|Doing Something About the Financial Mess||A Century of Tax|
by Christopher Chantrill
April 09, 2008 at 11:41 pm
WHAT DO you think? Is the mortgage meltdown over?
Predicting the future is like trying to look round the corner. If only you could take a quick look without getting your head blown off. If only.
Lets take a look at the faces of the pedestrians on the other side of the street. What can they see that we cant see?
First of all the inverted Treasury yield curve righted itself so that now short-term Treasury bills yield less than medium term notes and long-term bonds. Then the Libor yield curve righted itself. Last Thursday the Dow and the NASDAQ broke above their 65 day moving averages.
These portents have nothing in common with the auguries of Roman times or Chinese divination practices.
Then there is the all-important lagging indicator. Democratic politicians and the mainstream media are all over the mortgage crisis. Why, Hillary Clinton even contributed an addition to her series of award-winning 3:00 am Call TV ads.
It just shows how ill-suited she is to be president. Everyone knows that financial crises are not handled at 3:00 am. They are handled over the weekend.
It was over a weekend in mid March that Drill Instructors Ben Bernanke and Hank Paulson plunked the stockholders of investment bank Bear Stearns down into the barber chair and proceeded to give the young recruits a haircut that will be remembered as long as there is a Wall Street.
In the future every over-leveraged Wall Streeter tempted to put off recapitalizing because he is too cheap to dilute the stock will think back to the Bear Stearns weekend when the Fed and the Treasury stripped Bear Stearns of its equity and more or less gave the firm to JP Morgan Chase.
Then and only then they opened the Feds discount window to investment banks.
Notice what happened next. When the Swiss bank UBS announced $37.7 billion in writedowns on April 1, 2008 it simultaneously assured the world that it was seeking $16 billion in capital to improve its capital ratio.
Heres a nickel that says that all over the world bankers are busily lining up capital injections to improve their capital ratio and save their long golden hair.
Lets make a radical prediction. Lets say that the worst is over. Pretty soon it will be time to start handing out the medals and the gold stars.
Why dont we start with the man who appointed Ben Bernanke as Chairman of the Federal Reserve Board and Hank Peterson to be Secretary of the Treasury?
President Bush seems to be making a habit of sticking with questionable appointments and then finally, at the last minute, getting the right guy in there to turn things around.
President Bush could have dumped the late, unlamented Chairman of the Federal Reserve Board, Alan Greenspan, in 2004 instead of nominating him for a fifth term. For who could have forgetten the agonizing months in 2001, when the Fed, way behind the curve, slowly lowered its fed funds rate from a peak of 6.5 percent as late as January 2001 down to an eventual 1.00 percentor the still more agonizingly slow step-by-step increases by 0.25 points per month, starting in mid 2004, taking two years to get up to 5.25 percent, finally, in the summer of 2006.
He could have saved us from two unimpressive Treasury Secretaries, Paul H. ONeill and John W. Snow. What a relief it was when President Bush nominated Hank Paulson, veteran CEO of Goldman Sachs, to be Secretary of the Treasury on May 30, 2006, at a time when it was already clear that trouble was brewing on the mortgage front.
The real surprise is Fed Chairman Ben Bernanke. The surprises started with his nomination on October 24, 2005. Who would have thought that this mild-mannered economist would sail through his nomination process to be sworn in on February 1, 2006 just in time to deal with the mortgage mess? Who would think that an academic and expert on the Great Depression would turn out to be a decisive leader willing to take bold action to preserve liquidity in the financial system during the difficult months that began in August 8, 2007 when the Fed and the European Central Bank first injected emergency liquidity into the money market to prevent a meltdown?
In the next few months we will get to see whats around the corner, and whether the haircut administered on the weekend of March 15-16, 2008 by ruthless DI Bernanke to Bear Stearns got rid of the economic lice.
The real measure of Ben Bernanke will be if he has the cojones to raise interest rates as soon as the present crisis has passed. The problem hell have is that Democrats will be running around talking about the worst economy in the last 50 years just as they were in 1992 a full year after the end of the mild recession from July 1990 to March 1991.
There is no looking around the corner on that one.
Buy his Road to the Middle Class.
[W]hen I asked a liberal longtime editor I know with a mainstream [publishing] house for a candid, shorthand version of the assumptions she and her colleagues make about conservatives, she didn't hesitate. Racist, sexist, homophobic, anti-choice fascists, she offered, smiling but meaning it.
Harry Stein, I Can't Believe I'm Sitting Next to a Republican
[T]he way to achieve a system of determining admission to the public schools on a nonracial basis,
Brown II, 349 U. S., at 300–301, is to stop assigning students on a racial basis. The way to stop
discrimination on the basis of race is to stop discriminating on the basis of race.
Roberts, C.J., Parents Involved in Community Schools vs. Seattle School District
[T]he Liberal, and still more the subspecies Radical... more than any other in these latter days seems under the impression that so long as he has a good end in view he is warranted in exercising over men all the coercion he is able[.]
Herbert Spencer, The Man Versus the State
[To make] of each individual member of the army a soldier who, in character, capability, and knowledge, is self-reliant, self-confident, dedicated, and joyful in taking responsibility [verantwortungsfreudig] as a man and a soldier. — Gen. Hans von Seeckt
MacGregor Knox, Williamson Murray, ed., The dynamics of military revolution, 1300-2050
[The Axial Age] highlights the conception of a responsible self... [that] promise[s] man for the first time that he can understand the fundamental structure of reality and through salvation participate actively in it.
Robert N Bellah, "Religious Evolution", American Sociological Review, Vol. 29, No. 3.
[In the] higher Christian churches... they saunter through the liturgy like Mohawks along a string of scaffolding who have long since forgotten their danger. If God were to blast such a service to bits, the congregation would be, I believe, genuinely shocked. But in the low churches you expect it every minute.
Annie Dillard, Holy the Firm
[Every] sacrifice is an act of impurity that pays for a prior act of greater impurity... without its participants having to suffer the full consequences incurred by its predecessor. The punishment is commuted in a process that strangely combines and finesses the deep contradiction between justice and mercy.
Frederick Turner, Beauty: The Value of Values
Within Pentecostalism the injurious hierarchies of the wider world are abrogated and replaced by a single hierarchy of faith, grace, and the empowerments of the spirit... where groups gather on rafts to take them through the turbulence of the great journey from extensive rural networks to the mega-city and the nuclear family...
David Martin, On Secularization
What distinguishes true Conservatism from the rest, and from the Blair project, is the belief in more personal freedom and more market freedom, along with less state intervention... The true Third Way is the Holy Grail of Tory politics today - compassion and community without compulsion.
Minette Marrin, The Daily Telegraph
These emerge out of long-standing moral notions of freedom, benevolence, and the affirmation of ordinary life... I have been sketching a schematic map... [of] the moral sources [of these notions]... the original theistic grounding for these standards... a naturalism of disengaged reason, which in our day takes scientistic forms, and a third family of views which finds its sources in Romantic expressivism, or in one of the modernist successor visions.
Charles Taylor, Sources of the Self
There was nothing new about the Frankish drive to the east... [let] us recall that the continuance of their rule depended upon regular, successful, predatory warfare.
Richard Fletcher, The Barbarian Conversion
The Union publishes an exact return of the amount of its taxes; I can get copies of the budgets of the four and twenty component states; but who can tell me what the citizens spend in the administration of county and township?
Alexis de Tocqueville, Democracy in America