Greetings all. Back from vacation, shaved my obligatory hideous vacation-beard this morning, ready to come back to Earth. Had an outstanding week off, marked among other things by a confrontation with an enormous iguana on the beach at Anse Marcel in St. Maarten. The thing was nearly three feet long. Also, for any traveler who ever visits the place, I have to recommend a restaurant called L’Estaminet in Grande Case, which offers the most incredible desserts I’ve ever seen/tasted. The chocolate sampler even comes with this crazy metal toothpaste-tube-type contraption filled with mousse or something that you squirt into your pie-hole – and next to that there’s like a giant Chinese soup-spoon filled with these amazing chocolate pop-rocks … I’m swearing off jokes about the French for at least 18 months as a consequence.
Anyway, well, now that we’ve closed that window into my bourgeois lifestyle, we return to our regularly-scheduled Monday mailbag.
If you had to guess, how much would gas have to be per gallon here in the U.S. for violence and crime to start rising to almost Mad Max-like levels for the "precious juice"?
Me, I say 6 bucks.
Or, do you think fat America is just too lazy and sedated by their sweet HDTVs and cheap fast food to really ever make a stink about it?
Totally ready to join "The Humongous,"
Jim in Wakefield, MA
I think it’d be more like $7.50, unless the price of internet porn also goes up. You can still get so many free clips.
As you probably know, Newsweek just got sold and has a new editor, and they've changed some writers and all that. They've hired this guy, Niall Ferguson, who now writes an article that appears on the 2nd page of the whole magazine. I just wanted to bring this week's article to your attention.
In a fairly widely read national magazine, this guy is encouraging us to sell off highways and parking meters and other junk to make a quick buck. Living in Indianapolis, I've seen this happen to highways and parking meters, and I am concerned that 1) this stuff is being sold at way undervalued prices and 2) what possible good can come of public services (which are to benefit the public) being administered by private interests (which try to make themselves money)? This stuff scares the hell out of me. Thanks for reporting about Chicago and Pennsylvania, but please keep the pressure on!
This Ferguson article is incredible. This is why I try to avoid reading Newsweek and Time; in between all the transparently idiotic attempts to capture the red-state demographic without venturing too far into DC politics (“What the Bible Says About Sex” is a typically disgusting recent example) and the revolting corporate pop-culture pronouncements ( “Why Harry Potter Rules” comes to mind there), these mags constantly shovel out the most vile propaganda … The Ferguson piece is an amazing specimen; the guy only half-jokingly concedes that selling Alaska is probably going too far and seems to be in favor of selling off a fairly sizable chunk of the national infrastructure:
In fact, the U.S. government currently has about $233 billion worth of nondefense “property, plant, and equipment,” according to the Treasury’s Financial Management Service. That is almost certainly an understatement. The government owns somewhere between 600 million and 700 million acres of land, or about 30 percent of the country’s land surface, much of it in the Western states, where as much as half the land is federally owned.
Washington could also sell its stakes in the Southeastern Power Administration and related assets as well as the Tennessee Valley Authority’s electric-power assets. There’s Amtrak (which runs at a loss) and the extensive hydroelectric empire of the U.S. Army Corps of Engineers.
You’re right: the reasons for not selling these assets go far beyond the obvious patriotic issue of not selling the fucking “hydroelectric empire of the U.S. Army Corps of Engineers” to Asians and Arabs to pay for, essentially, bailouts and tax breaks for rich white people in Manhattan. Not only are these deals are almost always horrible values for the state – in Chicago, they sold off 75 years of parking meter revenue for about a fifth of what those meters were worth – they also invoke pretty serious national security issues. In the age of terrorism, are these right-wing types seriously advocating the sale, to foreigners, of Amtrak, of highways and dams, of bridges? Do we all want to be like the citizens of Chicago, watching parking meter rates quadruple overnight because some fund manager in Dubai decides he’s not satisfied with his returns? And again, even if Ferguson is right and we can fetch $233 billion for all this federal infrastructure, all that does is pay for a little over a fourth of the $858 billion extension of the Bush tax breaks, and maybe a twentieth of the financial bailouts, so it’s not like this is some kind of ongoing a solution to the revenue problem going forward. It’s just a really stupid, one-off giveaway of national sovereignty when the market is at its very lowest – selling bridges and grazing lands to finance extra vacations for Jamie Dimon and George Soros. Awesome idea.
Just wondered if you had a chance to see Tom Friedman's latest Op-Ed in the Times, featuring another classic metaphor right out of the gates:
'What's unfolding in the Arab world today is the mother of all wake-up calls. And what the voice on the other end of the line is telling us is clear as a bell:
"America, you have built your house at the foot of a volcano. That volcano is now spewing lava from different cracks and is rumbling like it's going to blow. Move your house!" In this case, "move your house" means "end your addiction to oil."'
Quite a metaphor when you immediately have to explain it.
I got a number of letters last week from Friedman-metaphor fans about this one. I’ve been trying to lay off Mr. Friedman, because there’s no sense in beating a dead horse, and in this case, “beating a dead horse” means “stop picking on Tom Friedman for continuing his eternal MMA cage-fight against the English language.” But his lava-spewing volcanic foot-house was pretty outstanding Friedmanese, on par with some of his best efforts from the early 2000s. Another passage I liked was from an earlier, ominously-titled column, “A Pharaoh Without a Mummy”:
As I kept walking to my hotel, I realized why. When I looked down at the Nile embankment — and this was central Cairo — all I saw was garbage strewn about, a crumbling sidewalk and weeds sprouting everywhere. I thought: If this were Sydney, Singapore or Istanbul, the government would have built a beautiful walkway along the banks of the Nile where Egyptians and visitors could stroll with families in the afternoon. Not here.
The thing is, if this were Sydney, Singapore or Istanbul, you probably wouldn’t be building a walkway along the Nile for Egyptians to stroll along. There’s just never going to be another Friedman.
In your interview with Bill Maher you talked Bernie Madoff and how he got the rope because he ripped off the rich and famous. But isn't Bill Maher rich and famous? Maher got ripped off just like the rest
of us. Didn't Madoff get nixed because he wasn't well connected, unlike all the other figures you talked about in your recent article?
True, Bernie Madoff ripped off rich and famous people, and true also, Bill Maher is rich and famous, and the guys who ripped him off – namely Lehman Brothers execs like Dick Fuld – have gotten off, unlike Madoff. So I suppose that’s sort of a contradiction. I think the point I was trying to make is that Madoff was really an anomaly, more of a common street con-man who ripped off high-society types, while guys like Fuld and the other bankers represented a more sophisticated systemic sort of fraud that broadly targeted foreigners, pensioners, and the middle and lower classes (and especially the urban poor). Going after one of the latter types would have opened a giant Pandora’s box and forced an industry-wide examination of financial practices that caused the crisis, while busting Madoff was a relatively simple matter that didn’t force the Justice Department and the SEC to take on the whole financial sector.
Madoff is exactly the kind of case that the SEC likes: a soft target whose investigation doesn’t necessarily lead in too many directions. Also, as former Lehman lawyer Oliver Budde just pointed out to me in an email, they couldn’t NOT prosecute Madoff – he confessed and was turned in! They would have had to do crazy intellectual somersaults to avoid jailing the guy. Not that they aren’t capable, of course.
Couple of mailbag questions for you...
First: What do you think will happen to the commodities markets with all the unrest in the Middle East? Other than that they'll go up and down and stuff and somehow or other the big banks will wind up making a ton of money, I mean. Do scenarios like some of the ones that are starting to seem plausible -- scenarios in which the fundamental structure of how the world's oil supply is controlled -- run any risk of causing some kind of insane economic upheaval because of how dangerously open commodities speculation has become? I need to know how many cans of Campbell's and shotgun shells to buy.
Second: How do I forgive myself for spending way more time thinking about the NBA trade deadline than I do about shit like whether the commodities market is going to blow up the world? I'm a pretty smart dude and all I want to do is curl up in a tiny ball and watch YouTube clips of Blake Griffin.
I can’t answer question A because I’ve been watching the same YouTube clips as you. Did you see the one-handed alley-oop Griffin threw down on the break in the first quarter of the Celtics game the other night? Sick. In a related matter, I was not aware that Libya was exploding in revolution until at least last Wednesday, when I turned CNN on by mistake while on vacation – but I watched roughly 78 hours of NFL combined coverage after coming home this past weekend. Anyone else see Julio Jones’s standing broad jump? There’s no way that guy makes it to St. Louis at 14.
Uh… in all seriousness, I hope to have a thing coming out on the blog about commodities and the Middle East in a few weeks.
What are your thoughts on this [article arguing that America has too much democracy]? I've long believed that having fewer elections would allow more focus on governance.
I think one big election every five years where we elect the President and all of Congress would be good.
Of course, the best thing we could do to focus our officials on actually running the country would be to eliminate all private contributions to politicians.
Readers should check out the above link. It’s a story about how an economist named Dambisa Moyo is arguing that countries like China are better able to deal with their economic problems because a) their politicians spend less time and effort campaigning and b) they have to spend less on inefficient pension and health care programs.
I don’t mean to be rude, but this is maybe the most retarded idea I’ve heard in a long time? American politicians spend too much time raising money and campaigning – so the solution is fewer elections? The solution is being more like China? It’s pretty obvious that, yes, government is a lot easier when your citizens don’t have any human rights, but … only in America are people lazy and full enough of self-loathing to come up with that idea voluntarily, without having it imposed on them by force. I mean, Jesus, has it really come to this?
After thinking about the GOP using their gubernatorial henchmen to break up the unions (public in WI OH, private in IN), I started to wonder if they might be screwing themselves when it comes to the Chamber of Commerce. I can't read legalese, but Citizens United says that corporations have the
same rights as individuals. I am also struggling to write my idea succinctly.
-Citizens United says corporations are people.
-People are being stripped of their right to unionize.
-Chamber of Commerce is a union of corporations.
-Therefore the Chamber of Commerce should be made illegal.
I might be missing a step in my logic. Am I wrong about this? Are the Republicans unknowingly making the CoC illegal?
That’s a pretty funny idea. If I get a chance, I’ll ask one of those Citizens United types the question. I almost just made one of those internet smiley-faces, but then I remembered that I have testicles.
I'm still trying to wade through the Goldman Sachs/AIG story, and I'm having a hard time with one of the storylines. In short, how is it that insurance was able to be sold to those who didn't actually own anything to insure?
In your most recent mailbag, there was the analogy of the garage sale, and all of the sudden the guy was buying insurance on someone else's store. And the dealership sold cars then went out and bought insurance on them. That sounds to me like I could go take a life insurance policy out on my next
door neighbor because he's 62 and smokes. He dies, I get paid.
What am I missing?
You’re not missing anything. In insurance, you’re right, you can’t buy policies on someone else’s property. But in finance, you can buy credit default protection on anything, whether you own the underlying property or not. This is called a naked credit default swap. So if Bank of America is holding a billion dollars in mortgage-backed securities, Goldman Sachs can actually buy swaps on all of those MBS, even though it doesn’t own them. Your problem with this is that you don’t understand it because you think it doesn’t make sense, and that’s because it doesn’t make sense – a naked CDS is totally indistinguishable from gambling, but it’s legal. There was an ill-fated attempt by Byron Dorgan to outlaw naked CDS in the negotiations for the Dodd-Frank bill, but that attempt failed.
My take on a reader's quibble: a narcissist can be blithely unaware of others. An asshole is actively injurious to others. So yes, there is a difference.
Yes, but can’t a narcissist be injurious, too? Not sure if that one holds up. Does it? Reader input welcomed.
I just finished Griftopia today. I am stunned, outraged and confused to say the least. I am wondering if you could provide a bit more detail about the conclusion of the "Hot Potato" chapter.
You pose the notion that with the total cost of the financial meltdown we could have "bought and paid off every single subprime mortgage in the country" as well as every remaining one of any kind and still had enough left over to buy a new house for every American who does not already have one.
Could you possibly provide a bit more detail and specifics as to how these figures were derived?
I am so freaked out by this I am ready to jump off a cliff in utter dismay and frustration!
The book was truly mindblowing.
I got that from my friend Nomi Prins’s book, It Takes a Pillage. Nomi, who used to be a VP at Goldman but is now one of the leading authorities on where the bailout monies have been spent and why, frequently makes the point that the bailouts were more about paying off bets than they were about stabilizing the economy. This is from her second chapter, “This Was Never About the Little Guy”:
Here are some numbers for you. There were approximtely $1.4 trillion worth of subprime loans outstanding in the United States by the end of 2007. By the first quarter of 2009, there were forclosure filings against approximately 4.4 million properties. If it was only the subprime market's fault, $1.4 trillion would have covered the entire problem, right?
Yet the Federal Reserve, the treasury, and the FDIC forked out $13 trillion to fix the housing “correction”… With all that money, the government could have bought up every residential mortgage in the country – there were about $11.9 trillion worth at the end of December 2008 – and still have had about a trillion left over to buy homes for every American who couldn’t afford them.