Saturday, September 20, 2008

Risky Business

"The fact is, the markets work, and they are working. And people - some of the big companies obviously - have taken risks. Risk means risk. And there's an upside as well as a downside in some of the choices they've made. We have to be careful not to have this set of developments lead us to significantly expand the role of government in ways that may do damage long-term for the economy. We don't want to interfere with the basic, fundamental working of the markets."

-Dick Cheney 11/26/07


Anonymous Moe said...

Doesn't "risk" assume you have something to lose? Did the people who ran the economy into the ground come away poor, or do they get to walk with their bonuses, plus whatever they could steal? Why do I think it's the latter?

9/20/2008 3:35 PM  
Anonymous Anonymous said...

Sounds like this guy should be President instead of Vice President.

9/20/2008 4:39 PM  
Anonymous judyo said...

Haven't seen him on the teebee lately. You??

9/20/2008 5:01 PM  
Anonymous am4 said...

"Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation."

John McCain
Contingencies Magazine Sep/Oct 2008

9/20/2008 5:42 PM  
Anonymous Not Sure said...

He needed the market outlook to be positive while he was selling his positions. Losing money is for the little people.

9/20/2008 6:39 PM  
Anonymous Anonymous said...

"We don't want to interfere with the basic, fundamental working of the markets."...

...unless, of course, we start taking losses.

9/20/2008 6:50 PM  
Anonymous Anonymous said...

Hmm interesting some saying Obama willl lose

Obama will lose

could be true

9/20/2008 7:25 PM  
Anonymous elfranko said...

it really is the end of times if dick says something i agree with. ugh.

9/20/2008 8:10 PM  
Blogger J. said...

I prefer the version with pre-Scientology Tom Cruise.

As to this guy Cheney, as I recall, his track record hasn't been too good, though yes, I do agree that risk is risky. By the same token, Dick is a dick.

9/20/2008 9:31 PM  
Blogger njdoc said...

Trickle Down Tax Cuts.
It has become obvious that this ridiculousness has left the realm of economics and is now a political problem. There is no question but that the Bush tax cut, spending increases and decreased regulations, all financed by borrowing, have allowed the Wall Street oligarchs to game the system in their favor and make an inordinate amount of money (who wouldn't want to pay 15% taxes on 100 million dollar bonus?). But we are well past the point where anybody thinks that this is either right or moral. The question is, what's next? What Mr. Paulson suggests is the largest tax cut for the rich in American history. 1 Trillion dollars of debt relief for the Wall Street oligarchs, financed either by tax increases or inflation, is what is on the table for us. I cannot for the life of me understand why the Democratic candidate for the US president, Mr. Obama, is favor of this solution. The Democratic party has always been the party of the working Joe, so how can Mr. Obama support one trillion dollars of debt relief for the Morgan Stanley's of this world. He is such a big critic of trickle down economics (rightly so), yet he is in favor of trickle down debt relief. Can you just imagine that you had one trillion dollars to play around with. You could give back to Wall Street, who created this mess, or you could spend it as your wish. How many factories, roads, power plants, schools, bridges, solar farms, etc.... could you build? How many jobs could you create with a trillion dollars. How many fiscal stimuli could one inject with a trillion dollars? But Mister Paulson believes the best utilization of our fiat currency is to fortify the Wall Street Oligarchs, "so credit could flow through our system!" This is bull shit!!!!! This is a false choice that is being presented to us!!!! I implore any and all who read my little blog to contact your congressman and senator and tell him/her that you do not want your money to go to Wall Street. Do you believe that is fair that the taxes paid by the brave men and women of our armed services, who put their lives on the line for us day in and day our, be sent to people vacationing on their yachts? If there is any debt relief to be had, let it be had by regular working people who were ensorcelled into taking excessive debt by the oligarchs' sales force. I propose that people have direct debt relief by sending any kind of debt that was incurred from 2003-2006 (or so) to a DRC (Debt Reduction Corporation), and thus 1 trillion dollars of debt relief can be had by the American consumer. Thus, they will have excess capital that can be used for spending, saving or investing. Much of this can be taxed by the government, so they will have a return on investment. I am shocked that Democrats have allowed Wall Street to flim flam them into their nonsense. Please, America, let us unite in this effort to end the Wall Street Debt Reduction plan. They don't deserve it!!!

9/20/2008 10:00 PM  
Anonymous e. nonee moose said...

We have to be careful not to have this set of developments lead us to significantly expand the role of government in ways that may do damage long-term for the economy. We don't want to interfere with the basic, fundamental working of the markets."

Unless we know the Democrats are going to win it all in '08 in which case, fuck 'em.

9/20/2008 11:06 PM  
Anonymous e. nonee moose said...

more choices of innovative products less burdened by the worst excesses of state-based regulation."


9/20/2008 11:07 PM  
Anonymous Anonymous said...

They're less malignant than the Repubs, and not batshit crazy. But I think the Dems are a long way from a real "party of the working Joe" -- unless you think that they're still the party of FDR. The Dems are owned by the corporate oligarchy every bit as the GOP. There are lots of valid reactions to what I suspect is coming, but "shock" should no longer be one of them.

Because what I'm hearing out of the Congressweasels is the same sweaty "crisis" jabbering that gave us the "Patriot" Act and the "authorization" to invade Iraq. Stand by for something epically stupid, hasty, gutless.
-- sglover

9/21/2008 12:13 AM  
Blogger Mr. Hedley Bowes said...

How speculative investment bubbles form.

9/21/2008 2:51 AM  
Anonymous Thomas Daulton said...

I am soooooo, sooooo, looking forward to hearing my "unbelieving" conservative relatives explain to me this week... that even though the Feds have nationalized three banks, and the banking system as a whole needs a 3/4 $TRILLION "bailout" which is fundamentally due to millions of people not being able to pay their mortgages...
..."But we're still not in a recession, you see, because we haven't even had one quarter of negative growth yet. These economic terms have specific definitions, and if you hippie pinko commie sympathizers don't want to use the definitions, I'm taking my ball and going home."

My gawd, if anyone ever needed proof that Federal economic statistics were being manipulated...


9/21/2008 3:30 AM  
Anonymous rapier said...

What a responsible central banker sounds like. Paul Volker.

Note in the short question session at the end uber pigman Pete Peterson asks an inappropriate political question in order to blow a dog whistle to 'conservatives' so as to delegitimize everything Volker said based upon partisanship.

Dirty dirty pool and perfectly instructive.

9/21/2008 7:39 AM  
Anonymous Anonymous said...

The Republicans are bringing the vacuum cleaners into the Federal Reserve vaults before they leave.

That's the great sucking sound Ross Perot talked about.

9/21/2008 10:04 AM  
Blogger Spider said...

Here's another illuminating Cheney quote. This one is from October 1986.

"Let us rid ourselves of the fiction that low oil prices are somehow good for the United States."

Yeah, how do you like how that one played out, folks?

9/21/2008 10:09 AM  
Anonymous Anonymous said...

“Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending.”

Alan Greenspan, April 2005

“Mr. Howard made it clear to the mortgage broker that he could not read or write, but his loan application erroneously claimed he had had 16 years of education.”

Center for Responsible Lending report, “IndyMac: What Went Wrong?” June 30, 2008

“That was your homework—to watch Boiler Room.

Lisa Taylor, Ameriquest loan agent, quoted in the Los Angeles Times, February 4, 2005

“It was unbelievable. We almost couldn’t produce enough to keep the appetite of the investors happy. More people wanted bonds than we could actually produce.”

Mike Francis, executive director, residential mortgage trading desk, Morgan Stanley, quoted in “The Giant Pool of Money,” This American Life, May 9, 2008

Dick Dastardly.

9/21/2008 12:18 PM  
Blogger njdoc said...

Sunday, September 21, 2008
Wall Street Perestroika
A Fait a Compli

Having watched the Sunday talk shows, it is obvious that the Wall Street Debt Reduction Plan is a done deal, with only minor detail to be discussed. I am not sure how to feel about it. But probably it is somewhere between bewilderment and incredulousness. Chutzpah, properly defined, is killing your parents and looking for sympathy that you have become an orphan. The one thing that this plan does not lack is chutzpah. The thieves on Wall Street have designed this plan so that they can improve their balance sheet, and in effect cover their losses on bad bets. Paulson will have absolute authority over the plan, and they will be able to buy instruments from foreign banks as well as commercial real estate paper. So the taxpayer has the added benefit of assisting his banker friends abroad and our Donald Trumps at home. This plan reminds me of another ambitious reform program. When Mikhail Gorbachev came to power, he knew that communism was not sustainable, and he believed it could be saved by a few reforms of the system, Perestroika and Glasnost (Rebuilding and Openness). The problem was that communism itself was a flawed system, and no amount of Perestroika could save it. The Soviet Union (and Russia today) had no finished product to sell abroad, and its collectivized farm system was unable to produce enough food for its population. It was completely reliant on oil exports to fund its ability to feed the masses, and when oil prices collapsed, it took out the USSR, despite all the attempts by the cronies to keep it propped up. So, as I look upon the landscape today, I see that Mr. Paulson is attempting a Wall Street Perestroika, so that the system can be saved!?!? However, one needs to ask a fundamental question, i.e. can our economic system, as currently designed, be saved? The parallels are frightening. As the USSR was dependant on oil exports to stay afloat, so to the USA is dependant on capital exports (treasuries/gse/mbs/derivatives etc…) to stay afloat. So just as a collapse of oil prices in the 80’s squeezed the USSR out of business, the last thing that the USA can tolerate is a new “price discovery’ on our capital exports. Because we are completely dependant on external powers to finance our budget and thus run our country is the reason why I believe these extraordinary measures are being undertaken. But just as Perestroika of the USSR failed because it was unsustainable, Wall Street’s Perestroika will probably fail. Adam Smith said that no country that has ever run up a large foreign debt has ever paid it back. I think that when foreigners understand that we do not have the capacity to pay back our debts, and that we are going to have to inflate our way our of our debt, they will pull the plug on the current finance agreements and in effect destroy the dollar’s standing as the world’s reserve currency. This may lead to the collapse of our whole economic system, despite Mr. Paulson’s best efforts to prop up the oligarchs.

9/21/2008 1:06 PM  
Anonymous Business said...

The Stock Market has always been Risky Business, I have try to buy stocks for a while with no luck whatsoever because they keep asking me for more than I have. I think every business have their own risk and have lose some or a lot of money in the long run.

9/21/2008 1:34 PM  
Anonymous Anonymous said...

I'm one of those damn "liberals" we've all heard so much about over the last decade. I consistently vote Democrat, and I make it a point to be outspoken about my political views - among family, friends, and acquaintances - even when those views invite the most harsh accusations and insults.

So, I just want to go on the record.

Using any of the following talking points to encourage the conservative movement is (NOW and FOR EVER) entirely off limits to any Republican.

redistribution of wealth
big government
fiscal responsibility
evils of socialism
self-regulating markets
evil taxes
nanny state
deficits don't matter
free market capitalism
government inefficiency
end of communism
Ronald Regan
free lunch
welfare queen
Democratically held congress
ownership society
failing public schools
innovation of the private sector
healthy competition
individual responsibility
George Bush

The Republican Party, the party that wrecked America!!!


9/21/2008 4:15 PM  
Anonymous goldhorder said...

The Democratic party has always been the party of the working Joe

Ever see the street hustle shell game in action. hahahahaha

Hedley is confusing a sympton with a cause...this is why we have speculative bubbles. Austrian economics predicted both the Nasdaq crash, the housing crash, and the debt crisis.

9/21/2008 4:20 PM  
Blogger Mr. Hedley Bowes said...

How am I confusing a symptom with a cause?

"Hayek explains the mechanism by which loose credit generates false signals to investors, leading them to chase fads all over the market, and ending in sector-wide failures. He was writing at a time when the gold standard provided partial restraint on the government and the central bank."

I am essentially in agreement with this thesis. However, we may differ on causality. I propose that the lower marginal tax rate of the new industrial wealth of the 1920s created so much available capital that 'loose credit' and 'market fads' developed as a consequence: similar dynamics support the run up to the dot com bubble and are exacerbated by the Bush II tax cuts, abnormally low and temporary target interest rates as an anti-recessionary tool in 2001-02, free issuance of ARMs, abdication/disablement of regulatory oversight. Too much capital in a boom market creating loose credit and an irrational environment described here.

The arguments of the Austrian School and the Chicago School fail on these points: the 'herd effect' as described above: the assumption that players will act 'rationally' is not universal. They also assume that all players will act 'morally': these market models are free from pathological players that create their own rules, engage in subterfuge and engage moral hazard for personal gain. As we can see, this is not proven in practice. In this regard, there are no 'perfect' markets hence the need for regulatory parameters and enforcement.

"In the American context of the Great Depression, one book captures the whole onset and response. It is Murray Rothbard's America's Great Depression. He shows that it wasn't the 1929 crash that was the problem; it was the response to the crash that created the Depression. Bailouts. Price controls. Wage controls. Government programs. Trade restrictions. Crackdowns on the capital markets. And who did all this? It originated not with FDR but with Herbert Hoover – clear echoes of today."

Rothbard himself echoes the cries of the neoCon acolytes of the Chicago School in their failure of the Bush Doctrine: 'if we'd only done it right we wouldn't be in this mess'. The outsized interventions of the 1930s were necessary stabilization tools in response to a massive, decade long speculative bubble and rapid devaluation of assets (the 1929-30 market crash) when the bubble burst. The suggestion that the underlying financial crisis wasn't not the problem is pure revisionism in defense of a failed idea that was, regrettably, reconstituted under the 'free market idealism' of Reagan/Bush 1 and 2.

I have lived through 3 (perhaps 5, depending on how one counts) Bush administrations. I can tell you that they have a unique talent for creating financial climates where malevolent players can game the system then walk away from the problems they've created leaving shareholders and taxpayers holding the bag. Declaring basic institutions like education and health care unaffordable while perpetrating trillion dollar follies of foreign policy and investment grifts. These are the realities that the Austrian and Chicago Schools omit from their models.

9/21/2008 5:44 PM  
Blogger Mr. Hedley Bowes said...

9/21/2008 6:31 PM  
Blogger Mr. Hedley Bowes said...

9/21/2008 11:34 PM  
Anonymous goldhorder said...

How is the system gamed Hedley? The system is gamed through the Federal Reserve Bank. It is central planning that gives the elite this power. Austrian economics looks at what takes place in the market place and predicts what the outcome will be. The method the elite use to fleece the masses is the federal reserve bank. I fail to see your point that the Austrian school ignores this. The Bushes could not have done what they did without the democrats help. Look what a weak fight they are putting up now. Austrian Business Cycle Theory clearly explains what happens during the boom and bust phases...from wikipedia...The Austrian business cycle theory is the Austrian School's explanation of the phenomenon of business cycles (or "credit cycles"). Austrian economists assert that inherently damaging and ineffective central bank policies are the predominant cause of most business cycles, as they tend to set "artificial" interest rates too low for too long, resulting in excessive credit creation, speculative "bubbles" and "artificially" low savings.[1]

You miss the whole argument Rothbard puts out. He recognizes the evil of central banking...this is the elite's tool with which to steal from the public. His argument concerning FDRs interventions is that he unnecessarily prolonged the great depression. The only thing that gets a people back on their feet are savings and living beneath your means. Only when you have built back up enough private wealth can an economy really take off again. That is what finally got America back on its feet after the great depression. That and the fact that the rest of the world had their manufacturing capabilities destroyed for a decade as a result of WW2. It had nothing to do with FDR and his cronies thieving. Hell...they were too busy destroying "excess food supplies" to help turn things around. haha

9/22/2008 3:41 PM  
Anonymous Anonymous said...

We Need to Bailout the Financials; Says Experts

WASHINGTON (AP) -- It's the largest government bailout in U.S. history and two days after it was introduced to the Americans paying for it, the proposal is still largely a mystery.

Among the unanswered questions: How will the government mop up the bad mortgage debt on banks' books, who will run the process and how much will it cost?

Key elements of the plan remain in flux as behind closed doors Democrats demand modifications that would provide more help for ordinary Americans in return for bailing out the country's financial giants.

9/22/2008 8:27 PM  
Anonymous Anonymous said...

I know he's the VP, but really, isn't it apparent after these last 8 years (remember Cheney selected himself the VP candidate for Bush and did not subject himself to the same vetting) that the guy is in it for himself and cronies. He's about as unethical as they come.

"...may do damage long-term for the economy." - You mean that wasn't their goal? Given their actions, it's hard to tell.

"...We don't want to interfere with the basic, fundamental working of the markets." - Except when it comes to the wealthiest. They say the opposite of what they mean. Hasn't these 8 years been a glorious boondoggle for them.

I like want Obama said:

snippet at Democracy Now:

"Sen. Barack Obama: “They said they wanted to let the market run free, but instead they let it run wild, and in doing so, they trampled on our core values of fairness and balance and responsibility to one another. And as a result, we are facing a financial crisis as profound as anything that we’ve faced since the Great Depression. As a result, your jobs, your savings, your economic security are now at risk."

President Clinton was on Letterman, and he had described the problem as too much money, no investment opportunities, with the wrong incentives. To have confidence, you need trust. If we can't trust professionals and our leadership to do no harm first, well, that doesn't speak well of us, does it. I'm not sure why anyone would want to do business with Wall Street in the first place given their business ethics.

9/23/2008 3:51 PM  
Anonymous MrToad said...

That last comment was interesting; back when I still thought of myself as a Republican (not just conservative), I believed that supposedly Christian principles of community and 'responsibility for each other' were important to people who kept saying that those principles really were important to them. During the 1990s I came to realize that the GOP leadership and membership who spoke so loudly about their commitment to 'religious values' and 'responsibility' and 'ethics' simply were mouthing words. What they actually thought, as demonstrated by their actions, was basically "every man for himself, and screw the losers". The Democrats, and 'liberals' generally, for all their many faults, still have some smattering of appreciation for the teachings of Christ. It's easy to believe what you are told, but it's more useful to see with your eyes rather than your ideology.

9/24/2008 11:55 AM  
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