Sunday, October 26, 2008

fool on the hill

(Globe) Ottawa bled $1.7-billion in red ink in August, offering the latest sign that Canada is in serious economic turmoil and that balancing the federal books will be a tricky challenge this year.

“We’re in for rough times. These are difficult times. Canadians should not underestimate what we’re facing. We’re not an island. We’re a trading nation,” Finance Minister Jim Flaherty said yesterday.
From Garth Turner's blog. (he apparently lifted it from the G&M).

When you have the Finance Minister making dire warnings, it is time to head for the hills. I know that he is incompetent, but still, he should be whispering sweet nothings in Canadians' ears to keep them from panicking. The point is, it is always much worse than is officially revealed. It was just a couple of weeks ago, during the election campaign, when we heard such things as "Canada is insulated", "We have planned for this", "We will not run deficits", and so on. Then it is revealed that there was a $1.7 Billion deficit in August, and that was before this melt-down got under way.

There has been trillions of dollars pumped into banks world wide, and Canada has probably pumped in 100 billion or more by now. Businesses still have trouble getting credit for inventory and operating expenses. I am not sure about mortgages right now, I won't bother thinking about that for some time to come. We hear that the problem is with liquidity, but the real problem is debt. The whole world is up to its eyeballs in it, and now the money tap is turned off. I've always called it "The Big Grab". "They" use the peons to generate vast wealth, and then "They" take it all back. It's just a huge shell game. My question is, why are we pumping money in to create more debt? How does this address the sea of debt that we are drowning in? How will that debt be reconciled when nobody has a job? It's too late to go back to basics, nobody knows them anymore.

I caught a bit of the Senatorial Inquisition into this sub-prime debacle - featuring Alan Greenspan. A Democrat by the name of Waxman (supposedly widely feared) was grilling Greenspan, who ended up having to admit that his whole ideology was fatally flawed, and that the whole economic structure of the global economy is a house of cards. My first thought on hearing that was that it was deliberate, and calculated - a conspiracy on an unbelievable scale. Derivatives, and all of the other legerdemain that is pulled off. Layers upon layers of pyramidal rip-offs. How could any body, in its right mind, allow banks and markets to regulate themselves? Why bother having transportation safety agencies, food inspection agencies, medical and drug standards, workplace safety standards?

This is going to be wild.


Anonymous said...

What a nice grandfatherly smile that man has... was he someone famous? I mean, before the cataclysm and our new world?

Art Vandelay said...

Wait a second. Nobody forces anybody to take out a mortgage, buy stocks or bonds, or put their money in a bank.

However much bankers, securities dealers, et al, were driven by avarice, we the taxpayers have only ourselves to blame when it comes to the things we loaded up on.

In a perfect world (one with no government regulation) the banks would fail because of their bad bets. Taxpayers' net worth would degrade thanks to our bad bets.

But where taxpayers really take it up the @zz is where government gets involved. Specifically, where government agrees to bail out bankers, insurance companies, brokerages (and soon: airlines, automakers, etc.) by printing more money. That is, by taking money from future generations of taxpayers and giving it to today's CEOs.

What little nominal value we have left in our investment and RSP accounts after this fiasco all shakes out will be virtually worthless in inflation-adjusted terms.

That is, while the current stock meltdown is bad news for our current financial health and our retirements, the situation is made much worse by government.

Much, much worse.

The answer to crappy government is not more more crappy government.

It's less government.

Anonymous said...

Speaking of unreal estate...

Anonymous said...

Speaking of unreal estate...

(Sorry link was broken on the last one)

solipsist said...

Nobody forces anybody to ...put their money in a bank

Where do you keep your money? Where would you suggest keeping it?

we the taxpayers have only ourselves to blame when it comes to the things we loaded up on

Personally, I have never loaded up on anything. I have an 18 year-old car that I paid cash for, an 8 year-old van, also purchased with cash, an 18 year-old television and stereo, also paid for with cash. What am I to blame for?

That is, by taking money from future generations of taxpayers and giving it to today's CEOs.

That is what I am pissed off about.

I dunno Art, yer starting to sound like an anarchist. Regulation is a neccessity. It was de-regulation that got the banks in trouble. De-regulation caused some 20 people to die of listeriosis. I wouldn't be too keen on having an appendectomy in some place like Belize. I wouldn't be too keen on an appendectomy in any case, but you get my drift.

My own stocks have been hit, but I am long term, long odds, and I only put in what I don't mind losing. In fact, I expect to lose, and then am double-happy-joy-luck when I win. It is more rewarding than lotto tickets - their fun only lasts a week, or less (unless one wins, of course, but those odds are way too long for me).

jesse said...

Do you blame Greenspan or the system that put so much faith in one man? There were dissenters in the Fed but in the toxic political atmosphere they were shot down. Bernanke and the next president would do well to surround themselves with dissenters.

Bernanke has hinted that the Fed's mandate should change to include monitoring asset bubbles that are not backed by fundamentals.

solipsist said...

Speaking of unreal estate...

Maggie is an exemplar of inhibited re-uptake of seratonin. Her ganglia just positiively must glow with such an infusion of sunlight and faerie dreams. Someone ought to bring her back to earth before she floats away.

I wonder if she would come over and clean my house? I'll make lemonade.

jesse - I don't blame anyone so much as snort contemptuously (not at you). I think that Greenspan may well have done his job very satisfactorily. My question falls to - what was his job?, and, who did he work for?

It is beyond belief that the system let such a subterfuge develop, and it was, and is, a subterfuge. But then, everything that the US does these days... I think you are right about things being different with a new administration. They have to be. I just wonder what will be left. And, should not everything be backed by fundamentals? Things like ability to repay, and such?

I caught just a few minutes of the hearings, and a little commentary, and what I gathered was that most just deferred to Greenspan, because he was "the only one" who had a huge-enough-brain to understand what he had created. Names such as "The Oracle", and others, were thrown about. P'shaw!

Maybe I am just cynical.

solipsist said...

I came across this unaccredited nugget. If this is so...

There may be another very large shoe to drop and if it does, what has occurred thus far may look like the good old days. I am referring to credit swap derivatives, also known as credit default swaps. This is a completely unregulated market, estimated to total approximately $62 Trillion.

Those who have issued CSDs do not have anywhere near the assets to satisfy claims should they occur in substantial numbers. For example hedge funds have issued about $15 trillion in CSDs, but among them only have an estimated $4 trillion in assets.

To (loosely) quote the great Warren Buffet, who has made it clear he wouldn’t touch them with a ten-foot pole, CSDs are the financial weapons of mass destruction, administered by idiots.

Anonymous said...

Wait a second. Nobody forces anybody to take out a mortgage, buy stocks or bonds, or put their money in a bank.

That's one of the loopiest comments I've heard in a long while; and there are legions of apologists spouting off their half-baked bootlicking syncophantic support of mainstream consensus.

Suggesting that none of us has to play ball with them is marvelous, but it's only good in theory.

I don't know where your money is --- do you? I trust mine to the bank, so I'm pretty sure I'm hooped.