Saturday, September 27, 2008

Friday, Sept. 26 Debate___The Irresponsibility Twins...

NEW Sept 9, The world is at severe risk of a global systemic financial meltdown and a severe global depression, by Nouriel Roubini
NEW Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks: by Nouriel Roubini

The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too: by James K. Galbraith (click features)

Introducing Students to the Generic Terminology of Social Research, by J. Grix
Philosophy of Social Science___Crash Course, by V.F. Hendricks
Descartes, Pascal, and the Epistemology of Mathematics: The Case of the Cycloid, by Douglas M. Jesseph
History and epistemology in mathematics education, by Giorgio T. Bagni, Fulvia Furinghetti, Filippo Spagnolo

"The needs of the many, and the thought-needs of the few..."

Our choice, standing on the American stage of awesome public responsibility, at the most momentous time in history, were two men of laudable personal integrity and responsibility, yet both lacking the “most necessary” responsibility of intellectual economic wisdom, to deal with our nation’s, and the world’s most pressing financial problems, since the great depression. Why would two men of fine personal means have not realized, true political power absolutely requires far more experience, knowledge and wisdom, than good judgment, an intellect of law and political power, by one, and an intellect of military political power, by the other? Why would anyone, either one, especially realizing both have warned for years about America’s coming economic problems, actively waiting in the wings of global financial turmoil, have wanted political power, while never educating themselves to the more than glaringly obvious necessity of economic wisdom required, once this highest office in the land was attained? Why?

This leaves the public having to choose between the lower irresponsibility, of less than fully higher responsible judgments. I just hate to see a choice of less than the best of the best, but this is what we’re left with. To me, this questions the deeper judgments of both candidates, Obama and McCain, leaving us, the public, at the mercy of another election of TV personalities. But to be fair, we do possibly have a higher lesser evil of the two to choose from, than elections of the past. I full well realize no candidate choosing to run less than five years ago, could ever have had the time to educate themselves to the proficiency level of technical economics required, but on the other hand John McCain has been actively desiring and attempting to attain this office over enough time to have educated himself, yet he willingly admits of knowing practically nothing of technical economics, even after serving some thirty plus years in the Senate___This seems to be in-excusable. And, Barack Obama must have had the desire for some time, but is too young to have had the time to fully educate himself to the technical dynamics of economics and finance required for full understanding either, yet at the same time, seems to know and be able to process many of its fundamentals far better than the more politically experienced McCain, and this I see as the most important fundamental of political thought, either possess___Sound judgment.

Though there are many advantages and dis-advantages in both candidates, neither made an issue of either’s irresponsibility to the true intellectual economic responsibility required for the proficient performance of the office at hand. I can understand McCain not making an issue of Obama’s intellectual economic inexperience, as he’s so many times admitted his own lack of economic technical knowledge, but Obama as well, dared not attack McCain’s lack of economic technical experience, in the areas of military, foreign policy and politics, as he himself lacks the full understanding of money’s pre-eminent role in any war politics___Planning, participating in, or completing, of said jobs. So, neither candidate fully realizes the extreme importance of money and finance, on the world stage, when it is truly the primary tool of war and peace alike. This has been my position of both these candidates, from the beginning___Neither possess the intellectual prowess of economic responsibility, over their own irresponsibilities, to warrant either to attain the Office of President of the United States. Yet, we must elect one to that very office. Who is our better choice?

It seems the only quality my judgment is left with is a choice of finding the more “trustworthy” of the inexperience of each. Who do I, or you and I, trust the most to handle what neither of them understand fully? This is the question. Myself, looking back over history for guidance would pick two men to inform my judgment. That would be Alexis de Toqueville and Thorstein Veblen, as Alexis offers the best assessment of democracy’s evolution in general, and American democracy in particular, over the ages, and Veblen offers the best philosophy of a personally irresponsible man, with the highest intellectual responsibility of most any man I ever read. Both offer glimpses into the super-consciousness of people and nations, at some of the highest levels of knowledge possible. Both these candidates could have read these two genius’ of history and economics, to much better understand the mandates of office required, but their handlers seemed to not recognize the importance of the moment, as pertains to the historical and economic responsibilities required, by the office applied for. Both DeToqueville and Veblen clearly warned a world of democracy’s and capitalism’s pitfalls over time, DeToqueville of the personal passions, desires and greedy corrupt motives of people and power groups, and Veblen’s warnings of the shortcomings of the two warring political and social classes, between its class warfares of the egalitarian working classes, and the tribalistic “dog-eat-dog” competition of the leisure classes. IMO, these two books alone, could almost educate a presidential candidate, with deep enough reflection, to practically be able to understand much of national and global economic-political evolution, “iff”, grounded in fundamental efficient necessity of thought. Yet, neither handlers of these two candidates, chose to front them with a finer necessary eco-geo-military-political understanding, than a less than “responsibility of irresponsibility” of self-sovereign spirits. But, upon thoroughly comparing the two, Obama, IMO, comes out on top, due to the fact he understands constitutional law dynamics, general eco-geo-politics, and the “needs of the many”, far better than McCain, who understands not, constitutional law dynamics, or general eco-geo-politics well enough, yet, well understands the “thought-needs of the few”, far too well…

So, do we go with the candidate of “Main St. and the needs of the many”, or the candidate of “Wall St. and the thought-needs of the few”? Notice I’ve stated a difference between “needs and thought-needs”, as thought-needs are not needs, except by intellects who have not yet figured out how to design global economic systems to support all desires, prudently and responsibly, which is certainly possible. I want a candidate who will lead us toward the “needs of the many”, and I think Barack Obama fills that bill, without question. This is just a scientific fact of simple math... If we all learn to add, we’d all choose Obama…

To connect the missing technically explained comment, from this post, please read the rest of my blog, beginning in May, and especially the post before this one. Skip the four posts about physics and biology, unless interested…

Monday: Call to Stop Paulson's Plunder
(1) Call your Representatives and Senators at 800-473-6711 or 202-224-3121 and say No Bailout!
(2) Email them too and tell your friends:

After a week of high-drama negotiations, Congress and Hank Paulson issued Bailout version 1.1, which is just the original Paulson pig with a lot of lipstick.
Republicans say the deal will be profitable for taxpayers, but they are lying - just as they did about the invasion of Iraq producing lower gas prices. It's a lie because Paulson has full power to pay too much for the securities and he will because his real goal is a bailout of bank executives and shareholders with our money - a massive ($2,333 per person!) transfer of wealth from the poor and middle class to the rich.

Democrats say they got oversight, accountability, and limits on executive compensation but each of these provisions is so full of Republican-written loopholes that they are meaningless - just like all other restrictions imposed on the Bush Administration, from Iraq to wiretapping. And that's before Bush simply negates any restrictions he doesn't like with one of his unconstitutional (and hence impeachable) signing statements.

So our answer remains ABSOLUTELY NOT.

The House will vote on Monday and the Senate will vote on Wednesday.
So call your Senators and Representative right now to say "No $700 Billion Bailout for Wall Street" - dial the Capitol switchboard at 800-473-6711 or 202-224-3121 or dial direct using the instant phone lookup on the right side of
And if you have not e mailed your Senators and Representative , please do it now:

Find more information and comment here:
Thanks for all you do!

NEW Sept. 29, The US and global financial crisis is becoming much more severe in spite of the Treasury rescue plan. The risk of a total systemic meltdown is now as high as ever...

by Nouriel Roubini | Sep 29, 2008

It is obvious that the current financial crisis is becoming more severe in spite of the Treasury rescue plan (or maybe because of it as this plan it totally flawed). The severe strains in financial markets (money markets, credit markets, stock markets, CDS and derivative markets) are becoming more severe rather than less severe in spite of the nuclear option (after the Fannie and Freddie $200 billion bazooka bailout failed to restore confidence) of a $700 billion package: interbank spreads are widening (TED spread, swap spreads, Libo-OIS spread) and are at level never seen before; credit spreads (such as junk bond yield spreads relative to Treasuries are widening to new peaks; short-term Treasury yields are going back to near zero levels as there is flight to safety; CDS spread for financial institutions are rising to extreme levels (Morgan Stanley ones at 1200 last week) as the ban on shorting of financial stock has moved the pressures on financial firms to the CDS market; and stock markets around the world have reacted very negatively to this rescue package (US market are down about 3% this morning at their opening).

Let me explain now in more detail why we are now back to the risk of a total systemic financial meltdown…

It is no surprise as financial institutions in the US and around advanced economies are going bust: in the US the latest victims were WaMu (the largest US S&L) and today Wachovia (the sixth largest US bank); in the UK after Northern Rock and the acquisition of HBOS by Lloyds TSB you now have the bust and rescue of B&B; in Belgium you had Fortis going bust and being rescued over the weekend; in German HRE, a major financial institution is also near bust and in need of a government rescue. So this is not just a US financial crisis; it is a global financial crisis hitting institutions in the US, UK, Eurozone and other advanced economies (Iceland, Australia, New Zealand, Canada etc.).

And the strains in financial markets – especially short term interbank markets - are becoming more severe in spite of the Fed and other central banks having literally injected about $300 billion of liquidity in the financial system last week alone including massive liquidity lending to Morgan and Goldman. In a solvency crisis and credit crisis that goes well beyond illiquidity no one is lending to counterparties as no one trusts any counterparty (even the safest ones) and everyone is hoarding the liquidity that is injected by central banks. And since this liquidity goes only to banks and major broker dealers the rest of the shadow banking system has not access to this liquidity as the credit transmission mechanisms is blocked.

After the bust of Bear and Lehman and the merger of Merrill with BofA I suggested that Morgan Stanley and Goldman Sachs should also merge with a large financial institution that has a large base of insured deposits so as to avoid a run on their overnite liabilities. Instead Morgan and Goldman went for the cosmetic approach of converting into bank holding companies as a way to get further liquidity support – and regulation as banks – of the Fed and as a way to acquire safe deposits. But neither institution can create in a short time a franchise of branches and neither one has the time and resources to acquire smaller banks. And the injection of $8 b of Japanese capital into Morgan and $5 b of capital from Buffett into Goldman is a drop in the ocean as both institutions need much more capital. Thus, the gambit of converting into bank while not being banks yet has not worked and the run against them has accelerated in the last week: Morgan’s CDS spread went through the roof on Friday to over 1200 and the firm has already lost over a third of its hedge funds clients together with their highly profitable prime brokering business (this is really a kiss of death for Morgan); and the coming roll-off of the interbank lines to Morgan would seal its collapse. Even Goldman Sachs is under severe stress losing business, losing money, experiencing a severe widening of its CDS spreads and at risk of losing most of its values most of its lines of business (including trading) are now losing money.

Both institutions are highly recommended to stop dithering and playing for time as delay will be destructive: they should merge now with a large foreign financial institution as no US institution is sound enough and large enough to be a sound merger partner. If Mack and Blankfein don’t want to end up like Fuld they should do today a Thain and merge as fast as they can with another large commercial banks. Maybe Mitsubishi and a bunch of Japanese life insurers can take over Morgan; in Europe Barclays has its share of capital trouble and has just swallowed part of Lehman; while most other UK banks are too weak to take over Goldman. The only institution sound enough to swallow Goldman may be HSBC. Or maybe Nomura in Japan should make a bid for Goldman. Either way Mack and Blankfein should sell at a major discount of current price their firm before they end up like Bear and be offered in a few weeks a couple of bucks a share for their faltering operation. And the Fed and Treasury should tell them to hurry up as they are both much bigger than Bear or Lehman and their collapse would have severe systemic effects.

When investors don’t trust any more even venerable institutions such as Morgan Stanley and Goldman Sachs you know that the financial crisis is as severe as ever and the fear of collapse of counterparties does not spare anyone. When a nuclear option of a monster $700 billion rescue plan is not even able to rally stock markets (as they are all in free fall today) you know this is a global crisis of confidence in the financial system. We were literally close to a total meltdown of the system on Wednesday (and Thursday morning) two weeks ago when the $85 b bailout of AIG led to a 5% fall in US stock markets (instead of a rally). Then the US authorities went for the nuclear option of the $700 billion plan as a way to avoid the meltdown together with bans on short sales, a guarantee of money market funds and an injection of over $300 billion in the financial system. Now the prospect of this plan passing (but there is some lingering deal risk the votes in the House are not certain) -as well as the other massive policy actions taken to stop short selling “speculation” and support interbank markets and money market funds - is not sufficient to make the markets rally as there is a generalized loss of confidence in financial markets and in financial institutions that no policy action seem to be able to control.

The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates - as it may now - a total meltdown of the US financial system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.

my response...
The "Shadow Banking System's" mess...

Nouriel, seriously, where do you stand on closing the international financial side of the foreign exchanges, and going to stringent capital controls, to save some of what's left? Just to give some breathing room, so real economists can work out the best route to salvage what's left of the global mess... The entire "Shadow Banking System" needs to be rolled back into the real banking systems of all economies, but no-one's able to price it___The problem___No Time! Due to the fact "no-one on earth" can truly figure derivatives valuations, as in Lehman's possible 10T derivatives exposure case, for an estimated two years hence, to wind down or back into the real system___drastic measures are certainly necessary___Don't you think...?

Lloyd Gillespie

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