ALEXANDER: You broke the ship. You broke the bloody SHIP! Wow! Amazing things happening these last few days in the financial world, with markets going nuts all over. We ordinary joes have learned a lot about how our betters run the world -- we can't switch away from a fossil fuel economy because it will be too expensive, there's no money for education, our infrastructure is falling down, health care for every American is impossibly expensive and will result in a huge government bureaucracy: but hundreds of billions will be available immediately for saving financial firms -- run now by the government -- ruined by their own criminal greed. You look at the mess on Wall Street, and you can't really blame me for being skeptical when the Establishment says its China policy is on the right track.
Here in Taiwan, after the National Stabilization Fund management committee Wednesday said that the government would not activate the National Stabilization Fund, the government overruled itself and announced that in fact it would make the $500 billion fund available to shore up the stock market.
The government decided to activate the state-owned National Stabilization Fund (國安基金) yesterday, an overnight change made ahead of the stock market opening, but it refused to reveal details of how the fund would act.
“The economic fundamentals of this country are still stable, but in view of the sharp decline in the US stock market on Sept. 17 and possible volatility in international financial markets … conditions are right for the fund to enter the stock market,” the fund’s management committee said in a statement.
The press release was issued at 10:10am, just over an hour after the TAIEX had opened down 242.82 points from its close on Wednesday, a drop of 4.19 percent. The benchmark index gained as the day progressed, ending 158.92 points down from Wednesday at 5,641.95, a drop of 2.74 percent.
Meanwhile Savior Ma's magical healing powers being temporarily stymied by the Forces of Miasmic Darkness emanating from Wall Street, he called on Vice President Vincent Siew to save Taiwan:
President Ma Ying-jeou (馬英九) yesterday assigned Vice President Vincent Siew (蕭萬長) to head an economic advisory task force charged with providing the Executive Yuan with recommendations on improving the economy.
Siew said he hoped the task force could meet soon, preferably next week, but that there were still many details to be worked out, which he hoped to finalize in the next couple of days.
Ma emphasized that the task force, which will meet bimonthly, will not be a decision-making body but a communication and consultation platform between the Presidential Office and the Executive Yuan as well as local and international experts. It would not infringe on the executive power of the Cabinet.
The stock market here has assumed an iconic status here, all out of proportion to its actual importance to the economy. In a nation where cram schools broadcast the scores of their high achievers on neon signs outside the school doors, the stock market functions more like a perpetual midterm grade that the national economy must constantly pass, than an instrument to raise capital for local firms.
Meanwhile, out in the real economy, where the rubber of infrastructure spending meets the road of high materials prices, Polaris Securities announced that it expected growth to drop to 4.1% this year. Note that this estimate was based on the assumption that government spending would account for 36% of fourth quarter growth. President Ma expects that infrastructure spending will raise GDP 0.5% this year, but don't count on it: construction companies, already in an industry-wide crisis here, are balking on bidding because of rising prices for raw materials. If Ma doesn't get his infrastructure boost, growth will probably slip below 4%.
The recent visit by typhoon Sinlaku to our shores, leaving 12 dead and wrecked buildings and bridges, has highlighted one of the Administration's most urgent problems: the appearance it gives of being deaf, dumb, diffident, dilatory, and indifferent. Ma needs to shed the Confucian scholar-emperor role, and get out there among the people, and lead.
[Taiwan]
According to Rush the big fat liar (yes, I listen to Rush for 5 mins each day just like I read this blog; I guess I like punishment), it is all those liberals on the Wall Street's fault (the NE liberal states as he called it)...please let the banks fail, I cannot morally support the bank's bail out with tax payers' money that's to be used for social programs for the poor.
ReplyDeleteWhile we are at it, I am getting into SKF when the SEC just banned short sells. The ban last till Oct 2, and you can quote me on it that this government bail out will be a waste of money and proven to be one of the greatest mistake that our corrupt (stupid) government made.
Some financial links to share:
ReplyDeleteThe Potential End Of America's Government - Karl Denninger youtube
And The Government Issues Its Edict - Karl Denninger youtube
(follow-up forum link)
Ron Paul Discusses Financial Turmoil and the Fed 9/18/08 youtube
Panic, Consolidate, Game Over - Jim Willie
The Point of No Return - Mike Whitney
All Roads Lead To Hyperinflation - Bob Chapman
Special Status and the $138 Billion Riddle? Rob Kirby
Financial Collapse and Destructive War = J. R. Nyquist
>There is only one conclusion to all this and it ain't good. (US market crash (~october) due to MASSIVE liquidity withdrawal).
Johnny Neihu had it right this morning when he wrote the STAPOC is coming to Taiwan.
You can forget about arms sales and any state dept TRA dialogue. It is meaningless at this point. We may as well face the fact and talk about what is to come.
If an American bank gives unlimited credit to a gang of gambling addicts, should we then be surprised when that bank goes bankrupt? And is it the task of the government to take over unpaid gambling debts to save that bank? One would not think so. Still this is what happened in the US - and is most probably still happening elsewhere. Central banks and financial authorities have rolled in ever-bigger anti-bankruptcy defense shields until they finally had to resort to the final savior: the money-printing press. From now on, not only are the drinks in the casino for free, the gambling chips are being liberally distributed also. And if the chips run out, please come back – that’s the clear message. The US had to choose this insane remedy. It shows how close we must have been to the total implosion of the system.
ReplyDeleteWhat should the public feel now? Relief that a catastrophe has been averted? Anger about the monumental gains made by the smartest bankers at the cost of taxpayers? Fear for the future now that a remedy for one disease might become the cause for the next? Judging from press editorials in the US and Taiwan: relief. A combination of all three with an emphasis on the latter in Europe.
A soon-to-be recovery of financial markets has become hollow because it will say nothing about the health of economic or financial systems. Here and elsewhere, the same gamblers of the past are already speculating that the current crisis has reached rock bottom and are preparing their new gambling chips. What will follow is new instability on an even higher level. In Europe, the prestige once associated with American-style capitalism lies in shatters. Some major European newspapers report that a large amount of the money with which the American government is taking over the huge debts has to be borrowed from the same foreign governments and institutions that already financed American spending fever in the past. Why is there no tribunal at which those guilty for the biggest scandal in financial history have to explain themselves?
"Why is there no tribunal at which those guilty for the biggest scandal in financial history have to explain themselves?"
ReplyDeleteBecause everyone has their hand in the cookie jar. No admin is to blame in the US. The Republicans and the Democrats have profited and both have sided with the businessmen in turn. It is not like nobody saw this coming.
Why is there no tribunal at which those guilty for the biggest scandal in financial history have to explain themselves?
ReplyDeleteI have no doubt that someone will eventually be hauled in front of the cameras to take the blame, but the real culprits of this mess are the people at all income levels who believed that they could get something for nothing, live beyond their means, and were willing to pander to, or support someone who pandered to that belief.
I know its been discussed briefly in the past, but it seems like the idea of China creating a pan-asian currency is back on the radar again. I wonder if this is the end-game of Ma's economic policy? ~ (only discussed at kmt/ccp grand poobah meetings in China??)
ReplyDeleteI am guessing that if we see the KMT allow Chinese banks such as the BOC into Taiwan, this plan may take hold. If the US banking system fails, that could mean withdrawal of US military from SK and JPN which would force them to join in.
P.S. I heard the name for the $700+ billion dollar bailout will be:
"No Banker Left Behind"
On June 10 Taiwan fishing boat sinks after collision with Japan patrol boat, the issue of Diaoyutai islands fiasco just play an excuess led to posturing about threatening war with Japan, a long-time ally and one of the best sources of tourism to Taiwan. That certainly will not help the economy but just show really existing face of this authoritarian nationalist Ma, and the unification are now on processing in Mr. Ma's goodwill toward PRChina. We should feel no unexpected happening with ture nature of Ma especially after a long time with a lot of effort to get into presidential position , history tell us the son and the father, Ma surely remember what dad's will, bring Taiwan under Great PRChina.
ReplyDeleteThe days of the Chinese Nationalist Party's (KMT) control of indoctrination, propaganda and the media are long gone, but that does not mean that the KMT does not keep influencing Taiwanese voters. Witness Taiwan’s last presidential election, where many sheep-like voters were led to believe that Taiwan’s main problem was its economy and that former president Chen Shui-bian was solely responsible for holding it back.
I would call this response a case of Stockholm Syndrome exhibited through a misguided loyalty resulting from Taiwanese being held hostage for 50 years by KMT one-party rule and indoctrination. Another and simpler explanation is that voters simply failed to do their homework.
At election time, the constant refrain and mantra in Taiwan was: “Our economy is so bad, we need a change.” In reality, with a growth rate of more than 5 percent, Taiwan’s economy was doing much better compared with many other places — and this is where voters first failed at doing their homework. So it was easy for them to be set up by the KMTs ace flimflam man, Ma Ying-jeou, who convinced them to vote for him. Ma promised he would lead Taiwan to catch up with or come closer to the inflated numbers of the People's Republic of China.
Ma was elected and the corner was supposedly turned. Taiwan was well on its way to the Promised Land. Unfortunately, the TAIEX and economy are immune to flimflam and the economy nosedived. Some began to see the light, but others still listened to the flimflam man. The argument now changed. Before the election, even though the world economy was bad and Taiwan's economy was fair, it was not a global problem; it was Chen's fault. When, after the election, Taiwan suddenly discovered that the world economy had been bad all along and when Taiwan’s economy became worse, this was not Ma's fault, it was a global problem. Logic? No, but that also is not a strong point of many Taiwanese voters.
There were some who sought to defend their choice to vote for Ma; they countered that the real election issue was corruption in Chen's family, corruption that seemed to be a problem that only afflicted the Democratic Progressive Party. Ma, after all, had been acquitted of corruption. But wait; let's go back to logic again. After appeals, Ma's secretary was thrown into jail for misuse of state funds, but it was Ma's bank account that had increased by more than half a million US dollars.
Wouldn't one think that the Harvard-educated Ma would ask where that extra half a million in his account came from? Is that not logical?
Further, why would Ma's secretary go out of his way to cheat people out of half a million dollars and put it in Ma's bank account? Is that logical? Is it devotion? Or is it simply taking the fall? Still, for Ma's staunch supporters, the flimflam man was pure as snow.
Let us return to Taiwan's tanking economy. The ball remains in Ma's court, so what is he doing? Desperate times call for desperate measures. However, it is not Taiwan's economy that is really most desperate right now.
What is desperate is Ma's reputation. His 6-3-3 campaign promise has for all practical purposes been jettisoned barely a month after election. Politicians are generally not expected to be held totally accountable for everything they promise before elections, but bailing out after one month is a bit too soon. This has left Ma with only one card left in his hand: to stake everything on direct links and tourists from China — and do it fast. So with little forethought and hardly a glance at the big picture, Ma has plunged ahead and ignored the risks to the people, the nation and the economy.
The first group of tourists has come with not too much trouble, but there is one hitch: Beijing has demanded that it do the screening and only allowed 1,000 people to visit a day, rather than 3,000. Even 3,000 tourists had raised questions as to whether it would help the economy, but 1,000? It will take a lot of flimflam to make that plausible.
In the meantime, what risks are involved? Health is a big one. The first wave of Chinese tourists was made of wealthy and healthy individuals, but has anyone done their homework on what can happen when the creme de la creme of China have come and gone, only to be replaced by the average Chinese tourist? Does anyone recall when Hong Kong opened up its Disneyland to average Chinese tourists? Not a pretty picture, but homework is a bit too hard, let’s trust the flimflam man.
What other things have been sacrificed with all this focus on getting some people from China here? First, the Taiwanese president who before the election said he would staunchly defend Taiwan's sovereignty now says he does not mind being called “Mr Ma” rather than “President Ma” by the Chinese — which doesn't have much of a sovereign ring to it. Could tourism be used as a cover to bring in spies and military personnel from China? Don't even ask.
And the other matters of state? They seem to be sliding. When he was elected, his Cabinet members were sometimes referred to as the “Boy Scouts” because of their lack of previous experience. On paper, Ma's team had better credentials, but in the first month or so, their performance has been more like “Cub Scouts” than Boy Scouts. Ma's main focus seems to be only on not offending China.
Then there was the cry that Taiwan's airports were not up to snuff for the Chinese tourists and that the infrastructure has been let to stagnate. Taipei's Songshan Airport in particular was singled out as not being ready. Did anyone do his homework on who the mayors of Taipei have been for the past 10 years? Who was in charge and let this slip? Flimflammed again.
Taiwan is not done; in addition to flimflam, the voters are being set up for the fluff that will follow. Now that we have a new administration, we are going to get pandas. It's homework time again. Pandas may be cute, but they are fluff; not only are they fluff, but they are expensive fluff. They come with an expensive rental price tag that no one talks about. China rents them out at millions of dollars a year, plus they need an expensive environment and care. Whose tax dollars will be put into that economy?
The argument will come and had been used by several zoos around the world, that the zoo attendance will shoot up and people will spend money on T-shirts, stuffed pandas made in China and so on. Yes, it is true attendance usually goes up for the first year or two. But then what? Continue with your homework and see how many zoos buckle under the long-term costs. And the rental fee? China might waive that if Taiwan admits it is a province of China. Yet in preparation, Taipei Mayor Hau Lung-bin, a KMT authoritarian nationalist member, has already made a trip to Shanghai on taxpayers’ money to work out an exchange between Taiwan's orangutans and gibbons and China's golden monkeys.
Hopefully their monkeys will spend more dollars here than our gibbons will in China.
Flimflam and fluff, you get what you vote for. If Taiwan loses its sovereignty, health and dignity in the process, well at least Ma did keep one campaign promise, (Mr. campaign slogan, TAIWAN TOWARD WEST, which mean eventually unify with PRCHINA) neither for Japanese and Taiwanese that is a laughing matter.
"the real culprits of this mess are the people at all income levels who believed that they could get something for nothing, live beyond their means, and were willing to pander to, or support someone who pandered to that belief."
ReplyDeleteThis is the one reason why I would like to see all of those banks go under. The rational side of me knows that there are many honest people who did not attempt to "live beyond their means" and so would be hurt by this, which is why I can't be totally against the bailouts. But really now, there are way too many Americans who have been irresponsible with their money for way too long. In fact, I know that if Americans could just get back an iota of fiscal responsiblity, they would indeed have the strongest economy on earth for decades. Tant pis! Too many fools out there.
I have to second Haitien. I remember back when the bubble was inflating, a friend of mine was seriously looking for a second house to buy. He was convinced that with the low-interest mortgage he would get, it could be nothing but a money-maker for him.
ReplyDeleteLuckily, he didn't find the situation he was looking for, or he'd be screwed today. Unfortunately, lots of people did find what they were looking for, and it turned out to be way more than they could afford.
Both lenders and borrowers share the blame here. The question is about next steps.
Who is to blame:
ReplyDelete1. Greenspan for keeping interest rates artificially low after 9-11 to pull the US economy out of the dot.com bust. In addition, Greenspan recklessly encouraged people to take cheap credit (option arms, etc.) and get into home ownership.
2. Chris Cox and the failure of the SEC. (rating agencies, allowing liar loans, allowing naked short selling, silencing the state regulators that saw what was going on and tried to stop it. (spitzer)
3. Clinton/Rubin for repealing the Glass-Stengal Act that allowed banks and investment firms to merge.
4. Paulson for looking out for his Wall St. buds and the Chinese instead of the American Taxpayers
5. Investment banks and other financial services (AIG,GMAC) for over leveraging assets and creating a quadrillion $ of risky CDSs. (so executives could make hundreds of millions of $ in bonuses.)
6. Fannie and Freddie executives for corrupting the politicians to look the other way while they became an unregulated hedge fund and over leveraged by 60 ~ 80%. (Chris Dodd, Phil Graham, B.Frank, Obama, etc. etc. etc.)
7. Speculators and flippers
8. The FED for just existing and screwing tax payers from day 1
9. Benanke for not acting years ago on something even laypersons (such as myself) saw coming.
10. Predatory lenders who put people into mortgages they could never afford.
11. Home buyers who lied about their income
12. Bush for being a complete idiot and allowing this to happen on his watch
My suggestion is to release all the people in jail today for simple drug possession and toss in every single one of these financial criminals as well as taking back all bonus $. Btw, impeachment should still happen after Bush gets out, this way he can still get thrown in jail and lose all his bennies. (he will prob escape to the bush ranch in Paraguay though ~ I'd guess a lot of people may seek to take him out at some point.)
Any congressperson that passes the upcoming trillion $ credit derivative bailout bill should be driven out of office and jailed. (Obama said he will).
There are other solutions to the meltdown, but the PTB are trying to force a powerplay on us.
P.S.1: Karl's latest: The Mother of all frauds (the smartest guy online, imo.)
P.S.2: If anyone has a couple of nights to spare, a great read is Sinclair Lewis's It Can't Happen Here It's about fascism during the great depression. I know it sounds boring, but its fascinating to see the similarities of then (1935) and today.
P.S.3: Sorry for the linkfest
Some of you must read very different American media than I do. The Motley Fool and Bloomberg have both been writing incessantly about moral hazard and very little about relief.
ReplyDeleteStill, I think the level of panic is somewhat over the top. Very healthy companies have double digit short ratios and indexes themselves are even shorted to a surprising degree. We may well see short squeezes all over the place once the Chicken Littles realize the sky isn't falling.
There are serious problems, for sure. Moral hazard and rising debt are among them. I wouldn't be going out and stocking up on "peak oil survivalist" gear, though.
"Why is there no tribunal at which those guilty for the biggest scandal in financial history have to explain themselves?"
ReplyDeleteThe reluctance of requiremtnts in fully disclosure for inflated assets may be a key. I though the Sarbanes-Oxley would hav had ramification in hand to avoid this catastrophe, or just as a paper tiger itself?
Nah, the Sarbanes-Oxley just keeps otherwise solid companies off the American exchanges. It's both a horrible expense for smaller caps and nearly useless in dealing with the abuses it was supposed to prevent.
ReplyDeleteHahaha, the Sept 18 Taipei Times ran an editorial lambasting Ma for attending the inauguration of the chairman of a biotech company rather than visiting typhoon victims. The same day the China Post ran a front page picture of Ma comforting typhoon victims - trying to portray him as concerned for the masses. But it was easy to see from the photo that it was clear blue skies and everyone had sunglasses on. The typhoon was long gone.... Hahahaha!
ReplyDelete3. Clinton/Rubin for repealing the Glass-Stengal Act that allowed banks and investment firms to merge.
ReplyDeleteWrong! Glass-Steagall Act was appealed by a bill introduced by Phil Gramm, a Republican, and James Leach, also a Republican. The votes come down exactly to the party line in the senate. Democrats voted all NO while all Republicans voted YES! The final version passed after a Republican controlled Senate and Congress consolidate their bills, and with 2/3 majority YES vote (yes, stupid democrats), Clinton can't veto it.
Btw, it is expected for some extreme democrats to bail out that and bail out this. However looking at your list, let's see who is to blame. Greenspan is a Republican. Benanke is a Republican. SEC Chair Cox is a Republican. Almost all large bank CEOs are Republicans except the Fannie and Freddie losers.
Now you wounder why did the banks always fail during the Republic administration (S&L in the 80s and the banking crisis today)? Btw, there is very good picture of McCain partying with Charles Keating online these days :).
Correct, Glass-Steagall. My mistake for pressing submit too fast. I would also add the L3 asset issue to #2.
ReplyDeletebtw, if you dig deeper than just the wiki explanation on Glass-Steagall, you will find that Citigroup was one of the main FIRE companies behind the repeal. Why? because they were the banker for Enron and Phil Gramm was the voice of Enron in congress. (his wife was on the BOD of Enron). Ruben (former GS'er like Paulson) took a fatcat job at Citi shortly after the act was repealed. They are all a bunch of crooks.
The New York Times seems to have identified the culprit:
ReplyDeleteFannie Mae Eases Credit To Aid Mortgage Lending