard of worthless fiat and ponzi schemes around the world. This says the vast majority of people continue to believe govts & banking crooks won't cheat them of the fruits of their labor down the road.

In the next 3 to 5 years, this assumption is going to be tested.

SwamyG · Post by **SwamyG** » 28 Aug 2010 21:56

Hari Seldon wrote:One admirable thing about the khanateis that however bad things get there (and they'll never get as desperately poor and obscene like us woeful SDREs with 80% of our popn earnng less than $2 a day and so on)

An obvious thing, that needs to be reiterated. Even if America loses its Empire, its poor will never be as poor as in Africa, Asia or Latin America. America has resources to take care of the basic needs. It has enough trees to make their houses, enough land to provide food and enough water to parch thirsty throats. Will they be able to feed acres & acres of Kentucky Blue grass lawns? Dunno. They have geographical isolation; all they need to do is control their Southern borders. Even with falling standards of living, America would be very inviting for the Latin Americans reeling under poverty & misery.
Another obvious thing, even if India becomes one of the richest country, the GDP per capita is all rosy, the living style is not going to be similar to that of the America.

Bade · Post by **Bade** » 28 Aug 2010 22:24

Another obvious thing, even if India becomes one of the richest country, the GDP per capita is all rosy, the living style is not going to be similar to that of the America.

In reality there are no absolute standards of living, as it is all relative to something else you see in your daily life and hope to achieve for yourself. It is maya in that sense. Same as many people in India do not miss spanking 6-lane highways even when shown them on TV, until they get to ride on one. Hence, even if a vast majority of Indians do not live like Americans today even in the next 50 years or more, nothing will be amiss to most of them.

But, if things keep falling rapidly in the west even by a small amount relative to what they are experienced to before, the pain will be felt.

SwamyG · Post by **SwamyG** » 28 Aug 2010 22:38

^^^
Bade sare: Let us say America becomes the 'poorest' country and India the 'richest' country. Now the definitions of poorest and richest could be discussed at length. Let us reserve our discussion to the ability of people to buy the essential items to live. Food, clothing, shelter, health & stability are the essentials in my opinion. Now what does it take a country to provide these to its citizens? If America lost its standards of living, which it will - there is some consensus on BRF about this, my opinion is that it can still provide the essentials with relative ease compared to say India.

* Food includes drinking water. Shelter includes 'clean' water for cleaning. Health can be restricted to communicable diseases and the common ones. Stability is peace and harmony.

Bade · Post by **Bade** » 28 Aug 2010 22:56

No disputing all that you said of US being able to provide the bare minimum. But will the populace be happy with just that. Look at the aftermath of Katrina. By Indian standards, a lot more was provided to the citizens of New Orleans. Now looting was not stopped in time, but then it was not so bad as third world standards either. Yet people complained because it was a precipitous fall from the green lawns and evenings with soul music and drinks and a few slings in the by-lanes of the French quarters. We have had many disasters on the same scale and people just pick up their lives and run with it with hardly a complaint. The Indian expectations are much lower and that will keep us happier and poorer relative to the western world on the average. How many Indians talk about the past events like the Bengal famine in the same vein as people in massa talk about the great depression at the sight of first negative turn of the economic indicators. Even in this forum we don't.

ShivaS · Post by **ShivaS** » 28 Aug 2010 23:43

Did somebody say why there no Hyper inflation in US? Will hyperinflation
kill dollar?

Good questions.

The answers are the book "Lost Symbol" By Dan Brown.
Read it?
I just finished. ( I will write about in a different dhaga)

The secret of Dollar is in the word yes atleast according Dan Brown!.

And the secret word is (drum roll...Drrrrrrrr..) is Dollar!

In our sastras it is called

"nityam cha shaashvatam shuddham dhruvam aksharam avyayam" from laghunyaasa (in Rudram)

"puNdarIkam param dhAma nityam aksharam avyayam"
Vishnu saharam slokA 12.....

so
1) DOLLAR IS aksharam!
2) DOLLAR IS avyayam!

Aa-- kshram that which can not be destroyed
Aa Vyayam: That which is not expendable (or spent away)

Since Khan is the ruling Indra
and Indra will never give up throne with out a fight and he has Vajra and Lord Vishnu is his protector, and georaphically from Vastu
USA has 5 great Lakes in NE corner, the talk of demise of Dollar is slightly premature even if hyper inflation scenario is around.

Agnis cha ma indras cha may, somas cha ma indras cha may,
Savithaas cha ma indras cha may, Sarswathi cha ma indras cha may,
Pooshaa cha ma indras cha may, Brahaspathees cha ma indras cha may,
Mithras cha ma indras cha may, varunas cha ma indras cha may,
Twashtaas cha ma indras cha may, Dhaathhas cha ma indras cha may,
Vishnus cha ma indras cha may, Aswinou cha ma indras cha may,
Maruthas cha ma indras cha may, Viswe cha ma indras cha may,
Prithvee cha ma indras cha may, Aanthareeksham cha ma indras cha may,

Fire and Indra,
Moon and Indra,
Sun and Indra,
Saraswathi and Indra,
Pooshaa and Indra,
Teacher of Gods and Indra,
Mithra and Indra,
Varuna and Indra,
Twashtaa and Indra,
Dhathaa and Indra,
Vishnu and Indra,
Aswini devas and Indra,
Marut devas and Indra,
Viswe devas and Indra,
Earth and Indra,
Atmosphere and Indra,
Heaven and Indra,
Four Directions and Indra,
The direction over head and Indra,
And Prajaa pathi and Indra.
Would bless me.

The above from Chamakam....
The meaning Unkil, has education, minerals, Land, Pharma, research, good climate for growing food.. the commitment and most importantly the ability to preserve himself.

ShivaS · Post by **ShivaS** » 29 Aug 2010 00:13

In order to protect BHEL etc PSUs losing orders..

enqyoob · Post by **enqyoob** » 29 Aug 2010 01:17

Neshant: Here is one of many things that stump me. The basic premise of the Free Market is that the natural tendencies and aspirations of the population will determine the best course for economic development, since greed drives people in the direction of wealth.

As you have been pointing out, intervention is evil.

Then how does it make sense to argue for "good behavior" from those who have the power to do what they want? Short of violent uprising by the population and complete breakdown of society and law and order, what controls are allowable in an ideal Free Market system?

Obviously, the best efforts of law enforcement have been completely ineffective in moderating the behavior of those crooks whom you blame for the economic crisis. But that's Free Enterprise, hey?

SwamyG · Post by **SwamyG** » 29 Aug 2010 01:36

Bade mian: Humans, typically will not be happy when living standards fall down. I agree with you the expectations from Indians would be lower as only a few have tasted the benefits of modern luxury and 'Corporatism'. It is nice to see you talk about happiness because it is a very important thingie. Ultimately we humans created all these institutions for happiness and stability - both in the present and for future, no? All the economic statistics are metrics to measure how we are doing; and even the experts agree some of the metrics do not truly measure our conditions. But they are still better than nothing.

SwamyG · Post by **SwamyG** » 29 Aug 2010 01:43

Neshant wrote:
Ever since the idea of researching, developing, manufacturing and marketting real goods went out the window along with the notion of living within one's means, trust in the system began to erode.

A nice song written by Kannadasan for the tamil movie Bhama Vijyam points this out precisely. Income: 8 annas, Expenses: 10 annas. End result: empty towel. Folks who understand tamil might enjoy the play of words there.
[googlevideo]5735559848639256196[/googlevideo]

Neshant · Post by **Neshant** » 29 Aug 2010 02:07

enqyoob wrote:Obviously, the best efforts of law enforcement have been completely ineffective in moderating the behavior of those crooks whom you blame for the economic crisis. But that's Free Enterprise, hey?

Bailouts, passing on losses to suckers, money printing, interest rate arbitrage for banking crooks, fractional reserve, picking winners and losers are all hallmarks of rigged enterprise. In free enterprise, these entities would fail, the CEOs would be selling hot dogs on the streets and some might be hauled off to jail - especially the bribe taking liars at rating agencies which defrauded many pension plans & investors.

In a real free enterprise with honest money, middlemen industries which contribute no real value would not even exist in the first place. Debt would something one would think very carefully before taking on. Loans would only be based on savings and not created out of thin air.

Its not complicated at all. The only reason it is made complicated is to find ways and means of justifying the insertion of a parasitic middle man into the equation. I am suspicious of any move that separates a person from the fruits of his labor with a layer of confusion and bad money in between. Without a doubt, such a move ends up having only one purpose : to perpetuate fraud.

Arya Sumantra · Post by **Arya Sumantra** » 29 Aug 2010 02:37

Neshant wrote:especially the bribe taking liars at rating agencies which defrauded many pension plans & investors.

None of these rating agencies could predict dot-com bubble, housing crisis, iceland or greek scenarios in advance while they continue to burden fiscally disciplined developing nations with inferior ratings to what they gave to iceland/greece once. Wonder why they are given so much credibility?
We too are to blame for having let our own homegrown rating agency Crisil get taken over by such vested interests while dragons have set out to create their own.

Neshant · Post by **Neshant** » 29 Aug 2010 02:59

I don't mind if a private entity follows the ratings put out by rating agencies and loses money on the basis of that. Follow those ratings at your own risk.

What I object to is that pension funds are forced by govt to make investments on the basis of ratings put out by these rating agencies. This is supposedly to protect pensions against making risky investments. They are allowed to invest only in stuff that has a certain investment grade.

When garbage that was stamped AAA blew up in 2008 on a massive scale highlighting blatant fraud, these rating agencies were taken to court. But since the govt which is controlled by banking crooks is fearful that a single victory against rating agencies could lead to an avalanch of litigation against them and those who packaged securitized sh&t, the ruling from the court is unbelievable : rating agencies are protected by freedom of speach!

In the case of publlic sector pension, the taxpayer gets hit up to make good the losses of these pension funds while banking crooks get away once again.

enqyoob · Post by **enqyoob** » 29 Aug 2010 03:28

Sorry, Neshant, but I am still too stupid to see the sense of these:

Bailouts, passing on losses to suckers, money printing, interest rate arbitrage for banking crooks, fractional reserve, picking winners and losers are all hallmarks of rigged enterprise.

In every one of those cases, if the action was illegal, as determined by judges or juries based on the best arguing capacities and fact-collection diligence of highly-paid, expert lawyers, the action would have been subject to reversal and punishment. So why HAVE the perps got away with it? Unless you go with the Rahul Mehta NBJP model and argue that the courts are all paid by Wall Street, which I would find hard to believe.

In my very limited experience, every time there is a sudden drop in value of some stock, I get a Notice of Settlement or something like that, informing me that someone has sued someone else, and that I as one of the suckers may be entitled to get Rs. 0.003. The lawyers are the ones that make the big bucks every time, so where are they now? Why have they not hounded these entities to prison, bankruptcy etc?

The only answer I can find is that what they did was not provably illegal. IOW, Free Enterprise at work.

In free enterprise, these entities would fail, the CEOs would be selling hot dogs on the streets and some might be hauled off to jail

We have seen ppl argue, correctly IMO, that allowing, say, AIG to fail would simply have destroyed the security of millions of people who have paid up insurance premiums for years, and cannot now qualify if they had to go take medical tests for new policies from new companies. So your recommendation there is completely against the "greater good". As for CEOs selling hot dogs, no way. There is a reason that Corporations are incorporated - it is to limit the liabilities of the entity, and protect the corporate officers. They are smart people (I am not saying "GOOD" people), and have carefully packaged Golden Parachutes etc. so if the corporation goes under, they may lose some stock options, but they are certainly not going to be poor.

- especially the bribe taking liars at rating agencies which defrauded many pension plans & investors.

This in fact is something that struck me as something remarkable. WHY did they lie? (Yes, I know they did). They did it, because, according to them,

a) if they had not given out AAA ratings the customers would have taken the business to competitors who would
and
b) they had to give out far more ratings than they had time to do due diligence on, so they simply gave the same (best) ratings that OTHER agencies had already given, while pretending that these ratings were independently developed through due diligence.

This is the same reasoning used by many university professors at, say, Harvard and MIT. The students would not be there if they weren't smart, the buildings are paid for by rich alumni, and hey, I am too busy writing proposals and traveling to sit on National Board meetings and making PPT charts, so I'll just give them the grade that they deserve as Harvard or MIT students - an A. Every else gives them that, why not?

When Rating Agencies do it, yes, it is punishable, or SHOULD be. So why hasn't the CEO of Standard & Poor (a desi, no?) gone to jail? Must be because he has immunity of some sort, by law.

Who made these damn laws? Well... hello, lawmakers elected in free elections by the free citizens of a free country.

In a real free enterprise with honest money, middlemen industries which contribute no real value would not even exist in the first place.

Middlemen exist because their customers on both sides see fit to pay them. I go buy air tickets on Expedia or Orbix or whatever, or directly from the airline, because I see fit to avoid the Ace Consolidators Heart Attack Generators Travel Agents. I don't see that the travel agent's services are essential or valuable. Others do. Same way here.

So how is it an "unfree" enterprise if middlemen are free to market their skills?

Debt would something one would think very carefully before taking on. Loans would only be based on savings and not created out of thin air.

Absolutely not in a FREE market system. In a FREE market system, as one real estate broker tried to hammer into our stupid brains,

YOU SHOULD NEVER UNDER-BUY!!

IOW, they wanted us to go buy a $3 gazillion house, the very absolute limit of what anyone would give us as loan, instead of the $1 minizillion house which is all we needed or were willing to go into debt for. Fortunately we are both miserly SDRE cowards, so we passed up that TFTA house for something we could handle. But it was poor Free Enterprise decision-making (or so it seemed then). If that house had appreciated 10% per year as projected, yes, we would have made it big on borrowed money.

As it happens, that is not what happened, but that is another story.

Its not complicated at all. The only reason it is made complicated is to find ways and means of justifying the insertion of a parasitic middle man into the equation.

But that's exactly what FREE Enterprise does. No one can dictate that the middle man should be bypassed, if customers on both sides decide that s(he) is worth the money. You would need a diktatorial system to diktat that there should be no role for middlemen.

I am suspicious of any move that separates a person from the fruits of his labor with a layer of confusion and bad money in between. Without a doubt, such a move ends up having only one purpose : to perpetuate fraud.

And that, IMO, comes straight out of Das Kapital or the Communist Manifesto. I am NOT disagreeing with it, just saying that it is as far as one gets from ideal Free Market/ laissez faire/chalta hai / Bhavitavyam Bhaveteva.

So there's my problem. What you are arguing for, is a rigid (why is that not surprising from the Achtung Hochschule von Osterreichen?) Managed Economy of the most Managed kind. Been tried. Failed. Except in Red China.

Sanjay M · Post by **Sanjay M** » 29 Aug 2010 06:01

Neshant isn't arguing for the outlawing of middlemen, but just that they not be given some legally enshrined role, which puts them in a position to skim off money.

If people want to keep money in their mattresses, then it's their right, and the govt should not be trying to confiscate their wealth through deliberate inflation and fiscal profligacy. That's just a form of redistributionism.

Butowsky on what ails the US economy:

Hari Seldon · Post by **Hari Seldon** » 29 Aug 2010 06:58

^^^ There are no free markets anywhere. Period. Just as there is no perfectly frictionless motion.

I was a big believer in free mkts during my grad student days, big fan of Milton Friedman and the chicago school and all. Not anymore ('Duh!').

BTW:

The lawyers are the ones that make the big bucks every time, so where are they now? Why have they not hounded these entities to prison, bankruptcy etc?

The only answer I can find is that what they did was not provably illegal.

Excellent point!

Which brings up the question that now that it is clear as day what he failings have been in the phree markit system, why have these not been 'addressed' in subsequent fin 'reform' legislation? Not only were these not addressed, the gubmint made things worse - by further entrenching the too big to fails and backbreaking the taxpaying middle class.

Research shows that upwards of 90% (and 85% in bad years) of congressional incumbents get re-elected anyway. Which is why it was necessary to deny corporations a megaphone that drowns out the little guy- the 'right' to make political campaign donations. McCain, to his shame, shot down campaign finance reform.

End result is a gubmint for, by and of the special interests only. The sheeple are incidental, seems like.

And this cuts across partisan lines, btw. The reason why you have candidates taking clear stands and attacking each other passionately on BS like gay marriage and abortion but never addressing how they differ on core bread and butter issues like control over currency and their position on financial regulation for example.

Anyway this is old hat and has been endlessly rehashed on this dhaga.

As for the west imposing protectionism and trade barriers, it may well happen regardless of what anybody says. Events have a logic of their own. We are doing our bit queering the pitch, perhaps.

/Have a nice day all.

Sanjay M · Post by **Sanjay M** » 29 Aug 2010 10:48

Roubini warns of double-dip:

http://www.bloomberg.com/video/62486152/

hariks · Post by **hariks** » 29 Aug 2010 12:40

According to George Soros real "free market" never existed. What was being practiced as free market was heavily loaded in favor of the countries with stronger currency. They enjoyed the fruits of labor from regions having a weaker currency. Laissez faire was the precursor of the current free market, and even in those days there were exceptions in pretty much every nation (especially UK) which was part of it. Protectionism returned by 19th century, and looks like "reaganomics" era will have a similar end. Whenever the sh&t hits the fan, "free market" goes out of the window. It seems safe to assume that intervention from "powerful entities" at all levels is the norm. Let the printing presses roll for another trillion or two. Instead of giving to banks, send checks to everyone - the kind that walmart and apple can accept directly and give the new "shiny stuff" in return.

Pulikeshi · Post by **Pulikeshi** » 29 Aug 2010 12:52

Free Market, Perfect Information, etc. exist in the theoretical mythologies of academics who attempt modeling and predicting behavior.
Not many things one can be certain of, but of the Malthusians who will keep this thread alive we can be.

My family doctor presented two options for the traditional rhino virus -
1. Tough it out - you will have a mild temprature, body ache, yada yada for a week at most.
2. Take drugs - no fever, but will be drowsy and feel lousy and it will last a week at most.

Not very different to the current macro situation here.... it will take the same amount of time.
Those waiting for a meltdown may need to open eyes to see that it is just a situation ripe for a new economic order?

As long as it is postponed by two generations, where is my freshly minted loot?

Neshant · Post by **Neshant** » 29 Aug 2010 13:39

The only answer I can find is that what they did was not provably illegal.

Legal and illegal lose all meaning when govts are packed with cronies of the parasitic middle man industry. What was illegal becomes legal and vice-versa through legislation introduced by bribe seeking politicians. We have just been through a major crash due to fraud on a biblical scale yet not a single person has landed in jail. So I don't expect anything to be provably illegal no matter how obvioius the crime is. Financial crimes under the present setup carry with them huge rewards and little risk.

So your recommendation there is completely against the "greater good".

Its profitable for any crook to have a system where the greater good is always framed with his greater profit motive in mind. That is to say if by perpetuating fraud, the system begins to crumble, he can always argue that the greater good requires money to be confiscated from someone else to shore up his fraud. That is the reason the federal reserve exists.

The greatest (never mind greater) good is in getting rid of the parasitic middle man. Towards that end, just about anything that will lead to his demise is good even if it hurts the people in the interm.

The paradox of crooks gaming the system in a democracy is that a good number of people are deliberately kept un-informed so they do not spot banking crooks ripping them off. There's a great quote from the Rothschild's - one of the founders of the Federal Reserve :

"The few who understand the system, will either be so interested from it's profits or so dependant on it's favors, that there will be no opposition from that class."

Certainly the parasitic middle man is doing all he can to obscure the thievery which is the reason the fiat money system is kept as complicated as possible. The wider the gap a parasitic middle man can create between the person who earned the money and the money itself, the more profit winds up in his pocket.

Middlemen exist because their customers on both sides see fit to pay them.

I use the word middle man as a shortened form of parasitic middle man in all these discussions. Certainly a middle man may have a useful role. But not a parasitic middle man - especially not one that is forcing itself upon the system. You would not want 50 parasitic middle men handing your paycheck each collecting a fee along the way claiming that's in the greater good of society.

Thievery becomes far more difficult if the system is based on honest money and small govt which is why the middle man is staunchly opposed to it. By its very nature, the system is simple and transparent - which is bad news for the middle man.

Hari Seldon · Post by **Hari Seldon** » 29 Aug 2010 16:40

Pulikeshi wrote: blah ^n

Have seen similar arguments before also. And they're quite valid too, IMHO. Their gist typically goes like this:

"It can't happen because it never happened before."

"It can't happen because nobody wants it to happen. Too many have their skin in the game."

"OK, even if it mistakenly happened before, well, it won't happen now. Learning curve and all. We're wiser now than in '29. Right?"

"OK, even if it happens despite all that, it will happen just a few generations down the line, by which time why should I care anyway? wink-wink nudge-nudge."

FWIW, I doubt this dhaga revels in human misery. I certainly don't and IMVHO the contributors here aren't in the business of selling sh1t to the next gen while calling it gold.

Again, FWIW, the meltdown scenario has receded bigtime. The world has indeed dodged a bullet from the dark days of sept 2008. The possibility exists that black swans may drop chaos, sure, but it is too small to matter seriously.

Again, JMTs and all that.
/Have a nice day all. Jai Ho.

Pulikeshi · Post by **Pulikeshi** » 29 Aug 2010 21:10

Hari,

I had a rather tongue-in-jowl arguments above... not sure where the similarity comes.

Let us say meltdown is imminent - that then allows for certain options - even unpleasant ones.
Which means, there is no black swan - meaning it is a known unknown at best.

The point is no one aprior knows of a particular black swan event - ipso facto one cannot plan for it.
The best one can do is acknowledge that they exist and prevent behavior that pretends they do not exist.

All that said, if you see my point, it is just limited to saying the worst could happen - so what?
It perhaps just means a realignment of power - economic, political, etc....
Who has naya wapum and the strength to support it wins the new game as it were...
That is, the meltdown if at all is a gray swan event, then what is in it for me?
All is maya onlee - show me the wapum!

Neshant · Post by **Neshant** » 29 Aug 2010 21:35

the tools.

you gotta have the right tools.

love the way they make printing money sound like brain surgery.

--------------------

Bernanke: Fed has tools to get economy on track

http://finance.yahoo.com/news/Bernanke- ... 2.html?x=0

Federal Reserve chairman Ben Bernanke bluntly acknowledged that the U.S. economic recovery has lost considerable steam, but said the central bank has the necessary policy tools to support continued growth.

"The issue at this stage is not whether we have the tools to help support economic activity and guard against inflation," Bernanke said at the Fed annual symposium in Jackson Hole, Wyo. "We do."

ldev · Post by **ldev** » 31 Aug 2010 04:23

By the way, some crystal ball expert on the forum had predicted a crash in the markets before August 20, 2010. Has anyone seen or heard of such a crash?

enqyoob · Post by **enqyoob** » 31 Aug 2010 04:54

No, this does not work:

Legal and illegal lose all meaning when govts are packed with cronies of the parasitic middle man industry. What was illegal becomes legal and vice-versa through legislation introduced by bribe seeking politicians. We have just been through a major crash due to fraud on a biblical scale yet not a single person has landed in jail. So I don't expect anything to be provably illegal no matter how obvioius the crime is. Financial crimes under the present setup carry with them huge rewards and little risk.

The point is not whether these "crooks" have been arrested by the government and charged - there of course the Corrupt NJBP Cabal Theory etc. can hold sway. The point is that self-interested disaster-chaser lawyers have not gone after these people (or maybe I am just not aware yet of them). If they are not going after them, that says that there is no substance to the allegation that there was wrongdoing or even actionably irresponsible behavior. I don't understand WHY the behavior of Standard & Poor was any better than that of the Pakistan cricket team, but then I don't understand a lot. Where are the ambuchaser lawyers?

Its profitable for any crook to have a system where the greater good is always framed with his greater profit motive in mind. That is to say if by perpetuating fraud, the system begins to crumble, he can always argue that the greater good requires money to be confiscated from someone else to shore up his fraud. That is the reason the federal reserve exists. The greatest (never mind greater) good is in getting rid of the parasitic middle man. Towards that end, just about anything that will lead to his demise is good even if it hurts the people in the interm.

Nothing. The issue was whether the govt. should stand by and let millions of paid-up insurance polices become worthless, just in the interest of Austrian Free Market religion. There is no way that this would have been responsible behavior from the government, so shoring up AIG was essential.

Most of these institutions that you condemn so freely, were formed by thoughtful people to prevent a recurrence of the utter devastation that followed the 1929 stock market crash, where the effects of "free market" excesses were very evident. Apparently they have been effective.

Sanjay M · Post by **Sanjay M** » 31 Aug 2010 07:49

You call it "Austrian Free Market religion" but the fact is that exposure to market forces is where the rubber hits the road, in economic terms. You may not want to see the poor rubber get scratched or scuffed by hitting road, but that's how traction occurs for locomotive purposes. You may not want to risk seeing the rubber get punctured by the odd stone that comes along, and yet many people have that happen to them everyday - they simply patch it up and move on.

Trying to put something between the rubber and the road for the ostensible purpose of "protecting" it will only interfere with traction and lead to a bigger crack-up.