Category Archives: History

Bizarro Robin Hood

Via Zerohedge: “The Reverse Robin Hood Construct

It seems the entire global economy has been subverted by the rich robbing from the poor.

It’s been said a sucker is born every minute, but should our economy be based on their victimization?

I can’t see how this won’t end badly.

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Can One Man Stop Goldman?

Matt Taibbi with the help of Rolling Stone:

On giving-Goldman a Chance

Iran – How Not to Rig an Election

Iran Election Video Update

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There had been some pundits predicting that Friday’s Presidential Election in Iran would devolve into their Tiananmen Square.

Given the Anti-Iranian propaganda we hear in America, I figured the Iranian theocracy was a pretty tight ship and they would easily rig this election and insure a peacful acceptance of whatever result the Grand Mullahs desired.

Turns out I was wrong as Iran is indeed seeing widespread urban protests, disrupted communications and the ongoing expulsion of foreign reporters.  As the above video attests, the Iranians are bad at both rigging elections and suppressing reporting on rigging an election.

All this could have been easily avoided had Iran just followed America’s lead in rigging an election.

Imagine this scenario:

Following the closing of polling booths Friday, the government should have gone into delay mode.  Whether blaming tremendous voter turnout or a close election the government could have spent the next weeks and even months counting votes and rounding up overly vocal protestors.

If Iranian leaders had known recent American history they could have used the example of of our election of 2000 to learn the value of a cooling off period when stealing an election.  Imagine our protests had Bush been declared the winner on election night 2000 with a unthinkable 65% to 35% margin of victory.  Even our uneducated electorate could have smelled that stinky a fraud.

Combine the delaying tactic with the anti-protest tactics of NYC Mayor Bloomberg.  The weeks of delay  could have allowed the Iranian authorities the dual benefits of being able to round up protestors and inserting agent provactuers to sully the oppositions reputation.

On Transparency…

Whether we are talking about Bank balance sheets or US Gov’t torture photos,

the absence of transparency reveals its own truth…


Meet the new bank

Same as the old bank

Won’t Get Fooled Again

Money

Mark to Market

The next great mistake in American Accounting History may occur next week.

It’s all about Mark-to-Market which, while as boring as a cow and some gold, also has as much societal importance as the first moment when some genius traded his gold for some cow.

Mark to Market (MTM) is a term used with investments where an owner assigns a daily value to a particular asset or investment. An easy example would be looking at the final price today for say, IBM, and then using that number to value your 1000 shares.

So today, March 20th , with IBM closing at $92.51 , the MTM value of your 1000 shares would be $92,510. Marking IBM to market is easy because it trades a lot every day. Imagine trying to MTM an item like a baseball card.

Now today we are hearing calls to suspend the requirement that banks MTM their investments in things like mortgage securities and credit default swaps (CDS). We all know what a mortgage is, but valuing the securities can be difficult, especially on a daily basis, and a CDS is even less frequently traded, if at all.

We don’t even need to know what a CDS, all we need to know is that the market is now saying many of them are virtually worthless. Of course the banks, and CNBC, insist that they’ll be more valuable once this storm passes.

Imagine the market today had priced IBM at $5 per share. We can disagree about the appropriateness of that price, but if we mark your 1000 shares to market, accounting rules force you to use this price. Your $92,510 just became $5,000. Add the caveat that you borrowed $90,000 to make the initial purchase and we quickly see how important the term Mark-to-Market really is.

Hence the whole debate about the MTM requirement.

Initially, I opposed suspending MTM because I believed that, similar to a fire sale; the securities these banks hold are indeed permanently damaged, even in some cases actually burned. I had other qualms as well. These same banks demanding accounting relief used these MTM rules to force their own customers and other counter-parties to sell at these supposed fire-sale price, using the ubiquitous margin calls of the last two years.

Then I had an epiphany.

We should suspend MTM, just not for the banks and billionaires.

Is your $600,000 house now supposedly worth $350,000? Do you have loans of $400,000? Don’t worry your little taxpayer head off.

We will suspend MTM for you. Just walk right into your bank and tell them: “I’m not interested in selling my house and my government told me you have to lend me money based on the value I assign.”

Who is a long term investor if not the homeowner? Suspending MTM and assigning “true” values to these assets will not only solve the underwater borrowing, but the tax shortfalls of local governments as well. Hey, homeowners can’t have it all; if you tell the bank your House is worth $600,000, you gotta pay the taxes.

Now, if you are of the not so rare breed that isn’t underwater, at least 80% of the population, then you can tell the bank whatever you want. No mortgage, just tell them your house a piece of s$#t and your taxes might be zero.

Maybe those crazy bankers are right after all about suspending MTM.

Unemployment

High unemployment is not only bad for the newly unemployed. It also forces down salaries for those still working by increasing competition for jobs. Simple supply and demand.

So all those “demanders”, owners and consumers, will now get to pay less for the labor portion of the production equation.

It is important to remember that a large portion of the populace thought the economy leading to the Great Depression era was just great, the gap between rich and poor, like today was approaching a good monarchy. Excepting the anarchy that punctuated the end to their laissez-faire policies, we might have already completely regressed to a serf type employment arrangement. Continue reading