My take-way from all the tarp 2 rollout? ... Starting with the sell - This is where hype is not your friend.
Moving on to the most important thing I felt I heard Secretary Geithner say (some version of):
The system is working against itself.
That's incredibly important for people to know for the sake of transparency. I am very glad Secretary Geithner mentioned this key bit of insight to understanding the larger context of the problem. For those who know it, it's obvious. But to those who don't know it, it's completely invisible. I can confirm from my own experience that this is true in more ways than the obvious ones.
He didn't say which ways the system is working against itself, but I mention two that I can think of below the fold. Maybe others know of ways in which the system is working against itself and want to share as well.
[Arrgh! Sorry: poor transition: Twice now the information that I have written in this diary has disappeared. [Very likely] it's my own fault, but it still hackles me a little bit; on top of the fact that it was so perfect last time. ;0) So I'll get right to the point and get on with it. Please forgive me if this is not well organized, or too cryptic. If anyone cares, I'll elaborate if asked. See Bonus foozle (fuzzy-woozle) question and pix at end.]
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Here is the most helpful interview of Geithner I saw on 'roll out' day (Tuesday Feb.10, 09). One thing I really want to be sure that people who don't understand the economy [no judgement, who would if they didn't have to?] get from it is this:
Aspects of the financial system are working against itself (against it's own success).
Many of us are aware of short-selling and hedges by now. That is one significant way the financial system is working against itself. [It's an 800 pound gorilla.] These investment tools may have brought stability to commodities markets (or other markets) in the past. But since the Enron Law allowed unengaged investors to hedge the financial success of others, it effectively pits one person's success against another's. Most people who invested in hedges did not know the effect of their actions. In fact the majority were large, passive, pension fund investors. This had a macro-effect which encouraged failure of certain companies, certain industries, certain sectors, certain currencies, even the dollar itself.
The intentions may not have been malicious, but the effects were. Even if they wanted to have a positive effect, they can't easily extricate them selves from these bets either, because they probably do believe that that the hedge in question does represent a future failure of some kind. The boards would have to vote against what they think is in the best interest of the investors. That's not gonna happen. Why at this late date would they suddenly believe the system will turn around and get rosy? They wouldn't so they don't. So their success remains tied to the failures of others.
When you hear people talk about the direction of the economy depending on 'contingencies', this is most likely what they are referring to... If 'this', then 'that'. Until the 'this' is clear - the 'that' remains up in the air. The TBTF's thought that they would be able to hold off the 'this' forever, and thereby avoid the 'that'. But time is up.
It's important to remember about these failing businesses and the bets against them : they can't all make it. Some will have to go down, and Geithner has to decide the criteria to decide which go down. By nature of the beast, that is going to upset and anger a large set of the economy. Think of it, if too big to fail is also too big to succeed, and no mistake no matter how grave, causes an ejection from the game - what you have is a game that only the big-insiders will win. Who would join once they know what's actually going on? As if anyone would want what Bernie Madoff's got any more, once we all know he's got nothing. Likewise, until the Bernie bankers are unwound, no one will trust the banks either.
Think about it... If no one ever loses, then the whole business model is a sham. Just set up shop, and rip 'em off, and let Uncle Sam foot the bill. That is a faulty financial structure and the world refuses to use it any more. Some of the behemoths must fail - because in truth the markets believe they already have.
So that's one part of it. Another part is the people burrowed in who are actively interfering with Geithner's and Obama's success, aka America's success. It's not just in the market, it's also in the intel regarding the financial info and who is who. It seems as if they are not getting the whole entire story - still/yet. [At least in the opinion and estimation of those I trust on this.]
So that's just two ways that the system is fighting itself. Any body know any more?
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Updated: to add fresh info on the fact that the world economic condition is now the top US security threat.
"Instability can loosen the fragile hold that many developing countries have on law and order, which can spill out in dangerous ways to the international community," [Adm. Dennis] Blair told the Senate Intelligence Committee.
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Bonus Foozle Question and Pix:
Has everybody seen the sweet pictures at reuters about the CFA volunteer who rescued a Koala from a fire ravaged area? The pictures are so touching and sweet. Sad, but sweet. Be sure not to miss the picture of Koala "Bob" comforting new friend-in-need, Koala "Sam".
And speaking about Australia here is something I heard from some friends who live there: They live by a lake that is the water source for many people and animals, crops and different things. They had to drain the lake to protect the homes. Now it's a pond - well what they said is it seems to be half-way drained. Not good for their future rationing. This adds to the drought fears in the most massive way.
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UPDATE FEB 27 '08: Wow, Speaking of the economy working against itself. Watch this. Cramer talks about how "fomenting" is illegal, but eveyone does it anyway, and how the standard modus operandi of hedge funds is to employ dishonesty. Well at least he's honest enough to admit it. And he wonders why he has a hard time getting people to take him seriously. Seriously?
hattip: KathrynW