Pariah Mutual
Another week gone by and I haven't anything more to offer than this, essentially a repeat of last weeks post. Ah repetition in the morning it smells like... Victory? Teen Spirit? No, more like... coffee and chlorine really. Get me rewrite! I've been stuck in a rut trying to understand the parameters of this credit crisis (Robert Reichs take:
TPMCafe | Talking Points Memo | The Bailout To End All Bailouts). But that may be a mistake. It may not be my job. Consider this, Walter Lippman writing in 1925: "We must assume that the members of a public will not anticipate a problem much before it's crisis becomes obvious, nor stay with a problem long after it's crisis becomes past. They will not know the antecedent events, will not have seen the issue as it developed will not have thought out or willed a program, and will not be able to predict the consequences of acting on that program."
Walter Lippman. "The Phantom Public," in Propaganda ed. Robert Jackall. 1995
Bailing out an entire economic system must necessarily be a science. You wouldn't want to just gun deck this quickly with just scraps and rumors of information
Behind Closed Doors, Warnings of Calamity - NYTimes.com. My grandfather bailed out his rowboat, a desperately ancient wooden beast that could take on enough water overnight that it would just leave two oarlocks sticking out of Pocasset sound in the morning. He would bail it out with a bleach bottle with the bottom cut out to form a scoop. We went through a lot of these until he replaced that boat. Always had a couple of new ones on hand. Possibly people in earlier times used a lot more bleach. This present matter is an unprecedented economic crisis to occur during a election season
Paulson plan could cost $1 trillion - Mike Allen - Politico.com. As such it cannot help but be politicized, in obvious and less obvious ways. It will be utter poison to congress, however their positioning on this will be largely over semantics. The plan as it was initially presented had the drawback as a selling point that it needs the bad debt to be bought out of these Wall Street concerns not at its current weak value which might be a bargain
Japanese Go Bargain-Hunting on Wall Street - washingtonpost.com , but rather at the value it should have if the streets logic had made sense (the idea is eventually it will return to this fuller value). It is little wonder it has such limited popularity
No deal - Paul Krugman - Op-Ed Columnist - New York Times Blog. All this has been well covered. I like all the lesser covered cranky angles that have fellow traveled with this. The Russian angle. This is the Russian belief that the credit crisis is artificial and was created to screw with them
FT Alphaville - Blog Archive - The other crisis. While it is true that the Russian stock exchange went into the most severe drop last week. so much that trading had to be formally suspended
Russia moves to stem crisis; stock markets closed - MarketWatch. It is all together too serious, too confusing and beyond administrative fiat, requiring of action from congress, to be merely demonstrative of the fictive aspects of de-linking. The Russian's problems are mostly of their own making.
Russian stocks resume trading - Boston.com There is the Power Grab Angle. At first blush the Fed's plan is an enormous assumption of power by the federal government. This has set off intense bi partisan alarm. Even so much so that VP. Cheney was told to take a hike. It however, simply seems to be an overreach by Secretary Paulson, and Chairman Bernanke, their native instinct to be executive minded. A tin-eared big fix
A Professor and a Banker Bury Old Dogma on Markets - NYTimes.com. Another is the Money Market/Hedge Fund angle. In the wake of the first dire warning over institutions that held leveraged mortgage debt. There was some very differentiated discussion on whether money markets were a good bet, or whether they were all that safe themselves
Money-Market, Similar Funds Appear Solid Amid Carnage - WSJ.com. There was enough of this discussion to lend some to wonder whether beyond the current credit crisis and forclosures, the next step repercussions were what was really on some peoples minds. Big wealth in peril
SignOnSanDiego.com Continuing credit crisis could cripple economy. Last the Complexity Angle. Or too much math, not enough mathematicians. Much of the debt in the market is hidden to varying degrees. Derivative financial products derivative markets. These markets their commodity the behavior of other markets draw in a lot of dollars and can be traded by computer fairly effortlessly, but they don't lend themselves to real-time spot valuation. or easy human approximation of their price. Not when everything begins moving at once.
This complexity also hides a perverse extensively each initial dollar of trade the subject of numerous subsequent transaction. Essentially just disguised gambling. It is as though at the race track there were windows for placing bets for picking the winner, win and place, and win place and show. Window four pays out for how the owners did. Window five on whether they bet on their own horse. Window six pays on how many will tear up tickets and damn a horses hide after each race. Window seven on whether they wear hats. Plenty of action but only so much actual cash. There are probably much better analogies for the modern financial markets. However, there would be few or no defaulting sub-prime loans if clever people hadn't cut up and bundled these loans to make it seem that there was more money available that peoples earnings would ever cover.
In the next paragraph of the same essay from the earlier quote Lippman reformulates his idea more succinctly "The Public will arrive in the middle of the third act and leave just before the last curtain having stayed just long enough perhaps to decide who is the hero and who the villain of the piece"
Rosencranz and Guildenstern are dead. Having McCain play Polonius was an inspired touch, but I've seen all I need to see. I'm beating the traffic home.
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