Dealbreaker

Entry: Do Credit Default Swaps On Treasuries Mean Anything?

posted by cy

Feb 20, 2009 1:15PM

Is there not a healthy treasury CDS market in which ratings agency downgrades trigger payment?

Entry: Return Of The Beard: Frank Versus The Beard

posted by cy

Feb 25, 2009 10:53AM

5-

Ron Paul simply wants a currency that cannot be printed out of thin air at the whim of our government or bankers.

Think about it, which would you rather use for a means of exchange (because that's all money really is)...

Something that's difficult to create more of, or something that can be created at will, esentially stealing from the current holders?

Entry: Return Of The Beard: Frank Versus The Beard

posted by cy

Feb 25, 2009 11:12AM

20-

It took me awhile to figure it out the whole gold thing, so hopefully I can help someone today...

When I first heard people talk about using gold as money I thought it was anachronistic and ridiculous. I mean, gold has basically zero real world value, beyond jewlery and some industrial uses, so why should we bother? I think Buffet said something along the lines of, "if aliens came down and saw us digging up gold from the mountains just to bury it in a vault somewhere, they'd think us irrational beings." OK, so on the surface it doesn't make much sense, but you have to consider the HUGE advantage it has to paper money... It cannot be created at will.

We are, right now, seeing the effects of a government printing too much money. They may do it under the auspices of "creating credit," but all they're actually doing is printing money that doesn't correspond to any actual real resources. When you have too much money chasing too few resouces, only one of two things can happen. We can either see general price inflation (which we've sort of seen) or ridiculous asset bubbles (of which we've just seen a few tremedous examples).

When you take away the ability of the government to create more money on a whim, you cannot have the massive misallocations like we've recently seen. So while it sounds completely crazy to use a commodity money, it would prevent the sort of disaster we're living through now.

Entry: Return Of The Beard: Frank Versus The Beard

posted by cy

Feb 25, 2009 11:38AM

36-

I somewhat agree with you. If we had a stable amount of dollars in the world, and the gov't was not able to create any more, a dollar system could theoretically work. Unfortunately, the temptation to print, spend, and inflate is way too strong for politicians to resist. And I'm not just pinning this on Obama (although his recent actions have been incredibly egregious.) Imagine if Bush had to drastically raise taxes in order to invade Iraq. Do you think we would have stood for that? And even if the population was whipped up into some sort of post-9/11 fervor and we opened our checkbooks, do you think they'd still be open 2,3, or 5 years later? Our government was originally set up so it could be "run by crooks." this meant an ironclad system of check and balances and no authorization for any one individual to spend money on anything. We're now at a point where someone like hank paulson has the audacity to write a bill saying he should personally be able to spend $350 billion with zero oversight or accountability whatsoever. Out of fucking control. So, maybe in theory we could just find honest people to run the government, but all history (and not just US history, but world history) suggests that we will never see those people in washington.

35-

I think you're missing the whole point. The point is that NO ONE will be in charge of the money supply. No one will have the ability to expand or contract. Interest rates will be set by market forces, so that savers and investors are properly matched. When you try to hand over the keys to the money supply to an individual or a small group, they're always going to fuck it up.

Entry: Return Of The Beard: Frank Versus The Beard

posted by cy

Feb 25, 2009 11:41AM

Sorry, Hank P wanted to spend $700 billion with no accountability.

Entry: Return Of The Beard: Frank Versus The Beard

posted by cy

Feb 25, 2009 12:26PM

45-

Exactly.

51-

It looks like you need more help than I can reasonably expect to provide, but I'll give it a quick shot...

So if I understand you correctly, when the market sets a price, that price is acutally decided upon by an individual or a very small group? Does it not trouble you that ALL economic theory and evidence suggests exactly the opposite conclusion? When you buy groceries, who sets the price of apples? I can guarentee you that there is no one person or group who sets that price. The price is simply a function of supply (how many apples have been grown) and demand (how badly do people want appples, what are they willing to part with in order to get them). I can't imagine that you'd dispute that.

So let's turn to oil. Again, I think it's clear that oil recently experienced an asset bubble along with a bunch of other commodities. Where were all those new dollars coming from to drive the price of oil? Irresponsible central bank printing. It's a lot harder for the free market to correctly price commodities when the substance they use to price (dollars) is being tampered with so furiously.

Since the creation of the Fed, we've continually had systematic credit/asset booms followed by contraction/liquidation busts. How is the fed making things any better? Since its inception, the dollar has lost 98% of its real purchasing power. Why should this be? If you went to your broker's office, and asked how things were going, and he said, "great...we're only down 98%," would you be happy about that? My guess is that you'd be fucking furious. The fed does exactly the same thing. Why should we allow ourselves to be continuously stolen from? The fed is the agent of that theft. It's gotta go.

Entry: Return Of The Beard: Frank Versus The Beard

posted by cy

Feb 25, 2009 2:10PM

67-

I'm glad you agree the the dollar has depreciated tremendously. I also realize that most people don't live to be 95, but why should we devalue the currency at all? As a society, we are consistently becoming more and more productive. This means that we can produce more things with less resources. Prices should be DROPPING. 56 points this out in his post. For 100 years, we had a period where the dollar was actually getting stronger as time went by, as it should. This is how we should all be enjoying the fruits of an expanding economomy. Unfortunately, our central banks steals these gains for us, telling us that they're not, because prices are stable. Well, prices SHOULD be lower, so the difference is what the fed has stolen.

I can't find the continuity in the rest of your post. You propose a hypotheical situation as a basis for redistributive taxes, and then extend this hypotheical to the real life oil market. What does this have to do with inflation? Are you saying the gov't should be stealing from us via inflation to redistribute to everyone else? Do you really think that is the most fair/transparent solution?

Re: oil. I've heard this "speculators caused the oil bubble" arguement before, but I'm still waiting for someone to provide some actual evidence of this. If these hedge funds and institutions colluded and drove up the price, which institutions and which hedge funds? If they actually did this, why aren't the doing it again right. Why aren't they constantly doing it? If this conspiracy really exists, how come NO ONE has come forward to give an insiders account? Is the secret really guarded that well?

Look, man, I don't know what your personal situation is, but if you have a positive net-worth, how on earth can you go along with a program that systematically steals from you? If you have a zero or negative net-worth (not an indictment, you may be young) you probably would like some worth in the future or you have family members with money. How is it morally acceptable to say to the older people in our society, who have spent their lifetime working and saving, "sorry, but we're steathily looting all you've worked to build up to finance our current wasteful spending." (whether that wasteful spending comes via "stimulus" spending or war spending makes no difference).

If you're comfortable with this type of system, and prefer that to a system where an individual's property cannot be stolen from him, and you like the way our government has been headed from 2000 till today (Bush and Obama are both doing the same thing: spending money we don't have on things we don't need) then I guess we can agree to disagree. If any of this, however, sounds remotely like a better way of doing things, I can direct you to some resources that make the case far better than I.

Entry: Return Of The Beard: Frank Versus The Beard

posted by cy

Feb 25, 2009 9:43PM

ATTENTION 72:

Admitting that there were inflationary boom & busts before 1914 does not make a compelling case for the Fed, considering the cycles now are just as frequent and even more dramatic. I agree that people found ways around old hard money policies, but, if anything, that simply means fractional-reserve banking should be outlawed, or we should have a system of "free-banking" where everyone realizes that a bank is to go bust the government will absolutely not step in to help it out. In that system, competition would force banks not to overextend themselves or else they'll face specie withdrawals and eventually a bank run. Previous examples of inflationary bubbles and contractions (often provided by gov't guaranteed loans) do not make it obvious that we should continue to do the same exact thing.

"Would you rather go back to the good ol' gold days of ultra-slow or negative growth and miserable living standards?"

Are you fucking kidding me? Are you going to sit here and tell us that living standards were pretty much the same in 1800 as they were in 1900? Would you characterize the century that produced the telegraph, the telephone, the phonograph, railroads, chemical photography, thomas edison's lightbulb, radio, and the automobile (Karl Benz's patent 1879; the mass production of Oldsmobiles starting in 1902, Ford 1914) as a time of ultra-slow or negative economic growth? Bad news: the engine of free-markets and technology was driving us forward just as quickly before soft-money got involved. Are living standards better now than they were in 1914? Obviously, but there's no evidence that soft-money had anything to do with that. Capital will still flow towards good ideas in a hard-money system.

Finally, you (or other soft-money types) have to clear something up for me. If I go to a bank to borrow in order to start a business, I'm not borrowing "money", so much as I'm borrowing a claim on real resources. If a bank can simply lend me money that's been created out of thin air (whether via central bank printing or fractional reserve), I'm not getting the claim on real resources that I thought I was, am I? How could this system of fooling borrowers possibly be "a pretty nifty way to allocate capital and create value?" The inflationary banker is LYING TO ME about the state of actual resources. Is it not obvious that this will have to end in tears?

Finally, despite all we know about the failures of top-down, command style economics, why would we think that a couple guys sitting around a conference room would be better at setting interest rates than a market process? Are "experts" better than markets in setting any other price? (In case you have to think about that, the answer is no.) How can twenty or so like-minded, middle-aged men possibly have more information about the economy than the aggregated transactions of millions of borrowers and lenders?

Entry: Currency Singularity

posted by cy

Feb 26, 2009 12:29PM

AB, #8-

I can't tell if you're being serious or not...

If you are, take a moment to think about who obviously loses in that scenario... consumers.

If you say, well you can either buy a malibu for 20k or a camry for 20k, I think the people have overwhelmingly chose the camry. If you say, well you can buy that camry, but you have to pay an extra 4k in tariff, you are taking that 4 grand from the consumer to subsidize the malibu. This is obviously harmful to the consumer, but that's not all. The 4k that comes out of the consumer's pocket would have been spent on something else, so you've destroyed jobs somewhere (wherever that 4k would have been spent). So while you may be protecting the worker that produces the malibu, you're doing it at the expense of another worker somewhere else. Since it's not obviously clear who that worker is, it makes it very tempting for politicians to save those that are highly visible. However, again, there have been no net jobs saved, and, in fact, probably some jobs destroyed, because we're not allocating our scarce resources as efficiently as we possibly can.

Entry: Currency Singularity

posted by cy

Feb 26, 2009 12:51PM

You think?

Entry: Currency Singularity

posted by cy

Feb 26, 2009 1:19PM

22-

Uhhhhh, why should consumers be forced to hand over money to domestic car producers at all? If this were wise, why shouldn't we just let car companies roam the streets with guns and demand money from whomever they encounter? What you're proposing is exactly the same thing: taking money from one group and giving it to another by force (pay these taxes or go to jail.)

The ONLY moral solution that will actually increase efficiency is bankruptcy.

Entry: Markets Bomb At The Open

posted by cy

Feb 27, 2009 11:51AM

Gang,

This is a little silly to argue over who the "real" big spenders are. If we pull our heads out of our "I'm a democrat, so republicans are the bad guys (or vice versa)" asses, we'd come to realize that WHOEVER comes to power will spend as freely as they can get away with. This is why we have (had?) a constitution in the first place. BOTH REPUBLICANS and DEMOCRATS are completely at fault. Who's really at fault, however, is ALL OF US for letting ourselves be so easily fooled into following a "two party" system when both parties deliver the same exact thing. Washington (probably unknowingly, they're not smart enough for this) has effectively implemented a "divide and conquer" strategy against the population. While the two parties sit around and argue about absolutely immaterial issues like whether you should be able to say "fuck" on TV or whether gay people should be allowed to marry or not, we're having the wool pulled over our eyes as our freedoms are continously eroded and our resources are systematically confiscated. DEMOCRATS are not the answer, and REPUBLICANS are not the answer. The answer is legally enforced limited government that emphasizes peace and individual freedom above all else.

Entry: Markets Bomb At The Open

posted by cy

Feb 27, 2009 1:09PM

76,79-

Yeah, the government will never actively seek to reduce its size or influence. The policiticans who do believe in limited government get marginalized and dismissed by both parties, because limited government can't satisfy the parties' power appetites. I'm not in the prediction business, but I think we'd have to be looking at a major, major political upheaval in order for anything to really change. Even if, against the odds, a guy like Ron Paul gets elected, he's still going to have to deal with congress, who are going to fight tooth and nail for their special interests. We either need a complete pyscological revolution in this country (which seems highly unlikely), or the next great liberal democracy will have to be formed outside the framework of the united states in its current form.

Entry: Make Tim Geithner An Offer

posted by cy

Mar 10, 2009 2:35PM

Has to sell causes his ARM is about to reset.

Entry: Alan Greenspan: Wasn't Me

posted by cy

Mar 11, 2009 1:08PM

10-

Yeah. Unbelievable. "That" is how he would like to remember the fed? I wonder if Friedman would give the fed the same high marks were he to see what has taken place now.

Greenie-

You still have yet to explain, given all you know/believe about markets setting prices vs. central planners setting prices why a group of 20 or so old men would be better at setting interest rates than a market process. Also, you still have yet to acknowledge that when you artificially depress interest rates, you are going to cause an undersupply of savers and an oversupply of borrowers. THIS is what creates unsustainable investment booms. Not "fraud."

Here is an interesting quote from the article, "If we are to retain a dynamic world economy capable of producing prosperity and future sustainable growth, we cannot rely on governments to intermediate saving and investment flows." NO FUCKING SHIT?! So then why do we have a Federal Reserve that tries to do exactly that??

Entry: Opening Bell: 03.13.09

posted by cy

Mar 13, 2009 9:03AM

Stewart made Cramer his bottom bitch.

Unfortunately, Stewart's thesis was that Wall Street and short term traders systematically loot the long-term "401k investors" and that there is a conspiracy between CNBC and these short-term traders. This is obviously nonsense, and it does us all a disservice by getting the we-need-to-tax-short-term-transactions camp all whipped up into a froth.

Otherwise, props to Cramer for taking his beat down like a man, and props to Stewart for not getting chummy, but actually calling out Cramer on all his bullshit.

Entry: Opening Bell: 03.13.09

posted by cy

Mar 13, 2009 9:19AM

My appologies, Anal...

Let us now resume discussing how much of a scumbag madoff is, how retarted bank CEOs are, and whether Obama sucks or is awesome.

Entry: Opening Bell: 03.13.09

posted by cy

Mar 13, 2009 11:03AM

22-

I'm not sure exactly what you're getting at. Are you claiming that CNBC was fully aware that the economy was a house of cards, but just kept quiet about it? Do you really think the people that run CNBC are that smart? It's easy to look backwards and say, "well, they should have known," but without the benefit of hindsight that call is a lot tougher. Remember, before everything actually came apart basically EVERY public intellectual was out there telling us that things were fine: Bernanke, Greenspan, Bush, Obama, McCain, Summers, Geithner, H. Paulson, etc. etc. You should give CNBC credit for at least giving airtime to the few that did see this coming Schiff, Taleb, Roubini, Einhorn etc, even if the anchors dismissed them as quacks.

All that said, I don't want to come off as defending CNBC. They definately do investors a disservice with shows like Fast Money and Mad Money, which encourages people to try to actively beat the market. However, I firmly believe that the consumer is king. If viewers actually want to sit around and watch that garbage (as entertainment or to springboard a I'm-a-retail-trading-god mental masturbation fantasy), then god bless.

Also keep in mind that CNBC had far and away its best numbers ever during the crash, so claiming that they had motive to perpetuate the bubble would run counter to how things actually played out. (I realize that CNBC probably didn't know beforehand how good a crash would be for them ratings-wise)

Finally, I also realize there is a fundamental conflict of interest between advertisers and the media, but this conflict is not unique to CNBC. While going soft on people that advertise through you may seem smart in the short run, in the long run, viewers are going to realize that you're journalistically bankrupt and abandon your product. Therefore, an organization that puts its reputation first (I am in no way claiming that CNBC fits into this category) will long-run do much better than a short-sighted competitor.

Entry: Presented Without Comment

posted by cy

Mar 13, 2009 12:29PM

Well done, #34.