Latest bailout

[Fole_Penalt]

Yes, I agree with you totally FP jaan that perfection should not be expected (i.e. reserved for God) and that it's the direction that is important. And I honestly hope we, as a specie, are at least heading in the right direction after 8 years of screw-up's by coke-sniffing Goergie boy promoting fear and terror in the world.

Thank you for the references from the Quran as always. I agree with your assessment there as well. As you have suggested the evidence is empirical as well and one does not necssarily have to read the Quran or believe in it, to see how destructive gambling and "intoxication" can be.

Of course, I have always associated the word "intoxication" with the use of any substance that alters one perception in a negative manner (i.e. one would be inclined to do negative things that he/she would not normally do under a normal state of mind). For example, I love the taste of beer (loved mau-shaeer since I was a kid ) and don't drink it to get drunk, but rather enojoy a couple of cold ones for the taste. That's obviously a long way from being intoxicated (as it does not affect my actions in the least bit - not in that quantity) amd I have never liked the drunk feeling. Frankly, I can't stand being around drunk (intoxicated) people, so, I can totally understand the intention behind these ayat in the Quran.

I am not sure with the world but in the US there has been some improvement in individual freedom with leaving of Bush. It is not that Obama has done well even as compared to the average of US presidents it is that Bush was the worst president in the US history in this respect. However the improvements have been quite minor. The biggest improvement that is required is transparency into the financial system. Without it the current world-wide crisis will persist. There has been none forthcoming thusfar. I am still hopeful but I am not holding my breath.

On alcohol, my main point for this thread was to point out that it is emphasized in the Quran that there can be no coersion in banning drinking alcohol or snorting of cocaine by the state. Otherwise, in response to your post above, the word used for intoxicants means anything that conceals one's own sense of awareness. There is no emphasis on alcohol or any other substance. Unlike what the general belief is among Muslims, in fact religiously so, drinking alcohol or in fact the taking of intoxicants is not prohibited religiously. It may be, depending on the use, and the judgment is left to the individual. In a nutshell, it is pointed out that there is beneficial uses but more often the use is harmful and a sin, and that it is each individual that must weigh the situation for himself. For example, there is no stronger intoxicant than general anesthesia, however its use for surgery is beneficial. On the flip side recreational use of pain drugs to get high is a sin. It is further pointed out (and those are the verses above and more that follows that I have not quoted that) that their use is a slipery slope and it is best to keep away from them and when using them to use extreme discipline.

It is not altering the perception in a negative way that is the target. Rather it is using a substance to conveniently cover one's own sense of awareness and reality that is the target. Escaping from reality has very bad consequences as reality will impose itself regardless of one's fantasies and artificial perceptions.

 

[Fole_Penalt]

http://www.youtube.com/watch?v=W49LcbGoCwA

Thanks for posting that Kaz jaan. God bless Ron Paul. Only five copies given to the Senate and the House each the night before and why does the bill have 1000 pages?

In any case listen carefully to the end, minute 4:20 I think. That is exactly why, I have maintained for a very long time, that the best practical situation for the US is a Democrat as President and a Republican congress. It would be wonderful if the Democrats get soundly defeated in two years in mid-term election, and it is a real possibility.

The worst possible situation for the US is a Republican president with a Republican congress, as the Republicans have proven to be the least responsible party when they have power.

 

[Kaz]

FP jan, a quote for you:

"I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it." - Thomas Jefferson

 

[Bi-honar]

I am not sure with the world but in the US there has been some improvement in individual freedom with leaving of Bush. It is not that Obama has done well even as compared to the average of US presidents it is that Bush was the worst president in the US history in this respect. However the improvements have been quite minor. The biggest improvement that is required is transparency into the financial system. Without it the current world-wide crisis will persist. There has been none forthcoming thusfar. I am still hopeful but I am not holding my breath.

On alcohol, my main point for this thread was to point out that it is emphasized in the Quran that there can be no coersion in banning drinking alcohol or snorting of cocaine by the state. Otherwise, in response to your post above, the word used for intoxicants means anything that conceals one's own sense of awareness. There is no emphasis on alcohol or any other substance. Unlike what the general belief is among Muslims, in fact religiously so, drinking alcohol or in fact the taking of intoxicants is not prohibited religiously. It may be, depending on the use, and the judgment is left to the individual. In a nutshell, it is pointed out that there is beneficial uses but more often the use is harmful and a sin, and that it is each individual that must weigh the situation for himself. For example, there is no stronger intoxicant than general anesthesia, however its use for surgery is beneficial. On the flip side recreational use of pain drugs to get high is a sin. It is further pointed out (and those are the verses above and more that follows that I have not quoted that) that their use is a slipery slope and it is best to keep away from them and when using them to use extreme discipline.

It is not altering the perception in a negative way that is the target. Rather it is using a substance to conveniently cover one's own sense of awareness and reality that is the target. Escaping from reality has very bad consequences as reality will impose itself regardless of one's fantasies and artificial perceptions.

Agreed FP jaan. I really like the terms you used "escaping reality" and "concealing one's own sense of awareness". That's what I was trying to get at by saying "altering one's perception in a negative manner" - albeit not as accurately and elegantly as you put it. My communications skills seem to be on decline lately!

 

[Zob Ahan]

http://www.dailyreckoning.com/never-fear-the-feds-are-on-the-case/

This is a good article. Is the US going to be another Japan?

 

[Fole_Penalt]

Kaz jaan, I like the quote to which I say, me too!

Bi-honar jaan thank you. It appears that we are in agreement.

Zob Ahan jaan, thank you for the article. It is slowly but surely dawning on people that a Japan-like or even a great depression like scenario is not only possible but likely. This, in and of itself is damaging. It should have never come to this and it would not have, had it not been for the twin towers of incompetence and stupidity in Bernanke and Bush, aided by even a more stupid organization in the European Central bank.

I love the quote in that article from Einstein, "Never expect the people who caused the problem to solve it."

A case in point appears to be Tim Geithner. He has managed to fumble the situation thus far. Got to give him some room but time is of essence here. And Bernanke must go. As soon as the guy opens his mouth he damages the US economy. He is that toxic.

Transparency is what is most needed. Then money can be given to existing and also poured in new start up institutions to distribute (that is essentially what a bank is.) such that the total pool of money is not shrinking as it has been, despite the reversal by the Bozo Bernanke.

I agree with the article that Japan is a lesson on how Keynesian economics is essentially quite silly. All that infrastructure spending has bought Japan nothing except massive, massive debt. This is because no one there has the political courage to stand up for the long-term. So they have and will loose the long-term.

Furthermore, what people forget is that one of the problems facing Japan is that it is first nation to be truly facing aging. The US is at the beginning of a similar trend (though it will not be as strong). The solution for the US is obvious and it is beyond me that among hundreds of proposals to deal with the current economic conditions why there is isn't someone standing up and saying what is essential: immigration laws must be at least temporarily changed such that legal desirable immigration is expanded as much as possible. For example they must reduce immigration through investment requirement temporarily, for example, anyone below the age of 45 who brings in 500K and buys a house gets a greencard, etc, and relax H1 immigration caps, especially for medicine.

 

[westwienmaskulin]

http://www.j-bradford-delong.net/economists/keynes_wsj.html

http://www.aei.org/publications/pubID.7119/pub_detail.asp

Japan's efforts to reinvigorate its economy and its stock market have so far foundered for fundamental reasons. Japanese policy makers have followed the advice of Keynesians while ignoring the wisdom of Keynes himself. Since 1992, 60 trillion yen ($600 billion) worth of public works spending, the ultimate Keynesian stimulus, has done no more than to recycle excessive private savings into Japan's depleted spending stream. Meanwhile, the deflationary momentum, so much feared by Keynes and created by the lingering effects of the Bank of Japan's overly tight monetary policy has not been broken. Until Japan's consumers are convinced that goods will cost more next year rather than less, the economy will remain chronically depressed.

Japanese policy makers would do well to read portions of Keynes's general theory related to the dangers of deflation and the symptoms of a liquidity trap. Japan's deflationary problems began with its investment-led boom in the 1980s, which pushed stock prices and land prices to highly speculative levels. Rightly alarmed by runaway equity and land prices, the Bank of Japan pushed up interest rates in 1990 and 1991. Equity and land prices collapsed from their inflated levels. Subsequently, the Japanese government attempted to restimulate the economy with public works programs that did no more than substitute wasteful government investment in Japan's inefficient domestic, nontraded goods sector for the excessive private investment that had driven the equity market to bubble levels before 1990.

Alarmed by the possible inflationary impact of growing fiscal stimulus packages, the Bank of Japan maintained a monetary policy that was too tight. Although after 1992 the Bank of Japan was lowering interest rates, until the middle of 1995 inflation was dropping faster than interest rates, so Japanese real interest rates were rising. The deflationary momentum was exacerbated by the sharp appreciation of the yen that resulted from Japan's rising real interest rates and by the spreading insolvency of Japan's financial sector. Meanwhile, growth of the Japanese economy stagnated for three years from 1993 to 1995.

The failure to recognize the extreme deflationary momentum that built up in Japan during 1994 and 1995 probably resulted from two problems. First, Japan's inflation indexes are outmoded: they failed to measure falling prices in newer retail outlets that were taking business away from Japan's traditional old, rigidly priced retail outlets. When the Bank of Japan undertook more representative samples of prices, analysts found that deflation was running at 3 percent per year and began to recognize the extreme dangers of a self-reinforcing deflation.

A second problem arose from the failure to recognize how deflation would operate on Japan's savers and investors and thereby on Japan's external accounts. As deflationary momentum in Japan accelerated, investment spending dried up rapidly, while high returns on financial assets including cash increased Japanese savings. As Japan's net demand for foreign investment dried up, Japan's net sales of goods to the rest of the world increased because the slowdown in Japan caused imports to collapse more rapidly than exports. The resulting excess demand for yen caused the Japanese currency to appreciate and accentuate the deflationary pressure in Japan.
Abetting Deflation

Japan's deflationary pressure has been exacerbated by a classic Keynesian liquidity trap. Japan's risk-averse households and corporations, made so by the collapse in equity and property markets, have found cash to be an attractive asset. Although cash pays no explicit interest rate, in a deflationary environment it rewards holders at a rate directly proportional to the deflation rate. Meanwhile, Japanese households have increased deflationary pressure by withdrawing funds from Japanese banks, thereby forcing a contraction in lending by the banks. For a Japanese household, the 0.2 percent offered by banks on time deposits does not compensate for the widely advertised risk that many Japanese financial institutions may be insolvent.

Deflationary momentum arises as households add to money balances rather than spend money or send it abroad. Less spending and more accumulation of financial assets at home lowers prices and causes the currency to appreciate, which lowers prices further. Japan had reached this deflationary crisis stage by the middle of 1995. The massive stimulus program in the form of another public works package equal to 3.0 percent of GDP, coupled with a sharp further easing of monetary policy by the Bank of Japan, has arrested the deflationary pressure in Japan but has not yet reversed it. Japan's nervous households are still adding rapidly to cash balances. Japan's narrowest measure, of money cash and demand deposits, is still rising at a 12 percent annual rate, although, as a slightly encouraging sign, this is down from the 16 percent rate of increase at the end of the summer.

The rapid increase in Japan's narrow money is a classic symptom of a liquidity trap, where a rapid increase in the money supply does not bring about an increased demand for goods but simply reflects the public's higher demand for money balances to hold in a deflationary environment. Broader money balances are stagnating or falling for two reasons. First, the public is withdrawing time and savings deposits from the banking system as interest rates on them drop toward zero. Second, the banks, needing to replenish reserves after heavy losses on property loans and equity holdings, cannot expand loans.

The much-hailed reduction in Japan's current account surplus is not the result of a rapid increase in spending in Japan related to successful reflationary policies. Rather, it is the result of the relocation of Japanese production facilities offshore to avoid some of the negative costs of an overvalued yen and the high-priced domestic labor. As Japanese production is moved to other Asian locations or to the United States, recorded Japanese exports fall because shipments by Japanese companies to world markets from locations outside Japan are not counted as Japanese exports. Meanwhile, Japanese imports rise because Japanese production facilities outside Japan, such as Honda in the United States, are shipping Japanese products back to Japan and those products are counted as imports.

Ether..

 

[Fole_Penalt]

Westi jaan, I think these articles more than anything affirm the view I have expressed here for some time and in particular going back on this crisis from now over 1 1/2 years ago, before others were calling it a crisis.

It is that, most government spending projects are a null at best, and a net negative in all likelihood in the long-run. It is like taking from one pocket to put it in another, except for the new way of spending almost always involve poorer decisions, and much more corruption and waste than those the money is taken from.

So when such infrastructure programs to "stimulate" the economy are instituted they tend to have some stimulus impact in the short-term as it involves borrowing from the future to pay for now, but in the long-run the costs will come home to roost. Japanese horrific and I mean horrific economic performance of now, following a tax increase in a down economy, is exactly that.

The only way that such government stimulus are ever good is when they are instituted in a deflationary spiral and the costs are never paid back. This is equivalent to printing money and such stimulus then work, not because government spending is good, but because when the pool of money is shrinking, efforts to increase the pool of money is good. The problem with this is that you need to be able to pull off selling under-performing debt. Japan cannot pull this off. The US may yet have a shot at it by selling more under-performing debt to China, Japan, and the Arabs.

Regardless, the entire point is that it is not the government stimulus itself that is doing the work. It is the increase in the money spiral under deflationary conditions.

When money supply is manipulated in this way, not a desirable situation to begin with, the problem often is the method of distributing the new money such that it is going to those who will have the most productive economic activities. Currently, for example, with the banks broken in the US, and confidence in the financial sector shot, due to embarrassing and in fact criminal lack of transparency that to this day persists, even as Bernanke et al at the Fed have woken up and are trying to print money to counter the shrinking pool of money (just recall that they were expressing concern with inflation just three weeks before the financial crisis exploded to the greatest economic downturn since the great depression-that is how out of touch they were), they do not have efficient institutions and methods of distributing that money to the right people. For example, I personally know of people that should get money for their business and cannot or at best have to spend a year worth of effort that they would spend in more productive work just to get money. I am sure people like Zob Ahan also sees that.

A more desirable situation is to never allow rapid expansion or contraction of pool of money to begin with.

 

[Fole_Penalt]

I like this quote from Volker:

He scoffed at the notion that those entities must be free to innovate -- stating that financial "innovations" like asset backed securities and credit default swaps have brought few benefits. The most important "innovation" in banking for most people in the last 20 or 30 years, he maintained, is the automatic teller machine.

What is the truth is that financial institutions leached on to the slogan of "free markets" because it was good marketing, and took advantage of the fact that most politicians are illiterate when it comes to economy and money itself in particular, and threw in some hefty lobbying, to set up usury schemes, effectively reducing market freedom. And despite the denials, most knew it deep down, except that the power to cover one's own awareness, the power of self justification is enormous.

What they had set up was fantastic asymmetric risk profile to derive usury profits.

In truth I disagree with Volker as follows, financial institutions should be free to innovate and do whatever they like, just as long as there is no federal insurance what so ever for their money, and that they have no leverage beyond their own pool of money.

As soon as they even so much as put a toe outside of this box, then they are functioning as the arm of a state enforced monopoly and must abide by the strictest laws to prevent usury.

 

[westwienmaskulin]

^^ FP jan,

I don't think that investment is a bad idea, it just depends on what you invest. We're talking about infrastructure. Infrastructure is a lot of things, ranging from better schools to better bridges. I don't think that it makes sense to invest the money on building bridges. It also depends where and how you spend it. Those programs with the bigger multiplier should get the support IMHO...to me that's education, research for sustainable energy and all that, stuff that will pay-off in the long run/future and might help pay off the debt of today.
Also, from what I got the stimulus and the bank bailout are two separate issues for now. What is also important is that the banks have been bailed out before in the early 80ies after their adventures in Latin America.
I might add, the second thing the financial sector managed to innovate was even more senseless mathematical formulas and modeling, stuff that makes sense mathematically but only if we live in a world where we can live off milk&honey and everyone runs around naked. I had to learn most formulas(Black-Merton-Scholes, PD, EAD etc.) at uni and I always thought that all that stuff sounds great but it just doesn't make sense in real life.

One example are the probability of default matrix rating agencies run..they are based on markov chains. Now, markov chains say that the future events depend on today, not the past but the whole analysis they have running rely on what has happened in the past and past experiences. Makes no sense at all.

 

[Bi-honar]

The saga continues... 10 Billion to keep about 50,000 people (including support industries) afloat for less than 2 years. Do the math, it's $100,000 a year per person!!!

GM and Chrysler ask for up to C$10 billion aid from Canada

http://ca.news.yahoo.com/s/reuters/090221/n_top_news/cnews_us_autos_canada

 

[Farsi Zaban]

This is awesome.
[ame]http://www.youtube.com/watch?v=a-nLS6FJtSM[/ame]

 

[Fole_Penalt]

This is awesome.

Sure! It is an awesome display of what government by lobby in order to steal really means.

Mayor Virg argument from start to finish was exactly this:

Because Wall Street has made an obnoxious amount of money that seems unfair, then our team, i.e. the unions are justified in stealing money in broad daylight. We need to get some too: we steal and we are proud of it. Reminds me of reeza and his photoshop: we photoshop and lie and we are proud of it.

I agree with mayor Virg that the financial industry had been and continue to get unfair advantages from Washington. However, I like to stop that as well as the unfair advantages that UAW has been getting.

I do not want anyone to get any unfair advantage enforced by the government at the point of a gun. This is the meaning of freedom.

What is sorely missing is that all the efforts of political activists have been concentrated on lobbying the government to steal for a group that they feel is not stealing enough. Instead, all the effort must be concentrated on the hard work of identifying and eliminating all the unfair advantages that government provides to people in order to allow them usury money. For example, Mayor Virg never identifies a single concrete example of how the financial industry has been getting an unfair advantage. That is hard work. Getting all emotional on an even greater injustice in order to mask the obvious stealing that the UAW has been doing is the easy way out.

This is the real solution. Then everyone will prosper, immensely so.

 

[Farsi Zaban]

I really don't respect your opinion because I don't think you have the slightest clue how the government or unions work. If I asked you how you would quantify the influence of labor lobby groups you wouldn't even know where to look.

 

[Bi-honar]

Looks like DOW is going to dip below the 7,000 mark today and TSX below 7,500 today. Remember I had predicted both indices to hit 6,500 by the end of the 3rd quarter in 2009? Well, we're not even at the end of the 1st quarter and things are looking this grim.

 

[Kaz]

I really don't respect your opinion because I don't think you have the slightest clue how the government or unions work. If I asked you how you would quantify the influence of labor lobby groups you wouldn't even know where to look.

FZ jan, what does that have to do with what FP said?

 

[Farsi Zaban]

FZ jan, what does that have to do with what FP said?

It has a lot to do with it. Because there are individuals who dedicate their entire post graduate careers to analyzing the political influence of different groups and they usually reach completely different conclusions than what FP states. I respect their analyses a lot more than FP's unsubstantiated opinion. With all due respect of course.

 

[Soroush-IK]

Wrong thread.

 

[shahinc]

Is thr $70 per hour figure correct ??!!
This is more than what an engineer with master makes per avaergae !!!!!

 

[Bi-honar]

Is thr $70 per hour figure correct ??!!
This is more than what an engineer with master makes per avaergae !!!!!

Yup, I've heard even higher estimates of up to $85/hour for some workers. Of course this is out of touch with reality and that's the reason the big 3 are no longer competative and they do need to go back to the drawing board. The union can ask for whatever it wants, but the truth of the matter is that their pay level is way out of whack and saying that because wall street exec's are way out of whack, therfore we should ocntinue on this same path, is a retarded analogy. $70 USD/hour is roughly $180,000 CDN per year and that's more than the cost of 95% of level "F" engineers (highest level) to Canadian companies.