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Subject: About This Week's Market Rally

Written By: Foo Bar on 03/26/09 at 10:57 pm

/rant on

The Rolling Stone article puts it in layman's terms.  The current Geithner plan is a scam.  In Randroid circles, it's decried as the "aristocracy of pull".  In left-wing circles, it's decried as corporatism or fascism.  In politically-neutral economics circles, it's called regulatory capture

The way the scam will work is as follows: one would have to be criminal to invest in this.

The markets' reaction basically confirmed this thesis.

Last weekend, Brad DeLong did an FAQ for the Geithner plan which says pretty much the same thing.  Remember, March 21st was the Saturday before the 500-point financial-led rally on Monday, March 23rd.  And compared to the rest of the econo-wonk-blogosphere, he's actually defending the plan.

Why the complexity?  A smokescreen so that Congress can wash its hands of responsibility when it fails, and so that the "private" portion of it can claim that it, too, has suffered losses. 

Now, how can you profit?  Well, you can't, since you don't have enough money to play ball.  At least, not unless you figured it out on Friday evening and bought metric assloads of bank stocks when the plan leaked out after the market's close on Friday.  I didn't.  Sucks to be me.

Has the gaming of the public-private partnership begun?  You betcha.  Less than 96 hours between official announcement and official blogospheric dissection of evidence for gamesmanship, as if the weekend's commentary wasn't enough.

There.  That oughta be enough gasoline on the fire.  But start with that Rolling Stone article.  Because it's the only one that won't warp your head.  (But read the rest, and pick a blog out of the list that you like, and read it - comments and all - daily for a few months.  You'll learn more about macroeconomics than you will in college.)

To recap, if you're Pimpco or Blackrock, you get to borrow a metric farkton of money, leverage it to buy a metric kilofarkton of bad assets, and you're guaranteed to lose only a small portion on that "investment".  That's fine -- because in bailing out the banks by buying their bad assets, you ensure that your other investments (namely the ones you've placed in the banks you're about to bail out) will soar.  If it all works out, it's unicorns-farting-rainbows all around.  If it fails, you still make a fortune, and the taxpayer gets stuck with the loss.  The FDIC and the Treasury underwrite the risk, the Fed prints the money the Treasury borrows to pay off the FDIC, and either the taxpayers end up in penury to paying the Chinese holders of US Treasuries, or the dollar is massively devalued and the consumer pays $100 just for the privilege of walking into a Wal(five-pointed-Chinese-commie-star)Mart.

/rant off.

(And for my next trick, I'll try my hand at putting links to econobloggers' articles in the context of lyrics from the new KFMDM album, but gimme until Saturday for that.  The first track is basically the last six months of my life.  The second track's also pretty close to the mark, even if it's primarily about religious hypocrisy rather than business hypocrisy.)

Subject: Re: About This Week's Market Rally

Written By: MaxwellSmart on 03/27/09 at 12:11 pm

Thanks for linking to the RS article.  I'll read it when I've got the time.

Remember the way the grownups talked in the Charlie Brown specials?  That's what it sound like when hacks like Geithner talk about this fiasco.  I can't make sense of what they're doing...and maybe that's because what they're doing doesn't make sense!

They caught Bernie Madoff but how many Bernie Madoffs will never get caught?

It's like Ann Coulter was saying on Faux News, the Democrats run Wall Street and the Democrats own the banks!

She's not entirely wrong here.  Even a blind pig finds a few acorns! The Dems, including her old nemesis Bill Clinton, were complicit in the rise of the kleptocracy.  Bob Rubin and Robert Reich were "New Democrats."  Yeah, let's kill off these old fashioned regulations.  We don't need 'em anymore; we gotta be competitive.  Let the banks do whatever they want with your money.  Wall Street is always right.  Wall Street always knows best! 

Well, Democrats, you can't blame it all on the GOP.  This is your baby too! 

These Bernie Madoff type motherf*ckers aren't even capitalists.  They're just thieves.  Thieves of the worse kind. 

I think perhaps the Left and the Right can join hands on this one.  Time for a taxpayer revolt!  Heck, time for a non-taxpayer revolt.  A lot of folks are outta work and they don't want to be. 

Oh no, we can't do that! The world economy will collapse!  It'll be chaos; it'll be anarchy.  You know something?  The world economy seems to be collapsing anyway and when it does, the least we can do is not sit here like chumps while the dirty crooks sneak away and divy up the loot.  Fuggem!  Pass me the whiskey and the ammo!

Subject: Re: About This Week's Market Rally

Written By: Tia on 03/27/09 at 12:22 pm

the more i read about this the more it makes me wonder about obama, sadly. is geithner pulling one over on him because HE, obama, doesn't understand this stuff either? or is he complicit in it? or was this plan simply the best thing they could come up with now that the bankers have become so powerful they can actually shove this stuff down the government's throat? in any case i find it distressing that obama would buy this tripe that we need to put bankers in treasury and the fed because they're the only ones who understand what's going on. they're the ones with a demonstrated history of failure! it's like hiring a drunk security guard, he lets the warehouse get robbed, and then you put the same security guard in charge of tracking down the robbers because he's the only one who knows what they look like.  ::)

i say put in academics and independent experts, instead. these banker guys have vested interests, and are not acting in the interests of the public. but the part that i wonder about is, don't these people know this is going to really bring the system down? are they really so busy snorting up these golden eggs that they're completely ignoring the goose? or do they figure the system's gonna collapse anyway and they'd better hoarde money now for their gated communities and private blackwater-esque security firms for when the torch-wielding mobs come after them?

Subject: Re: About This Week's Market Rally

Written By: Macphisto on 03/28/09 at 11:56 am

It seems like the solution is simple.

Heavily regulate speculation and leveraging.

I know this isn't the most analytical source, but after watching the debate between Stewart and Cramer (or rather the beatdown of Cramer), leveraging seems to be a big part of this.

Why not just make it illegal to leverage things to the degree they currently are?  Say, limit leveraging down to a 2 to 1 ratio instead of 30 to 1.  That would allow the economy to be more realistic and sustainable.

As for all the bad assets, all or nothing should be the approach.

Let some of them crash and burn to pieces but nationalize others.  None of this half@$$ed loan crap.

That would fix our current situation more than the status quo.  Of course, the GOP would throw a bitchfit over any nationalization.

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