rcwhalen's blog

Looking at the distribution of income, comparable data from the IRS show that the top 1%, who paid 38% of the taxes, earned 20% of the income and the top 5%, who paid 59% of the taxes, earned 34% of the income.  In contrast, the bottom half earned 12.5% of the income but paid only 2.5% of the taxes.

As we learned working in Mexico in the 1980s and 1990s, the world of debt defaults and fiscal crises inevitably results in strong inflation, but a big part of the inflationary process is perception.  Think of this week as the point in the learning curve when Washington started getting the attention of the entire nation and world -- a year before the next election

The debt ceiling debate that has dominated the headlines over the past month has been thoroughly infused with a string of unfortunate misconceptions and a number of blatant deceptions. As a result, the entire process has been mostly hot air. While a recitation of all the errors would be better attempted by a novelist rather than a weekly columnist, I’ll offer my short list. 

The below is a letter I recently found in my "examiner friends" archives that I thought was worth sharing. This was written in 2005 by an anonymous former Federal Reserve examiner. As a former bank supervisor myself, the accuracy should challenge us all to pay more attention to those in the trenches doing the actual work (whether bank supervisors or in your own firm; management by walking around, as Tom Peters used to quip). To say the below is insightful is an understatement.

The negative trend in Bank of America's financial results over the past several quarters is deeply troubling and, as we have long predicted, may suggest an approaching Dodd-Frank restructuring is in the cards.

Outgoing Joint Chiefs Chairman Admiral Mike Mullen’s bumbling replies to questions by “automated” university students during a mid-July Beijing visit were symptomatic of total disarray in U.S. China policy. Instead of clear-cut defense of no military takeover of Taiwan, with its 25 million the only free society in Chinese history, the Admiral backed into a defense of U.S. policy as if the Taiwan Relations Act were an impediment Washington leadership had difficulty overcoming.

If the United States had to pay the interest rates the Italians have to pay, the US would face a game changer...

Systemic Risk: In one of his serio-comic sequences, Charlie Chaplin’s little tramp starts pulling a thread from his crumpled suit. Before long, his whole miserable costume dissolves. Is there that kind of loose thread here?

Increasing numbers of economists, market participants and some members of the US policy establishment have come to a greater appreciation of the role of globalization on US economic performance. They view globalization and the US policy response to it as the cause of the US asset price bubbles and hence the balance sheet nature of this “recession”. This perspective also implies that counter-cyclical fiscal and monetary policies do not address the cause of the under-performance of the US economy and hence are not solutions.

Below is a translation of a letter from Professor Schwarz-Schilling to Richard Herzinger of Die Welt c/o my friend Achim Duebel in Berlin. He writes: "Mr. Mladic perhaps is right to be angry, sitting so lonely in the dock in The Hague. A Europe unable to learn from its past sits in the shadow behind him."

In his June 29th press conference, the President again singled out rebates to push U.S. fossil fuel production in his demand for tax increases for an economy already threatened by double-dip recession. The proposal compounds regulatory mischief: blocking oil and gas in the Gulf of Mexico while Chinese and other foreign companies drill off Cuba almost within sight of Florida beaches, forfeiting 250,000 jobs.

The Fed is not backing off of its desire to stimulate the economy, all it is doing is backing off of its policy of steadily adding to that stimulus. The air is not, on net, leaking from the tire, it is still in the balloon. That stimulus is still working and the key question is how effective it has been and will be.

For investors and risk managers, the legal and sovereign risk illustrated by the Tropp v. the Corporation of Lloyd's litigation boggles the mind. If the Tropp petition is denied by the US Supreme Court, can any US individual, fund or fiduciary invest in Lloyd's with confidence?

“…through thousands of years of Chinese history, I know no example where outside pressures about the domestic structure of China produced domestic changes in, in [cq] China. ...”

I confess to be more than a little surprised when yesterday's morning reading turned up the following headline, from Bloomberg's Bob Ivry: "Fed Gave Banks Crisis Gains on Secretive Loans Low as 0.01%"