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I present to you a video in which POTUS Barack Obama could learn much from the wisdom of 16-year-old Pakistani teenager Malala Yousafzai.
Ye Gods! Even that discredited old hack, Alan Greenspan ? the man who bears as much responsibility as anyone for the hypertrophy of state- supported finance and thus for the havoc it continues to wreak ? is at it, trying to tell us that because of a low ‘equity premium’ (read: ludicrously intervention?depressed bond yields), the ‘momentum’ of stocks ‘is still relativel. Such a market is therefore likely to suck everyone in to its last, Plinian updraft no matter how stretched everything becomes and no matter how great the risk of being cast into perdition in the pyroclastic collapse to come.
What politicians want from their regulatory efforts is a world of pure beta and zero alpha. This is the ultimate “level playing field”, where no one knows anything that everyone else doesn’t also know. The presumption within regulatory bodies today is that you must be cheating if you are generating alpha. How’s that? Alpha generation requires private information. Private information, however acquired, is defined as insider information. Insider information is cheating. Thus, alpha generation is cheating. QED. Why would politicians want an alpha-free market? Because a “fair” market with a “level playing field” is an enormously popular Narrative for every US Attorney who wants to be Attorney General, every Attorney General who wants to be Governor, and every Governor who wants to be President … which is to say all US Attorneys and all Attorneys General and all Governors. Because criminalizing private information in public markets ensures a steady stream of rich criminals for show trials in the future. Because the political stability of the American regime depends on a widely dispersed, non-zero-sum price appreciation of all financial assets – beta – not the concentrated, zero-sum price appreciation of idiosyncratic securities. Because public confidence in the government’s control of public institutions like the market must be restored at all costs, even if that confidence is misplaced and even if the side-effects of that restoration are immense.
David Stockman, author of The Great Deformation, summarizes the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government - that is, the warfare state, the welfare state and the central bank...
What is flailing is the vast expanse of the Main Street economy where the great majority have experienced stagnant living standards, rising job insecurity, failure to accumulate material savings, rapidly approach old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut...
He calls this condition "Sundown in America".
The last 4 days have seen the price of protection against a default on US Treasuries spike by the most in 4 years. While USA CDS trade on both a default and devaluation basis (as well as technical issues related to which Treasury is cheapest to deliver) this spike to 5-month highs (from what was extremely high levels of complacency) is very notable in light of today's Kocherlakota "whatever it takes" speech. While still well off 2011's debt ceiling debacle panic highs, this move does suggest more than just the politicians are worried about a technical default occurring on US debt. By way of comparison, Germany trades at 23bps and Japan at 61bps against USA's 32bps. But there is a way to trade the debt-ceiling debacle that doesn't invlove leveraged speculation in credit derivatives...
Let us not forget where and when this vast unending clusterfuck reached terminal velocity...
Confirming, once again, that without fail Wall Street executives tend to have irreconcilable sociopathic tendencies in addition to delusions of grandure, AIG's Bob Benmosche found himself promptly under fire from all sides following his interview with the WSJ (reported here) in which he said that outrage over banker bonuses "was intended to stir public anger, to get everybody out there with their pitch forks and their hangman nooses, and all that - sort of like what we did in the Deep South. And I think it was just as bad and just as wrong." There were two main differences: this time around, to pretty much everyone's disappointment, there were no actual lynchings or even anyone going to prison. But more importantly, racial hatred and lynchings in the "deep south" were generally irrational and without reason, which is certainly more than can be said about a banker uberclass that would not exist if it wasn't for taxpayers saving their ungrateful offshore bank accounts. In other words, the hatred at the likes of Benmosche is certainly warranted. Which, together with Elijah Cummings promptly demanding his resignation, is why in less than a day the CEO found himself apologizing for a "poor choice of words."
When we pointed out AIG CEO Benmosche's somewhat disconnected-from-reality comments comparing banker-treatment to lynchings of black people in the deep south, we suspected there would be fallout. Sure enough, none other than Rep. Elijah Cummings (among the leading investigators into the 2008 excesses that led to AIG's bailout) has called for Benmosche to "resign his position as CEO immediately." Cummings stated: “As the leading critic of AIG’s lavish spending before and after its taxpayer funded bailout - and as the son of sharecroppers who actually experienced lynchings in their communities - I find it unbelievably appalling that Mr. Benmosche equates the violent repression of the African American people with congressional efforts to prevent the waste of taxpayer dollars..." We await the "...out of context..." retractions tomorrow...
As if you needed any more evidence of how disconnected, entitled, irrational and sociopathic the heads of financial firms in America are these days, along comes AIG’s CEO Robert Benmosche to dispel any lingering doubts. In a highly disturbing interview with the Wall Street Journal, Mr. Benmosche compares the murder of black people in the deep south based on racial prejudice and hate to the vast majority of Americans expressing disgust with the fact that Wall Street decided to suspend capitalism when it was in their best interests in order to give themselves trillions of dollars. He actually compares an environment where the rule of law was often completely suspended to allow the murder of a disenfranchised racial group, to widespread public anger about the suspension of the rule of law to benefit the wealthiest, most connected people in the nation.
While the commemoration of the 5 year anniversary of the start of the Great Financial Crisis is slowing but surely fading, another just as important anniversary is revealed when one goes back not 5 but 15 years into the past, specifically to September 23, 1998. On that day, the policy that came to define the New Normal more than any other, namely the bailout of those deemed Too Big To Fail, a/k/a throwing good (private or taxpayer) money after bad was enshrined by Wall Street as the official canon when faced with a situation where capitalism, namely failure, is seen as Too Dangerous To Succeed. This was first known as the Greenspan Put, subsequently the Bernanke Put, and its current iteration is best known as the Global Central Banker All-In Systemic Put. We sow the seeds of bailing out insolvent financial corporations to this day, when instead of making them smaller and breaking them up, they are rewarded by becoming even bigger, even more systemics, and even Too Bigger To Fail, and their employees are paid ever greater record bonuses.
A decisive tipping point in the evolution of American capitalism and democracy - the triumph of crony capitalism - took place on October 3, 2008. That was the day of the forced march approval on Capitol Hill of the $700 billion TARP (Troubled Asset Relief Program) bill to bail out Wall Street. This spasm of financial market intervention, including multi-trillion-dollar support lines provided to the big banks and financial companies by the Federal Reserve, was but the latest brick in the foundation of a fundamentally anti-capitalist régime known as “Too Big to Fail” (TBTF). It had been under construction for many decades, but now there was no turning back. The Wall Street bailouts of 2008 shattered what little remained of the old-time fiscal rules. There was no longer any pretense that the free market should determine winners and losers and that tapping the public treasury requires proof of compelling societal benefit.
- Merkel Blames SPD’s Schroeder for Letting Greece Into Euro (BBG)
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- Anger at IRS Powers Tea-Party Comeback (WSJ)
- China has much at risk but no reach in Middle East (Reuters)
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- Bankers Brace for Fed Wind-Down (WSJ)
- A Veteran Saudi Power Player Works To Build Support to Topple Assad (WSJ)
- Gunmen shoot at weapons experts' vehicle in Damascus: U.N (Reuters) - as long as it's not drones
- ECB Council Members Split in Jackson Hole Over Rate Cuts (BBG)
- Fed Officials Rebuff Coordination Calls as QE Taper Looms (BBG)
- As Egyptians Ignore Curfew, Talk of a U.S.-Brotherhood Conspiracy (NYT)
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