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Knock knock! Who's there? October surprise! But it's still September ...

Is it reasonable to believe that the past week's instability in the financial markets — Lehman Brothers being sold for the value of their data centers plus 10%, AIG being bailed out (thus saving the US airline industry), the shockwaves taking down one of the UK's biggest banks and panicking the government into bending the rules to permit an otherwise-illegal merger, the Russian stock exchange closing to avoid cratering, and the $455Tn global derivatives market teetering on the edge — was anticipated, but happened too early?

Charlie's dark suspicion: it was expected to arrive in January; a nice welcome mat for the new proprietors, courtesy of the outgoing bustout crew.

93 Comments

1:

I dunno. Sure it's all part of the looting but I'm not sure they have the competency to time the fallout. It seems more likely to me that they simply didn't care about it (beyond pushing it past 2004). OTOH, they have been busy littering the bureaucracy with their moles. Who knows?

I'm curious though, has the sheer scale of what's happened affected "419"?

2:

Bustout - can also be thought of as a variation on the "Golden Parachute" for the perpetrators, and the "Poisoned Chalice" for the new takers.

I agree, it's all gone VERY pear-shaped just too soon. Coupled with the appalling ongoing housing/mortgage/reposession situation in the US, and the past 8 years screwing around (starting with ENRON - remember them? All Obama has to do is keep his cool, and keep on about: "It's the economy stupid!"

Timing is all, so you also don't want to attack Palin too hard, until about two weeks before the election - THEN you go hard for her links (via her favourite quotes) to US Fascism and the "writer" Westbrook Pegler.

3:

JDC: has the sheer scale of what's happened affected "419"?

Quite possibly -- but I'm not due to start work on 419 until next year, and I've got a secondary plot that I can bring front-and-center in a hurry if the main McGuffin's just blown up over Wall Street.

4:

Given that people seem to ignore the past on a regular basis, see for example the market crashes in the 80's due partly to deregulation permitting a free for all, I see no reason we wno't have exactly the same problems again in a decade or maybe a little more, got to allow time for people to forget.

5:

Except that Bush said there was a problem back in 2003 and 2004, and tried to pass legislation that the Democrats blocked because they thought everything was fine and dandy (see the NY times link). The Republicans tried to follow up as McCain was part of a push in 2006 to get the reform going but the Democrats seem to have blocked it. So, as much as I would love to put the blame on Bush and Co., I'm not sure we can.

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print

6:

Take off the tinfoil hat, Charlie. Something like this has been coming since at least the spring (and cooking for a hell of a lot longer). You give the Republicans entirely too much credit on ability to control the economy.

7:

I agree with Will. These guys are just too incompetent at economic managment to pull off this kind of thing, even for their own benefit. And the nature of bubbles is that nobody plans for them to burst.

8:

@6 + @7: although I don't want to give the idiots too much credit, they've certainly managed to transfer a huge part of the nation's wealth into their publicly-traded pet industries (Halliburton et al). You could also argue that the new super-rich have all disappeared into private equity (think Carlyle Group) and they don't care if the hoi polloi fry in a failing public marketplace.

9:

PRT, whoever you are: case you haven't noticed, the finger I'm pointing isn't aimed at the Freddie/Fannie problem, which has been festering for more like 20 years than 5 and is part of the fallout from the housing bubble in general. (Also: I notice that you didn't bother to mention why the house Democrats had a problem with the Republican-backed "solution" to the mess, which solution turned out to be another whacky wealth transfer from the poor to the rich.) The current problem goes beyond the sub-prime mortgage crisis and extends to the hedge funds and insurance infrastructure in general.

Will: I don't believe the Republicans are magicians capable of stage-managing the US economy; quite the opposite, I think they're incompetent gangsters and looters who over-estimated how much hollowing-out the infrastruture could withstand.

10:

Wow. That's breathtakingly cynical. By which I do not mean to argue that it's necessarily false. But I'm impressed to see you come up with a theory about the manipulation of the economy for political purposes that hadn't even occurred to me.

11:

Seems to me that this relies on the idea that they were sure they were going to lose in November. I think they thought the party might have carried on a little longer if they could just double down on the culture war/actual war angle. So you rattle the sabre at Iran, dangle NATO membership in front of Georgia and hope it does something stupid and put a moose-hunting flat-earther on the card.

Which might even have worked if they'd managed to keep a lid on the financial mess.

12:

@5 - That's quite the spin you're trying to put on an attempt by the Bush Administration to take even more power away from Congress. With a little more research you'd have read that the proposed "regulation" was actually proposed BY the agencies to be regulated and, according to analysis at the time, would have served to actually lower the regulatory burden on Fannie and Freddie (or remove it altogether given the Bush Co's track record).

13:

I vote bustout (and thanks for reminding me of the term). Bush and Cheney are going to break as much as possible, not as part of a long-term strategy, but because they're venal, petty bastards who know that the only way to keep them from getting nailed by Obama's Justice Department (or, dare I say, his Great Justice? Yes, I dare) is by covering their tracks with financial and foreign crises so dire that no one will have the time and energy to track them down.

14:

Maybe. It's nearly impossible to control when a bubble bursts, but they might have believed they could. It would fit with their general overconfidence. No-one is going to know during my lifetime, anyhow, not unless there's an investigation.

15:

Adam @13, reminds me of how many people who have foreclosures leave their houses in a wreck.

16:

This is seriously in tin-foil hat territory. Like the collapse in 1929, we've had decades of changes that have led us to this point. The timing was all but uncontrollable - rather like Taleb's "Black Swan" idea. Furthermore, ask who would really gain? Suppose the current administration was engineering a 2009 collapse, the people it would hurt, e.g. the shareholders and senior execs of these companies are not stupid, they aren't going to blame a Democratic administration, even if they are in denial about their own role in the debacle. Secondly, a collapse during the next administration would be a gift for the forces of re-regulation, something that financiers have been strenuously trying to prevent. Having the collapse now might allow plenty of waffling to steer the decision for re-regulation in a different direction.

However, if you are looking for other reasons for a collapse, then I would point to the "end of times" beliefs of the fundies (and their role in the Bush administration, possibly including GW himself). You could hardly get a better script for engineering an apocalypse than warmongering bluster, egging on protagonists in the ME and topping it all off with a nice financial collapse and possible depression to engender lots of nationalistic fervor. Somebody surely will do something crazy now, maybe with a small nuke....

17:

Alex: there may have been decades of stepwise changes leading up to this point, but I'm fairly certain that for the past eight years certain folks in positions of power have been doing their best to use their positions to line their pockets, and those of their friends. And when it becomes clear that the positions of power aren't going to be accessible for much longer, why should they bother milking the cow in a renewable manner when they can slaughter it for meat instead?

The shift towards centralization and wealth concentration (from wealth production) happened in the late 1950s to early 1960s. It's accelerated since then. The current folks at the top, reaping the harvest, were young men back when that critical change happened: it's not unreasonable for them to want to cash out now.

Add the "end times" nonsense as an added justification -- a side-effect of Dominionist theology -- and yes, you get a belief system that provides believers with a prefabricated excuse for these crimes.

18:

tolley I think many people are still going to believe that it's Obama's fault. Keep in mind that many people still blame Clinton for the Somalia mess he inheirited from Bush.

19:

Lehman Brothers should invest in tinfoil futures. They could buy themselves out of their own mess.

Plenty of blame to go all around. Individual idiots financing homes they couldn't afford thrice-over. Homeowners using their home equity like debit cards. Big Spenders leveraging their houses up to 150%.

Institutional idiots assuming that real estate values would never, ever fall. Lend Lend Lend while idiots Spend Spend Spend. Idealogical idiots insisting that a chicken for every pot wasn't good enough, there had to be a house for every credit-risk.

Ride the bubbles. Over 8 eight years ago, all the fundamentals in Tech Stocks were ignored while bubble mania created false NASDAQ wealth right up until the dot-bomb implosion. Tech investors lost their shirts, companies went under, 401K's decimated.

Money immediately moved to Housing, where the fundamentals were ignored again as 25% of homes in America go underwater. Eventually the housing bubble pops, drowning the idiots who stayed in too long.

Can't wait to see where the next bubble inflates, eventually popping in 2016; where our future selves will act surprised. Just like today. And back in 2000. Again we'll be surprised. And blame the politcial partys we hate the most, our favorite whipping boys.

The wheel house blames steerage, the steerage blames the pilot, the pilot blames the lookout and the deck band plays on.

20:

Lycan,

No blame for the Congressional idiots who specifically exempted these debt instruments from regulation, allowing the other idiots to blindly invest tens of billions of dollars in ways that make them worth at most a tenth of that?

By the way, a lot of people weren't surprised. Disgusted, certainly, but not surprised. I started pulling out of stocks and funds almost a year ago, and my financial adviser gave me lukewarm agreement. Then 6 months ago he started saying: "Time to get out of the stock market and mutual funds while the getting is good." But he told me a couple of weeks ago he thinks the recession will be over by 2Q 2009; I replied that I expected that to happen in 2H 2009 sometime, probably late 3Q. Now, I'm not so sure; the markets are so spooked that the US government is ready to bail out just about anyone; we've already dumped almost $0.4 Tn onto the debt to save Fannie, Freddie, AIG, etc., and doubling that is quite possible in the next month or two. That increase in the debt service has to result in slower recovery. Another stimulus package would probably have the same effect; I think most people are so spooked right now they might actually put a lot of it in savings rather than go out and blow it on flatscreen TVs.

21:

The problem to me seems to be too much regulation, not to little. This is what happens when you try and prevent capitalism's natural pressure-relief systems. Boom-bust is a feature, not a bug -- it prevents crashes.

22:

Hmm.

From my understanding of the current administration, the abuse of power has been largely war privateer actions. I wouldn't quite agree that it is a direct action of hollowing out by those actually in the office. However, they sure unwound a lot of regulations and looked the other way quite a lot. Their willingness to ignore the needs of the many and serve the powerful few is unsurprising but sad. And the effects will echo on.

Money is being constantly and rather brutally sucked out of the public US market and injected back into private firms, as was mentioned. Those who have been merrily filling up their personal 'retire as gods' funds took a look at the election, about a year back, and realized that they only had one horse in the race with a good chance, and it was sort of coughGuilianicough lamed and a bit of an embarrassment.

To the mention of the Great Depression, there is a lot of disagreement on the link between actions of Federal Reserve and the (perhaps, giving the benefit of the doubt) massive collapse partly fueled by said actions. On one hand, it did shake out thousands of smaller, less stable, and more 'air' backed banks. Who knows but that if there had been another year before the destabilization and crash that it might not have been an uglier explosion, in some people's minds.

The AAA credit rating of the United States is currently under consideration. To many in US or abroad, that's a flicker of the 'TILT' light. Their reactions differ. Many of the collapsing investment banks were the recipients of SEC exclusions to regulations, allowing them to far overextend themselves.

Speaking as someone whose ability to own a home in the future went from "you cannot afford it with the constantly rising prices" to "you cannot afford it because there will be no credit", I am not precisely amazed. My opinion still holds that the biggest failure of the modern economic system in the US and many places abroad, evident also in the outlook of individual investors, shareholders and homeowners, is that something must always increase in value significantly and that anything else is unforgivable. We accept the write down on a car, but not on the value of a home.

Consequences that few have mentioned yet from the devaluation of homes in the US will include massive impact on school systems and municipal or local governments. As the property tax values plummet, the shortfalls in spending on the local levels will become more obvious.

I knew I should have become an asset stripping specialist for private equity..... Damn.

23:

Hey, I'd like to get paid several million a year for quite a number of years even if it all went belly up and I had to resign my well paid position...

24:

guthrie,

... and I got a $20 million golden parachute in the bargain for being such an incompetent executive.

25:

Bruce@20: Congressional Idiocy is so rampant it makes the floor slippery, but regulation can't prevent bad management from making poor decisions.

TechSlave@22: I would argue that the US economic system is by no means a failure - even our poorest are fat.

26:

Andrew G: So what regulation caused all those financial institutions to bury themselves in debt?

27:

Posted by: Andrew G.:

"The problem to me seems to be too much regulation, not to little. This is what happens when you try and prevent capitalism's natural pressure-relief systems. Boom-bust is a feature, not a bug -- it prevents crashes."

Charlie, you've got a winner for the year in two categories:

1) The 'destroy the village in order to save it' category, and 2) The "it's not a bug, it's an undocumented feature" category.

28:

I would add the 'incredibly bad glibertarian logic' category, but it's well known that the most extreme examples of that actually cause cranial implosion, killing all in the room. I'm still alive, so it's merely run-of-the-mill bad glibertarian logic.

29:

Interesting. I had also been uttering "its happening too early" with regard to price movements. I'd expected the oil price would be kept in check till the election, but instead its inflated, then had its first blow out, all before the election.

If the rest of the predictions come to pass then that's not comforting, but WHY are events running away so fast?

30:

Charlie@17 "why should they bother milking the cow in a renewable manner when they can slaughter it for meat instead?"

Well the meat is not bovine, more like large feline. The milked will turn on the milkers and savage them very badly. It would end any hope for a Republican Party revival in the future. It's a fun idea, but I don't buy it for one nanosecond.

wkwillis@18 "I think many people are still going to believe that it's Obama's fault."

You're probably right. Wingnuttery is rampant these days.

Andrew G@21 "The problem to me seems to be too much regulation, not to little."

Huh? The financial industry in the US and in the UK have been progressively deregulated for decades. Ending Glass-Steagall was probably the biggest example. The only major new regulation that I have seen in decades is the Sarbanes-Oxley reporting rules that were put in place after it became apparent that accounting rules were being seriously bent.

31:

Bruce @ 20: I thought it was the SEC who rammed the exemptions for the Big 4 or Big 5 (I heard varying accounts) to over-extend themselves into much greater debt ranges in their sprawling cancerous growth phases at the height of the private equity feeding frenzy. Was there also congressional approval?

Andrew G @ 21: [...] I hope you're not serious. If this is a feature, we either forgot to run acceptance testing or the entire spec document was only written on toilet paper before a big Mexican food lunch.

While some of the basics are good, the full concept of completely unregulated free market capitalism remind me of people I've met who have a great entry-level opportunity for you to be in on the ground floor of an exciting new marketing program which will absolutely guarantee that you will earn one thousand percent return on your investment in the first year.

While profit motivation is a great incentive for individuals and companies to compete, the concept of 'charge what the market will bear' creates monopolies and trusts where services or goods are NEVER available for a fair or competitive price. Like any system, it can be perfect in a computer modeled environment without the lovely variables of real human life.

Lycan @ 25: Fat != Happy Fat != Healthy Fat != Hopeful Please never equate 'fat' or 'well fed with consumer goods' with 'cared for adequately'. The uninsured, under-insured, and those scared to go to the doctor for fear of our future health insurance rates will all argue with you. Additionally, your statement applies only to select citizens in select countries. Considering the apparent world-wide ramifications, the 'failure' argument can easily be made if you have a different goal than domination of the world economic markets powered by the natural resources and human suffering of the majority of world population.

The gap between the executive pay grade and the employee pay grade has widened from a multiplier of 30-40 to a multiplier of 300-400 in thirty years. While not a tectonic or explosive shift it is still ridiculous. And when the purchasing power of said 'averaged' employee pay is reduced to levels lower than a decade ago. Not to mention the constant rise in average debt per person and per household.

Its sure good the last thirty years have been a slow, constant shift towards deregulation. Otherwise, who KNOWS how little executives would be paid! And their poor families, who might have to attend public school or consider working for a living in the future without their parents Golden Parachute to keep them happily aloft. Heck, if it wasn't for massive executive overpay and deregulation, we might have been forced to keep adequate levels of industrial and consumer manufacturing in the US. Imagine all the idyllic views wrecked by the smoke stacks! Even now, we're busy exporting our next problem, electronics waste, straight to where we've been dumping old cars, tires, and various chemical toxins for decades. But see the smiles on the faces of the African nations who we pay to take it. After all, as long as its NIMBY!

(pardon, a touch bitter. The Proud Steel Booted March of Capitalism makes me vomit bile)

32:

To further bolster the deregulation as culprit argument:

http://bigpicture.typepad.com/comments/2008/09/regulatory-exem.html

TechSlave@20 "I thought it was the SEC who rammed the exemptions for the Big 4 or Big 5" It was five and 3 have blown up so far - as per the reference above.

33:

I can't figure out who said it, but fat poor people aren't fat because of any benefit, they're fat because they're hungry but filling in the corners with cheap, high-fat or high-carb foods.

My father's mom was shaped like a hassock cushion, and apparently was that way all her life despite the Depression. She stayed that way by not 'wasting' food on her nine children and one of her favorite things was bread spread with lard.

Good quality food is more costly than cheap food. It is less fattening (fruit, vegetables, whole grains, lean meats) but way more expensive. If you're American, think of the offerings in the $1 section of your grocery store.

We're in a financial corner right now and trying to fix nutritious, healthy meals is a trial.

34:

While I'm being a bit trite, it's not time to get scared until the American poor start getting skinny.

@31 = Healthy, Happy, & Hopeful + Well Cared For: Just where is that supposed to come from? Subjective states that depend much on individual choices and internal perceptions. Finance Regulations just don't have the frequency response for that.

Again, blaming deregulation is just some people's whipping boy of choice. Show me a Regulated, Nationalized economy that has people bursting with Health & Happiness and then please pass the Soma.

35:

Naming all of the regulations that have caused the weakness and problems of the US and world economies would be too many to name. It's most of them, those not aimed at preventing outright fraud. And not just regulations of course, but a whole range of policies and tax structures.

Mortgage deductions, for instance. Or the twin abortions that were Frannie Mae and Freddie Mac. Or the arbitrary suspension of rules to bailout some companies but not others, which encourages risk.

Plug a hole in one area and create a leak in another. It's a fool's errand.

36:

Lycan @ 34

Again, blaming deregulation is just some people's whipping boy of choice. Show me a Regulated, Nationalized economy that has people bursting with Health & Happiness and then please pass the Soma.

Facts, please, not ideology. I'll ask you too: was it regulation that made so many financiers buy up tens or hundreds of billions of dollars of debt with the certainty that it would be a great investment? Maybe these bozos do need some adult supervision.

Techslave @ 31

In the late hours before adjourning for the winter holidays at the end of 2000, the US congress passed a bill that explicitly disallowed any sort of regulation on credit default swap derivative instruments. So no one trading them was required to maintain a reserve to support them, and records of their trading were not required. The result is that no one knows just how much money was put into them, though the bill for bailouts of major banks in the last few weeks gives us a known lower limit. Also, no one knows how much they're really worth in the market, but it is clearly not anywhere near as much as the institutions that gorged on them have assumed, so there are almost certainly going to be more banks and insurance companies threatening to go belly-up if the US Govt. doesn't bail them out.

37:

Charlie,

I think the reason the process ran away ahead of the Bushite's schedule is that they've never had this much power to screw up the system before, and they underestimated just how quickly and thoroughly they could bugger it. Hell, even Bush finally realized that saying "The fundamentals are sound" was just making him look like a fool.*

  • Unless he was misquoted, and was actually saying, "The fundamentalists are sound," in which case he's really off his nut.
38:

Just repeating something I read somewhere today. The reason they bailed out Lehman was that letting it go down would require unwinding all their counterparty business, and after what happened to the other firms, all the counterparty unwinders are full up and working 80 hour weeks. No clue if that is what really happened. You know somebody in a Wall Street back office?

39:

Alex @ 32: Thanks, appreciate the info. Considering a 60% failure rate thus far, I can only hope the management of the others are more competent.

Paula @ 33: I made an example, mainly to indicate that using the weight of the average American is not an indication of anything else. In fact, I continue below, but in brief I agree with you. I've made conscious effort to eat better, at home, with cheaper health-oriented foods, but it costs me time I little can afford. Not impossible but certainly a challenge.

Lycan@ 34: I disagree. Depression, dissatisfaction, and a sense of personal failure (among many other causes, medical and physical or emotional) can lead to weight gain. Considering the sugar-and-carbs to nutrients ratio in most cheap store bought foods which require minimal preparation, a major shift in national weight to skinny or to heavier would be a bad indicator. That, or it would advise us that someone's been throwing diet pills in the reservoirs.

I think we have a right to be worried far before starvation sets in on the majority of the populace. Where is the common or market good in finance deregulation that later costs billions of dollars in taxpayer debt, the plan to build structures for dumping toxic subprime debts costing billions if not trillions more over time as well as jobs lost not to mention other effects from the non-financial sectors damaged by the mortgage bubble bust? If it is there, it is in a very long view. And with extreme long views, the nice part is that you can find another path to the same place which might entail less suffering.

I am not denying that the average American shares a responsibility in this - people bought houses who could not afford them at the price they were offered. Some of us however can smell rotten fish without seeing it and know that it is, indeed, fish - and rotten. And we do not like the smell.

I admit that a fully nationalized economy with more regulations than action is also a guaranteed failure. But we're talking reality here, not a contrast of absolute extremes. The concept of a balance, actively overseen and willingly engaged by both sides to the benefit of all. Compromise. The race towards privatization has its own hazards, especially in life-critical areas such as medical emergency service and water. Or can create bloated industries like the US prison industry, now more populous than some states in the union.

Bruce @ 36: I can't manage to be brief on some of these subjects, very sadly. However, I had not known that the Congress specifically disallowed regulation on credit default swap derivative instruments, hereafter known as 'bloody bad ideas'. Then we are left with the extent of damages unknown, and never likely to be truly known. This type of thing has always been a shady area, and the tracks tend to be covered well with a combination of deletions and blizzards of paperwork and legal documentation.

More bailouts, more bad debt on the staggering US national debt. More desperate printing of money. Somehow, I have a feeling some people are trying to advocate a careful tightrope act over the lion's pit of a small or large general run on the banks. Letting enough of the companies fail and file as bankrupt to trim the market down to a realistic size without starting a wholesale panic that can hit the major consumer or employment sectors.

Sometimes I wonder if the tinfoil hats are getting something right, when they talk about central banks and deliberate market destabilization.

40:

Here's one of the things which makes me think we have actual dishonesty in Wall St.

Under British law, employees are pretty high in the pecking order of creditors when a business fails. (And just consider the effect of "outsourcing" on that liability.) Lehman was transferring all the money out of the British branch, at close of trading, and moving it back to head office, returning it just before the British markets opened. (I saw this mentioned in passing in a news report, on Monday.)

So when they went bust, on a Sunday, there were no assets under the control of British law, and nothing to pay the staff in Britain.

Whether, when you figure the requirements to have actual money to back the actual trading, you figure it worldwide or locally, I'm not sure, but it looks a big crooked.

And here's the biggie, even possible criminal liability. Under British law, if you know a business is at risk of bankruptcy, you have to be careful how you handle the money you do have. You can't give preference to particular creditors within a class. You can't hide the money from the system.

So where people at Lehman acting illegally? It might take years of investigation, and a long chain of courts cases and appeals, before anyone can be sure.

Were they crooks? I'm inclined to think so.

41:

There's something a little odd about that Data Centers story, Charlie.

Might be slipshod reporting, but the description reads as two data centers, in the same building, done as a post-9/11 security upgrade.

Even if the reality is one Data Center in New Jersey, and the other in corporate HQ on Wall Street, that feels a little bit too close together if you get one of those rare hurricanes that goes a long way north. But two in the same building is just insanely stupid.

(There are likely good reasons to be physically close to such things as the NYSE, because they'll need reliable high-capacity communications. And the more miles, the more backhoes.)

42:

Oh well, c'est la vie .... It looks like the American Dream of consuming, wasting and driving looks as if it's coming to an end. They own plenty of guns though, so I suppose they will work out a new dispensation.

43:

Hey, Lehman UK had an out-of-town facility, presumably their DR site, in High Wycombe. Yes, the town which is home to Royal Air Force Strike Command's bunker.

Not that any contingency involving someone attacking Strike would leave any reason to worry about a bank.

44:

Further, I don't buy the "teh surprise" thing. What incoming government has ever omitted to announce that everything is a TERRIBLE DISASTER left by the other lot, and therefore we'll all have to limit our expectations? This always works because in the case where everything isn't a TERRIBLE DISASTER, you can then suddenly discover this and deliver a nice surprise, and in the case where it is, well, you can blame it on the other lot.

45:

While I'll happily concede that markets are a highly efficient way of matching supply and demand, and they're the engine on which our fiscally-denominated wealth[*] is created, I tend to believe that the "free market" that the likes of Andrew G and Lycan are obsessing over is simply the American ideological equivalent of "true communism". True communism is a chimera -- can't work, basically, unless it's populated by New Communist Man who is happy to obey the rules -- and free markets don't work either, unless you populate them with happy capitalists who don't try to bend the rules in order to shift the balance of zero-sum transactions their way.

Bluntly, a small but significant proportion of human beings will commit ethical breaches for their own benefit, regardless of the political/economic system they operate under. They need policing. Market regulation to the extent necessary to stop sociopaths from stealing everything that isn't nailed down is absolutely vital -- and at that point you don't have a "free market", you've got a regulated one.

I'll happily agree that minimizing regulations is desirable -- ideally we'd have a small number of general principles that deter defectors, rather than a huge bundle of arbitrary patches that plug specific loopholes -- but the latter is what we've got, it evolved piecemeal over time, and we can't simply replace it wholesale without breaking the current system in the process. Trying to remove regulations (to permit certain parties to manipulate the system for their own benefit) is what got us into this mess. QED. The argument should be between more regulations or better regulations, not between regulation/no regulation.

If you want an example of an unregulated, utterly free market, all you need to do is look at the illegal narcotics trade in any big city. The whole thing operates in a regulatory vacuum (after all, the police and courts aren't going to protect the contractual rights of drug dealers, are they?). That is your classic "free market" in a nutshell, drive-by shootings and gang turf wars and loan sharks and all.

Finally: Lycan challenged me to point to a regulated, nationalized country that's nice to live in. I'd have to say that if I spoke Swedish I'd emigrate there in a shot, even though I'd have to cough up an extra 15% of my income in taxes. Germany and France -- despite the tendency of the Anglophone press to focus on whatever looks bad -- are pretty good, too. It's interesting that the most gung-ho pro-free-market Americans seem to be unable to conceive of the idea that there are places on the planet that are just plain nicer than the hot-bed of winner-take-all greed that the USA has been turning into over the past few decades.

[*] As opposed to the stuff you can't put a price on; a surprising amount of human activity centers around stuff that is not tradable in any currency -- love, happiness, health, wisdom -- and we ignore these things at our peril.

46:

@36 & @39: Deregulation is your whipping boy. I get that. Everyone has their pet rocks.

Before those deregulations, there was the 1995 Regulation: The Clinton Administration's regulatory revisions to the Community Reinvestment Act. Increased the number & amount of loans to higher risk borrowers. Enabled the sub-prime model. Ushered in lenders that didn't mitigate loan risk with savings deposits. Created ARMS with easy terms for hard risks.

Alex@32 The table and place settings for this collapse was well set long before 2004. Not saying your point isn't a valid contributing factor. Too much bad paper was already built up by 2004 though.

Deregulation exacerbating the Risk. Regulation creating the Risk. Getting dizzy. Deregulation bad. Regulation bad. Which one to shot first?

"Murder on the Orient Express" and "Julius Caesar" - so many different stab wouds. Which knife to hold responsible? Guess I'll indict the one I dislike most.

In all seriousness, it's the houses' fault. Damn four-walled, roofy bastards. If only they would have just kept on appreciating, we wouldn't be posting all this.

47:

Lycan: you're not getting out of this so easily.

Here's your clue -- look for the folks who have been focussing on getting wealth rather than making wealth.

We forget (at our peril) that market making is an essentially parasitic activity; yes, we need to be able to match up investors and capital with entrepreneurs who'll put the money to good use and generate a return on it, but when (as in the UK) finance accounts for around 20% of GDP, on a par with actual industry, something's gone badly wrong.

48:

Lycan, I hope you aren't operating under the assumption that most of us actually supported Clinton.

Charlie- last I read manufacturing industry was around 16% of GDP, from Wikipedia, 2003 figures, and I see no reason at all to suggest that it has increased, rather, fallen, given that the last 5 years include a shedload of jobs moving to Eastern Europe. (Eg the project engineer at work worked for the company which makes cash machines, up until a couple of years ago when they pretty much shut down manufacturing in Dundee) However I couldn't find more up to date figures on the ONS website, I'll have another look later.

49:

Charlie: finance only accounts for so much GDP in the UK because UK-based financial companies and/or UK-located people allocate capital for much of the planet. If we were only doing it for the UK, the financial sector would necessarily be very much smaller.

I'd agree that it's parasitic, but I'm not sure that its producing 20% of one country's GDP is necessarily a sign that something is wrong.

-- N., posting during lunchtime from a parasite's desk ;)

50:

N: the problem with financial sector stuff accounting for 20% of the UK's GDP is that it can go away, frighteningly fast. Being a major planetary finance center is great while it lasts, but relying on an information-based industry for 20% of GDP, when 75% of it can move to other financial centers in a relative eye-blink, ought to be giving the Prime Minister sleepless nights.

During 1979-1982, the British economy shrank by 10%. A terminal financial meltdown could see it shrink by 10-15% in an even shorter period of time. And it's a lot harder to build up the real-world industries to take up the slack -- that's why we've got all this hollowed-out infrastructure, short-haul airlines booming but no new rail networks (runways are much cheaper to build than it is to purchase multi-hundred-mile railway right-of-way in the UK), a balance-of-trade deficit that's propped up by financial trading rather than real exports, and so on.

51:

Charlie @ 45: I don't think the drug market, or any other black market is a good example of a free market. They may be free of regulation, but the illegal nature puts a massive and unnatural level of risk on the markets. This in turn drives prices up and encourages those involved to take other risks since simply being the the business at all is a large risk.

Look at Prohibition in the US, vs. the large alcohol companies today. Prohibition in many ways is the ultimate regulation.

52:

Charlie@47: "...when (as in the UK) finance accounts for around 20% of GDP, on a par with actual industry, something's gone badly wrong."

Another slice: gross global product is $65-70 trillion. -- and I've seen several times the guesstimate that there are ~$60T of CDSes out there.

So the pile of "I'll cover you if that counterparty lets you down" promises is of the same order as ALL THE NEW VALUE CREATED BY EVERYONE ON EARTH IN A YEAR.

Does that seem odd to anyone else? Maybe a little too much meta in the mix?

53:

Guthre@48, no assumptions of Clinton support intended or implied. Only brought up his CRA 1995 cuz I believe it's releveant to this topic.

I'd have to correct any impression that I advocate a 100% free-market-anything-goes, - would agree that some level of regulation is always required - even Dodgeball has its rules - but regulation can't protect against executive idiocy. I'd rather Err towards the side of Free, away from Regulated (Freedom!)

Charlie@47, wouldn't dream of getting out. My first & main point is that there's plenty of blame to go around, from the largest of Institutions right down to the Individual. Too many contributors for us to hang it soley on our favorite scapegoats, a lot of sacred cows trampled their shit around too.

54:

Charlie@45: "I tend to believe that the "free market" .... is simply the American ideological equivalent of "true communism"

I think you are setting up a straw man. No-one believes that markets work best without some rules, despite the rhetoric that some people express. There is a large body of law that acts as rules to ensure transactions are fairly carried out. There is also a smaller body of rules to prevent a few players using their dominance to manipulate prices. Whilst transgressions occur with depressing regularity, I don't know of any study that shows that "market failure" is common. The preceding is somewhat different from regulations that prohibit certain types of businesses. The best example in this current crisis was the 1933 Glass-Steagall Acts which separated investment and commercial/retail banks. Glass-Steagall was explicitly repealed in 1999(?) by Congress in a bill proposed by Phil Gramm, who is the economic advisor to McCain and would possibly be the next Treasury Secretary. The same bill specifically ensured that some types of financial instruments could not be regulated, and of course part of that was what allowed Enron to play it's games before it blew up. We've not even had a decade before the banking deregulation brought us back to the brink of depression, and essentially by the very same mechanisms that brought the banking giants down the last time. In this case, I think it is clear that we needed sane banking regulations to guard against systemic instability. OTOH, there are regulations that seem pointless and in some cases set up to protect incumbent industries, which I think could be beneficially removed.

What US citizens (and others) should be seriously piqued about, is that a plutocracy used money to buy the regulations they wanted to make Gilded Age fortunes, then when the game blew up, are getting the government to clean up their mess at everyone else's expense.

BTW, notice how none of the players is accepting blame. It is all passive "securities were too complex..." rather than "we screwed up".

55:

Lycan @53: there's a difference between "executive idiocy" (which you can't protect against -- see KfW's huge whoopsie for a classic example) and permitting and encouraging a business culture in which (a) the maximization of profit at all costs is legitimized (Gordon Gecko flashback time: "greed is good"), meshing with (b) a winner-takes-all climate, and (c) corporate governance fads (the idea of management as an abstract science that can be applied to any realm of endeavour, so that the manageriat don't actually have to understand the nuts and bolts of whatever business they're running). I submit that what we've got is precisely what we should have expected, as the culmination of a generational shift towards handing all our enterprises over to a caste of highly-trained sociopaths for safe-keeping.

(Because in a business climate dominated by factors (a), (b) and (c) human empathy is a liability and only sociopaths are fully equipped to prosper. See also Enron.)

56:

TechSlave @ 39

Considering a 60% failure rate thus far, I can only hope the management of the others are more competent.

I doubt it. The ones who've already bagged it are the managers who are competent enough and smart enough to realize just how badly wedged their companies are, and that pulling the cord on their Golden Parachutes™ would be the best way to ensure a future of writing their memoirs while sipping margaritas on the veranda of their mansion in Notaxistan. The ones who haven't pulled the trigger yet are the ones who don't have a clue just how seriously up the collective cloaca they are. There's still hundreds of billions (maybe trillions, no one knows for sure) of dollars of face value worth of CSDs sitting around out there, waiting to devalue the financial reports of their holders.

57:

As an amateur Cassandra, rather than a professional in good standing, I can say, Charlie, that I and many others I've talked to expected what we got, but I don't think any of us realized the magnitude of the disaster*.

Charlie, weren't you asking about Ponzi schemes that brought down state economies in the "419" thread? Well, here we are.

  • I have a good friend who is a profession economist, and therefore allowed to publish "I told you so" in professional journals. He's not pleased about the opportunity.

** Yes, it is a disaster. Estimates of the size of the CDS holdings varies quite a bit, and it's likely we'll never know to closer than 50%, but even it if is only US $1Tn then that means that we're facing a situation where roughly $0.5 to $0.9Tn was created out of whole cloth, used to back loans, and now doesn't exist again (by Heisenberg! Virtual money!), and a large number of someones are going to have to either cover those loans or go under. And if the US taxpayer ends up footing the bill (who else?), the effect is going to be really rough on the economy for the next several years.

58:

Banking is an industry which makes its money by skimming the cream off of what passes through its doors. It doesn't produce anything, and anyone who claims it does is somewhat detached from reality.

However, by aggregating the resources of a large number of people it does allow other people to get the resources that are needed to make money. Which is how there is some cream to skim off in the first place.

It's possible that the only practical way to distribute the loss is for governments to pay. I've seen it claimed that, as the markets have developed, nobody quite knows who owns what. Which, when you're looking at your most recent bank statement, seems a distinctly odd claim to make. But, given the ingenius financial instruments traded over the last decade, I can believe it.

59:

Where is the evidence this cretinous crew have ever displayed such competence in the past?

Bruce @ 57. Some of us have been admiring the view as the world economy passes the 37th Floor of the Empire State Building for some time now, and saying so. Oh, and with true American generosity, the cost of this cock up has been exported world wide.

60:

Charlie@55: I don't know who shot first.

American individual consumers have been spending spending spending, living far beyond their means with easy credit, easy financing, 0% til 20xx durable goods, McMansion sub-prime ARM mortgages. Running up huge credit card balances while the Fed just kept printing money money money. Dumping all that credit card debt into their home equity loans.

With citizens like those, who needs sociopaths?

61:

Dave Bell: "Banking is an industry which makes its money by skimming the cream off of what passes through its doors. It doesn't produce anything, and anyone who claims it does is somewhat detached from reality."

You are arguing that middlemen have no value. That is untrue. If a bank is more efficient at aggregating funds than individuals or loan seeking firms, then the cost savings do add value. Furthermore, by acting as pooled money repositories and centers for money transaction clearing, they reduce the friction of those transactions. Having said that, investment banking and private finance is a very different animal which today has become almost pathological IMO. For example, M&A activity is deal driven and serves little purpose other than to make bankers (and CEOs) extremely wealthy, with that wealth extracted from the shareholders. The other wealth extracting activity is money management. The growth in 401Ks in the US are a great source of wasted management fees for the plan administrators and fund management firms. You never (well I haven't ever) seen no-load mutual funds offered in these plans - a far better choice for the investor.

62:

Definitely some interesting points and views raised here.

Charlie @ 46: Germany and Sweden. Aaah, if only I could convince my girlfriend that its not too far from her family. I hear the German banks are currently smirking up their sleeves, even with some significant damage to some few of them, because they managed not to stick their hands into the meat-grinder.

Charlie @ 55: Not certain how things are in the UK, but in the US, executives and boards are answerable to criminal charges if they fail to take advantage of profit potential due to concerns of environmental or ethical impact that is not a direct violation of current law. It makes my teeth hurt.

Lycan: We can agree that there is responsibility in many places. Don't mistake my opinion that deregulation is solely at fault. But regulation is something that I can, as a citizen, make a moderately effective demand for and on which action may be taken in realistic time lines. Consider this enforcement of personal responsibility on the part of corporate entities (which have special personhood under US law). If financial entities large enough to accidentally step on and crush the GPD of many nations want to be members of society and enjoy the rights and protections thereof, they must too accept the responsibilities and liabilities thereof.

Bruce @ 56: Sadly, you are likely right. A lot of these institutions don't even know themselves how overextended or poisoned they are, since they didn't put in place enough internal tracking to be able to get a clear view. Virtual money indeed. I knew I should have invested in gold mining operations on WoW, they'll be our next major reserve currency.

63:

Lycan@60: How about those consumers?

If these people were so obviously living beyond their means, there's something severely wrong with the creditors who lent them what they couldn't possibly pay back.

Presumably, the impetuous to fill the (universally present) demand for severely unsafe loans came from people who either had no idea what they were actually doing, or didn't care.

64:

Expanding a bit on Charlie@45, there is indeed a specific psychological problem with the American free-market dream humanity. It requires people willing to be completely atomistic and selfishly motivated (so as conform to the equations), but also willing to stop all dreams of fraud and other illicit gain at the boundaries of what law enforcement the rest of the society is willing to pay for. It's possible to run wide open with minimal or no regulation only if people can switch instantly from greed to altruism at just the right point. But if any noticeable fraction of the people ever decide that the law should matter as much as people's well-being and yearning for security - which is to say, not at all unless there's a buck in it - then we'll continue to need more law than the market as a whole is willing to grant.

65:

Charlie@45:

Like other small northern European countries, everybody under a certain age in Sweden speaks English well enough to shame many native-speakers, so there would be no linguistic barrier at least in the short term.

OTOH, their beer isn't up to much and the price will make your eyes water. I recommend staying within drinking distance of the Caledonian brewery ;)

66:

Bruce @ 64: The free market doesn't need people to be any particular way. It will evolve based on whatever the people in it are like. If they are greedy and fraudulent, it will evolve in ways to cope with that. Perhaps higher transaction costs or more conditions placed in contracts. A more altruistic and open population would develop differently.

If you someone forced a totally free market on the US, on Africa, and on China in a few years the three markets would look completely different.

67:

Apparently quite a few people here don't understand the concepts (and instruments) being written about.

A credit default swap is an insurance policy: "I'll pay you 3% a year of the face amount of some bonds, and if the company that issued the bonds defaults, you have to buy them from me at par."

What is the total face amount of all the fire insurance policies in the UK?

(The difference is, default by one company, especially one that has written protection, can lead to defaults by others, even more than one house burning down leads to a major conflagration. Correlation risk is never priced correctly.)

68:

"Which might even have worked if they'd managed to keep a lid on the financial mess."

It'll still work if they can discreetly remind the American Voter, never the brightest bulb in the room, that Obama is Black.

69:

Seth Breidbart @ 67

Apparently quite a few people here don't understand the concepts (and instruments) being written about.

I don't see why you say that, or what the point of your explanation is. The current debt crisis is the result of large volumes of CDSs being traded as if there was no risk of default occurring, and as if they had a real value to the holder equal to the value of the loan being secured (plus interest, of course). Right now much of that paper is waiting to have a value put on it, at which point a lot of people are going to have to report the true value of their holdings, which will be considerably lower than they're currently saying, simply because the insurers didn't keep enough reserve to be able to cover even a reasonable fraction of the defaults.

70:

Actually, Charlie, I've seen a few excellent examples of the classic 'free market' and I'm sure you have too: Farmers markets. Flea markets. Rummage sales. There you get a fair approximation of Rational Man, no sticking contracts, etc. And in a lot of instances, no taxes!

Hmmm . . . how about the vendors at all those cons you go to? Seems like the classic case of the hustling entrepreneur, a place where someone with smarts, moxie, a little can-do and a bit of luck can make some spare change.

Interesting thing about these instantiations, though. Notice that although you have cases of the serious business man who sets up early at the market, has his kids out there at the turn-off with cuteness and large sings directing prospective customers to fresh corn, tomatoes by the bushel, laid-this-morning eggs, as well as the tubby and aging Farmer Maggot and his wife selling a few indifferent potatoes and maybe a few watermelons as an excuse to come into town and gossip with his cronies, they really don't do much differently than the other. The hustler is going to make some money, no doubt about that, but his ROI is maybe five-to-ten times better than his slacker counterpart. Not five hundred or a thousand.

Iow, contrary to the idea of the Free Market as this sort of Eldorado where anyone can hit the jackpot if they just make the right moves at the right time in front of the right people, the opportunities for true wealth are really few and far between. Edisons or Rockefellers are one-in-million, not one-in-twenty, they mythology notwithstanding. Now, the 'free market' that we have here in the U.S. is usually anything but, and it looks like the vast majority of those who make out like bandits are, well, bandits. Not hard-working and canny men of business. But it's the latter that's held out as the exemplar of the Free Market, not the former, Wall Street, not Diagon Alley. A nation of tycoons, not shop owners.

It is of course what's very consciously and cynically peddled by certain elites: Gus Farber knows that if the Gub'mint would just get out of his life and let him keep his hard-earned money, if they would just have let him keep that $223.16 he paid in taxes last year, and the year before that, and the year before that, why, he could have parleyed that into millions! Rush Limbaugh told him so.

Sigh. Pardon the rant. It's just that among other things, the free market is the victim of it's own propaganda.

71:

As I've said before, "There ain't no such thing as a free market." If for no other reason than if you leave one out, someone is bound to steal it.

72:

Thanks for the explanarion, Seth.

Googling on "CDS" wasn't any help.

73:

Don @ 68: Obama being black isn't an issue. People bothered by that sort of thing aren't going to vote Democrat anyway.

What they need to do is remind voters that he's Liberal. In much of the US, them's fightin' words. :)

74:

Andrew G @ 73

What on Earth or anywhere else makes you think that Democrats can't be racists?

75:

Repeating another rumor. The AIG bailout language lets them desegregate your stock in your account from the assets of the firm. So instead of the firm going bust and your stock getting assigned to you, you become another unsecured creditor and your shares are pooled with other assets. These are rumors. How am I (or you) going to know if they are true? You note, I do not ask if this is legal. I am old enough and have read enough history to understand the way that legal changes with time and circumstances.

76:

Bruce @ 74: They say so themselves. :)

77:

Dave @72, Here's Wikipedia's explanation.

78:

If Glass-Steagall hadn't been repealed the situation would be, if anything, worse. The act forced a separation between commercial banking and investment banking, the repeal allowed mixed banking the mixed banks on the whole have done a lot better than the investment banks. Of the big investment banks at the start of the crisis Bear Stearns and Merrill Lynch have had to be taken over, Lehman Brothers has collapsed, Morgan Stanley appears to be in advanced merger talks and even Goldman Sachs looks vulnerable.

79:

It's being pointed out elsewhere (by Devilstower at Daily Kos, for one) that this problem goes back much farther: look at the savings-and-loan crisis in the US in the 70s and 80s. The regulatory agency proposed rules that would have restricted what the S&Ls could do, and the S&Ls ignored the rules, and were allowed to continue doing so by laws written by, among others, Phil Gramm, and strongly backed by, among others, John McCain, who was a close friend of Charles Keating, whose S&L, Lincoln Savings, was one of the largest to go under (and, IIRC, one of the earliest).

Politicians recycling bad ideas: don't vote for them.

80:

I'm disinclined to think it's a conspiracy, but if it were I think it would have a strong flavour of "starve the beast" to it.

General question: Are those the Free Market would leave with the most power such that we're better off with their holding it? I certainly wouldn't it want most power to be in the hands of those best able to rise in the Army, or the Church, or the Party, but my guess is that I'm better off in a world where a slightly-enslaved market means that there are other ways to powers than through it...in particular, by being able to appeal to those who don't do well at that particular game.

Similarly, I want there to be public land, because I implicitly give up rights whenever I step into private land---I am definitely not allowed freedom of speech, assembly, or the right to bear nukes on your land should you not wish me so free, and for that matter if you want to quarter Redcoats there I can't stop you. This is related to the question of selling off "[ui]nalienable" rights when that contradicts the meaning of the adjective.... (I know, 'Welcome to left-libertarianism.')

Maybe I'd have an easier time with it if the the winners at that game didn't seem especially prone to believing that not only are they on the top, but that they fundamentally deserve to be, and that God (or a misinterpretation of Spencer's interpretation of Natural Selection) makes them deserving of power. One thing about the often-dirty business of politics: there seems to be a decent chance that a sane and smart man (most often it's a man) will easily be free of the idea that his extremely contingent election makes him one of the Elect...especially if there are other power centres beside government....

(This last is based somewhat on a Pratchett character's musing on how the Good Folk and aristos not only rule, but believe that it's only right that they should.)

81:

A rant from America:

The fun begins again a month. That's the grace period for not shorting bank stocks on the US government's "list". Those 2 up days on the Dow Thursday and Friday...short positions being closed out.

So we can start watching the real collapse just before the election. Not that we Americans don't deserve it. 10 trillion in debt, and an economy that has outsourced itself to the point it has no industry left. And the cronies in Washington have decided to bail out the people that put them into power in the first place.

For those of you that are British, I should remind you that at the present time, the nameless and faceless US Congress has a 10% lower approval rating than the President. So for all of you Bush-haters in the crowd, just keep in mind that Congress controls the purse strings. If the Democrats weren't profiting just as much as the Republicans from our foreign escapades in Iraq, it's highly unlikely we'd still be there. Democrat's do put a lot of lip-service on the pig yet the money to fund the war comes through every business quarter like clockwork.

As for the banking crisis, my wife's solution is use the $700 billion to give people back their homes that have been foreclosed, give the rest to those that still owe on their mortgages with the provision the money goes straight to paying off said mortgage. Ultimately then the banks get their money, and the general population gets what would be the best stimulus package of their lives...homes that are paid off. Personally I like her idea. No mortgage means huge increases in consumer spending. More consumer spending, more employment. (Cue Louis Armstrong's "What a wonderful world")

Of course I liked when politicians used to be tarred and feathered and ridden out of town on a rail for incompetence. Wall Street CEO's however will get their golden parachutes, and probably get rehired at another company, or at the very least become a member of the Board of Directors at another company.

For my closing rant against globalization, I hate the Belgians for buying Anheiser-Busch, as we Americans are now being bombarded with "lager" instead of "beer" commercials...

82:

Thorne: I have one bone to pick with you: Anheiser-Busch have never been in the beer business. They were, however, moderately successful at convincing Americans that rat piss was beer (aided and abetted by the natural degree of confusion engendered by 20 years of Prohibition).

83:

Prohibition in the USA only ran from 1920 to 1933.

Beer, and shoe shops, are likely the first signs of the dangers of pure capitalism.

When the beer gets that bad, a new pair of shoes may be the only legal mood-enhancer available.

84:

Bruce Cohen @69: If there were no risk of default, CDSs wouldn't be traded at all.

The value of a CDS is the present value of the expected payoff if the target company goes bust, times the probability of it going bust (during the term of the CDS), times the expected fraction of its debts the underwriting company will pay off; less the expected value of the payments on the other side (it's a swap, sort of like an insurance contract: I pay you 3%/year, if Company goes bust you buy their bonds from me at face amount).

That formula has been known and used in the market since CDSs started.

The problem, as I wrote, is that correlation risk is never priced correctly.

85:

Thorne: "For my closing rant against globalization, I hate the Belgians for buying Anheiser-Busch, as we Americans are now being bombarded with "lager" instead of "beer" commercials..."

And guess what, Stella Artois is finally getting some serious exposure in the US.

86:

Thorne @81, while I'd like to have my mortgage paid off (by my 65th birthday, at least, since then my income drops to a third of what it is), that doesn't help the folks paying massively-raised rents.

(Paulson was on Meet the Press yesterday and his voice was hoarse.)

The Democrats like the general Republican plan, but want to limit executive pay.

87:

Charlie @82: Did you hear me arguing the point? However, for the Belgians to call our favorite (in reality, cheapest) brand of rat piss "lager" is an affront to the senses. Note to the Belgians, if you can get your brewers to figure out how to get rid of that horrible tasting last drop in the bottom of the aluminum(aluminium) cans, you could actually win the hearts and minds of Americans around the globe. I quit drinking American beer a long time ago, though (as once one expands one's horizons beyond American shores, there is quality to had elsewhere)...

However, from a purely aesthetic point of view, the Budweiser brewery architecture in St. Louis is truly a marvel...Put it on one's "bucket" list and hope the Belgians never touch the buildings.

Marilee @86: I may have to empty my 401K to prevent foreclosure on my home as I was recently laid-off after 15 years...My mortgage was not obscene compared to many others I've seen. But this is a story for another day.

88:

Erm .... "Stella Artois" ???

UGHHHHH!

Did you know that recently, there was a very prominent Brit advert for this retpiss "lager" which calimed purity (NOT Rheinheitsgebot, OF COURSE) and: "Only 4 ingredients: - Water, Malt, Rice-grains (!), and Hops"

Which is a bit of a giveaway, since it can't be a BEER without .... YEAST!

Oops.

Which reminds me, there is a wonderful pub in Royal Hill, Greenwich, London, called the "Union" - often called by the name of its' brewery: "Meantime" ALL their beers are Rheinheitsgebot, including some callsic German-style ones, and a deadly IPA. On the walls are some superb photos of the REAL 4 ingredients - the tinted scanning elctron-micrograph of the yeast cells is excellent!

89:

If you really want to be paranoid, maybe the idea was to have 800B in funds that they can legally distribute with no oversight whatsoever.

90:

Stella is indeed shite (says the man whose preferred pub session beer is a toss-up between Deuchars IPA and Schneiderweiss, with an occasional sortie into real Budweiser, i.e. the Czech stuff from Budvar).

91:

Charlie, one of my many London drinking-holes is the delightful "Czech & Slovak House", in W. Hampstead. Always has both Budvar and Pilzen on draught + Czech food ....

92:

Charlie, one of my many London drinking-holes is the delightful "Czech & Slovak House", in W. Hampstead. Always has both Budvar and Pilzen on draught + Czech food ....

93:

Thursday, September 25th, 2008 saw the largest bank failure in living memory. Washington Mutual filed for Chapter 11 Bankruptcy, resulting in the FDIC seizing the bank’s assets. Now, if the worst had happened, each of the bank’s customers would have been set to receive up to $100,000 per individual, $200,000 for joint accounts, and up to $250,000 for IRAs, and so forth. J.P. Morgan Chase decided to bail the bank out with a last minute buyout, but if they hadn’t, the consequences could have been disastrous. If the FDIC had to pay out to the customers of Washington Mutual, it could have drained up to half of the FDIC’s resources, and that could be the worst thing at the moment, because the number of banks that are going to fail in the future is uncertain. What has gotten WaMu and others into this trouble is predatory lending in the subprime mortgage market. Some people are afraid that this situation is only going to get worse, and others are convinced that the market will right itself. If your bank is not a reliable source for a short term bailout if you need one, then you can try a payday loan for some relief.

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