Tue 2010-03-09 18:13 EST

Gandhi's Seven Blunders - and then some

Donella Meadows

A few weeks before he was assassinated, Gandhi the Mahatma had a conversation with his grandson Arun. He handed Arun a talisman upon which were engraved "Seven Blunders," out of which, said Gandhi, grows the violence that plagues the world. The blunders were: Wealth without work. Pleasure without conscience. Knowledge without character. Commerce without morality. Science without humanity. Worship without sacrifice. Politics without principles. Gandhi called these disbalances "passive violence," which fuels the active violence of crime, rebellion, and war. He said, "We could work till doomsday to achieve peace and would get nowhere as long as we ignore passive violence in our world." To his grandfather's list of seven blunders Arun later added an eighth: Rights without responsibilities. Gandhi gave the list to Arun in 1947. Almost 50 years later the blunders have been institutionalized, built into our corporations, our governments, our very culture. Not only are we no longer embarrassed by them; we actively practice them. In some of them we even take pride...

blunders; Gandhi s.

Sun 2010-02-28 13:43 EST

"Sultans of Swap" by Gordon T Long, FSU Editorial 02/24/2010

...When asked why there are $605 Trillion derivatives outstanding (1) how do you articulate an answer to this horrendous and almost unimaginable number? The US is the largest economy in the world but tallies only 2.3% in comparison. Global bank reserves amount to only 1.2% of this accumulation. The gargantuan size appears to defy all logic...we discover the Sultans of Swap. The Bond Vigilantes are of a previous era. They are dead -- RIP. Through the magic mix of Credit Default Swaps, Dynamic Hedging and Interest Rate Swaps the Sultans of Swaps effectively control interest rate spreads. Through Regulatory Arbitrage they extort tremendous political sway globally. They live in the world of risk free spreads. Low interest rates simply attract more volume for their concoctions. We have had an explosion in Money Supply globally as the charts (right) indicate. The parabolic rise matches the increase in these derivative products along with their ability to turn Interest Rate Swaps into high powered bank lending...Everything is based on tax payers paying, GDP expanding and interest rates staying low...

FSU Editorial 02/24/2010; Gordon T Long; sultans; Swap.

Sun 2010-02-28 13:39 EST

America's Future: My Baseline Scenario | Ian Welsh

1) employment is not going to recover to pre-great recession levels for at least a generation, maybe more, in terms of % of people employed. The late Clinton economy is the best you or I will see in our working lives. 2) Politics will continue to be dominated by monied interests and that dominance will increase, rather than decrease. They will use their power to fight over the shrinking pie, rather than to increase it, and will make any real systemic restructuring of the economy essentially impossible. 3) a right wing ``populist'' will get in after Obama. Since the only sort of stimulus they can do is war stimulus, they will pick a war with someone. Who, I'm not sure. In economic terms they will have all the wrong solutions to various real problems... Americans will put off cutting the military, I think, till they've gutted virtually everything else. I expect the military will probably win the fight against financial interests when the moment comes, though we'll see...

America s future; Baseline Scenario; Ian Welsh.

THE PRAGMATIC CAPITALIST Sat 2010-02-27 23:06 EST

THE MANY MYTHS OF WARREN BUFFETT

TPC

Warren Buffett is the most glorified and respected investor of all time. And rightfully so. After all, he became the world's wealthiest man by essentially picking stocks. But Warren Buffett...formed one of the original hedge funds (The Buffett Partnership Ltd) and used his gains to one day purchase Berkshire Hathaway. His evolution into the value investor we now think of today has been long in the making. Make no mistake, Buffett is a hedge fund manager. Yes, he comes from the ilk of the oft vilified and awful hedge fund clan. Today, he hides behind the curtain of incorporation, but in many ways Buffett hasn't changed one bit since his Partnership days...

myth; pragmatic capitalists; Warren Buffett.

Wed 2010-02-24 08:49 EST

What the PBoC cannot do with its reserves

Michael Pettis

...Revaluing the RMB, in other words, is important and significant because it represents a shift of wealth largely from the PBoC, exporters, and Chinese residents who have stashed away a lot of wealth in a foreign bank, in favor of the rest of the country. Since much of this shift of wealth benefits households at the expense of the state and manufacturers, one of the automatic consequence of a revaluation will be an increase in household wealth and, with it, household consumption. This is why revaluation is part of the rebalancing strategy -- it shifts income to households and so increases household consumption. So a revaluation has important balance sheet impacts on entities within China, and to a much lesser extent, on some entities outside China. But since it merely represents a distribution of wealth within China should we care about the PBoC losses or can we ignore them? Unfortunately we cannot ignore them and might have to worry about the PBoC losses because, once again, of balance sheet impacts. The PBoC runs a mismatched balance sheet, and as a consequence every 10% revaluation in the RMB will cause the PBoC's net indebtedness to rise by about 7-8% of GDP. This ultimately becomes an increase in total government debt, and of course the more dollars the PBoC accumulates, the greater this loss. (Some readers will note that if government debt levels are already too high, an increase in government debt will sharply increase future government claims on household income, thus reducing the future rebalancing impact of a revaluation, and they are right, which indicates how complex and difficult rebalancing might be). In that sense it is not whether or not China as a whole loses or gains from a revaluation that can be measured by looking at the reserves, and I would argue that it gains, but how the losses are distributed and what further balance sheet impacts that might have.

PBoC cannot; reserves.

Asia Times Online Fri 2010-02-05 10:49 EST

Stiglitz pinpoints 'moral' core of crisis

Nobel Laureate economist Joseph Stiglitz rightly condemns the "ersatz capitalism" of the United States, yet the government there is fixated on resurrecting the morally depraved system that led to the present crisis. Reformists forget that predatory lenders in the US in theory forfeit any right of collection. Start to fix that, and a new economic order could emerge. - Henry CK Liu

Asia Times Online; core; Crisis; morale; Stiglitz pinpoints.

Jesse's Café Américain Wed 2010-02-03 20:13 EST

Italy Seizes Bank of America Assets In Derivatives Fraud Probe

Jesse

"more than 519 municipalities that face 990 million euros in derivatives losses"...Globalization is used as a rationale for stripping nations of their sovereign rights, and the people from their ability to rule and protect themselves in accord with their own beliefs and preferences...The US is a relative safe haven for multinational corporations that engage in various forms of fraud and market manipulation around the world, like modern day privateers. It appears unable to regulate them because of widespread political corruption and the self interest of its monied elite.

America assets; Derivatives Fraud Probe; Italy Seizes Bank; Jesse's Café Américain.

Joe Bageant Sun 2010-01-31 11:57 EST

Raising up dead horses

bageant

The national money shamans have danced around the carcass of our dead horse economy, chanted the recovery chant and burned fiat currency like Indian sage, enshrouding the carcass in the sacred smoke of burning cash. And indeed, they have managed to prop up the carcass to appear life-like from a distance, if you squint through the smoke just right.

dead horses; Joe Bageant; raised.

Jesse's Café Américain Mon 2010-01-18 09:56 EST

Franklin Roosevelt's First Inaugural Address: A Fitting Reminder For Our Crisis Today

Jesse

...I never read it in full, but like most people just remember the famous quote about fear. It's worth reading this. It shows a mindset in terrible, overwhelming times that was determined to set things right, not to take care of business, but to address the business of the people directly, and not only the immediate concerns of the crisis but the long term problems that caused the financial collapse in meaningful ways...

Crisis; fitting reminder; Franklin Roosevelt's; inaugural addresses; Jesse's Café Américain.

Wed 2010-01-13 12:10 EST

Lynne Huxtable and Jeffrey Agnew, v. Timothy F. Geithner, et al., >> Foreclosure Combatant

Lender's refusal to modify loan may have violated borrowers' Fifth Amendment rights to due process.

Foreclosure Combatant; Jeffrey Agnew; Lynne Huxtable; Timothy F. Geithner.

Calculated Risk Wed 2010-01-13 12:01 EST

HAMP Loan Modifications and the Fifth Amendment

CalculatedRisk

...The homedebtor enjoyed some initial success arguing a non-judicial foreclosure was a violation of due process...The homedebtors are named Huxtable and Agnew. Interestingly, Agnew is also listed as the "lead attorney" for the plaintiffs. The plaintiffs defaulted in late 2007, and the bank began a non-judicial foreclosure process in late 2008. The plaintiffs filed suit in federal court to stop the foreclosure, naming as defendants Timothy Geithner, the FHFA the lender and the servicer. The plaintiffs were allegedly denied a HAMP modification, and they claim the government and the bank violated the plaintiffs' right to "due process under the Fifth Amendment for failing to create rules implementing HAMP that comport with due process."...The judge refused to dismiss the case because the plaintiffs might be able to prove the government has "insinuated itself into a position of interdependence" with the bank.

amendment; Calculated Risk; HAMP Loan Modifications.

Tue 2010-01-12 23:32 EST

Dr. Edwin Vieira, Jr. on the Failure of the Public Sector, the Coming Military Crackdown and What Can Be Done to Stop It

...The foremost problem-because it is the source of, or contributes significantly to, almost every economic difficulty now plaguing this country-is the inherent and ineradicable instability of the present monetary and banking systems centered around the Federal Reserve System. The second problem derives from the first. It is the ever-accelerating development of a first-class para-militarized police-state apparatus centered around the United States Department of Homeland Security, with its tentacles reaching down into every police force throughout the States and localities. Fundamentally, this apparatus is not, and never was, designed to deal with international "terrorism". If that were its goal, its first task would be absolutely to secure the southern border of the United States, which it has never seriously attempted to do. Rather, it is being set up to deal with what the political-cum-financial Establishment anticipates (and I believe rightly so) will be massive social and political unrest bordering on chaos throughout America when the monetary and banking systems finally implode in the not-so-distant future-surely in hyperinflation, and probably in hyperinflation coupled with a gut-wrenching depression. Of these two problems, the second is actually the more dangerous...

Coming Military Crackdown; Dr. Edwin Vieira; failure; Jr; public sector; stop.

Culture of Life News Mon 2010-01-04 16:52 EST

The Horrors Of The Carbon Trade Derivatives Beast

Elaine Supkis

There are many ways of fixing things. Using the right tools is important. The international bankers have chosen a very nasty tool for fixing both global warming and dealing with the Hubbert Oil Peak: wild derivative futures markets modeled on the goofy OTC --CDS market! The thing that just destroyed international banking. We mustn't forget that the reason we had a banking meltdown was due to the sudden climb in energy prices beginning with the invasion of Iraq.

Carbon Trade Derivatives Beast; Culture; horror; Life News.

Calculated Risk Sun 2010-01-03 23:50 EST

Putting the MERS Controversies in Perspective

CalculatedRisk

A great deal has been written in the last year or so about cases in which a court has denied a lender the right to foreclose on a mortgaged house. Lately many of the decisions have involved MERS, an acronym for the nationwide Mortgage Electronic Registration Systems, Inc. This post focuses on two August decisions in which the courts decided MERS should be able to foreclose, despite vigorous legal efforts by the homeowners.

Calculated Risk; MERS Controversies; perspective; putting.

zero hedge Sun 2010-01-03 23:46 EST

This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied

...A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets."...In essence, the entire US capital market is now a hedge fund, where even presumably the safest investment tranche can be locked out from within your control when the ubiquitous "extraordinary circumstances" arise.

denied; government; legal right; Money-market accounts; redeemed; Zero Hedge.

naked capitalism Tue 2009-12-29 09:03 EST

Guest Post: Investor Psychology ... Fear Turns People Into Sheep

George Washington

Investors are basically rational, right? In fact, as many studies have demonstrated, the answer is no...Rather than search rationally for information that either confirms or disconfirms a particular belief, people actually seek out information that confirms what they already believe. For the most part people completely ignore contrary information...

Fear Turns People; Guest Post; Investor psychology; naked capitalism; sheep.