Casino Capitalism Dictionary
"During times of universal deceit, telling the truth becomes a revolutionary act."
- George Orwell
It's amazing how the stuff written tongue in cheek seems
to describe the real world better than the academic papers.
The gambling known as business looks
with austere disfavor upon
the business known as gambling.
1% Fed rate:
Also called "Easy Al single shot for completely drunk patrons" after famous bartender
Chairman Greenspan. Usually represents "Road to hell is paved with good intentions" road sign on
rate cuts road. The subprime crisis has discredited Greenspan’s aggressive cuts.
2% Fed rate:
Big Ben floor. Named after Ben Bernanke. Jury is still out how damaging for the economy
Big Ben floor will be... Lately Bernanke was seen being in line with all the French tourists shopping
in Tiffany's and paying in euros.
Investors in the phony replacement of pensions brainwashed that the only real way to save for
retirement is to buy stocks via questionable mutual funds with exorbitant fees and hold them indefinitely.
power blown away
Anyone sold a retirement plan by some fancy-suited sharpie must be looking at share prices
with horror, even as central bankers inflate currencies at ever-more alarming rates and blow away
whatever value is remaining. Investment for the long term? Losers all!
More proper name for 401K investors. The real return on S&P500 since 1998 after subtracting consumer
price inflation is below zero. Bonds and cash at least beat inflation. `998 also marks the
beginning of the era of "loose money" when Federal Reserve cut interest rates to aid the bail-out
of Long Capital management.
Derogatory term implying some rating machinations or other well hidden scam
in bond or synthetic securities ratings. "Playing AAA game" means a Ponzi scheme based on false rating
of mortgage securities aided and abetted by credit agencies. Sometimes used sarcastically as a synonym
for unachievable perfection like in "Have a AAA day" or "If you want to be in AAA, you better
buy an Autoclub membership".
Ace of Spades
Not long ago, Peter Schiff famously
called "The Maestro" the "Ace of Spades" in an Iraq War-style deck of playing cards that had,
as its purpose, identifying the most important and dastardly members of the Iraqi government.
Age of Froth
How do you describe a time of
obscenely easy credit; stock and housing bubbles;
stratospheric Wall Street profits, outlandish banker salaries and general prosperity?
In his Bloomberg
commentary Jonh Wasik wrote:
I derive the concept of froth from former Federal
Reserve Chairman Alan Greenspan, who told Congress on July 20, 2005, that
"the apparent froth in the housing markets
appears to have interacted with evolving practices in mortgage markets."
Greenspan's remarks coincided with the peak of the bubble, when U.S. median home prices hit $230,200
that July. We may not see house values reach that level for another decade or so.
More disturbing about Greenspan's observation is his acknowledgement that interest-only adjustable
mortgages that were used "to purchase homes
that would otherwise be unaffordable'' may leave "some mortgagors vulnerable to adverse events.''
As it stands now, that was the financial understatement of this young century. Greenspan and the
Fed -- with the exception of former Governor Edward Gramlich, who wrote a prescient book about
mortgage abuses -- did nothing to curb these "exotic" mortgages, hence the current crisis.
The most ridiculous Fed statements like Bernanke statement about support of the dollar.
Very exact term as Fed almost perfectly resemble Politburo being an unelected body of powerful shadow
investment bank lobbyists, kind of shadow Investment Banks Insurance Corporation.
Proposed headquarters of joined commission of investment bankers and federal regulators on preventing
future financial crises.
"All animals are equal, but some animals are more equal than others":
Senators Dodd and Conrad were among the government officials who scored V.I.P. loans
from C.E.O. Angelo Mozilo. Two U.S. senators, two former Cabinet members, and a former ambassador
to the United Nations received loans from Countrywide Financial through a little-known program that
waived points, lender fees, and company borrowing rules for prominent people.
Refers to individuals that commit to strict adherence to the principles of supply-side
economics and market fundamentalism and refute all other contrary beliefs and opinions. The term
gets its name from combining Al-Qaeda, the fanatic Muslim militant organization and Larry Kudlow,
arguably the group’s most visible albeit completely clueless figure.
Whenever you hear a business executive or politician use the term “American competitiveness,”
watch your wallet.
Politically correct term for "intoxicated to the level of loss of sensitivity". Means
relatively insensitive to reality including incoming data like level of inflation ("inflation
expectations are well anchored")...
Unelected Treasury and Fed employees and first of all Fed Chairman and Secretary
Of course, US smoke and mirrors apparatcheks have always needed the kindness and
cooperation of foreigners to maintain their false Wizardry. The whole Oz thing is preconditioned
on bountiful blank checks and poor policy from foreigners. The problem now is that there are inflationary
emergencies all over the world, and authorities are half heartedly moving to deal with it. Europe
in particular has sent unilateral signals that they would like to at least have a surviving currency
of sorts left at the end of the day. They understand that money is preferable to crack up boom
barter conditions and hoarding.
Asymmetric monetary policy:
Socialism for banks on the downside along with crony capitalism on the upside;
The key idea is privatizing profits and socializing losses via investment banks, hedge funds and
buyout firms. Greenspan was the most famous proponent of crony capitalism and really enjoyed in his
role Robin Hood for banks, hedge funds and derivatives traders. He was widely admired both on Wall
Street and Congress (which at the time was just an extension of or more correctly investment banks
Things which happens when you want cheap money, substitute borrowing short term for
borrowing long term, get in trouble, dial 1-800-get-me-out and no one answers
A person sent in after the battle to stab the wounded.
The variant of the game Where's Waldo". Buried in every accounting statement there
is something the accountant's refer to a "Plug" - a number they fudge to get the totals to add-up.
The aud itor's job is to find it.
You don't need them in a Bull market, you don't want them in a Bear market
. . .Old Wall Street joke
"Cornucopian puffery from navel-gazing, coddled analysts who swallow government-manufactured economic
statistical propaganda wholesale because they are either stupid or afraid."
When people take fluffy, subjective information and treat it as fact, to justify
a viewpoint that they want to justify.
Attilla the Hun:
Allusion to the typical style of behavior of Wall Street brass. "Feeling sorry for
people on Wall Street is like feeling sorry for Attilla the Hun."
Auction Rate Securities:
ARS in a nutshell was a way to trade long term debt like donuts. Strike that. I meant,
like Miami condos. No, no. Strike that too. I really meant, like Credit Default Swaps. So Goldman
Sachs created Auction Rate Securities as a means to . . . . . . . . well, they want you to believe
it was a new form of liquidity for the markets, but if you look at it real hard, it was nothing more
than a shortcut to disaster and huge fees for companies like Goldman Sachs. The problem with all
of this liquidity we created, is that it was constantly being moved, just like the pea under the
shell or the three-card Monte scam. For those of us that have been taken in by the shell game, you
know there is no pea . . . and you can’t beat the Monte scam. Well, that’s the same thing we are
seeing today in our financial markets. We’ve carved off so many pieces from the side of beef, that
there is no beef in the game. Guys like Paulson, Rubin, Mozilla, and other have the beef socked away
in their private meat lockers.
Back to Auction Rate
Securities. They were created so long term debt could be traded like short term debt . . . with huge
fees and expenses going to companies like Goldman Sachs for the privilege of playing the shell game.
Other than the skimming that went on, the ARS has demonstrated that liquidity is totally controlled
by the creators of the game . . . just like the guys on the streets of New York with the shell game
and three-card Monte. When they want to play, they are taking your dollars. When you figure it out,
they pack up shop and leave. Ah, hah. I think I just summed it all up in a neat and tidy package
Reminds me of something Desmond Tutu once said: “When the missionaries came to Africa they had
the Bible and we had the land. They said, 'Let us pray.' We closed our eyes. When we opened them
we had the Bible and they had the land.”
Exercise in creative accounting. Presuppose creative implementation of accounting rules
to transform "loss" to "gain"
A dominant type of democracy which is often hypocritically vilified. The time has come to announce
the formation of the Banana Republic Club. Membership is open, with the sole requirement of
verifiable behaviors in advanced economies that resemble those of supposly corrupt developing countries,
which are often are referred to as banana republics. Is the U.S. a Banana Republic? If so, then its
sovereign risk premium should be rising, no, rocketing higher. Adding high interest rates to the
already toxic credit crisis mix means...oh well, it means we are all too bullish. And that actually
settles the quest: inflation or deflation. In banana republics inflation and recession often appear
together like a married couple.
A person who will lend you an umbrella when the sun is shining, and ask for it back when it starts
a nanny state for well-paid bankers.
Investment bankers which are more dangerous then terrorists and in case of lax supervision (greenspanism)
can inflict far greater damage on the economy. They should be treated accordingly. there should
be world wide one set of rules for accounting as well as for banking, and on the top very strict
government policy to treat them as potential criminals and to punish those who recklessly playing
with the citizens finances. Ten year should be minimum term for the banksters who are caught: capitalism
should doe not mean absence of punishment for criminal behavior. Examples:
- "They vilify us, the scoundrels do, when there is only this difference: They plunder
the poor under the cover of law ... and we plunder the rich under the cover of our own courage..."
pirates of the Caribbean csmonitor.com
- "Surprise, Surprise, the banksters are corrupt, and the Fed will be spending hundreds of billions
of taxpayer dollars to cover for them. Where are my "Save the Banksters" t-shirt and bumper sticker?
" Banksters are behaving like gangs of brutish, feral fifteen-year-olds who egg each other on,
claiming “respect” by kicking and knocking down elderly passers. So far governments have reacted...by
saying that we have to let these young people express themselves. But the tide may be turning...
Bankruptcy for profit:
Trick used if poor accounting, lax regulation, or low penalties for abuse give owners an incentive
to pay themselves more than their firms are worth and then default on their debt obligations.
Russell famously comment on Bear Markets is fully applicable to 401K investors:
"In a bear market, everyone loses, and the winner is the
one who loses the least."
Bed of Procrustes
The way financial industry deals with Main Street.
Hat tip to Barry Ritholtz
Ignorant, foolish or disingenuous.
Chief mis-interpreter of Great Depression. In 2007-2008 confirmed his helicopter credentials
by slashing rates more then 3%. Hypocrites who want a fall guy for their own feckless financial incontinence
don't need to look further. No legitimate Keynesian would have kept interest rates negative or low
in times of nominal economic expansion. But it was Greenspan regime of Long Boom Exceptionalists
including Helicopter Bernanke, who created this mess...
Writing marked by cluelessness about the current situation and dishonest, pervasive Pollyanna-style
peddling of "everything is OK" mantra. Such people should probably stick to exposés of organic
vegetables. Markets, media and economics are not their forté, especially in the current situation.
For example "The Bellows » Robert
Samuelson Drinks Deeply From the Cup of Stupid: Washington Post columnist Robert Samuelson has
long impressed me as one of the most hackish economic columnists not associated with the Wall Street
Journal and not named Ben Stein, but today’s piece on cap-and-trade is dismally, embarrassingly stupid."
Unjustified belief that we exist independent of the rest of the world, that the US is the focus
and the rest of world economy is just a stable background. In practice he is using 1930’s monetary
policy in the economy of 2008. The concern is that the Fed treats other countries with something
of a benign neglect when setting policy, effectively ignoring the reserve currency function of the
Combination of Fed chairman name with the word "mess" that appears in mainstream publication separated
by less then 100 words serves as the litmus test of Fed credibility. The recent "Bernanke Mess"
sighting was Bernanke's
Market Week at
General rule is that the two words must appear within 100 words or two paragraphs of each other to
Bernanke isn't pushing on a string, he's pushing a corpse...
Bernanke Strong Dollar Bluff:
Chairman probably needs some poker playing lessons. The first rule of bluffing is that it's important
that nobody at the table suspected that it's a bluff.
Big Brother of Treasury:
Goldman Sachs Group Inc. Hint on the fact the several Secretaries of Treasures were Goldman
The next time you read about billion losses in some large bank please remember that bank is destroying
YOUR tax money. A billion is a actually difficult number to comprehend. A billion seconds ago it
was 1959. A billion minutes ago Jesus was alive. A billion hours ago our ancestors were living in
the Stone Age. A billion days ago no-one walked on the earth on two feet. A billion dollars ago was
only 8 hours and 20 minutes, at the rate our government is spending it. That enormousness is
fully applicable to finance and as one risk officer of a bank notes: "The billions involved
were so hard to contemplate that we almost certainly lost sight of the possible consequences [of
our credit business] until it was too late."
A system that is over-reliant on prediction (through leverage, like
the banking system before the recent crisis), is susseptable to loss of stability,
demostrated in unforeseen “black swan” events. Capture of regulators and
high operational leverage are making economic crisis more prolog and deeper
with each new iteration. .
The best way to lose your capital via inflation. Never buy a bond of a country until you know who
and how runs the statistics office. Stealth devaluation of currency via "friendly" inflation statistics
is an old, dirty and very popular trick to play with the bond holders, especially foreign bond holders.
"Governments that have repeatedly inflated away or defaulted on their debts will, in all likelihood,
not hesitate to default again" See
Argentine Bonds Plunge. Bloomberg.com
The new name of business cycle. See
Cycle was replaced with the Bubble Cycle.
The USA in last ten years of Greenspan regime.
Individuals who believe we are in a perpetual bull market. Alternatively called "401K donors"
CNBC, Mecca for bubbleonians near and far. Populated with attractive female market commentators.
Bubblevision has all the shortcomings of regular TV—the emphasis on appearance, lack of financial
insight, mindless optimism, etc. Promotes permabull mentality by giving microphone time mainly to
folks with a positive bias who think stocks naturally go up and that any downward movement is merely
a temporary correction or setback. Bubblevision is very dangerous for 401K investors and viewing
it should be specifically discouraged.
The most intentionally misleading compilations ever attempted. Mathematically, the budget is
comic. Politically, it is conniving. Morally, it is probably closer to a venal sin, rather than a
cardinal one. Legally, it is a fraud.
A random market movement causing an investor to mistake himself for a financial genius.
Temp. ousing for whose who lost their home to subprime real estate foreclosures. Compare with Hoovervilles
-- shanty-town 1930s communities of homeless citizens nestled out of sight near the railroad tracks.
CEO -- Chief Embezzlement Officer.
CFO -- Corporate Fraud Officer.
Captains of industry:
People extremely skillful in disguising what is going on and enriching themselves at the expense
of shareholders. You get your name in the paper by ginning up mergers and acquisitions. You build
up mountains of debt. And you crunch the numbers into such grotesque and unnatural shapes that even
their own mothers wouldn't recognize them. The company itself suffers. Real investors, who actually
understand what is going on, are appalled. But the little guys who get their information from the
newspapers and their emotions from television love it and buy the stock. Growth! Expansion! Technology!
We're all going to get rich….
Cargo cult economics:
the repetition of past solutions without any recognition that we're living in a different world.
Typically flavor of economic practiced by Fed.
Another name for the stock market, at least while the dipsters and bubbleonians are still in force.
"Wallstripers" are people in charge of the stocks casino. John Maynard Keynes argued that “when the
capital development of a country becomes a byproduct of the activities of a casino, the job is likely
to be ill done”. Greenspan was to much of a musician with insatiable desire for applause from Wall
Street to be able to comprehend this truth.
Variant of version of feudalism the USA morphed during the last two decades based on unlimited usage
of financial derivatives. Instead of serfs this brand of feudalism relies of levies imposed on 401K
lemmings (called donors in Wall Street jargon).
Rule of law is suspended during this period as all of the most important
regulations have gone right out of the window. 401K lemmings are brainwashed to the idea promoted
by financial institutions that the real way to protect your retirement is to buy stocks.
Like in any feudalism the second most revered institutio n after Wall Street in "casino capitalism"
is the military. But as Keynes remarked,
When the capital development of a country becomes a by-product of the activities of a casino,
the job is likely to be ill-done.
Looks like "casino capitalism" is a strategy that has a well-deserved name: “Gambler’s Ruin.”
A rip off of small investors possible only under Fed cover. As of July, 2008, a three-month CD yields
just 2.65%, or little more than half the measured rate of inflation. It wasn't the nation's small
savers who brought down Bear Stearns, or tried to fob off subprime mortgages as "triple-A." Yet it's
the savers who took a pay cut -- and the savers who, today, in the heat of a presidential election
year, are holding their tongues.
Credit Default Swaps aka Unidentified financial objects (UFO). Credit Default Swaps are traded
(swapped) from investor to investor (read: sucker to sucker). Protectors of our financial markets
created Credit Default Swaps as another means to make money from nothing. Kinda like the Dire Straits
lyrics . . . Get your money for nothing and the chicks are free. Unfortunately, there are NO safeguards
in place when Credit Default Swaps market faced reality. None. Nada. Zipity Doo Dah.
"One of the lessons that investors seem to have to learn over and over again, and will again
in the future, is that not only can you not turn a toad into a prince by kissing it, but you cannot
turn a toad into a prince by repackaging it. But very imaginative people in the securities market
try to do that. If you have bad mortgages they do not come better by repackaging them. To some
extent the chickens are coming home to roost for the mortgage originators and securitisers."
Warren Buffett, Financial Times, October 26, 2007
Sell-side analysts whose idea of research is to talk to company management before issuing a "buy"
rating (or to downgrade a stock to "accumulate" after it implodes). Also used for servile press which
tried to brainwash the viewers/readers/listeners with messages like "Please leave Bernanke, Paulson,
and Wall Street Bankers alone! They went to Princeton, Harvard, and Yale! These are America's best
and brightest! -- America is in the best hands!! They know exactly what to do!"
Politically correct term for financial obscurantism. In a more narrow sense a special dialect of
English designed to hide and/or obscure all important or relevant to the discussion facts. One of
the best known practitioners was Alan Greenspan. The term implies never-ending deceit like in quote
"How do you know when the chairman of the Fed is lying? Answer: Every time he moves his lips" (Barron,
A politically correct term for oil and ethanol lobbies.
The banner of Fed hypocrisy; useless unscientific measure accepted only by adherents of woodoo economics
that has nothing to do with real inflation and serves as a justification of keeping rates below inflation
to enrich banksters.
" A kind of transaction in which A plunders from B the goods of C, and for compensation B picks the
pocket of D of money belonging to E." The Devil's Dictionary by Ambrose Bierce
- A cul-de-sac down which ideas are lured and then quietly strangled.
- A group that keeps minutes and wastes hours.
- The unwilling, picked from the unfit, to do the unnecessary.
Contrary to Krugman’s suggestions, the G.O.P. has shown great concern for the “unfortunate”: look
at all those “unfortunate” crooks, criminals and incompetents on Wall Street who have been bailed
out with the odd trillion of taxpayers’ money. And please note – the fact that some of this bailout
money is then used to fund the election campaigns of G.O.P. politicians is entirely coincidental.
a fancy word for nationalization. See Phony and Fraudy
the moment when you understand that government statistics is so screwed and Fed is so in bed with
investment banks that you suspect the worse and start accumulating gold and commodities. In a narrow
sense admission that something is wrong with the yield curve which defies Fed tightening actions.
The word was made famous after the period after the most reckless monetary policy of chairman
Greenspan when rates were kept around 1% for quite a long time. From June 2005:
In remarks broadcast by satellite to a monetary conference in China late Monday, Greenspan ruminated
on what he previously described as a “conundrum” — long-term interest rates that have remained
low and even fallen despite the Fed’s yearlong campaign to raise short-term rates.
Cold turkey market:
Market after collapse of the major bank in the process of deleveraging of the economy. The term gained
popularity after the collapse of Bear Stearns in March 2008. Also refers to Greenspan
preferred way of "treating drag addict with cocaine" policy.
A misnomer. Former Senator Alan Simpson famously said: “Those who travel the high road in Washington
need not fear heavy traffic.” If he had sought truly deserted streets, however, the Senator should
have looked to Corporate America’s accounting. -- Warren Buffet
The most close relative of Soviet Politburo. Usually staffed with CEO cronies. Board members
receive expensive tickets to important sporting events, the theatre, and are also treated to use
of the company’s fleet. Worst of all, the board itself is not made accountable because corporate
board elections are generally a joke. The inherent quid pro quo is to pay the board huge retainers
for attending several meetings per year and rubber stamp ill conceived CEO proposals. Board meetings
are often a complete travesty.
Deep slump short of compete crash. In stock the meaning to 10% drop from the high.
Appointing a bank lobbyist for the position of Fed Chairman and similar acts for other less important
federal agencies. In broader sense of word populating government agencies with political cronies.
Lobbyists in such positions are worse then con men and criminals. It's difficult to accept, but it's
true - and we'd best do something about it by not repeating the disaster of appointing a bank lobbyist
like Greenspan and letting him stay for 20 years protecting his position like
Edgar Hoover. It
is because of Hoover's long and controversial reign that FBI directors are now limited to 10-year
terms. That same should be done for Fed. In addressing our present "Subcrime Bubble", we should oppose
concentrating yet more authority in trembling hands of yet another Benevolent Chairman with too much
narcissism, too close connection to investment banks and too little brains for the job.
Economy which instead of producing anything of value, propagates a Ponzi-styl e of importing
Chinese staff and exporting IOUs. The system hummed like clockwork until the debt chickens started
coming home to roost.
Paulson's latest attempt to rescue financial firms now mired in the toxic swamp they created.
A covered bond is kind of bond back by mortgages with the following provision: Banks must hold onto
the mortgages, paying the "bondholders out of their own cash flow, not from the proceeds of the mortgages."
Credit Default Swaps (CDS):
Financial weapons of mass destruction (WDM). Selling piles of this dung overseas was incredibly short-sighted
and destroyed a lot of investor confidence in our financial system. That financials could decline
by a total of 80% would not be a bit surprising.
the only real flavor of capitalism in existence. Despite being more or less standard condition of
the society often used in negative sense, for example, " Let's call a spade for what it is: privatizing
profits and socializing losses is crony capitalism, pure and simple."
behavior of fiat currencies in periods of financial crisis...
Designated agitprop disseminator from Fed. The perception of control and responsible behavior must
be maintained in the face of irresponsible acts. Think what I tell you to think, pay no attention
to what I do.
The place is where people with no talent for risk-taking gather
to imagine what actual risk-takers might do
There's an old saying in poker: if you are playing the game and you don't know who the mark is, that
means it's you. Journalists tend to romanticize markets, to see the results of free market
operation as virtuous. In fact, a market practices equivalent to "date rape," are prominent even
if they are not prevalent. While it isn't just humiliating as real date rape, it is costly
on a scale you might find surprising. The most common variant of financial "date rape" is called
index roll congestion. This involves profiting from the requirement that public investors' positions
in commodities indices be "rolled over" from one contract month to another over a known five-day
period. The price of the old month's contract is depressed and the price of the new month's contract
is inflated. This can be a huge source of profit for those ready to take advantage of the naive public.
How Big Traders Can Extract Excessive Profits and
role of indexes
Dead Cat Bounce:
Miracle that many expected to deliver in early 2008 to make possible for major foreign players to
get rid of US equities.
Former CIOs of major banks who are not yet in jail
Very similar to alcoholic addiction. You probably know the symptoms: the liquor stashed behind the
fridge; the stumbling into the pool, the humiliating rescue; the tearful promise of change which
goes nowhere, pathetic attempts to con listeners into believing he's got his "problem" under control
and all the rest.
An interstellar financial instrument of balance sheet destruction. The Debt Star is able to destroy
an entire planetary economy with its Correlation Laser. Often used ironically like in "Darth
Paulson is nearing completion of the Debt Star..."
A trait which is pretty foreign for banksters, Fed functionaries and neo-classical economists. Here
Yves Smith's assessment of Greenspan legacy:
"It's one thing for Greenspan to sell books and give speeches to try to salvage his reputation.
Nixon did that too, with more success and less profit. It is quite another for him to benefit
in a far more direct fashion from the devastation he created, by hooking up with the fund that
scored the biggest kill from the worst aspects of the negative real interest rates that Greenspan
put into effect.
Overly cheap credit always and inevitably leads to bad investments, And Greenspan of all people
should have known that. How he can rationalize his actions then and now is beyond me. But I forgot.
Objectivism means never having to say you're sorry.
Actually, it is worse than that. More than 50 years ago, this country could be awakened from its
nightmare of Joe McCarthy-led Communist-in-every-closet witch hunting by the exposure of McCarthy's
methods in the first nationally televised Congressional hearings. The pivotal moment occurred
when a Boston lawyer, Joseph Welch, rebuked McCarthy with the now-famous phrase, "Have you no
sense of decency, sir, at long last? Have you left no sense of decency?"
Hilarious attempts to mask grave situation with over-optimistic forecast. See also Pollyanna. For
...the US Federal Reserve is now being dragged kicking and screaming into a new higher interest
rate decoy. Their attempts to rectify all this are hilarious to say the least. In the case of
Ben Bernanke there’s less of the future subjunctive fiddle while Rome burns crap heard from his
“hawkish” colleagues. Instead, and incredibly, Ben has elected to pull the recovering economy
ploy out of his bag of tricks as the justification for what the market is doing in the face of
terrible US financing conditions and inflation.
An approach to fiscal deficits reflected in the immortal quote "deficit does not matter". Typical
among banana republics leadership and GOP. Inevitably lead to cold turkey syndrome (see
the general ethical maturity of the managerial class can be of critical importance to an economy.
The past several decades have demonstrated that no such ethical maturity exists, that powerful managers
can acquire vast sums from failing enterprises, and that an entire country can become victim to executive
fraud at the highest levels.
Weapons of Mass Financial Destruction. Paraphrasing Churchill Enron is a duckpond compared to the
Atlantic that is the financial sector derivative accounting. With mortgage back securities being
the Wall Street’s version of nitroglycerin. In the two decades of Greenspan's tenure, the Fed's Washington
staff, other regulators and the Congress allowed and enabled Wall Street to migrate more and more
of the investment world off exchange and into the opaque world of over-the-counter derivative instruments
and structured assets. This change is described by people like Greenspan as "innovation," By
replacing exchange traded securities with ersatz OTC instruments, Greenspan and the economists who
dominate the Fed's Washington staff have created vast systemic risk that need not exist at all and
that now threatens our entire financial system. They cause a failure at so many levels that it’s
hard to find a piece of the financial system that is actually unaffected. As a result we are
now dealing with failed institutions, shortsighted analysis, and some unscrupulous, greedy
bastards who would (and do) loot any system that allows for looting. Commenting on Bear Stern rescue
by Fed Meredith Whitney noted that the rescue was absolutely all about counterparty risk. If Bear
went under, everyone’s solvency was going to be thrown into question. There could have been a systematic
run on counterparties in general,” she said “It was 100 percent related to credit default swaps.”
Mish blog reader recently noted "1 trillion in credit default swaps bet on whether GM goes
under or not". My god! What does any rational person say to a figure like that? Can any financial
system that functions like this survive? I mean survive without the government taxpayers giving a
full backstop to this nutty gang of banksters? "
A side effect of revolving doors. An amazing ability of financial regulators to close eyes
on corruption in the regulated industry in hopes that soon they can join the table.
a deep and protected mess; if the owrk is used that means that there is no any hope for economic
revival in the new employment report.
Individuals who mindlessly buy on dips. See also "Bubbleonians."
Disastrously-botched fiscal policy (DBFP)
Replay of Reagan domestic macroeconomic mismanagement (aka "voodoo economics") during 90th
and 2000x under Easy Al.
Used to be America's national currency and the world's problem. Now deeply troubled fiat currency
which requires mint freshener and America's problem. Sometimes called "US peso." A Federal
Reserve economist once recounting a conversation with his young daughter, who asked him, "What do
you do at work, Daddy?" He answered, "I help make important decisions." "What kind of decisions,
Daddy?" "Oh, things like how much money the government needs to print.".
Refers to the moment when "There's Never Been a Better Time to Sell
Your Gold Jewelry for Cash"
No less dangerous then sober banksters, but more reckless. "Wall Street got drunk; it got drunk and
now it's got a hangover" -- President Bush II.
He gets it, he really gets it.Well, sort of. Wall Street got drunk, but the the rest of us are
the ones with the hangover.
Bank executives inclined to make risky bets that allow them to profit when things go well
and to push the losses on bond and stockholders when things go sour. It is becoming increasingly
difficult to trust the fat cats who always seem to land in the honey even as they shed employees
and turn to the government for help. Would it not be wise--to put some regulatory teeth -- not guidelines
-- into the whole business?
All debt and no savings means that there’s Hell to pay...
fraud, fantasy, fiction and foreclosure. The first three are the foundation for the fourth "F." Enough
said. We take this and divide by H + I, which represents Hype and Incompetence. Okay, so you don’t
need a discussion about the four "F’s" or the Hype. But let me share a bit about just how severe
the "I" factor is of total, absolute, and beyond any belief . . . Incompetence.
U.S. Department of Wall Street Welfare currently chaired by Ben Helicopter Bernanke. Shadow Politburo-style
organization representing the interests of the banking community over the general public. Under Greenspan's
regime it degraded to the level of bank insurance corporation and became the most dangerous branch
of Federal government able to destroy the economy of the country. In difficult times serves as Wall
Street’s pawnbroker of last resort. Of more precisely bartender of last resort serving booze to already
drunk patrons. Fed actually perfectly well resembles Politburo as an agency which in not under the
direct control of the Executive branch or Congress, and therefore is not really answerable to the
voters. There was question about the frequent trips of Alan Greenspan to the Whitehouse during Bush
II administration. Ceding regulatory control of financial sector to such an agency amounts to an
outright assertion that democracy just doesn't work.
A mutation of the Wizard of Oz: the perception of its power vastly exceeds reality. Lemmings consider
him to be the most powerful unelected official in the USA while in reality he is more of a lackey
of investment banks (at least Greenspan was). In normal times, the limited tools central bankers
have at their disposal can be used to great effect, but extreme conditions reveal their impotence.
Fed discount window:
It's not a window anymore. It's a widemouth cargo door
A place which requires wet vacuum cleaning from corruption and incompetence accumulated during Greenspan
"Hear No Evil, Speak No Evil, See No Evil". Especially true about financial derivatives.
Fed Monetary Politics:
Euphemism for devaluing of dollar. From the words ’poly’ meaning ’many’ and ’ticks’ as in ’small,
blood-sucking parasites’. And God forbid that working and middle class people get a break and have
paychecks a least keep up with inflation.
Fed Uncertainty Principle:
The Fed, by its very existence, alters the economic horizon and rules of the game. Compounding the
problem are attempts to game the system taking excessive risk to maximize private profits and using
Fed as a free insurance when chicken come home to roost. . As Mish Shedlock stated in his
Fed Uncertainty Principle there are several Corollaries:
- The Fed has no idea where interest rates should be.
- The quasi-government body most responsible for creating this mess (the Fed), will attempt
a big power grab, purportedly to fix whatever problems it creates.
- Don't expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with
bigger and bigger doses of exactly what created the initial problem.
- The Fed simply does not care whether its actions are illegal or not. The Fed is operating
under the principle that it's easier to get forgiveness than permission.
Back in the Goode Olde Days, people spent uncounted hours trying to forecast the future. If they
had a cat, they could try felidomancy, which is the art of using cats to predict the future. If they
had feet, they could try pedomancy. Nowadays, people indulge in fedomancy, which is the art of predicting
interest rates by observing the Federal Reserve Board. It's a difficult practice. The most famous
fedomant was without question Henry Kaufman.
Obscurantism of the worst type, reminding Soviet Politburo speeches. For example: "I think we're
in for a prolonged bout of hyperdistagdeflation where assets must be madmaximized to avoid suboptimal
human capital utilization due to commodity deficit effects."
Uncertainty Principle Corollary Number Two:
The government/quasi-government body most responsible for creating this mess (the Fed), will attempt
a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates,
the more power it will attempt to grab. Over time this leads to dangerously concentrated power into
the hands of those who have already proven they do not know what they are doing.
Fancy financial footwork. Usually connected with disingenuous attempts to cover criminal asses under
pretext of "not impeding financial innovation." Was typical weapon used by Easy Al.
What happens when company stop innovating in technology and resorts to "Trimming costs, "raising
capital," "suspending stock dividends," "enhanced liquidity" and other obscene forms of financial
manipulation. GM is one example...
Dismantling barriers again investment bank greed.
Group of firms which obviously think investors are utter fools and fleecing them left and right.
And for a while, they were correct. They suckered people into buying into this mess the whole way
down. Bottom calls each and every level -- all of which failed.
Release earnings. Issue guidance. A few weeks later, lower earnings. A few weeks after that, take
more write-downs. Raise more capital. Start it all over again next quarter.
Rinse. Lather. Repeat.
The banks have adopted a Chinese water torture approach -- dribbling out the bad news in small
doses over time. Its been working up until now, but I doubt it will keep working much longer. Can
they keep fooling people much longer?
Derivatives enthusiasts (allusion to neocons). In effect, finacons are like America's gun
advocates who argue that "guns don't kill people; people kill people."
"The art or science of managing revenues and resources for the best advantage of the manager. The
pronunciation of this word with the i long and the accent on the first syllable is one of America's
most precious discoveries and possessions." The Devil's Dictionary by Ambrose Bierce
Opportunistic scavenging. Real innovation withstands the test of time. There was absolutely nothing
innovative about turning chicken liver into Chicken crap with a fancy model and sales pitch, both of
which lacked any resemblance of merit.
: See securitization. "It's sort of a little poetic justice, in that the people that brewed this
toxic Kool-Aid found themselves drinking a lot of it in the end, " -- Warren Buffet
bad habit that are more dangerous for financial health of banks and other financial institutions
then smoking is to your lungs. Should come with appropriate health risks warning.
A situation in which a rumor that both Bear Stearns and Lehman Brothers are insolvent looks like
an understatement and people suspect that Fannie Mae and Freddie Mac are on the list.
financial Puritan is someone who is always suspicious that someone, somewhere is having a too good
time on the markets.
CEO of financial services companies in time of trouble. "Comrade Ben is determined that there will
be no financial meltdown and no depression while he is in command," economist Ed Yardeni wrote to
clients. "Given the initial reaction [on Wall Street], I suppose this means we are all financial
In Secretary Paulson view consolidation of banking and securities regulation under the Fed's aegis with
the central bank acting as a financial stability regulator. In Wall Street view a nuisance that
interfere with getting absence profits from little understood instruments sold by crooks and bought
: finance, insurance and real estate. Now really on fire.. "I hope we're all wrong and this credit
crisis is not the worst financial threat in a couple generations." Actually, I hope it is, or becomes
that. Because IMO it is the only way there is a chance that Americans will be made to see the folly
of a FIRE-based economy, with its illusion of prosperity.
Fireman as arsonist:
Allusion to the Fed role in the latest financial crisis. As seen in the Fed Funds vs. Crude Oil prices,
clearly that hasn't been water coming out of Ben Bernanke's fireman's hose.
First Rule Of Banking:
"Only lend money to those who do not need it".
Fiscal Poison Pill:
According to Paul Krugman
(Commentary, NY Times): A poison pill, in corporate jargon, is a financial arrangement designed
to protect current management by crippling the company if someone else takes over. ...[T]he tax cuts
enacted by the Bush administration are, in effect, a fiscal poison pill aimed at future administrations.
Flight to quality:
Looting emerging economies by repatriation of speculative capital
Flopping and chopping:
Up-and-down motion that essentially goes nowhere.
Monetary policy committees, deciding interest rates is like a car being driven by a drunk. (interest
rates decided by politicians is like a car driven by a drunk on drugs). The FOMC is a price fixer.
The reason we are in this crisis is that they fouled up. They manipulated interest rates until consumers,
investors, banks could no longer make rational decisions about the price of money - because the feedback
mechanism was/is broken.
A street in the city of Manhattan, New York where several major brokerage firms
and stock exchanges are located.
Former Wall Street. For example
smalltown USA turned on 'Fraud Street'
U.S. policy of selective protectionism, which protects workers in highly paid professions from
foreign competition. Free trade is simply not on the national political agenda, although political
figures who support subjected non-college educated workers to competition with low-paid workers in
the developing world like to refer to their policies as "free trade."
A form of market fundamentalism ( aka Reaganomic, voodoo
economics, vulgar libertarianism ) that was promoted in "Capitalism and freedom" by Milton freedman.
Chicago school economics) proved to be the most effective destroyers of developing
nations economics comparable in efficiency with Hitler armies (in case of Russia). John Kenneth Galbraith
said that “Milton’Friedman’s misfortune is that his economic policies
have been tried.”
Frightened of own shadows:
The current mode on bank lending.
To effectively default on debt. This is an old dirty game that was rejuvenated by Easy Al, who for
the obvious reasons preferred CPI as a measure of inflation. If the BLS used the same rules today
as in 70th the inflation rate would be 11%. Again this is nothing to do with any academic arguments
(CPI is a joke from any academic standpoint): this is a blatant stealth attempt to orchestrate a
default of the government debt. In no way CPI reflect the massive inflation across food, energy
not to mention healthcare and education among other areas. The game of fudging indexation is not
limited to the USA. For example, as of June, 2008, a good share of Argentina's debt is in default.
What else do you call it when a government that owes over $30 billion in inflation-indexed debt
is publishing an understated inflation rate that is used for calculating indexation payments. Holders
of TIPS now have a nice company of Argentina's miserable indexed bond holders...
Americans want cheap fuel, no matter what it costs.
Fed chairman Alan Greenspan, the father of subprime mess and securitization crisis known for obsessive
desire to frequently move rates and keep them below inflation (see interest rates masturbation).
Greenspan's two forthcoming books are: "What, Me Worry?" and "Maintaining the Faith in Free
Market with Derivatives". Jesus may have turned water into wine, but Greenspan has turned the US
dollar into toilet paper.
Specialized in obscure terminology and naive models mercenaries at service of a particular, usually
stupid, doctrine. Job of ordinary economists is to explain why things cannot be better for common
people. Most appear to enjoy this work and to regard harsh economic realities much as personal injury
lawyers regard severe injuries.
" a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path
to big money. The object is to recognize the trend whose premise is false, ride that trend, and step
off before it is discredited." George Soros
outsourcing everything and everybody. The USA market fundamentalists have gotten themselves into
quite a pickle this time around. The orgy of greed and deregulation will undoubtedly be muted. Sharply
turning toward the center will provide an illusory salve and legitimacy to an overly harsh and unjust
ideology that places profits above people. Far more difficult is the problem of how to feed the beast
as resources become scarce and its monster footprint grows ever larger. Some kind of self-cannibalization
seems highly likely with unclear consequences for perhaps billions of people.
Emperor have no clothes:
Standard development after Fed chairman does something really stupid. The moment can be delayed
until he leaves his position and publishes his memoirs.
Emperors Without Clothes Club:
S&P, Moody and Fitch. With the monoline insurer fiasco, the rating agencies give critics
more evidence that their grades are a sham, dictated by political considerations instead of economic
End of credit crunch:
This is not the end or even the beginning of the end, though it may be the end of the beginning.
30% of US crude oil energy futures are traded in what is called a dark market -- that is a market
that was deregulated in December of 2000 at the behest of Enron. Prior to that legislation all energy
futures traded in the United States or affecting the United States in a significant fashion were
regulated under a regime that had been perfected over about 78 years. Many observers believe that
Enron loophole was an invitation for fraud and used as such by traders providing them the ability
to boost the price virtually at their will.
a situation where the appendage caught in the crack is squeezed to get testimony on record about
bigger fish "who and how". Usually the case against banksters is weak unless somebody turns songbird,
but there has to be an indictment to 'enliven the memory' of the little peckers about former Masters
of the Universe behavior.
Back in the 1960s Charles de Gaulle would complain about the "exorbitant privilege" that accrued
to the United States by virtue of its role as the key currency in the post-World War II Bretton Woods
international monetary system. Other countries had to worry about their balances of payments: they
had to constrain demand or go through the distress of a devaluation in order to balance their trade.
But the United States did not: it could simply print extra dollars to cover whatever excess of desired
imports over desired exports happened to exist.
Harvard Business School MBAs:
People with surgically removed ethical compass which is replaced by a very strong instinct for social
Harvard peer pressure is all about rich spoiled brats enjoying the closed society of
a system based on nepotism which is a natural extension of their social environment. Harvard is just
a daycare center where kids can play and then party. Often they are taught by prominent looters like
Andrei Shleifer. Alumni include Jeff Skilling, Paul Bilzerian, Henry Paulson, Stan O'Neal, and of
course, George W. Bush. HBS is turning out roughly 900 MBAs a year. A lot of people who graduate
from HBS aren't the brightest bulbs and are hardly different from being "stuck in adolescence", where
seeking acceptance is a prime motivation. Seeing the H on a resume is a clear "no hire" indicator
for any innovative company, but this is offset by their vast alum network which perpetuates the gross
The problem is contagion: once one gets in, the network follows. Some graduates are fundamentally
stupid, unlearned, and incapable of extracting any real content even from into level books. Most
are unambiguously afflicted with excessive hubris, compulsive salesmanship, mediocre intellect, and
unimpressive analytical skills -- in other words, quite well positioned to assume leadership roles
in an average company.
the great euphemisms of economic profession: deep troubles that nobody understands. Fro exaple "US
economy faces some headwinds".
Arsonist Turned into Firefighter. The replacement of Chairman Gereenspan. Starting to look like
Ben B will accomplish “Mission Impossible” – high unemployment AND inflation – gotta ratchet up the
pain for the non-working class as the next leg in this non depression.
layoffs of VP deadwood. Wall Street pattern is to first get rid of the VP types, who are comparatively
costly but not yet revenue generators, and proportional cuts in secretarial staff. MD cuts tend to
be limited to those who are out of favor and/or in areas that look terminal. Next to go are slightly
more and less senior. In my day, VPs would not have been entitled to severance, but again, things
may have changed, and I have no idea about support staff.
The first act of "Chairman Al and his unlucky successor Ben" rate cutting soap opera. The second
act is impotent panic over sky-high gas prices.
HIWTYL (“Heads I win, tails you lose”):
A popular game that is played by investment banks and brokerages with 401K investors. 401K investors
are usually ecstatic when new management of overleveraged banks both cuts the their dividend and
dilutes their equity after paying billions in severance pay and bonuses to the outgoing management.
Based on derivatives (from "Hell as IOU's")
High living standards:
For decades the western world considered Texans to be the great unwashed, uneducated , uncultured
peasant rogues. And we may soon regain the living standards that accompany that descriptio n. Detroit's
high schools already have a 31% graduation rate.
or the ability to convince oneself that while the price of everyone else’s home will fall, your neighborhood
is clearly different.
Forget drugs. Our national addiction is gasoline.
American financial system is a casino disguised as "free markets". The house always wins and well
connected house always wins big. Goldman Sacks is a well connected house.
The politically correct term for the U.S. dependence on the kindness of strangers to finance its
import bill. These days, those strangers are likely to be in China, Brazil, Mexico or some other
emerging nation. The U.S. has to import almost $2 billion in capital a day to cover its enormous
trade gap. Of the $920 billion that foreigners pumped into U.S. stocks, bonds and government securities
in 2007, $361 billion or 39% came from emerging-market nations, according to calculations by Bank
of America, using Treasury Department data. Foreigners earned an average annual return of 4.3% on
their U.S. investments, while Americans earned 11.2% on their investments overseas. Recently foreign
purchases of US assets have come
almost exclusively from central banks and sovereign wealth funds, not private sector players.
Greedy Oil Party
Bush 2008 rebates.
Politically correct term for the period of dollarization of the xUSSR region and Eastern Europe in
1991-2000. Since post-1973 real global GDP has remained weak vs. the 4.9 percent average for 1950-73,
the more correct term might be 'The Great Wage Stagnation', though that has certainly not been the
case for the become stretched-too-far financial sphere. The Great Moderation could also be described
as the Debt Abberation as it has been driven by asset price inflation and "financial innovation",
which have financed consumer spending. Increased access to borrowing has led to greater, unsustainable
leverage of consumer balance sheets, and a deterioration of corporate credit. Peddlers of Great Moderation
like Easy Al forget to mention that the price fir "Great moderation" is the current US financial
crisis and dollar debasement resulting from measures to reduce (in real terms) the value of the debt
Ben Bernanke. Refers to Ben pretending that inflation is not a problem. Many object singling
out Bernanke and claim that the a whole culture of Pretenders in Fed under Greenspan including
Easy Al was supporting the pretense. Sill unless Bernanke somehow manages to pull the rabbit out
of his hat prior to January 2009, many think his career as head of the Fed might be one of the shortest
on record. Right now the Fed is ready to monetize cow dung, if that will help the banks. And since
the Fed is owned by the banks, why is this position of theirs always seen as a surprise?
The modern analogue of ancient farmers who would curse the gods every time they didn't plan ahead
for a possible drought and were stuck without reserves. God may be dead but the impulse to blame
an all-powerful, shadowy figure for one's own mistakes never does. In a narrow sense a new
and popular form of Monday morning quarterbacking. Publishing a book critical of former fed
chairman Greenspan after he left the office while being silent before; also bashing "Greenspan's
cult-like belief is self regulating market" or calling him "a dangerous market fundamentalist"
in mainstream press after everybody realized the damage was done and the derivatives and subprime
horses left the stable.
Prominent supporter of "crony capitalism" (see asymmetric monetary policy), a former Wall Street
lobbyist and republican party political operative who managed to became Fed chairman. There is nothing
so unseeing as a wronged economist. Former Maestro, now he is considered to be a
Grigory Rasputin like
figure in US finance history. He was instrumental in socialization of losses for the most reckless
financial players ("Greenspan put") while simultaneous neutering regulation in the name of "free
markets" (understood by him as freedom for Wall Street to play with financial nitroglycerin in the
form of derivatives; see financial weapons of mass destruction). He fecklessly followed the
financial industry’s lead in promoting reckless deregulation, even as dangerous trends and little-understood
products like derivatives proliferated. Like John Edgar Hoover he managed to last
almost 20 year and was not fired or jailed for his transgressions (face down like approving Bush
tax cuts to stay in power for another four years do not count). After Hoover's long and controversial
reign FBI directors are now limited to 10 year terms. The same should be done for Fed chairmen. Greenspan
benefitted from extremely good timing: first collapse of the Soviet Union saved him from being fired
for incompetence. Also while during the last four years of Greenspan tenure the economy was
like a slow-motion train wreck propelled by derivatives and reckless lending, he managed to
jump the train near collision and even published a book. Profit from his book should probably be
Excess sensitivity of the Fed not just to asset prices but also to the concerns and
fears of Wall Street
A situation when central bankers have become hostage to inflated asset markets. In a more narrow
sense the promotion of crony capitalism (financial socialism or socialism for investment banks and
hedge funds) based on privatization of profits and socialization of losses via government sponsored
bailouts. In a narrow sense dereliction of Fed duty in regulating banking system along with
compulsive micro-managing of interest rates by Feb, a bad habit similar to masturbation. Important
part of Greenspanism is that are artful camouflage of intentions and actions as well as real consequences
of the current policy by long explanations to various Congress committees designed to conceal absence
of substance and complete lack of understanding of the current situation by Fed (Ezra Pound
said “The less we know, the longer our explanations.” ).
Important part of Greenspanism is the creation of cult of personality by arbitrary and frequent change
of interest rates (interest rates masturbation). If the Fed proposed tomorrow to fix the price of
orange juice, everyone would think they were mad. Ironically, the vast majority sees nothing wrong
with price fixing interest rates, even though it is clearly proven that for the last decade Greenspan
Fed has no idea what it is doing. Consecutive bubble blowing is a proof. Also Greenspan Fed missed
the risks in the shadow banking system -- it really thought that risk had been diversified
globally, and didn't realize that a lot of US housing risk was held in off-balance sheet vehicles
backstopped by US institutions in London. See asymmetric monetary policy.
the worst type of lie, despicable even in lie-infested worlds of politics and banking. Named after
Fed Chairman testimony supporting Bush tax cuts. In a narrow sense blatant betrayal of your previous
position and proclaimed principles for four more years in the office.
Like Greenspan got "Enron Prize for Distinguished Public Service" it might be time
to establish "Greenspan Prize for Distinguished Fed Service" or, better, "Greenspan prize for
the banana republic approach to banking supervision". The so-called "prosperit y" in the US over
the past few years was a complete and total fraud - a counterfei t economy, if you wish. The banking
and finance industry scored hundreds and hundreds of billions in "profits" from fees on cheap money
that was borrowed to buy assets whose prices were marked up. Did that process create any new wealth?
Of course not. The bankers got the profits, and the formerly middle class in the US got the mortgage
liabilitie s. The problem is that the housing assets are deflating and the mortgage liabilitie s
are not going to be paid, so now the banksters are in trouble.
Memoir of a rat who got caught by the door slamming on his tail just as he was about to escape. Where
was all his high mindedness two, three, four years ago....? He was and is part of the problem, not
the solution. He's sooooo concerned about free markets.... Awwww....
Guantanamo monetary policy:
force-feeding $3 billion of daily debt to the rest of the world.
Allusion to the Republican policymakers. Like in " Idiots Fiddle While Rome Burns". For example (The
The collection of ne'er do wells, clueless dolts, political hacks, and oh, let's just be blunt
and call them what they are -- total Idiots -- expands into an ever larger circle.
While the Republic burns due to the unsavory combination of incompetence, ideological rigidity,
and crony capitalism, the fools and assclowns seem ever more determined to avoid any personal
responsibility for the damages they have wrought. Instead, they flail about blindly, blaming everything
and everyone -- except their own horrific negligence.
This is financial incompetence writ on a scale far grander than anything seen for centuries.
As a nation, our institutions have failed us: Under Alan Greenspan, the Federal
Reserve slept through the most reckless and irresponsible expansion of bank lending in history
for reasons of ideological purity. His opposition
to the Fed’s regulatory role reached the point of malfeasance long ago. History is unlikely
to be kind to the
Ignorance is a bliss:
The motto of 401K investors.
Improve education so we can better compete globally:
Politically correct way of saying "Graduates should get used to a lower standard of living and some
of them need to accept jobs of bartenders and waiters"...
A side effect of fiat currency Ponzi games. In other words the FED will intentionally create inflation
to benefit debtors at the expense of creditors regardless of the impact on the economy. As William
Poole put it the FED in the German daily Frankfurter Allgemeine Zeitung:
“In historical perspective inflation is a means to diminish the stress felt by debtors. The
policy of the US central bank is construed to create inflation to alleviate that stress. Its monetary
policy was, is, and will be "lax" until the economic situation, and the situation of financial
firms, will be improved. All in all this will entail an inflationary tendency, even if the latter
will entail a bundle of new problems in another three or four more years.”
A politically correct term for wage increase demands. Also the game with the same name that Fed are
playing with unsuspecting public by jaw-boning and pretending to fight it while in reality destroying
the measures or introducing bogus measures like "core inflation" (Greenspan's debasement of statistics
quality). Should be distinguished from "currency sentiment": a widespread concern over the value
of the dollar ("negative currency sentiment") which is a result of, well, the declining international
value of the dollar and correlated with this decline sharp increases in prices of food and energy.
In Fedspeak "well-anchored inflation expectations" means that workers are so impotent that Fed can
afford lowering interest
rates below real inflation rate to save friendly banksters under the cover of "open mouth
operations" -- some meaningless jingling of obscure words.
Inflation has remained high, largely reflecting
sharp increases in the prices of globally traded commodities. Thus far, the pass-through of high
raw materials costs to the prices of most other products and to domestic labor costs has been
limited, in part because of softening domestic demand. However, the continuation of this pattern
is not guaranteed and future developments in this regard will bear close attention. Moreover,
the latest round of increases in energy prices has added to the upside risks to inflation and
inflation expectations. The Federal Open Market
Committee will strongly resist an erosion of longer-term inflation expectations, as an unanchoring
of those expectations would be destabilizing for growth as well as for inflation.
Interest rates masturbation:
useless or harmful change of interest rate (typically lowering it) based on false or misinterpreted
data. Favorite practice of Fed under Greenspan and Bernanke. What is really funny that Greenspan
was never interested in real inflation and did a lot to diminish the prediction with which it was
measured. This is a really harmful habit, totemism that threatens to crush the world economy.
The Fed under Bernanke is now doing what Henry VIII did, devaluing the currency to inflate our way
out of huge U.S. debt. However, not taken into consideration is that our Fed may get austerity orders
now, just like a third world country.
Variant of groupthink endemic in large financial institutions where one only listens to those who
are already in lock-step agreement, reinforcing pre-existing set of beliefs and creating a situation
ripe for gross miscalculation.
A greedy group of crooked, corrupt, inbreeding halfwits, as that is the nature
of banks and bankers (aka "emphasize revenue at the expense of risk" ). Here in America, they are
supposed to be kept in check by the Glass Steagall Act, which prevents banks from speculating in
the markets and playing risky games with depositors' money, which was enacted after the Crash of
'29. It was a good law that worked perfectly fine, until a creep named Bill Clinton perversely
repealed it during his embarrassing presidency, and look what happened; his wife wants to be president!
Adam Smith’s invisible hand has a puppeteer -- the Federal Reserve..
Japan lost decade:
the future of US stock market. In the US, despite the brave talk of free markets, we have been socializing
losses right and left and trying to shore up plummeting asset values. As the banking system is in
bad shape, demand for imports will slacken further, which will reduce growth, and in some cases,
reduce consumption. Also high fuel price act as a tariff, again hurting exporters. And there is the
bigger question of whether we really have reached a crisis of capitalism: whether a system whose
raison d'etre is growth can adapt to a world of resource constraints.
King of Food Stamps. (via
The Economic Collapse)
Ever wonder who is processing the transactions of the
record 43.2 million member food stamp program?
Yup, you guessed it. JP Morgan.
You couldn't make this stuff up. So after ruining an economy by placing bets on trillions of dollars
of worthless derivatives, forcing the government (people) to bail you out at gunpoint, getting endless
amounts of money from the Fed at almost zero interest and
front-running said Fed in the Treasury market and making billions in profits for literally nothing,
JP Morgan wants to benefit from the growing misery and hunger of the US population?
bashing people who just left Fed. See also Greenbashism.
Companies with stratospheric valuations.
The place occupied by Ben Stein as well as Al Kuldow and his friends "including those complete
fools Jerry Bowyer and Don Luskin"
Almost Daily 2¢ - Lost His Marbles?
Larry Kudlow financial advice:
"... anyone who has ever read Larry Kudlow wonders how he's able to manage a folding chair without
Last of the Mohicans:
Uncorrupted analysts who do their homework. The species is rare, borders on extinction. One example
is Meredith Whitney, the analyst who prompted a $369 billion plunge in the value of US shares in
November 2, 2007 by issuing a negative note on Citigroup. She courageously braved Wall Street’s culture
of intimidation after receiving several death threats from investors in the bank.
If you're a bellicose, retarded lawyer, you always have a future in Congress.
Lehman stock, a food for Lehman’s lemmings and 401K donors who applauded huge buybacks of the stock
in 2006 and 2007. Nothing went wrong at Lehman. Ponzi finance always self-destructs in the
end. That's a known outcome.
Lehman helped create wealth illusions via leverage and used that to transfer great amounts of wealth
from those who invested in these illusions to those who created them. Collapse was always inevitable.
What defines success or failure is how much the executives and star traders pocketed before the whole
thing went bust. Most savvy managed to walk away with a fortune before the collapse of the stock
and leave the shareholders, clients, and financial markets in ruins.
That was always the plan and the true measure of success in the finance culture we have today. This
is how they use money and resources. And yet the economic orthodoxy says that we need to react to
the collapse of these schemes by giving the same sort of people even more access to money through
Fed bailout and emergency funding so that they can invent even better plans for profiting from social
and economic destruction.
Politically incorrect nickname for 401K investors.
Level 3 assets:
"marked to a hope and a prayer" .
A spectre haunting Wall Street. The popular business model of making money from thin air called
Leverage and off-Balance sheet entities is now kaput. Its a new era of De-leveraging,
and Re-capitalizing. Here's an example of how that leverage works: Assume a hedge fund has
$20 of real capital. If a bank allows it to leverage five times its capital, the fund can acquire
$100 of risky assets with $20 of equity and $80 of debt. Now assume the assets fall by 10% in value,
or $10. The hedge fund's leverage suddenly increases to nine times -- that's $10 of equity (the original
amount less the loss) and $80 of debt now supporting $90 of assets.
Stephen Foley noted:
You've got £1. Invest it wisely, you might end up with £2. If you had £1 and borrowed another
£1, then invested them both, you would end up with £4. Even when you've paid back the £1, you
have made double the profit. That's leverage.
Now, say for the sake of argument you've got $30bn of cash and other assets. You use those
to persuade others to lend you $1 trillion. You make multibillion-dollar profits for years, pay
huge bonuses and recycle all the money into new loans to businesses, to home buyers and to small
investors. That's leverage, Wall Street-style.
But imagine you invested your money unwisely. What if your £2 investment ended up halving in
value? You have just £1 left, and that has to be paid back to your lender. You would be wiped
Multiply that to Wall Street proportions, and you've got the credit crisis. If that sounds
too simple, it is maths that was derided for years by the bankers who faced their day of reckoning
yesterday. They had complex models to prove that all their investments, all used as collateral
for each other, could not halve. Their models didn't predict the US housing crash.
Why were they allowed to borrow 30 times the value of their assets? Because they borrowed from
each other. Because they believed they had invented clever ways of reducing the risk of leverage.
Because they were greedy. And because nobody stopped them.
London interbank offered rate. The difference between Libor and Treasuries often serves as sort
of storm indicator on Wall Street.
.... benchmark rate for $350 trillion in derivatives and corporate bonds and 6 million U.S.
mortgages.... It´s even more reassuring that the Britisch Bankers´ Association is still seeing
no need to reform their methodology....
Recently charged to be manipulated by big banks.... The WSJ analysis indicates that Citigroup
Inc., WestLB, HBOS PLC, J.P. Morgan Chase & Co. and UBS AG are among the banks that have been
reporting significantly lower borrowing costs for the Libor.
[Study Casts Doubt on Key Rate]. to save the face BBA on
April 17, 2008 said it would kick out any bank found to be reporting inaccurate rates. Over the
next two days, banks raised their reported rates, causing dollar-denominated Libor to log its
biggest jump since August. In May, 2008 swaps traders reported record interest in alternatives
In order to protect our children, all fines and prison terms should be tripled if any institutional
investor is caught trading commodities within a thousand feet of a school. See
proposes banning insitutional investors from commodity ...
Convenient scapegoat which usually is invoked in case of any substantial of financial problems and
masks absence of IQ. Usually used in the form of a "lack of liquidity": an epidemic dysfunction of
modern society. As money games are considered to be similar but more exciting then sex it
needs to be differentiated with a very similar but milder ailment called erectile dysfunction which
usually affect men of the same age bracket as typical CEOs of large banks. Examples of usage:
Failed deal? Blame lack of liquidity. Failed banks? Blame lack of liquidity. Ailing high street sales?
Blame lack of liquidity. Lost your house? Blame lack of liquidity. Hellish traffic jams on your journey
out of the capital for your Easter break? Blame lack of liquidity.
Credit card companies, once having had Washington in the palm of its hand, is now facing a backlash
as "gotcha" fees combined with a lot of Americans paying credit card rates that a generation ago
would have landed the lender in jail (no joke, on an NPR show, a caller said his uncle, a former
loan shark, was in wonder of the credit card industry's practices. Said uncle did 15 years of hard
time for lending at 17%). Card features have been finely tuned so as to capture the hapless or unwary.
Who is this guy Margin that keeps calling me?
Market fundamentalisms include financial opening and deregulation which, in different forms, were
applied on a world scale right along with the theft of public goods through privatizations, et cet
-- a 'grand' global looting had been unleashed in a (partially directed) effort to overcome systemic
crisis. The failure of political Keynesianism, and then monetarist policies to ressurect rate of
profit dovetailed with a 'we don't know what to do so lets try 19th c laissez-faire on a world scale'
set of policies demanded by the U.S., given voice by Reagan and Thatcher in her famous statement:
'There Is No Alternative [to a worldwide free market]' The great pendulum of American economic outrage
moves back and forth over time between anger at big government and anger at big business. For almost
thirty years, big government has been the target - starting with Ronald Reagan's admonition that
government is the problem, not the solution; We deregulated much of the economy and pretty much allowed
corporations to do what they wished. At the beginning results were good as the dissolution of the
USSR lifted all boats: a buoyant economy, a bullish stock market, a strong dollar. But now we're
experiencing what happens when the pendulum swings too far and big business is given so much leeway
that the public is harmed and the economy jeopardized. The corporate looting scandals that began
with Enron were a wakeup call. Then came the practice of post-dating executive stock options. And
more recently, an epidemic of unsafe products: drugs like Vioxx, tainted foods, Heparin and lead-painted
toys imported from China. We've had defense contractors that don't deliver on their contracts, and
insurance companies that won't deliver on their promises. And just this past year, the subprime loan
mess, a financial meltdown on Wall Street, out-of-control hedge funds and derivatives. Perhaps manipulation
of oil futures markets. The reality is that neither big government nor big business is the problem.
Both are necessary parts of a modern economy. Problems arise when they're out of balance - as they
were by the 1970s, when government had grown so large it was stifling the economy, or as they have
become this decade, as big business, including Wall Street, grew so irresponsible as to undermine
public trust and threaten the economy.
One stage below overt corruption; usually far from competitive, and a recent administration policies
reduced competition even further.
the standard condition of the market with large players.
Toxic financial waist. Also the type of derivatives that US Patriotic Fund for Saving Big Banks
from Subprime Mess, named after Chairman Bernanke is interested in buying.
Originally meant jobs in McDonalds and other fast food chains. But the rich folks are working hard
to recreate pre-19th century conditions where being a live-in servant or cook is once again an attractive
career choice for substantial numbers of people.
selling old policies under a new name. In a narrow sense attempt to put a lipstick of a pig of deficit
spendings (tax holidays for rich) and fiscal irresponsibility.
An orderly process of the correction of the USA financial system.
Merchants of Debt:
Disingenuous promoter of market fundamentalism. As John Kenneth Galbraith nailed it: "Milton’s [Friedman’s]
misfortune is that his policies have been tried.”
They should probably stop talking about models that didn’t work. It was the regulators who didn’t
Modest but positive growth:
Fed-speak for stagflation
Money management business:
the industry which adds no value and by any standards ought not exist
A potential cascade of derivative defaults, with huge amounts of capital Citigroup, Merrill Lynch,
etc, will have to raise in response, further dilution in shareholder equity, and more unwillingness
to lend by banks and brokerages. There is far more to the monoline hurricane than first meets the
eye. Bond insurers such as Ambac Financial Group (ABK), MBIA Inc (MBI) and FGIC are talking to banks
about wiping out $125 billion of insurance on risky debt securities to limit the damage.
Viagra for securitization
Politically correct term for endemic corruption. In banking often means taking unnecessary risks
in order to get huge private bonuses in good times with government bailout when the downside finally
comes. See subcrime.
Treasury secretary Henry Paulson
The fund-management industry that has done really well — but mainly for itself. See 401K lemmings.
A cute trick, naked shorting is done by pretending to borrow a bunch of stocks, pretending to sell
them high just before the share-price falls, pretending to buy them back at a lower price when the
share price has fallen, and then pretending to return exactly the same number of lower-priced shares
to the lender, pocketing the difference. Real shorting is cute enough, and involves "clearing" the
sales -- i.e. proving that real stocks were really lent and really returned. Shorting is helped along
by generating rumors that a given company is in trouble, thus nudging share prices down. This works
really well when a company already is known to be struggling, as many now are. In fact, it usually
works best when a struggle turns into a feeding-frenzy -- as when a bleeding mullet attracts the
swarming sharks. When this scam is run using odd-lots of millions and tens-of-millions of shares
sharked up at many dollars each, the profits to be made in this sport is obviously huge.
With naked shorting, however, the stocks being shorted are basically non-existent, imaginary, made-up,
fictional, registered only as pixels in a program. It's a racket, pure and simple, run by both the
supposed borrower of the stocks and the supposed lender and, more to the point, was wholly and absolutely
against the law before the SEC declared a selective holiday from it. So, what the SEC action really
demonstrates is the utter lawlessness reigning on Wall Street, and the SEC's singular unfitness as
an enforcer of the laws, not to mention the criminal irresponsibility of the clearing authorities
who only pretend to go through the motions of certifying the sales. What's more, the companies cherry-picked
for immunity against shorting were some of the very companies believed to be most active in profiting
off naked short sales against other companies.
SEC. The SEC lacks the bite to adequately regulate the problems thrown up by the current crisis (such
as naked shorts, conflict of interest i.e. monolines and rating agencies collision). Under Cox SEC
appears even weaker then before because he shies away from any regulation. On most critical issues,
the SEC clearly has lacked leadership. For example, "If in fact Lehman is significantly understating
its exposures (and that's only a hypothesis), then we can pretty much assume that their liquidity
provider (the Fed) and their narcoleptic regulator (the SEC) are complicit, which boosts the odds
of uncontrollable systemic effects if anything fishy does turn up."
: In the logic of two last administrations the desires of the financial services industry are identical
with the national interest. See casino. John Maynard Keynes argued that “when the capital development
of a country becomes a byproduct of the activities of a casino, the job is likely to be ill done”.
"Americans make a living selling each other houses, paid for with money borrowed from the Chinese."
-- Paul Krugman
Neither responsible nor prudent:
Fed-speak for “criminal and crazy”.
Negative real rates:
politically correct term for uncontrolled Ponzi scheme like credit expansion typical for Greenspan
regime. The USA met the real enemy, and this proved to be not communists but banisters and their
puppets in Fed. The rest of the world is telling US about this problem semi-politely and behind closed
doors. If necessary, be sure that they will tell it in less polite form of dumping dollars.
If it takes a deflation in Bubblemerica to bring down severe inflation in much of the rest of the
globe, the rest of the globe's central bankers are going to vote for that outcome. And we are not
going to have any real choice because we won't get any kind or real or comparatively rapid recovery
without their help. . .
a catch phrase for semi-dead and partially discredited policies that favor domestic deregulation
and dismantling trade barriers internationally and policies that policies that favored the top echelon
at the expense of everyone else domestically. Twenty-five years of repetition have created an almost
Pavlovian reflex that equates "free markets" with "good" Willem Buiter might call it "cognitive capture."
But more and more people consider Milton Freedman views to be a nasty and very expensive for the
USA joke. Everybody and his brother realized the neo-liberalism has failed. For
Perhaps one of the few virtues of George W. Bush’s administration is that the gap between rhetoric
and reality is narrower than it was under Ronald Reagan. For all Reagan’s free-trade rhetoric,
he freely imposed trade restrictions, including the notorious “voluntary” export restraints on
Bush’s policies have been worse, but the extent to which he has openly served America’s military-industrial
complex has been more naked.
The form of defense against own blunders and evading criticism perfected by Maestro Greenspan. The
problem with Greenspan is that he keeps expressing surprise at the very things he should have known
about and that many market watchers were fully aware of. He's either dumb or disingenuous. He's pretending
the former, I choose the latter.
Off-balance sheet vehicle
: Farce which was popular on Wall street since the days of Enron. Essentially a bank subsidiary with
zero capital. Have been used to avoid the need to hold regulatory capital against assets and artificially
increase return on capital due to increased leverage. Off-balance sheet vehicles made debt-to-equity
ratios for financial institutions a pure fiction, permitting to increase leverage to astronomical
numbers. Although many leading banks have improved their capital positions in 2008, these steps
have been focused on repairing the damage wreaked by credit losses – rather than offsetting any impact
of new assets rolling back on balance sheets. That Herculean task is still ahead and might wipe out
Citigroup from the face of the Earth.
Oil: The shadow reserve currency of the world and the final frontier of all bubbles. At the same
time, the insatiable addiction of the Western economies to oil are showing mild withdrawal symptoms.
It is frankly ridiculous not to consider oil to be the global reserve currency of modern times.
Being the life-blood of all modern economies oil is now serving as the only source of global monetary
discipline, the role gold used to perform. So when a nation debauches its currency like was the case
with dollar, the oil markets react instantly. And oil will not accept monetary malpractic e, certainly
not by the U.S. Federal Reserve. If traders perceive that the dollar is declining, this perception
pushes oil prices up. The re is an old saying that "You can't fight the Fed". But oil speculators
are fighting the Fed. In fact, oil speculators so far scored a knockout of Bernanke Fed, like Muhammad
Ali over Sonny Liston. Th e Fed can no longer cheat with the money supply and get away with it.
Open mouse operations:
Monetary policy propaganda. In narrow sense -- Treasury claim that it support strong dollar while
in reality it supports its decline (aka appreciation of other currencies). Often used in broader
sense as any statements by Fed or Treasury officials that they know are blatantly false and but still
lie "for the sake of the country". For example: "Bernanke’s statements are like standing
in front of a tsunami proclaiming "The Worst Is Over" before the wave even hits the shore."
Most observers find it stunning that anyone would take any prognostication by Alan Greenspan or Ben
Bernanke, on any subject, as worthy of consideration, given that the past and present Fed chiefs,
respectively, apparently understand nothing about what has been the engine of the economy for more
than a decade -- that is, speculation.
other people money. Opium for Wall Street.
Overly credentialed morons :
Neoclassical economists of Chicago school-- a classic case of mafia-like a close-knit group which
are quick to penalize those among them or from outside who overstep the boundaries. Anybody
who strays from conventional wisdom is in danger of being ostracized. "These overly credentialed
morons insist on abstracting away from all the details of actual economics. Their models and terminology
are so abstract, so devoid of operational reference, that it is actually difficult to see if they
are talking about any real thing at all" As Perelman noted "[neoclassical] economists, having spent
so much time on the analysis of marginal increments, may want to focus for a change on marginal excrement."
Modern day alchemists. A motley crew of math wonks, computer scientists, PhDs and
electrical engineers, many of them immigrants from China, Russia and India employed by investment
bank to find philosophical stone.
Fire sale of assets and attempt to raise of capital in rapidly deteriorating or barely functional
market. For example:
June 9 (Bloomberg) --
Lehman Brothers Holdings Inc. raised $6 billion to help survive the collapse of the mortgage
market after reporting a $2.8 billion second-quarter loss, the first since the company went public
The percentage of investors wetting their pants as the market keeps crashing.
In financial industry according to Ambrose Bierce "When two thieves have their hands so deeply plunged
into each other's pocket that they cannot separately plunder a third party."
business model of rating junk bonds as AAA for big fees
Phony and Fraudy:
Two largest in the world and the most leveraged fixed income hedge funds. Fannie and Freddie have
phony status and phony accounting: they operate at much higher leverage ratios than any other similar
hedge fund or banks. JP Morgan Chase or BAC, for example, have almost as much bank-level capital
as this two GSEs combined supporting only one fifth of the commitments. In reality GSEs should maintain
minimum capital of 10 to 12% of assets almost eight times more then OFHEO has let them get away with.
If taxpayers pay to support the GSEs, shareholders should be wiped out and the GSEs should be nationalized.
But instead, the powers that be are pretending we can have our cake and eat it too. We can have a
"backstop" and the rest of the world will be satisfied that the US is supporting Fannie and Freddie.
No cost (what's a mere "tens of billions") yet we've satisfied the demands of our friendly funding
sources. Isn't finance grand? Some people are now planning to make money by betting that the U.S.
government's AAA rating would crumble like Parmesan cheese. As in "a trillion here and a trillion
there, and pretty soon you are talking about real money."
Even if we include the fair value of preferred equity, then on a fair value basis, Fannie Mae
is operating at a gross leverage multiple of 72.7 (total assets comprised primarily of mortgage loans,
divided by shareholder equity). In other words, a 1.4% deterioration in the value of Fannie's book
of assets will wipe out all of the shareholder equity. This makes Long Term Capital Management look
like a conservative strategy.
Hat tip to Barry Ritholtz
Pervasive Pollyannas of Prosperity. Wall Street fifth column. See
The Big Picture Pervasive Pollyannas of Prosperity
... the disconnect between reality and the "Pervasive Pollyannas of Prosperity"
has rendered moot William Safire's catchphrase.
Indeed, the bias is precisely the other way -- between reality and ideological absurdity.
Its the Lite Beer marketing syndrome: If your product is pisswater, and fattening to boot,
you never admit that in your advertising.
Instead, you frame the debate as whether it "tastes great or is less filling." Its jiu
jitsu marketing, turning your liability into an advantage. The misdirection is often effective.
How absurd has the Panglossian cheerleading become? On my pal
Larry Kudlow's show
last night, several of Candide's descendants talked about how great stocks are if you hold them
for 30 years. That's right, the holding period for equities according to this crowd is three decades.
Of course, this means
every pullback is a buying opportunity. Words such as these can only be spoken by someone
who has never worked on a trading desk or managed assets professionally -- or if they did, they
lost most of their
Rather than address why the public is so unhappy, the triple Ps toss charges of bias. Ignore
the worst monthly
Auto Sales since 1992, ignore the latest signs of consumer distress (Starbucks closing
And when that stops working, PPP starts discussing the long run, ignoring the
trading wisdom of Keynes.
Its yet more evidence of the pollution of economics with partisan politics.
Fortunately for most of the Pervasive Pollyannas of Prosperity, they don't have to live off
their market calls. Those who invest based on their "Never
say recession" worldview best have another source of income. Fortunately, most of the
public isn't so easily misled.
Hat tip to Mike "Mish" Shedlock
The act of donating money to both political parties in hopes of securing a lucrative contract
no matter who wins.
A newspaper famous for its disinformation. There are several major brands of newspaper Pravda
in the USA. The major two are Washington Pravda and New York Pravda. Some also mention Pravda Today.
A perfect way to convert a country into banana republic. Elections matter only when nations
build strong institutions such as independent courts, ministries, a free press, credible central
banks and ample systems of checks and balances. Their absence means many governments don't operate
as transparently or successfully as expected. At the same time the chaos it ensures provides a perfect
opportunity for western firms to grab the lion share of resources.
Pressure on bank balance sheets:
Bank is insolvent
a governing non-elected body -- half Mafia, half corporate board -- so obsessed with staying in power
that it is ill-equipped to deal with any challenges. Usually populated by gerontocrats. In
the USA Fed are only of the few bodies that have strong resemblance to Politburo and Fed Chairman
especially in Greenspan years pretty closely (and not only in age and speeches) resembled the General
Secretary of the CPSU. Ponzi-style prosperity: From Bill Gross letter to investors (Investment
Outlook July 2008:)
- Dear President Obama:
- You have inherited a mess. Your predecessor,
fixated on emulating a former Republican icon from a far different economic era, chose to emphasize
tax cuts for the rich and excessive consumption for all Americans. He promoted deregulation and
free markets when, in fact, the markets and their institutions needed tough love. Over eight years,
he failed to put forth a coherent energy policy. He needlessly invaded Iraq and lowered worldwide
esteem for this nation as a symbol of freedom and benevolence.
in financial world equals to putting lipstick on pigs. "And not just any pigs, mind you, but the
biggest, ugliest, most diseased representatives of their species." The classic financial PR type
is Gershon Kekst who advised to Henry Kravis and Sanford Weill among others...
measures against of some crack up boom trader who is not on the official looting guest list (subcrime
a new wonder of Wall Street, a creature with a deceptive appearance of independence which in reality
is deeply in bed with banks. Ratings are at the heart of the regulatory system, but rating agencies,
which essentially outsourced a SEC function (and have franchise protected by SEC),
are themselves unregulated. At the same time they are, in essence, agents of the government
in terms of setting standards and the basic rules for the investment process. As a result of lax
supervision an issuer of debt pays the agencies to rate its product and sometimes, in the case of
structured credit, to help design the product, too. Both cases represent conflict of interest
situation. Rating agencies played an central role in the capital markets, yet
were subject to no regulatory supervision. Power corrupts,
and while the rating agencies had far from absolute power, they had enough unchecked authority to
lead them into plenty of trouble. So it took two and a half decades of utter neglect before the rating
agencies, which had performed a useful function, drove themselves and the credit markets off the
cliff with their flawed structured credit ratings. The roots of those problems are well known, starting
with conflicts of interest and lack of rating agency liability for their decisions.
Decisions based on the low probability of getting caught
In finance usually used in context of lack of thereof. For example (FT.com):
Sir, Is Alan Greenspan serious? Has he looked at what the subprime rate was when he retired?
Doesn't he accept the main share of the responsibility?
He says market models are imperfect. No . . . anybody with Econ 101 could have seen
what was happening. I returned to the US in 2004 planning to buy a home. I took one look at the
galloping prices - and rented.
Any time value to cost gets that far out of line, it is a crisis in the making. Homes priced
at 10 times their cost to build, loans being given for 10 or 20 times a buyer's annual income,
demand artificially stimulated. The "economic" models are based on 2.5 times annual income. They
work. Simply stated: when home prices return to 2000 prices the market will stabilize and the
economy will heal itself. No amount of artificial "stimulus packages" or manipulation will override
Many think that RICO is applicable to banksters. Me think they need to pass [a similar] special legislation
to deal with the financial industry shenanigans. Form a top-gun team of well-paid investigators that
would be shielded from "external influences" except in extraordinary circumstances."
Reduction of entry barriers:
removal of safeguards from movement of wealth to large transnational corporations.
Typically banks overextended in construction loans. Like their larger brothers they are starting
to get smoked.
As Robert Peel would put it, in financial matters the question is never laissez-faire vs. regulation,
but always good smart regulation vs. bad stupid regulation.
Rest of World (ROW):
People who need to supply their resources for the fleshly printed US dollars.
Run on a bank:
A new American sport? A legacy of Maestro Greenspan benevolent regime ? May be both.
State Assisted Ponzi for 500 bankers. Stocks are now a fraudulent representation of economic
reality. It’s an interesting academic exercise whether we’re seeing Fed-financed ramping, Fed-financed
churning, Fed-financed pump and dump, Fed-financed painting the tape, or what have you.
Result of lax monetary policy of the owner of global currency. Printing presses running like mad,
printing Yuan (Renmimbi) and other currencies with the peg to the dollar.
Toothless wonder of Bushies incompetence. The Bushies have a knee-jerk preference for cosmetic measures
and deregulation. Under Chris Cox the SEC did not even try to understand the markets that they are
required by law to supervise and preferred "hands off" approach.
Since World War II:
used by economists when they are afraid to refer to Great Depression.
Securitization: "There's a name for this - it's called 'passing the trash,'
a vicious circle in which banks and other market players who took on too much risk are all trying
to get out of unsafe investments at the same time, causing “significant collateral damage to market
Serial Bubble Blowing (SBB):
Attempts to blow securitization bubble after dot com bubble and commodity bubble after securitization
bubble by Greenspan and Bernanke. "...the financial community is using winning long commodity and
short dollar positions to offset losses on credit market instruments. Leverage in one direction to
allow deleveraging in another. The Fed can’t exactly send those trades into a tailspin; there would
be no place left to hide. Indeed, the Fed needs to feed a bubble somewhere – the “where” in this
case is just terribly inconvenient as far as inflation [is] concerned..."
Candidates for the blue ribbon award for greed, arrogance, and stupidity in the off balance sheet
Shadow banking system:
A complex system of leveraged lending with hedge funds as the major players. It is so hard to understand
that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge fund
managers in August, 2007. As Gross and others see it, the real problem is that derivatives are now
a new way of creating money outside the normal central bank liquidity rules because they're private
contracts between two companies or institutions.
A gathering of government leaders, i.e., IMF meetings, G8 meetings, etc.
In old days the term is used to describe the successful destruction of Russian economy by Harvard
economists who proved to be more destructive then Hitler armies. Now is used to describe the policy
of cutting interest rates, which was initiated in response to the subprime/structured finance crisis
that hit the markets late last summer. Resulted in the meteoric rise in commodity prices with
oil playing the prima donna in the commodity inflation symphony. Interest rate cuts shock therapy
is always a gamble, with the main risk the Fed run out of ammunitions too soon. It looks like Bernanke
lost the gamble. "Silly interest rate talk":
Part of "open mouth operations". Typical Fed announcement that they will raise interest rates
while in reality they plan to do nothing. For example: "It
looks like we're in for months and months of "silly interest rate talk", a phrase that, if memory
serves, Chuck Butler at Everbank coined a few years back."
Was not this an attempt to support one of the few not-outsourced industry? Is not service economy
the only one left in the country ?
a long forgotten feature of banks. In fact banks and whole national banking systems are insolvent
in many countries, with some banks remaining insolvent for years. To survive they need just to avoid
deposit defaults. Japanese banks were probably insolvent for many of the last 15 years, yet they
didn't default on their deposits. Right now a similar situation repeats with US banks.
Who would have guessed that when socialism comes to America, it would be wearing a business suit
and carrying a corporate logo?
the most successful attempt to strangulate the US economy with over-regulation. Unleashed the
greed of Big Five in the same way as securitization unleashed the greed of investment bankers.
The level of stupidity and detachment from reality in enforcing SOX has analogs only in Mao cultural
a stage of development of Ponzi economy when only one of the symptoms can be treated.
Standard of living:
unstable and too prone for sharp declines metric. In the USA the Fed's policy of benign neglect
towards the dollar had been stymied by oil, which is now eating deep into the country's standard
What people say they will do and what people do are not always the same. It looks like in case
of Bush 2008 stimulus package policymakers barked at the wrong tree. They should have recognized
that employment has tended to recover sluggishly in recent recessions and implemented policies that
are known to create jobs. The money should have been invested in infrastructure instead. "Who says
the American government is dysfunctional? You certainly wouldn’t believe it from witnessing the alacrity
that the US Congress moved with in order to give US$168 billion of the people’s money to the people,
otherwise known as the "stimulus package". " -- Julian Delasantellis
Like casino the stock market is a very simple business: it takes the most amount of money from the
most amount of people (aka 401K lemmings) in the least amount of time. Place your bets please.
"What’s the difference between a stockbroker and a pigeon? A pigeon can still leave a deposit on
Stocks for a long run:
A fallacy which presuppose indefinite un-abating growth of the economy. One of the most difficult
of all questions for any 401K investors is "What if what they taught you is wrong?" This is
also a question that financial advisers might be asking themselves today, eight years into a secular
bear market in stocks where "stocks for the long run" may not make a whole lot of sense for someone
whose "long run" is only 15 years or so and happened to begin around 2000. "I really wish that our
esteemed policy makers would pay attention and correct 401K plans to include more diversified set
of assets not ten variants of S&P500 with different (and higher then SPY) fees. It’s so depressing
to see people who get 10% less return then TIPS since 2000 for following this fallacy.
Washington and London politicians subservient to financial interests.
Behavior of Maestro and his Fed puppets. Can we repossess the profits he made from his book?
Survival of the unfittest:
Reverse Darwinian process used for selection of the corporate CEOs. Suitable candidate should
have a couple qualities. Politically, he should be a survivor who never made many waves. In no way
he/she ever promoted controversy. He’d never employ anyone underneath him who might be a threat.
The boards like these guys… this type of CEO.
Sword of Damocles
An ancient name for side effects of financial deregulation of investment banks: possible collapse
of systemically important player who engaged in risky or crazy behavior due to the greed and lack
of regulation. The problem is that the losses imposed on the financial system by such collapse could
be enormous. There is some justice that Alan Greenspan, the most reckless Chairman of the Federal
Reserve in history, was still alive to observe collapse of Bear Stearns. Translating the FED statement
that disclosing the contents of a $30 billion portfolio somehow constitutes a 'danger to markets'
from NEWSPEAK to ENGLISH: "the risk to the taxpayer far exceeds $30 billion and constitutes a danger
to our current jobs and to future job prospects with Goldman, Lehman, or even one with a second tier
The investments were "synthetic" but the pain may be real.
the status of US finance system after Bear Sterns debacle.
When the powers that be force prices absurdly higher in a short period of time.
The source of growth that should be realigned with the foundations of economic growth which lie in
advances in science and technology, not in speculation in real estate or financial markets. Why should
those who make their income by gambling in Wall Street’s casinos be taxed at a lower rate than those
who earn their money in other ways. Capital gains should be taxed at least at as high a rate as ordinary
income. (Such returns will, in any case, get a substantial benefit because the tax is not imposed
until the gain is realized.)
Universal remedy for economics and other ills that can cure cancer and alleviate bee-bites.
Politically correct name for lowering tax on the wealthy. Opposite act always called tax hike.
The Great Moderation
: refers to reckless policies pursued during the period after collapse of the USSR. The period when
lax monetary policy was OK as new market with 500 million people absorbed tremendous amount of
dollars. It was good when it lasted. But it led to dismantling of social insurance. The USA abolished
welfare, let unemployment insurance wither, and paid scant attention when corporations eliminated
defined-benefit pensions and cut health insurance benefits. To be more correct safety nets are being
spread for the wrong people. Well, folks, that means that the great moderation was something of a
trap, and now tens of millions of Americans are in trouble with no safety net to help them.
The fiasco of suburbia:
the shocking implications of what the rise of prices on oil and natural gas imply for the American
way of life... Both the American economy and the way of life were based on gasoline costing $3 a
gallon, now that it's $4 a gallon everything is breaking down. Gasoline in the US is still underpriced
at $4 and should be around $8-9 like in Europe ...but that would basically case mass panic.
"The system is fundamentally sound"
In Fed-speak means "The shit is about the hit the fan" -- the signal to run for cover for 401K investors.
When central banks seek to assure us that “the system is fundamentally sound” that means that the
system is most certainly not sound, and that the wheels are about to come off. Instead of Fed
it can actually be Treasury Secretary who can utter the fateful line like recently happened to Secretary
Traders's Momentum Daily:
Investor's Business Daily.
A need for a financial institution urgently raise more capital. The rule of thumb: if a financial
institution needs capital, sell it. The law for financial institutions in trouble is "Everyone
who has been in trouble stays in trouble." Bank of America (BAC) , with its ludicrous buy of Countrywide
(CFC) , that could actually sink this great bank; Wachovia (WB) ; National City (NCC) ; Washington
Mutual (WM) . They are all still in need of capital. Because if you are a regulated business, you
can't hedge this stuff properly and you need to raise capital, and no one wants these bonds -- whatever
the heck's in there -- so more money needs to be raised. At some point balance sheets magic rabbit
show will run out of tricks!
The ration of non-performing loans to tangible assets plus reserves. In case it exceed 100% the bank
is in danger of default.
synonym for Reaganomics and supply-side economics.
: basic foundation of democracy as well as any sound financial system. Unfortunately, these days
financial truth is hidden behind a constellation of asterisks and footnotes, making it nearly impossible
to distinguish fact from ...
"Used to Be Smart". When you subtract the losses in the buying power of the Swiss franc as inflation
in prices has surged around the world, and which is currently running at 2.6% in Switzerland, I derive
some Bad, Bad News (BBN) for UBS shareholders; you will almost certainly never break even in terms
of buying power by owning UBS shares. You will always get back less buying power than you invested!
Hahahaha! Suckers! (The
"Unprecedented times with respect to the financial strains"
The phase intended to mask the gravity of the situation. In "Fed speak" usually means: "Folks,
we are pretty much f@cked. Time for another major bailout -- once again dear friends." For example,
"We are in nearly unprecedented times with respect to the financial strains." Larry Summers, March
7, 2008 at Stanford.
In reality only rogue economists failed to see the problems years ago when the Ponzi scheme of mortgage
financing was being fueled by the Fed and the regulators looking the other way. Crooks were doing
what crooks do when allowed and legally protected.
Unregulated American Dream:
When investment banks seek profits by recklessly concocting hundreds of billions of mortgage-backed
securities that are anchored in shaky mortgages whose quality no one has bothered to check, sell
these dodgy derivatives to others, and even risk their own institution’s equity cushions by borrowing
billions of dollars to invest in junk securities themselves. Behavior similar to behavior of reckless
laboratory scientists who concoct toxic substances that can infect not only them, but also millions
of innocent bystanders.
The art of buying low and selling lower.
The apt definition of supply-side economics by George H.W. Bush, who in his run for 1980 elections
derided Reagan's policies as "voodoo economics". In the United States, commentators frequently
equate supply-side economics with Reaganomics. Supply-side economics is a school of macroeconomic
thought that argues that economic growth can be most effectively created using incentives for people
to produce (supply) goods and services, such as lowering income tax and capital gains tax rates.
Sometimes supply-side economics is called trickle-down economics, now a derogatory term given to
right-leaning economists' views. The typical policy recommendation of supply-side economics is the
reduction of marginal tax rates. According to proponents increased private investment generally brings
higher productivity, which increases economic growth, and lowers costs for consumers. Supported by
the powerful editorial page of the Wall Street Journal, seconded by the Washington Times,
supply-side economics became a force in public policy starting in the early 1980s.
Abandoning "upside-down" mortgage. In case house prices declined substantially, for people with
poor credit ratings and few assets, apart from their house, walking away does seem to make disturbingly
Walk Away Cry Babies:
A throng of irresponsible lenders who are demanding "responsibility" from borrowers whose calls they
would not even take a year ago. Greedy lenders, their irresponsible customers and incompetent Fed
formed an unholy alliance to perpetuate a myth: that consumers, companies and governments could keep
spending more than they earned and suffer no penalty.
the fat guy who ruins a good barbecue by taking too much. Recently with Greeenspan Fed it became
also a place were the inmates run the asylum. "A symbol for sin for every devil to rebuke. That Wall
Street is a den of thieves is a belief that serves every unsuccessful thief in place of a hope in
Heaven." The Devil's Dictionary by Ambrose Bierce
Is usually employed as an epithet by conservatives, especially banksters and one particularly corrupt
Fed official, to describe governments that use tax money to insure some basic level of education,
heath care and subsistence for all citizens of the state.
Federal Reserve honchos.
Last Wednesday's report on WTOP, the all-news radio station here in Washington, was both startling
and priceless. I'm paraphrasing the second part of this quote, but the beginning is exactly
what I heard:
"Well-fed policymakers later today will be deciding whether to increase interest rates."
It took me a minute or two to realize that the reporter was really saying:
"Well, Fed policymakers later today will be deciding whether to increase interest rates."
The more I think about it, I'm not sure what was actually being reported. After all,
lunch is almost certainly provided at these meetings
The wealth effect is all about their wealth
A time-honored response to the nation's economic turmoil.
Wolf pack :
Hat tip to Kenichi Ohmae (FT.com)
This is a syndrome known as “wolf pack” in a group theory. While the wolves are good at attacking
the victim as a team, they have a tendency to attack the weakest of the cohort should extreme hunger
prevail. The banking crisis is like this metaphor. If
goes, people look at the “next” and all of a sudden, the victim is the weakest of the bunch. When
Lehman goes, it is
and the next is
When Wachovia merges with Citicorp, then people look for another victim, and could point to
This is an endless process and continues until the last wolf no longer finds anybody to point its
finger. In Japan, we have now only three money center banks, down from over a dozen in the 80’s.
The remaining banks are all mega-banks, and according to the Japanese Financial Services Agency,
they are too big to fail.
Allusion to the role of Reagan in institutionalization of this absurd cult called "supply
side economics" and deregulation (Easy Al was a Reagan appointee). See also voodoo economics. Since
Reagan's first election, government economic policies have brought us an unbroken string of terrible
economic events. Is it possible that they have not been trying to save us, but are intentionally
liquidating the country? If so, this is not failure, but an unparalleled success.
banks which pretend that they are solvent. As Keynes pointed out, 'The markets can remain irrational
longer than you can remain liquid'. Substitute "you" with "banks". Other variant used is "Zombification
Understanding investing terminology
Over the past few months, I have been spending part of my free time listening to podcasts on investing.
The vocabulary used on wall street is super interesting (I am a finance major, so I love this stuff),
and includes fun words like LEAPS, DRIPs, oscillators, breakouts, resistance, support lines, asset
classes, and a whole slew of other interesting terminology. To make sense of all this market speak,
I have been referring to the
Trader’s Glossary A-Z. If you need to figure out wall street terminology, this is a great place
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