American capitalism has evolved into a situation where there is no accountability. Who has really has been held accountable for this crisis? Even with Lehman Brothers those who crashed the company haven't had to disgorge any past profits.
Look, Larry Summers pushes hard for de-regulation. He gets a very influential job with the Obama Administration. Goldman Sachs makes huge bets in OTC market with AIG and loses but gets $93 billion from gov't to cover their losses. AIG makes all kinds of bets its ass can't cash and it gets bailed out. The list is endless.
But, we suffer the consequences. We lose our homes, jobs and shirts.
Now, the House Financial Services has already passed a watered down version of this Act last week. The House Agriculture Committee's took its turn yesterday and passed an even weaker version. Overall, the problem has been there are exemptions everywhere. This potential exemption will kill this bill:
The Agriculture Committee's bill, shepherded by Chairman Collin Peterson (D-Minn.), does increase oversight of these previously mysterious and exotic financial instruments, experts say. Many derivatives trades would now have to go through clearinghouses or an exchange. But there are exemptions. In an effort to protect companies like airlines and manufacturers that use derivatives to hedge against things like price fluctuations and currency exchange rates, these so-called end-users would not be required to make public the terms of their contracts. Rather, they would continue to operate in the dark.
But Peterson on Wednesday amended the bill to extend the exemption to big banks and financial institutions, as long as their contracts were with these end-users.
So, if a financial conglomerate is on the other side of a transaction, it is exempt from any disclosure or other requirements. What is the point of the Bill?
Financial conglomerates dominate the OTC market they have their finger prints on probably almost every derivatives contract in OTC.
equate capitalism with democracy. Capitalism can destroy democracy as we are seeing with the astroturfing, 5 lobbyists to 1 congressperson, and massive misinformation campaigns by U.S. Chamber of Commerce.
What is sorely needed Countervailing Power - Capitalism needs this.
Lordy, I am no fan of macroecon but I've got to say, you've laid this out in a way that is easy to understand and for that i cannot thank you enough.
So many of us out here are wandering around with our heads up our butts, confused to death about the whole shebang of money and how it makes the world go round.
We know it's important and that much hangs in the balance; just don't understand the intricacies.
You've made it not only understandable but imminently more frightening as well. For that I'd like to both thank and slap you! :-)
Please keep up the great work! I've added you to my rss reader and will be looking forward to additional posts!
Cheers,
Steven
high unemployment. What amazes me is the GOP brand is for shit but yet Blue Dog Dems and New Democrats Caucus want that conservative label. Oh, wait, its the corporate money they want from GOP.
Progressive economic policies work - Democrats shouldn't be afraid of them. Implement a little counter-cyclical fiscal policies when economy gets better and bam - Democratic sweep again. But no, they would rather have the corporate money then the support of their constituents.
At the top of the executive branch and the Fed are two individuals who despised regulations. Although Bush probably didn't understand why he opposed them - he just did. Those two individuals hire/appointment people in their likeness. Like at the FDIC, SEC, the Fed, OTC - there is pattern of total disregard for regulations. It was systemic.
Second, these dark pools like OTC derivatives there is stuff to hide and that is the huge margins these financial conglomerates are getting on these transactions. That is why they want to keep these things in the dark.
What would happen if we forgave debts passed the 7 year limit suggested in the Bible? And what would happen if we did not allow banks to charge too much excess and what would happen if Americans only bought USA products?
NO ONE. Moody's should be brought up on RICO charges. Geithner and Summers shouldn't have jobs right now. Greenspan goes on the lecture circuit and still gets millions. Too big to fail gets even bigger.
That was my reaction to the episode. The Chairwoman of CFTC finds fraud in the system, tries to bring it under control by rule making, and you have three very senior officials actively engaged in obstruction. If an allegedly independent regulator (Greenspan) colludes with White House and Treasury in trying to silence another regulator, what are we to make of it? Rubin has "13 bankers" in his office and he is doing their bidding by intimidating a public official over the phone?
And Phil Gramm? Frontline should do a sequel and look at the role of Gramm in this revolving door sleaze.
Willie Sutton had it right. He was just on the wrong side of the counter.
Frank T.
The World is dividing into two blocs - the Plutonomy and the rest. The U.S.,UK, and Canada are the key Plutonomies - economies powered by the wealthy. Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.
we hear so often about “the consumer”. But when we examine the data, there is no such thing as “the consumer”
....in the U.S. or UK, or other plutonomy countries.There are rich consumers, and there are the rest. The rich are getting richer, we have contended, and they dominate consumption.As the rich have been getting richer, so too stocks associated with the rich, have performed exceptionally well. Our Plutonomy Basket, generated returns of 17.8% perannum, on average, from 1985. If Plutonomy continues, which we think it will, if income inequality is allowed to persist and widen, the plutonomy basket should continue to do very well.
The issue may be more one of quality as Rebel Capitalist says, rather than absolute value. Hussman's evaluation is far more sophisticated than anything I can do, but based on the actual numbers it would seem no so severe. Annualized "operating earnings" at the end of q2 were $55.24 for a 20x multiple based on current pricing and using the projected numbers for q3, the annualized multiple is 18x. Not hugely overinflated by market standards. But the quality of those earnings is key. Corporations got there by slashing staff, closing plants and outsourcing jobs. In other words, just generally decimating the labor force. So revenue growth will come from where? PCE was up in the third quarter and credit was down. That creates an enormous squeeze on what's left of savings (which were way down in August) and is followed by epic fail in the economy. People need jobs in order for the economy to grow and corporations to earn profits, unless most of those earnings come from overseas sales and currency gains.
And then there is the issue of writedowns. Operating earnings are bogus for a lot of reasons, and reported earnings (which include writedowns) are more reflective of a company's health. But therein lies an interesting story.
Writedowns in the first quarter, with the economy contracting at a 6% rate, were $2.60 a share, or roughly equivalent to the writedowns taken in the fourth quarter of 2005, when the economy was running "full blast". Nothing wrong there!!!
When the results from the second quarter were initially aggregated by the S&P, with the economy contracting at close to 1%, writedowns were $.02/share. You need to go a long way back in the historical record to find that kind of a trivial difference.
Somebody must have let the CEOs know that they were all swimming with their shorts down. Since then the difference has ballooned up to $.30/share due to "adjustments". Between you and me a $.28/share adjustment to the aggregated S&P500 earnings is not a trivial change. It would seem that the Federal Government is not the only organization that adjusts its numbers for initial reporting purposes.
The real question is how long the pretense can be maintained or, as a corollary, how long is the collective memory of the Big 4 accounting firms? (anyone remember Arthur Anderson?) [FYI, Writedowns in the fourth quarter of 2002, a full year after the end of the 2001 recession, but just 6 months after AA went down in flames were much, much larger than in 2001.] The shysters can keep this going for a long time if their accountants have short memories. I suspect there will be some reckoning in the fourth quarter, but nowhere near as much as it should be. That will push "as reported" P/E into the upper 20s; definitely bubble territory, but nowhere near the upper 40s seen at the height of the tech bubble. But given that the consumer is gone and jobs are gone, the whole thing could unravel in 2010.
I just had to take this opportunity to spew forth on Rogoff, but please consider, if he has at least equal access to the same information I do -- and as I've seen the undergrad library at Harvard University and imagine he probably has much better access to data given his position and placement -- and he has arrived at the "learned" conclusion that the financial crisis is over --- while many of the rest of us consider that it has just begun --- then what scholarly accuracy and historicity do you really consider his writings to possess?
Off to Chicago for the union protest against that American Bankers Association meeting there -- hope not to encounter any trouble from the Chicago PD, but if it's combat they want, they'll find a number of combat vets there, from across several generations, at least.
I certainly don't agree with Rogoff on everything (probably very little) but he and a colleague did publish an interesting paper about history of past economic crises caused by financial sector.
My acerbic reply isn't, of course, directed at you, RebelCapitalist, but your mention of Rogoff does provide my opening.
I happened to turn on NPR the other night and Rogoff was on, laying forth on his recent econ history text and prosyletizing on the recovery and the end of the recession!
He sounded amazingly ignorant and stupid, but then, Rogoff is a member of the Group of Thirty (same as Summers, etc.) and the Bretton Woods Committee (whose influence greatly watered down the "Buy American" clause in the stimulus which appears to be going more towards the multinationals then American workers) and the Peterson Institute (whose long-term agenda is the offshoring of as many American jobs as possible, the privatizing of Social Security and proclaiming anything and everything which might aid the American worker - such as the auto industry aid - to be against the WTO's Financial Services Agreement - whil dutifully ignoring that all those bankster bailouts were directly against the WTO's Financial Services Agreement).
You are logically seeking answers to stats which have been purposefully obfuscated. Employers only above a certain size have to report actual unemployment numbers or laid off workers, and many times will ignore layoffs at subsidiaries as they can frequently get away with listing them as a unique, small business entities.
Likewise, sometimes they will count their foreign (as in offshore) job site employees, sometimes not. (They may also include them in their productivity stats, while not including them in their actual worker count.) The most difficult stat to arrive at is actual number of the unemployed for these reasons and numerous others. Just arriving at the number of offshored jobs is impossible from straight data, as it is considered "voluntary" information when sought by the GAO and Congress, and the last request in the early part of this century '00 or '01, yielded only a 1% response (I repeat ONLY 1% response) from corporations inquired of on this topic. From that, various stink tanks made erroneous extrapolations which were obviously statistically incorrect and invalid.
The crucial items are the BLS study, reported here and in the NY Times some weeks back, which indicated that there had been effectively zero job creation in the Private Sector from July 1999 to July 2009, extraordinarily indicative of having reached critical mass in the offshoring of American jobs (as in, there's hardly any offshorable jobs left - thus bringing the unemployment jobs loss multiplier into effect) -- as well as 9 consecutive months of rising unemployment in the 372 American cities surveyd by the BLS -- as well as 9 consecutive months of downward trending in payroll hours of the employed.
It is similar to that phony process they use to "record" exports, counting everything shipped to any offshore factory or production site as an export, even though it isn't receiving any payment in return, but will go into that creation process, thus artificially (and fraudulently) driving up the number of exports astronomically, when in fact they are actually quite paltry.
This is not like a typical recession. This recession was caused by a financial crisis. History, according to Prof. Ken Rogoff, tells us that recessions caused by financial crisis are deep and nasty. Does this mean our Great Recession will be any different? I don't know and neither does New Deal Democrat (despite the well researched and reasoned analysis).
American capitalism has evolved into a situation where there is no accountability. Who has really has been held accountable for this crisis? Even with Lehman Brothers those who crashed the company haven't had to disgorge any past profits.
Look, Larry Summers pushes hard for de-regulation. He gets a very influential job with the Obama Administration. Goldman Sachs makes huge bets in OTC market with AIG and loses but gets $93 billion from gov't to cover their losses. AIG makes all kinds of bets its ass can't cash and it gets bailed out. The list is endless.
But, we suffer the consequences. We lose our homes, jobs and shirts.
RebelCapitalist.com - Financial Information for the Rest of Us.
This time it is the Over the Counter Derivatives Markets Act of 2009.
Now, the House Financial Services has already passed a watered down version of this Act last week. The House Agriculture Committee's took its turn yesterday and passed an even weaker version. Overall, the problem has been there are exemptions everywhere. This potential exemption will kill this bill:
So, if a financial conglomerate is on the other side of a transaction, it is exempt from any disclosure or other requirements. What is the point of the Bill?
Financial conglomerates dominate the OTC market they have their finger prints on probably almost every derivatives contract in OTC.
RebelCapitalist.com - Financial Information for the Rest of Us.
equate capitalism with democracy. Capitalism can destroy democracy as we are seeing with the astroturfing, 5 lobbyists to 1 congressperson, and massive misinformation campaigns by U.S. Chamber of Commerce.
What is sorely needed Countervailing Power - Capitalism needs this.
RebelCapitalist.com - Financial Information for the Rest of Us.
Lordy, I am no fan of macroecon but I've got to say, you've laid this out in a way that is easy to understand and for that i cannot thank you enough.
So many of us out here are wandering around with our heads up our butts, confused to death about the whole shebang of money and how it makes the world go round.
We know it's important and that much hangs in the balance; just don't understand the intricacies.
You've made it not only understandable but imminently more frightening as well. For that I'd like to both thank and slap you! :-)
Please keep up the great work! I've added you to my rss reader and will be looking forward to additional posts!
Cheers,
Steven
high unemployment. What amazes me is the GOP brand is for shit but yet Blue Dog Dems and New Democrats Caucus want that conservative label. Oh, wait, its the corporate money they want from GOP.
Progressive economic policies work - Democrats shouldn't be afraid of them. Implement a little counter-cyclical fiscal policies when economy gets better and bam - Democratic sweep again. But no, they would rather have the corporate money then the support of their constituents.
RebelCapitalist.com - Financial Information for the Rest of Us.
I need this type of respite from the madness surrounding our economy.
RebelCapitalist.com - Financial Information for the Rest of Us.
At the top of the executive branch and the Fed are two individuals who despised regulations. Although Bush probably didn't understand why he opposed them - he just did. Those two individuals hire/appointment people in their likeness. Like at the FDIC, SEC, the Fed, OTC - there is pattern of total disregard for regulations. It was systemic.
Second, these dark pools like OTC derivatives there is stuff to hide and that is the huge margins these financial conglomerates are getting on these transactions. That is why they want to keep these things in the dark.
RebelCapitalist.com - Financial Information for the Rest of Us.
What would happen if we forgave debts passed the 7 year limit suggested in the Bible? And what would happen if we did not allow banks to charge too much excess and what would happen if Americans only bought USA products?
Is this too morale for America?
I trying to find the Rep. Melissa Bean's amendment but it sounds like it may have been modified and banks are not happy.
RebelCapitalist.com - Financial Information for the Rest of Us.
NO ONE. Moody's should be brought up on RICO charges. Geithner and Summers shouldn't have jobs right now. Greenspan goes on the lecture circuit and still gets millions. Too big to fail gets even bigger.
Where the f*ck is the accountability?
RebelCapitalist.com - Financial Information for the Rest of Us.
That was my reaction to the episode. The Chairwoman of CFTC finds fraud in the system, tries to bring it under control by rule making, and you have three very senior officials actively engaged in obstruction. If an allegedly independent regulator (Greenspan) colludes with White House and Treasury in trying to silence another regulator, what are we to make of it? Rubin has "13 bankers" in his office and he is doing their bidding by intimidating a public official over the phone?
And Phil Gramm? Frontline should do a sequel and look at the role of Gramm in this revolving door sleaze.
Willie Sutton had it right. He was just on the wrong side of the counter.
Frank T.
a deep indifference. Let them get theirs and forget the rest of the country. Checkout some quotes from this Citigroup Newsletter featured in Michael Moore's movie on capitalism:
Here is Part 2 of this Citi report.
RebelCapitalist.com - Financial Information for the Rest of Us.
census, bls ... how about a URL?
As a matter of accountability - Larry Summers and Tim Geithner either should resign or be fired.
Are we the only country in the world where you have a direct role in a major crisis but are rewarded with a new and even more influential job?
RebelCapitalist.com - Financial Information for the Rest of Us.
The issue may be more one of quality as Rebel Capitalist says, rather than absolute value. Hussman's evaluation is far more sophisticated than anything I can do, but based on the actual numbers it would seem no so severe. Annualized "operating earnings" at the end of q2 were $55.24 for a 20x multiple based on current pricing and using the projected numbers for q3, the annualized multiple is 18x. Not hugely overinflated by market standards. But the quality of those earnings is key. Corporations got there by slashing staff, closing plants and outsourcing jobs. In other words, just generally decimating the labor force. So revenue growth will come from where? PCE was up in the third quarter and credit was down. That creates an enormous squeeze on what's left of savings (which were way down in August) and is followed by epic fail in the economy. People need jobs in order for the economy to grow and corporations to earn profits, unless most of those earnings come from overseas sales and currency gains.
And then there is the issue of writedowns. Operating earnings are bogus for a lot of reasons, and reported earnings (which include writedowns) are more reflective of a company's health. But therein lies an interesting story.
Writedowns in the first quarter, with the economy contracting at a 6% rate, were $2.60 a share, or roughly equivalent to the writedowns taken in the fourth quarter of 2005, when the economy was running "full blast". Nothing wrong there!!!
When the results from the second quarter were initially aggregated by the S&P, with the economy contracting at close to 1%, writedowns were $.02/share. You need to go a long way back in the historical record to find that kind of a trivial difference.
Somebody must have let the CEOs know that they were all swimming with their shorts down. Since then the difference has ballooned up to $.30/share due to "adjustments". Between you and me a $.28/share adjustment to the aggregated S&P500 earnings is not a trivial change. It would seem that the Federal Government is not the only organization that adjusts its numbers for initial reporting purposes.
The real question is how long the pretense can be maintained or, as a corollary, how long is the collective memory of the Big 4 accounting firms? (anyone remember Arthur Anderson?) [FYI, Writedowns in the fourth quarter of 2002, a full year after the end of the 2001 recession, but just 6 months after AA went down in flames were much, much larger than in 2001.] The shysters can keep this going for a long time if their accountants have short memories. I suspect there will be some reckoning in the fourth quarter, but nowhere near as much as it should be. That will push "as reported" P/E into the upper 20s; definitely bubble territory, but nowhere near the upper 40s seen at the height of the tech bubble. But given that the consumer is gone and jobs are gone, the whole thing could unravel in 2010.
Sorry for the long comment.
I just had to take this opportunity to spew forth on Rogoff, but please consider, if he has at least equal access to the same information I do -- and as I've seen the undergrad library at Harvard University and imagine he probably has much better access to data given his position and placement -- and he has arrived at the "learned" conclusion that the financial crisis is over --- while many of the rest of us consider that it has just begun --- then what scholarly accuracy and historicity do you really consider his writings to possess?
Off to Chicago for the union protest against that American Bankers Association meeting there -- hope not to encounter any trouble from the Chicago PD, but if it's combat they want, they'll find a number of combat vets there, from across several generations, at least.
I certainly don't agree with Rogoff on everything (probably very little) but he and a colleague did publish an interesting paper about history of past economic crises caused by financial sector.
RebelCapitalist.com - Financial Information for the Rest of Us.
My acerbic reply isn't, of course, directed at you, RebelCapitalist, but your mention of Rogoff does provide my opening.
I happened to turn on NPR the other night and Rogoff was on, laying forth on his recent econ history text and prosyletizing on the recovery and the end of the recession!
He sounded amazingly ignorant and stupid, but then, Rogoff is a member of the Group of Thirty (same as Summers, etc.) and the Bretton Woods Committee (whose influence greatly watered down the "Buy American" clause in the stimulus which appears to be going more towards the multinationals then American workers) and the Peterson Institute (whose long-term agenda is the offshoring of as many American jobs as possible, the privatizing of Social Security and proclaiming anything and everything which might aid the American worker - such as the auto industry aid - to be against the WTO's Financial Services Agreement - whil dutifully ignoring that all those bankster bailouts were directly against the WTO's Financial Services Agreement).
You are logically seeking answers to stats which have been purposefully obfuscated. Employers only above a certain size have to report actual unemployment numbers or laid off workers, and many times will ignore layoffs at subsidiaries as they can frequently get away with listing them as a unique, small business entities.
Likewise, sometimes they will count their foreign (as in offshore) job site employees, sometimes not. (They may also include them in their productivity stats, while not including them in their actual worker count.) The most difficult stat to arrive at is actual number of the unemployed for these reasons and numerous others. Just arriving at the number of offshored jobs is impossible from straight data, as it is considered "voluntary" information when sought by the GAO and Congress, and the last request in the early part of this century '00 or '01, yielded only a 1% response (I repeat ONLY 1% response) from corporations inquired of on this topic. From that, various stink tanks made erroneous extrapolations which were obviously statistically incorrect and invalid.
The crucial items are the BLS study, reported here and in the NY Times some weeks back, which indicated that there had been effectively zero job creation in the Private Sector from July 1999 to July 2009, extraordinarily indicative of having reached critical mass in the offshoring of American jobs (as in, there's hardly any offshorable jobs left - thus bringing the unemployment jobs loss multiplier into effect) -- as well as 9 consecutive months of rising unemployment in the 372 American cities surveyd by the BLS -- as well as 9 consecutive months of downward trending in payroll hours of the employed.
It is similar to that phony process they use to "record" exports, counting everything shipped to any offshore factory or production site as an export, even though it isn't receiving any payment in return, but will go into that creation process, thus artificially (and fraudulently) driving up the number of exports astronomically, when in fact they are actually quite paltry.
This is not like a typical recession. This recession was caused by a financial crisis. History, according to Prof. Ken Rogoff, tells us that recessions caused by financial crisis are deep and nasty. Does this mean our Great Recession will be any different? I don't know and neither does New Deal Democrat (despite the well researched and reasoned analysis).
RebelCapitalist.com - Financial Information for the Rest of Us.
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