Tuesday, February 03, 2009

Of Coal Mines & Canaries

The roundup below is from Furtherism - A Rejection of Kabuki, which you'll be hearing from often, it's run by a very old gonzo economist friend who is starting into blogging. Before Christmas, I drafted a post about how this thing is going to unspool bad, but held off because, well, we had one last Bing Crosby Christmas. That was worth it, but I know this financial shit in my bones. Or maybe lungs.

Bottom line, the likelihood of the spreading globo-riots coming here this year is high. We screwed up: the solution to the financial crisis was to tell it to eat itself. Stick those transactions where the sun don't shine, where it never did. We didn't declare the unregulated, illegal, hopelessly opaque tangle of Casino Credit Default Swaps null and void so that 15% of mortgage failures in their value basis wouldn't take down the whole system. A maximum default of 15% called the values of all bets into question and froze a highly leveraged system into final crystals. Stupid! Stupid.

In turn, those casino bets devalued the high-yield Collateralized Debt Obligations bonds they rested upon, then they seeped down into sure-thing Money Market Funds, the surest of which broke the buck. Why? When the back-street gamblers broke the banks, the casinos weren't honest. They didn't say to their patrons, "All bets are off. Take your markers, it's a raid. Go home." Instead, they kept everybody playing, went to the cops who were on their take, and demanded to be made whole. The cheek.

The failure to declare off-book transactions as null and void is what's dragging everything down. Those deals are illegitimate, irretrievable, bets scrawled down on scraps of paper which will never be accounted. That's why the Troubled Asset Relief Program hasn't fixed the problem. It can't, it never will. The gas in the air everyone's running from is lethal, and no one is talking about it. They're either running or dead:
You think Obama is going to save us? Remember, he is not a messiah that can perform magic and miracles. That job is left to us collectively. But in the meantime, let's see whether the canaries are chirping:

From Russia: The Guardian is reporting:
A wave of protests swept across Russia yesterday in one of the first signs of mass discontent with the Kremlin's handling of the financial crisis
From China: RIA Novosti is reporting
20 million Chinese workers have received "pink slips" and are headed back to the hill

At the same time, however, groups of wealthy Chinese are treking to America to by foreclosed properties
From Switzerland:
Wealthy attendees of The World Economic Forum were informed that the global financial crisis has destroyed 40% of the worlds wealth
From Great Britain:
The rich are buying gold to keep (literally) in their mattresses.
From Saudi Arabia:
Economists here are referring to the current troubles as The Greater Depression.
From USA:
Personal bankruptcies are up only 33% to 1,086,130 in 2008
From Brazil:
100,000 indigenous peoples and eco-socialists met in Belem for the World Social Forum to discuss alternatives to "global capitalism", and no one paid much attention
So today's trivia question: what is the canary's song?


A. Peasant said...

I believe the canary was whistling Young at Heart when he keeled over dead. But then he went to heaven.

Fairy tales can come true, it can happen to you
If you're young at heart
For its hard, you will find, to be narrow of mind
If you're young at heart

You can go to extremes with impossible schemes
You can laugh when your dreams fall apart at the seams
And life gets more exciting with each passing day
And love is either in your heart or on its way

Don't you know that its worth every treasure on earth
To be young at heart
For as rich as you are its much better by far
To be young at heart

And if you should survive to 105
Look at all you'll derive out of being alive
Then here is the best part
You have a head start
If you are among the very young at heart

Still Life Living said...

Lord over all us hordies,

Thanks for the promo. The big question is whether the bailout is working or can work.

It is interesting how we Americans recently poured $140 billion into Citibank ($50 billion cash and the rest thru off-balance sheet Fed incentives, loans, and cash infusions), and the market cap today is only $19.35 billion!

God bless america. Where else could such a ruse be pulled off? Why didn't the US just buy all of the outstanding shares at market prices and go forward with a truth commission like investigation? Once we own the company, we own the history. Then we can prosecute and maybe seize assets and get our money back.

Halliburton has a market cap of $16.4 billion. I think the USA should buy it so we can own the history and start prosecutions.

MarcLord said...

LOL Pez, that's a good one, a fitting tune to sing at the riots:

"You can go to extremes with impossible schemes
You can laugh when your dreams fall apart at the seams"

MarcLord said...


The truth is spoken, the light is seen. I'll post your insights as soon as I find the proper visual for "pissing money down a hole."