Misblog

Originally Published July 11, 2008; Updated and Republished September 15, 2008; Updated and Republished September 18, 2008; Updated and Republished September 22, 2008; Updated and Republished September 26, 2008; Updated and Republished September 28, 2008; Updated and Republished September 29, 2008; Updated and Republished October 01, 2008; Updated and Republished October 03, 2008; Updated and Republished October 06, 2008; Updated and Republished October 09, 2008; Updated and Republished October 13, 2008; Updated and Republished November 25, 2008; Updated and Republished December 01, 2008; Updated and Republished December 09, 2008; Updated and Republished December 16, 2008; Updated and Republished December 21, 2008; Updated and Republished January 02, 2009:

It's hard to imagine what former Senator Phil Gramm¹, cum McCain economic whatever, is hoping to accomplish by referring to Americans as recession spooked whiners!?

Is this former Texas senator cum McCain economic whatever seriously suggesting our declining output and increasing inflation (stagflation) is just an American mental problem²—if so, surely central bankers worldwide are rejoicing and Robert Lucas resurrecting!

Web:

• UPDATED 01/02/2009 WP, Manufacturing Falls to 28-Year Low.
• UPDATED 12/21/2008 NYT, The Wrecking Reckoning: White House Philosophy Stoked Mortgage Bonfire.

• UPDATED 12/16/2008 AP, World markets push higher ahead of Fed decision [to reduce the short term interest rate too between 1-0%]. The long bond yield falls as its price rises. (Daily Treasury Yield Curve Rates)

  Buying a bond is a bet on future interest rates, if you bet correctly you make a little money, else you lose:

  Suppose you purchase a bond for $1 that agrees to pay 5% interest per year forever (assumes the issuer will be around forever).

  After receiving 5¢ every year for 30 years you decide to sell your right to the annual nickel.

  If current bonds are now paying 10% interest for every $1 how will you sell your right to a nickel (5%) for a dollar (your original investment)? The only way is to match the current interest rate. That requires you to sell your right to a nickel for 50¢ (matching the current interest rate of 10%)—you lose half your original investment!

  What happens if in 30 years the current bonds are paying 2.5% interest instead of 10%? How much will your right to an annual nickel be worth then? Are you convinced that interest rates and bond price move in opposite directions?³

• UPDATED 12/09/2008 BBC, US faces deep problems, OECD says.

• UPDATED 12/01/2008 BBC, US recession 'began last year'.

  "The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession."--NBER Business Cycle Committee--

• UPDATED 11/25/2008 AP, Massive new programs aimed at loosening credit.
  Thank god (and the American people) we dethroned King Bush the Idiot Et ilk before he declared himself emperor!

  "Total bailout commitments, loans and pledges of backing neared a staggering $7 trillion."--AP Writer Martin Crutsinger--

• UPDATED 10/13/2008 NYT, U.S. Investing $250 Billion in Banks
• UPDATED 10/10/2008 AP, US to buy stake in banks, first since Depression
• UPDATED 10/09/2008 Reuters, Global stocks falter, safe-havens fall amid market calm
  "The Dow Jones industrial average declined about 7.3 percent or 678.91 points on the day to close at 8,579.19, about 40 percent below its peak close of 14,164.53, exactly a year ago."--NYT--

• UPDATED 10/07/2008 Google->NYT, Markets Plunge Despite Hint of Rate Cut. "The Dow Jones industrial average plunged 508 points, or 5.1 percent, extending a slide of months that has erased a third of its value in a year. In the last five trading days alone, the Dow has lost 1,400 points."

  "Americans' retirement plans have lost as much as $2 trillion in the past 15 months — about 20 percent of their value — Congress' top budget analyst estimated Tuesday..."-- Retirement accounts have lost $2 trillion so far--

• UPDATED 10/06/2008 AP, Dow recovers to close down 370 after plunging 800.
• UPDATED 10/03/2008 Emergency Economic Stabilization (Bailout) Act of 2008. Signed by King Bush the Idiot within an hour after its passage in the House.

• UPDATED 10/01/2008 AP, Senate passes $700B rescue; House votes lured

  Neo-capitalism: Mark-to-Market Accounting on the upside; Suspend Mark-to-Market Accounting on the downside.

• UPDATED 09/29/2008 UPI, House votes down bailout plan
• UPDATED 09/28/2008 House->Speaker Pelosi, Draft of The Emergency Economic Stabilization Act of 2008 (aka Wall Street Bailout)

• UPDATED 09/28/2008 WP, Lawmakers Reach Accord on Huge Financial Rescue

  House Speaker Nancy Pelosi (D-Calif.) has reportedly pledged to make the plan available to the public for at least 24 hours before the House votes on it.

• UPDATED 09/26/2008 Reuters, China banks told to halt lending to US banks-SCMP. China, a major United States creditor, currently holds approximately $400.2B (billion) dollars in US Treasury Bonds and another approximately $800B of dollar denominated assets.
• UPDATED 09/24/2008 White House, Text of President's Address to the Nation, Bailout
• UPDATED 09/22/2008 NPR, Reid: Congress Won't Rubber Stamp Bailout Plan. Includes streaming audio.
• UPDATED 09/22/2008 NPR, The Wall Street Bailout: A Conflict Of Interest?. Interview of NYT financial reporter—34 minute streaming audio, included.

• UPDATED 09/19/2008 Reuters, U.S. launches all-out attack on credit crisis. Short selling has been prohibited, request for information have been sent to hedge-funds (can you say indictments), and a trillion of your tax-dollars is being appropriated to bail-out "stabilize" those creating the mess.

  It seems useful to remind those being "stabilized" to the tune of a trillion dollars that some of them routinely belittle, shame, and begrudge “stabilizing” our poor and economically disadvantaged to the tune of a miserly several hundred dollars!

• UPDATED 09/18/2008 Reuters, Central banks open taps to tackle market squeeze. Turns out central bankers aren't rejoicing, but adding emergency liquidity to the world financial markets after investors head for gold and bid up the price yield of the 30 year bond (declining yield price)! [Simple Investor Consumer Education Booklet, A Primer for Investing in Bonds (300K pdf); and Daily Treasury Yield Curve Rates]

  How ironic that King Bush the Idiot is offering assurances and McCain retrospectively asserting he’d fire the SEC chairman—wonder if Gramm still thinks Americans, the ones paying for the emergency liquidity, are a bunch of whiners?!

  New York's attorney general (and likely FBI) has begun investigating the short sellers (i.e. investors betting against King Bush the Idiot's assurances. (see NY probes short-selling in financial stocks)

• UPDATED 09/17/2008 AFP, AIG bailout fails to calm global markets
• UPDATED 09/16/2008 Reuters, Obama accuses McCain of ignoring Wall St. excesses McCain says he'll appoint a commission to "study" the financial system meltdown—this is the most time honored, reliable, and proven insider method for doing nothing while appearing to voters (constituents) your doing something!
• UPDATED 09/15/2008 NYT, Wall St.’s Turmoil Sends Stocks Reeling Closing down more than 500 points! (But, as McCain would say "the fundamentals are strong"!!)
• UPDATED 09/15/2008 Reuters, Wall Street mauled by Lehman bankruptcy, AIG fears
• UPDATED 09/15/2008 Reuters, Edgy Wall Street waits for AIG plan
• UPDATED 09/15/2008 Reuters, Lehman, Merrill shake markets
• UPDATED 09/15/2008 Reuters, House plans vote on $50 bln to stimulate economy
• Obama slams McCain backer over 'nation of whiners' jibe

Blog:

• UPDATED 09/29/2008 WP->Fix, Analysis: The Failure of the Bailout Bill. Includes a great picture of Capitol—don't you just want to airbrush in some lightning bolts?

-----notes-----

1. Former Senator Phil Gramm and many of his senate colleagues, including Senator McCain, are responsible for the experimental economic policies that have completely destroyed America's middle class, looted the treasury for generations and jeopardized our nation's future.

A nation of angry whiners will likely turn into a nation of ragers when their experimental economic policies have fully played out and are completely understood by our decimated middle class and other Americans.

2. UPDATED 09/15/2008 McCain, has since removed Gramm from a public campaign role but, today mindlessly repeated the Bush-McCain-Gramm mantra: "the fundamentals of our economy are strong".

McCain then went on to implicitly apologize (almost) for inflicting such economic harm on America (McCain, Obama promise Wall Street overhaul):

"The fundamentals of our economy are strong, but these are very, very difficult times and I promise you we will never put America in this position again,"--John McCain--

Pssssst,... financial institutions and banking systems do not meltdown in a fundamentally strong economy...why did you put America in this position in the first place?

Tell us again why you, Bush, Gramm, et al deregulated the institutions and banking systems which are now melting down after implementing experimental economic policies enabled by the deregulation. Experimental policies which have and are now harming so many Americans?

Neo-capitalism: Privatize on the upside; nationalize on the downside.

3. Assume the issuer is a country, say America. Does a low (high) future looooong term interest rate imply anything about that country? What?