Thought for the New Year

And see here.

And here.

And here.

And especially here.

Dark Ages

Rush Limbaugh offered something like the following perceptive observation on Friday last:

Scientists have become alarmed at the accelerating decrease in sunlight available each day in the Northern Hemisphere. Since the end of this past June, the minutes of daylight have steadily shrunk to the point of near panic. All U.N. scientists now agree that, if this decrease continues apace, our 24-hour day will be totally dark by the end of this coming June … not one glimmer of luminescence. And what is worse – it seems that this lost light has been leaking down below the equator. While we here would be forced to live without natural illumination, those in Africa, South America, and Australia would enjoy twenty-four hours of sunlight … obviously Nature’s reward for these peoples’ limited use of the world’s natural resources.

So everyone in the Northern Hemisphere is besought to stop driving their cars, heating their homes, and using electricity for any purpose. And moreover, everyone is also asked to purchase daylight offsets from the George Hamilton Daylight Offset Foundation. Each $1,000 donated will allow us to regain one more second of daylight over the next six months. Please, please, please don’t let George Hamilton fade to pastiness. Thank you all!

Bush Derangement Syndrome

President Bush was interviewed on television today … of which snippets were replayed on MSNBC tonight. I happened to catch this exchange:
Questioner: “What are you going to do about the auto industry bailout?”
Pres. Bush: “You’re assuming I’ve made up my mind.”
Switch to Keith [D]Oberman back in the MSNBC studio: “No, that’s assuming Bush has a mind!”

Also today I received the following link from my wife’s cousin in France: http://www.sockandawe.com/
At this site you get to throw shoes at President Bush. Over 44 million shoe hits have occurred (from around the world). Now, isn’t that special?

Both these instances above indicate a galloping lack of civility toward the United States and our current leadership. They display a degree of rabid disrespect and even hatred that I have seldom seen exhibited … except perhaps for our mortal enemies in time of war. This “Bush Derangement Syndrome” is freely displayed by TV commentators/talking heads, in many published venues, by most reporters, and very often in “polite” conversation. It seems that everyone is now vying with John Stewart of the “Daily Report” to out-snide him. As bad as Jimmy Carter was, I don’t recall him ever being excoriated like President Bush. We have now a wood-chipper main stream media which likes to pulverize public figures just for the sport of it. And, if Barack Obama thinks he will be forever immune from their blood lust, then he is more naïve than perspicacious.

I Believe …

- Many powerful liberal politicians believed that everyone in America should own a home regardless of their means or morals. (Some now believe that they were wrong ... how quaint.)
- They coerced, with regulatory and oversight threats, banks and other institutions into offering such “sub-prime” mortgages.
- Banks and these other institutions discovered that they could package these mortgages (collateralized debt obligations -- CDOs) and sell them to, among others, Fannie Mae and Freddie Mac.
- Since the origination fees from this pass-through sub-prime mortgage process was very profitable to these banks and other institutions, they became willing co-conspirators.
- Because of the implicit government guarantees of these packaged mortgages, credit rating agencies placed unrealistic high ratings on them and on the institutions that held them.
- Fannie and Freddie were overly-populated with liberal ex-pols who were more than willing to participate in this fraud since their annual compensation was based on the volume of said transactions. The growth in the portfolios of sub-prime mortgage packages at Freddie and Fannie was exponential.
- All efforts to monitor and/or regulate this sub-prime process at Fannie and Freddie were squelched by accusations of racism from liberals in Congress
- At the start, the ease with which these sub-prime mortgages were off-loaded caused banks and others (such as Countrywide) to drop any semblance of checking the credit-worthiness of their mortgage borrowers. The writing of mortgages without suitable documentation became rife. Home-buyers couldn’t believe their luck and many went hog wild.
- The volume of these sub-prime mortgages grew to such an extent that many remained at their originators because, for no other reason, the origination fees were so profitable.
- Concurrent with this, because of accounting frauds at Enron and others, accounting rules were changed by the SEC to force companies to “mark to market” all balance sheet assets
- Also concurrent with this, a financial instrument appeared called a Credit Default Swap (CDS) which allowed institutions to insure most any financial asset against credit default
- Banks and other institutions sold CDS’s to protect themselves against losses that would occur if the collateralized mortgages on their books went into default. But they went much further; they (including many insurance companies and foreign institutions) bought and sold CDS’s far beyond the face value of the underlying assets (as much as ten times their value). CDS’s became, effectively, a gigantic, unregulated casino.
- When sub-prime mortgages began to default in droves, asset packages including these mortgages became difficult to value (or mark to market). Many of these asset packages (even though producing a steady, albeit somewhat reduced, income flow) were forced to be drastically devalued on balance sheets.
- Because of the sheer size of the CDS market ($60 trillion?) and its lack of regulation, many of the insurance policies on these defaulting sub-prime mortgage packages could not be honored which put the buyers and sellers of these CDS’s in great financial jeopardy (eg. AIG). This then began the world-wide freezing up of capital markets.
- Because of the capital-ratio requirements at banks, many of such institutions were forced to raise more capital in a capital market that was rapidly freezing up. It was then either insolvency or a government bailout.
- Enter Henry Paulson and the U.S. taxpayer.

Car Czar

My wife made a beautiful suggestion this AM regarding the automaker's bailout. Make Mitt Romney the "Car Czar" ... the one who oversees the bailout money and the reorganization plans of the automakers (since it now seems inevitable that they will get a ton of taxpayer money). He has all the qualifications and then some ... and seems to have the time. Nah!!! He would probably insist on the unions biting the bullet and it would also set him up as a political rival to the Democratic juggernaut. We can't have that!! It will probably be some doofus like Robert Kennedy Jr. Sigh ...

It’s not what you say …

it’s the way that you say it. A comparison was drawn recently between Barack Obama’s interview on 60 Minutes … his talking in dulcet tones and in complete sentences … and George Bush’s grating, fractured English. However, it seems to me that we all need to pay more attention to what people say and not to the melodious nature of their rhetoric. For instance, shortly after his election to the most powerful political position in the world, I would still like to know if Obama:
- Is going to raise taxes on the wealthy and lower taxes on 95% of Americans?
- Is going to withdraw American troops from Iraq before the most recent Iraq-set target date of the end of 2011?
- Is going to zero-out unproductive and non-effective government agencies?
- Is going to reach across the aisle to Republicans or have Rahm Emanuel take out his Uzi?
- Is going to bail out unconditionally the big three auto makers or make the United Auto Workers first bite the bullet?
- Is going to install almost a trillion dollar stimulus package or pull in the U.S.’s fiscal horns?
- Is going to create a civilian defense force bigger than our military?
- Is going to renegotiate NAFTA and back away from other free-trade agreements?
- Is going to eliminate workers’s secret union ballot?
- And many more.
Somehow, after cringing through one of GWB’s leaden presentations, still I always knew where he stood. Not so the case with our current President elect.

Speak Up Joe Biden

Golly gee, I sure hope that the Indian government didn't torture those terrorists that they captured last night in Mumbai. That would surely be wrong.

The Fox in the Henhouse

Let's see:
Barney Frank is set to fix the sub-prime mortgage mess.
Robert Rubin is pulling the strings to unravel the credit default swap debacle.

What's next?
Osama Bin Laden will be asked to remedy Islamic terrorism?

The Experts

They said that saccharin was needed to stop the plague of diabetes. Then they said, “Oh no, stop. It causes cancer!”
Six months ago, they said gasoline was going to $6.00 or more a gallon. I just filled up at $2.03.
They told me butter was bad for me. Eat margarine instead (the original transfat). They were dead wrong. (Julia Child knew.)
They told me I couldn’t use DDT. It made the egg shells of peregrine falcons thin. The result was that millions of people died of diseases carried by mosquitoes that DDT would have eliminated.
They told me I couldn’t eat French fries cooked in lard (that tasted sooo good!) Now I eat them cooked in tasteless safflower oil while the French laugh at us.
During the Carter administration when interest rates were 16%+, they said they would never again sink into single digits. They are now 1%.
They told me that the thimerosal in vaccines causes autism. It now appears that they were wrong See this NY Times Article.
They told me that to eat only organic foods while they stuffed their noses, stomachs, and veins full of non-organic, illicit designer drugs.
Now, they say that carbon dioxide is the bane of mankind.

Not So Merry-Go-Round

From the Dartblog: “According to data from Markit printed by WSJ, on August 1, it cost $15,000 to insure $10 million of US Treasuries against default but only $7,000 for German sovereign debt. That number has more than doubled to $32,000 for US debt but Germany’s has spiked to $33,000. The UK trails in at $58,000 and Italy at $109,000.”

From the above it is clear that the credit default swap (CDS) market is indeed existential. If one has to insure one’s purchase of an U.S. Treasury obligation against default, then what happens if such an event does occur. Clearly, since for each billion dollars of Treasury obligation, there is probably $10 billion of CDSs written against it, such writers of these CDSs will likely again be flocking to the U.S. Treasury for a bailout since most such insurers would be far too undercapitalized to make good on the bets they had made (like AIG). However, since it would have been the government itself that had defaulted, where are they (we) going to get the moolah then to perform such bailouts? And, if we stupidly print this money, wouldn’t this just snowball into more U.S. Treasury defaulting?

Twice Shy

I know that the Kool-Ade drinkers don’t believe that Obama flipped off Hillary earlier this year (middle finger scratching his cheek whilst he referred to her.) Now, he’s at it again while congratulating McCain. See: Congrats John Please, you Obama supporters with those bright orange stains around your mouths, rationalize how this happens twice. Or perhaps you think that it is cute to be so thuggish?

Redistribution

I guess I am not surprised that Obama has been revealed as favoring a redistribution of wealth. But what fazes me is that my leftie friends believe that this just means “marginal redistribution” … that is, upping the tax rate on people earning over $250,000 per year (Obama’s original target) … er, $200,000 per year (ala Obama, more recently) … er, $150,000 per year (ala Biden, yesterday). But, true redistribution of wealth would go much further … into redistribution of our citizen’s assets (remember what happened in China, Cuba, etc.?) Don’t snigger, the radical left is perfectly capable of applying this precept, particularly if they have a super majority in the Senate. Don’t forget that Obama’s church, the Trinity United Church, has required all its members (and this includes Obama) sign its manifesto which eschews “middleclasscedness.” I know that this sounds like scaremongering (as per Dennis Kucinich Noonan) but are you confident enough in Obama to say that this is not part of our future as he sees it?

What Went Wrong

Why things currently seem so bleak:
- Overleveraging (subprime mortgages, credit-default swaps, hedge funds, low interest rates)
- Lack of oversight in credit markets
- Commodity bubbles (oil, corn, natural gas, gold)
- Interlocking world credit markets
- Slowdown in Chinese infrastructure spending after the olympics
- Lack of fiscal discipline in government spending
- Competition for hegemony (Russia, Venezuela, Iran, North Korea, Syria, China)
- Decline in statesmanship among U.S. politicians
- U.S. Election (Democrats seeking advantage by talking down the economy)
- U.S. Elections (growing fear about the consequences of an Democrat sweep)
- Decline of objective media reporting

Thought for the Day

When times get tough the electorate blames everyone except themselves.

Yes, We Can’t

Yes, I am old and crotchety. But I still remember the can-do attitude that prevailed through most of the twentieth century. Then, the United States could do anything we put our minds to – build the Empire State building in one year; the Hoover dam in five years, the Golden Gate bridge in two years; win two World Wars; tame nuclear fission and fusion; make viewable movies; build the most massive engineering undertaking by man – our interstate highway system; put a man on the moon; and invent most of the technologies that are now manufactured in foreign lands. But this national spark seems to have faded as we limped into a new millennium. Today we are, unfortunately, a nation of can’t-dos:

- We can’t exploit our natural resources such as oil, coal and timber
- We can’t build a strategic missile-defense shield
- We can’t smoke tobacco (other herbs are OK)
- We can’t win any war into which we are drawn
- We can’t build nuclear power plants
- We can’t wear fur or perfume
- We can’t control government spending
- We can’t exercise our national hegemony
- We can’t keep unqualified people from having mortgages
- We can’t control who immigrates into our country
- We can’t execute serial or cop killers
- We can’t discipline our children
- We can’t preserve our time-honored traditions … such as marriage or Christmas
- We can’t stop killing full-term fetuses
- We can’t eat meat or animal fats
- We can’t keep uneducated students from graduating
- We can’t encourage our residents to learn English

And the sad irony is that those who mostly espouse the above taboos are the ones who are noisily chanting the mantra, “Yes, we can!”

Same Sex Marriage

Marriage is a social contract between two people of opposite genders who promise to procreate and raise the resultant children to the benefit of our future civilization. This contract is consequently rewarded by our society with certain social and financial benefits (including an ephemeral caste elevation). Now same-sex partners seek (and, in some states, have already received) these same benefits. May I suggest that same sex marriage brings with it the following problems:

- Male-male marriages cannot, by definition, procreate. Yes, they can raise adopted children but do not seem to be overly enthusiastic to do so. And those that do suffer the problem of imprinting a stigma on children of either sex that females are somehow flawed.

- Female-female marriages can, due to modern science, procreate. And they can also adopt children (those who make it past Planned Parenthood’s vacuum cleaner). However, I think that their issue (or adoptees) also suffer from the potential of making any male rug-crunchers feel that they are substandard and not deserving of intimacy.

- There is a bookshelf full of laws that have been written using the base-line assumption of male-female marriage. Changing this definition will throw many of these laws into a cocked hat ... which should take a generation to unwind. This will guarantee full-employment for lawyers for ages. (One reason why we might think about excluding lawyers from our governing bodies.)

Nose Thumbing

When George Bush put restrictions on under what circumstances the federal government would fund stem-cell research, at least two states, California and Massachusetts, stepped up to announce that they would fund such research themselves, California put aside $3 billion and Massachusetts, $1.25 billion. Effectively, they thumbed their noses at Bush and played Mother Teresa to Bush’s Ebenezer Scrooge
.
Now California is running short of funds and has floated a trial balloon that it might have to ask the U.S. Treasury for a loan of $7 billion. See California Loan I predict that Massachusetts will probably be soon in the same predicament as its reputation for fiscal restraint under Deval Patrick is not stellar. See Budget Problems

May I posit that our Treasury Secretary, Hank Paulson, should respond to these hat-in-hand requests with the suggestion that these states first find the money in their stem-cell research kitties?

Corrosive Practices

The following are, in my opinion, popular or looming practices that are corrosive of our society and would be better left on the cutting-room floor:
- Sub-prime mortgages
- World government
- Government sponsored enterprises (GSEs)
- Motor-voter registrations
- Same-sex marriage
- Black reparations
- Credit default swaps (CDSs)
- Goth culture
- Mark-to-market accounting
- Late-term abortions
- Too-easy credit
- Dark-pool securities trading
- Government bail-outs
- Hedge funds
- Global warming hysteria
- Single-payer healthcare
- Off-balance-sheet accounting
- Onerous gun registration laws
- Islamic fundamentalism
- Grunge, rap and heavy-metal music
- Disproportionate executive pay
- Same-day voter registration
- Naked short selling

What They’re Not Telling Us

$700 billion is a boatload of bailout money (if it is eventually allocated by Congress). But, to fully understand our current economic paroxysm, one must add to this money the $200 billion bailout of Fannie Mae/Freddie Mac AND last week’s $300 billion Congressional bailout of Main-Street mortgage holders. This would total $1.2 trillion of taxpayer relief to ameliorate this financial predicament (tagged “The Sub-prime Mortgage Crisis”). Add to this the approximate $400 billion of write-downs that U.S. corporations have already taken against these bad assets brings this total to around $1.6 trillion. If the average mortgage in default is for $200,000 (probably high) that suggests that there are around 8 million houses that are foreclosed or in arrears. This seems to me like a very high number since the total number of U.S. homeowners’ mortgages is only about 44 million. To view it another way, as of this summer there were in the U.S. $3.6 trillion in real estate loans and the latest statistic is that 9% of them are foreclosed or in default. This totals $324 billion of problem mortgages or about ¼ of the government money that Frank/Pelosi/Paulson have or want to be thrown at this problem. And this is less than the toxic amount that has already been financially evaporated off corporate balance sheets!

So, it seems to me that there is a lot more to this economic crisis than they are telling us. I suspect I know what it is … and it is something called “credit-default-swaps” (CDSs). Basically these are unregulated (and therefore opaque) ad hoc insurance policies that have been created to offload risk from debt holders (such as banks) in case these debts (such as mortgages) are not paid back. These CDSs carry an insurance premium and have been traded worldwide back and forth like stocks and bonds … that is, they did until the credit markets recently froze up. (The worldwide nature of CDS trading, it seems to me, is why what should be an U.S.-only problem has spread around the globe.) Now, if the final holder of some of these CDSs goes belly-up (such as AIG), then this insurance also disappears and the backstop to mortgage holders becomes will-o-the-wisp. The most recent estimate of the total amount of CDSs circulating world-wide is $62 trillion … a staggering number … which effectively multiplies the size of the mortgage crisis by almost 39! Now note that, when AIG went south, the Federal Reserve also stepped in and fronted AIG with an $85 billion bailout. So, I conclude, that, no matter how this financial crisis is being painted as the failure of U.S. sub-prime mortgages, it is now really a collapse of the worldwide CDS market precipitated by the U.S. sub-prime mortgage crisis (which, as has been shown, should have more than enough committed funds to fix it).

Obvious Conclusion: The $700 billion bailout package REALLY IS A BAILOUT OF WALL STREET AND ALL THOSE INSTITUTIONS THAT HAVE CREATED CDSs. IT ONLY HAS A TANGENTIAL RELATIONSHIP TO MAIN STREET. IT SHOULD NOT, I REPEAT NOT, BE ENACTED UNLESS AND UNTIL IT CONTAINS RULES AND OVERSIGHT FOR THE CDS MARKETPLACE. (IMHO)

Word Smart

As used by Joe Malchow in the blog, Dartblog (definition from Websters)

semiotics
def: a general philosophical theory of signs and symbols that deals especially with their function in both artificially constructed and natural languages and comprises syntactics, semantics, and pragmatics