U.S. National Debt Clock Runs Out of Digits

That's right, we've quite literally maxed out the ability of this NYC clock to reflect our national debt. How thoroughly depressing.

Bailout FAIL!

Dow plunges below 10,000 amid global sell-off

Which means, even though we've passed the horrible bail-out legislation (more on that monstrosity later), investors both in the U.S. and abroad know it's complete B.S. Great way to top off your presidency, GWB.

Excerpt from Morford Column today

The good news: As Michael Lewis over at Slate points out, so long as the U.S. government keeps borrowing massive sums from foreign banks (thanks, China! Here, have some saccharine Tibet-free bulls--t Olympics coverage), we probably won't feel much of BushCo's $700 billion bailout on your tax bill. But your grandkids? Oh my God. Wait, do you even have grandkids yet? No? Well then, screw 'em. Damn whippersnappers probably had it coming.

The bad news: Fed Chairman Ben Bernanke's confession that the program will put a "significant amount of taxpayers' money on the line," which is a bit like saying "removing this wing from the plane will put a significant amount of death in your face." God knows we haven't funded the absolute ineptitude of Bush sufficiently, to the tune of two trillion dollars, for a failed and lost war. Now we get to save countless gluttonous MBAs and inept investment bankers and rather hopeless home buyers who were far too easily duped by cretinous lenders into believing it was perfectly OK to take on a sub-prime loan for a quarter-million dollars when they only made 25K per year. But hey, at least now some of us can afford to buy a house. In Stockton.

Excerpts from Bush's speech on the economy last night (WARNING: foul language)

• Good evening. This is an extraordinary period for America’s economy.

• No sh*t?

• Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration.

• Oh yeah? Your net worth was somewhere between $9 and $26 million in 2003. I'm sure you can really relate to the average American. Side note: Cheney's net worth is somewhere between $30 and $100 million, McCain's is between $25 and $38 million. Yet the Republicans are largely supported by America's working class (well at least the Christian part). I don't get it. Well, I guess I kind of do, but I don't want to believe it.

• Financial assets related to home mortgages have lost value during the house decline, and the banks holding these assets have restricted credit. As a result, our entire economy is in danger. So I propose that the federal government reduce the risk posed by these troubled assets and supply urgently needed money so banks and other financial institutions can avoid collapse and resume lending.

• The government bailout will most certainly not "reduce the risk posed by these troubled assets" - rather, it will transfer that risk to the American people, and our government. Has no one thought yet, what if the bailout doesn't work? Then, not only are we stuck with a supremely f*cked economy, but we will have shown the world that our government is completely incompetent and powerless. And so the American empire declines...

• First, how did our economy reach this point? Well, most economists agree that the problems we’re witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad because our country is an attractive and secure place to do business.

• A decade, huh? As in, "It's not my fault!" Investors abroad, huh? As in, "Blame the foreigners!" Sigh. Haha, I won't even start on the irony of his "IS an attractive and secure place to do business" line - but...seriously?

• I’m a strong believer in free enterprise, so my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business.

• Oh yeah? Clearly, your ideology is very important to you. That's why you're currently engineering the "mother of all bailouts". F*cking Republican hypocrites.

• Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America’s financial system are at risk of shutting down. The government’s top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.

• Scare tactics. Sound familiar? Maybe because preying on the fear of average Americans has been the main route of this administration to doing whatever they want - i.e. Iraq, expansion of executive powers, the f*cking Patriot Act, and so on. There's some merit to this claim, but a bailout of this size is bound to extend weak economic growth through the very long term (have you looked at our national debt figures lately?) rather than a lot of lay-offs in the short term, which would hopefully be replaced by another economic growth engine (I will detail my general idea of how to revitalize our economy at the end of the post).

• And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And, ultimately, our country could experience a long and painful recession.

• FEAR! FEAR! FEAR! You're f*cked, America, unless you give us unlimited power and money.

• I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street.

• No you don't. If you really did, you couldn't get up there and honestly ask the American people to agree to this ridiculous bailout. Liar.

• It would remove the risk posed by the troubled assets, including mortgage-backed securities, now clogging the financial system.

• Really, our economy is just one big toilet and someone took a massive dump in it.

• First, the plan is big enough to solve a serious problem. Under our proposal, the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system.

• Note: In its original form, they wouldn't have access to $700 billion - they would have access to a $700 billion line of revolving credit. Meaning, Paulson could buy a bunch of bad mortgages, sell them at a loss, and buy more. Continue process. Continue to prop up failed businesses. That'll help restore confidence in America's economy. *saaaaaarcasm*

• Second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply, yet the value of many of these assets will likely be higher than their current price, because the vast majority of Americans will ultimately pay off their mortgages. The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the Treasury as these assets are sold, and we expect that much, if not all, of the tax dollars we invest will be paid back.

• ...And peace and love and happiness will reach all the children in the world. Ok, this part actually makes some economic sense - HOWEVER, if it's true, then why can't healthy companies (there are still some!) buy them up? Plus SWFs? If it's true, why are we in this mess at all? Why go straight to the taxpayers? The truth is, a lot of this is psychological - which adminstrations like Bush's LOVE. Breeds fear. So watch out.

• Earlier this year, Secretary Paulson proposed a blueprint that would modernize our financial regulations. For example, the Federal Reserve would be authorized to take a closer look at the operations of companies across the financial spectrum and ensure that their practices do not threaten overall financial stability.

• Don't be f*cking fooled - the Fed played a BIG ROLE in the creation of this sh*tshow. Don't get me wrong, I think we need a huge revamp of our regulatory system. But what we really need is more transparency, not more shady Fed dealings (ever notice how the amount of money printed by the Fed isn't publicly released?). Just think how this whole crisis could have been averted if a simple piece of information was collected and disseminated, like, oh, household income maybe? Loan-to-value ratio? Information that should have been collected regardless of passing on the risk. A simple statistical analysis of the mortages bundled in a RMBS would have probably been enough due diligence then to prevent a stampede of subprime buyers. Or at least enough to keep Fannie Mae and Freddie Mac from buying them up, if HUD had done its job correctly...
• My main point - capitalism DOES work, if everyone has the relevant information. Buying up all that sh*t was not smart business - it was deliberate greedy ignorance and stupidity on the part of executives.

• In the long run, Americans have good reason to be confident in our economic strength. Despite corrections in the marketplace and instances of abuse, democratic capitalism is the best system ever devised. It has unleashed the talents and the productivity and entrepreneurial spirit of our citizens. It has made this country the best place in the world to invest and do business. And it gives our economy the flexibility and resilience to absorb shocks, adjust, and bounce back.

• WHAT?! First of all, I do still believe that democratic capitalism works -- it was the main driver for America's rise to a superpower. However, the Bush administration and its policies were pretty much entirely responsible for royally f*cking up American democratic capitalism - to invoke it here seems almost blasphemous. And that last line, I mean, seriously?!?!

• I know that Americans sometimes get discouraged by the tone in Washington and the seemingly endless partisan struggles, yet history has shown that, in times of real trial, elected officials rise to the occasion.

• Just like you did with Iraq, right? Oh wait...

• So here are just a few of my thoughts, mainly about how we can move our economy into the future, rather than seek to patch up our f*cked up past (apologies for all the cursing, by the way - I'm just so frustrated by the whole thing, being young, I feel like I'm the one who will be paying off the government's credit card purchases for, oh, my whole life). In the past, the one area of our economy that has kept recessions mild was housing. For example, during the early 1990s and after the tech bust, the one area of value creation in an economy that had lost its growth engine, was the re-financing/purchase of homes. The reason was, in recessionary times, the Fed lowered interest rates. Familes that had purchased homes at a time of higher interest rates could refinance, extract home equity, and do a bit of consumer spending (usually on home improvements, furniture, etc.). But this was always as a replacement for the then-defunct actual economic growth engine that was fueled by real innovation (like energy, finance, technology, etc.). Housing basically buoyed GDP growth in times of decline.
• In the housing boom years of 2003 to 2006, the housing market became the growth engine. Obviously, this had happened before, but never to this extent. Everyone believed home prices would never go down (ok, just for future reference, whenever everyone rushes to invest in the same thing, it's going to create a bubble that will overvalue the worth of the assets, and eventually it will burst - you f*cking morons) and made a lot of stupid decisions as a result.
• Now the housing market, usually a source of growth during a recession, is the thing at the very heart of the economic downturn. So, what does our government want to do? Rather than stimulate a replacement industry, they want to throw wads of cash at FAILED BUSINESSES. Did I mention the people you're giving money to WERE INCREDIBLY STUPID?
• So what do I propose as a solution? Actually, something very similar to what Barack Obama has proposed (thank you!). Take that money and instead, invest in jobs that we need (we don't really need investment bankers, though in normal economic times, they do serve a purpose -- although part of me believe Gordon Gecko/Michael Lewis/etc. may have ruined that profession) -- like jobs rebuilding America's failing infrastructure and jobs in renewable energy and healthcare. Industries that could actually produce value in the form of innovation, because our housing industry will not be producing value for a very long time. This bailout is meant to subsidize it in the meantime.
• What would happen if we invested money, instead, in growing industries? Well, people who lost jobs in construction, design, etc. could find work in these industries, which would produce less unemployment and more income growth. These businesses would attract foreign capital back to the U.S. Eventually, new financial firms would rise to help investors tap into these growing markets. The circle of life continues.
• Would it be easy? Oh hell no. A lot of job losses. Massive unemployment in the next year or so. But what worries me about the bailout, is that in order to actually restore capital at these banks, like enough capital to keep them from failing, the government is probably going to have to pay more than the securities could be worth. Meaning, taxpayers take the loss. Meaning, taxes are definitely going to be raised on us in the future. Meaning, it's going to be a lot harder to create wealth during my lifetime than it was during my parents, grandparents, etc. Meaning, f*cking forget about the American Dream.
• I hope I'm being overly negative here and that this all works and our economy is peachy again in 2-3 years. But I just don't know...

• Comments encouraged. And I know how militant I sound and I know my socialist friends are going to blame capitalism and if you do, I just want proof that something else would have worked better. Blaming without providing an alternative solution not allowed. Cool? Fingers crossed.
• Now I'm going to read the terms of the bailout (the agreement was just reached) and probably get angrier. Enjoy your day.

This is B.S.

It's SEPTEMBER!


Sigh.

Wall Street, WTF?

I'm crazy busy at work right now, but wanted to put this here as a placeholder. I have lots of thoughts about what's been going down (like the DOW - zing!) this week.

The next Dan Quayle?

*Props to Andrea for making the analogy alluded to in post title

Sarah Palin ballses up one of the biggest economic issues going on at the moment. Haha, can't wait for the VP debates...

Well, duh.

Federal Reserve official: "Institutions must be allowed to fail."

Two things for later

These Knowledge@Wharton articles had provocative titles.
Note to self: Read later.

Eat, Drink and Go Shopping: Why Thoughts of Death Whet Consumers' Appetite for Stuff

How the U.S. Government Has Mismanaged the Country

Save the Internet

Ok I am a little ashamed to admit this, but I wasn't really aware of this issue until a friend sent me a link to this site today. Here's an excerpt:

How does this threat to Internet freedom affect you?

Such corporate control of the Web would reduce your choices and stifle the spread of innovative and independent ideas that we've come to expect online. It would throw the digital revolution into reverse. Internet gatekeepers are already discriminating against Web sites and services they don't like:

In May 2008, the Max Planck Institute released a comprehensive study that found both Comcast and Cox Communications to be deceptively blocking access to peer-to-peer file-sharing networks.

In October 2007, the Associated Press busted Comcast for blocking its users' access to peer-to-peer file-sharing networks like BitTorrent and Gnutella. This fraudulent practice is a glaring violation of Net Neutrality.

In September 2007, Verizon was caught banning pro-choice text messages. After a New York Times expose, the phone company reversed its policy, claiming it was a glitch.
In August 2007, AT&T censored a live webcast of a Pearl Jam concert just as lead singer Eddie Vedder criticized President Bush.

In 2006, Time Warner's AOL blocked all emails that mentioned www.dearaol.com -- an advocacy campaign opposing the company's pay-to-send e-mail scheme.

In 2005, Canada's telephone giant Telus blocked customers from visiting a Web site sympathetic to the Telecommunications Workers Union during a contentious labor dispute.

In 2004, North Carolina ISP Madison River blocked their DSL customers from using any rival Web-based phone service.

Shaw, a major Canadian cable, internet, and telephone service company, intentionally downgrades the "quality and reliability" of competing Internet-phone services that their customers might choose -- driving customers to their own phone services not through better services, but by rigging the marketplace.

This is just the beginning. Cable and telco giants want to eliminate the Internet's open road in favor of a tollway that protects their status quo while stifling new ideas and innovation.


Seriously, check it out. I think the freedom of information we have right now is far too precious to let be taken away.

Ah yes, the geniuses working for government agencies (or, technically, government-sponsored enterprises)...

"If I had better foresight, maybe I could have improved things a little bit. But frankly, if I had perfect foresight, I would never have taken this job in the first place."

-RICHARD F. SYRON, Freddie Mac’s chief executive.

**from NYTimes

Let's recap the mess we're in...

The big freeze: A year that shook faith in finance

*from the Financial Times


What has made this upheaval so shocking is not simply its scale and duration but the fact that almost all western policymakers and bankers were caught unawares. “If you had said a year ago that America could suffer a banking crisis on the scale of Japan, people would have laughed,” one former senior US regulator admits.

Weep-worthy.

President Bush inherited a budget surplus of $128 billion when he took office in 2001 but has since posted a budget deficit every year.

President Bush's budget chief blamed the faltering economy and the bipartisan stimulus package for the record $482 billion deficit the White House predicted for the 2009 budget year.




Or maybe, that messed-up, expensive war we're in had something to do with it.

Boomers running up the national credit card

Taken from Slate:

The Democrat-sponsored housing bill received 72-13 Senate approval in a rare Saturday session, giving the Treasury Department sweeping authority to prop up the country's two largest mortgage finance companies and potentially costing the government billions of dollars. "The bill raises the national debt ceiling to $10.6 trillion ... the first time that the limit on the government's credit card has grown to 14 digits," the NYT reports. Sen. Jim DeMint (R, S.C.), mentioned in both stories, told the WP that that the Treasury's new authority "crosses the line into socialism"; John McCain and Barack Obama both support the bill. The Post's economist sources say that the end of crunch won't come near as fast as the bill's passing. In fact, one says, the 400,000 households the bill hopes to assist are "a drop in the bucket."



This will make things worse.

Global Rich List

Type in your annual salary and this computes your place in a world income-ranking. According to this gadget, I'm in the top 1%. Nice to remind everyone how lucky they really are.

"You are the 54,175,729 richest person in the world! "

Cost of Government Day

Congratulations! In order to pay taxes, you worked from January 1 until today (if you're one of my American friends). During that time, the government spent some money on this, some on this, ran up debt like this, and wasted a whole bunch of their (our?) time trying to do shit like this. Now doesn't that feel good? Aren't you glad you labored for such noble causes? Just curious.

The truth is, it's not like I hate the government programs with admirable aims - Medicare etc. - but when our government can be hijacked for eight years by scoundrels, why give them such a big budget to play with? There's got to be a better way.


**I thought I should mention that I'm not a Republican, or a Norquist fan, and thus am not endorsing them nor their ideas through way of reference, but rather I find the information (if true) to be quite provocative.

Reverse incentives much?

'Regulation-induced Innovation': The Role of the Central Bank in the Subprime Crisis

My favorite paragraph:

Regulators and others mistakenly focus on maintaining market liquidity, he noted, citing John Maynard Keynes: "There is no such thing as liquidity of investment for the community as a whole. The social object of skilled investment ... is to outwit the crowd, and to pass the bad, or depreciating half-crown to the other fellow." In the cases of the current subprime crisis and the 1980s savings-and-loan mess, the "other fellow includes the taxpayer," Kane said, "and that's what pisses me off."


More commentary to come on Fannie/Freddie, Bernanke (and what an idiot he is), etc.

Loveliness.

This is a great way to combat theft.

"Nothing is so permanent as a temporary government program." -Milton Friedman

In its latest batch of too-little-too-late actions, the Fed is going to restrict exotic and subprime mortgages. So they're going to take them off the market now that no one will touch them with a ten-foot pole? Way to be innovative and productive Bernanke (I hate when they do pointless things just so they can claim they did something). Additionally, Ben B. said that the Fed was considering extending its program of low-cost overnight loans to the nation’s largest investment banks into next year. Yup, that was supposed to be temporary. Soon enough, they'll be teaching discount window i-banking in b-school. Sigh.

Melinda's really long term real estate investment outlook

Long Alaska property - you heard it here first. At some point, those clever Alaskans may be the only ones with gas, water, a reasonable climate...