good article for those that aren't ready for the full iTulip

[hoodoo]

An excellent article from The Atlantic. While the iTulip crowd will recognize this as another description of the rise of the FIRE economy and the American Oligarchy the writing is good and I've been sending this to my friends that aren't ready for iTulip but are still interested in a deeper discussion of the economic crisis.

Hoo

http://www.theatlantic.com/doc/200905/imf-advice?

[johnny531]

Re: good article for those that aren't ready for the full iTulip

That's an excellent article, thanks for sharing. I actually forwarded it to my senators & congressman, in addition to my family. I know, I know, it at least made me feel better

[World Traveler]

Re: good article for those that aren't ready for the full iTulip

This is a GREAT article, he calls a spade a spade and goes into detail on how we have become an economy dominated by and run for the benefit of the financial elite (his term is oligarchy). Up to and including NOW. The last few paragraphs are the "money quotes":

"In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and AIG. The administration will try to muddle through, and confusion will reign.

Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity. When inflation is high, who can say what a piece of property is really worth? When the credit system is supported by byzantine government arrangements and backroom deals, how do you know that you aren’t being fleeced?

Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.

The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.

Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.

The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late."

[cjppjc]

Re: good article for those that aren't ready for the full iTulip

Here is the part I like:


This is what Ben Bernanke, the man who succeeded him, said in 2006: “The management of market risk and credit risk has become increasingly sophisticated. … Banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks.”

Or as someone at iTulip once said "If you think central bankers know what they are doing........ Think again."

[strittmatter]

Re: good article for those that aren't ready for the full iTulip

The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.

Once again, an excellent article.

[Munger]

Re: good article for those that aren't ready for the full iTulip

Simon Johnson is a hoss. His blog, The Baseline Scenario, is a must read.

[Supercilious]

Re: good article for those that aren't ready for the full iTulip

Here is the essence:

Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent.

That is called leeching a country.

My only problem with the article is that it paints a rosy picture for the IMF, like they are some caritable, altruistic financial organization, while the IMF has an abysmal record of 'rescuing' a country. Usually the IMF help results only in an exchange of the leeching elites. A country ruined by a greedy and corrupt national elite, is IMFed and part of the national elite is discarded, and a small obedient part becomes profit extraction overseers for the mew international masters.

Basically a part of the local masters are recycled as overseers for the new foreign masters. This is what happened in Russia for example, when the old domestic oligarchs, were replaced with western leveraged, new siloviki oligarchs.

In countries that are too poor and undeveloped to allow milking directly through the FIRE sector, then IMF and WB insure the milking takes place by concession of rights over essential utilities and natural resources. This is what is happening in Africa in Latin America etc.

IMF and WB seems to have lately an obsession for creating artificial scarcity of water:
http://academic.evergreen.edu/g/grossmaz/VANOVEDR/

Currently there is a rush to privatize water services around the world. The World Bank and International Monetary Fund (IMF) are pushing for the privatization of water services by European and U.S.-based companies. They are pushing privatization through stipulations in trade agreements and loan conditions to developing countries. These privatization programs started in the early 1990’s and have since emerged in India, Bolivia, Chile, Argentina, Nigeria, Mexico, Malaysia, Australia, and the Philippines, to name a few. In Chile, the World Bank imposed a loan condition to guarantee a 33 percent profit margin to the French company Suez Lyonnaise des Eaux while the company insisted on a margin of 35 percent.

Besides being too curteous to the IMF the article is great and the conlusion perfect.

[World Traveler]

Re: good article for those that aren't ready for the full iTulip

Symbols,

I agree with your assessment of the IMF - history has certainly proven it is correct. And I also thought he painted too rosy a picture of a benevolent(!?!) IMF.

But I hope a lot of people read this article, so they get a sense of just how bad this situation is in the U.S., how corrupt and extortionist our financial elite are, and the long term outcomes of current U.S. policies.

[jandkmeyer]

Re: good article for those that aren't ready for the full iTulip

I've been telling everyone who will listen that this is a political crisis and that the "bailouts" are just more looting by the same crony capitalists. The economic problems will not be solved because the real purpose of all this is to continue their own enrichment. Nothing will be solved until the political crisis is solved.

Sounds like I'm preaching to the choir here.

[vanvaley1]

Re: good article for those that aren't ready for the full iTulip

I'm still waiting for somebody to tell me what a sagacious individual said about bankers and what to do with em. So what did Shakespeare say?

[Slimprofits]

Re: good article for those that aren't ready for the full iTulip

This is a good article, but I have to add one criticism:

As an unnamed senior bank official said to The New York Times last fall, “It doesn’t matter how much Hank Paulson gives us, no one is going to lend a nickel until the economy turns.” But there’s the rub: the economy can’t recover until the banks are healthy and willing to lend.

What about a willingness or lack thereof to borrow?

Epic fail - game over. Johnny Consumer has been replaced by Johnny Debt Pay Down.

[Supercilious]

Re: good article for those that aren't ready for the full iTulip

Symbols,

I agree with your assessment of the IMF - history has certainly proven it is correct. And I also thought he painted too rosy a picture of a benevolent(!?!) IMF.

But I hope a lot of people read this article, so they get a sense of just how bad this situation is in the U.S., how corrupt and extortionist our financial elite are, and the long term outcomes of current U.S. policies.

No doubt it's a great article, very good to be shared with family and friends. Thanks for the link. The IMF part of my reply was just chatty nitpicking.

[Rajiv]

Re: good article for those that aren't ready for the full iTulip

Simon Johnson is a hoss. His blog, The Baseline Scenario, is a must read.

At the website, an excellent collection of resources - Financial Crisis for Beginners

[blazespinnaker]

Re: good article for those that aren't ready for the full iTulip

My favorite quote:

To those who say this would drive financial activities to other countries, we can now safely say: fine.

[Thailandnotes]

Re: good article for those that aren't ready for the full iTulip

“The real fight in Thailand and Indonesia in 1997 was about which powerful families would lose their banks. In Thailand, it was handled relatively smoothly.”

I question this. It took four or five years before non-performing loans were transferred to the state. Only 7 banks were nationalized. More should have been.

Thailand’s bankruptcy laws were a joke. You could borrow a gazillion dollars to build a condo and walk away from it half built when the economy collapsed. Even if you had extensive land holdings, creditors couldn’t come after you.

The IMF insisted Thailand implement bankruptcy reforms as part of the loan package, but the changes have gotten decidedly mixed reviews. Creditors still face a long shot getting money from defaulters.

Here comes rising unemployment just as thousands of condo units are coming on line. The Thai economy is contracting. Non-performing loans are increasing. Many condos are being completed by the same companies that just walked away from loans in 97.