Friday links roundup

China and fossil fuels: It's our turn...
China and fossil fuels: It’s our turn…

“Grundfest: You and your partner, Warren Buffett, have for years warned about the dangers of the modern derivatives markets, particularly credit derivatives, and about interest rate swaps, currency swaps, and equity swaps.

“Munger: Interest rate swaps have enormous dangers given their size and the accounting that has been allowed. But credit default derivatives took that danger to new levels of excess—from something that was already gross and wrong. In the ’20s we had the “bucket shop.” The term bucket shop was a term of derision, because it described a gambling parlor. The bucket shop didn’t buy any securities. It just enabled people to make bets against the house and the house furnished little statements of how the bets came out. It was like the off-track betting system.

“Grundfest: Until the house lost its money and suddenly disappeared. Or the house made its money and suddenly disappeared.

“Munger: That is right. Derivatives trading, with no central clearing, brought back the bucket shop, because you could make bets without having any interest in the basic security, and people did make such bets in the billions and billions of dollars. Some of the most admired people in finance — including Alan Greenspan — argued that derivatives trading, substituting for the old bucket shop, was a great contribution to modern economic civilization. There’s another word for this: bonkers. It is not a credit to academic economics that Greenspan’s view was so common.”

–Stanford Lawyer, “Q&A with Charles T. Munger” (PDF)

“Foreclosure filings in the U.S. rose to a record for the second consecutive month in April as banks increased efforts to seize homes from delinquent borrowers….

“‘What you’re seeing is the inevitable result of severe job losses,’ Nicolas Retsinas, director of housing studies at Harvard University in Cambridge, Massachusetts, said in an interview. ‘Until we stem the job losses, we can expect to see continuing foreclosures.'”

–Bloomberg, “U.S. foreclosure filings hit record for second month”

“Several senators are expected to seek caps for credit-card interest rates, with a proposed ceiling as low as 18%. Caps on rates are unlikely to draw enough bipartisan support to clear the full Senate, however. Even if one of the proposals for a higher cap (around 36%) did pass, it would face resistance even from some Democrats in the House (where legislation passed with strong bipartisan support — and no rate caps).”

–WSJ, “Lawmakers line up to amend credit-card bill”

“Nearly three-quarters of survey respondents said the recent increase in the U.S. saving rate is the beginning of a major behavioral shift.

“A consumer retrenchment is one factor that is likely to make any recovery a long slog. The economists on average expect the unemployment rate to climb to 9.7% by the end of the year, with two million more jobs lost over the next 12 months, even as growth returns to the economy.”

–WSJ, “Economists foresee protracted recovery”

“President Barack Obama, calling current deficit spending ‘unsustainable,’ warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“‘We can’t keep on just borrowing from China,’ Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. ‘We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.’

“Holders of U.S. debt will eventually ‘get tired’ of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. ‘It will have a dampening effect on our economy.'”

–Bloomberg, “Obama says U.S. long-term debt load ‘unsustainable'”

TARP tracking: Floyd Norris (NYT): “An offer they couldn’t refuse”; DealBook (NYT): “Mapping the TARP’s reach”

More: Krugman on China and global warming: “Empire of carbon”; Robert Reich, “The truth behind the Social Security and Medicare alarm bells”; NYT reporter Edmund Andrews: “My personal credit crisis”; NYT: “Angry ads seek to channel consumer outrage”; WSJ: “Drug makers’ lobbying bets rise”; Bloomberg: “‘Good bad’ economy inspires consumers as slump eases”

Comments (2)

  1. Submitted by Bernice Vetsch on 05/15/2009 - 05:41 pm.

    Mr. Perry – How about a look at health care “reform,” as in an administration and Daschle and Baucus plan that leaves the for-profit insurance industry in charge of our system/

    The $2 trillion the companies have promised the administration they will “try” to save over 10 years is most likely a mirage. The $4 trillion to be saved by a switch to single payer would be real.

    The president says we have to build “on what we have” and to create a “truly American” solution.
    Like the Massachusetts Plan, which runs hundreds of millions of dollars over budget each year and has yet to cover more than 75 percent of the population instead of a system that would cover 100 percent of us from Day 1: Single-payer, or Medicare-for-All, but better because the risk pool would be the entire population instead of just the more expensive elderly.

    Many Dems and other liberals in Congress who used to support single-payer have gotten in line behind the administration to “show support.” The insurance companies and other for-profit profit-takers say they feel so “welcome” now.

    Unlike the president’s assertion that single payer would take effect “overnight,” John Conyers’ HR-676 would be phased in over 10 years — most job losses would be by attrition and all change would be very gradual. Except for savings.

    Bernie Sanders’ S-702 (703?) bill would allow each state to create its own plan as long as it met certain standards set by Congress. We are actually ready to go locally should his bill pass, with John Marty’s SF 118/HF 135.

    See the web site of Physicians for a National Health Plan (www.pnhp.org), the doctors who are being shut out of every possible forum and committee meeting.

    Thank you!

  2. Submitted by dan buechler on 05/18/2009 - 02:32 pm.

    Mr. Perry, I couldn’t find another way to send this info so use it or pass along please. The Bayer insecticide that treats the emerald ash borer has also been linked to decimated honeybee colonies. Looks like it puts Minnesota in a tough spot hopefully most treatment will go below ground.

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