Did it surprise anyone? Surprise anyone that Goldman Sachs and JP Morgan, heaped in massive profits in their last quarter?
I don't have the figures to quote directly- to lazy to go an google the exact amount- but it is in the record books and the bank sheets and the pockets of a lucky few.
Eff you, Washington, we can make our own money thank you very much.
To be fair, there are reasons to why they were able to make their own money.
For one, Goldman Sachs, at least, did not follow the same management and investment style Lehman Bros and Bear Stearn's did. In fact, they ran a very conservative balance sheet, of mixed assets that were able to offset themselves from the subprime mortgage meltdown.
JP, to some extent, played it safe and took affirmative action to make sure its bank sheets were clean. Perhaps JP was a survivor by accident? When every one else was hogging in on the subprime CDS trades, they were the ones left out of the business.
The second reason, is that they are two of the very few houses that are still in fully functioning operation, without government bailout money. For the mere fact that they were able to stand on their own and take government funds as a matter of dictate from DC, over that of them having to, allowed their reputation to be saved and do business the way it is supposed to.
Goldman and JP consolidated and took the pickings from the carcases of bank houses that hit the floor, like Lehman, took the best parts, and cut the staff of those who they didn't need. They had their pick of the litter as to which banks and businesses they would buy and allow to consolidate.
Goldman, also, at least, has high ranking friends in DC, who could have foretold the eminent danger ahead and send signals to their house, that this is what you need to do to stay in business. Joe Louis didn't get the memo when he bought Bear Stearn's, but the staff at Goldman- with their ex-chief Hank Paulson as Treasury and immediate past Secretary- did.
Jamie Dimon at JP Morgan, is just a smart and crafty dude and messaged his bank's position, very carefully. Kudoes to him.
I love a good story. We can hopefully start the next week better. So much for stimulus.
Thursday, July 16, 2009
Sunday, July 12, 2009
American Stimulus 2: The return of the left!
I guess the news has hit mainstream that the recent American stimulus plan, The American Recovery and Reinvestment Act of 2009 (TARRA), didn't exactly stimulate the American economy the way it was billed it. Sensible economists knew it was not targeted enough to small business and the traditional economy. Conservative fiscal hawks knew it spent too much- over $800 billion of 40% tax cuts and 60% cold hard cash- to begin cutting the budget deficit. And, political scientists and politicians, alike, knew it was the pay off pitch to traditional democratic and left leaning party supporters of the Obama campaign. But, why did it pass in the first place and why is there talk of another stimulus by the end of this year or early next year?
Let's remember some of the facts. For all intents and purposes, this is the third- yes third- American stimulus plan, if we count the TARP, 2008 (Troubled Asset Relief Program) that was supposed to save the American economy, by bolstering and bailing out the financial system, with the financial system, being the "plumbing" for the American economic engine. However, this program didn't encourage financial institutions to lend the money it had or the newly injected funds it received from the American government, as it was envisioned.
There was a bit of politics being played by the large financials, as well as there were legitimate economic reasons to why they were reluctant to lend- even though firms like Goldman Sachs and JP Morgan had pretty stable and profitable companies during this economic crisis. More importantly, the job losses further fueled the fear for investors of a profitable investment climate for the USA in the short term, coupled with job losses being tied to the housing market and how that affected the wider economy.
To the extent that TARRA, 2009 actually supported the traditional sector as well as acted as a psychological support mechanism to the TARP, 2008, was something that was overshadowed by the overwhelming urge for lawmakers to do something, which, in itself, eased the burden of the economic crisis and gave the market confidence that the worst was possibly over.
However, the recent job losses in the USA- 467,000 jobs in June and the unemployment rate ticked up another tenth of a percentage point to a 26-year high of 9.5 percent- shows that there is more economic pains to bear.
What was wrong with TARRA, 2009 was that it was heterotactic as it related to core and related inputs that are proven drivers of direct and rapid economic growth. For example, TARRA 2009’s focus on education, increased state funding and agriculture and to a smaller extent, transportation, which could have been understood as construction related and could have aided traditional economic forces, but certainly all are not components for growth through stimulating investment and consumer spending.
Also, stimulus funds were geared towards industries that were not yet tested and proven to be viable engines of economic growth, like green technology and even worse, subsidies to state legislatures for pet projects that have nothing to do with creating employment or spurring investment for Small and Medium Enterprises (SME's). In the USA, SME's employ over 80% of the total work force.
When President Obama said he represented change, he meant change. Even at the direct and immediate cost of the traditional American economic engine, at the core, barring the financial services sector. I guess you could not possibly attempt to implement change, if you invested stimulus funds and energy into the things of old. (Why should we have thought that the party of big government could have possibly done any better by the private sector and for the wider economy?) I digress.
More importantly though, over 30% of the funds allocated in the stimulus were given directly to the states in the union, and legislators have, in turn, padded their local budgets as they too are facing difficult times with regard to the economic downturn and the loss of state revenue due to it.
Enter from the left, Vice President Biden, Speaker of the US Congress Nancy Pelosi and her whip, Steny Hoyer, with the idea of an American Stimulus 2.
How exactly will TARRA 2 be formatted is up for debate. In fact, there were talks that TARRA 1, could have been expanded and would have possibly be ballooned to $ 1.5 trillion along with the mention that if that wasn't possible, TARRA 2, could have been in the pipeline allot sooner. Whatever the semantics are, there is a need to do more for the American economy and TARRA 2 must come.
If TARRA 2 is to be, it should be directed toward SME’s, if it is to jump start the job market. Private sector employment should be the key focus and assistance should be in the form of tax credits and employment subsidies, in the short term. For the long term, however, issues like expanding partially state funded health insurance and allowing for regulations to fasciate and create synergies within inter and intra-industries, with special regard to expanding property rights through fully liberalised patent legislation and improved clustering.
Secondly, TARRA 2 should have incentives for financials to back and issue direct consumer and credit card loans, as well as finding room for an amnesty or facilitated amortisation of credit card debt. While the downside is that this would, possibly, fuel another bubble, I must remind the reader that the bubble that caused this crisis was the packaging of these toxic assets and specialised derivatives products built on those bad loans and not the extension of those bad loans themselves. While a high amount of default is unacceptable, if tighter lending rules are applied on top of sensible derivatives regulations, the bubble that burst from this aspect can be minimized if, at all, voided.
Whatever the case may be, certainly, American stimulus packages have not seen their end.
Let's remember some of the facts. For all intents and purposes, this is the third- yes third- American stimulus plan, if we count the TARP, 2008 (Troubled Asset Relief Program) that was supposed to save the American economy, by bolstering and bailing out the financial system, with the financial system, being the "plumbing" for the American economic engine. However, this program didn't encourage financial institutions to lend the money it had or the newly injected funds it received from the American government, as it was envisioned.
There was a bit of politics being played by the large financials, as well as there were legitimate economic reasons to why they were reluctant to lend- even though firms like Goldman Sachs and JP Morgan had pretty stable and profitable companies during this economic crisis. More importantly, the job losses further fueled the fear for investors of a profitable investment climate for the USA in the short term, coupled with job losses being tied to the housing market and how that affected the wider economy.
To the extent that TARRA, 2009 actually supported the traditional sector as well as acted as a psychological support mechanism to the TARP, 2008, was something that was overshadowed by the overwhelming urge for lawmakers to do something, which, in itself, eased the burden of the economic crisis and gave the market confidence that the worst was possibly over.
However, the recent job losses in the USA- 467,000 jobs in June and the unemployment rate ticked up another tenth of a percentage point to a 26-year high of 9.5 percent- shows that there is more economic pains to bear.
What was wrong with TARRA, 2009 was that it was heterotactic as it related to core and related inputs that are proven drivers of direct and rapid economic growth. For example, TARRA 2009’s focus on education, increased state funding and agriculture and to a smaller extent, transportation, which could have been understood as construction related and could have aided traditional economic forces, but certainly all are not components for growth through stimulating investment and consumer spending.
Also, stimulus funds were geared towards industries that were not yet tested and proven to be viable engines of economic growth, like green technology and even worse, subsidies to state legislatures for pet projects that have nothing to do with creating employment or spurring investment for Small and Medium Enterprises (SME's). In the USA, SME's employ over 80% of the total work force.
When President Obama said he represented change, he meant change. Even at the direct and immediate cost of the traditional American economic engine, at the core, barring the financial services sector. I guess you could not possibly attempt to implement change, if you invested stimulus funds and energy into the things of old. (Why should we have thought that the party of big government could have possibly done any better by the private sector and for the wider economy?) I digress.
More importantly though, over 30% of the funds allocated in the stimulus were given directly to the states in the union, and legislators have, in turn, padded their local budgets as they too are facing difficult times with regard to the economic downturn and the loss of state revenue due to it.
Enter from the left, Vice President Biden, Speaker of the US Congress Nancy Pelosi and her whip, Steny Hoyer, with the idea of an American Stimulus 2.
How exactly will TARRA 2 be formatted is up for debate. In fact, there were talks that TARRA 1, could have been expanded and would have possibly be ballooned to $ 1.5 trillion along with the mention that if that wasn't possible, TARRA 2, could have been in the pipeline allot sooner. Whatever the semantics are, there is a need to do more for the American economy and TARRA 2 must come.
If TARRA 2 is to be, it should be directed toward SME’s, if it is to jump start the job market. Private sector employment should be the key focus and assistance should be in the form of tax credits and employment subsidies, in the short term. For the long term, however, issues like expanding partially state funded health insurance and allowing for regulations to fasciate and create synergies within inter and intra-industries, with special regard to expanding property rights through fully liberalised patent legislation and improved clustering.
Secondly, TARRA 2 should have incentives for financials to back and issue direct consumer and credit card loans, as well as finding room for an amnesty or facilitated amortisation of credit card debt. While the downside is that this would, possibly, fuel another bubble, I must remind the reader that the bubble that caused this crisis was the packaging of these toxic assets and specialised derivatives products built on those bad loans and not the extension of those bad loans themselves. While a high amount of default is unacceptable, if tighter lending rules are applied on top of sensible derivatives regulations, the bubble that burst from this aspect can be minimized if, at all, voided.
Whatever the case may be, certainly, American stimulus packages have not seen their end.
Friday, July 10, 2009
Happy 36th Independence Bahamas!
It's been 36 years since we were made independent from Great Britain, my country of birth the Bahamas has. It is not all rosy, but it ain't all bad either. No more Queen, but we have a young democracy that has critical flaws. One being which we can't seem to find a way to allow for strong debate, without it being deadlocked or forced down the throats of everyone and sundry or on the other end, the plaintiff ending up in tremendous social difficulty. The second is that we have not found a way to provide for equity for a greater majority, to which Bahamians can find ownership and control the flows of this country.
My feeling is that since Independence, we have not had any major changes from the status quo in the Bahamas since the early 80's. Nothing else is new with regard to economic reform or political reform, for any Bahamian to feel sound in mind to stand on his or her own feet and say what's best moving forward without being racked over the coals, first.
I would not trade my country of birth for anything, except for the USA, or being born as royalty in some Nordic country, however. Other than that, I like the Bahamas compared to any other country quite fine.
Happy Independence Bahamas!
Youri
My feeling is that since Independence, we have not had any major changes from the status quo in the Bahamas since the early 80's. Nothing else is new with regard to economic reform or political reform, for any Bahamian to feel sound in mind to stand on his or her own feet and say what's best moving forward without being racked over the coals, first.
I would not trade my country of birth for anything, except for the USA, or being born as royalty in some Nordic country, however. Other than that, I like the Bahamas compared to any other country quite fine.
Happy Independence Bahamas!
Youri
Update from The Han province.
Apparently, this latest disruption in the Han province, all resulted from a fight that exposed all of the tensions in that area.
Reports have it that there is a long standing issue with ethnic tension in the Han province, with the minorities easily infuriated.
Just for the record, there are all 55 minorities in China and it's about 46 mirorities living in the Han province, with the Uighurs being one of them. There are almost 80 dialects in China and they all speak their own dialect in their particular provinces, but they will speak Mandarin when speaking to others.
What a conincidence that the Uighurs the US government let go to Bermuda, are from the same place that is having the tensions in the Han province in China.
Reports have it that there is a long standing issue with ethnic tension in the Han province, with the minorities easily infuriated.
Just for the record, there are all 55 minorities in China and it's about 46 mirorities living in the Han province, with the Uighurs being one of them. There are almost 80 dialects in China and they all speak their own dialect in their particular provinces, but they will speak Mandarin when speaking to others.
What a conincidence that the Uighurs the US government let go to Bermuda, are from the same place that is having the tensions in the Han province in China.
Wednesday, July 8, 2009
Pictures from the rioting in China...
A fellow blogger in China gave ear to my request for photos and information on the rioting in China.
I have a few pictures to put up of what's been taking place. I am awaiting some details from my friend on what the dynamics of the issues are. But, preliminarily, it is ethnic in the Han region and with other minorities.
What was the purpose for the flare--land dispute, victimisation or corruption, is yet to be determined by me. However, I will continue to reach out to get the story!
I have a few pictures to put up of what's been taking place. I am awaiting some details from my friend on what the dynamics of the issues are. But, preliminarily, it is ethnic in the Han region and with other minorities.
What was the purpose for the flare--land dispute, victimisation or corruption, is yet to be determined by me. However, I will continue to reach out to get the story!
Tuesday, July 7, 2009
More calls for commodities futures trading regulations!
At some point you are going to have to do something about commodities trading. Not just talk.
The FT reports that Gary Gensler, chairman of the US Commodity Futures Trading Commission,the US futures regulator, said on Tuesday the agency would hold hearings to determine whether federal speculative limits should be set on “all commodities of finite supply,” in particular oil, natural gas and energy commodities.
This may be a little harsh, but we need to go hard the other way in order to see our way around making it better for everyone.
However, we have had commentary that these measures would do nothing to curb the high price of oil. The problem has always been OPEC. They cut supply when they want to and have done so in the last few months, in order to raise the price of oil.
I think we need to deal with both of them in a way that shuts them down. Let's face it, no one will be upset if we clamp oil producing countries. In fact, we can really put them into the international sphere and further put pressure on them like how we have done with Iran and now, we have put a regime in place in Iraq that is stable--regardless if the war was necessary or not, removing Saddam Hussein did work out to a more stable government in Iraq.
As with commodities trading, I wrote an article earlier about what we need to do to look at the issue. Here.
Hopefully my recommendations would hit the main stream blog matrix and be seen by someone who reads into these things. And, magically, end up as a talking point. In fact, my first point and last point, adds up to what the main point about trade limits and transparency at the end of the FT article.
We can only hope that there will be more.....
The FT reports that Gary Gensler, chairman of the US Commodity Futures Trading Commission,the US futures regulator, said on Tuesday the agency would hold hearings to determine whether federal speculative limits should be set on “all commodities of finite supply,” in particular oil, natural gas and energy commodities.
This may be a little harsh, but we need to go hard the other way in order to see our way around making it better for everyone.
However, we have had commentary that these measures would do nothing to curb the high price of oil. The problem has always been OPEC. They cut supply when they want to and have done so in the last few months, in order to raise the price of oil.
I think we need to deal with both of them in a way that shuts them down. Let's face it, no one will be upset if we clamp oil producing countries. In fact, we can really put them into the international sphere and further put pressure on them like how we have done with Iran and now, we have put a regime in place in Iraq that is stable--regardless if the war was necessary or not, removing Saddam Hussein did work out to a more stable government in Iraq.
As with commodities trading, I wrote an article earlier about what we need to do to look at the issue. Here.
Hopefully my recommendations would hit the main stream blog matrix and be seen by someone who reads into these things. And, magically, end up as a talking point. In fact, my first point and last point, adds up to what the main point about trade limits and transparency at the end of the FT article.
We can only hope that there will be more.....
Monday, July 6, 2009
Measuring Aid for Trade....
Is it doable? The WTO has gone through a review of their Aid for Trade programme for developing and least developing countries. They reported several key areas, as well as the success in Asia between Cambodia, China, Lao People’s Democratic Republic, Myanmar, Thailand and Viet Nam with regard to the programme and how it has facilitated trade.
Robert Zoelick, World Bank President, has also noted key successes in Africa, in particular in Mali and their mango producers.
Most notable there were no statistics to back up the claims of success stories. I guess this is the dilemma when we begin to track economic success to policy.
But, what ever facilitates greater trade, can't be bad....
WTO Aid for Trade Report
Robert Zoelick, World Bank President, has also noted key successes in Africa, in particular in Mali and their mango producers.
Most notable there were no statistics to back up the claims of success stories. I guess this is the dilemma when we begin to track economic success to policy.
But, what ever facilitates greater trade, can't be bad....
WTO Aid for Trade Report
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