The news continues to horrify me and fascinate me in the same time, in a “Oh my God, that schoolbus just got hit by a train,” sort of way.
Some good reading for today …
Now that the catastrophe is here, Taleb’s anger at the economic establishment that drove us over this cliff—and populates the Journal’s conference—makes him a representative figure of ordinary people. Like most Americans, Taleb is seething with rage about the financial establishment’s role in bringing the about credit crash. “Nobody saw the crisis coming,” he says. “Bernanke, all these guys, I want them out. They proved incompetent, they crashed the plane.”
First, he says, we have to unmask the charlatans of risk like Myron Scholes. To Taleb, Scholes is the Great Oz in this Emerald City because his work on options and derivatives allowed the whole of the financial system to adopt poorly understood products-like the ones that brought AIG down-that hide risk. To Taleb, Scholes’ academic work, which enabled the widespread use of complex derivatives, was like “giving children dynamite.”
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
Trade is Falling Faster in 2009 Than in 1930 By way of alarming comparison, this six-month drop is a bit faster than the six-month fall at the beginning of the Depression, when trade fell from $920 million in October ‘29 to $640 million by April of 1930: i.e., 30.4 percent. In May, the Congress added the Smoot-Hawley Act and foreign tariff retaliation to the effects of deflation and falling demand. Trade totals then fell by another 72 percent over the next three years, bottoming out at $184 million in February 1933.
Obama Backs Banks, Seeks to Block Fair Lending Probe
The administration late yesterday urged the U.S. Supreme Court to bar New York and other states from enforcing their fair-lending and other consumer-protection laws against federally chartered banks including JPMorgan Chase & Co. and Wells Fargo & Co.
The legal brief, which adopts the Bush administration’s position, is a setback for consumer and civil-rights groups that had urged President Barack Obama’s team to switch positions. The filing puts the administration at odds with New York Attorney General Andrew Cuomo over the respective roles of state and federal regulators.
Brazil considering OPEC’s renewed invitation Brazil’s President Luiz Lula da Silva, apparently reversing earlier decisions, said his government is again considering an invitation to join the Organization of Petroleum Exporting Countries. “Very, very soon Brazil is going to participate in OPEC,” said the Brazilian president, according to Argentina’s Empresas News. If correct, the statement would reverse earlier remarks by Lula, who last year said he preferred Brazil to export refined products, not crude. The Brazilian president’s remarks follow a Mar. 23 statement by Mines and Energy Minister Edison Lobao, who said the country was officially invited to join OPEC last week, but that it should enter the organization only when it effectively becomes an oil exporter.
Oil Production Cutbacks Threaten Major Price Spike, Study Says The slowdown in investment in oil and gas production could lop off nearly 8 million barrels a day of future oil supply growth, setting the stage for another big crude price spike in the years to come, according to a new study. The global credit crisis and falling oil prices have squeezed oil companies’ finances and forced many of them to cut capital spending and postpone projects. That could have big implications for supply when the global recession ends and demand for energy recovers, the report by Cambridge Energy Research Associates says.
The mother of all diamonds — 10 billion trillion trillion carats.
Have a good and safe weekend
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