Rep. Collin Peterson (MN-7) Pretty Good Idea

     Credit Defaults Swaps are insurance for bonds.  Rep. Peterson wants to limit ownership of said insurance to people who actually own the bonds.  This is the right direction.

     Of course, if you wanted to buy some CDSs for 10 million dollars, you wouldn't mind buying one bond in with the mix.  In fact, the total value insured by the CDSs should not be allowed to exceed the values of the bonds, and the total amount of insurance held by anyone should not be allowed to exceed the value of their bond-holdings.

     In New York State we already have a law, says the husband of a Tax Attorney I know, that prevents anyone from buying insurance on something they don't have a material interest in.  This, in small part, prevents people from buying life insurance policies on people they don't know (and, since the profit motive exists, trying to get said people killed).

Economic Wisdom You Can Trust

     The Bush Boom.

     Lawrence Kudlow needs another television show, after writing the foreword to this book.

Global Capitalism and Guinea

     As a reminder, after the death of Lansana Conte, dictator/President for 24 years in Guinea, there was a bloodless coup by a mostly military group.  Conte had come to power the same way 24 years ago. 

     The Conte government took money from the international aluminum producers and made little to no effort on behalf of the Guinean people.  The Camara gov't could be interested in making itself rich, and has sought power for that purpose...  it could be interested in seeing benefits for its linguistic group (the Malinke)...  it could be interested in helping everyone in Guinea except the Soussou (those who benefitted most from Conte's rule)...  or it could be interested in serving all Guineans.

     The ironic part being that the global capitalist(best-price-seeking) mindset wants Capt. Camara to be a petty, selfish corrupt dictator bent on keeping the peace and being the only one who gets a slice of the pie.

Krugman On the Media

     Krugman was saying that, in general, economics reporting has improved over the last decade, but he made one exception, here is a close paraphrase: that you can't be taken seriously on foreign policy unless you were wrong about Iraq, and you can't be taken seriously on the housing crisis unless you were wrong about the bubble.  He was saying that the only people who get quoted who are "sell-side" in the housing industry.

     Strangely, later he made a strange timeline mistake.  Smoot-Hawley was passed in mid-1930, but Krugman said it was passed before the Great Depression started (1929).  At least he said, following Ha Joon-Chang, that the numbers don't add up to pin any serious blame on Smoot-Hawley for worsening the depression.  They do not add up at all.

Bulls & Bears on Fox News

     I have been out of touch with the idiot media recently.  These numbnuts actually got me to yell at the TV!  Is Obama bringing us to a command economy like the Soviet Union?  The best way to understand the Soviet Union is a non-democratic government that, in addition to running National Defense, a National Pension, the Education System, the Health Care System... ALSO ran Ford, GM, Chrysler, Exxon/Mobil, Johnson & Johnson, Kraft, ABC, NBC, CBS, et cetera, et cetera.  The labels less unimportant.

     Bulls & Bears had four or five guests talk about the issue with State Budgets.  In this discussion, no one mentioned that States are, in most cases, bound to balance their budgets by their own laws.  Four of the five simply hate government.  The "defender" of taxes couldn't get the name of Gramm-Leach-Bliley out correctly, which makes me think he was being fed information.

The Timeless Wisdom of F. M. Cornford

     We aren't electing Barack Obama because he has any special insight into the mix of Islam, Oil-ogarchy and terrorism.  We aren't electing Barack Obama because he's just the kind of Keynesian the current insanity merits.

     In 1908 F. M. Cornford wrote Microcosmographia Academica: Being A Guide for the Young Academic Politician. By "Academic" he is, in fact, referring to the politics of Oxford University.  That is of no moment.  His truths are timeless, as is in evidence when he describes two of the five Parties.

A Conservative Liberal is a broad-minded man, who thinks that something ought to be done, only not anything that anyone now desires, but something which was not done in 1881-82.

A Liberal Conservative is a broad-minded man, who thinks that something ought to be done, only not anything that anyone now desires; and that most things which were done in 1881-82 ought to be undone.

We should have gotten over this racism thing decades ago.

HE Found it!

     Alan Greenspan said today, in testimony before Congres, "Yes, I found a flaw," when referring to his free market ideology.

     _HE_ found it.

     All of us were just sitting around, nothing going on, and like a light in the darkness, a flashbulb of an idea went off in Mr. Greenspan's brain.

     "Eureka! I've discovered a flaw, and if we don't act now, people might get thrown out of their homes which are foreclosed... in record numbers!"

     IN OTHER NEWS Barry Goldwater's granddaughter, the one who made a documentary about him, has endorsed Barack Obama.  She says

My grandfather (Paka) would never suggest denying a woman's right to choose. My grandmother co-founded Planned Parenthood in Arizona in the 1930's, a cause my grandfather supported. I'm not sure about how he would feel about marriage rights based on same-sex orientation. I think he would feel that love and respect for ones privacy is what matters most and not the intolerance and poor judgment displayed by McCain over the years.

The only person President or Congressman-then-Vice-President with a more conservative voting record than Barry Goldwater in the last 75 years has been Dick Cheney.

Samuel Joe the Plumber

Plumber wants to buy the business he works for.  He thinks the business pulls in more than $250,000/year.  In actuality the business pulls in about 50-80 thousand in profit on $250,000 in sales.  It is a DAMN shame that this guy might actually buy a business.

The Long, Long Cycle

I can't wait for this credit crisis to be over so I can go back to being blissfully unconcerned with the credit markets which will, inevitably, lead to another credit crisis.

The Business News Networks

Having recently started a job, I've been bummed about the recent economic news.  Being new means I have very little job security.  So, I tune into the business news channels to look at the Futures contracts on the various exchanges.  If the Dow futures are up .5%, it means the Dow will likely go up right away when the markets open for full trading the next day.

You know what I've noticed about the "business" news channels?  The focus on the stock market.  If a company is really both debt (bonds) and stocks, then should (maybe) half the news be about the corporate bond market?  Of course, of course, bonds don't change nearly as much, and the business news does report ratings upgrades and downgrades.  But when they talk about a company, it might be nice to say something like

12,000,000 shares of stock outstanding currently trading at 2$/share with an earnings per share of 25 cents.
100,000,000 of bonds outstanding trading at 99.58 (of face value) and with a yield of 4.8%

For those that don't know, if a company declares bankruptcy, the bondholders are paid back first, then the stockholders share whatever is left.  The extra risk of stocks is related to the potential extra reward.  A ratings downgrade means the ratings agencies think the company has a decreased chance of paying back its debts, so they should be charged more (i.e. pay a higher interest rate) when they issue bonds.  Preferred stock gets paid off (in a bankruptcy situation) before regular stock, but also has less upside potential than common (voting) stock, and there is some type of bond that is riskier than all the rest, but still more secure than all stock, called subordinated debt (it gets paid off after all other bondholders) but I don't know if there is much of a public market in that.

The Markets

Who is thrilled that Wall St. firms are being bailed out?  That said, I understand that after Bear Sterns, FNMA and FHLMC, there will be no deal on Lehman Brothers that includes taxpayer money.

Considering that the Republican Party's DNA says that they shouldn't take over or bail out firms, and a history of acting that way, I am proud that they have taken some actions.  It is not clear whether former Secretary O'Neill would have done so.  Thomas Mellon, Hoover's Secretary of the Treasury, is infamous for his quips suggesting the markets will just sort themselves out.

As a reminder, though, the one Republican who spoke at the Democratic National Convention was Jim Leach of Iowa.

I just thank goodnessness and graciousness that Bush passed all those tax cuts for the super-wealthy!  That is why our economy is so strong and we are chugging along like gangbusters!

Bad Samaritans, Again

Ha-Joon Chang is turning pretty much every dearly-held Republican and American economic belief on its head.  Apparently, inflation is entirely unrelated to economic growth as long as inflation is under 40%! 

You know what I like about inflation?  Imagine two people, one has a billion dollars in the bank, the other person has nothing except a job which barely covers expenses.  If there is 20% inflation, the worker might be able to get a 20% raise.  There is absolutely nothing a billionaire can say to the banker to make their billion dollars increase by 20%.

If there is more inflation, more workers will have to try harder to get raises, and this is a burden on them.  It will, inevitably, lead to increased labor organization.