SubscribeObama said wasteful spending was a problem across the whole government but he zeroed in on the defense industry after earlier citing a project to build a new presidential helicopter fleet as an example of the procurement process "gone amok."Whoa. Here's to the DoD's first bake sale!
"The days of giving defense contractors a blank check are over," Obama told reporters.
"A Gripping Saga of Cod, Elves, and Bankers"cheers!
Your latest entry in depression tourism, Michael Lewis touches down in Iceland. (via)
Yes, the economy is crappy. You know what’s really crappy though?I think that's as applicable to, say, a giant corporation as it is to a mom and pop store. orthogonality says:
That otherwise smart, goodhearted, well-meaning people start a business out of a labor of love, and no one tells them about the part where you have to learn how to run a business.
I do want to come back to one idea. Early on, I described a Winterspeak/Moldbug synthesis in which the government comes off as incredibly powerful. Government money is what everybody wants because everybody wants it. The government destroys money through taxation and borrowing, and creates it by spending and lending, and can do so at will. A very large fraction of "private" lending is in the influence of government, by how it organizes the pseudoprivate banking system as well as via direct market interventions. With so much power, what are the government's constraints? Why can't it get an outcome that it wants, presumably a good economy with a bit of corruption on the side? Let's put aside the institutional stuff. (For example, governments usually have to pretend private banks are private; their ability to direct the loans they guarantee is limited; in fact, a bankers-control-government-expenditure story is historically more compelling than government-controls-bank-expenditure). Right now, the government can pretty much do what it wants with the banking system, can expand the quantity of risk-free claims to meet demand at will, can lend to whomever it pleases. Why can't it fix the country?like i was thinking this was a great comment on the 'meaning' of fiat currency: "I cannot get my head around why the Fed can, or would 'accumulate' surpluses. It’s like an airline 'accumulating' it's own frequent flier miles."
Cassandra had a brilliant post not long ago called "an idea crunch". Read it if you haven't. Ultimately, a financial system has to find productive projects for the private parties to invest in. The government can invest directly, can delegate investment to the best and the brightest, can saturate the public's demand for money until private parties try to find other means of storing wealth. But it's what real human beings do with real resources that ultimately matters. Our financial system didn't fail because it was overlevered. It failed because it was uncreative: It could not conjure up worthwhile things to do with the capital it was asked to invest, and instead of owning up to that, it pretended that poor projects were good. Financial markets are ultimately information systems. The only way out of this is to discover worthwhile things to do, or more importantly, to develop better means of generating a diverse menu of worthwhile things to do going forward. Right now, the government is being asked to do what the semi-private financial system could not: generate a positive real return on trillions of dollars of undifferentiated future claims. The stakes are very high — that Moldbugian monetary Nash equilibrium can be a bitch. Money is the bubble that need not pop, but that's no guarantee that it won't. Anything that's desirable only because everybody desires it is just a single major failure away from being yesterday's darling. If unthinkable banking system failures can occur, so can unthinkable failures of the monetary system.
For more than 170 years, it has been accepted doctrine that markets are not to be trusted when there is a liquidity squeeze. When the prices of even safe assets fall and interest rates climb to sky-high levels because traders and financiers collectively want more liquid assets than currently exist, it is simply not safe to let the market sort things out.viz. Anti-Trust America
At such a time, central banks must step in and set the price of liquidity at a reasonable level – make it a centrally-planned and administered price – rather than let it swing free in response to private-sector supply and demand. This is the doctrine of “lender-of-last-resort.”
For more than half that time – say, 85 years – it has been accepted doctrine that markets are also not to be trusted even in normal times, lest doing so lead to a liquidity squeeze or to an inflationary bubble. So, central banks must set the price of liquidity in the market day in and day out...
But now it appears that, despite all this, we still have not had enough central planning in finance. For, even as the central banking authority administered the price of liquidity, the price of risk was left to the tender mercies of the market. And it is the price of risk that is the source of our current distress...
The US Federal Reserve, the US Treasury, the European Central Bank, the Bank of England, and other public financial regulatory entities are being pushed toward a further expansion of their roles. The Treasury and Federal Reserve are adding preferred stock to the balance sheets of the US mortgage giants Fannie Mae and FHLBC and the insurance giant AIG in the hope of shoring up their capital cushions and lowering their borrowing costs so that they can buy more mortgages.
The Treasury has asked for authority to purchase $700 billion of mortgages to get them off of the private sector's books. Expanding the demand and reducing the supply of these risky assets is a way of manipulating their price. The Fed and the Treasury are walking down a road that ends with making the price of risk in financial markets, along with the price of liquidity, an administered price.
This was how central banking got started in the first place: letting the market and the market alone determine the price of liquidity was judged too costly for the businessmen who voted and the workers who could overthrow governments. Now it looks as though letting the market alone determine the price of risk is similarly being judged too costly for today’s voters and campaign contributors to bear.
Why, then, did the country’s GDP drop by 6.2 percent in the fourth quarter of 2008? While it’s true, as the president says, that America’s stock of physical and human capital remains undiminished, something important was indeed destroyed last year: trust...cf. When Does Faith in Financial Engineering Wane? & The Biggest Story of the Week
For financial markets to play their vital role once again, we must restore people’s faith in them. The most effective way to do so is to eradicate the perception that the government is run in Wall Street’s interest. The ethics rules issued by President Obama are a good but insufficient first step. More important is to redesign the bank rescue plan so that it clearly acts in the interest of the country (having well-capitalized banks), not the interest of Wall Street (having taxpayers bail out current investors). Not only is this feasible, it is also fair. And fair rules of the game are what investors need to regain their trust.
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But all the same, I'm beginning to wish there was a Firefox plugin that would strip out any news or blog stories containing the word "economy." It's just so incredibly depressing. The early slow-down-and-see-the-car-wreck appeal has long faded. It's like the middle east. There's never any good news and I'm just tired of hearing about it. I'd rather just read about other things that have educational/informational merit.
posted by Afroblanco at 10:53 AM on March 4 [3 favorites]