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Friday, January 09, 2009

Ponzi Package

It would be easy enough to characterize his opinion piece as an opaque hint toward the need for better and more pliant sexbots, but the fact is that Spitzer has a valid point. Since Obama has not yet formally acceded to office, the smart thing to do has been to hold fire on passing premature judgment. But so far, the proposals are pretty underwhelming, and that includes Thursday's hortatory speech on the imperative nature of Our Crisis.

Obama talks about "responsibility", yet so far has utterly failed to hold the "responsible" parties even rhetorically accountable. Handing a blank check to the very same dumbasses and spreadsheet bookies who lost the money in the first place is not a logical acknowledgement of "responsibility", sorry. The bailout has been ongoing for a full quarter now, and all that has happened is that the official rate of unemployment has ticked up a full point, and instead of recirculating that bailout cashola back into the economy, the banks appear to have used it to shore up liquidity and reserves. That's the best guess anyway, since apparently they don't owe anyone a fucking explanation.

Maybe I'm just a simple caveman, but I'll be damned if I can figure out how this is better for this smoke-and-mirrors economy we have, than simply handing every taxpayer a check for ten or twenty grand. Seriously. Even the infrastructural makework projects in the upcoming proposal are simply bandaids on a deep wound, temporary fix-its for systemic problems.

When oil prices skyrocketed last summer due to panicky future speculation (not unlike the current market itself), as with all price spikes, industry solons fingered their rosaries and recited the usual catechisms about fungibility. Expecting any other response would be like expecting a carny to tell you that half the bolts are loose on the Tilt-A-Whirl, or that the ring toss is fixed. And indeed, the availability of oil is fungible, though obviously subject to all the various geopolitical risk premiums we've all heard about since Fredo decided to bungle into Baghdad lo these many years ago.

But risk premiums aside, the fact is that the summer spike was due to bookie-generated activity -- the spreadsheet monkeys saw other spreadsheet monkeys jumping in to buy futures at whatever ridiculous price they could get, and engaged in a spate of lemming-like behavior. They panicked each other into thinking that the price would continue to ascend practically indefinitely. This is what happens when greedy assholes are allowed to play with other people's money. Not a huge secret there.

And at no point (at least not a publicly admitted one) is the likelihood of peak availability in the face of ramped-up demand acknowledged. Just imagine what the prices would have been in such an instance. What we've seen over the past four months or so in the financial market is an eerie parallel to the oil dynamic -- the heavily leveraged speculation on a commodity that may or may not even be there in the first place. Basically what you had, it turns out, was people basing their valuations on risk management formulas, in many cases without accompanying contextual data.

In other words, to use Junior's most idiotic go-to phrase, these clowns would fire up the Excel sheets, dial in their VaR quants right after closing, and use those numbers to decide what over-leveraged, over-valued, over-bundled securitized derivative to unload. Clearly this was independent of actual company or valuation data, at least on the front end, or they wouldn't have gotten so overextended in the first place. So you end up with a cascading series of panic short-selling on the CDOs and SIVs and credit default swaps and all the other phantom-valued, hyper-leveraged derivative junk.

Friends 'n' neighbors, I'm not an economist, nor do I play one on the teevee, but this makes about as much sense as cashing in every asset you own, and using it all as collateral to borrow ten times that amount from a loan-shark, to bet on the Super Bowl a month in advance. Except you've also decided to base your ultimate decision on which quarterback finished the season with the highest rating. This year, Philip Rivers finished with the highest rating. Go hock your house and car for collateral on a much bigger personal loan, and bet it all on San Diego winning the Super Bowl, and see what that gets you. That is essentially what these fucktards have done, and they've been able to do it because they, unlike you, are secure in the knowledge that no matter how careless and ridiculous they are with their little bets, we'll bail them out, and thank them for the opportunity.

This is no way to run a railroad, and when wealth ultimately turns out to be largely fictitious, except for those at the very top end of the pyramid, the debt-based economy becomes less and less viable. I'm not quite ready to buy into the bucolic low-consumption resilient community scenarios just yet, because human nature is what it is. But the scenarios these folks portray, however post-apocalyptic or even exaggerated from some points of view, at least have the benefit of sounding less implausible or irresponsible than the conventional ones that are being foisted upon us by our agents of change. I don't see a Mad Max scenario developing, but it's more likely than AIG doing a fucking thing to replenish a single job that the finance industry's shameless excesses have cost. Prove me wrong, you thieving Wall Street cocksuckers.

Since Bernie Madoff's big bust, the boutique references have revolved around the nature of Ponzi schemes. It is unclear as to what part of the supposedly conventional system of finance we operate under does not qualify as a Ponzi scheme. Why should it take $800 bn to create 3 million jobs, which would be over a quarter-million per; why not just disperse the money directly instead of through a bureaucracy, or a grasping industry that has overextended itself?

1 comment:

Thomas Daulton said...

"I'm not quite ready to buy into the bucolic low-consumption resilient community scenarios just yet, because human nature is what it is. But the scenarios these folks portray, however post-apocalyptic or even exaggerated from some points of view, at least have the benefit of sounding less implausible or irresponsible than the conventional ones that are being foisted upon us by our agents of change. I don't see a Mad Max scenario developing, but it's more likely than AIG doing a fucking thing to replenish a single job that the finance industry's shameless excesses have cost. Prove me wrong, you thieving Wall Street cocksuckers."

Gawddamn, I think we may have found the perfect blog entry of the 21st century. Sheer brilliance. I couldn't stand the fact that nobody else has commented on it as of yet.