06/26/09 Tampa Bay, Florida I was really ready for a laugh when I read the Bloomberg article, “Derivatives Industry Gets Second Look From Congress.”
To start off the festivities, it opens with a photo of the odious Christopher Dodd, the self-important arrogant loudmouth from Connecticut who milks the job for special “favors” and personal aggrandizement, actually chairs the House banking committee and, as a long-time member of Congress, is directly responsible for the economic catastrophe befalling us and the world, a sorry fact that I hope is a complete and utter embarrassment to the voters of Connecticut.
But the article was not about Christopher Dodd or how something is obviously wrong with this guy, and naturally it did not mention the fact that if I thought, for even a minute, that I could get away with it, I would go to Washington, D.C., walk into this guy’s office, grab him by the lapels of his coat and slap, slap, slap the hell out of his smarmy face until whatever in the hell is wrong with him has been knocked out of his stupid Leftist, economically-illiterate head.
Instead, we read that now that his incompetence is evident, “Congress will take a second shot at the derivatives industry after its decision nine years ago to forgo regulations led to a $592 trillion market that brought some financial firms to their knees.”
Then, to show you that Mr. Dodd, the bank or the Federal Reserve don’t have an exclusive on economic illiteracy, the article quoted Mark Halverson, “a staff director for Senate Agriculture Committee Chairman Tom Harkin”, as saying that “One of the key underlying problems in the whole lead-up to the meltdown was too much leverage, too little capital or too little collateral.” Hmmm!
Well, while he is exactly right that there was too much leverage, where the buyers of these toxic assets were putting up a few cents in chump change and borrowing the rest, he apparently doesn’t know what leverage is, even though I just explained it, which shows how much people pay attention to me around here. Morons.
The fact is that Mr. Halverson is being merely redundant when he says there was too little capital, as distinct from leverage, but I got a Real Hot Mogambo News Flash (RHMNF) for this Halverson fella about “too little collateral”, as there was lots of collateral, dude! All the collateral you want! More than you could ever want!
You want more collateral? Hell, give me a couple of minutes and I can whip a lot of IOUs and vague promises into a package and give you all the freaking collateral you want! I’ll give it a fancy title, too, like “Collateralized Debt And Vague Promises Obligation.” Too little collateral, you say? Hahaha!
Then, just when I thought it could not get funnier, I got to a funnier part where, as part of the overhaul of the entire economic and financial system of America, the Obama administration has a proposal that would “require standardized over-the-counter derivatives contracts to be guaranteed by a clearinghouse.” Hahahaha!
And if the clearinghouse decided it could not, or would not, pay? Hahaha! Hell, we got that system now! Hahaha!
The scary part was that the Obama administration is revealed as clueless, too, and Bloomberg remarked that the White House “said in its regulatory proposal that while derivatives didn’t cause the financial meltdown, they ‘became a major source of contagion through the financial sector during the crisis,’ instead of dispersing risk as intended.” Hahaha! Wrong!
I was just getting ready to fire off a lot of scathing emails about such a ridiculous stupidity, when I realized that here was the perfect solution to my problems at work!
No, not my main problem of calling employees and customers “morons” for not buying gold, silver and oil when their own stupid government is ruining the dollar right in front of their eyes by allowing the Federal Reserve to create such excesses of new money and credit so that the government can borrow the money and spend it, now that people are not borrowing and spending money with their customary élan because they are broke and unemployed.
Nor was it a solution to any of my many, many other personal problems which are, I might add, all the result of other people acting like they have a lot of brain damage. Wasn’t it Sartre who said, “Hell is other people”?
Instead, this could be the solution to the problem of how I am probably going to get fired because I have alienated the customers and made enemies of the employees, which was not part of my Fabulous Mogambo Plan (FMP), which was to take the customer’s orders, demand a big deposit, and then just say, “Screw ‘em!” whereupon Sales would always be bringing in new customers, whereupon I would take a little of that new deposit money and settle out-of-court with the irate customers for pennies on the dollar. A real moneymaker of a plan!
So, obviously, the financial problems of the company are not my fault. The sales department fell down on the job, ruining everything.
As I watch her face turn red with anger, I remember that I am just hoping to stall for time, as it will not be long before gold, silver and oil shoot upwards in price and I, who have these things, will have enough money to buy the damned company and fire them all, including my boss and her “Get out of my office or I’m calling Security!” crap!
Actually, I am thinking, “Whee! This investing stuff is easy!”
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Nice way to say that it was fraud and not derivatives.
Actually, Christopher Dodd gives the word “odius” new depth and definition. You go, Mogambo.
…I’d give a hundred bucks to know the day before that the Mogambo Guru was going to be on Rush Limbaugh.
The man is damn near a comic genius and his insight and raucous rebuttal of the chumps ‘we’ elected and continue to tolerate (Dodd, Frank, Obama and the rest of the clan) is a bright spot in my day. I knew I wasn’t insane; to have my instinctive recognition of what was going on in the ‘USSA’ (as it’s becoming) validated makes me sleep so much better!
God save and protect Richard Daughty; he is a lighthouse!
Right on, Mogambo.
But it was politicians, fraud, AND derivatives that sank us. ………….
But you better hope that we don’t get big deflation first for 10 years, or even our gold and silver may not save us.
If only our politicians would wise up, and let a SLIGHTLY regulated capitalist system work, and get back to saving and producing (the only things that work long term). And if we would wise up and elect politicians that did not tax and spend us to ruination, like Dodd and his ilk. We need some intelligent change that will work.
Mogambo, the clearinghouse idea will work. Actually, I have been promoting that idea for 2 years now. Currently the CBOT already has hundreds of billions of derivatives on their clearinghouse that are marked to market every day with collateral (real money, not IOUs). Not a problem. If not enough real collateral, then position is closed out or sold the next day. The only addition to the clearinghouse rule that is needed is that a rule concerning capital size of position takers would be necessary, if it is a naked position. But if a hedge position, then not necessary. ……
Another option would be to ban naked credit default swaps as too detrimental to systemic risk. All the rest could be handled on clearinghouse easily just like CBOT. ……
P.S. Did you know that a variation of this was proposed to Greenspan, Rubin, Summers and Clinton back in 1999 by Ms Born, the head of CBOT? Greenspan and others said Hell, NO. So look what we got!
O Great Mogambo,
It pains me to say this, but for once you are wrong. Chris Dodd is not a “stupid Leftist, economically-illiterate head”. He is a “Venal, Greedy, I would Kill my Grandmother right now to get Mine before I Ruin it all and I know Exactly what I am doing Leftist” (VGKGMREL). I’ve been ruled by these “Best and Brightest” since I was 15. All they have ever done is drive the country closer and closer to the drain.
Deflation is a process by which wealth is drained out of the system. But overall the system will finally return to a more homogeneous state since the poor had nothing to lose since they had nothing, and the cost of necessities going down is a relief to them. The rich will still be richer, but they will probably view the world in a more humble light and thank God and the gods that at least the system was preserved.
One has to put on a very serious mask when he or she begins to contemplate the horrors of inflation. Who cares if Gold goes to $8000/oz? Are you going to have enough to fight or bribe off the Praetorian Guard and/or the roaming gangs. Think History. Both the East and the West have many and highly varied examples. Qing dynasty is a good one. So is the Roman Empire.
I quote from Wikipedia:
“Augustus’s death on August 19, 14, marked the end of the Praetorian calm. Augustus would be the sole emperor who could command the Praetorians’ complete loyalty. From his death, the Praetorians would serve whatever ends they believed were to their personal benefit.”
Deflation can be kind of fun. Just imagine waiting around for something to get cheaper and thinking, “Well, since that is getting cheaper, maybe I CAN buy those video games for the kids.” Probably deflation in Japan wasn’t so bad. On the other hand, inflation is very problematic. In this case one might think, “Damn it! This is getting more and more expensive every week and my pay cannot keep pace! There is absolutely NO WAY that the kids are getting video games this Christmas.”