Killing the Buddha: Outside a tea party.

David E's Fablog: Tony Heyward goes boating.

The Inverse Square: Carly Fiorina reveals the source of her failure at HP.

Tapped: Greenspan is back, baby.

Connecting the Dots: McChrystal's MacArthur Act.

Brad Blog: John Kyl just makes stuff up.

Guest post by Batocchio. Temporarily e-mail tips to batocchio9 AT yahoo DOT com.

Economics is like actuarial science: Voodoo predictions based on a set of assumptions and mathematical models. The thing is, none of those models work when behavior is erratic, rules broken and and focus put on the quick buck rather than true growth. If no other lesson from the financial meltdown resonates, let that one ring.

Alan Greenspan knows it too. That's why he came before Congress on October 28, 2008 and told them he was wrong:

He was wrong, yes, but now he's not willing to blame the Wall Street moguls for everything. In March, he gave this gem of an interview to Bloomberg News. Here are some of the mind-boggling parts:

HUNT: Right. Let’s talk about the subprime a little bit. You said in your Brookings speech, I’m going to quote you, “We at the Federal Reserve (this was a footnote I think actually) were aware -

GREENSPAN: I’m impressed.

HUNT: - (inaudible) as early as 2000 of instances of some highly irregular subprime mortgage underwriting practices but regrettably viewed it as a localized problem subject to standard prudential oversight, not the precursor of what was to happen.”

Is that saying you saw instances of highly irregular underwriting, but you didn’t dig deeper?

GREENSPAN: No, we knew that there was a lot of egregious underwriting going on. The critical issue is that it wasn’t subprime per se that created the triggering of the crisis. It was securitized subprime. And securitization didn’t happen until mid-2003, 2004 in the volume, including not only securitization but essentially adjustable rate mortgages - subprime adjustable rate mortgages

I had to read that twice, but I think I understand it now. My interpretation: "We knew there were a lot of toxic assets being created, but it was ok because at that point they weren't carved up and bundled as securities."

This happens after the S&L mess, Orange County, California's bankruptcy after a $1.6 billion dollar loss on derivatives, and the failure of Long Term Capital Management in 1998 due to a huge derivative loss.

If there was a lesson to learn from those three events it is this: Bad loans make bad investments. If that has the ring of truth, how on earth can Greenspan sit and admit with a straight face that he knew bad loans were being made?

Of course, Greenspan loves hedge funds now, especially since he consults for one of the biggest ones, and has since January, 2008. They love him too. Digby points out that the guy who loves him best is John Paulson. THAT John Paulson. The Goldman-Sachs-is-in-very-deep-trouble John Paulson. Let that deep conflict of interest sink in.

His next tidbit made my head explode. In a discussion about the deficit, the current recovery, whether it's sustainable, and whether a value-added tax makes sense he says this:

GREENSPAN: The problem, however, is very much the type of issue that Greece has got. We can find money to bail them out in the short run. But unless the underlying system contracts, the deficit contracts, it’s just delaying the problem.

So I’m not convinced by any means that we can succeed in stabilizing this long term outlook strictly from a value added tax because unless we come to grips with the fundamental issue, which is the fact that we have promised in the ways of benefits for Medicare, for Social Security physically more than we have assets to deliver with.

So the economy can only grow so far and right now the claims on the real economy, forget finance, are getting larger and larger. And it is not an issue just in Social Security I might add, its money. You can always print money and solve it.

Medicare is a defined - is not a defined benefit program. It is one based on the physical needs of the population.

Those darn American people again. Sitting around on Main Street, getting in the way of the economic recovery with their health care and retirement needs. Those entitlements.

This is the same guy who gave away the Treasury to the rich guys by green-lighting Bush tax cuts. The same guy who testified that cutting the deficit and creating a surplus was the way to economic growth in the 90s before he said if the deficit got too low and the US got too solvent, it could cause economic problems in 2000. The same guy who let John Paulson endow a chair in economics in his name at NYU so he could leave a legacy of inconsistent, erratic, self serving conservative monetary policy to students in perpetuity.

If you're in the mood for some common sense abuse, read the whole thing. He'll explain why big banks shouldn't be broken up but why they shouldn't be bailed out, why regulators missed the warning signs of the meltdown (I'd argue they ignored them, didn't miss them), why Fannie and Freddie were good before they were bad, and more.

It would be so nice if something made sense for a change. - Alice in Wonderland

The Mahablog: Lies, lies, lies, lies, lies lies lies

digby: Willingly Brainwashed

The Big Picture: Explaining the impact of ultra-low interest rates to Greensapan

Bay Area Houston: Rightie blogger vs Sean Hannity

slacktivist: Lying your way to crazy

Brad DeLong: Worth reading, mostly economics

The big news this week on the financial front was the Independent’s claim that Gulf Arabs and France, Japan, Russia and Japan were planning to move from buying oil in dollars to buying it in a basket of currencies, including gold and a new universal currency shared by the Gulf nations.

Buying oil in dollars is one of the foundations of the dollar’s role as the world’s primary reserve currency. Because the the dollar is the world’s primary reserve currency Americans have been able to borrow money for significantly less than other countries are able to. This has both made America more prosperous, and through the perverse incentives of cheap money, helped lead to the high indebtedness of American citizens and the financial crisis.

In addition, buying oil in dollars is one of the things which allowed strong dollar policies to drive the price of oil down. Making dollars extremely scarce in the 80’s and nineties was one key factor leading to a price per barrel under $20. Oil prices started their rise upwards after Greenspan’s Federal Reserve let loose the money spigot in the Asian crisis and the Long Term Capital fiasco. Greenspan essentially never took his foot off the pedal from that point onwards, and oil prices soared, until last year at one point they were over $150/barrel.

So one consequence of going off the dollar is that a major benefit of the strong dollar play is taken off the table, and the US loses its ability to control the price of oil. Since at this time, contrary to what the Feds are saying, a strong dollar play isn’t in the cards (the US needs to borrow way too much money) that’s not a big deal in the short run—in the long run it is.

But buying oil in dollars isn’t the only thing that underpins the dollar as the world’s reserve currency and to understand what buying oil in something other than dollars would mean we need to understand what else makes, or perhaps more accurately, made, the dollar so important.

Continue reading »

American Street: Our public discourse is so broken, so dysfunctional, that privileged people worth millions can describe someone with a background like Obama's, as elitist, and be taken seriously.

Emptywheel: John 'Torture' Yoo and academic freedom.

MoJo Blog: Cops and former Secret Service agents ran black ops on Greenpeace and other progressive groups.

Roger Ailes: The Senate Gay-Straight Alliance Club

Politics in the Zeros : Dr. Greenspan's amazing invisible thesis

Mark Of The Beast: Don't Sugarcoat It award-winner for today...

Here’s your wakeup call (h/t commenter ysbaddaden). Thought you might need that. Know I did. Brad Jacobson of MediaBloodhound here, the guy who won't be invited to ABC News’ Christmas party. But that’s OK. Let somebody else get stuck at the punchbowl with George Will. And now, on to the links:

Regret the Error's best of the worst of 2007 media mistakes and corrections.

Happy Valley News: “CIA Admits It Destroyed Entire Third Season of Saved by the Bell.”

Scholars & Rogues presents a journalist’s story: “Back then, news people ran newspapers. Today, they decidedly do not. Corporations do.”

Mr. Rogers is mad as hell and he’s not going to take it anymore. Plus, the Freeway Blogger deals with the long (crooked) arm of the law.

Entering the file marked “If Life Were Only Like This on a Regular Basis,” Shaheen is forced to step down as Clinton co-chair after his Obama remarks.

Actor212 of Simply Left Behind may not be Alan Greenspan, but he knows stagflation when he sees it.

Crooked Timber thinks Ed Balls has quite a pair for suggesting a common sense approach to teaching foreign languages.

That’s all, truth-seekers. Send those post suggestions to mediabloodhound (at) yahoo (dot) com.

Largest Minority: "Prepare for War with Iran" Says France

TPM Cafe - Don Key's Blog: "Pity the Nation," a poem by Lawrence Ferlinghetti

David Stephenson: Using the web to protest the war.

MadKane: So are you planning to run out and buy Greenspan’s self-serving, history-rewriting The Age of Turbulence? There’s really no need to, because MadKane has summed up the former Federal Reserve Chairman’s new book in a single haiku!

Hillbilly Report: Senators McConnell, Vitter, Craig.... Diapers, and The Ten Commandments, with bonus Youtube video!

Guest round up by Blue Gal . Thank goodness the panties my mother sent me never went "viral."

Scott Horton: The story of how constitutional scholar, Erwin Chemerinsky, was hired, then fired by the University of California at Irvine, reveals that he was the target of a quiet political vendetta of a kind now practiced with increasing frequency and effect.

Norwegianity: Leftover links...

Middle Earth Journal: Alan Greenspan's memoir is critical of Bush

Talk To Action: 9/11/07- Convicted terrorist released from federal prison

Law Blog: Retired judge, Michael Mukasey, is rumored to be the leading candidate to replace Gonzo

OFF THE BEATEN PATH: Collingwood's, The Great Endarkenment, Fallenmonk, Singularity

Andrea Mitchell: "A Crisis For Journalism"

That's what Andrea Mitchell said on Hardball today-while she didn't know the facts she was talking about herself.

Armando: "You see, just a moment before, Andrea Mitchell repeated a lying smear forwarded by the Vice President's office -- that Wilson said the Vice President sent him to Niger. That is a lie. It has been debunked. And yet, here she is again, Mrs. Alan Greenspan, who has been lying and covering up on this for 2 years, doing it one more time.

Download | play -WMP low res

Download | play -QT- Bittorrent-QT

There's more including Somerby's backing of the simple truth that Joe Wilson never said Dick Cheney sent him to Niger. Is that so hard to understand?

Tom Flannery: Goddamn republicans! Gothamimage: Warning: Suspicious Libby Leaks

Over at The Reaction, Michael J.W. Stickings has a comprehensive post on the reaction--across the ideological spectrum--to Bernake's nomination as sucessor to Greenspan.

Shrillblog: Timothy Noah welcomes Bush I Chief-of-Staff John Sununu to the Ancient, Hermetic, and Occult Order of the Shrill.

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