Official News Of the Day Thread -African National Congress

A suggestion of a topic in here... the hostages taken by the Taliban in Afghanistan that have been getting executed?
http://news.yahoo.com/s/ap/20070730/ap_on_re_as/afghanistan

 

What?

Sinre do you live in a different reality to us? First "we could manage without MidEast oil; it would be briefly uncomfortable but I'm confident we'd be fine otherwise", now this.

Litvinenko was an outspoken critic of the Kremlin and President Putin in particular.

The Kremlin has a paranoid and uniquely Russian world view.

Britain expelled the British diplomats in protest of Russia "not taking it's international obligations seriously" after the Kremlin refused to extradite Andrei Lugovoy.

Russia responded by expelling British diplomats.

It's literally that simple.

E_S

 

US Sub-prime mortgages threaten global economy

Previously people thought that if the subprime problem was contained ot the US housing sector, it'd be contained and thus, relatively low-key.

But with another hedge fund sinking it's now become everyone's problem.

How on earth could a system as fundamentally stupid, untenable, and ill-conceived as sub-prime mortgages take off?

It boggles the mind, though I know the answer.

If it's hitting the Nikkei and Hang Seng, though, that's not a good thing. Thoughts?

E_S

 

Subprime Superpower
By Patrick J. Buchanan
Tuesday, August 7, 2007

There was a time when events like the collapse of that bridge over the Mississippi would have been taken in stride.

Yes, it was a tragedy, a mature nation would have said, but like earthquakes, hurricanes, tornadoes and bolts of lighting hitting folks on picnic grounds, these are "acts of God." Even in a good life and a great country, bad things happen.

But today, there has be someone to blame, someone to be held accountable, someone who could have prevented it, someone whose head must go on a pike. And it is the job of the journalist to give us the guilty. And the modern journalist relishes nothing more than standing before a TV camera passing moral judgment on failed mortals.

After Katrina, it was President Bush, who neglected to send in the 82nd Airborne at once, and "Brownie," the FEMA chief. Yet, all concede Brownie had done "a heckuva job" in the Florida hurricane.

We are now told there are 70,000 bridges in this country that are "structurally deficient," whatever that means, since collapsing bridges are a rarity. One recalls the crumpling of a slab of the Bay Bridge in San Francisco a few years back, but few others. Yet, a clamor has arisen for hundreds of billions of tax dollars to repair our crumbling infrastructure of roads, sewers, bridges and electrical grids.

Fine, but where are we going to get the money?

We are bust. We consume all we earn. We save nothing. We borrow $2 billion a day to finance our trade deficit and buy all those goods and gadgets at the mall. The Chinese save between 35 percent and 50 percent of all they earn.

Though dependent on OPEC for 60 percent of our oil, we haven't built a refinery or a nuclear power plant in more than 25 years, and we are not permitted to drill in much of Alaska or off California or Florida. We don't build dams anymore, like Hoover and Grand Coulee, we tear them down. We were once the greatest road-builders since Rome, as Ike's Interstate Highway System was built in two decades, not two centuries.

Barack Obama wins standing ovations from liberal Democrats by pledging to double foreign aid. Thus, under President Obama, the U.S. government will borrow from China and Japan $50 billion each year to subsidize regimes in Africa, putting our kids in hock forever, so we can feel good about ourselves.

Wake-up call: This is not the 1950s. We are not the world's greatest creditor nation anymore, but the world's greatest debtor.

Credit card debt, mortgage debt and corporate debt have never been higher. The fall of 800 points in the Dow the last two weeks resulted from defaults on home mortgages, bundled up and traded like stocks in the Grand Casino of Wall Street by the boys at Bear Stearns.

Abroad, the United States fights two guerrilla wars that have not yet taken the lives of as many soldiers as we lost putting down a Philippine insurrection a century ago. Yet, an ex-chief of staff says the U.S. Army is "breaking."

Query: If those "savage wars of peace," in Kipling's phrase, can break our army of 500,000, how in heaven's name can this little army fulfill war guarantees and treaty commitments to fight for 25 NATO nations, Israel, the Arab Gulf, Taiwan, South Korea and Japan?

We are committed to police the world. Yet, we have an Army that is "breaking," as presidential candidates bray about attacking Iran, a nation three times as large and populous as Iraq, and invading Pakistan, a Muslim nation of 170 million with atom bombs.

Whom are we kidding?

U.S. foreign policy is bankrupt. We can't cover our commitments with the ground forces we have. And a world watching America thrash about in Mesopotamia is beginning to recognize it and act upon it.

While the federal deficit is only 2 percent of GDP, the surpluses of the 1990s are history, and we are steering toward an entitlement iceberg.

"Social Security, Medicare and Medicaid ... already exceed 40 percent of the $2.7 trillion federal budget. By 2030, their share could hit

 

....a culture 'American values' means what church someone goes to, whether or not they believe in a god or the sanctity of marital union, or what they do in the privacy of their own bed rather than things like fiscal responsibility...

I'm just sayin'. Fiscal conservatives would make a lot more headway if they could distance themselves from social and religious conservatives.

 

It's probably worth noting, and not that I'd ever accuse Pat Robertson of being informed (perish the thought), that saving 35-50% of what you earn isn't economically a good thing.

Of course, being a reactionary, "zomg!" type knee jerker he's not really expected to deliver less than ill informed fear mongering so why am I surprised?

E_S

 

What many people don't recognize is that while saving some of your income is a good idea (I try to keep a 3 month reserve in my accounts), deficit spending is not necessarily a bad thing.

Consider buying a house. In order to do that, unless I am willing to save for decades (during which time I would still need to pay for a place to live), I need to borrow more money than I have, creating a deficit in my budget. Similarly, many people take out loans to buy a car rather than deal with a several thousand dollar expense all at one time. Again, many people take out loans in order to finance starting or expanding a business. None of those are necessarily unhealthy for either personal finances or for the economy as a whole. In fact, often they are all quite healthy.

The problem comes in when you are unable to pay off your loans as planned within your normal income. When you get a mortgage bigger than you can afford to pay, that leaves you with the options of either defaulting or taking out a loan to pay off another loan.

A deficit is not a bad thing as long as you can afford to keep making your loan payments.

Kimball Kinnison

 

Exactly.

We're spending more than we can sustain in the long run.

 

Yes Kimball but I'd have thought my antipathy towards subprime mortages was clear from the post I made addressing the point earlier. It was a gimmie scheme to entice people with almost no equity into borrowing more than they can hope to repay (as I understand the interest on it anyway) to the lenders credit.

I'm sorry but whilst that's wrong, lauding Chinese savings is equally wrong. That and protectionism caused the recession of 1929 to end up as a depression...

(...and Robertson supports both protectionism and the slowing down of the flow of capital. Yep, a man to trust)

As private equity firms have shown, "debt as an asset" is possible provided you have the capacity to manage the debt. They know what they're doing. Clearly sub prime lendees don't. And Robertson is therefore just as bad for lauding a stupid alternative.

I don't think he's ever said anything I thought was intelligent...

E_S

 

At least address the man by name if you're referring to Buchanan, E_S. It seems a bit petty to change his name because you don't agree with his formulations. It's the same with the individuals that change Obama's name to Osama.

The key is what you said here:

The problem with that is that in the not-too-distant future, we will be completely unable to manage our debts (entitlements). Our capacity to generate revenue to sustain such commitments will not remain possible when my generation reaches retirement age. Social security, Medicare, etc....

 

DM.

It's called a mistake.

They're made by people.

It wasn't an intentional slight against the intellectual black hole you still seem to cling to despite me showing his arguments to be ill informed time and time again.

I meant Buchanan I just mistakenly called him Robertson.

At the end of the day, he's really just blowhard who doesn't know a damn thing but won't shut up.

Why you insist on subscribing to his ravings is beyond me.

E_S

 

My apologies, E_S. I thought you were being snippy with it.

I know you don't like his opinions, mostly.

However, our fiscal situation here in the US is a mess.... We're promising more money to entitlements and other such commitments than we can't afford to sustain in the long run. It's going to come back on my generation when we hit retirement, or on our generation's children.

I'm no economist, but it seems basically straightforward that people and businesses go bankrupt when their expenditures and costs outpace their ability to pay for them. Deficit spending hasn't hurt the US so much in the recent past, but we'll be in deep **** if we can't manage to sustain payments for the rising costs....

 

It doesn't change the fact he's an idiot, DM.

E_S

 

Opinions are not to be confused with facts, E_S.

 

Well given he doesn't infuse his opinion in facts, DM, that's lucky for him.

In any event, the man flails about ineffectually trying to adapt the world around him to him, rather than adapting to the world. What would you say about such a cretinous oaf?

E_S

 

Isn't that what ideologues on various sides generally inherently do, E_S?

You guys are simply on different ideological sides of the isle. I don't expect you to agree with the man, but I think he raises good points, as you often do as well. I don't disagree with him to an extent on the idea that we should basically return to hesitancy to intervene in foreign entanglements (which was my position generally before 9/11, for which I have returned). I don't disagree that we're in financial trouble as a nation.

I don't disagree with you generally that globalization is a good thing, but I don't think it's necessarily the be-all-end-all positive economic juggernaut. I find a certain measure of protectionism inherently necessary for national sovereignty (as most countries on the planet... including China... already practice).... I don't want large portions of our debt financed by other nations, rendering us at their whims. I don't like that we're dependent on OPEC and other such nations for our energy demands.

But, I like quality, which is why I buy foreign vehicles. I like imports, whether it's exotic foodsuffs, wines, etc.

I'm basically an avocate of a balance that gives my nation - selfishly, admittedly - the most bang for the buck.

 

No, DM, we're not on different sides of the aisle, unless you're talking the informed vs uninformed aisle.

The man is an op-ed blowhard who does scant research and is often unpurturbed by fact.

You like him because his paleoconservative suspicion of the world fits yours, yet if you did any independent research you'd realise that someone like him is a reactionary with no frame of reference.

He's also, frankly, stupid.

So I tell you what, he's on the other side of my aisle if you and Osma are on different sides of the aisle?

E_S

 

That's hardly a fair assertion.

You often quote only one periodical for your researched op-eds, the Economist, which has become somewhat of a trademark of yours. We don't really know who's writing the articles, but I wouldn't generally comment on the intelligence of the author but on the content of the piece.

Not everyone that disagrees with you or your point of view is a stupid uneducated and uncivilized neanderthal.

 

I never claimed they were.

But substance, that's a worthy addition to any debate.

I routinely read a variety of subscription only or academic journals which do present strongly, say, collectivist or soft-left views, but they do it in the less snarled way possible.

I am willing to bet I could find someone make a similar argument in spirit to Buchanan without the gross inaccuracies, the LCD panderings, and the hostile anti-intellectualism that he holds so dear.

So you think it's a style thing, and you're wrong. It's a substance issue, or Buch's lack thereof.

E_S

 

This is the kind of thing that is worrisome, E_S.

 

No.

It's only worrisome if you take common sense out of your life and find tabloids to be a source of news.

The US is China's largest export market. Assume for a second you can distance yourself from your inherent fear of China DM that the ignorant and greedy media fuels - China is far from wealthy enough to be indepedent, right? So why would China try to tank their lion's share business partner?

That's right, they wouldn't. It makes no sense. Factor in that in China, lending to someone so they can buy from you is common enough to be considered nothing special and you have your answer.

So unless you were saying it was worrisome that you read tabloid journalism and confuse it with broadsheets, or that the Telegraph could make outlandishly stupid editorials a feature, then I'm afraid you've nothing to worry about.

E_S

 

I don't think it has anything to do with being 'coddled' to have concern that another nation owns a significant portion of our debt, E_S....

That alliances don't always stand the eternal test of time...

 

DM how much of the world's debt does America own?

OMG AMERIKA IS LIEK GOING TO KILL JAPAN AND YOUROPE, LOLOLOLOL!

Seriously, don't you get tired of being the fearful conservative from time to time?

CHina's not the new Soviet Union, and I don't care how gripping The Bear and the Dragon was, I really don't. You just have to stop being afraid and remove your blinkers and have the courage to take issues without bias, fear or prejudice and assess them objectively.

It's called "being moderate".

Part of it knowing how intertwined the global economy is, and again, part is common sense.

China's GDP has been growing at ~10%, and yet it remains the 2nd richest (on PPP) and one of the poorer countries on earth. Tanking the US economy isn't an isolated incident, it has a ripple effect which means that markets which depend on trade or investment from the US get affected by a US downturn. That's an awful lot of countries facing a dire economic outlook. As a natural result FDI into China will simply dry up as befits a global economic slowdown which means not only does China lose it's primary export market, it loses it's secondary markets and primary investment sources. So, in short, China loses too.

It's just that this is one instance where the fearmongering towards China which has an audience with some groups in America isn't let down by a lack of cultural insight; it's let down by a lack of common sense.

E_S

 

Banks in trouble | The game is up

The game is up
Aug 16th 2007
From The Economist print edition

Credit markets and the crisis of confidence in global finance

THE old-fashioned financial system was like Old Maid, a parlour game once beloved of small children. The banks were like players, dealt hands from a pack of cards, which they swapped among each other. At the end, one player was left holding a lonely queen?a bad debt, if you will?and lost. Over the past few decades the game has changed. Securitisation has snipped the old maid into pieces; new faces, such as hedge funds, have joined the party, enabling the banks to distribute those pieces among a larger number of players. When the game is over, lots of players are left holding small losses instead of one player holding a big one.

During two exceedingly prosperous decades, that theory seemed to work just fine. But the swings in almost all financial markets this month have made dispersed risk suddenly morph into dispersed mistrust. The uncertainty has been magnified by the way that bad risks have become so hard to value. Investors have bought asset-backed securities that use shaky subprime mortgages in America as collateral, but as defaults have risen, the value of that collateral has tumbled.

Meanwhile, collateralised-debt obligations (CDOs), made up of clumps of those securities and laced with leverage, have become almost impossible to trade. So none of the players really knows how much he has lost. While this uncertainty lasts, investors are taking it out on the banks that peddled the securities by dumping their shares; and the banks are taking it out on those they sold them to by demanding more collateral on their loans. The banks have even grown cagey about lending to each other.

The doubts burst into the open on August 9th when central banks were forced to inject liquidity into the overnight money markets because banks were charging punitive rates to lend to each other. At first, the problems appeared more serious among European banks. The pain in America was concentrated in the largest hedge funds, including those run by Wall Street?s biggest name, Goldman Sachs. Increasingly, however, analysts worry about the exposure of American, Canadian and Asian banks.

On Wednesday August 15th shares in Countrywide Financial, a large American mortgage lender, fell 13% after an analyst gave warning of possible funding difficulties. Despite liquidity injections by the Federal Reserve on August 15th, the S&P 500 index fell 1.4%. The heavy selling spread to Asian and European stocks on August 16th.

Every crisis begets finger-pointing, and the blame now is falling on the rating agencies that helped structure these exotic instruments. Currently, they are guided by a voluntary code that aims to tackle potential conflicts of interest. The biggest is that the agencies are paid by the firms they rate. Rating CDOs was a profitable business.

If these securities are now downgraded, banks could be forced to offload lots of illiquid instruments into a falling market?one of the fastest ways to lose money yet devised. But if there are no buyers, banks may have to sell something else to shore up their balance sheets.

Something like this indiscriminate selling has been affecting hedge funds over the past couple of weeks. Faced with more demanding standards from their banks and investors, some have been forced to unwind positions in order to realise cash. That has led to unusual movements in debt and equity markets, which have only got some funds deeper into trouble. Quantitative funds have been hardest hit, as investment models that had made money for ages briefly proved worse than useless.

Since banks lend to hedge funds, any problems there quickly become their concern. On top of this, both Bear Stearns and Goldman Sachs have found that when funds bearing their name get into trouble the desire to preserve their reputations soon leads to a rescu

 

Good background on the above

E_S