Goldman Sachs Woos Gadaffi

Matt Taibbi has a searingly funny account on his Rolling Stone blog of how Goldman Sachs took Gadaffi to the cleaners with corrupt deals that immediately blew up. First they did a $1.5 billion deal that immediately lost 98% of its value. Then they came back with a deal for $3.7 billion but, knowing that Gadaffi may be more than a little mad about being burned on the previous deal, they threw in all kinds of "sweeteners" to corrupt the officials into signing the deal despite its being a bad, bad deal.

Here's how Taibbi depicts the Goldman Sachs style of "modern" investment banking:

This is classic modern investment banking. You pitch some kind of deal to a city, state, or country, and it may or may not be a good deal for the actual citizens/residents whose money is at stake. But you can make it objectively a great deal for the individual officials with the power to sign off on the deal by sending a big fat check either to the politician in question or to some local slimeball consulting firm of his or her choosing. Anyway, there is some reason why we journalists are not supposed to call things like Goldman's proposed “$50m payment” bribes, but I can’t remember what it is.

This is the bank that has placed almost all the high posts in the last dozen US presidencies with Goldman Sachs "personnel", i.e. criminals everywhere! No wonder the US is being run into the ground. The lunatics are running the asylum.

Read the whole post to get the full picture of the depth and breadth of corruption within Goldman Sachs.

Update 2011jun05: Here is a video of Taibbi talking about this story with Eliot Spitzer:

Fiction is More Popular than Fact

The mainstream media in the US doesn't see the job of journalism as reporting "facts". That is too déclassé for the post modernist reportage now favoured by US media. Why get down in the mud and squirm around in facts and analysis when you can shape reality by letting ideologues spout theory as fact?

Dean Baker with his Beat the Press blog provides an excellent example:

Umm, Representative Ryan's Plan Does Turn Medicare Into a Voucher Program

The Washington Post reported that House Budget Committee Chairman Paul Ryan won applause from the Republican freshman caucus when he criticized President Obama for saying that Ryan's Medicare plan would turn the program into a voucher system. The Post should have reminded readers that Ryan Medicare plan does turn the program into a voucher system.

Ryan's plan gives beneficiaries a fixed amount on money that they can use to buy insurance in the private market. This is what most people would consider a voucher system. The Congressional Budget Office's projections indicate that it would raise the cost of buying Medicare equivalent policies by $34 trillion, approximately 5 times the size of the projected Social Security shortfall.

Read the original post to get the embedded links.

It is astounding that a political party can publish as "plan", vote on it, and then claim that it isn't what the words on the paper say it is. But I guess that is simply "effective leadership" if you are the party of George Bush who could go to war in Iraq claiming that it wouldn't cost the taxpayers anything but has now rung up about $2 trillion in total costs. A war, by the way, built on the big lie that Saddam Hussein was supporting al Qaeda and that he has "weapons of mass destruction". Lies that let him stampede Americans into a completely wrong-headed, destructive, wasteful war that has left hundreds of thousands of Iraqis dead and given a huge strategic advantage to Iran, sworn enemy of "the great Satan", i.e. the US.

With political "leadership" like this, what is to be surprised in having them announced that the Ryan voucher plan is "not a voucher" plan?

The Truth about "Getting Ahead" in the US

From Robert Paul Wolff's blog The Philosopher's Stone, the basic "facts of life" about education and opportunity in America:

If you have a low-wage job and want to move up to something that will allow you to put food on the table, pay the rent, finance a car, buy health insurance, and maybe even have a bit left over for a restaurant meal or a night out at the movies, you very quickly run into what can be an insurmountable problem. To get any one of a large number of pretty good jobs, you need a college degree. And if you are one of that seventy percent who do not have a degree, you are screwed.

...

And so forth. Everyone in America knows this, although they may not be able to quote chapter and verse. And this means that there are maybe a hundred million Americans 25 and older who are perfectly well aware of the fact that they are on the outside looking in, with no hope of getting in, when it comes to good jobs.

How does it look form where I stand? What follows is subjective and anecdotal, but not therefore irrelevant. I live in a world of college graduates. Everyone of my relatives is a college graduate [grandchildren excepted, of course], and so are all of my friends and acquaintances. All the opinion makers on television are college graduates. Even the professional basketball and football players are, by and large, college graduates [LeBron James to the contrary notwithstanding.] The people without college degrees who appear in the media are, by and large, there for "man in the street" or "local color" interviews.

This skewed perception is deeply engrained in the endless public conversation about the needs of the "middle class." In 2008, the median household income for all households was a bit more than $50,000. Since the median wage of full-time workers was about $35,000, this of course means that most households were sending more than one wage earner into the labor market. But households with annual income of $150,000 or $200,000 are routinely described by politicians as "middle class,' despite the fact that a quick calculation of Government statistics shows that only a bit more than 5% of all households had annual incomes of $175,000 or more. The endless talk about the "interests of the middle class" is profoundly dishonest and out of touch. The reality of American society is that people are, by and large, much poorer and possessed of much less in the way of educational credentials than anyone is willing to acknowledge.

And that, I am convinced, is what lies beneath the rhetorical surface of so-called "Tea Party" anger. People by and large may be ill-informed, or lacking in educational credentials, but they are not stupid. Those on the outside looking in know perfectly well that they are not living, and have little hope of living, the lives portrayed in the media. It is those on the inside who engage in self-delusions, imaging that their $150,000 a year incomes make them "middle class," and that everyone save for the lazy and the people of darker skin have college degrees.

The tragedy is that the electorate in the US lives within a bubble maintained by the media, the false belief that "anybody can get ahead if they just put their shoulder to the wheel". The reality is that there is less social mobility in the US than there is in Europe! Yes, that crusty old aristocratic Europe now is more meritocratic than the "Go west young man!" America.

Until the American voter wakes up to the facts and forces his politicians to stop playing games of brinksmanship over "debt limits" and instead confront the real issue that faces the country (jobs, economic recovery, stimulus), the political muddle will continue. The politicians are all millionaires. They have no clue how the bottom 90% live. The politicians are in the top 10% and have gold-plated retirements guaranteed by the government, so they don't have to worry about jobs or health plans or what to do with grandma. They are too busy getting payola under the table and selling their votes to the highest paying lobbyist to be bothered with noticing that 14 million Americans are un-employed or under-employed and struggling to feed their families to keep shelter over their heads.

You don't fix this problem by doing the chic "anarchist things" of wearing a black hoodie and running around the upscale part of downtown smashing in windows. You fix this problem by voting out the rascals, the politicians who failed to represent the people. You tell the Republican party to quit lying and playing political games. You tell the Democrats to knock some sense into Obama and get him moving on rejuvenating the economy.

The Role of Oil Speculation in US Markets

Here is a report from McClatchy newspapers:



More detail can be found here on the McClatchy site:

But in the cables, Saudi officials explain that they have two primary concerns about artificially high crude prices: that they'll dampen the long-term demand for oil and that the wide price swings typical of commodity speculation make it difficult for them to plan future oil field development. After that $147 a barrel peak in 2008, for example, prices plunged to $33 a barrel as the global financial crisis rocked the world. That was a stunning change in less than half a year.

One cable recounts how Dr. Majid al Moneef, Saudi Arabia's OPEC governor, explained what he thought was the full impact of speculation to U.S. Rep. Alan Grayson, D-Fla., who in July 2009 was in Saudi Arabia for the first time.

According to the cable, Moneef said Saudi Arabia suspected that "speculation represented approximately $40 of the overall oil price when it was at its height."

Asked how to curb such speculation, Moneef suggested "improving transparency" — a reference to the fact that most oil trading is conducted outside regulated markets — and better communication among the world's commodity markets so that oil speculators can't hide the full extent of their trading positions.

Moneef also suggested that the U.S. consider "position limits" — restrictions on how much of the oil market a company can control — something the CFTC is considering. But the proposal to prevent any single trader from accumulating more than 10 percent of the oil contracts being traded hasn't received final approval, and the CFTC also has yet to define what it considers excessive speculation.

Saudi concerns also came up during a May 2008 meeting in Riyadh, the Saudi capital, between U.S. officials and Prince Abdulazziz bin Salman bin Abdulaziz al Saud, the assistant petroleum minister.

Prince Abdulazziz was "extremely worried" that high prices would destroy the demand for oil, according to the May 7, 2008, account of his meeting with embassy officials.

"Aramco is trying to sell more, but frankly there are no buyers," the cable quoted him as saying, referring to the Saudi state oil company. "We are discounting crudes."

These Wikileaks make it pretty clear that the US government has been fully informed about speculation but has chosen to pretend that its hands are tied. In short, the US government is aiding and abetting the speculators. I could understand that under the Bush administration, but it appears to have happening early in 2011 under the Obama administration. And the key figure behind the speculation? Goldman Sachs, the recipient of over $40 billion of taxpayer money when it was going backrupt in late 2008. Talk about biting the hand that feeds you!

How the Federal Reserve Enabled the Great Recession

Here is an interview with the authors of a new book on the crash of 2008:

More detail at the Yahoo Daily Ticker site.

Notice how these authors, Gretchen Morgenson and Josh Rosner, point out that "nothing has changed". The regulation is still too loose and now the "too big to fail" banks are even bigger!

Sure the Republicans are to blame for being obstructionists and clueless, but Obama has to shoulder blame for failing to act. He has had the reins of power for 29 months and he has shown little real initiative to get on top of the crisis, reboot the economy, and solve the immense social suffering among the victims of unemployment and home foreclosure. Sure he's helped the billionaires and millionaires, but where's the help for the bottom 90% of the population, the innocent victims of greed at the top? Obama is "missing in action". He is relying on the same corrupt insiders as the Republicans used.

The Second Leg Down in the Great Recession

It looks like the "experts" and political "leaders" are leading the world's economy over a cliff for the second time since 2008. Here is a post by Paul Krugman looking at the lastest research by one of the bright lights of the Federal Reserve's in-house economists:

1937 in 2011?

Gauti Eggertsson has a nice piece on the New York Fed blog about the great monetary/fiscal mistake of 1937, which sent the Great Depression into a second downward leg. As he notes, the underlying situation bore a significant resemblance to current events: unemployment still high (actually under 10 percent if measured by modern standards, so quite similar to now), but with rising prices thanks to commodity shocks.

Where I part with Gauti here is his assertion that modern economists won’t make the same mistake. The research staff at the NY Fed won’t; but the ECB very probably will, and the Board of Governors is under a lot of political pressure to raise rates.

We’ve learned a lot less these past 74 years than you might have imagined — or rather, we learned some stuff, but have spent the last few decades unlearning it.

I side with Krugman. I think that even though smart guys like Eggertsson can see the problem, their bosses won't let them do what's necessary. So we will go into a mini-recession inside the Great Recession, just like in 1937. It is sad, but the "leaders" of today are worse than FDR's brain trust while the Federal Reserve is marginally smarter than the 1937 Federal Reserve, Bernanke is too timid to do the right thing.

American Economic "Leadership"

It is poorly lacking as Paul Krugman points out in this op-ed article in the NY Times:

From G.D.P. to private-sector payrolls, from business surveys to new claims for unemployment insurance, key economic indicators suggest that the recovery may be sputtering.

And it wasn’t much of a recovery to start with. Employment has risen from its low point, but it has grown no faster than the adult population. And the plight of the unemployed continues to worsen: more than six million Americans have been out of work for six months or longer, and more than four million have been jobless for more than a year.

It would be nice if someone in Washington actually cared.

It’s not as if our political class is feeling complacent. On the contrary, D.C. economic discourse is saturated with fear: fear of a debt crisis, of runaway inflation, of a disastrous plunge in the dollar. Scare stories are very much on politicians’ minds.

Yet none of these scare stories reflect anything that is actually happening, or is likely to happen. And while the threats are imaginary, fear of these imaginary threats has real consequences: an absence of any action to deal with the real crisis, the suffering now being experienced by millions of jobless Americans and their families.

Here's the real problem:

Do the scare-mongers even believe their own stories? Maybe not. As Jonathan Chait of The New Republic notes, the politicians most given to apocalyptic rhetoric about the deficit are also utterly opposed to any tax increase; they argue that debt is destroying America, but they’d rather let that happen than accept even a dime of higher taxes. Yet the inconsistency and probable insincerity of their fear-mongering hasn’t stopped it from having a huge effect on policy debate.

And this:

Unemployment isn’t just blighting the lives of millions, it’s undermining America’s future. The longer this goes on, the more workers will find it impossible ever to return to employment, the more young people will find their prospects destroyed because they can’t find a decent starting job. It may not create excited chatter on cable TV, but the unemployment crisis is real, and it’s eating away at our society.

But while Rome burns, the politicians sit around playing their hoedowns and doing dosido dosey-dos. The reality is tragic:

So we’re paying a heavy price for Washington’s obsession with phantom menaces. By looking for trouble in all the wrong places, our political class is preventing us from dealing with the real crisis: the millions of American men and women who can’t find work.

Go read the whole article.