We are constantly told all our problems are too complex to be addressed with simple "big idea" solutions. Complex problems require complex solutions, we are assured, and so the "solutions" conjured by the Central State/Cartel Status Quo are so convoluted and complex (for example, the 2,319-page Dodd-Frank Wall Street Reform and Consumer Protection Act or the 2,074-page Obamacare bill) that legislators say they must "pass the bill to see what's in it." The real "solution" is to see that complexity itself is the roadblock to radical reformation of failed systems. Complexity is the subterfuge the Status Quo uses to erect simulacra "reforms" while further consolidating their power behind the artificial moat of complexity. Over the next three days, I will present three "big idea" solutions that cut through the self-serving thicket of complexity. Nature is complex, but it operates according to a set of relatively simple rules. The interactions can be complex but the guiding principles can be, and indeed, must be, simple. Big Idea One: Radically lower the cost basis of the entire U.S. economy. The cost basis of any activity is self-evident: what are the total costs of the production of a good or service? The surplus produced is the net profit which can be spent on consumption or invested in productive assets (or squandered in mal-investments).
Tim Geithner outdoes himself this evening with three hypocritical, self-defecating-deceiving, and typically ignominious clips courtesy of his interview with Jeffrey Brown of PBS NewsHour. While we knew TurboTax was beyond him, the Treasury debacle-in-chief admits he doesn't understand how the debt limit has bubbled back up (seeing it as part of a partisan political agenda); admits that perhaps the NY Fed has a 'perception problem' with Jamie Dimon on the board; and his piece-de-resistance his cognitive dissonance erupts as he touts Obama's economic and jobs record: "look how well we are doing relative to any other major country". It seems the election cycle is well and truly upon us and revisionism and populism will once again trump sensibility and forthrightness.
Back in 2006, contrary to conventional wisdom, many financial professionals were well aware of the subprime bubble, and that the trajectory of home prices was unsustainable. However, because there was no way to know just when it would pop, few if any dared to bet against the herd (those who did, and did so early despite all odds, made greater than 100-1 returns). Fast forward to today, when the most comparable to subprime, cheap credit-induced bubble, is that of student loans (for extended literature on why the non-dischargeable student loan bubble will "create a generation of wage slavery" read this and much of the easily accessible literature on the topic elsewhere) which have now surpassed $1 trillion in notional. Yet oddly enough, just like in the case of the subprime bubble, so in the ongoing expansion of the credit bubble manifested in this case by student loans, we have an early warning that the party is almost over, coming from the most unexpected of sources: JPMorgan.
Guest Post: Welcome to the United States of Orwell, Part 4: "Consumer Protection" Just Another Federal Reserve Power GrabSubmitted by Tyler Durden on 03/29/2012 14:22 -0400
This is truly Orwellian: the latest and greatest Executive Branch/Federal Reserve power grab is labeled "consumer protection." I am indebted to correspondent Jim S. who seems to be one of the few Americans to have actually sorted through this monstronsity and gleaned its true nature: an unprecedented extension of Executive (i.e. Imperial Presidency) and Federal Reserve power. Let's start by recalling that the Federal Reserve is a consortium of private banks. Calling a private consortium of banks the "Federal Reserve" is the original Orwellian misdirection, for there is nothing "Federal" about the Federal Reserve. It is not a government agency. Now guess who will fund and control this vast new bureaucracy of "consumer protection"? Yes, the private consortium known as the Federal Reserve. "The Consumer Financial Protection Bureau (CFPB) will be an independent unit located inside and funded by the United States Federal Reserve. It will write and enforce bank rules, conduct bank examinations, monitor and report on markets, as well as collect and track consumer complaints." Since managing the money supply and interest rates is the ultimate "consumer protection," we can ask how well the Fed managed those tasks in the past 15 years: alas, their management has been catastrophic for the nation and the middle class, which has been gutted by their policies of serial bubble blowing, leveraged speculation and bank predation.
- 6.0+ Magnitude quake strikes near Tokyo (USGS)
- Ireland Faces Legal Challenge on Bank Bailout (Reuters)
- Bernanke says U.S. needs faster growth (Reuters)
- Spain Promises Austere Budget Despite Poll Blow (Reuters)
- Orban Punished by Investors as Hungary Retreats From IMF Talks (Bloomberg)
- Obama vows to pursue further nuclear cuts with Russia (Reuters)
- Japan's Azumi Wants Tax Issue Decided Tuesday (WSJ)
- Australia Losing Competitive Edge, Says Dow Chemicals CEO (Australian)
- OECD Urges ‘Ambitious’ Eurozone Reform (FT)
- Yields Less Than Italy’s Signal Indonesia Exiting Junk (Bloomberg)
Dallas Fed Confirms that Big, Insolvent Banks Are Killing Our Economy ... and Democracy
Why do families persist in taking on $100,000 student loans for mostly mediocre educations with mostly mediocre "benefits" in the job market? Because they feel they have no other choice. Why do people persist in mortgaging their future and accepting the yoke of debt-serfdom to own a house? Because they feel they have no other choice, and owning a house has become integral to the "American dream." Why do local state, county and city politicos continue playing absurd budget games, shuffling funds, borrowing from their employees' pension plans to make this year's pension plan contribution and similar threadbare tricks? You guessed it: they have no other choice, lest someone somewhere feel some pain. Why do our Federal "leaders" borrow $1.5 trillion each and every year now, fully 10% of the nation's total output, knowing full well that this level of borrowing will bankrupt the nation? (Don't forget to add in the "supplemental" off-budget borrowing.) You know: they have no other choice, lest someone somewhere feel some pain. So instead they keep the accelerating vehicle pointed straight for the cliff. There are only two end-states to this level of borrowing: hyper-inflation or default. Any other "choice" is mere fantasy.
Nearly two years after his catastrophic foray into Op-Ed writing, here is Tim Geithner's latest, this time making the hypocritical case to "not forget the lesson from the financial crisis"... which he himself ushered on America as head of the New York Fed. Frankly we are quite sure it is not even worth reading this drivel: the unemployed man walking has been a total disaster during his entire tenure (at both the New York Fed where he supervised all the banks that subsequently fell, and the Treasury), and we are fairly confident that reading anything written by this pathological failure will cost collective IQs to drop by 10 points at a minimum. Hey Tim: is there a risk the US can get downgraded? Any risk?
Last week we had the mispleasure of suffering a subdural hematoma or 7 after reading CA Congresswoman Nancy Pelosi's formal response to the gas price shock, in which it became abundantly clear that the amount of heavy metals in the California water supply is directly proportional to the insolvency of said state. Yet the only thing better than the resulting cathartic post, which had over 57,000 reads, and hundreds of comments, is JPMorgan doing the very same to what some allege is the most corrupt and incompetent legislator in the history of the US Congress. Which, to our and our readers' utmost delight, is precisely what happened today, when JPM Private Bank CIO Michael Cembalest decided to clinically deconstruct her argument into its constituent utterly insane components. Below we present the carnage.
Warning: Not for the faint of heart.
Aspirin at the door
The mainstream view uniting the entire political spectrum is that all our financial problems can be fixed by what amounts to top-down, centralized policy tweaks and regulation: for example, tweaking policies to "tax the rich," limit the size of "too big to fail" financial institutions, regulate credit default swaps, lower the cost of healthcare (a.k.a. sickcare), limit the abuses of student loans to pay for online diploma mills, and on and on and on. But what if the rot is already beyond the reach of more top-down policy tweaks? Consider the recent healthcare legislation: thousands of pages of obtuse regulations that require a veritable army of regulators staffing a sprawling fiefdom with the net result of uncertain savings based on a board somewhere in the labyrinth establishing "best practices" that will magically cut costs in a system that expands by 9% a year, each and every year, a system so bloated with fraud, embezzlement and waste that the total sum squandered is incalculable, but estimated at around 40%, minimum....The painful truth is that we are far beyond the point where policy/legalist regulatory tweaks will actually fix what's wrong with America. The rot isn't just financial or political; those are real enough, but they are mere reflections of a profound social, cultural, yes, spiritual rot. This is the great illusion: that our financial and political crises can be resolved with top-down, centralized financial reforms of one ideological flavor or another. It is abundantly clear that our crises extend far beyond a lack of regulation or policy tweaks. We cling to this illusion because it is easy and comforting; the problems can all be solved without any work or sacrifice on our part.
Scared by PM Volatility? Identify Severe Undervaluation Points in Gold & Silver v. Trying to Call Perfect BottomsSubmitted by smartknowledgeu on 01/26/2012 06:39 -0400
For a new investor in gold and silver, here is the most lucid piece of advice I can offer. Identifying severe undervaluation points in gold and silver, buying gold and silver assets during these times, and not worrying about interim short-term volatility, even if the immediate volatility is downward, is much more likely to impact your accumulation of wealth in a positive manner than trying to perfectly time market tops and bottoms in the highly manipulated gold and silver game.
- Angela Merkel casts doubt on saving Greece from financial meltdown (Guardian)
- Germany Rejects ‘Indecent’ Call to ECB on Greece, Meister Says (Bloomberg)
- Obama Calls for Higher Taxes on Wealthy (Bloomberg)
- Fed set to push back timing of eventual rate hike (Reuters)
- Recession Looms As UK Economy Shrinks By 0.2%, more than expected (SKY)
- King Says BOE Can Increase Bond Purchases If Needed to Meet Inflation Goal (Bloomberg)
- When One Quadrillion Yen is not enough: Japan's first trade deficit since 1980 raises debt doubts (Reuters)
- Sarkozy to quit if he loses poll (FT)
- U.S. Shifts Policy on Nuclear Pacts (WSJ)
- ECB under pressure over Greek bond hit (FT)
The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism (Final, Part 4)Submitted by Econophile on 08/17/2010 02:05 -0400
Until I began to examine the Dodd-Frank financial overhaul bill I had no idea that it would so significantly change the direction of the United States. It's scope is so vast and pervasive that it is difficult to grasp its totality. I wrote this article to try to explain this and why I believe it is so important for us to understand it. This is the final part of this four part series. I examine the consequences of Dodd-Frank.