Continued world financial crisis fallout

Taleb Says Nationalize Banks, You Can’t Trust Them  

Quote:

Jan. 29 (Bloomberg) -- Bank nationalizations are “absolutely necessary” to stop them damaging the financial system further with more losses, said Nassim Nicholas Taleb, author of the best-selling finance book “The Black Swan.”

“You cannot trust the banks in taking risks,” Taleb said in an interview with Bloomberg Television in Davos. “We have a very strange situation in which it’s the worst of capitalism and socialism, a situation in which profits were privatized and losses were socialized. We taxpayers have the worst.”

The global economy will slow close to a halt this year as more than $2 trillion of bad assets in the U.S. help sink economies from there to the U.K. and Japan, the International Monetary Fund said yesterday. Taleb echoed comments from New York University Professor Nouriel Roubini, who says the majority of U.S. banks are insolvent.

“You have to eventually nationalize U.S. banks, you have to take the problem by the horns,” Roubini told Bloomberg Television in Davos today. “In my view actually most of the U.S. banking system is insolvent.”

So much for the usual bubbly sort of investment bank report -

ML chief economist David Rosenberg has broken the D(epression)-word seal. In his most recent report "Some Inconvenient Truths" he says we are currently in a depression

http://zerohedge.blogspot.com/2009/01/merrill-lynch-analyst-says-depress...

Sadly, he gives a number of great reasons why it will be hard to get out as people make sustained changes to their economic behaviour in tough times.

more on DABA Girls

"Ain’t Messin’ With No Broke Banker"

January 27, 2009 in Uncategorized

"This whole messy ordeal has advanced my Botox start date by at least two years.  Like every other DABA girl, the economy was wreaking havoc on my relationship and youthful good looks.  Phone calls went unanswered, Hamptons invitations un-extended, plans canceled (including, but not limited to, expensive opening night tickets to the ballet, which were scalped instead of being graciously offered to me and a galpal), and so forth and so on.  Until – the horror of all horrors – my FBF lost his job, which I guess technically downgrades him to just my BF.

Overnight, he went from unavailable to downright clingy.  He wants to have dinner every night.  By dinner I mean staying in and cooking as Megu is no longer in the budget.  AND, FYI DABA girls – chopping vegetables along side your man in a hot New York sized kitchen is NOTHING like the sexy kitchen scene between Mickey Rourke and Kim Basinger in Nine and a Half Weeks.  Seriously.  It sucks.  Anyhow, he suggested I meet his parents over the holidays and he keeps commenting that half Asian babies are by far the cutest.  My take on his 180: having no steady source of income for the foreseeable future, he realized that his chances of securing another fashion industry type girl are pretty much zilch and so he is cleaving to me as the last vestige of his former high rolling lifestyle.

Thanks to the recession, I now have a completely devoted BF, which is exactly what I wanted.  So I should be happy, right?  Wrong.  I’m bored and can’t stop thinking about my perpetually unattainable Euro ex-boyfriend who is recession proof courtesy of an offshore trust account.  To be honest, I’m only with my BF because I just don’t have the heart to change my facebook status from “in a relationship” to “I ain’t saying I’m a gold digger, but I ain’t messin’ with no broke banker.”

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http://LASIK-Flap.com ~ Health Warning about LASIK Eye Surgery

[url=http://www.guardian.co.uk/business/2009/jan/31/global-recession-europe-p... across Europe tremble as angry people take to the streets[/u][/color][/url]

Jerry West said: 

Quote:

Governments and economists push economic growth as the mechanism to create employment. There are better ways at this point in history. The bulk of new employment must come now from jobs created to repair our infrastructure and the environmental damage that we have done to the planet. The finances to pay for those jobs must come from changing how we redistribute wealth in society. Currently wealth is redistributed primarily through market mechanisms. Markets will not work well for accomplishing what we must do. We need to change our method of redistribution by increasing government control of wealth through more progressive taxation.

Exactly! Markets fail, and more economists are admitting this awful truth today. And I think there are more direct methods than taxation for  bringing the life blood of economies under democratic control, ie money creation and credit. That's another one which capitalists fought hard to bring under their exclusive control post cold war era, Jerry. As an unrepentant Marxist, I would prefer 100% control of money by democratically elected government. But I think even if we return to what existed in Canada from 1938 to 1974 with the feds creating about a quarter of the money supply as interest-free, debt-free money(government-created money as opposed to bank-created money) for special purposes, we could afford green infrastructure and vital program spending. Canadian William Krehm says there are municipalities across Canada that can not afford to repair aging infrastructure let alone build anew. And the experiment in privatization of vital infrastructure ie. water and sewers for example, has been a bust around the world where tried. 

But I also agree that if the feds simply taxed corporations and the wealthy at more progressive rates(OECD average to EU-15 average as a percentage of GDP) and actually enforced collection, then Ottawa and our various layers of sub government would have anywhere from $35B to $75 billion dollars(Mel Hurtig, The Vanishing Country: Is it too late to save Canada) more every year to finance public needs.

Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.

The research was conducted for The Sunday Times over the last two months in three provinces vital to Chinese trade – Guangdong, Zhejiang and Jiangsu. It found that the global economic crisis has scythed through exports and set off dozens of protests that are never mentioned by the state media.

http://business.timesonline.co.uk/tol/business/economics/article5627687.ece

 I think Jerry is pointing out the inequalities and inefficiencies in our current system. Why should robots make cars and subway trains if people can be paid to do it? What's the hurry and drive to do away with providing employment to real human beings?

What about parking all those gasoline powered streetsweepers, and paying unemployed people a living wage to do it with brooms?

How about cutting out capitalists and giving a pay raise to hospital cleaning staff? We could afford to do things like that, if we cut out the banksters for 25% of money creation and credit, or simply raise taxes on those bastards siphoning off our oil and gas for a song.

I believe robots have a purpose, like doing surgeries by remote control - bomb disposals - digging tunnels for mining - and generally any task that requires greater than human accuracy and precision.

But not for the sake of reducing labour costs and maximizing profit. And not aerial drones for murdering people villages in Pakistan with "smart bombs"

 I can see eliminating physical work by use of robots and technology at some future time when everyone is well educated and capable of doing advanced work. In the future, society may benefit from genetic engineering and things like speed learning through machine-human interfacing or some such. I think this period we're living in now will be looked back upon as the period of pre-genetic engineering and advanced medicine.

 Science and tech has had some bad press for a long time with not producing anything of real value for the human cause. I think that will change. I think the average life expectancy will be permanently altered for the better for the first time in about 50000 years. People will live longer in future, and all that they learn in time will become invaluable to economies of the future. But dont quote me.

Fidel wrote:

Why should robots make cars and subway trains if people can be paid to do it? What's the hurry and drive to do away with providing employment to real human beings?

Um, weren't people paid to make the robots? Doesn't all productive capacity ultimately derive from human labour?

"Providing employment" is the euphemism of the capitalist for "exploiting human labour". You make it sound as if forcing people to sell their labour power so that a handful of owners of capital can get richer by appropriating surplus value [b]is conferring a benefit on the workers![/b]

People don't "need jobs", as the social-democratic politicians are so fond of saying. Who "needs" to produce commodities that will be taken from them and sold by their employer to a third party?

What people "need" is a fair share of the socially-produced wealth (whether produced directly by people or indirectly by robots that were built by people) to enable them to have the time and the wherewithal to enjoy fulfilling and satisfying lives.

Let the robots make commodities, and give human workers shorter working hours and more pay. Let the workers enjoy the fruits of increased productivity, instead of allowing the capitalists to appropriate them.

30 for 40!   

M. Spector wrote:

Fidel wrote:

Why should robots make cars and subway trains if people can be paid to do it? What's the hurry and drive to do away with providing employment to real human beings?

Um, weren't people paid to make the robots? Doesn't all productive capacity ultimately derive from human labour?

Yes, I'm not saying we need to stop making robots, just make them for appropriate purposes.

Quote:

What people "need" is a fair share of the socially-produced wealth (whether produced directly by people or indirectly by robots that were built by people) to enable them to have the time and the wherewithal to enjoy fulfilling and satisfying lives.

Why not give people a choice of what they can do to contribute to the greater good?

Quote:

Let the robots make commodities, and give human workers shorter working hours and more pay. Let the workers enjoy the fruits of increased productivity, instead of allowing the capitalists to appropriate them.

30 for 40!

Less work sounds good to me. But the capitalist idea for excess workers and surplus human beings is a waste of humanity. And I think people do want to work and contribute to something greater than themselves. The capitalist idea for  sending someone a cheque in the mail to sit at home and do nothing tends to destroy our will to live at some point. Of course, with this economy and the way it wastes human labour and energy, some environmentalists are saying we should pay people to stay home and not contribute to global warming. I can see that, too.  

I agree, NorthReport. I think childcare should be available for anyone who does want to work while raising children. But I think, too, that if someone wants to stay at home and raise their own children, then that should be everyone's choice as well.

M. Spector wrote:

What, human-powered rickshaws instead of automobiles? Humans shovelling snow off the roads instead of snow ploughs? Humans running on treadmills to recharge batteries to power their toasters?

Sheesh.  You mean you are opposed to using bicycles instead of motor vehicles where appropriate?  Switchboard operators instead of multi-level automated machines?  Agricultural workers instead of fruit picking machines?  etc., etc.?  Not all industrial development is socially or environmentally beneficial.  Some is, some is not.

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What on earth makes you think that "human energy" comes at any lesser cost than the natural renewable sources of energy we already have?

For one, human energy is a natural, renewable source of energy, and although all of the other energy that we generate is natural, much of the source of the current energy is not renewable, at least in the time frame of human society.

Quote:

"Cheap" human labour is only cheap to the capitalist who exploits it - all he's doing is passing the cost off onto the worker and his/her family.

Who said it had to be "cheap"?  And who said that there had to be capitalists?  Are you making an argument that humans should be able to live without lifting a finger?  That would be unnatural. :)

genstrike wrote:

I think what we should be striving for is letting the robots and mechanical devices do their thing, but instead of replacing people's jobs we should be reducing working hours (with no reduction in pay!).  Why not increase leisure time for everyone instead of creating unnecessary work?

Using mechanical devices where appropriate is fine, the question is where are they appropriate.  And reduced working hours, why not?  In a society with more equitable distribution of resources working hours would probably be less.  Studies have stated that a least some hunter-gatherer societies worked a lot less than modern industrial ones.

And, my point  isn't about increasing unnecessary work, but about replacing non-renewable energy when appropriate with renewable energy, which human labour is.  It is about reducing the subsidization of (among other things) capitalism by the environment.

MS wrote:

What people "need" is a fair share of the socially-produced wealth (whether produced directly by people or indirectly by robots that were built by people) to enable them to have the time and the wherewithal to enjoy fulfilling and satisfying lives.

I agree.  But of course this does beg the question, what constitutes fulfilling and satisfying, and what responsibility does one have to acquire the necessities of life, and what responsibility does one have to contribute to the welfare of society.

More people are taking the final way out of their financial difficulties by committing suicide or turning in desperation to crime.

The body count is still rising. For months on end, marked by bankruptcies, foreclosures, evictions, and layoffs, the economic meltdown has taken a heavy toll on Americans. In response, a range of extreme acts including suicide, self-inflicted injury, murder, and arson have hit the local news. By October 2008, an analysis of press reports nationwide indicated that an epidemic of tragedies spurred by the financial crisis had already spread from Pasadena, California, to Taunton, Massachusetts, from Roseville, Minnesota, to Ocala, Florida.

http://www.alternet.org/workplace/123563/the_financial_crisis_is_driving_hordes_of_americans_to_suicide/?page=entire

The 10 people most reponsible for the recession

http://timesbusiness.typepad.com/money_weblog/2009/01/the-ten-men-to-blame-for-the-credit-crunch.html

Maybe they will fall more than that. I think we may well be many years away from any kind of rebound in housing prices. There is still a huge amount of denial out there in the press about the state of the economy.  

    House prices 'could fall 40 per cent without loan boost'

http://www.independent.co.uk/money/mortgages/house-prices-could-fall-40-per-cent-without-loan-boost-1523110.html

TSX down over 150 basis points in the first 5 minutes of trading today - another buying opportunity!

http://investdb.theglobeandmail.com/invest/investSQL/gx.index_today?pi_symbol=TSX-I&pi_action=

Yes. Didn't hear any complaints about U.S.fiscal policy when old Gwyn was heading up EnCana , eh? Establishing U.S.markets for Canada's biggest.

But the Globe needed a Tar Patch voice. Unfortunately, it got rid of a correspondent who  apparently revealed too many internal doings in her weekly report - for jittery oilmen anyway.

Quote:

The daily bleeding of thousands of jobs will soon turn our economic crisis into a political crisis. The street protests, strikes and riots that have rattled France, Turkey, Greece, Ukraine, Russia, Latvia, Lithuania, Bulgaria and Iceland will descend on us. It is only a matter of time. And not much time. When things start to go sour, when Barack Obama is exposed as a mortal waving a sword at a tidal wave, the United States could plunge into a long period of precarious social instability.

[b]At no period in American history has our democracy been in such peril or has the possibility of totalitarianism been as real. Our way of life is over. Our profligate consumption is finished. Our children will never have the standard of living we had. And poverty and despair will sweep across the landscape like a plague. This is the bleak future. There is nothing President Obama can do to stop it. It has been decades in the making. It cannot be undone with a trillion or two trillion dollars in bailout money. Our empire is dying. Our economy has collapsed.[/b]

I enjoyed this response to Morgan's oil patch article in today Globe.

S Rankin from Chatham, Ontario, Canada writes: How tiresome. Another self-serving piece from Canada's clueless right-wing dragging Trudeau out of his grave yet again. How amusing that the writer failed to credit another liberal, Paul Martin for finally putting an end to 30 years of structural deficits - the single biggest factor in providing economic bragging rights to Canadians in the current debacle. Also how convenient to talk about Trudeau's contribution to the structural deficit when deficits run up under Mulroney were as great in dollar terms. What is it about the rightie mind anyway? They obviously take people for saps. A similar logic is in play in the USA: Bush and the Republican economic team that controls the SEC regulations have been in power for 8 years, the Republican Congress has either been in power or has had to power to block legislation for 13 years, the deregulation that has been traced as a cause of the crises took place on Bush's watch as well as his 3 previous predecessors ... so therefore the whole thing is Obama's fault. And here is how conservatives take responsibility for thier actions: (1) Point finger at nearest victim (2) Claim, in a loud voice, that the nearest victim is actually the culprit, and (3) Claim that you and other conservatives are simply hapless and pathetic victims of the MSM and "liberuls". Get a clue! In regard to deficit spending in the age of ZIRP (zero interest rate policy... Canada will soon be there): "There are no atheists in foxholes and there are no libertarians in financial crises." (Paul Krugman)

As Krugman (NYTimes) says, there are no "libertarians" in financial crises.

God it's nice to see someone who understands the meaning of libertarian.

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And you and Sheldon Wolin have found rapport since last spring, MS (see book lounge posting and revival of his theory).

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I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasised the US economy's fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism.

Putin at Davos

Talk about corruption.

And what's been discovered and exposed is obviously only the tip of the giant crooked iceberg that's floating around the globe.

Rats in the Grain

The Dirty Tricks and Trials of Archer Daniels Midland

http://www.nytimes.com/books/first/l/lieber-rats.html

Not only was Whitacre busy but he appreciated the nimble, decisive can-do atmosphere at ADM. He reported directly to Mick Andreas. The huge lysine plant, with an annual output capacity of 250 million pounds, went from blue prints to production within less than a year and a half, an astonishing feat. The facility, which looked like an indoor stadium, opened in February 1991.

    At the time, lysine was selling for about $1.30 per pound. ADM started a price war in order to win market share. When the price hit 60 cents, the operation was not even paying off the building costs. According to Whitacre, "we were losing money, a few million dollars a month. Production costs were high because we were just getting started."

    This sorry state was not regarded by ADM as permanent but only as stage one. As Whitacre put it, stage two started when Mick Andreas and James Randall, the ADM president, put him in touch with Terry Wilson the president of the corn processing division. Not especially popular among employees, Wilson, a gruff, bearish man with forearms like hams, silver hair, and metallic glasses, was the subject of office rumors about price-fixing. He put Whitacre at ease about losing money and said it was time to meet with the major competitors, which were two Japanese firms, Kyowa Hakko Kogyo and Ajinomoto.

    Whitacre told his FBI handlers that Wilson previously had set up a conspiracy to fix prices in citric acid. According to Whitacre, Wilson and Mick Andreas convinced the Japanese that it was time for everyone to climb out of the red in lysine. The way to do it was by raising prices collectively and carefully dividing up the market.

    Whitacre reported that ADM even had a price-fixing motto: "The competitor is our friend and the customer is our enemy." The phrase stood modern capitalism on its head. Whitacre promised that it "turned up lots of times on the tapes" he secretly made of the meetings. "Terry used to say it, and Mick would say it. It was our philosophy.... There are tapes of Mick Andreas quoting his father as always saying this."

    From the first, the government declined all requests to release the tapes under the Freedom of Information Act, because they were evidence in an ongoing criminal investigation. ADM also early developed a militant strategy to prevent any disclosures of the tapes, but portions leaked out.

    After his exposure, Whitacre publicly recounted how he became an informant wearing a wire and at times carrying a tiny recording device implanted in his briefcase. He claimed that in 1992, when price-fixing was being discussed with the Japanese but before it actually began, lysine batches in the ADM plant came out spoiled. There was a suspicion of sabotage by engineers from the Japanese competitors, who had visited the Decatur facility. Eventually sabotage was ruled out. Before it was, Dwayne Andreas became concerned, and ADM called a contact at the CIA who referred the case to the FBI. This resulted in the invitation of Brian Shepard to the plant. Among others, Shepard approached Whitacre who allowed the FBI to tap his home phone and agreed to spy. One of the ironies of the case is that the FBI initially contacted Whitacre about matters unrelated to price-fixing.

    In 1995, Whitacre insisted that he was not threatened by the government. "The FBI never forced me to do anything." He wanted to do the right thing because "from the beginning, I wasn't comfortable with the idea of price-fixing, not only because it's illegal but because I also believe it's the wrong way to do business."

    Brian Shepard also was a significant part of the equation for Whitacre. "I don't know. I just really trusted the guy. If it were another kind of guy, I might not have told him. He was really trustworthy and I found it a real relief to talk to him.... We really hit it off well."

    For the most part, Whitacre charmed the press, which did not probe the inconsistencies in his stories. For example, Whitacre always maintained that Dwayne Andreas was in on the price-fixing scheme. If so, why did he alert the CIA about alleged sabotage and later invite the FBI on site? If the competitor truly was the friend, why would such a friend even be suspected of sabotage? Above all, why really did Whitacre cooperate with the government? No similar tugs of conscience had disturbed him during school or in prior jobs. He was not known for making ethical stands or for doing anything to put his meteoric career at risk.

    Whitacre fast was becoming a folk hero of American business. A pariah at ADM, he found himself at the center of the largest antitrust probe in American history and in the pages of the New York Times, Wall Street Journal, Time, Newsweek, and Barrons. Fortune devoted a cover piece and extensive space to Whitacre's first-person account: "My Life as a Corporate Mole for the FBI." Residents of Moweaqua, from the barber to the police chief, told television that Whitacre and his wife Ginger were model citizens, parents, and philanthropists. The couple was especially concerned with the plight of poor children. They organized toy drives and invited local kids to play on their grounds. Time described Whitacre as practically a "second son" to Dwayne Andreas. Reporters, editors, and readers warmed to the story of a man who had everything and seemingly put it all at risk as a covert operative for the FBI in order to protect free enterprise.

Down, down it goes. How far down nobody knows!

Vancouver’s low pay out of whack with home prices: tech blogger 

http://thetyee.ca/Blogs/TheHook/Labour-Industry/2009/01/30/HomePrices/

"Affordable commercial real estate is hard to come by in the city - leading in some cases to a perverse reverse-commute where urbanites must schlep out to the suburbs to their workplaces - but more importantly this discourages companies from locating here.

"Most large cities with expensive downtown cores operate as financial centres ...Vancouver does not...

"B.C.'s resource industries, the bread and butter of Vancouver for more than 150 years, are weak thanks to everything from the U.S softwood lumber tariffs to Kyoto to a number of key mining company collapses. Our province has failed to diversify its economic base...

"The advanced industries like software and aerospace that keep California sizzlin' have failed to grow in scale in this city. Investment in this area is weak," with the exceptions of alternative energy and biotech.

"The film industry...is a fickle bride" and "the profits are retained in New York and LA...."

Bell goes on to note that B.C.'s largest industry is the marijuana trade, hardly a good foundation for your basic well-regulated urban economy.

And, when it comes to greasing the wheels of commerce, the Lower Mainland's transportation system is "pathetic."

 Samuelson :

"So the American electorate is very unhappy. Free trade and globalization add to world productivity. It also adds to the potential standard of living of many people, but unequally."

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Right. We went around denouncing globalization and the NAFTA and now they wouuld appear to be coming apart as protectionism takes over. And that is bad because people are hurting.

But wasn't that to be the future? "Change" is needed in a healthy economy. It was a sign of mental health to invite and accept change - even as people were being laid off and production went "offshore".  People were hurting. But it was slow, insidious like a cancer. And, anyway, this was becoming a "knowledge based" economy, thanks to IT. Right? (That one was challenged by the local newspaper here, in the home of RIM, for the first time a week ago as unemployment locally went above the national average, defying holy writ).

And you just had to ignore the obvious limits to growth for generations to come. The ubiquitous "they" will come up with something. For everything. And a majority of people still buy that one.

Let's face it. "Authority" rules because we haven't the foggiest what is going on in focus groups and labs where the future is being fashioned. It's not just "Frankenstein monsters of financial engineering." And ignorance is bliss.