Our age is one of dire consequences. No longer can we afford to waste our precious resources on frivolous luxuries; a point not lost on a friend of a friend’s during a recent night out. "God damn c*****ckers", he said as he spit on every SUV parked on the side of the road. Of course living in Isla Vista, the student ghetto adjacent to the University of California, Santa Barbara populated by a rather motley assortment of privileged rich kids, there were plenty of "daddy bought" luxury SUVs for him to unleash his salival wrath upon. I counted something like 25 in one block alone (we have really long blocks). I know what you’re asking: How did he complete this awesome feat whilst remaining hydrated? Easy! After every 5 or so SUVs he took a swig off his store bought bottled water. Age of consequences Indeed...
Not only was this guy one of the most vigorous efficiency warriors I’ve ever witnessed, he was also a definitive model of The New American Water Cycle. What is The New American Water Cycle? The New American Water Cycle is a seven step cycle much like the water cycle you probably read about in school:
* The Jesuit's diary :: ::
*
1. An average American mammal becomes thirsty and seeks water.
2. Perfectly sanitary Municipal water "tastes funny" and is deemed unsuitable for consumption.
3. Luckily, "Aquafina" or other such businesses have taken it upon themselves to bottle the Municipal water of another city. This bottling process consumes wealth and generates pollutants including co2.
4. Knowing full well that there billions of oppressed American mammals across the country "Aquafina" or other such businesses take it upon themselves to ship these bottles of water across the country, hoping that the average American mammal will be willing to pony up $1 for the same water they can get free in their own kitchen, if only it were just a little more convenient and a lot more wasteful to do so.
5. Success! The Average American mammal buys in, swearing off tap water forever!
6. All the waste and co2 generated by this exorbitant process causes "Global Warming", causing temperatures across the world to Rise. Oh no!
7. Sensing the hotter climate, the Average American mammal becomes even thirstier, craving even more water, and the cycle continues... infinitely!
Begin Rant:
They very fact that you can commercialize something as basic and abundant as water is alarming enough, the fact that so many of those who buy in are both completely unaware of the harm they’re doing while at the same time quick to chastise others for not thinking about the consequences of their actions is even more so. The only real differences between driving an SUV and regularly drinking bottled water are that SUVs are less wasteful, and the inefficiency of bottled water hasn’t to my knowledge been regularly attacked in the mainstream conscience. Think about it, SUV’s may be gas guzzlers but at least that gets you more space, rugged off road capability, and arguably better safety. Sure, most people don’t need all that crap, but at least they have it should they need it. When you drink bottled water you are participating in one of the most wasteful processes known to humanity and getting absolutely nothing in return.
Just how wasteful is drinking bottled water? In the age of Wikipedia you really have no excuse to not know. here are some of the stats:
...the process of making the plastic for the water bottles consumed in the U.S. uses approximately 17 million barrels of oil per year.
As opposed to roughly 0 barrels if you would just drink it from the friggin tap.
Bottling water created more than 2.5 million tons of CO2 in 2006. This corresponds to about 0.1% of U.S. greenhouse gas emissions.
As opposed to roughly 0% if you would just drink it from the friggin tap.
250g (0.00025 tons) of CO2 are released for each bottle of FIJI Water imported to the United States. This includes 93g for manufacturing a bottle in China, 4g for transporting an empty bottle to Fiji, and 153g for shipping a full bottle to the United States. [8]
Overall, the average energy cost to make the plastic, fill the bottle, transport it to market and then deal with the waste would be "like filling up a quarter of every bottle with oil.
And that, my friends, is gas guzzling.
But that’s not all; Americans wasted over 10 billion dollars last year buying a free and abundant resource. That’s 10 billion dollars that didn’t get donated to cancer research, environmental sciences, or my retirement fund. What a complete waste of money.
I’m sorry to be so harsh, but hey, I own a Buick so I have to make myself feel better somehow.
Please drink it from the tap, it only tastes "funny" because you’re used to bottled crap, I drink from the tap all the time and it tastes fine. Finally, if you don’t trust private enterprise to take care of your health care system why do you trust them to sanitize your water? So I leave you with one more fun fact from the Wikipedia article:
About 22 percent of brands that are tested contain, in at least one sample, chemical contaminants at levels above strict state health limits.
Happy Drinking.
DJHJD
Friday, August 17, 2007
What if someone told you
That drinking bottled water was more wasteful than driving a huge Hummer SUV?
Thursday, August 16, 2007
Random tidbits for ostriches
With attribution and thanks to David Brin, Daily Kos diarist.
Facts that scream.
* Like the fact that, in Bill Clinton's day, we did not have to lower our recruitment standards, forcing our long-suffering Army to let in ex felons... or offer $20,000 signing bonuses to bribe new "volunteers." A sure sign that the nation is not behind this "war."
* Or the fact that only two (just two!) of our Army's brigades are currently fully trained, equipped and ready for actual war to defend this country! All the rest have been converted into counter insurgency urban swat teams. (One general said "Bill Clinton's U.S. Army could beat our present force with one hand tied behind its back.")
* If Bill Clinton was hiding so much, why did he cut government secrecy in half? If the Bushites are so responsible, why do they run from facts, from testifying, from oversight? Why have they multiplied government secrecy to levels ten times greater than when we were in a life death Cold War struggle against the Soviet KGB?
* In past wars, patriotic wealthy Americans stepped up, accepting the need to help pay for a struggle fought by other peoples’ sons. If we’re now "at war," how come the top neocon billionaires have just two priorities - increasing their tax cuts and getting no-bid, crony contracts to NOT deliver what’s needed in Iraq?
So, get off Clinton's back already. He got a blow job. You've given one. Get over it. Clinton hasn't been President since January 20, 2001 and you're still trying to blame him for everything that's wrong. Uh .. sure. Keep that up.
AMMO CAPSULE!
After inheriting surpluses from Clinton, Bush has run up over $3 TRILLION dollars in debt. Bush's FY2002 budget forecast understated the five-year deficit by $2.8 TRILLION dollars. Federal spending as a percentage of GDP was 21.4% when Clinton took office and 18.5% when he left, but is now back up to 20.8%. The Dow Jones Industrial Average increased 325% during the Clinton years but only 27% during the Bush years. The S&P 500 increased of 309% under Clinton and 9% under Bush. Economic growth was considerably higher under Clinton than under Bush and small businesses grew even faster than giant ones. Isn’t that what we want?
"What would you have said if Bill Clinton had --"
And then fill in the blank with something any conservative ought to find repulsive, if they did not have their head buried in the sand.
Like "losing" several billion dollars in cash, by the side of an Iraqi road.
Or "losing" a quarter of a million weapons in Iraq without even keeping their serial numbers.
Or "losing" several billion dollars worth of Iraqi oil per month...
...which is vastly more than the right wing screamed about, during the so-called "Oil-For-Food" scandal.
"What would you have said if this happened under Clinton?
If one thousandth of any of this had happened then?"
Notice how strenuously the Bushites have striven to strengthen the Presidency and insulate it from all supervision, oversight or duty - not only to Congress but the people - sending secrecy skyrocketing far beyond anything we saw in the Cold War. And ask yourself this. "Do you really want future Democratic presidents to have such power? Or do you feel that the Bushites are doing this because they don’t intend to ever let that happen?"
Now, on that torture thing - back to Harper's Magazine:
John Donne: Against the Abomination of Torture
Preached on April 17, 1625, on Easter Sunday, to the Congregation at St Paul’s Cathedral in London
[Image]
John Donne
Transgressors that put God’s organ out of tune, that discompose and tear the body of man with violence, are those inhuman persecutors who with racks and tortures and prisons and fires and exquisite inquisitions throw down the bodies of the true God’s servants to the idolatrous worship of their imaginary gods, that torture men into Hell and carry them through the inquisition into damnation. St Augustine moves a question, and institutes a disputation, and carries it somewhat problematically, whether torture be to be admitted at all, or no. That presents a fair probability which he says against it. We presume, says he, that an innocent man should accuse himself, by confession, in torture. And if an innocent man be able to do so, why should we not think that a guilty man, who shall save his life by holding his tongue in torture, should be able to do so?
And then, where is the use of torture? It is a slippery trial and uncertain (says Ulpian) to convince by torture. For many says (says St Augustine again) he that is yet but questioned, whether he be guilty or no, before that be known, is, without all question, miserably tortured. And whereas, many time, the passion of the Judge, and the covetousness of the Judge, and the ambition of the Judge, are calamities heavy enough upon a man that is accused. If the Judge knew that he were innocent, he should suffer nothing. If he knew he were guilty, he should not suffer torture. But because the Judge is ignorant and knows nothing, therefore the prisoner must be racked and tortured and mangled.
John Donne and the Outlawing of Torture
Recently I asked a clerical friend whether, considering the persistence of torture as a moral issue, he had thought of giving a sermon on the subject? He looked very uncomfortable and responded saying that his congregation was bipartisan and that he would be loathe to introduce a political issue as a sermon topic. It would fragment the congregation, he thought. Really?
I reject the notion that torture is a political issue of any sort. It is a great moral issue. And when those who have a clerical vocation fail to understand it and address it in those terms, they do their flock and themselves a great disservice.
Consider John Donne’s sermon of 1625. It was delivered as his Easter Sunday sermon, which is important. Then as now, the Easter service drew the biggest crowd of the year. The Easter sermon was the minister’s minute in the spotlight—the moment when he would reach his greatest audience and make his reputation. And we know from John Donne’s correspondence, he was concerned about another audience: the king, his entourage and the courts. When Donne rose to deliver this sermon, torture was a heated “political” issue in England. Under the Stuart monarchs, the use of torture was viewed as a royal prerogative (how little things change). It was administered by judges, particularly by the national security court of seventeenth century England, the so-called Court of Star Chamber. John H. Langbein’s important book, Torture and the Law of Proof gives us very clear guidance into how torture was prescribed and used.
Over a series of centuries, the genius of the English law had been steadily to restrict and limit the use of torture, until at this point, under King James, it was controlled by the king’s judges and limited in practice through a series of special writs. Which is to say, legally it was far more constrained than it is today under an Executive Order issued by King James’s understudy in allegedly Divine Right governance, George W. Bush.
Donne delivered a direct blow against this system, the use to which it was put, and the suffering it caused. He makes no equivocations. And in the end he delivers his blows against even the king’s judges who administer the system. No one viewed Donne as a “political figure.” Indeed, owing to his Catholic background and sympathies, he eschewed court politics. Nor in the end was there anything “political” about the question of torture—it was an issue of ethics and of faith.
Donne’s resolve is strong. He cites and relies on two classical authorities. And whereas they muddle and equivocate, he does not. St. Augustine, writing in book nineteen of the City of God said that “torture is indeed a thing to be lamented, and, if that were possible, to be watered with a fountain of tears.” But what follows is arguably the darkest and most ethically dubious moment in the entire work. Augustine pulls back from a condemnation of torture, accepting it as a part of man’s barbarity, and accepting even that a person might be forced to torture, and should not be held to have done wrong for it. Many centuries would pass before the Roman Church recognized the error in Augustine’s reasoning. Donne also cites Ulpian, the famous author of the civil law commentaries from the third century, who described the use of torture in great detail, and its evolution in the Roman legal system. Ulpian reminds us that torture began as a process authorized for use only against slaves, then it was applied to non-Roman citizens, and finally it applied to citizens as well. (How the past echoes even in today’s newspapers, in which we learn of the use of torture against Jose Padilla, a U.S. citizen). In the end, Ulpian rejected torture, though his argument is morally indifferent. “Torture is a difficult and deceptive thing for the strong will resist and the weak will say anything to end the pain.” The law, Ulpian argued, must be a pursuit of the truth. Torture always leads into a cul de sac. Yet you would not think from hearing Donne that either of these authors had even a second’s hesitation in condemning torture. Certainly Donne does not.
Donne points to the ultimate irony of the use of torture, not to punish the guilty, but as a tool to extract information—when it is well established that doesn’t serve that end. He notes the immorality of this practice. John Donne was the most important clerical voice in England in his day. His opinion carried weight. Only three years after this sermon, following the assassination of the Duke of Buckingham, the lawyers and judges of England assembled in the Inns of Court in London to consider a special question put to them by the king. Was the practice of torture to be permitted by the common law?
And the judges met, deliberated and declared “upon their sacred honour, and the honour of England” that the answer was “no.” That marked the end of legalized torture in the English-speaking world… until the arrival of George W. Bush. And what hand did John Donne and his sermon have in this important moment in history? The answer is plain enough. And John Donne can stand as a solid model for men and women of faith today–to have courage, stand for their convictions, and not be cowed by the hollow charge of “politics.”
Back to me now.
Clinton had a blowjob and prevaricated. Bush, Rove, Cheney, Gonzales, Rice have all engaged knowingly in felonious, criminal acts that violate the law of this land since the Founding Fathers. You wouldn't want to go against the Founding Fathers, would you?
So, take a deep breath and forgive Clinton his blowjob. You've done it. Blowjobs, I mean. And then lied about having done that. So, you've done exactly what Clinton has done and for the same reasons. Have you committed felonies against the deepest convictions held by our Country for more than 225 years? No, you haven't. So, which is more important - being self righteous about Clinton having a little frisky fun isn't in the same realm, the same conversation, the same Universe as crushing people's emotional and physical state, as violating laws that George Washington and the other Founding Fathers spoke their word in favor of as being among the most important values of our Republic.
I'm not talking about the rest of what you've been ignoring. You're not able to handle it.
Facts that scream.
* Like the fact that, in Bill Clinton's day, we did not have to lower our recruitment standards, forcing our long-suffering Army to let in ex felons... or offer $20,000 signing bonuses to bribe new "volunteers." A sure sign that the nation is not behind this "war."
* Or the fact that only two (just two!) of our Army's brigades are currently fully trained, equipped and ready for actual war to defend this country! All the rest have been converted into counter insurgency urban swat teams. (One general said "Bill Clinton's U.S. Army could beat our present force with one hand tied behind its back.")
* If Bill Clinton was hiding so much, why did he cut government secrecy in half? If the Bushites are so responsible, why do they run from facts, from testifying, from oversight? Why have they multiplied government secrecy to levels ten times greater than when we were in a life death Cold War struggle against the Soviet KGB?
* In past wars, patriotic wealthy Americans stepped up, accepting the need to help pay for a struggle fought by other peoples’ sons. If we’re now "at war," how come the top neocon billionaires have just two priorities - increasing their tax cuts and getting no-bid, crony contracts to NOT deliver what’s needed in Iraq?
So, get off Clinton's back already. He got a blow job. You've given one. Get over it. Clinton hasn't been President since January 20, 2001 and you're still trying to blame him for everything that's wrong. Uh .. sure. Keep that up.
AMMO CAPSULE!
After inheriting surpluses from Clinton, Bush has run up over $3 TRILLION dollars in debt. Bush's FY2002 budget forecast understated the five-year deficit by $2.8 TRILLION dollars. Federal spending as a percentage of GDP was 21.4% when Clinton took office and 18.5% when he left, but is now back up to 20.8%. The Dow Jones Industrial Average increased 325% during the Clinton years but only 27% during the Bush years. The S&P 500 increased of 309% under Clinton and 9% under Bush. Economic growth was considerably higher under Clinton than under Bush and small businesses grew even faster than giant ones. Isn’t that what we want?
"What would you have said if Bill Clinton had --"
And then fill in the blank with something any conservative ought to find repulsive, if they did not have their head buried in the sand.
Like "losing" several billion dollars in cash, by the side of an Iraqi road.
Or "losing" a quarter of a million weapons in Iraq without even keeping their serial numbers.
Or "losing" several billion dollars worth of Iraqi oil per month...
...which is vastly more than the right wing screamed about, during the so-called "Oil-For-Food" scandal.
"What would you have said if this happened under Clinton?
If one thousandth of any of this had happened then?"
Notice how strenuously the Bushites have striven to strengthen the Presidency and insulate it from all supervision, oversight or duty - not only to Congress but the people - sending secrecy skyrocketing far beyond anything we saw in the Cold War. And ask yourself this. "Do you really want future Democratic presidents to have such power? Or do you feel that the Bushites are doing this because they don’t intend to ever let that happen?"
Now, on that torture thing - back to Harper's Magazine:
John Donne: Against the Abomination of Torture
Preached on April 17, 1625, on Easter Sunday, to the Congregation at St Paul’s Cathedral in London
[Image]
John Donne
Transgressors that put God’s organ out of tune, that discompose and tear the body of man with violence, are those inhuman persecutors who with racks and tortures and prisons and fires and exquisite inquisitions throw down the bodies of the true God’s servants to the idolatrous worship of their imaginary gods, that torture men into Hell and carry them through the inquisition into damnation. St Augustine moves a question, and institutes a disputation, and carries it somewhat problematically, whether torture be to be admitted at all, or no. That presents a fair probability which he says against it. We presume, says he, that an innocent man should accuse himself, by confession, in torture. And if an innocent man be able to do so, why should we not think that a guilty man, who shall save his life by holding his tongue in torture, should be able to do so?
And then, where is the use of torture? It is a slippery trial and uncertain (says Ulpian) to convince by torture. For many says (says St Augustine again) he that is yet but questioned, whether he be guilty or no, before that be known, is, without all question, miserably tortured. And whereas, many time, the passion of the Judge, and the covetousness of the Judge, and the ambition of the Judge, are calamities heavy enough upon a man that is accused. If the Judge knew that he were innocent, he should suffer nothing. If he knew he were guilty, he should not suffer torture. But because the Judge is ignorant and knows nothing, therefore the prisoner must be racked and tortured and mangled.
John Donne and the Outlawing of Torture
Recently I asked a clerical friend whether, considering the persistence of torture as a moral issue, he had thought of giving a sermon on the subject? He looked very uncomfortable and responded saying that his congregation was bipartisan and that he would be loathe to introduce a political issue as a sermon topic. It would fragment the congregation, he thought. Really?
I reject the notion that torture is a political issue of any sort. It is a great moral issue. And when those who have a clerical vocation fail to understand it and address it in those terms, they do their flock and themselves a great disservice.
Consider John Donne’s sermon of 1625. It was delivered as his Easter Sunday sermon, which is important. Then as now, the Easter service drew the biggest crowd of the year. The Easter sermon was the minister’s minute in the spotlight—the moment when he would reach his greatest audience and make his reputation. And we know from John Donne’s correspondence, he was concerned about another audience: the king, his entourage and the courts. When Donne rose to deliver this sermon, torture was a heated “political” issue in England. Under the Stuart monarchs, the use of torture was viewed as a royal prerogative (how little things change). It was administered by judges, particularly by the national security court of seventeenth century England, the so-called Court of Star Chamber. John H. Langbein’s important book, Torture and the Law of Proof gives us very clear guidance into how torture was prescribed and used.
Over a series of centuries, the genius of the English law had been steadily to restrict and limit the use of torture, until at this point, under King James, it was controlled by the king’s judges and limited in practice through a series of special writs. Which is to say, legally it was far more constrained than it is today under an Executive Order issued by King James’s understudy in allegedly Divine Right governance, George W. Bush.
Donne delivered a direct blow against this system, the use to which it was put, and the suffering it caused. He makes no equivocations. And in the end he delivers his blows against even the king’s judges who administer the system. No one viewed Donne as a “political figure.” Indeed, owing to his Catholic background and sympathies, he eschewed court politics. Nor in the end was there anything “political” about the question of torture—it was an issue of ethics and of faith.
Donne’s resolve is strong. He cites and relies on two classical authorities. And whereas they muddle and equivocate, he does not. St. Augustine, writing in book nineteen of the City of God said that “torture is indeed a thing to be lamented, and, if that were possible, to be watered with a fountain of tears.” But what follows is arguably the darkest and most ethically dubious moment in the entire work. Augustine pulls back from a condemnation of torture, accepting it as a part of man’s barbarity, and accepting even that a person might be forced to torture, and should not be held to have done wrong for it. Many centuries would pass before the Roman Church recognized the error in Augustine’s reasoning. Donne also cites Ulpian, the famous author of the civil law commentaries from the third century, who described the use of torture in great detail, and its evolution in the Roman legal system. Ulpian reminds us that torture began as a process authorized for use only against slaves, then it was applied to non-Roman citizens, and finally it applied to citizens as well. (How the past echoes even in today’s newspapers, in which we learn of the use of torture against Jose Padilla, a U.S. citizen). In the end, Ulpian rejected torture, though his argument is morally indifferent. “Torture is a difficult and deceptive thing for the strong will resist and the weak will say anything to end the pain.” The law, Ulpian argued, must be a pursuit of the truth. Torture always leads into a cul de sac. Yet you would not think from hearing Donne that either of these authors had even a second’s hesitation in condemning torture. Certainly Donne does not.
Donne points to the ultimate irony of the use of torture, not to punish the guilty, but as a tool to extract information—when it is well established that doesn’t serve that end. He notes the immorality of this practice. John Donne was the most important clerical voice in England in his day. His opinion carried weight. Only three years after this sermon, following the assassination of the Duke of Buckingham, the lawyers and judges of England assembled in the Inns of Court in London to consider a special question put to them by the king. Was the practice of torture to be permitted by the common law?
And the judges met, deliberated and declared “upon their sacred honour, and the honour of England” that the answer was “no.” That marked the end of legalized torture in the English-speaking world… until the arrival of George W. Bush. And what hand did John Donne and his sermon have in this important moment in history? The answer is plain enough. And John Donne can stand as a solid model for men and women of faith today–to have courage, stand for their convictions, and not be cowed by the hollow charge of “politics.”
Back to me now.
Clinton had a blowjob and prevaricated. Bush, Rove, Cheney, Gonzales, Rice have all engaged knowingly in felonious, criminal acts that violate the law of this land since the Founding Fathers. You wouldn't want to go against the Founding Fathers, would you?
So, take a deep breath and forgive Clinton his blowjob. You've done it. Blowjobs, I mean. And then lied about having done that. So, you've done exactly what Clinton has done and for the same reasons. Have you committed felonies against the deepest convictions held by our Country for more than 225 years? No, you haven't. So, which is more important - being self righteous about Clinton having a little frisky fun isn't in the same realm, the same conversation, the same Universe as crushing people's emotional and physical state, as violating laws that George Washington and the other Founding Fathers spoke their word in favor of as being among the most important values of our Republic.
I'm not talking about the rest of what you've been ignoring. You're not able to handle it.
Wednesday, August 15, 2007
Not that anyone would care, but
Okay, so it's not that you would care. It's that you'd read it, go "hmph" and then go back to what you're doing.
Time Warner has pulled off a coup - they've gotten the Postal Rate Commission to agree to refrain from increasing the postal rates on TWC's big publications - Time comes to mind - while jacking the rates on smaller publications not supported by large multi-national corporations. So, the publications that I read to get real perspective and information, like the Nation, will have a postal rate increase of about $500,000 a year.
They did everything by the book, but the complexities of Federal regulation and the pervasiveness of high dollar lobbying prevented anyone from understanding what was going on.
Just on the off chance that someone may want to bitch somewhere about this, here's an article that tells you what exactly went down and how to contact someone.
Fun tutorial on money supply, banking, and why the wealthy in our country are determined to avoid their own appointment at the Bastille gates.
And finally, this morning, you know how I feel about health care. Here, the leaders of the fight to enhance profitability for the healthcare industry are discussed.
Time Warner has pulled off a coup - they've gotten the Postal Rate Commission to agree to refrain from increasing the postal rates on TWC's big publications - Time comes to mind - while jacking the rates on smaller publications not supported by large multi-national corporations. So, the publications that I read to get real perspective and information, like the Nation, will have a postal rate increase of about $500,000 a year.
They did everything by the book, but the complexities of Federal regulation and the pervasiveness of high dollar lobbying prevented anyone from understanding what was going on.
Just on the off chance that someone may want to bitch somewhere about this, here's an article that tells you what exactly went down and how to contact someone.
Fun tutorial on money supply, banking, and why the wealthy in our country are determined to avoid their own appointment at the Bastille gates.
And finally, this morning, you know how I feel about health care. Here, the leaders of the fight to enhance profitability for the healthcare industry are discussed.
Tuesday, August 14, 2007
A socialist layman's description of our economic events
August 13, 2007
Margin Call - Jim Kuntsler
The seas were a mite choppy off Hedge Fund Island last week after all when the Federal Reserve started tossing life preservers of ready cash to the Big Fund Boyz bobbing and thrashing in the swells. Now, about that "money" -- which is, in essence, a bunch of extended lines of credit at the Fed's artificially-low official interest rate -- what actually happens to it? The simple answer is: it disappears into the same ocean of financial woe that the Boyz are drowning in.
The mere $38 billion that the Fed tossed out Friday afternoon, as the Dow was tanking down a few hundred clicks, will be used by banks and investment houses to cover losses in the synthetic securities they themselves created, and have been trading, during this psychotic final blow off of cheap energy capitalism. In essence, the Fed is buying worthless paper. The trouble is, there is so much more worthless paper out there that all the computers at the Federal Reserve could never generate enough pixelated cash to cover them in the life of this universe or several like it.
An additional problem: there is a practically inexhaustible supply of "dead" mortgages and corporate loans washing up on the pebbled beaches of Hedge Fund Island. No matter how bad the mortgage-and-credit-derived racket looks now, it is certain to only get worse as the dead mortgages and loans fester in the sun and the tropical foliage on Hedge Fund Island starts to wilt from the toxic fumes of all that decaying matter. This summer is only the beginning of a cycle of adjustable mortgage interest rate re-sets. The numbers go way up in the fall and are scheduled to continue rising well into the winter of 2008. How long do you think the Big Fund Boys can tread water?
What you're seeing now is a simple matter of financial sector players trying desperately to evade the consequences of their own actions. The fake wealth generated by the synthetic securities they created is now being recognized for what it is: a swindle. The hallucination is over. The collective denial that supported that hallucination is dissolving. The losses are become manifest. Even worse, the losses are growing exponentially because the synthetic securities were used as collateral to leverage far greater multiples of "positions," bets, and plays in a casino-like global electronic trading arena.
This is what happens when investment gets de-coupled from real productive activity and becomes an end in itself. It has been terrifically enhanced by computer programming. But no amount of digital legerdemain --with the "sugar-on-top" of accounting trickery -- can now hide the fact that there is no "value" there. What's more, the losses are going to have to show up somewhere. If you try to suppress them in one area, they'll pop up in another. If the Federal Reserve tries to cover the losses racked up by the Big Fund Boyz by giving "cash" away, they'll only succeed in destroying the value of the cash itself, i.e. the US dollar.
Now, few reasonable people can really imagine that the Fed would blunder into hyper-inflation. But the situation is so desperate that the Fed's mission to do what's necessary to rescue drowning banks may over-ride the prudent deployment of cash life preservers. As that occurs, foreign holders of the US Dollar may detect the impending loss of value of the dollar, and there would be a stampede to the redemption windows to get rid of them. That would leave the Federal Reserve (and by extension the American Nation) in a position of stark and implacable insolvency.
In any case, the US now stands on the brink of an unprecedented liquidation of assets. The mortgaged title holders to over-priced McHouses will have to liquidate their positions as "home-owners." The over-leveraged holders of credit-card debt will have to sell their Ford Explorers, bass boats, sports memorabilia (good luck with that shit) and flat-screen TVs. The retired dentists will have to dump their stocks and bonds. The corporations will have to sell off subsidiary operations, buildings, and corporate jets. Some colleges will just shutter. The Big Fund Boys will have nothing of value left in their portfolios to sell. They will just drown. Their heirs and assigns will then have to dispose of the house in Sagaponak, the 10-room apartment on Central Park West, and the family fleet of SUVs. The Big Boyz will take quite a few institutions with them -- the club-like banks and investment "houses" that employed them and went along with their mendacious shenanigans.
The upshot is that we are going to find ourselves a poorer nation. There will be far fewer people with money. There will be far fewer buyers of repossessed McHouses, bass boats, etc. Even the houses in Sagaponak and the Manhattan apartments will go cheap. The effort to pretend our way out of a financial crisis will fail. Sooner or later the recognition will set in that all that "boo-yah" was dreamed up. The United States swindled itself. We became a nation of such greed-crazed clowns that we committed financial suicide in an orgy of self-deception.
Anyway, that's how I see it this morning. The equity markets open in a half hour or so. The mood out there must be dark. The hands that hold the Starbucks cups must be trembling at the trading desks. I hasten to add that I think the turmoil and destruction can go on for quite a while. This slow-motion train wreck is not going to play out in just a week or two. And in case anyone forgets, in the background looms another storm at least as potent as the one now blowing through the financial markets: the gathering permanent global energy crisis (a.k.a. "peak oil"). Just because some Big Fund Boyz liquidated their positions on the oil futures market last week to try to cover their losses elsewhere does not mean that price of oil is going to keep going down. It may rest on the ledge in the $60 -$70 range for a spell, but you can be sure it will take flight again. And if it does as the dollar is crashing for other reasons, this will become a pretty disorderly nation in a very dangerous and unforgiving world.
Margin Call - Jim Kuntsler
The seas were a mite choppy off Hedge Fund Island last week after all when the Federal Reserve started tossing life preservers of ready cash to the Big Fund Boyz bobbing and thrashing in the swells. Now, about that "money" -- which is, in essence, a bunch of extended lines of credit at the Fed's artificially-low official interest rate -- what actually happens to it? The simple answer is: it disappears into the same ocean of financial woe that the Boyz are drowning in.
The mere $38 billion that the Fed tossed out Friday afternoon, as the Dow was tanking down a few hundred clicks, will be used by banks and investment houses to cover losses in the synthetic securities they themselves created, and have been trading, during this psychotic final blow off of cheap energy capitalism. In essence, the Fed is buying worthless paper. The trouble is, there is so much more worthless paper out there that all the computers at the Federal Reserve could never generate enough pixelated cash to cover them in the life of this universe or several like it.
An additional problem: there is a practically inexhaustible supply of "dead" mortgages and corporate loans washing up on the pebbled beaches of Hedge Fund Island. No matter how bad the mortgage-and-credit-derived racket looks now, it is certain to only get worse as the dead mortgages and loans fester in the sun and the tropical foliage on Hedge Fund Island starts to wilt from the toxic fumes of all that decaying matter. This summer is only the beginning of a cycle of adjustable mortgage interest rate re-sets. The numbers go way up in the fall and are scheduled to continue rising well into the winter of 2008. How long do you think the Big Fund Boys can tread water?
What you're seeing now is a simple matter of financial sector players trying desperately to evade the consequences of their own actions. The fake wealth generated by the synthetic securities they created is now being recognized for what it is: a swindle. The hallucination is over. The collective denial that supported that hallucination is dissolving. The losses are become manifest. Even worse, the losses are growing exponentially because the synthetic securities were used as collateral to leverage far greater multiples of "positions," bets, and plays in a casino-like global electronic trading arena.
This is what happens when investment gets de-coupled from real productive activity and becomes an end in itself. It has been terrifically enhanced by computer programming. But no amount of digital legerdemain --with the "sugar-on-top" of accounting trickery -- can now hide the fact that there is no "value" there. What's more, the losses are going to have to show up somewhere. If you try to suppress them in one area, they'll pop up in another. If the Federal Reserve tries to cover the losses racked up by the Big Fund Boyz by giving "cash" away, they'll only succeed in destroying the value of the cash itself, i.e. the US dollar.
Now, few reasonable people can really imagine that the Fed would blunder into hyper-inflation. But the situation is so desperate that the Fed's mission to do what's necessary to rescue drowning banks may over-ride the prudent deployment of cash life preservers. As that occurs, foreign holders of the US Dollar may detect the impending loss of value of the dollar, and there would be a stampede to the redemption windows to get rid of them. That would leave the Federal Reserve (and by extension the American Nation) in a position of stark and implacable insolvency.
In any case, the US now stands on the brink of an unprecedented liquidation of assets. The mortgaged title holders to over-priced McHouses will have to liquidate their positions as "home-owners." The over-leveraged holders of credit-card debt will have to sell their Ford Explorers, bass boats, sports memorabilia (good luck with that shit) and flat-screen TVs. The retired dentists will have to dump their stocks and bonds. The corporations will have to sell off subsidiary operations, buildings, and corporate jets. Some colleges will just shutter. The Big Fund Boys will have nothing of value left in their portfolios to sell. They will just drown. Their heirs and assigns will then have to dispose of the house in Sagaponak, the 10-room apartment on Central Park West, and the family fleet of SUVs. The Big Boyz will take quite a few institutions with them -- the club-like banks and investment "houses" that employed them and went along with their mendacious shenanigans.
The upshot is that we are going to find ourselves a poorer nation. There will be far fewer people with money. There will be far fewer buyers of repossessed McHouses, bass boats, etc. Even the houses in Sagaponak and the Manhattan apartments will go cheap. The effort to pretend our way out of a financial crisis will fail. Sooner or later the recognition will set in that all that "boo-yah" was dreamed up. The United States swindled itself. We became a nation of such greed-crazed clowns that we committed financial suicide in an orgy of self-deception.
Anyway, that's how I see it this morning. The equity markets open in a half hour or so. The mood out there must be dark. The hands that hold the Starbucks cups must be trembling at the trading desks. I hasten to add that I think the turmoil and destruction can go on for quite a while. This slow-motion train wreck is not going to play out in just a week or two. And in case anyone forgets, in the background looms another storm at least as potent as the one now blowing through the financial markets: the gathering permanent global energy crisis (a.k.a. "peak oil"). Just because some Big Fund Boyz liquidated their positions on the oil futures market last week to try to cover their losses elsewhere does not mean that price of oil is going to keep going down. It may rest on the ledge in the $60 -$70 range for a spell, but you can be sure it will take flight again. And if it does as the dollar is crashing for other reasons, this will become a pretty disorderly nation in a very dangerous and unforgiving world.
Sometimes, you just have to go public
For years now, I've had my information posted on a website that matches consultants with people who have "needs" for consulting services.
My services offered have been, of course, writing support. Over the last five years, I have had dozens upon dozens of small business owners who have wanted help identifying and writing grant proposals.
Recently, I had a project invitation, meaning that someone had reviewed my credentials and sought me out, rather than just posting a job like Craigslist for consultants. The fellow asked me if I were willing to write articles for his website on gay men's sexuality and health issues.
What has devolved has been ongoing mirth (on my part) and cluelessness (on his part.)
In short, he wanted me to write 25 articles - 750 words in length each - for ten dollars per article. $.0133 per word.
Just because it's gotten SO silly, it's time to now share this with the larger world.
We talked via instant messenger next, and he pointed me to the website for which he wanted these articles. His website sells naughty lingerie, and he's looking for "content" that can be indexed with the search engines to increase his viability.
It had originally been presented in such a way that I assumed he wanted this for a non-profit publication. My error.
I told him over instant messenger that I was not interested. As in "no, I'm not interested. Thank you for contacting me."
Over the next few weeks, I get these messages from him:
After enduring these missives, I write him back:
That seemingly wasn't clear enough (and it was a repetition of what I had said weeks earlier by IM.)
Now it's starting to remind me of some town slut, who can't remember who she's slept with and speaks to everyone as if it's their first encounter.
My reply:
To which he replies:
Hello? Clue phone for you, sir...
At this point, I call my friend who is a professional editoress in the Woodlands, and share this exchange with her. She nearly aspirates her coffee laughing so much. I visit with her about how best to reply, and post this response:
Now, at $75/article and 750 words per piece, that's only $.10 per word, which is a market rate.
Undaunted, our fearless Capitalist responds with:
Maybe he prices the naughty brassieres in the same fashion he offers to pay for articles. What do you think is the reason he can't make any money?
So, after letting his latest plea for charitable assistance languish for nearly a month, today I have another invitation from a different "employer" who has invited me to respond to his need for ... wait for it ... grant money so he can travel around the world and write articles about gay and lesbian life in other countries. This carries me back to the website (which I avoid like the plague so as to not have to look at the people who want to open a gift shop and hair salon in Buttface, New Mexico and think that the Government will GIVE them the money to do it.) There, I see this unanswered cry for help and I feel it's time to provide a further response, to-wit:
Will he get the hint? Does he speak English?
My services offered have been, of course, writing support. Over the last five years, I have had dozens upon dozens of small business owners who have wanted help identifying and writing grant proposals.
Recently, I had a project invitation, meaning that someone had reviewed my credentials and sought me out, rather than just posting a job like Craigslist for consultants. The fellow asked me if I were willing to write articles for his website on gay men's sexuality and health issues.
What has devolved has been ongoing mirth (on my part) and cluelessness (on his part.)
In short, he wanted me to write 25 articles - 750 words in length each - for ten dollars per article. $.0133 per word.
Just because it's gotten SO silly, it's time to now share this with the larger world.
I am definately intrested in talking to you about this project. I have been looking for somebody to do the whole project but the more I thought about it, I knew it would be hard for sombody to be accurate to write who knew nothing about the lifestyle. It was funny, I was about to repost the project when I opened up my account to my suprise you and a couple other writter who lived the life style has responed to my ad. My buget was allowing 1000.00 for the whole project, as I am a simple website and not a large conglomerate, so now I will have have to split that 3 ways for the project. Are you neg about your price? Please get back to me soon as I have to get an answer and get sombody writting soon. Thanks
Posted by Employer ID:
Posted on February 21, 2007 11:28:21 EST/EDT
If you noticed I did split the project into 3 to make it a little easier for people to bid on it. Besides if your articles are good, I would be intrested in getting a couple articles on issues relating to male/male sexual attraction, especially in bisexual behaviors, homosexual curiosity in straight men, the depth of homosexual behavior in the apparently "straight" world, gay men and transactional/sexual validation, gay men and pseudo relationships with a "look," or with a sexually compatible individual. Please get back to me soon. Iwas thinking that for the first 25 articles "for him to him" about 10.00 per article (500 -750) words and the same for each articel after. If your articles are very good and really do what they are intented for the nwe can look at raising that down the road. Once I find the right writter then I will want to keep them.
Posted by Employer ID:
Posted on February 25, 2007 11:37:04 EST/EDT
I am looking for all 25 of these articles to be done, these are the topics for each article. Once these 25 have been done, then I would be looking for a couple articles a week for a year.
25 For Him (to do to Him)
1. Fantastic Fellatio
2. Getting the (Hand) Job Done
3. Anal Play Done Right
4. Anal Play Safety
5. The Top Five Toys for your Gay Relationship
6. Gay Love (Isn't Just About Sex)
7. The Top Five Gay Role-Plays
8. Gay Fetishes
9. Threesome Fun
10. Love & Sensuality for Gay Males
11. The Importance of Safe Sex (A Gay Perspective)
12. Stimulate the Prostate
13. Sexual Liberator Furniture for Gay Men
14. Bisexual Dilemmas
15. Your First Time
16. The Physicality of Love
17. Top, Bottom, or Switch - Does it Matter?
18. The Best Positions for Gay Sex
19. Homosexual Curiosity for the Straight Man
20. Homoeroticism and It's Effect (On Society)
21. The Normalcy of Gay Relationships
22. Homosexual Stereotypes: Real or Fake
23. Adding Spice to a Committed Gay Relationship
24. That Night (Tips for the Night of your Committment Ceremony/Civil Union/Gay Marriage)
25. Mending Relationship Troubles
We talked via instant messenger next, and he pointed me to the website for which he wanted these articles. His website sells naughty lingerie, and he's looking for "content" that can be indexed with the search engines to increase his viability.
It had originally been presented in such a way that I assumed he wanted this for a non-profit publication. My error.
I told him over instant messenger that I was not interested. As in "no, I'm not interested. Thank you for contacting me."
Over the next few weeks, I get these messages from him:
are you not intrested since you haven't got back to me? if let jsut tell me your not intrested. if you are intrested i need to speak to you asap to get this project going.
Posted by Employer ID:
Posted on April 22, 2007 11:28:55 EST/EDT
Posted by Employer ID:
Posted on April 22, 2007 11:28:08 EST/EDT
can you contact me today on msn im my account is xxxxxxxxx a sing hotmail.com
Posted by Employer ID:
Posted on March 23, 2007 13:34:21 EST/EDT
Are you wanting to do this project? I need to hear back asap.
Posted by Employer ID:
Posted on March 01, 2007 10:17:52 EST/EDT
After enduring these missives, I write him back:
We spoke directly on this subject; that it's for a for-profit site, and the very minimal amount of pay, I was not at all interested, thanks.
Posted by Douglas Hord (Pro ID: 492422)
Posted on June 02, 2007 18:33:06 EST/EDT
That seemingly wasn't clear enough (and it was a repetition of what I had said weeks earlier by IM.)
i am intrested in talking further about this, are you intrested and do you have msn im ?
Posted by Employer ID:
Posted on June 06, 2007 07:47:41 EST/EDT
Now it's starting to remind me of some town slut, who can't remember who she's slept with and speaks to everyone as if it's their first encounter.
My reply:
I'm not interested. This is the fourth time I've indicated this to you. You and I have already communicated via MSN.
Posted by Douglas Hord (Pro ID: 492422)
Posted on June 06, 2007 12:04:07 EST/EDT
To which he replies:
lets chat again, i am intrested and it seems each time i send a email i get one back telling me to leave you alone, i am so confussed, i really would like to chat with you and have you write me an article each month for my news letter.
Posted by Employer ID:
Posted on July 15, 2007 12:35:47 EST/EDT
At this point, I call my friend who is a professional editoress in the Woodlands, and share this exchange with her. She nearly aspirates her coffee laughing so much. I visit with her about how best to reply, and post this response:
I'm not interested in the meager price you've offered to benefit your for-profit business. We had a clear discussion about this.
I'd gladly write these articles for you with a quick turn around for $75/article - one half in advance and the other half on acceptance.
Posted by Douglas Hord (Pro ID: 492422)
Posted on July 15, 2007 15:16:51 EST/EDT
Now, at $75/article and 750 words per piece, that's only $.10 per word, which is a market rate.
Undaunted, our fearless Capitalist responds with:
my news letter is geared to be informative, i do realize that i have a for profit website, but realy i don't make a profit, all money in the site goes back into the site and reader, we are trying to be a informative site on every thing sexual and i am trying to included gay and bi sexual as information that people want to know more about, the articel per month is for a news letter where you could control the column it would be like your own column, but i do need more articles to help fill the library of intresting article, in which i do not charge my library is open for any one to read yet i pay for the articles. so if you intrested let me know but at 75.00 an article i would go broke very fast! if your willing to be more reasonable i may be willing.
Posted by Employer ID:
Posted on July 16, 2007 16:03:59 EST/EDT
Maybe he prices the naughty brassieres in the same fashion he offers to pay for articles. What do you think is the reason he can't make any money?
So, after letting his latest plea for charitable assistance languish for nearly a month, today I have another invitation from a different "employer" who has invited me to respond to his need for ... wait for it ... grant money so he can travel around the world and write articles about gay and lesbian life in other countries. This carries me back to the website (which I avoid like the plague so as to not have to look at the people who want to open a gift shop and hair salon in Buttface, New Mexico and think that the Government will GIVE them the money to do it.) There, I see this unanswered cry for help and I feel it's time to provide a further response, to-wit:
Actually, after having told this amusing story regarding our ongoing interchange to a number of writers with whom I am friends around the country, it's significant to note that the price I quoted is the reasonable figure, and the price you quoted me months ago brought peals of laughter.
Posted by Douglas Hord (Pro ID: 492422)
Posted on August 14, 2007 14:34:54 EST/EDT
Will he get the hint? Does he speak English?
Monday, August 13, 2007
Monday, Monday ver. 983.1
I'm working my way through my task list for the day. Still a bunch of things on the list, but I'm working away here.
Have to run out to Pasadena today, I think. If not, then tomorrow morning.
So, Bram is all excited about the patio table on the back courtyard. Today, I was talking to Nicole and Tom about how to make the courtyard far more pleasant, and I started thinking about your idea for putting up some cross pieces between the garage and the house, and maybe finding some sort of climbing plant to go up there that would create and arbor cover - Nicole suggested Wisteria. http://en.wikipedia.org/wiki/Wisteria
Tom says that I could build planter boxes up along the top of the wall and have the wisteria grow along the wood cross members - it would create a cover over the entire courtyard that would flower in the spring. It would block the sun during the summer months, and would thin out during the colder months, allowing more sunlight onto the courtyard.
And, the plants on the courtyard floor would stop cooking.
I think it sounds like a winner idea! The only thing is that apparently, wisteria is VERY strong, grows VERY sturdy, and would be heavy and .. unforgiving on the roof structure etc.
This weekend, we had people over for dinner and DVDs both Saturday and Sunday night. Funny how only Thursday, I was thinking (to myself) that I would make this house into a social destination much as Larry's Stroud Plantation was in the late 1980s for all of my friends back then. So, here at the Bend, we started the program conceived only 48 hours earlier in an informal but very successful way. Saturday night, we had OJ, David (with whom I had seen "SiCKO" last week,) Bram, and Bram's "boyfriend" Geo. Food was served in the manner of Divoghetti, which was well consumed. We watched "Accepted," which was a hoot, "The Bourne Identity," and "Connie & Carla." Bram and Geo headed upstairs shortly after the last crust of their garlic bread soped up the last gram of Divoghetti sauce, not to be heard from again until the morrow.
Sunday morning, I dragged OJ to church, followed by the board meeting. We didn't get home until nearly 3:00 pm, and pulled into the garage to find Bram Bramalizing the courtyard. He was so excited about the patio table and chairs that Nicole loaned us that he had to tidy up, sweep, hose down and then mop the courtyard. After sundown, he dashed out to buy a box fan to use out there, and bought some cushions for the new chairs. He lighted tea lights in all of the candle holders outside, and held court out there until nearly midnight.
So, we're going to see what we can do to cultivate that.
Have to run out to Pasadena today, I think. If not, then tomorrow morning.
So, Bram is all excited about the patio table on the back courtyard. Today, I was talking to Nicole and Tom about how to make the courtyard far more pleasant, and I started thinking about your idea for putting up some cross pieces between the garage and the house, and maybe finding some sort of climbing plant to go up there that would create and arbor cover - Nicole suggested Wisteria. http://en.wikipedia.org/wiki/Wisteria
Tom says that I could build planter boxes up along the top of the wall and have the wisteria grow along the wood cross members - it would create a cover over the entire courtyard that would flower in the spring. It would block the sun during the summer months, and would thin out during the colder months, allowing more sunlight onto the courtyard.
And, the plants on the courtyard floor would stop cooking.
I think it sounds like a winner idea! The only thing is that apparently, wisteria is VERY strong, grows VERY sturdy, and would be heavy and .. unforgiving on the roof structure etc.
This weekend, we had people over for dinner and DVDs both Saturday and Sunday night. Funny how only Thursday, I was thinking (to myself) that I would make this house into a social destination much as Larry's Stroud Plantation was in the late 1980s for all of my friends back then. So, here at the Bend, we started the program conceived only 48 hours earlier in an informal but very successful way. Saturday night, we had OJ, David (with whom I had seen "SiCKO" last week,) Bram, and Bram's "boyfriend" Geo. Food was served in the manner of Divoghetti, which was well consumed. We watched "Accepted," which was a hoot, "The Bourne Identity," and "Connie & Carla." Bram and Geo headed upstairs shortly after the last crust of their garlic bread soped up the last gram of Divoghetti sauce, not to be heard from again until the morrow.
Sunday morning, I dragged OJ to church, followed by the board meeting. We didn't get home until nearly 3:00 pm, and pulled into the garage to find Bram Bramalizing the courtyard. He was so excited about the patio table and chairs that Nicole loaned us that he had to tidy up, sweep, hose down and then mop the courtyard. After sundown, he dashed out to buy a box fan to use out there, and bought some cushions for the new chairs. He lighted tea lights in all of the candle holders outside, and held court out there until nearly midnight.
So, we're going to see what we can do to cultivate that.
Okay, so maybe the Chinese aren't about to nuke our currency
And, the credit crunch isn't as bad as it may have seemed last week.
Here, cross posted from his weekly newsletter, is Dallas economist John Maudlin's explanation of each of those two scary closet monsters. John Maudlin is an economist whose commentary is very accessible yet thought provoking, and whose work I read each week. You can reach him (and ask for a newsletter subscription of your own) at JohnMauldin@InvestorsInsight.com.
On the credit liquidity crisis, hedge funds and sub-prime mortgage securities:
Here, cross posted from his weekly newsletter, is Dallas economist John Maudlin's explanation of each of those two scary closet monsters. John Maudlin is an economist whose commentary is very accessible yet thought provoking, and whose work I read each week. You can reach him (and ask for a newsletter subscription of your own) at JohnMauldin@InvestorsInsight.com.
China - Upping the Rhetorical Ante
Early this week the currency markets were roiled as not one but two senior Chinese officials publicly advocated using China's large dollar reserves as a political weapon should the US attempt sanctions on Chinese goods if the renminbi is not valued higher against the dollar. The two were senior officials at Chinese think tanks. Shifts in Chinese policy are often signaled through key think tanks and academics.
He Fan, an official at the Chinese Academy of Social Sciences, used uncharacteristically strong language, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.
"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced their dollar holdings.
"China is unlikely to follow suit as long as the Yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily. (London Telegraph)
This comes as the US Congress will consider legislation that will implement tariffs on Chinese goods if China does not revalue its currency. Given the level of rhetoric from both political parties and presidential candidates, it is no wonder that China is finally responding with a little rhetorical shot of its own. After smiling at the editorial cartoon below, let's look at the likelihood of such an event.
China has an estimated $900 billion in US dollar reserves. There is no doubt that if they did decide to sell a few hundred billion here or there, they could push the dollar down against all currencies and not just the renminbi. That would also have the effect of increasing US interest rates on not just government bonds, but mortgages, car loans and all sorts of consumer credit.
Given the current state of the credit markets, that is not something that would be welcome. But it is not likely for several reasons. First, it is not in their best interests to do so. It would hurt the Chinese as much as the US, as it would devalue their entire dollar portfolio and clearly do damage to their number one export market - the US consumer.
Secondly, it is unlikely that the US will actually be able to get such legislation passed into law. Even if such legislation passed Congress (an admitted possibility) it would be vetoed by President Bush. That means that any real change would not be possible until some time in the middle of 2009.
The renminbi has already dropped almost 10% in the last two years since the Chinese started their policy of a crawling peg. For reasons I outlined at length a few weeks ago, it is likely that the Chinese are going to increase that pace over the next two years, for their own internal reasons. A higher renminbi valuation helps them slow their economy down from its way too fast pace of growth that is evident today. (If you would like to see that analysis, click here.)
By the time any real legislation could get passed, the renminbi will be very close to the level where the China bashers in Congress want to see it, if it is not already floating. Hardly enough to want to start a trade war at that time.
But let's look at what the bi-partisan economic illiterates in Congress are actually advocating. First, they whine about lost American jobs. But a 25% higher renminbi is not going to bring any manufacturing jobs back. China is no longer the low cost labor market. There are other Asian countries with lower labor costs. We just will not be able to competitively manufacture products that have high unskilled labor costs.
But we will continue to manufacture high value added items in a host of industries where skill and talent are required. Even though manufacturing as a percentage of US GDP is down, our actual level of exports and manufactured products is up by any measure. It is easy to write about the closing of a plant, and it makes the headlines, but the fact is that free trade has created more jobs by far than we have lost.
Secondly, if our cost of imports were to rise by 20-25%, that cannot be understood as anything but inflationary. And it would not just be Chinese products, but the products of all developing countries. Many Asian countries manage (manipulate) their currencies to keep them competitive against each other and the Chinese. You can bet that if the renminbi rises another 20%, there is the real prospect that they all will.
And much of what China and the rest of Asia produces is bought by those on the lower economic rungs of the US ladder. So, if Congress gets its way, they would be advocating putting pressure on those least capable of paying higher prices. But no one lobbies for the little guy. Congressional members can pander to their local unions and businesses without having to answer for what would be higher prices.
And higher prices means more inflation which means that interest rates have to be higher than they should, which means higher mortgage rates, etc. Protectionism has a very high cost. Free markets create more jobs everywhere.
Finally, we should hope the Chinese continue to allow their currency to rise slow and steady. Neither country needs the turmoil a rapid rise would induce. The world needs a stable China. We are watching world credits markets freeze up because things went very bad very quickly in the relatively small subprime world. A 20% drop in the dollar in a few months would be even more catastrophic. Senators Lindsey Graham and Chuck Schumer are competing to be this century's Smoot and Hawley that creates a depression from trade wars where none should be.
The danger in all this is that politicians who have little economic literacy create a hostile environment with their rhetorical poison, with both sides feeling the need to play to their "home crowd." That is a very dangerous environment.
It won't happen, but I would like to see the following question asked in the presidential debates to those (like Hillary Clinton, Obama and Dodd, etc.) who basically advocate a weaker dollar.
"Why are you advocating a weak dollar policy? Why do you want American wage earners to pay 25% more for the goods we buy from foreign countries? Do you really think there is no connection between the value of the Chinese currency and the rest of the currencies of the world? Do you think American consumers need to send even more money overseas and get less for our dollars? Do you think the American consumer is so well off they can afford to pay more and that it will have no affect on the US economy? Do you realize that a 25% lower dollar will mean a rise in world oil prices? Do you think there is no connection between the value of the dollar and US prosperity?"
I won't hold my breath.
On the credit liquidity crisis, hedge funds and sub-prime mortgage securities:
Back to 1998
Let's get in the Wayback Machine and revisit 1998. (For reference for my foreign readers, the "Wayback Machine" originally referred to a fictional machine from a segment of the cartoon The Rocky and Bullwinkle Show used to transport Mr. Peabody and Sherman back in time.)
First, there was the Asian currency crisis and then Russia looked like it would default on its debt, causing a crisis in the credit markets. A hedge fund called Long Term Capital Management had leveraged their bond positions about 80 to 1 based upon the relationship between certain types of bonds always, emphasize always, converging upon a certain price. They diversified on bonds throughout the world as an "extra" protection.
Except that the markets in the fall of 1998 were not acting as they had in the past. The relationships changed just a very small amount, but if you are leveraged 80 to 1, then small is enough to wipe you out. The Nobel Prize winners who designed the system overlooked the possibility that the market could become irrational.
Fast forward to 2007. Again, the credit markets are in turmoil, and the subprime mortgage problems are spreading, as predicted here last January. Let's look at some things that are similar to 1998.
First, normal relationships between certain types of bonds have been turned on their head. For many companies who go into the credit markets, there are different types of debt they sell. Certain types of bonds or loans are considered "senior" because in the event of the company going bankrupt, they get paid first. Then debt that is subordinated to the senior debt gets paid, and lastly the shareholders get to split what is left over, if anything.
So, clearly, it stands to reason that senior debt is more valuable than subordinated debt. Why would you pay more for the riskier debt? So, if you want to put on a hedge, you can "go long" the senior debt and "go short" the subordinated debt. And in the past, that works.
Except not this time. There are a number of funds that are having real problems and are being met with high redemptions because they are exposed to the subprime markets. But no one is buying the subprime debt, so they have to sell what they can to meet redemptions. And what sells? The quality senior debt. At a discount, of course.
So, if you are another fund holding that debt instrument that just traded down, you just saw the value of your high quality loan or bond drop. But because the subordinated debt you sold as a hedge is not trading, there is not a price for it, so you can't show the profit there should be on the pair trade. Your fund is down for the month. Bummer.
Now, if you are not over-leveraged and forced to sell, you can wait a few weeks or a month and the normal relationship will come back. And you may even benefit as quality will rise even as the riskier instruments fall. But until there is a price made on your hedges, you cannot just make up a price based upon normal rational markets.
And if you are in the lucky position of having cash, you can go in and buy very good debt at a fire sale price today. There are a lot of debt instruments of very good and profitable companies that is on the market for much less than what it will be in a few months when things get back to normal. And if you are a company with cash, you may be able to go back in and buy your debt at a discount.
The End of the Quantitative World
I should first note that the average hedge fund made money in July, and some did quite well. There are a number of hedge fund strategies that have the potential to benefit in this type of environment. That being said, if a fund has invested in the subprime mortgage space (unless they are short), they are losing money. It is easy to see the relationship between the subprime mess and the funds that invested in it. But there are other funds which are losing money, and the connection to the subprime markets is less clear.
There are any number of statistical relationships which have simply not functioned as they have in the past. Large quantitative hedge funds that employ teams of mathematicians and physicists to develop complex "black box" trading programs to computer trade on these relationships are finding themselves losing money. As Spencer Jakab writes:
"Quantitative hedge funds running 'black box' models are primarily market neutral, seeking to exploit small inefficiencies in valuations and historical volatility between similar securities. A period like the last few weeks would have typically seen such funds outperform most of their peers in the hedge-fund community, but they have instead shocked investors with steep losses.
"Because risk managers were able to demonstrate that they were less risky, on paper at least, they were allowed to use far more borrowed money than other leading hedge fund strategies. Some are clearly overextended. 'The inherent leverage is killing them,' said a broker at a major investment bank who deals with hedge funds."
"Analyst Matthew Rothman of Lehman Brothers wrote that the models are working in exactly the opposite way they should to protect a black box fund in an up or down market. 'It is not just that most factors are not working but rather they are working in a perverse manner,' wrote Rothman. 'The names that are short are outperforming, often notably, while the names that are long are underperforming, although less severely.'"
Goldman's Global Alpha, which has been losing money for two years, is down 26% for the year and down almost 40% since the end of July. It is not surprising they are being hit with redemptions. And that forces them to sell. Many of the largest hedge funds are the very quantitative funds that are being forced to sell, putting pressure on the markets.
In 1998 problems in Asia and Russia spread to the rest of the markets, affecting Norwegian bonds and US stocks. It took a few months to sort out, and a lot of people lost money. Today, problems in the subprime mortgage markets spread to other credit markets and the affect is spilling over into stock markets.
But there is a difference. Today, instead of one fund that was at the epicenter of the problem, the problems are spread around the world among scores of funds and permeate the largest institutional and pension funds. While that means the losses are spread among thousands of investors, it also means that central banks can't bring everyone to the table to "fix" the problem.
The problem of the last two days was triggered by BNP Paribas telling investors in three of their funds that they would not be allowed to redeem. This simply froze the European markets. The European Central Bank has injected $211 billion into their system. Central banks have put $339 billion into the world system in the last 48 hours. And you should be very glad they did, by the way.
I heard on TV that some are saying the Fed is bailing out banks. Not they way I read it. They are simply taking short term "repo" paper for a few days to inject liquidity. If you are going to have a central bank, then this is a proper action. The fact that the excess liquidity which produced the bubbles can be laid at the Greenspan Federal Reserve's feet is a topic for another day.
And while we are on the topic, I think BNP Paribas probably did the right thing. They have funds which have invested in all sorts of credit vehicles. Nothing is trading, so if they tried to meet redemptions, they would have to sell assets at much distressed prices, and then guess at what prices the other assets should be valued at in the absence of a market price. If they guessed to little, then those exiting would lose too much, notice their losses were too high and sue. If they guessed too high, then those remaining would notice that they lost more than they should have and then sue. BNP was in a no win situation. To be fair to all investors, they have to wait until the market prices the assets in their portfolio.
They have not said what those assets are. If they are not US mortgage related it is likely they will turn out ok. If there is subprime in the mix, they will take significant losses.
Subprime for a Long Time
And one last difference between 1998 and today. Back then, the problems in the markets became known and were priced into the markets in relatively short order. It is going to be several years before we know the extent of the subprime losses. Remember the table that I used last week which showed the bulk of subprime mortgage interest rate resets was not until the first half of 2008. It is going to take years for the markets to know what the losses on the subprime will actually be.
And it is not as if it should be a total surprise. Any investor can go to their Bloomberg and pull up a listing of subprime Residential Mortgage Backed Securities. There are 2,512 of them. If you sort by the ones with the most loans over 60 days past due, you find that the average RMBS has 12.39% of their mortgages over 60 days, and 2.39% have already been repossessed (REO in the next table), with almost 5% in foreclosure.
The table below shows the RMBS with the highest level of 60 day past due (or worse) mortgages in them. Yes, the worst two offenders are the 2006 vintage of RMBS. But notice that a lot are from 2000, 2001, 2003 and earlier, well before the supposedly lax standards of the past few years. The third listed RMBS, the INHEL 2001-B is selling at 18 cents on the dollar (you can't see this from the table), and has been dropping since 2003. Over 25% of the mortgages in that portfolio have already been repossessed or are in foreclosure, with another 25% past due for over 60 days. Can you say ugly?
But you can also find paper from 2001 that is not doing badly. It should be clear to anybody who did a little due diligence a few years ago that there were problems in the subprime RMBS markets. There was a great deal of difference in the quality of various offerings. So it paid you to do some homework. If you could not get transparency, then you were taking a gamble.
That being said, many of the European and Asian institutions who bought this paper relied on the credit rating agencies. They relied on the models built by the investment banks that put this paper together. As I have written, they sold their AAA rating but put legal language buried in the documents that basically said, "OK, this is not what we mean by AAA in our other ratings." The document for the RMBS mentioned above was 300 pages of fine print. I will bet you that the vast majority of people buying this paper did not read it or understand what they were reading if they did.
You can bet lawyers all over the world will look at this same screen I show below. They are then going to ask the bankers and credit agencies how they could put such a high rating on the paper seeing the problems in these securities? "Really, you didn't look at the lending standards?" It's all hindsight, of course. But that's what lawyers do. And in front of a jury, it will be a tough day for the banks and credit agencies.
Paris Hilton is hurting you
She's not just another vapid lily of the field, according to a new book she's causing you psychological and monetary injury.
Here, cross posted from Digby's Hullabaloo is a discussing/review of the book's subject matter and premise:
Here, cross posted from Digby's Hullabaloo is a discussing/review of the book's subject matter and premise:
We hear a lot about income inequality these days and if you're like me, you probably wonder, other than the fundamental unfairness of it all, why this matters. After all, life isn't fair, get back to work and stop lallygagging.
As it turns out it matters a great deal, and that sense of dissatisfaction and anxiety so many of us feel is a direct result of the conspicuous consumption of the fabulously wealthy overclass trickling down through society and making it necessary for people to constantly buy more, even as they are earning the same. According to Frank, it's not just keeping up with the Joneses or class envy or any of the other things that people usually attribute to those who live beyond their means. It's a natural, human response to the context in which they live. Frank makes a compelling case that measuring yourself against your neighbors, co-workers or whatever, isn't just a matter of "keeping score." It's the way we make sense of the world. And that measure is affected every day by what the super-rich are buying.
In a delightfully droll passage, Frank describes going shopping to replace the battered $89.00 bar-b-q he'd used quite happily for years, until all his repairs finally failed and it fell apart. He sees this amazing Viking grill extravaganza with burners for stir frying and rotisseries that practically cook the food itself and deliver it to your table. It costs $5,000. But, boy is it awesome. He reluctantly turns away and contemplates a different model with some of the same features, but now that he's seen the top of the line, it just isn't as impressive. But being a responsible consumer he realizes that he can't be that extravagant and he considers buying this more basic model -- for $1,160. It's so improved from the banged up old $89.00 model on which he'd happily grilled for years they might as well not even be called a bar-b-q, but in spite of that, he feels a vague sense of disappointment at what it doesn't have compared to the fancy Lamborghini level grill. Buying it would feel positively frugal, even though it's ridiculously expensive on its own terms. I'm sure you've all been there. You have no idea what's out there, but once you see something with all the bells and whistles you subconsciously compare everything else you see to it. And something that you would have found to be an amazing improvement over what you once had, suddenly becomes a compromise.
For the record, Frank settles on a $250.00 Weber and felt extremely frugal buying it --- though it cost three times what his other grill had cost. But you can also tell by the loving detail with which he describes those more expensive models, that they made a lasting impression. He went back a year later to look at them again and the top of the line model was now $13,000.00 --- and that $1100.00 model now looks like a worthless piece of junk by comparison.
This is the mechanism by which the extremely wealthy change the context of our everyday lives in ways we aren't even aware. And in a society that ties such fundamental community functions such as schools and public safety to property values and perceptions of power, it is almost a matter of necessity that the middle class keep reaching for the bigger house and the bigger car in order to maintain a stake in their community. It is perfectly understandable that people want to have their kids educated in good schools and live in safe neighborhoods.
Neither is it counter-intuitive that if you need to be taken seriously by people who have money, you have to appear that you have money too. I remember being confused when I first started working in a business where there were always a lot of recent college grads in entry level grunt positions driving very fancy cars and dressing in designer clothes. It took me a while to realize that they were all children of wealth. As a result of their ability to give the properly successful appearance, those of us who didn't have money spent far more on such things than we had any right to, merely to even be in the running. I suspect this gets worse every year as the rich continue to shed the last vestiges of social restraint on flaunting their wealth.
The problem is that middle class American incomes are not even close keeping up with what they need to spend in this kind of cycle and haven't been for more than two decades, while income gains for these super-rich have been stratospheric. That's what's making everyone feel the squeeze: the middle class are working themselves into an early grave and taking on more debt than they can manage not because they are foolishly trying to keep up with Paris Hilton but because they have to in order to hang onto the place in society they already have.
Frank discusses at length the costs of this striving and I think we all can imagine what they are in terms of health and happiness. This is a sick little merry-go-round we're on. Fortunately, he has a novel solution that I would hope the powers that be would consider: a progressive consumption tax that would give an incentive for the rich to think twice about this reckless extravagance that's dragging everyone else down as they try to keep up. It would encourage saving among the rest of us, which virtually all economists agree is sorely needed, and if nothing else would force the super-wealthy to at least kick in something for the public good while they're running themselves ragged with their endless shopping for expensive gew gaws.
This is a very accessible little book, written in easy to understand language that gets to the heart of the problem for average people who are just trying to make a living and raise their kids and find some way to leave this world a little better than they found it. It gives us some real insight into how we actually find our place in the world around us and --- pursue happiness. That important knowledge leads to how we might change policies to actively encourage that fundamental American value.
Paris Hilton is hurting you
She's not just another vapid lily of the field, according to a new book she's causing you psychological and monetary injury.
Here, cross posted from Digby's Hullabaloo is a discussing/review of the book's subject matter and premise:
Here, cross posted from Digby's Hullabaloo is a discussing/review of the book's subject matter and premise:
We hear a lot about income inequality these days and if you're like me, you probably wonder, other than the fundamental unfairness of it all, why this matters. After all, life isn't fair, get back to work and stop lallygagging.
As it turns out it matters a great deal, and that sense of dissatisfaction and anxiety so many of us feel is a direct result of the conspicuous consumption of the fabulously wealthy overclass trickling down through society and making it necessary for people to constantly buy more, even as they are earning the same. According to Frank, it's not just keeping up with the Joneses or class envy or any of the other things that people usually attribute to those who live beyond their means. It's a natural, human response to the context in which they live. Frank makes a compelling case that measuring yourself against your neighbors, co-workers or whatever, isn't just a matter of "keeping score." It's the way we make sense of the world. And that measure is affected every day by what the super-rich are buying.
In a delightfully droll passage, Frank describes going shopping to replace the battered $89.00 bar-b-q he'd used quite happily for years, until all his repairs finally failed and it fell apart. He sees this amazing Viking grill extravaganza with burners for stir frying and rotisseries that practically cook the food itself and deliver it to your table. It costs $5,000. But, boy is it awesome. He reluctantly turns away and contemplates a different model with some of the same features, but now that he's seen the top of the line, it just isn't as impressive. But being a responsible consumer he realizes that he can't be that extravagant and he considers buying this more basic model -- for $1,160. It's so improved from the banged up old $89.00 model on which he'd happily grilled for years they might as well not even be called a bar-b-q, but in spite of that, he feels a vague sense of disappointment at what it doesn't have compared to the fancy Lamborghini level grill. Buying it would feel positively frugal, even though it's ridiculously expensive on its own terms. I'm sure you've all been there. You have no idea what's out there, but once you see something with all the bells and whistles you subconsciously compare everything else you see to it. And something that you would have found to be an amazing improvement over what you once had, suddenly becomes a compromise.
For the record, Frank settles on a $250.00 Weber and felt extremely frugal buying it --- though it cost three times what his other grill had cost. But you can also tell by the loving detail with which he describes those more expensive models, that they made a lasting impression. He went back a year later to look at them again and the top of the line model was now $13,000.00 --- and that $1100.00 model now looks like a worthless piece of junk by comparison.
This is the mechanism by which the extremely wealthy change the context of our everyday lives in ways we aren't even aware. And in a society that ties such fundamental community functions such as schools and public safety to property values and perceptions of power, it is almost a matter of necessity that the middle class keep reaching for the bigger house and the bigger car in order to maintain a stake in their community. It is perfectly understandable that people want to have their kids educated in good schools and live in safe neighborhoods.
Neither is it counter-intuitive that if you need to be taken seriously by people who have money, you have to appear that you have money too. I remember being confused when I first started working in a business where there were always a lot of recent college grads in entry level grunt positions driving very fancy cars and dressing in designer clothes. It took me a while to realize that they were all children of wealth. As a result of their ability to give the properly successful appearance, those of us who didn't have money spent far more on such things than we had any right to, merely to even be in the running. I suspect this gets worse every year as the rich continue to shed the last vestiges of social restraint on flaunting their wealth.
The problem is that middle class American incomes are not even close keeping up with what they need to spend in this kind of cycle and haven't been for more than two decades, while income gains for these super-rich have been stratospheric. That's what's making everyone feel the squeeze: the middle class are working themselves into an early grave and taking on more debt than they can manage not because they are foolishly trying to keep up with Paris Hilton but because they have to in order to hang onto the place in society they already have.
Frank discusses at length the costs of this striving and I think we all can imagine what they are in terms of health and happiness. This is a sick little merry-go-round we're on. Fortunately, he has a novel solution that I would hope the powers that be would consider: a progressive consumption tax that would give an incentive for the rich to think twice about this reckless extravagance that's dragging everyone else down as they try to keep up. It would encourage saving among the rest of us, which virtually all economists agree is sorely needed, and if nothing else would force the super-wealthy to at least kick in something for the public good while they're running themselves ragged with their endless shopping for expensive gew gaws.
This is a very accessible little book, written in easy to understand language that gets to the heart of the problem for average people who are just trying to make a living and raise their kids and find some way to leave this world a little better than they found it. It gives us some real insight into how we actually find our place in the world around us and --- pursue happiness. That important knowledge leads to how we might change policies to actively encourage that fundamental American value.
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