"Governments don't rule the world... Goldman Sachs does..."

This is probably one of the most frank discussions I’ve ever seen out of a financial guy stating the de facto situation: Governments don’t have the power to control the economy, and banking effectively rules the world.

He also talks about the state of the Eurozone and how bankers love markets like this because there’s a lot of chance to make boatloads of money.

Bailout Links for 10 Oct 2008

Berlusconi Says Leaders May Close World’s Markets | The Italian Prime Minister would like to suspend the markets for a short time in order to “rewrite the rules of international finance.” Well, the problem I see is that you have debt. And not only people but governments living excessively outside their means. Fiat currencies not backed by gold and you basically have a bunch of paper that people say has a certain value. When that paper gets traded at 20 times its value, it’s only a matter of time until that becomes untenable. And it is going to correct. If they keep the markets from sinking further in number, they do it in actuality through inflation. Just look at Zimbabwe, Argentina, etc. to see where this could end up for us.

AIG Draws Fire for Executives’ $440,000 Post-Bailout Retreat at Posh California Resort | Shock. Amazement. Bewilderment. The government bails you out because you screwed up and what do you do? Fix it? NO. You go on a fscking resort and pay for $6 diet cokes on the company (now taxpayer) dime. These people should have their personal assets taken from them to pay back the 85 billion (or part of it) and get a pittance of a salary to fix it. Or they can just quit. Or they can go to jail. I like door number three myself. “Executive Douchebag? meet Bubba. He likes men.”

Jim Cramer: Get Out of the Market | Jim Cramer recommends that people get the heck out of the market if you plan on using that money in the next five years. We heard something similar from our USAA advisers about 6 months ago when this all started to rumble with the sub-prime debacle. But this is going mainstream. Will this affect a sell-off of large proportions?

Settlement Day Approaches For Derivatives | Derivatives are really the 800 lb. Gorilla in the corner that everyone’s been ignoring. If these things go, get ready for fun.

Is This A Replay of 1929? | No. And that’s a relief. Newsweek’s Robert J. Samuelson talks about the differences and similarities between now and the Great Depression. Also see The End of Prosperity, Time’s look at similar concerns.

Worst Case Scenario Is Approaching Rapidly | The European Union is in chaos as certain countries jump out of step to secure their own domestic banking accounts.

Bailout Thoughts

As the bailout has passed the Senate and the House, it appears to be the law of the land. $700,000,000,000.00 dollars. That’s a lot of zeros. “700 Billion” doesn’t look as bad as $700,000,000,000.00 does it? It seems that everyone is now lining up for money because of the credit crisis. California is asking for $7 Billion ($673B left) to “pay for teachers salaries, nursing homes, law enforcement and ever other state-funded service” [emphasis mine].

Two quotes are applicable:

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
-Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)

“The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people, until the wealth is aggregated in a few hands, and the republic destroyed.”
– Abraham Lincoln, November 21, 1864, a letter to William F. Elkins

Telling indeed.

And now to read about others blaming religion for making them financially insolvent due to "Prosperity theology". The thought “that God would ‘make a way’ for poor people to enjoy the better things in life” is more than a little disconcerting. The way is, and always has been, work. There are no entitlements. You deserver absolutely nothing in life. And some of the things that are most important to you will be suddenly and mercilessly taken away from you. God didn’t want you to get a house. God didn’t want your loved one to die. Let me be perfectly clear in my belief on this:

God doesn’t act.

He cares, okay. Fine. I’ll go with that. But if God’s hand is at work everywhere, then free will cannot exist. And saying “it’s God’s way” is another means for one to absolve themselves of responsibility for the actions that the take on a daily basis.

Take responsibility for yourself. Live within your means. Strive to improve your situation. Don’t give up on life. Don’t expect a handout. And don’t blame God for your problems.

People are to blame.

Bailout Links for 02 Oct 2008

I was working on my Friday links article and I saw that way too many of them were specific to the Bailout and all things financial, so here they are in a seperate post:

Derivatives are the Next Big Problem | $55 trillion dollars in credit swaps is where a lot of growth happened, however, it wasn’t proper growth. So now, we’re stuck with a big problem. No bailout can fix this stuff. It just has to adjust.

Bank Limits Fund Access by Colleges | Wachovia has limited about 1,000 colleges access to their $9.3 billion i assets held by the bank. When credit disappears, bad things happen.

BB&T President Tells Congress to Rethink the Plan | John Allison, President and CEO of BB&T, basically called out Congress asking why there’s a bailout for people who were simply irresponsible and reckless and calls out many of the points that are just plain dumb. Here’s the original PDF scan

Treasury Admits No Basis to $700B Figure | From the article: “It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

There is no Crisis | A commentary calling out what it sees as a blatant lie of the Bush administration to help their friends on their last days in office.

A Moral Hazard for the Housing Bailout | How do you sot out those who really got screwed versus those who wanted to play the market and got caught with their pants down (but were knowledgeable about the risk)? You cannot privatize profit and socialize debt and risk. It just doesn’t work that way. We have to let risk-taking financial institutions fail

Bailout as Nigerian Scam Email | This is quality. For those of you who have suffered the Nigerian email scams over the years, this will make you laugh (or cry… you decide).

Wonkette Canned Soup Index | Campbells Soup is the only thing to gain in a day of losses. Bring on the soup lines!

Credit Cards to Implode | UK analyst believes that “a combination of a 10-year steady drip of deteriorating personal finances and a tidal wave… brought on by the mortgage and credit crisis leads us to believe that credit cards are going to implode in the near term.” Yay.

Wind Me Up... (or A Vent on Domestic Energy Policy)

My Dad sent me an op-ed from the New York Times entitled Mr. Bush, Lead or Leave this morning and asked my opinion on it. I agree with a lot of what the author says, but I think that we’re missing the boat entirely on this stuff. People are thinking about this as “how do we replace oil?” The real question they should be asking is “How do I live without oil?”

Not radically different, but if we only look at how to replace oil, we limit the potential of what can happen. Everyone scrambling for a piece of the pie too. “Clean Coal” — which I believe to be the biggest oxymoron since “slightly racist” — sponsored most of the Presidential debates. You know what that got us? Very few questions or discussion about a real energy policy.

Anyway, here’s my reply, in whole, to my father. It was written quickly, not proofread, and is missing links. I’ve tried to add them where appropriate to fill in the context of conversations not shared, but the idea is there. The bold paragraph at the end is the most important thing.

— Begin —

Oh, where do I begin?! :)

deeep breath

Basically, even if we found new reserves in US Territory and sucked them dry, that would only account for something like 8 Billion barrels (gotta find where I read that). At 120 million barrels of world consumption a day, that’s a little more than two months supply.

Two months

Those reserves would take years to find and even longer to bring online, and then we don’t have the transportation in place to get most of that to refineries (well, the coastal shelf stuff we do, but not the ANWR). Also, it’s a reserve. Regardless of what you think might be there, it was set aside for a reason. Is Bush’s next element of the energy policy to open Yosemite to geothermal companies and The George Washington Forest to loggers?

It’s basic macroeconomics: The problem is a combination of an increase in demand without an increase in supply. And there really isn’t any more supply. The OPEC guys can’t get it out of the ground fast enough to keep up with China and India’s demand. And we can’t tell them to not develop. Their people see American culture and want to live that way. Problem is, that culture was built on sixty years of cheap oil.

Alternate energy isn’t much better at this point because all of it – every single thing that’s out there today, relies on an underlying fossil fuel economy in order for it’s manufacture, delivery, marketing, etc. Yes we’ve been losing research jobs in alt energy overseas, but that’s as much to blame on bad policy since 1970. All nuclear engineers go to France or China because we’ve not launched a new plant since Three Mile Island. “Nuclear power is great! except… um… put it in HIS backyard” – that’s the problem.

Geothermal is great too. This would work well in the Northern central plains where heating is critical more so than anything else. But how do you tell an out of work auto worker or small family farmer that they need to drop thousands of dollars on a new geothermal heat pump? Only if it’s cheaper than their heating bill from oil. Wave energy looks cool too, and would be quite successful in our area I feel (with the sheer area covered by the massively tidal Chesapeake, it could be quite a boon) and is also working 24-7. But that’s a lot of investment and maintenance (corrosive salt water).

Solar? Cool stuff. We have a massive desert in the southwest, the majority of which is still federally held land. Smack some arrays down there and make a combo solar/wind farm. Or do Algae. Some big Texas oil men are already dumping money into wind to take advantage of the free stuff they get on the plains. Again, manufacture and transportation rely on oil. Photovalactic cells have come a long way, and are still progressing. Same with battery banks. They all have a shelf life as well.

Another issue with solar is cost. In the state of Virginia, I can’t make back my investment because of the way that Dominion power doesn’t really pay you for the power you generate back to the grid. Waldo has an excellent article on this from last year. With energy starting to skyrocket tho, it might become cost effective in the math.

On a smaller scale, you can do what they did at Gaviotas in Columbia. A solar reflector (basically aluminum) heats water and creates a turbine. It’s like a coal fired engine but with the sun. Now that is renewable and not oil dependent (except maybe for milling of pipe, etc). That can also be used as just a water heater for showers and for distilling water.

Ethanol? Corn is such a crappy fuel. We put almost as much into it via petrochemicals (that also pollute the crap out of the Mississippi and turn the Gulf of Mexico into an algae bloom, killing off other species) that it’s a zero gain situation. And with world grain consumption and crop failures up (3 million acres of corn lost from these recent floods) you’re going to have food riots (already happening overseas) and all food prices are going to increase and stay high (see this article about the CEO of Nestle ). We could use switchgrass, but you’ve got farmers paid to raise corn, not switchgrass. Brazil is all ethanol based, and look what sugar production is doing to the Amazon.

That algae based idea would be great if they could get it into production. The return per acre would make the american southwest the algae ethanol king. Heck, Mexico could even be better than us in the Sonora states.

The author, James Howard Kunstler, writes about a lot of these technologies in his book “The Long Emergency”, which, while quite dour, is a potential vision of what we’re up against. I’ve already seen many of the ideas he espoused years ago in main stream media outlets (McMansions are the new ghettos, etc). (See his article in the Washington Post from May.)

I agree that a real President would get up and do a Kennedy-esque speech of energy independence before the next decade is out. Seeing as I don’t foresee Sen. McCain making it through the next decade, that leaves the only logical choice :) But it’s not just energy. It’s about sustainable human settlement patterns. It’s about bringing back victory gardens. It’s about effective mass transit. It’s about tearing down the temples of commerce sitting in seas of asphalt (e.g. malls, strip malls, etc) and building livable, walkable communities. It’s about reverting the way america lives to pre-WWII. It’s about family farming. It’s about sustainable agriculture.

I expect to see replays of the 1970s sooner rather than later, regardless of the direction taken by any President or Congress. We’ve already had rice rationing in some states. It’s like getting prepared for a massive hurricane that will leave you without power, food, or gas for years.

Man. I want a farm.

— End —

So yeah. Um. Discuss?

The New Face of The Queen's Currency

!http://www.boboroshi.com/assets/2008/4/11/royal_currency.jpg (The new coinage from the Royal Mint)!

The Royal Mint held a competition to replace the design of the British coins in circulation since the 1970s. The final designs are simply, beautiful. They are based upon the shield of the Royal Arms, as if each coin was a vignette onto a part of the shield, with the one pound pice having the entire Shield on it’s side. Hoefler and Frere-Jones have a nice comparison between this new coinage and the Department of the Treasury’s new Five dollar bill, complete with a purple “5” in Helvetica.

Maybe the US Federal Government should hold a design competition. (via Ministry of Type)