FRANCONOMICS.COM
Friday, July 3, 2009
Friday, July 3, 2009
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WEEKLY PODCAST 1. Moral Hazard of letting Goldman pay back the 10 billion TARP money: Citi and the others will use the excuse to hike up the base pay (to go past the bonus constraints) with impunity, citing concerns that Goldman and other firms not under the scrutiny of the Compensation Czar will lure away their best and brightest (what best and brightest run a business into the ground and need almost 50 billion dollars to keep the business afloat) unless they do so! 2. Why the real unemployment is at least 15%? Because the 9.5% only includes those who are drawing unemployment, it does not include those who are past that, those who are dejected and not looking for jobs any more, those who are in jail, those who are homeless, and those who would like to work but are forced to be “home-makers.” 3. Are the BRIC (Brazil, Russia, India, China) economies really decoupled from the West? If so, how will they pull us out of the ditch we are in? Also, if they are really decoupled, why do those stock markets go down 40 to 50% when Dow goes down 40%? Is it prudent to invest in BRIC stocks? 4. Dr Bernanke’s recent thrashing at the hands of lawmakers during his Congressional testimony regarding BOA's acquisition of Merril Lynch: It feels good to know that some bankers (as in the CEO of BOA) got thrashed by the Fed, but did Dr. Bernanke and other Federal Reserve executives prop up the worse bankers (as in the employees of Merrill Lynch) in the process? We analyze all the above in enough detail to keep you entertained throughout this 20 minute long podcast. Listen / Subscribe Using: DOWNLOAD>> READ TRANSCRIPT >> Older Podcasts |
To Dr. Summers & other Friedman disciples In charge of policy: When you say you are a Friedmenite, it smells oxymoronic. Milton “Mr. Greed” Friedman believed in free markets. Then, why are you messing with the markets? If you are a true Friedmenite, stop trying to manipulate the markets – the mortgage markets by trying (and failing) to lower mortgage interest rates, the bond markets by trying (and failing) to jack up toxic bond prices through TALF and pPiP and what not, and the stock markets by claiming (falsely) that the economy is improving when unemployment is going up (now at 9.5%), foreclosures are going up (now one in 73 American homes is in foreclosure), and homelessness is going up (as per one estimate, another 1.5 million will become homeless in the next two years thanks to joblessness and foreclosures). Stop taking money from the working poor and giving it to the rich bankers in the name of stabilizing stock and home prices. Stop loading up on toxic waste from banking excesses using our money. Stop being greedy Friedmenites, power-hungry parasites, free-riding hypocrites, and toxy-morons. Current News BusinessWeek - Jobs Report: A Blow to Optimism Bloomberg.com - Auto Task Force Adviser Wilson Sees GM IPO in 2010 FT.com - Citi raises card rates on millions Bloomberg.com - China Manufacturing Expands a Fourth Month Bloomberg.com - General Motors Executives Put Wind-Down Costs at $1.25 Billion Bloomberg.com - Shiller Sees ‘Improvement’ in Rate of Home-Price Drop Times of India - A rally for the rich? Mercurynews.com - Bernard Madoff gets maximum 150 years in prison Reuters - Paulson to testify July 16 to House panel news-press.com - Be careful when buying foreclosures WSJ - Fed Documents Fuel Concerns About Expanding Central Bank's Role Bloomberg.com - Bernanke Grilling May Weaken Case for Expanded Powers Reuters - Michael Jackson leaves hefty debts, unrealized comeback LA Times - Michael Jackson dies leaving legacy of award-winning music The Washington Post - Bernanke Emerges From Hearing Bloodied But Unbroken Boston.com - Citi boosting salaries to offset lower bonuses NYT - Developing World Seen as Engine for Recovery Trouble Falling Asleep? Try these long Articles... (HEALTH CARE) The New Yorker - The Cost Conundrum by Atul Gawande (BANKING) The Atlantic - The Quiet Coup by Simon Johnson |
Value Drain™ II - The 14 Trillion Dollar Looting of America in the name of Capitalism, Meritocracy (aka Greed), and Free Markets
The Value Drain™ framework applied below is adopted from the classic Value Chain analysis for businesses. In a value chain, each segment of the chain adds some value, so that the customer enjoys a margin; i.e., Value Chain Margin = Value Delivered to Customers - Value Created by the Business. Similarly, the $8.7 trillion dollars (As of May 3rd, 2009) Value Drain™ chart below is self-explanatory:
The above $8.7 trillion dollars that the Wall Street Banks and other Financial Institutions have been able to successfully extract as of April 30, 2009 are as follows:
$8.7 trillion Value Drain = $4.8 trillion Federal Reserve Asset Buying Program + $1.9 trillion in Loans like TALF promised by the Federal Reserve + $700 billion Paulson Bailout + $300 billion (from the $787 billion Obama Stimulus) + $1 trillion estimated from Treasury's pPiP program
If you add $5 trillion from the deflated US stockmarkets (currently in disequilibrium, will reach equilibrium once the Dow Jones is up another 20% from where it stands today at the time of this writing - May 3rd, 2009), you get a grand total of $13.7 trillion value drain, equivalent to the US GDP (Gross Domestic Product) of $14 trillion!
To read the complete article, please click here...
(Note: Our weekly podcasts throw more light on the looting depicted above, so please check them out here. To listen to the first in a series of podcasts exploding this Value Drain, please click here. The day the
Paulson Bailout was announced, we had published our first in the series
of Vaue Drain™ articles, explaining the 700 billion dollar Value Drain™ (including the $85 billion committed to AIG). To read this article, please click on this link --- Value Drain™ )
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