Bookie-Client Confidentiality

I have a fever, and the only prescription is more cowbell:

Data reported in the news media and other sources show that the prices, or spreads, on California CDS wrongly brand our bonds as a greater risk than those issued by such nations as Kazakhstan, Croatia, Bulgaria and Thailand. The perception ofrisk could adversely affect the price of our bonds when we go to market. That makes the CDS market important to our taxpayers. That is why I want to fully understand the municipal CDS market in general, the market for California CDS, and [Goldman-Sachs'] role in these markets.

Lockyer is feeling the heat, but then again, anyone stupid enough to take the job of California State Treasurer deserves to roast in his own juices. California doesn't need Goldman-Sachs to ruin its prospects for funding and recovery; the majority of Californians have already mastered the art of economic destruction, and had been hard at work long before this Depression began to manifest.

The ship's going down, and they're arguing about the position of the deck chairs.

The Fed: An Interpretive Dance

Meet the new year, same as the old year

What do reporter David Reilly and the Great White Shark have in common? The ability to devour and digest insane amounts of garbage without ill effect, of course:

Hunkering down by the fire, I snuggled up with H.R. 4173, the financial-reform legislation passed earlier this month by the House of Representatives. The Senate has yet to pass its own reform plan. The baby of Financial Services Committee Chairman Barney Frank, the House bill is meant to address everything from too-big-to-fail banks to asleep-at-the-switch credit-ratings companies to the protection of consumers from greedy lenders.

I quickly discovered why members of Congress rarely read legislation like this. At 1,279 pages, the “Wall Street Reform and Consumer Protection Act” is a real slog. And yes, I plowed through all those pages. (Memo to Chairman Frank: “ystem” at line 14, page 258 is missing the first “s”.)

The reading was especially painful since this reform sausage is stuffed with more gristle than meat. At least, that is, if you are a taxpayer hoping the bailout train is coming to a halt.

If you’re a banker, the bill is tastier. While banks opposed the legislation, they should cheer for its passage by the full Congress in the New Year: There are huge giveaways insuring the government will again rescue banks and Wall Street if the need arises.

The chief outrage is addressed in the title of the piece: "Bankers Get $4 Trillion Gift From Barney Frank". Yep, with a 'T'. Reilly goes on to point out that while the funds are not automatically dispensed, the caveats and restrictions are so (purposely) vague that the whole of it amounts to merely haggling over the price, as the old joke goes.

Working under the assumption that compounding the errors that caused the last crash does not actually provide a viable solution, and that said solution is not the forestallment of a necessary correction, and that HR 4173 receives corresponding support in the Senate (support from the White House is given, at this point), when will the next tsunami of corrections hit?

Is this all as predictable as it seems to be?

Rendering unto Caesar

He that has the gold (and maintains a lock on it through issuance of notes), makes the rules for those that use those notes:

There were reports of public outrage and confusion after the announcement of the measure, which requires North Koreans to swap existing won notes for new ones at an exchange rate of one to 100 — effectively knocking two zeroes off their value. Because of a cap of 100,000 won per family (£475 at the official exchange rate), anyone with significant holdings of cash will have their savings wiped out.

“Loud sounds of weeping in every house have not ceased since the news was released,” a South Korean website quoted an inhabitant of Sinuiju, a city on the border with China, as saying. “Weeping and fighting between couples has not stopped anywhere. The atmosphere of the city is terrible now.”

Promissory notes are just that: promises. When the distributor is a known liar, is it wise to put any faith whatsoever in the endless promises of stability and solvency?

I'm looking at you, Bernanke... You and all of your cohorts, elected or not.

Withholding the truth

Walks like a duck, quacks like a duck, and we're stuck holding the bill:

Effective Sunday, expect less of a paycheck.

The amount of income tax withheld from your check is going to climb by 10 percent.

In the scheme of things, it's not a big hit, state officials and accountants said. But don't tell that to people who feel it's just another form of taxation to make up for an inept state Legislature.

No amount of taxation could make up for the spendthrift habits of our legislature. Also, it's not "making up" for squat: taxation is not the balancing force to a group of parasitic layabouts, it's symptomatic of their presence. There is no way to gently coerce someone out of their wealth.

"There's some perception that I've heard that this is a 10 percent tax increase ... that's absoslutely not the case," Palmer said. "This will, in no way shape or form, change anybody's tax liability. You owe what you owe."

And employees can always go to their payroll department and ask to withold less, officials said.

Whether it is essentially a tax or not was perhaps not even the greatest concern, the accountant Theisen and others said.

It's a concern about the potential for the state to again face the same woes it endured this year as it teetered on fiscal collapse.

"It's a fix to a problem that's not going to be fixed," Theisen said.

Taxpayers will get their refunds, but they might get IOUs before that, he said.

So, borrowing without permission, with no intention of repayment. Furthermore, what's to prevent the legislature from appropriating one's paycheck two years in advance? Three? Ten? And to what percentage? What are the absolute limits of the appetite of the State? Does anyone really expect them to make good on the IOU scheme?

If anyone required confirmation that one's paycheck is merely what the State allows one to keep after "wetting its beak", this is it.

When in doubt, empty the clip

- Somewhat aged, but as the target flotsam study floats around the confines of the Internet, this should serve to shut down mindless yapping to its affirmative: Eugene Volokh tears into the University of Pennsylvania study claiming that carrying a firearm increases the chances of being shot by 450%.

- Color me unsurprised: the proletariat in the PRK is unhappy with the situation in Sacramento, but is unwilling to remove the persistent source of the problems that plague the state.

- Unpossible; guns are illegal in Chicago! Perhaps if they made them double-plus-ungood-illegal, that would convince those that already disregard the laws to stop disregarding the law.

- Speaking of, guess what has reached a new low?

- It's popular for a reason.

- Wynn is full of win.

- If "recovery" is a new euphemism for "muddled financial cluster-screw", then this does indeed deserve the moniker "Recovery Act".

Liquidity management yields solid waste with hot gaseous byproduct

A billion here, a billion there... As Everett Dirksen observed, it does add up:

Oct. 17 (Bloomberg) -- Harvard University’s failed bet that interest rates would rise cost the world’s richest school at least $500 million in payments to escape derivatives that backfired.

Harvard paid $497.6 million to investment banks during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the school’s annual report said. The university in Cambridge, Massachusetts, said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps...

“Substantial losses” in Harvard’s General Operating Account, a pool of cash from which bills are paid, further put pressure on the school, the report said. The net asset value of the account fell to $3.7 billion from $6.6 billion during the fiscal year, according to the report.

With the frequency that the phrase "the best and the brightest" is thrown around, to watch the institutions that advocate and enable these financial schemata to manifest in "a free market" get burned in a pyre of their own making is delicious beyond measure, and sweet beyond belief.

The article also offers up this tasty tidbit:

The annual report provides new details on Harvard’s derivative-related losses. Many were entered into in 2004, said Harvard spokeswoman Christine Heenan. Lawrence Summers, director of President Barack Obama’s National Economic Council, was the university’s president at the time. White House spokesman Matthew Vogel declined to comment.

No comment is necessary, Mr. Vogel.

Jim Rickards on the US Dollar Three-Card Monty

Jim Rickards spells it out:

"If you go through all the contingent liabilities, the total comes to about sixty-trillion dollars... There is no combination of growth, no feasible combination of growth, and taxes, that can fund [those] liabilities."

Although I think that the total liability is quite a bit higher, nearer to something of Richard Fisher's estimates of $99.2 trillion, they ultimately reach the same conclusion regarding the untenable debt accumulated by our government: currency implosion.

Plan (and invest) accordingly, folks.

Another day in the PRK