Posts Tagged ‘Simon Johnson’

The Age of Mammon

"Never have so few, done so little, and made so much, while screwing so many."  Jim Quinn

Courtesy of Jim Quinn of The Burning Platform

The Age of Mammon

“Financiers – like bank robbers – do not create wealth. They merely distribute it. While the mob may idolize holdup men in good times, in the bad times it lynches them. What they will do to the new money men when their blood is up, we wait eagerly to find out.”  - Mobs, Messiahs and Markets

  

As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.

These are the robber barons that represent the Age of Mammon. The greed, avarice, gluttony and acute materialism of these American traitors has not been seen in this country since the 1920′s. The hedge fund managers and Wall Street bank executives that occupy the mansions and penthouses evidently don’t find much time to read the bible in their downtime from raping and pillaging the wealth of the middle class. There are cocktail parties and $5,000 a plate political “fundraisers” to attend. You can’t be cheap when buying off your protection in Washington DC.

Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also. No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You
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The G20’s China Bet

The G20’s China Bet

People walk in front of a construction site at Beijing's Xidan shopping district June 18, 2010. China's economy will keep up its robust pace of growth despite the euro zone debt crisis and may exceed the United States to become the world's largest economy in 2020, an academic adviser to the central bank said in remarks published on Friday. REUTERS/Bobby Yip  (CHINA - Tags: BUSINESS CONSTRUCTION SOCIETY)

Courtesy of Simon Johnson at Baseline Scenario

The G20 communiqué, released after the Toronto summit on Sunday, made it quite clear that most industrialized countries now have budget deficit reduction fever (see this version, with line-by-line comments by me, Marc Chandler and Arvind Subramanian).  The US resisted the pressure to cut government spending and/or raise taxes in a precipitate manner, but the sense of the meeting was clear – cut now to some extent and cut more tomorrow.

This makes some sense if you think that the global economy is in robust health and likely to grow at a rapid clip – say close to 5 percent per annum – for the foreseeable future.  With high global growth, it will matter less that governments are cutting back and unemployment will come down regardless.  Taking this into account, the IMF is actually predicting (as cited prominently by the G20) that budget “consolidation” actually raise growth over a five-year horizon.

There is no question that some weaker European countries, such as Greece, Portugal, and Ireland, had budget deficits that were out of control.  Particularly if they are to pay back all their foreign borrowing – a controversial idea that remains the conventional wisdom – these countries need some austerity.  But what about those larger countries, which remain creditworthy, such as Germany, France, the UK, and the US?  If these economies all decide to reduce their budget deficits, what will drive global growth?The answer in Toronto was obvious: China.  China is only about 6 percent of the world economy, measured using prevailing exchange rates, but it has a disproportionate influence on other emerging markets due to its seemingly insatiable demand for commodities.  It also has a relatively healthy fiscal balance – and its fiscal stimulus, working mostly through infrastructure investment, did a great job in terms of buffering the real economy in the face of declining world trade in 2008-09.

Now, however, the Chinese government is trying to slow the economy down – there is fear of “overheating”, which could mean inflation or rising real wages (depending on who you talk to).  Chinese economic statistics are notoriously unreliable, so reading the tea leaves is harder than for some other economies, but most of the leading indicators suggest that some sort of slowdown is now underway. 

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Dead On Arrival: Financial Reform Fails

Dead On Arrival: Financial Reform Fails

Courtesy of Simon Johnson at Baseline Scenario 

The House-Senate reconciliation process is still underway and some details will still change. But the broad contours of “financial reform” are already completely clear; there are no last minute miracles at this level of politics.  The new consumer protection agency for financial products is a good idea and worth supporting – assuming someone sensible is appointed by the president to run it.  Yet, at the end of the day, essentially nothing in the entire legislation will reduce the potential for massive system risk as we head into the next credit cycle.

Go, for example, through the summary of “comprehensive financial regulatory reform bills” in President Obama’s letter to the G20 last week.

The president argues for more capital in banking – and this is a fine goal, particularly as the Europeans continue to drag their feet on this issue.  But how much capital does his Treasury team think is “enough”?  Most indications are that they will seek tier one capital requirements in the range of 10-12 percent – which is what Lehman had right before it failed.  How would that help?

“Stronger oversight of derivatives” is also on the president’s international agenda but this cannot be taken seriously, given how little Treasury and the White House have pushed for tighter control of derivatives in the US legislation.  If Senator Lincoln has made any progress at all – and we shall see where her initiative ends up – it has been without the full cooperation of the administration.  (The WSJ today has a more positive interpretation, but even in this narrative you have to ask – where was the administration on this issue in the nine months of intense debate and hard work prior to April?  Have they really woken up so recently to the dangers here?)

“More transparency and disclosure” sounds fine but this is just empty rhetoric.  Where is the application – or strengthening if necessary – of anti-trust tools so that concentrated market share in over-the-counter derivatives can be confronted.  The White House is making something…
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Goldman Sachs: Too Big To Obey The Law

Call to break up the big banks – more to follow. – Ilene 

Goldman Sachs: Too Big To Obey The Law

13 Bankers Courtesy of Simon Johnson, co-author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, at Baseline Scenario 

On a short-term tactical basis, Goldman Sachs clearly has little to fear.  It has relatively deep pockets and will fight the securities “Fab” allegations tooth and nail; resolving that case, through all the appeals stages, will take many years.  Friday’s announcement had a significant negative impact on the market perception of Goldman’s franchise value – partly because what they are accused of doing to unsuspecting customers is so disgusting.  But, as a Bank of America analyst (Guy Mozkowski) points out this morning, the dollar amount of this specific allegation is small relative to Goldman’s overall business and – frankly – Goldman’s market position is so strong that most customers feel a lack of plausible alternatives.

The main action, obviously, is in the potential widening of the investigation (good articles in the WSJ today, but behind their paywall).  This is likely to include more Goldman deals as well as other major banks, most of which are generally presumed to have engaged in at least roughly parallel activities – although the precise degree of nondisclosure for adverse material information presumably varied.  Two congressmen have reasonably already drawn the link to the AIG bailout (how much of that was made necessary by fundamentally fraudulent transactions?), Gordon Brown is piling on (a regulatory sheep trying to squeeze into wolf’s clothing for election day on May 6), and the German government would dearly love to blame the governance problems in its own banks (e.g., IKB) on someone else.

But as the White House surveys the battlefield this morning and considers how best to press home the advantage, one major fact dominates.  Any pursuit of Goldman and others through our legal system increases uncertainty and could even cause a political…
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Simon Johnson and James Kwak on Bill Moyers

Simon Johnson and James Kwak on Bill Moyers

Click here for the Video.>> 

Bill Moyers, Simon Johnson, James Kwak

Transcript:

BILL MOYERS: Welcome to the JOURNAL. With all due respect, we can only wish those tea party activists who gathered this week were not so single-minded about just who’s responsible for their troubles, real and imagined. They’re up in arms, so to speak, against big government, especially the Obama administration. 

But if they thought this through, they’d be joining forces with other grassroots Americans who will soon be demonstrating in Washington and elsewhere against high finance, taking on Wall Street and the country’s biggest banks.

The original Tea Party, remember, wasn’t directed just against the British redcoats. Colonial patriots also took aim at the East India Company. That was the joint-stock enterprise originally chartered by the first Queen Elizabeth. Over the years, the government granted them special rights and privileges, which the owners turned into a monopoly over trade, including tea. 

It may seem a stretch from tea to credit default swaps, but the principle is the same: when enormous private wealth goes unchecked, regular folks get hurt – badly. That’s what happened in 2008 when the monied interests led us up the garden path to the great collapse. 

Suppose the Tea Party folk had dropped by those Senate hearings this week looking into the failure of Washington Mutual. That’s the bank that went belly up during the meltdown in September 2008. It was the largest such failure in American history. 

WaMu, as we were reminded this week, made sub-prime loans that its executives knew were rotten, then packaged them as mortgage securities, and pawned them off on unsuspecting investors. 

SEN. CARL LEVIN: And that was your responsibility to make sure that the securities which went out to the investors were following notice to the investors of everything that they needed to know in order that the information be complete and truthful. That’s what your testimony was, under oath. 

DAVID BECK: It’s a very real possibility that the loans that went out were better quality than Mr. Shaw laid out. 

SEN. CARL LEVIN: And you don’t - 

DAVID BECK: A very real possibility. 

SEN. CARL LEVIN: And there’s a very good possibility that they were exactly the quality that he laid out, right? Is that right? 

DAVID BECK: That’s right. 

SEN. CARL LEVIN: Okay. And you don’t know, and apparently you don’t care. And the trouble is, you should have cared. 

BILL…
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WILL EMERGING MARKETS LEAD THE MARKET LOWER?

WILL EMERGING MARKETS LEAD THE MARKET LOWER?

Courtesy of The Pragmatic Capitalist 

MIT professor Simon Johnson says the next big down leg in the bear market will come from emerging markets:


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The Most Dangerous Man in America: Jamie Dimon

The Most Dangerous Man in America: Jamie Dimon

Courtesy of Simon Johnson at Baseline Scenario 

Financial Crisis Inquiry Commission Holds First Public Hearing

There are two kinds of bankers to fear.  The first is incompetent and runs a big bank.  This includes such people as Chuck Prince (formerly of Citigroup) and Ken Lewis (Bank of America).  These people run their banks onto the rocks – and end up costing the taxpayer a great deal of money.  But, on the other hand, you can see them coming and, if we ever get the politics of bank regulation straightened out again, work hard to contain the problems they present.

The second type of banker is much more dangerous.  This person understands how to control risk within a massive organization, manage political relationships across the political spectrum, and generate the right kind of public relations.  When all is said and done, this banker runs a big bank and – here’s the danger – makes it even bigger.

Jamie Dimon is by far the most dangerous American banker of this or any other recent generation.

Not only did Mr. Dimon keep JP Morgan Chase from taking on as much risk [as] its competitors, he also navigated through the shoals of 2008-09 with acuity, ending up with the ultimate accolade of “savvy businessman” from the president himself.  His letter to shareholders, which appeared this week, is a tour de force – if Machiavelli were a banker alive today, he could not have done better.   (You can access the full letter through the link at the end of the fourth paragraph in this WSJ blog post; for another assessment, see Zach Carter’s piece.)

Dimon fully understands – although he can’t concede in public – the private advantages (i.e., to him and his colleagues) of a big bank getting bigger.  Being too big to fail – and having cheaper access to funding as a result – may seem unfair, unreasonable, and dangerous to you and me.  But to Jamie Dimon, it’s a business model – and he is only doing his job, which is to make money for his shareholders (and for himself and his colleagues).

Dimon represents the heavy political firepower and intellectual heft of the banking system.  He runs some of the most effective – and tough – lobbyists on Capitol Hill.  He has the very best relationships with Treasury and the White House.  And…
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Simon Johnson Explains ‘Too Big To Fail’ On The ‘Colbert Report’

For more from Simon Johnson, visit Baseline Scenario.

Simon Johnson Explains ‘Too Big To Fail’ On The ‘Colbert Report’

Via Huffington Post 

The Colbert Report Mon – Thurs 11:30pm / 10:30c
Simon Johnson
www.colbertnation.com
Colbert Report Full Episodes Political Humor Health Care Reform

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Financial Reform: Will We Even Have A Debate?

Financial Reform: Will We Even Have A Debate?

Courtesy of Simon Johnson at Baseline Scenario 

The New York Times reports that financial reform is the next top priority for Democrats.  Barney Frank, fresh from meeting with the president, sends a promising signal,

“There are going to be death panels enacted by the Congress this year — but they’re death panels for large financial institutions that can’t make it,” he said. “We’re going to put them to death and we’re not going to do very much for their heirs. We will do the minimum that’s needed to keep this from spiraling into a broader problem.”

But there is another, much less positive interpretation regarding what is now developing in the Senate.  The indications are that some version of the Dodd bill will be presented to Democrats and Republicans alike as a fait accompli – this is what we are going to do, so are you with us or against us in the final recorded vote?  And, whatever you do – they say to the Democrats – don’t rock the boat with any strengthening amendments.

Chris Dodd, master of the parliamentary maneuver, and the White House seem to have in mind curtailing debate and moving directly to decision.  Republicans, such as Judd Gregg and Bob Corker, may be getting on board with exactly this.…
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Doom Loop, In Cartoons

Doom Loop, In Cartoons

Courtesy of Simon Johnson at Baseline Scenario 

Drawn from “The Doomsday Cycle”, joint with Peter Boone, in LSE’s Centrepiece Winter Issue  (permanent/direct pdf link: CEP centerpiece Feb 2010).  

I recommend the pictures – designed by the impressive team at the Centre for Economic Performance (we just did the words).

By Simon Johnson

The Doomsday Cycle pdf here.>> 


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Phil's Favorites

The Blacker Swan

 

The Blacker Swan

Courtesy of John Mauldin, Thoughts from the Frontline 

“A similar effect is taking place in economic life. I spoke about globalization in Chapter 3; it is here, but it is not all for the good: it creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words, it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial institutions have been merging into a smaller number of very large banks. Almost all banks are now interrelated. So, the financial ecology is swelling into gigantic, incestuous, bureaucratic banks (often Gaussianized [bell curve] in their risk measurement)—when one falls, they all fall. ...



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Zero Hedge

Dr. Fauci Is No Nostradamus: How COVID-19 Ran Amok Under His Watch

Courtesy of ZeroHedge View original post here.

Authored by James Grundvig via Vaxxter.com,

Michel de Nostradamus was born in Saint-Remy, South of France, in 1503. Beyond the gifts he would one day explore in astrology, he pursued an education to become a physician. After his first year at the University of Avignon, an outbreak of the plague swept through France, forcing the University to close.

...

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ValueWalk

Coronavirus stimulus check 2: Get it together, Congress

By Michelle Jones. Originally published at ValueWalk.

Many Americans are waiting for coronavirus stimulus check number 2, and the June jobs report caused some to think there won’t be one. However, it sounds like a second round of IRS stimulus checks is still possible. In fact, we might even be able to say that it’s likely.

Q1 2020 hedge fund letters, conferences and more

Mixed unemployment numbers

The Department of Labor showed that the U.S. economy added 4.8 million jobs last month, which is the largest increase ever recorded. ...



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Biotech/COVID-19

Coronavirus deaths and swelling public sector debt share a data-quality problem

 

Coronavirus deaths and swelling public sector debt share a data-quality problem

Different countries report coronavirus data differently. Shutterstock.com

Courtesy of Marion Boisseau-Sierra, Cambridge Judge Business School

Watching scientists, politicians and journalists struggle to compare national death rates from the coronavirus pandemic, I had an acute case of déjà vu. Though the virus may be novel, the confusion generated by inconsistent data standards is anything but. It’s something I&...



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Chart School

Golds quick price move increases the odds of a correction

Courtesy of Read the Ticker

Every market corrects, maybe profit taking, maybe of allowing those who missed out, to get in!


The current open interest on the gold contract looks to high after a very fast price move, it looks like 2008 may be repeating. A quick flushing out of the weak hands open interest may take place before a real advance in price takes place. The correction may be on the back of a wider sell off of risk assets (either before of after US elections) as all assets suffer contagion selling (just like 2008).

This blog view is a gold price correction of 10% to 20% range is a buying opportunity. Of course we may see  a very minor price correction but a long time correction, a price or time is correction is expected, we shall watch and...

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The Technical Traders

Wild Volatility Continues As US Markets Attempt To Establish New Trend

Courtesy of Technical Traders

We’ve continued to attempt to warn investors of the risks ahead for the US and global markets by generating these research posts and by providing very clear data supporting our conclusions.  Throughout the entire months of May and June, we’ve seen various economic data points report very mixed results – and in some cases, surprise numbers as a result of the deep economic collapse related to the COVID-19 virus event.  This research post should help to clear things up going forward for most traders/investors.

As technical traders, we attempt to digest these economic data factors into technical and price analysis while determining where and what ...



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Kimble Charting Solutions

Nasdaq 100 Relative Strength Testing 2000 Highs

Courtesy of Chris Kimble

The tech bubble didn’t end well. BUT it did tell us that the world was shifting into the technology age…

Since the Nasdaq 100 bottomed in 2002, the broader markets have turned over leadership to the technology sector.

This can be seen in today’s chart, highlighting the ratio of Nasdaq 100 to S&P 500 performance (on a “monthly” basis).

As you can see, the bars are in a rising bullish channel and have turned sharply higher since the 2018 stock market lows. This highlights the strength of the Nasdaq 100 and large-cap tech stocks.

...

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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

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