Quote for the Week, March 31-April 6, 2013

Did EU banking officials really believe that haircutting depositors would be sufficient to restore confidence in Cypriot banks?  The infantile quality of the actions of EU officialdom is mind boggling.
--Christopher Whalen

Big Brother in Asia

Trailer:  "State of Control"

American filmakers are trying to document social unrest in occupied Tibet.  Their chief obstacle:  Chinese computer hackers trained to delete.

Criminals to the Left of Me, Criminals to the Right

€100,000 invested with Madoff 5 years ago would still be worth €79,000. If you deposited it in Laiki Bank, you now have €20,000 <cough>
— Grant Williams (@ttmygh) March 27, 2013

Tuesday Tune-up

Jefferson Airplane, "White Rabbit"

Bair Refuses to Hibernate

Sheila Bair with Bill Moyers

[22 min.]

The former FDIC Chair talks about the U.S. Senate's investigation into the risk-taking and disinformation campaign carried out by JPMorgan Chase.  She points out that federal regulators are subject to "cognitive capture" by the very industry which they are charged to oversee.  "We need a culture change with the regulators," she tells Moyers.  "They confuse bank profitability with bank safety and soundness."

Quote for the Week, March 24-30, 2012

Hell hath no fury like a saver robbed.
--Ambrose Evans-Pritchard

We Have Met the Enemy

"Have they no grandchildren?"

--Jeremy Grantham, interviewed by Charlie Rose

03-11-13

[53:39--click here]

Investment adviser Jeremy Grantham (GMO) worries that the human population has surpassed the carrying capacity of planet Earth.  We are seven billion going on ten by 2050; we need to be on our way back down to four.  We survive at the moment solely because of fossil fuels, representing "millions of years of stored energy" and affording us "an amazing, but short, time-out."  How short?  Let's say 250 years, and we are well into the second half.

In the competition for resources, "the rich half of the world is pricing out the other half."  Crude oil has quadrupled in price since 2000.  Indeed, "resource prices are squeezing the rest of the system," likely constraining economic growth to little more than 1% annually for the foreseeable future.  The world's phosphorus, essential in sustaining animal and plant life, will be exhausted in 50 years, assuming an annual increase of 2% in consumption.  Most portfolio managers don't care.  They live in a "paper world," not the real one, and are too busy chasing short-term returns to worry about long-term consequences.

Grantham advises that we not confuse human ingenuity with a resource bonanza.  To those confident that we will somehow figure things out, Grantham observes that throughout human history robust civilizations, prior to the mining of coal, routinely collapsed.  After the time-out, they may again.

Ripple (Or Tsunami?) From Cyprus

Now, whenever you hear the word "bailout" assume your bank account goes missing. Unless it's for Wall St. in which case they get trillions.
— Michael Krieger (@LibertyBlitz) March 21, 2013

Tuesday Tune-up

Priscilla Ahn, "Dream"

Quote for the Week, March 17-23, 2013

When interest rates rise into decelerating nominal GDP, 'accidents' can happen.
--Vince Foster

Too Big To Nail?

In the crosshairs:  JPM CEO Jamie Dimon

"JPMorgan Chase, the nation's biggest bank, ignored internal controls and manipulated documents as it racked up trading losses last year, while its influential chief executive, Jamie Dimon, briefly withheld some information from regulators, a new Senate report says."
--N.Y. Times DealBook [full article here]

Full Senate report here.

Senate hearing begins in one hour.

Tuesday Tune-up

Lindsey Stirling, "Song of the Caged Bird"

Quote for the Week, March 10-16, 2013

The experience of over 250 debt crises over the past few hundred years tells us that there is no specific point when the markets lose confidence in a government's debt.  When it happens, though, it is ferocious in its intensity.
--John Mauldin

Tuesday Tune-up

Steve Miller Band, "Swingtown"

ZIRP Is a Zero-Sum Game

The man with a plan.

"Further deficits are not a viable option, and threaten undesirable long-term consequences. The ideal solution is to pair deficit reduction efforts with policies to stimulate gross domestic investment. 'Investment' in this context does not mean financial investment, but real investment in factories, equipment, capital goods, research, and development. Policies to stimulate investment include investment tax credits, accelerated expensing of investment, R&D incentives, and similar programs....[emphasis author's]

"The only sustainable course to a higher standard of living is to encourage productive investment. Policies like those currently pursued by the Federal Reserve attempt to encourage consumption, but do so by distorting savings and investment decisions toward speculative activity rather than productive investment. Unfortunately, the reluctance of consumers to spend is tightly linked to existing mortgage and consumer debt burdens, many of which remain unserviceable and have not been restructured. Attempts to squeeze greater consumption demand from these individuals, without a strategy to increase productive activity and income, is likely to produce continued failure.

"While policies to stimulate gross domestic investment may be viewed as unwanted 'tax expenditures' in deficit reduction efforts, these policies are critical to prevent the unintended consequence of economic contraction."

John Hussman's commentary appears in full here.

Quote for the Week, March 3-9, 2013

[Those who] are waiting for the arrival of intelligent government are utopians.  The real choice today is between bigger or smaller unintelligent government.
--George Will

Hurdles for Would-be Home Owners

Want a home loan?  Submit your fingerprints and grab a Snickers.  It's going to be awhile.

"It's very painful to be a borrower in a refi or a purchase position...it's the relatively small number of approvals.  And I hate to say this, but it's probably going to get a little bit worse along those lines before it gets better."
--Rick Sharga, Carrington Mortgage Holdings, in a recent radio interview