Monday, May 17, 2010

Debt And GDP

Lest we forget good old USA amidst all the euro-hand wringing, here's a graph...

Data: FRB and St. Louis Fed
Annual Changes In Total Debt and GDP (Current $)   

..and here are two questions:
  1. Where did all this additional debt go (i.e.  what was it used for), since it didn't generate appreciable incremental economic activity?
  2. Should we solve this obvious imbalance by reducing GDP (i.e. incomes, jobs, etc.) or by getting rid of debt (through default)?
...and, not so off-topic, in a poll conducted May 6-10 by NBC/WSJ Goldman Sachs has an approval rating amongst Americans of... drumroll... four percent (4%).  That's right, 96% of Americans hate their guts (a fast and loose interpretation of the poll, of course).  I wonder what it feels like to be so universally despised? God only knows - and he should know, since they are doing His Work, after all?  I predict heavy-duty scape-goatism heading their way.

I wouldn't have mentioned it, but their share price is currently scraping lows made last July, when the overall market (S&P 500) was at 875 (it's at 1,127 today).  So, is GS underpriced or is SPX overpriced?  Hmmm.. as GS goes so does Wall Street? 


    1. I like option 3 best (i.e. the one not on the list).

      Let's create an externality by giving it to someone else ;-)

    2. Or how about using a towel so we can pretend that if we don't see it then it won't see us.

    3. 1) Asset price inflation, the assets being housing and paper.
      2) Asset price deflation, through paying or defaulting by the debtors and creditors who took on the risk. No more risk shifting, socialism for the rich, etcetc. Savers (pensioners, renters) will start spending and pull the economy out of the recession.

    4. That is the trouble with transferring your wealth to the uber-rich--Lloyd Blankfein and his homeys can only utilized a limited amount of homes (assets).

      We've seen the dismantling of effective government here in the US over the last 25 years by the Ronald Reagan/Grover Norquist republicans, and what we are experiencing now is the result of valuing big corporations over something like a viable middle class or a Gulf of Mexico eco system.

      The only real estate going up in value over the next decade will be dry space under the interstate overpass.

    5. "Savers (pensioners, renters) will start spending and pull the economy out of the recession."

      They were cautious by nature to begin with. After the last couple years they're even more spooked. Its going to take a while for them to spend.

      "Or how about using a towel so we can pretend that if we don't see it then it won't see us."

      Douglas Adams was a genius!

    6. the debt was well spent: it went to prop up the artificially high prices of non productive assets such as stocks, real estate, company buyouts. if it weren't spent, then the abyss of the underfunded public pension plans would be really scary. and everyone with a private pension savings plan would feel like retirements is a mirage.

    7. BB has a point.
      Lots of people seem to still believe that a bird in the bush is worth more than one in the hand..
      The problem with default is not what it IS, it's what it looks like.
      It looks like an admission of failure.
      Failure ? My God, think about how unthinkable failure has become in our society...
      "Failure" is for losers.
      Being a loser in a place that preaches "three strikes and you're out" is not a good place to be...
      How many strikes have "we" used up, now ?

    8. Tnx Dink, I bet you a cup of coffee that if asset prices would return where they're supposed to be, savings value is restored and ponzeconomics a bad dream, those savers would spend.
      You're right, savers are very spooked and trying, with grinding teeth, to save against future losses, as it appears that's where we're heading.

    9. The funny thing about savings is it has to go somewhere.

      Does your savings sit in a bank to help the bank's balance sheets so the bank feels more secure to lend or at the very least pay hefty bonuses to its employees so that they can consume more?

      Do you put your savings in a company which then consumes it in some way? Say hiring more sales people for its new product, or spending more on R&D, etc...?

      Do you give your savings to the government as you purchase Treasury bonds so that they can most definitely use it to spend on more jobs, health care, salaries, etc...?

      Do you give it to the Chinese who will very definitively consume more with it as they build more skyscrapers?

      Do you save everything and keep it in your mattress?

      ... This is the one savings I keep wondering about as I can't figure out if anything happens here. If you know I'd love to know.

      Savings isn't the enemy one bit.

      It's what we do with that savings that is.

    10. "You're right, savers are very spooked and trying, with grinding teeth, to save against future losses, as it appears that's where we're heading"

      Agreed. Its a difficult time for those highly-sensitive "loss-adverse"

      "The funny thing about savings is it has to go somewhere"

      Also agreed. Was it Hell who said that one person's saving was by definition someone's else debt. (And don't you, Okie, or Hartman get into another "zero-sum" wrassling match over this or my head will explode ;) ). And no one bring up gold; it triggers this funny tic in me to go buy goats, yurts, and freeze dried vegetables.

    11. The savings that you stick under the mattress induces everybody else to stick THEIR savings under the mattress by imitation and... your economy goes down like the Titanic. Running on the bank.
      The herd phenomenon.

    12. So is one in the hand really worth two in the bush? ;-)

      Who was/is right: Keynes or Hayek/Rueff?

      Or were they both right?

    13. Keynes was a great psychologist. He took into account the way people BELIEVED and how they acted on their belief. (I am NOT a psychologist, by the way...)
      Was Hayek a great psychologist ?
      I don't know. I'm not a specialist.
      Warning : anything that I say on this blog on Keynes is based on second hand. I have NOT read Keynes. Only ABOUT him.
      But... how many people on this blog HAVE cracked Keynes, by the way ?
      Just curious..

    14. Father forgive me for I know not what I said..
      mea magna culpa.
      Strike "the herd phenomenon". Thanks.

    15. Keynes was right in theory. The problem has always been that politicians, in good times, have been unwilling to curb their appetites for more spending and cutting taxes during economic boom times. It was during this time that Keynes argued for taxation and austerity to pay down the debt and prevent the ultimate boom and bust cycle to the economy. The great general purpose is to balance out the economy to prevent both extremes of the business cycle.

      Another aspect of Keynesianism is to put laborers back to work doing public works projects so that they can create "aggregate demand." Once they are back to work earning money, they have a strong tendency to spend it, whether it is buying basic supplies for living, paying down debt or paying for luxuries.

      This in turn releases the entrepreneurial spirit that will seek to exploit said demand created by those who spend. The ensuing job creation from increased economic activity spurs further economic growth through the "multiplier effect."

      I'll make this as simple as I can: Keynes is generally followed by people on the political left (especially during depressions) and Heyek, Mises and Rothbard (known as the Austrian School) are followed by Libertarians, Anarcho-capitalists, Objectivists and those on the political right such as free-market Republicans.

      The Austrian school calls for austerity measures during economic downturns and tax cutting during boom years. Austrian school adherents are strongly opposed to government regulation of any type (some accept it as necessary to prevent "force or fraud").

      Now, I'll just say that most of what I just wrote comes from memory from what I studied in undergraduate Political Science classes from about 20 years ago.

    16. @Hell: I'm interested to hear your answer to "where did all the additional debt go" --- is it under some titanic mattress?

    17. No, it's not under a mattress..

      Today's debt was created in significant part by the shadow banking system (think CDOs made up of CDS, for example) and went on to inflate asset prices, from stocks and real estate, to more bonds.

      In other words, this debt was "margin" debt - and still is. Which is why people in finance are scared silly of defaults right now, since they will wipe out a much wider and deeper swath of assets than previously.

      And it explains why everyone in power is tripping all over themselves to provide bailouts by the trillion.

      It won't work, of course...

    18. Let me provide an example, say from 2007:

      Investment bank A creates a synthetic CDO (a bond) by slapping together a portfolio of 30 different CDS. Presto, you have debt out of thin air because CDS can be created out of thin air....

    19. I see the problem with... seeing Ponzi everywhere as not seeing how faith makes the WHOLE economy work, whether that economy is based on... immaterial finance, or material products.
      Like... money has always been... fiat money anyway.
      Now... we DIDN'T BELIEVE it was fiat money, but that was because we hadn't opened that consciousness door that enables us to see that our symbolic systems are auto-referential and that their relation to the physical world is an arbitrary one that is BASED on faith and consensus.
      We opened that door in the late 19th century, and early 20th.
      Opening that door... DISILLUSIONED us on a major scale. (It was a philosophical and metaphysical revolution, by the way...)
      Because... it was nice believing that every greenback we spent was firmly anchored to some stock of gold in Fort Knox, for example. That way we could "concretely" measure what our money was worth. (I think there must STILL be people around who believe this, by the way, probably we have already talked about it, I have a hole in my head...)
      Like it's nice believing that when you say "tree", you are talking about that physical object in your front yard, and that in some obscure way, that physical object in your front yard is.. AFFECTED by the fact that you call it "tree". (Now, words like "lazy", "unproductive", they are in a different ballpark.)
      Nuance : it is NOT because I see fiat everywhere anyway that I say that... anything goes and that CDS, or government bonds, for that matter, are as... valuable as that chest that I have in my living room.
      But.. what is the difference between.. Ponzi and the "real" economy, and valid investment if loss of faith brings the house of cards down anyway ? Regardless of whether there is an intent to embezzle or not ?
      I don't understand..
      Thanks for the quickie course in Keynes, Okie. I appreciate. I read this stuff, and promptly proceed to forget it...
      I HAVEN'T, however, forgotten the post Hell wrote a while ago about the timing of the finger pointing at Greece.
      Something along the lines of the U.S. Treasury wanting to scare investors/speculators into buying treasury bonds to finance the U.S. government, wasn't it ?

    20. Hell,aren't well all guilty of this?

      Wasn't I just as guilty of creating the same "out of thin air" as Investment Bank A when I loaned my neighbor a few bucks for a couple of pints of Guinness the other night at our local Irish Pub?

      ... Now that I think on it, he still owe's me that $

    21. Okie Lawyer has, in my view, given a reasonably fair accounting of Keynes versus Mises and Co. Of course, in the U.S. "We are all- and have been for generations, as Per Richard Nixon's famous observation, Keynesians now."

      But ideas, such as those of Maynard Keynes, are not, contrary to Deb's oft made assertion, what make the world go round, they are simply the cover we employ to justify basic (and base) drives towards the acquisition and maintenance of power.
      We don't necessarily do this consciously, but we do it just the same.

      It has always been thus, and it's why so many very obviously flawed ideas have, at different times and in different places, held sway, and it is why so many good ones have been distorted, perverted or otherwise undermined. The price of liberty is rarely, if ever, another "better" idea.

      In the meantime, gold continues to be rather seriously underestimated and misunderstood. It is simply not fair to place it into the same category of "faith" that our present confidence (fiat) game operates on.

      The hard money system certainly had its flaws, but it was not the kind of abstract system-and therefore, for that reason, and others, not prone to the most egregious fraud- that our present (dying) system is. To the extent we can make comparisons, its track record holds up well against what we have had of late. The Real Bills regime, for example, which was employed for purposes of trade, worked very well, and it would likely work well again. Seems we've had this discussion before, so, pardon me for running over already well trodden territory.

    22. The price of liberty is rarely, if ever, another "better" idea.


    23. Nope, Edwardo, we definitely DO NOT AGREE on this one...
      We are not JUST a motley assemblage of "base" drives that our language throws a thin veneer over.
      Because our language throws a definite kink into those "base" (!) drives.. It modifies them, if you like.
      You are saying that... because you can touch "gold" it is less abstract than paper money ?
      But... you can touch paper money too, now, can't you ?
      (Now, you can't touch the money that is running all over our computer screens, that's for sure...)
      WHATEVER your society consensually decides will be the measure of value, and used for exchange, REMAINS consensual, and BEING CONSENSUAL, it CAN be challenged and changed (over time...).
      Is gold valued as... a measure of exchange (what the economy needs TO KEEP GOING) or as a vain, futile attempt at assigning absolute and intemporal value ? Not the same thing at all, in my book.
      Hey, Edwardo, I thought you would enjoy hearing how... FREUDIAN you sound in your statement about those "base" drives.
      THAT'S the PART of Freud's theory that I have dispensed with. (I no longer.. BELIEVE in it, if you like..)
      Because... it is a JUSTIFICATION for melancholy and pessimism.
      We need to feel GOOD about ourselves these days, (and that is not the same thing as running out and buying everything that moves and doesn't, either..).
      Yeah, I've said this a lot, granted, but think about this one...
      HOW MANY TIMES did you fall down when you were learning to walk ?
      Lots of repetition there before you learned how to walk. And talk.
      You learn by repeating. Until it sinks in. (And you gotta keep using it or you will forget it, too...)
      Hopefully some of what YOU say here will eventually sink in to MY head.
      And the reverse.
      That's what.. EXCHANGE is all about now, isn't it ??

    24. My sincere and belated apologies to Freud, who though long dead, can perhaps "hear" me, wherever he is now...
      Those ideas about drives are the vulgarized, predigested ones that the social body has created by trimming a bit here, brutally cutting a bit there, stretching and padding elsewhere to make them fit the preconceptions already floating around in our society...
      Freud was more subtle than we give him credit for.
      But... how would we know ?
      We read cliff notes, don't we ? (Most of us...)

    25. Here's an interesting little piece that I picked up at Barry's BP..... It's worth while taking a look at it.....

      Cognitive Biases - A Visual Study Guide by the Royal Society of Account Planning

      Best regards,


    26. "...CDS can be created out of thin air...."

      Yes....! Once the proceeds are distributed and recirculated, they are re-leveraged, It's like purchasing leveraged assets with leveraged assets.

      Look at the case of Spy Net during the dot com boom... Print your own money, as much as you can, while you can...



    27. Oh Eco, I saw that too and really really like it! Thanks for the referral as I love that kind of reading.

      Be well

    28. PS- Bias is not just in your (my) mind, it is built into the very fabric of your cellular structure.

    29. @ Okie (my apologies all others for using this board as an email. You all can skip my message as it relates to zero-sum, which you’ve all heard enough from me on… Thai, you may be interested in why I/we see your 2+2=4 as seeming obvious to me/us, while you are coming up at 3.)

      Okie, Okie, Okie…. WHY ? Why are you doing this to yourself? I back read the posts, and went to the link that Thai posted about zero-sum. It’s chicken or the egg! Getting him to see our point is as pointless as getting us to see his. (It’s like a debate between a religious person and an atheist about whether G0D exists.)

      This is my final theory… as I spent nearly 2 straight hours in bed last night thinking about it, while trying to fall asleep!!! This would be my Thesis.

      “Time” is the thorn in zero-sum. …fraud, consumption, cost (and/or even opportunity cost, as it relates to both cost, or consumption/return), and various other recognizable anomalies are all enabled as “time” allows the recognition be extended. Cost is actually like the “prequel” to “time”, while zero-sum is legitimized only in a state of frozen “time”, and fraud, consumption/return are the sequels to “time”.

      Ya see, when Thai gives team A the trophy, a string of cost proceeded it. All of which have an externality that can zero sum it. …but for every externality added, there is an infinite cost association added to that externality. It’s infinite. A loop. Cost, zeroed out by an addition of an externality. (that externality then, in turn, brought about another cost, which then further needs another externality to zero it, which in turn brings about another cost… so on and so on….)

      On the forward side of “time”… fraud, consumption/return, etc, (and our exotic ways of leveraging/compounding, legitimizing, and eventually pricing (through inflationary/deflationary and suppy/demand concepts)) are never recognized in a frozen state. When Team A has the trophy, that -1 on the other side continually moves out until it is “Recognized/realized”. Our financial system doesn’t work in a recognized/realized way! Sure, for accounting purposes, we’ve created conceptual freezes… but the actual system is always based on Popeye’s / Whimpy’s concept of: “I’ll gladly pay you Tuesday, for a hamburger today.” That’s how debt works. That’s how our monetary system works, that’s how “faith” works. (deb, if you were reading, that one was for you. p.s. good post by you above.) The externality of that -1 you keep adding to zero-sum is actually extending infinitely until realization. (consumption/return has a depleting +1 and increasing -1 that is thrown off by time, and overall short if recognition of the original -1 is made.)

      I’m sure smarter humans then me have covered this topic and reached the same conclusions I have. If not… is a nobel prize in order? (Reminder, I am not in any way schooled, read or studied on this theory. 2 weeks ago was the first I ever thought of it, so don’t blast me if I’m stealing someone else’s theories that may have already been stated likewise. …and if you disagree with me… that’s ok… I can come up with an externality that mekes me right.

      My final statement on zero-sum activity might actually be best summed up as: Anything that in some way relates to time, can NOT be Zero-sum. Time is constant with no tangible opposite.

      ha ha ha …and as time = money, you need to show me the zero-sum of time to disprove me.

      All the best,
      Miss America – Rich Hartmann

    30. I just reread my post... and can't believe I was able to sumarize what was in my head in under 42 pages.

      You may not think it... (or maybe you do?) ...but that may be one of the most brilliant (or horrific) theories I've ever stated.


    31. Hey Rich...
      You got me thinking there, about Ponzi, and everything..
      You know, the problem is NOT creating out of thin air, the problem is.. WHAT you're going to create out of thin air, now, isn't it ??
      Not all "objects" have the same value.. over time...

    32. Thai:

      If you like that kind of stuff, check out "The Origins of Virtue" by Matt Ridley.... Fairly easy reading....

      Best regards,


    33. Econolicious:

      I considered posting that same link.

      I was even thinking which one of those I could use against Thai. ;)

    34. @Rich:

      I was going to try to send you an e-mail from the link on Seeking Alpha, cut it kept refusing to join me.

      Oh well.

      Anyway, I was thinking that Thai was wrong about the cost of the trophies as an externality because the cost of the trophies was known, and therefore NOT and externality in the sense that i am used to using it (akin to unliquidated damages, because they are not mathematically calculable).

    35. @Eco

      I've read Ridley's "Red Queen", as well as several similar books by Robert Wright such as "Nonzero", "Moral Animal", etc... and others like Dawkins and Pinker, etc... in this same vein, but I've never read "Origins of Virtue" so if you recommend it, I'll pick it up next time I order from Amazon.

      @Okie, use all of them. It would be no fun if you didn't. ;-)

      And I don't think you and Rich are actually on the same page though I readily admit I might be wrong.

      @Rich, I've been reading up on the paradox of conservation laws in relativity and I still keep thinking we are in one of these paradoxes but then you say something that confuses me.

      You are absolutely correct that I am holding "time" as you say constant (really a constant background). And I can see how we could get very different results if the background were changing and or time was not constant between two different observers and I keep thinking you must mean this.

      But then you talk about "realizing the loss" and further that "time is constant" and this is where I am having a hard time putting myself into your perspective.

      If you realize the loss then I think the system now needs to include where that realization has occurred.

      If time is constant, (and PS- I don't think it really is between any two people... Indeed I think notions of time are one of the primary ways people differentiate evolutionarily in the human social ecosystem but that is an entirely different topic), then I have a hard time seeing a relativity paradox.

      Can you hum a few more bars about why you think time makes this non-zero? I am trying to see your view, honest.

    36. Wait a minute...

      When you say finance is non-zero sum, are you saying it is non zero-sum because the models finance uses to describe things are inexact e.g. "Our financial system doesn’t work in a recognized/realized way!"

      Are you using non-zero sum to mean inexactness?

      If you are, then we absolutely agree (medicine has exactly this same problem). But model inaccuracy/inexact description of reality is not the same thing as non-zero sum, at least the way I have come to understand and discuss things.

      Is this what you are saying?

    37. About zero sum and time...

      Entropy - the ultimate non zero sum concept within the 2nd law of thermodynamics - is also an excellent definition of the vector of time.

    38. Nope, Edwardo, we definitely DO NOT AGREE on this one...

      We are not JUST a motley assemblage of "base" drives that our language throws a thin veneer over.
      Because our language throws a definite kink into those "base" (!) drives.. It modifies them, if you like.

      -We are complex to be sure, but the drives are called base, not because they have a crudeness about them, but because they are evolutionary imperatives on which everything else rests on and rotates around.

      As for language modifying those drives, I'd say it obfuscates them more than it modifies them. Language is tool, a very sophisticated one that we have developed over the millenia, but I don't see it as one that modifies our essence, though it might, very occasionally, act as a leavening agent in relations between people. At other times, not so much.

      You are saying that... because you can touch "gold" it is less abstract than paper money ?

      -Let me check and see if I said that. No, I didn't.

      Paper money should be nothing more than a proxy claim on something that has an intrinsic value, that no one has a monopoly on, and that is no one's debt or liability. Gold has managed that function better than any single object throughout man's history. Why that is is something of a mystery, and perhaps one day someone will fully explain it. I have a few ideas, that run along the following lines:

      Gold's beauty when fabricated in conjunction with its relative lack of utility-though it is highly ductile- make it a perfect choice to act as a store of value. It's why silver is more problematic functioning as a monetary store of value. Silver has tremendous industrial utility.

      Gold can be debauched, but it's vastly harder to do than it is with fiat currencies. Purveyors of three card monte games writ large and small have been trying to destroy gold's place for eons, but they can't succeed for reasons that should be apparent by this point in human history.

      Hey, Edwardo, I thought you would enjoy hearing how... FREUDIAN you sound in your statement about those "base" drives.
      THAT'S the PART of Freud's theory that I have dispensed with. (I no longer.. BELIEVE in it, if you like..)
      Because... it is a JUSTIFICATION for melancholy and pessimism.

      -I see. So you are saying that you have dismissed these stark and inconvenient truths because they have a marked tendency to engender in you melancholy and pessimism. That's not really an argument, but it's certainly understandable as part of a coping strategy.

      We need to feel GOOD about ourselves these days, (and that is not the same thing as running out and buying everything that moves and doesn't, either..).
      Yeah, I've said this a lot, granted, but think about this one...
      HOW MANY TIMES did you fall down when you were learning to walk ?

      -I don't remember, which either means that my cognitive growth and development at the time precluded remembering, or I fell down too many times on my wee heed and my memory chip was impaired.

      Lots of repetition there before you learned how to walk. And talk. You learn by repeating.

      -Careful, I'm a tad OCD.

      Until it sinks in. (And you gotta keep using it or you will forget it, too...)

      -Well, to quote The Bard, who I know you are quite fond of, most of us learn our lessons not wisely but too well.

      Hopefully some of what YOU say here will eventually sink in to MY head.
      And the reverse.
      That's what.. EXCHANGE is all about now, isn't it ??

      -Yes, I speak and you listen. Just joking.

    39. Hey, this is really getting interesting here today..
      Couple of questions...
      What is the difference between...
      "What is the meaning of the word "time""
      "What is time ?"
      Different universes. Different kinds of consciousness.
      On the meaning of the word "time"...
      It means something different according to whether you are MEASURING it and recording its measurement on clocks, watches, etc etc,
      or... growing crops in a field, for example...
      Those different meanings, we conveniently clump them together under the syllable "time" but... WHAT TELLS US THEY'RE THE SAME THING ??
      And... how do the tools you invent create the thoughts you have in your head, and inflect your consciousness ?
      No, Edwardo, language is NOT a tool.
      When the dolphins are chirping together, are they using a tool ? Poppycock.
      Language is an organic, living PART of us.
      WE are language, IT is us.
      We haven't GOT language...
      Interestingly enough, it is this THOUGHT that we've got language as something outside of us, and parallel to our physical bodies that is creating so much of our... spiritual and metaphysical suffering these days.
      A FETUS is already responding to language in its mother's womb. A FETUS can already differentiate between language and music, for instance, and random noise. And by the time you were two years old, you already knew how your language worked, and the incredibly complicated metaphysical, linguistic operations that organize it. That's NO tool.
      And I was only partly right when I said that the problem was NOT creating out of thin air, it is WHAT we create out of thin air.
      A BIG part of the problem is our PERCEIVING that we are creating out of thin air.
      It is a consciousness problem.
      We are no longer NAIVE about our money.
      And we have LOST FAITH in it, because we are no longer naive.
      Geez... we get further and further out of the Garden all the time..
      One last question worthy of sci fi...
      Since Beneveniste noticed that the Greek categories of thought corresponded to the Greek categories of language...
      How do we know that we are not observing OUR OWN CONSCIOUSNESS when we are talking about physics and thermodynamics ??
      I will grant you that it can be rollicking fun.
      The "aristocracy" has always had fun this way...
      But I keep repeating myself..
      Goody.. my spam word.. kings

    40. ..."How do we know that we are not observing OUR OWN CONSCIOUSNESS when we are talking about physics and thermodynamics ??"

      How do you know that you are observing anything OTHER than your own consciousness, or even that it is your OWN consciousness?

      Cogito ergo sum.

    41. Hey Hell..
      That's the problem with... OBSERVING, now, isn't it ?

    42. Yes,it's an organic part of us, but it allows us to "do things", many things, and in in that sense, it is a tool. albeit a very sophisticated one. It serves a purpose as do most things on or about us.

      To wax rhapsodically about language in any other way is misguided. one might as well get all gooey about one's hair, toenails or auditory functioning which are, in the aggregate, far less glamorous or useful appendages/attributes than our hard wired ability to communicate through spoken language.

    43. Both worthwhile taking a gander at...

      It's all about fraud, and the elected officials and the mainstream media that facilitated the fraud.....

      William K. Black on Fraud

      Why the 'Experts' Failed to See How Financial Fraud Collapsed the Economy
      By James K. Galbraith
      May 16, 2010

      Is the fraud variable a component of your economic model....?

      Here's something they don't teach you at Harvard......


      Best regards,



      So true

      Even this is fractal ;-)

      Be well

    45. Edwardo, You don't be dissing the hair!

      @Hell re: "The Law"

      0th law: You have no choice, you have to play the game whether you want to or not.

      1st law: You can't win.

      2nd law: You can't even tie... except on a VERY cold day.

      3rd law: It NEVER gets that cold.

      So Rich says it's less than zero since he can't break even.

      ... I feel like I'm talking to Maxwell's Demon.

      And "yes" the increasing entropy forming on this subject thread definitely defines a vast vector of enjoyably wasted time.

      And while we might get that time back, sadly we will never remember if we do. ;-)

      Be well

    46. Thai, I knew I'd seen that article somewhere before, but I couldn't recall where. I guess I was having a bad hair day.

    47. Aw Edwardo...
      You're trying to tell me that THERE'S NO DIFFERENCE between William's "Merchant of Venice" and Hayek's books on economics ??
      Or what about..
      "When I do county the clock that tells the time
      And see the brave day sunk in hideous night,
      When I behold the violet past prime
      And sable curls all silvered o'er with white,
      When lofty trees I see barren of leaves,
      Which erst from heat did canopy the herd,
      And summer's green all girded up in sheaves
      Borne on the the bier with white and bristly beard ;
      The of thy beauty do I question make
      That thou among the wastes of time must go,
      Since sweets and beauties do themselves forsake
      And die as fast as they see others grow ;
      And nothing 'gainst Time's scythe can make defense
      Save breed, to brave him when he takes thee hence." Sonnet 12
      Come on, Edwardo. Gimme a break.
      Utilitarianism is pornographic.
      And not poetic either...
      Remember where the word "poetry" comes from.
      I'll let you take over on the.. GREEK, Hell...

    48. Ugh. Typos. That's "count" and "then".

    49. Funny enough, I used the Bard today in explaining why a terminally insolvent person should simply default and walk away from her debts (she owes $140,000 on a house with a market value of $70,000).

      "It's not like you pledged a pound of your flesh as collateral for your loan", I said...and concluded "It's only money" (that you borrowed).

      Poetic? Hardly. Poiesis (the correct greeklish spelling) means Creation, BTW...

    50. Speaking of poesis...

      I'm not sure if any of you follow Craig Venter but if not, you might want to read up on him a little. I swear that guy will rule the world one day as he simply does not sit down.

      Just in 2000 he reports the first map of the human genome and he's been on a tear ever since.

      Well, today he claims he finally did it. (and I have no reason to doubt him)

      Frankenstein here we come

    51. The good news is...
      Since we are a species that tends to follow trends...
      Hubris is going out of style.
      For the time being, at least.
      I just spent two and one half hours translating "Macbeth" into French with friends.
      The witches' speech at the beginning of the fourth act.
      Talk about counting angels on the head of a pin...
      Half of a page maybe.
      LOVE IT.
      (Ew, yuccky, I have been noticing lately that you guys' problems with apostrophes are inflecting my speech..)
      I agree with you on money and the pound of flesh, Hell. Good advice. William would have approved too.
      As it turns out... he was a rather savvy businessman...
      Reasoning the way he did about money, (and doing it with a poetic flourish to boot...) I can understand why.

    52. @Hellasious:

      Please be very careful about such advice. Walking away may not be such a good idea in states that recognize defciency judgments. (Oklahoma does recognize them, by the way.)

      In such cases, debtors should definitely talk to a bankruptcy attorney before they make a rash decision.

    53. Deb, your tendency is to exalt mankind, and mine, well, isn't.

    54. Our revue de presse this morning was on Craig and his.. hubris.
      Poiesis ?
      I don't particularly care for Craig's... STYLE, should we say ?
      Craig needs to read... "Oedipus". Sophocles.
      I bet he doesn't even know it exists...
      Scientific materialism is NOT DEAD, by the way.
      I even heard somebody say something along the lines of.. "science is neither good nor bad, it's a tool".
      Like... "money is neither good nor bad, it's a tool".
      That sounds so.. LOGICAL. So... RATIONAL.
      Why do I get this unpleasant feeling that BOTH of these so called "tools" have taken control of US, and are taking us down ?? Just like Frankenstein's "monster", incidentally.
      Gotta be careful what you invent, because IT invents you too, right ?
      I'll be out of town until Monday.
      A little... disintoxication stint.
      Teetotaling is good for the literary soul.

    55. Oh, and Edwardo ?
      Somebody over there on my loony forum where I spend a fair amount of time... evangelizing asked me what "belief in God" was "good for".
      And I said... it sure beats the hell out of physics for keeping you warm in the midst of that black, interstellar night.
      The consolation factor.

    56. "Where did all this additional debt go (i.e. what was it used for), since it didn't generate appreciable incremental economic activity?"

      Two guys make a bet at a casino, or better yet two banks enter into a CDS agreement neither understood or could pay for.

      The bill comes due for one of the parties and I get the bill.

      Money is sucked from my life and given over to a US bank that doesnt lend to anyone.

      You know JP Morgan is now offering $100 just to open a checking account. Capital One was offering a similar deal.

      Two scuzy corps who want to maintain access to the discount window under the guise they are serving the tax-payer.

      I am actively converting over every one I know to credit unions.