Monday, July 27, 2009


The Hammer Without a Master

(Economics with a hammer)

(and a grateful nod to the New York Times Editorial Page)

Sure enough, last week Morgan Stanley
explained its quarterly loss by saying
that some of its traders were still “gun shy”
after last year’s near-death experience in the financial markets,

Sure enough, last week Morgan Stanley
explained its quarterly loss by saying
that some of its traders were still “gun shy”
after last year’s near-death experience in the financial markets,

Sure enough, last week Morgan Stanley
explained its quarterly loss by saying
that some of its traders were still “gun shy”
after last year’s near-death experience in the financial markets,

that some of its traders were still “gun shy”
after last year’s near-death experience in the financial markets,

still “gun shy” after

“gun shy” after

“gun shy” after

after last year’s near-death experience in the financial markets,

after last year’s near-death experience in the financial markets,

last year’s near-death

last year’s near-death

last year’s near-death


year’s near-death experience in the

year’s near-death experience in the

year’s near-death experience in the

financial markets.


that the firm now planned to increase its risk taking.

that the firm now planned to increase its risk taking.

that the firm now planned to increase its risk taking.

that the firm now planned to increase its risk taking.

firm now planned

to increase its risk taking.

increase its

risk taking.

To try to stay competitive with Goldman and other banks,

Morgan Stanley has also allocated a big chunk of its net revenue for compensation.

a big chunk of its net revenue for compensation.

a big chunk of its net revenue for compensation.

of its net revenue

for compensation.

Thursday, July 16, 2009

Great Time for Bankers

This is a comment I just sent in response to the article, A Great Time to be a Banker, by NY Times columnist, Floyd Norris. Can't quite figure out if the title is meant ironically or he's actually being sincere. Maybe a little of both. I decided my comment is too good to bury there among all the other comments, so I've decided to bring it over here as well:

These bankers are like drug addicts or chronic gamblers. Surely they are intelligent enough to realize their day is done, that the "profits" they are now realizing are as much an illusion as they were before the last meltdown. They must also realize that, unless they are willing to totally insulate themselves, their wives and their children, from the rest of the world, they'll soon be enduring hateful stares, hurtful remarks, threats, veiled and otherwise, or worse. Their millions won't be worth it, but, like the addicts they are, they won't care.

Sadly, for us and also for them, they have become hooked on "the action" and can't help themselves. And since they have become too powerful and connected to be stopped, their path to total self-destruction, both moral and financial, is now insured. Truly, this is a morality tale writ large, for all the world to witness, and it's fascinating to see it being played out in the media and the Internet in such exquisite detail.

It should be clear to anyone following the events of the last two years that they are literally living in a bubble, the bubble created by the highly questionable, but possibly "necessary" decisions of both the Bush and the Obama administrations, to keep them in business at all costs. And since the only business they know is gaming the financial system, and since that system has been force-fed to the point that it can still be gamed no matter what, they are going to continue to play and play and play no matter what, with all the "skill" at their disposal, until the bubble finally bursts, totally and completely, beyond the power of any individual or any government to patch. And when that time comes, then we -- and they -- will finally and for all time be free of the drug called: money.


Vom armen B. B. -- On the Poor B.B.

German poem by Bertolt Brecht, interleaved with English translation by DocG, and paraphrase by DocG

Ich, Bertolt Brecht, bin aus den schwarzen Waeldern.
Meine Mutter trug mich in die Staedte hinein
Als ich in ihrem Leibe lag. Und die Kaelte der Waelder
Wird in mir bis zu meinem Absterben sein.

I, Bertolt Brecht, am of the dark forests.
My mother bore me from there to the cities
As I lay in her womb. And the cold of the forests
Will be with me to my death.

I, DocG, am of the white river.
My parents once took me to New York City
On a boat. And the winds of that voyage
Will blow through me all my life.

In der Asphaltstadt bin ich daheim. Von allem Anfang
Versehen mit jedem Sterbsakrament:
Mit Zeitungen. Und Tabak. Und Branntwein.
Misstrauisch und faul und zufrieden am End.

In the asphalt city I feel at home. Right from the start
With every last sacrament supplied:
With newspapers. And tobacco. And brandy.
Mistrustful and lazy and, in the end, self-satisfied.

In New York City was I at home. Until the very end
Supplied with every last sacrament:
The Village Voice. And Schimmelpfennig cigars. And Jack Daniels "Sippin" Whiskey.
Cynical and lazy and far too self-confident.

Ich bin zu den Leuten freundlich. Ich setze
Einen steifen Hut auf nach ihrem Brauch.
Ich sage: es sind ganz besonders riechende Tiere
Und ich sage: es macht nichts, ich bin es auch.

I'm a friendly sort. I set
A Bowler on my head as people do.
I say: They’re animals with a very peculiar odor.
And I add: it doesn't matter, I smell too.

I set myself apart from the others. I wear
A floppy hat so I’ll stand out.
I say: people are very very strange
And I ask: isn’t that what it’s all about?

In meine leeren Schaukelstuehle vormittags
Setze ich mir mitunter ein paar Frauen
Und ich betrachte sie sorglos und sage ihnen:
In mir habt ihr einen, auf den koennt ihr nicht bauen.

Mornings, in my empty rocking chairs,
I bring some ladies nigh,
Study them casually and say:
I’m one on whom you can't rely.

Mornings I fantasize about finding a lady
To rock in my all too empty chair.
She’ll study me casually, and say:
Why don’t you come over here?

Gegen abends versammle ich um mich Maenner
Wir reden uns da mit "Gentlemen" an
Sie haben ihre Fuesse auf meinen Tischen
Und sagen: es wird besser mit uns. Und ich frage nicht: wann.

Toward evening I gather some men around me.
We address one another as "Meine Herren."
They place their feet up on my table
And say: our time will come. I don't ask: when.

From time to time I get together with a friend or two.
We address one another as "Monsieur."
They plant their muddy feet on my brand new rug.
One says: I've got a promising interview coming up next week. And I say: Oh, sure.

Gegen Morgen in der grauen Fruehe pissen die Tannen
Und ihr Ungeziefer, die Voegel, faengt an zu schrein.
Um die Stunde trink ich mein Glas in der Stadt aus und schmeisse
Den Tabakstummel weg und schlafe beunruhigt ein.

Toward morning in the grey dawn the fir trees piss
And their vermin, the birds, begin to cheep.
At that hour, in the city, I drain my glass, stub out
My cigar and drift into troubled sleep.

Toward morning in the gray dawn the Hudson River belches
And its victims the fish begin to weep.
At that hour, in the city, I rise to take a piss, then flush
The toilet and return to fitful sleep.

Wir sind gesessen ein leichtes Geschlechte
In Hausern, die fur unzerstoerbare galten
(So haben wir gebaut die langen Gehause des Eilands Manhattan
Und die dunnen Antennen, die das Atlantische Meer unterhalten).

We, a heedless generation, have made ourselves at home
In buildings we thought immune to destruction
(Thus we erected the skyscrapers of Manhattan
And the thin antennae which bemuse the Atlantic Ocean).

My generation has made itself homeless
In mad pursuit of some vague ideal
(Thus we dabbled in drugs and religion,
Trod the thin red line between the real and the unreal).

Von diesen Staedten wird bleiben: der durch sie hindurchging, der Wind!
Froehlich machet das Haus den Esser: er leert es.
Wir wissen, dass wir Vorlaeufige sind
Und nach uns wird kommen: nichts Nennenswertes.

Of these cities will remain: that which passed through them — the Wind!
The house makes the diner merry: he wolfs it down.
We know we’re not here for long
And after us will come: nothing of much renown.

Of our dreams will remain: that which fueled them — hot air!
The balloon will lift slightly, then falter and sag.
We know we’ve been here much too long
And hardly have much cause to brag.

Bei den Erdbeben, die kommen werden, werde ich hoffentlich
Meine Virginia nicht ausgehen lassen durch Bitterkeit
Ich, Bertolt Brecht, in die Asphaltstaedte verschlagen
Aus den schwartzen Waeldern in meiner Mutter in frueher Zeit.

In the earthquakes to come, I hope I won’t
Let bitterness dim my cigar’s red glow
I, Bertolt Brecht, smuggled to the asphalt city
From the dark forests in my mother long ago.

In the disillusionment to come, I hope I won’t
Start smoking again in desperation
I, DocG, sold down the river
To New York City by the older generation.

Tuesday, July 14, 2009


Illness is a kind of intoxication
In which you drink pure pain
Like a freezing glass of pure grain
Alcohol. All your senses strain
Against a kind of ontological membrane --

If it breaks you die.

Slowly that psychological feeling like sky
Infuses the room where you lie
And your inmost you, letting go,
Presses itself against the dirty window
Where the dirt seems to form a kind of rainbow.

So few and so slow
Are the things you remember to know
As you fall behind
With lazy motions of the mind

And really begin to unwind.

Saturday, July 11, 2009

An Economist Gets It Right!

I was about to give up on them. I was saying things like "the economy is too important to be left to the economists." If you go to just about any professional economist's blog these days you'll often get more thoughtful, logical, probing and realistic analysis in the comments section. For example, here is one of my favorites, Paul Krugman, in a recent column titled The Stimulus Trap: " . . . policy makers should stay calm in the face of disappointing early results, recognizing that the plan will take time to deliver its full benefit. But they should also be prepared to add to the stimulus now that it’s clear that the first round wasn’t big enough." Not particularly edifying -- and almost certainly wrong. But check out the following response from a reader named David, from San Francisco:
If the credit driven excesses of the past, like the dotcom and the housing bubbles, could simply be cured by even more borrowing and essentially creating money out of thin air, then it follows that there are no consequences to economic malfeasance and crimes.

The implicit premise in your insistence for massive additional stimulus is that we can somehow get back to the "good old days", or somewhere close.

What if we have so abused our economy, our dominant economic position in the world, and the reserve currency status of the US Dollar, that the whole system is trying to reset at a new, rational, and lower equilibrium? It is foolheardy to fight an avalanche. Our standard of living is going to go down regardless of what you advocate or what Obama does. The only question is if we are going to gracefully accept this new paradigm.
Thank you, David! And that was only the second comment on the list. I don't have time to sift through all 380, but I'm sure there are many other laymen like David, with meaningful things to say.

And, to my surprise and delight, I just now found a real live economist with something meaningful to say. Robert Reich! You remember him, he was Secretary of Labor during the Clinton administration, when he also had meaningful things to say. Maybe it's his tendency to speak meaningfully -- and honestly -- that got him into trouble with Obama, who seems to have fallen in love with just about everyone else from the Clinton crowd.

Anyhow, Reich just came up with an amazing article, just now published at the AlterNet blog, entitled: When Will the Recovery Begin? Never. This is very good stuff, especially since it echoes things I've been saying for months now. But who pays attention to little me? Maybe now these ideas will get some serious attention, because, and I'm sure I'm being just a bit egotistical when I say this, but: I know I'm right. And if I'm right, Reich must be right too. Say that 25 times in a row. Only Reich will be taken seriously. Why? Because he is an economist. And I am . . . . not (not really, no). Here are a few gems from Reich's great piece:
The so-called "green shoots" of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. . .

In a recession this deep, recovery doesn't depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. . .

Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can't be built on replacements. Don't expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don't rely on exports. The global economy is contracting.

This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.

The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.

Yes, Robert, please. More! This is one economist I'm happy to listen to.

Thursday, July 9, 2009

Moment of Truth

A moment of truth has arrived for President Obama and the Democratic party. According to the NY Times, in order to pay for meaningful health care reform, Democrats in the House are proposing an income tax surcharge on the wealthiest Americans: a piddling 2% for those earning more than $250,000, somewhat more for those earning $500,000 and still more for those earning $1,000,000 or over. Considering the extreme inequalities of compensation that have been the norm in this country for many years now, this is the sort of legislation that is long overdue. However, according to the Times, it's "an idea that Senate negotiators have all but dismissed as unworkable."

We keep hearing complaints about the cost of "entitlements" (fat-cat-speak for the social safety nets that keep our country from descending into barbarism), but when even the most modest tax increases on the most entitled among us are proposed, all we hear is that such measures are "unrealistic," politically out of the question, "unworkable."

Interesting. Especially in the light of the latest news regarding the Swiss bank UBS, where reportedly as many as 52,000 of the wealthiest Americans, hiding billions from the IRS, will most likely remain safely anonymous, protected by the "honor" of the Swiss government as part of a shameful "deal" with the Obama administration.

If every single Democrat in the House and Senate does not actively support this long overdue tax surcharge on the wealthy, then the name of each and every one opposing it should be posted on every blog on the Internet -- and every store front on "Main Street."

Monday, July 6, 2009

Curioser and curioser

How many of you knew Goldman Sachs was using proprietary computer software designed for "low latency (microseconds) event-driven market data processing, strategy, and order submissions"? What does that mean???? Good question. Anyhow, a story is now breaking via Reuters that a former G. S. employee named Sergey Aleynikov made off with the the secret code referred to above, code that G. S apparently uses routinely to do something called "programmed trading," aka market manipulation. The story, as Reuters is reporting it, is one of business espionage and theft. But over at a much more interesting Internet venue called Zero Hedge, a guy named Tyler Durden is seeing through the smoke and mirrors and telling it like it is. According to someone who is apparently a G. S. lawyer, “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.” Durden definitely has this guy's number:
At least it is refreshing that none other than Goldman's own de facto attorney admits that the firm has created a piece of code that permits "market manipulation." When Goldman is the perpetrator, the manipulation is conveyed via "fair ways." And when the manipulator is someone else, the ways become "unfair."
Faithful readers of this blog may recall two posts entitled Reading the Entrails and Reading the Entrails -- Part 2, in which I wrote (in part 2):
By all means, correct me if I'm wrong, but it looks to me like these markets are being manipulated, possibly according to a scheme similar to the one I presented in my last post, where bets are made based on the relation between the principal index and the VMA (voume moving average). If this is the case, then what does it mean when, at the end of the day, the "market" is up or down by this or that number? As far as I can tell, all it means is that this is where things stood at the time the betting window slammed shut.

Here's the scheme I was referring to, as posted on How to Read the Dow Jones Industrials Indicator:

I'm sure the Goldman Sachs software is far more sophisticated than what we see above, but this will give you some idea of the potential for "programmed trading," i.e., market manipulation. This is legal, supposedly. When used by Goldman Sachs. In the hands of a "rogue trader," I suppose it becomes illegal -- but only because it's stolen. NOT because it makes investing in the stock market a total crap shoot for everyone other than those doing the manipulating.

Meanwhile, for your amusement, here's the latest Youtube sensation, a video of Aleynikov and his wife in a dance competition. Don't forget, you saw it first on this blog:

What's next, I wonder, for the magical US economy?
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