The Stingy News Weekly (08/14/2011)
Debt, downgrades, and inflation
"Whether we are watching rioting in Greece, the US debt-ceiling showdown, or even the City of Toronto simply trying to reduce the number of libraries they offer, the issues in each case are exactly the same ..."
The Nixon Shock
"Burns was replaced by Jimmy Carter in 1978. The following year, with inflation rocketing toward 15 percent, Burns delivered a keynote speech, “The Anguish of Central Banking,” in which he argued that central bankers around the world were failing because elected leaders were unwilling to risk displeasing constituents. The new Fed chief, Volcker, did tame inflation unlike Burns, he had the fortitude to subject the country to a brutal recession. But the dilemma faced by Burns—how to withstand the demands of the public for limitless monetary expansion—did not go away. We see it now in the troubles of nations from Greece to Ireland to the U.S. And the anguish that Burns felt is Ben Bernanke’s unfortunate inheritance."
"The UN’s first ever report on the state of childhood in the industrialized West made unpleasant reading for many of the world’s richest nations. But none found it quite so hard to swallow as the Brits, who, old jokes about English cooking aside, discovered that they were eating their own young."
"If you are not a critic of neoclassical economics, particularly after the 2008 crash, you aren’t thinking. The models did not consider the the effects of a big buildup in debt across the economy. They were debt-neutral, which was a big mistake."
Idiots at work: high prices only edition
"France, Spain, Italy and Belgium will impose bans on short-selling from today to stabilize markets after European banks including Societe Generale SA hit their lowest level since the credit crisis."
The lower stocks go, the more I buy
"U.S. Treasuries are still triple-A in that there is no question that we will repay the interest and the principal. Every contract will be repaid. So our bonds are triple-A. Our currency, the dollar, is not triple-A. Our bonds are."
Watsa sees dirty thirties pain ahead
"The U.S. economy appears to be heading toward a lengthy period of deflation such as the one that struck Japan, and there is little policy-makers can do to prevent it, says one of Canada’s most accomplished investors. But it isn’t just the United States and Europe that Prem Watsa is worried about. The potential bursting of a property bubble in China has him even more concerned. And if Chinese demand for commodities dries up at the same time as U.S. consumers are shutting their wallets, then the global economy is in for a lengthy period of pain."
"The world is led by debt junkies who think that debt doesn’t matter. They are leading us to a greater crisis where the only thing that does matter is debt, and for political reasons, some governments will not be willing to pay in full."
It’s the Economy, Dummkopf!
"With Greece and Ireland in economic shreds, while Portugal, Spain, and perhaps even Italy head south, only one nation can save Europe from financial Armageddon: a highly reluctant Germany. The ironies—like the fact that bankers from Düsseldorf were the ultimate patsies in Wall Street’s con game—pile up quickly as Michael Lewis investigates German attitudes toward money, excrement, and the country’s Nazi past, all of which help explain its peculiar new status."
The difference between AAA and AA+
"We simply don't have enough AAA and AA rated data to be statistically confident in these distinctions ex ante, which is why AA+ and AAA rated securities differ very little in their yields, usually by only 10 basis points (0.1%) on average. Here's the data from Moody's, that excludes Munis and ABS"
How debt has defined human history
"Since 1971, when the U.S. abandoned the gold standard, and the world has been moving to a system of virtual credit money, we have been entering a new period of history. But it’s not entirely unprecedented. In fact, contrary to popular belief, credit has been the predominant form of money in world history."
Who got the margin call?
"The market is not puking. Some prime broker is puking the stocks held by one or more very large hedge funds. So lets play the game: guess who got the margin call!"
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