Category Archives: Fuckin’ Politics

Everything is connected… and the wires are tangled

Sarkozy: Do we know what we’re doing? Merkel: Shut the fuck up…

About two days ago I had a friend ask me for some help for an interview he’s got coming up. The guy he’s been connecting with sent him one of his weekly write-ups about the current economic/market conditions and told him that’s the sort of thing he’d have to start knowing. Here’s basically what I talked to him about (this will be a long post, I’m trying to be in-depth so anyone can follow).

For starters, the sovereign debt crisis in Europe is the most important thing going on right now. I’ll get into how it affects the US in a minute. Greece is the most likely default case of anyone right now, as CDSs on greek debt have about a 450 bp spread (i.e., expensive as shit to buy those CDS’s, b/c there’s a very high probability of default). The ECB/IMF/EFSF (European Financial Stability Facility) are continuing to pump money into its bond markets, as well as Italian, Spanish, and Portuguese bonds. Whether they think Greece will ever be able to repay this debt is almost irrelevant (they won’t), so these cash flows are being used to keep rates from ballooning and to stop a full on default. Worst case scenario is Greece defaults, which triggers CDS payouts (not good for the US), margin calls, and significant flight from European sovereign debt. The last part of course could see defaults by more important countries such as Spain and Italy, but that is less likely (I refuse to say highly unlikely b/c as you can see this shit has never really been seen before). The main problem is European banks, who hold a huge amount of these sovereign bonds. If we see a restructuring of sorts, or huge drops in bond prices, these banks will have to make enormous writedowns. After this, further possible events include major drops in equity and bond prices of these banks as investors flee from fear the banks will have liquidity, or even solvency issues. This of course is a classic self-fulfilling prophecy: investors fear they’ll lose big from these banks, so they dump them, which of course causes the actual problem they feared in the first place.

The US comes into this directly in two ways. First, US banks have written a colossal amount of CDS’s for European banks over the past 3-4 years. As of early July, we’ve sold $34 bln, $54 bln, and $41 bln in Greek, Irish, and Portuguese debt CDS’s alone. That’s not even counting CDS’s on European banks. If there’s widespread default (again, unlikely, but possible), then the US will be losing BIG on those payouts. The second way is economic rather than financial. Europe is one of our main trading partners, and if they enter a recession (probably will), we’ll be taking a big hit in export losses and possibly face import shortages as production slows down there. This also ties into emerging markets (esp. China), as expectations are quickly rising that we’ll see a pretty hard landing in a year or two. In other words, nearly every country is facing stagnant (or negative) growth for a few years, which… is bad.

For those who’ve wanted to actually stay in a good mood, and therefore haven’t watched the news in awhile, the main political/economic topics right now are the US debt level, and our struggling economy. Before I get into this, let me make on thing clear: you cannot solve a debt crisis in a recession. Whether or not the media/politicians have been playing up the debt situation, I really have yet to see any issues arise from the ACTUAL debt level itself. Obviously the track we’re on is unsustainable and blah blah blah, but I’m talking over the course of a couple years. Our gov’t is having no trouble at all borrowing money; the 10YR Treasury is still sub-2%… from a buy&hold/investment standpoint that is absolutely outrageous. It just goes to show that when the world is freaking out, everyone looks to the US.

As much as I hate to say it, the real issue is the political system. I’m not saying we need to raise taxes or cut spending or whatever the buzzwords are right now, I mean the political process is absolutely KILLING our economy right now. It took over half a year for the debt limit to be raised, literally up to the last possible moment. The next day, BAM! Equities plummeted and Treasury yields approached record lows (and to my utter disbelief, reached those lows a few weeks later). This of course wasn’t expected, as the pundits had been chirping “yields will pop as the world realizes we can’t repay our debt!”. Bull. Fucking. Shit. This isn’t a series of graphs relating debt levels to interest rates or whatever, this is real life. What’s more, we have an entire year before election season, and you can bet your sweet ass no politician will be willing to make the tough decisions if it means pissing off their voters.

The debt ceiling squabble was one of the most atrocious displays of leadership I’ve ever seen, and I’m not exaggerating. The hard decisions weren’t even close to being made. If I remember correctly, we raised the debt ceiling by about $1.5 trillion and promised to cut about $2 trillion over the next 10 years. I don’t even have to do the math to see that $2 trillion over 10 years is a joke when we’re projecting a $1.5 trillion deficit in 2011 alone. If anything, all we did was push the decisions off for another few months. The debt level itself isn’t the immediate issue, it’s the perception that our leaders are unable to make the necessary decisions to get the US on the right path.

This perception is twofold. On one side we had non-stop political bashing occurring all summer long, with both sides bickering over what should be cut, what’s off the table, and who’s to blame for our national debt’s recent surge. On the other side, we have a country who is on the brink of relapsing into recession (sidenote: I don’t know why, but I think the term double-dip is so fucking stupid). Unemployment is STILL above 9%, and won’t return to normal levels for awhile. What’s more, I believe the drop we’re seeing in equities is due to people realizing the Fed has run out of bullets. Which is another way of saying that their policies aren’t doing what they said they would. Rant:

Let me get this straight. The Fed is making sure rates stay low, which is a good thing to have. But jesus christ have you not opened your eyes? I’m usually agree with the Fed/Bernanke, but what the fuck. Rates are at all time lows! And nobody is borrowing! Not only are rates at all time lows, but they’re there without your doing. People aren’t arbitraging Treasuries, they’re using them as a bank. If we have another international recession, Treasuries are gonna continue to be the safest asset. So what is the point of more bond buying? Does buying the 10YR down to 1.85 from 2 and the 30 from 3.1 to 2.9 really do anything? Rates are there. Save the ammo. God damn.

Alright back to the main point, bulls are currently pointing to corporate profits and equity levels as the main reason why we shouldn’t end up in a recession. I think that that is exactly why we’re entering a recession. Corporations are preparing for the worst by hoarding cash and laying people off. The majority of them will weather the storm to come, but people as a whole are left out to dry. If everyone is scared to lose their job, they’re gonna take whatever pay they get and hold onto it. Which, ya know… doesn’t help the economy grow. The uncertainty that’s clouding everything is all hanging on one major thing–Europe. People are waiting for Merkel/Sarkozy/anyone to come out and save the day. Obviously if they had the strategy to end all strategies for fixing the European debt crisis, we’d have heard about it already. As of today, Germany has said they’re capping their bailout funds at 221 billion euros, which gives the EFSF about 450 billion euros when recapitalization is needed (for both banks and the various countries who will undoubtedly need them).

I’m pretty lost right now, so I’m just gonna end this here. I’ll go back and go through each area more in depth throughout the next week(s), but this is a dece start. As you can see, everything is connected, even more so than 4 years ago. My prediction: we’re not gonna see an end to this until the EU is literally on the brink of collapse. That’ll be an interesting time… hopefully I have a job by then.

Political Profile: Mitt Romney

That’s one handsome son of a bitch

I’m gonna start doing some profiles on candidates, and give my opinions on their positions. First up… Mitt Romskis (Warning: pretty fuckin’ biased, sorry)

Trade: Romney, like all Republicans, supports free trade. He’s especially focused on the rising Asian economies. What I like about his stance on trade as opposed to others’, is that he acknowledges the benefits of emerging economies. I have yet to hear him say something like Pawlenty’s quote, “America’s rightful place is not behind China”. That may rile up people in Iowa who don’t realize we’re no longer the only superpower, but his optimism in the future of trade is refreshing. It’s a long-term comparative advantage position: free trade will allow us to eventually cut loose those the shitty industry sectors that no longer help us. I just re-read that Pawlenty quote and I just can’t help but feel that’s the kind of shit that got our country in this position in the first place. People just feel like we’ll always be the ultimate superpower no matter how much evidence there is to the contrary. Now, we’re obviously still dominating the world (China’s GDP at PPP is about 2/3 ours, and much less for nominal GDP), but we haven’t had a 5-year stretch of at least 5% growth like… ever. Pawlenty is promoting his “goal” of 5% growth for the next 10-years. Get the fuck outta here.

Taxes: Once again, love the action this dude takes. When he was governor of Massachusetts, he jacked up court fees, professional licenses, and gun licenses, (shit people usually pay for whatever the cost) raising $400 million in the first year. He was also able to raise about $180 million more over two years through business taxes. While many people complained these were tax increases, he did it through fixing loopholes. By cutting out these loopholes, he’s effectively reducing the uncertainty in future taxes, and people can finally shut the fuck up about tax uncertainty. In reality, the only corporations who strictly choose their investment opportunities based on tax rates are fortune 500 types. The average business prolly doesn’t blink twice at the tax rate. He also didn’t support the temporary extension of the Bush tax cuts in 2010 saying, “because the extension is only temporary, a large portion of the investment and job growth that characteristically accompanies low taxes will be lost.” I feel like it’s rare for a politician to admit that a tax cut extension doesn’t really do much. It’s not like they’re gonna go out and buy a fuckin’ car because taxes got reduced a little bit for 2 years, as much as people want to believe that. Unlike many politicians, he truly understands the economic effects of taxes on the economy (both good and bad).

Energy: I only mention this because of his recent statements. There’s growing skepticism of humans’ role in global climate change in conservative circles, with some denying global warming entirely. Romney is coming out and backing his stance that everyone is indeed fuckin’ up. I love that this dude is finally growing some balls and saying “blow me” to all the ultra-conservatives. He has a strong position on the need for alternative energies, citing the compromising position of foreign oil reliance. This isn’t extremely important to me at the moment, but it’s nice to see he’s comfortable with his moderate position.

Immigration: As opposed to picking one of two sides, amnesty vs. rounding up every alien and shipping them off, Romney wants to implement a plan to encourage illegals to apply for citizenship. While border control is obviously important, the US has already been “penetrated” by illegals. When I can drive to the west-side of Grand Rapids and 30% of the people I say are Mexicans, it makes border control seem like a lost cause. He’s also big on cutting federal funds to “sanctuary cities” like San Francisco and NYC. I don’t think the important part is the fund slashing, but the idea of cities that encourage illegal aliens to live there must face consequences.

Health Care: Dude wants to make state rights the standard. That’s a good thing for Republicans. His individual mandate eliminated the possibility of people showing up to emergency rooms and forcing the state to pick up the tab. That’s called enforcing personal responsibility, not forcing someone to buy something they don’t want. If you can afford health care, you’ll probably have it. If you can’t, the state will subsidize it. While that may not be good in an ideological sense, please take note that as of now Romneycare takes up 1% of the Massachusetts state budget. It ain’t breakin’ the bank. Furthermore, I’ve stood in line behind people who have to walk away empty handed because they can’t afford their fuckin’ diabetes meds. I’m not saying that government needs to provide health care. I’m just saying with all of the wasteful spending, 1% of a state’s budget is not such a bad thing. There’s plenty of evidence showing increased education spending doesn’t help kids in the long run, use some of that to make sure one of those kid’s dad doesn’t drop dead on him. You call it a liberal view, I call it proper spending allocation.

Education: While there’s a lot of roadblocks and issues to face with improving education, he focuses on what I believe to be the biggest problem. Romney has consistently expressed his view that increased incentives, like bonuses or higher salaries, for high performing teachers is pivotal to increased standards. He realizes that just injecting money into schools doesn’t yield results. It’s not a monetary problem, it’s a fundamental problem. When a teacher can get tenure for sitting on their ass for 3 years and then basically never get fired, that’s seriously fucked up. It’s one of the few professions I can think of that pay is completely unrelated to performance. When we’ve got teachers unions screaming to block these changes in pay structure and tenure, it’s pretty clear their thoughts are on themselves and not the future of the country. If teaching was a $100,000/year job, we’d have some good ass teachers. Some people might say “oh well people will just teach for the money then”. Well, not if they’re shitty because they’ll get fired. It makes so much sense I can’t even stand it. And I’m tellin’ you, a good teacher makes every difference in the world.

Abortion: He thinks any policy that is based on a religious view is unacceptable, and that there are more important problems. What else is there to say? Fuck abortion issues, fuck don’t ask don’t tell, and fuck the gay marriage debate. We got bigger issues to focus on.

My Take: Well if you can’t tell, I’m guarn voting for Romney. He’s got two knocks on him right now tho, one more obvious than the other. Obviously people have been shitting on him for Romneycare, which I can understand because Republicans just spent 2 years doing the same thing to Obama. I think it’s important to note the state vs. federal power here; Romneycare fits very well in a state like Massachusetts, but other states don’t have to follow suit. The other problem I think he has is he’s trying to appeal too much to moderates. It’s definitely a growing area of the population, but there’s not a fucking chance the average moderate/moderate-liberal votes for anyone else other than Obama. So, while I think he should be able to beat out Pawlenty and Santorum, I feel like it’ll be a toss-up between him and Obama. Liberals fucking love Obama unconditionally, like he’s a god damn family member. It’s wild.

Who’s retarded now?

Just read this great article that provided me with some, I’m assuming, legitimate data for something I’ve considered many times: the quality of a democracy depends on the education level of the average voter. My thoughts are usually more in the form of “why are there so many god damn retards out there?” There’s an actual graph of the relationship between gov’t quality and avg. education, but here’s an excerpt:

In order to evaluate the actions of politicians, voters need to be able to process the available information and understand the impact of the actions of elected officials on their welfare. Voters unable to process information and make rational decisions are as ineffective as uninformed voters. Winston Churchill, who had a dismal view on voters’ ability to process information, once said: “the best argument against democracy is a five-minute conversation with the average voter”.

When we’ve got Mike Huckabee–a legit candidate in 2008–saying “[abortion] transcends all of the political issues”, then we’ve got fuckin’ problems. Huckabee, as much as I don’t wanna admit it, is obviously a pretty smart dude. But do you think he actually believes that bullshit? Heeellllll no. But there are PLENTY of people in this country that do… and he’ll gladly scoop those votes when he needs them. I mean seriously. Not the economy. Not education. I’d even accept fuckin’ airport security over this shit. Abortion! But… what are ya gonna do?

It’s hard not to feel depressed about all this. I mean I regularly bitch about the bullshit politicians do, but the reason they vote in lockstep over every single partisan issue is because that’s how they’ll get re-elected. The political process isn’t dangerous, it’s expected. What’s dangerous is the amount of people who vote for someone based solely on their party-affiliation, or their position on one or two issues. Down in Alabama, Billy Bob doesn’t know jack shit about the Dodd-Frank Act. But you can bet your sweet ass the second he finds out his district’s rep wants to close down all the Chic-fil-A’s in the state, he’ll be voting for the other guy.

Just remembered this video… laughing at the beginning and screaming at the end:

Dimepiece at 2:15 tho… that stutter is cool with me cutie.

Smooth move, Ferguson!

Nobel Prize winning economist and MIT prof Peter Diamond just reported today that he’s withdrawing his name from consideration for the Fed Board. I just finished reading his op-ed in the NYTimes, which can basically be described as “fuck you guys I deserve this”. I mean the title of the op-ed is “When a Nobel Prize Isn’t Enough”… way to make it awkward douche bag.

For those who don’t know, he’s been nominated by Obama about 3 different times to fill 1 of 3 Fed Board vacancies. Each time, hardly any Republicans voted for him, the last one being a unanimous rejection by the GOP. This shouldn’t come as a surprise, as Diamond was one of the biggest supporters of the Fed’s monetary stimulus, QE1 and QE2. Naturally, Republicans want someone in there who will curb the government’s spending habits. So, not shocking at all, Diamond tries to defend himself and his bruised ego in the op-ed. This is where you start to think saying “fuck you guys I deserve this” would’ve prolly been the better move.

After a few paragraphs of mentioning how much he’s chroned up over the years (make no mistake, dude has balled real hard), he starts trying to counter the statements made by Senator Shelby, the main opponent of his appointment. The gist of the op-ed is that he thinks the higher-ups aren’t putting enough emphasis on the analysis of unemployment into their monetary policy ideas. He goes on to explain the technicals of unemployment and how to analyze which type (structural vs. cyclical) is the main “culprit” of our heinously shitty u-rate of 8.7%. He then states that his years of diligent research have allowed him to decide that structural unemployment is the problem… that’s about it.

I’m gonna guess a lot of people are lookin’ around thinkin “shit… might be a good thing he’s dippin’ out now”. If you’re not catching my driftingtons, this guy prolly wouldn’t have gotten jack shit done if he were on the board. He’s basically saying nobody is paying attention to the connection between monetary policy and unemployment. Look pal, we see you’re a smart guy and you obviously know what you’re talking about in regards to what the problem is and blah fuckin’ blah, but you ain’t the only one. Nothing’s gonna go the way you want if you hold up a bunch of charts saying “would ya just LOOK AT IT!?” while your other hand is up your ass. The right dude for the job is gonna be able to take those already well-understood ideas and push them through legislation. In other words, it’s gotta be someone who realizes the political process isn’t gonna change anytime soon, and knows how to work it too. It ain’t gonna be some dude who runs away crying holding up his trophies when nobody listens to him.

Weinerface

WEINER!

Well I’m gonna be completely honest here. Ain’t shocked in the least by what this guy is admitting to right now.

  1. Has had online relationships with at least 6 women in the last 3 years. Word
  2. Never met any of the women. Ok, I’ll believe that
  3. Will not lay out what happened in the relationships. Good move.

I am on the other hand loving this little part. The reporters are hounding him now for the age of the women, saying these girls were only a few years older than his kids. Ummm… I’m gonna go ahead and say he’s prolly not tryin’ to swap dirty talk with a 40 year-old housewife. If anything that’s the most relieving part of this whole thing. Hey guys, at least the bitches weren’t old right?

Best quotes from the whole press conference, both happened as he’s walking off stage:

  1. Were you fully erect or flaccid in the photograph?
  2. Do you plan to support Governor Schwarzenegger’s love child?

Let a player play.