Juggling Dynamite

Bill Moyer’s Journal had a disturbing discussion this week with former International Monetary Fund chief economist Simon Johnson and US Rep. Marcy Kaptur (D-OH) on the blatant nepotism of Wall Street and Washington. It is a nauseating review of how the ideals of democracy has been hijacked and degraded in a flagrant display with little civil outcry to date. This should make people mad as hell if they are paying attention.
Obama did inherit a flawed structure, but the financial crisis gave him a rare opportunity at the outset of his term to clean house and start fresh. Instead he appointed the usual suspects to his inner circle, promoting and rewarding those who created and profited most from the disaster. So far Obama has failed completely to deliver the meaningful change he has promised in this critical area. He cannot plead ignorance and innocence on this any longer. The longer he misses his opportunity here, the more the monkey of blame will climb on to his back. The Nobel Peace Prize beckons him to seize his opportunity or be judged accordingly.
Watch the 30-minute interview here:

1. What's happening in California (the world's eighth largest economy) is incredible. Really, these are not 'ordinary' times. Maybe its time to reread The Grapes of Wrath:
See the UK Observer's story: Will California become America's first failed state?
2. Quick builds on cheap imports during the housing bubble are the plague that keeps on giving: see Thousands of US homeowners site drywall for ills
3. It's hard to find anyone optimistic on the US dollar these days, which should be a red flag in itself. ” Talk of the perils of dollar weakness has been exaggerated for three decades-and in that way is somewhat comical–while predictions of its demise as the reserve currency are premature. The dollar saga is also the stuff of a short memory.”
See a contrarian argument: Dollar's Demise-Bah Humbug
4. Following up on Meredith Whitney’s observations about contracting credit for small business loans, maybe its not so much banks not wanting to lend, but people unwilling to borrow that is reducing the total credit outstanding. Again, short term this reduces leverage and growth expansion, but longer-term it’s main street taking back its power from the loan sharks. See: You can’t see Main Street from Wall Street.

Lately markets have seemed manically euphoric. For those of us taking sober measurements prices seem pretty crazy here. Most of the independent veterans who are risk managers rather than traders are voicing scepticism and concern about a gapping disconnect between economic reality and soaring prices over the past few months. But so far the falling US dollar is continuing to incite a panic-like speculation in most other assets, pretty much across the board. Where and when this wild ride end will end is everyone's guess at the moment.
A couple of weeks ago Pimco manager, Mohamed El-Eran caught media attention with his assessment that world markets were now trading on a liquidity injected sugar high that would eventually fall hard.
In a similar theme, we read with some amazement this morning a Bloomberg story on rampant cocaine abuse in London's financial district.
“…medical experts say [it] is rampant in the City, London’s financial district. It’s a habit that often goes hand in hand with heavy drinking. Junor says he and his mates wanted to maintain the thrill they felt at work as they poured into the Square Mile’s pubs and clubs after a day of getting high on finance.
“It’s the same rush from doing a deal and doing cocaine,” Junor, 45, says. “The adulation from doing a deal spills into going for a beer and then a party — it’s an amorphous blob of energy.” Everyone knows about the City’s drug problem, recovering addicts say. Bosses turn a blind eye to drugs, as long as you’re making money for your firm — and until recently, making big money was easy to do.”
See Cocaine Survivors Losing London Bonus See End to Bubble’s Binge: for a lengthy account of the problems.
Gee I wonder if London is an anomaly in this abuse, surely drug use is not rampant among traders and finance types in other major cities in the world? So much for omnipotent markets setting rational prices… No wonder some of us are not seeing the math here, we've been trying to make these assessments straight…