longestpost

Good evening, and welcome, everyone coming over from bradhicks and also from Making Light; I'd been wondering what was spiking my traffic. My partner annathepiper just said, "Quickly! Be entertaining!" and I'm all "ikr!" and, well, I wouldn't go that far, but I hope you enjoy your Daily Dose of Down.

Really, these last few days have been a bit odd, or maybe it's my lack of focus. Simultaneously you have massive numbers of things going on, and nothing going on - at least, nothing seismic, if that makes any sense.

The auto bailout is much less than it seems; Mr. Bush essentially gave them enough to foist the problem off onto Mr. Obama. Mish at Global Economic Trend Analisys notes correctly that the contingencies on parts of the funding are not actual contingencies at all. The Canadian Federal government and provincial government of Ontario have chipped in another Can$4 billion - about twice as much per capita as the US pledge. That's not going to change the plans to idle plants.

What interests me more is GM's delay in the factory planned to build the engine for the Volt. I have good sources telling me that GM is betting everything left of the company on the Volt - but GM management has many different factions, and if the Volt faction is losing out, well... I don't suppose my opinion of GM management could sink any lower anyway, so it probably doesn't matter, and neither does GM.

Everyone's favourite pack of looting bastards insurance company AIG keeps showing up with massive new writeoffs, going, "oh, my! How did those get there?" Meanwhile <sings>everybody loves to be a bankerrrrrr</sings> including Discover, which is probably the most abusive of the credit-card companies (two-cycle billing is made of evil). It's all part of the scramble for tax dollars, in the form of the TARP. Hedge funds are in that game now, too, tho' they're borrowing from the TALF rather than the TARP. ToMAYto, toMAHto, sure, but as the Financial Times notes, "In effect, the Fed will now take on the role of prime broker – the lead bank that lends to a hedge fund – for specific assets." Lender of only resort, and all that.

The best part, of course, is that the ratings and purchasing decisions are being made based in no small part on ratings issued by the same clown-driven rating systems that helped get us in this mess. Mr. Mortgage has commentary on that, noting that most of the loans made over the last several years should've been given much lower ratings than actually awarded - as default rates are demonstrating.

TheStreet implies that blame for a lot of mortgage breakdown severity can be pinned to creation of the ABX index, on the basis that the ABX index gave MBS and CDO holders the first clues about how bad their holdings actually were. (Yes, this is the same ABX I've been talking about. Also, its friend the commercial-properties CMBX.) It's part of concerns about a new, similar index for so-called "prime" mortgages. I find this interpretation... annoying. I do find it amusing that even Fox News, subservient lapdogs they are, have gotten upset enough at all the opacity to sue over stonewalled FOIA requests.

I can't find the link right now, but I do want to mention that the new US interest rates will actually mean good news for a lot of people on adjustable mortgages, if and only if they aren't underwater on equity, and if they aren't in option-ARMs; this might reduce the size of that second-wave I keep pointing out in home mortgage reset graphs. I don't know what that ratio is, but I don't expect it's good. Still, at least some people will be in better positions, so that's a good effect. Also, this is a better TED spread than we've seen in some time, so that's good too.

Brad at Trader's Blog thinks the US will follow through on the implicit plans to print as much as it thinks is needed to avoid deflation. I'm reminded of the Paul Krugman paper asserting that deflation cannot be solved through printing. (Well, I suppose technically he ignores the currency-destroying cases, but one hopes that's not the plan.) The crew at Naked Capitalism have the same thoughts I have; the Fed is absolutely desperate. I'm also quite afraid of the whole treasuries-bubble blowoff possibility, because at that point, well, again, no currency. (Too many of these damn roads seem to go down the road of "oh noes, no currency anymore!" Makes me nervous.)

Home equity extraction - in the form of HELOCs and refinancing - has plunged through the floor and into negative numbers. This is unsurprising but will certainly continue to have a severe effect on consumer spending, as throughout the middle of the decade most of the gains in US consumer spending were powered by these "equity extractions."

Housing in the UK has started down the same cliff as housing in the US, with declines of 10% or so expected in 2009. Unemployment is also spiking up, with large jumps in initial claims. Ambrose Evans-Pritchard reports a bit breathlessly that Germany is "already collapsing," by which he really means is in rather sharp recession and a rather nasty confidence index, which, while bad, isn't the same thing as a collapse. Steady on, old man.

Mish Shedlock has a rather extensive rundown on the budget situation in California, along with a general economic overview for the state that I wouldn't consider at all pretty.

Japan is taking emergency action, moving their discount rate to 0.1% from an already trivial 0.3%, and has decided to resume quantitative easing practices. It didn't really work before, so they're hoping it will work this time if they do it faster. I suspect the rate action was part of their programme to intervene against their own currency. They're also acting to prop up their stock market. Mish (in the previous link) notes that the last set of currency interventions didn't get anywhere, and, in fact, there was an inverse correlation between intervention and result. That said, the JCB action was followed by a quick climb back up in the US dollar index.

Finally, don't piss off your lenders. And they're getting fairly pissy, talking about import tariffs. That's always, by which I mean almost never, a good idea. But what can the US do about it?

Eight days meme

Things making me happier today, Saturday 20 December (day 4):

1. Nostalgic snow
2. No power outage (yet)
3. Sponges shaped like kawaii piggies ^_^

(Eight days meme rules here)

hungry hungry birdies

Gee it's Cold

mostly for my own reference

( Mandolin pickup research consensus )

Hey You Guys

Hey, anybody local played or attended The Wayward Coffeehouse's open mic? I'm thinking of showing up next Sunday, weather permitting. Anybody know anything about it? If you do, pls. fill me in!

starting to get it

I am v. sleepy and kind of full of lolling, but I want to post these before I forget:

Andrew Sullivan tries to explain the necessity of impeachment, or, since that's now too late (because the Democrats took it "off the table" and held it there for so long), the criminal prosecution of Dick Cheney:

What Cheney has advanced is that the president has the right to dissolve the constitution permanently. That he has the right to commit war crimes with impunity. That there is no legal authority to which he is ever required to pay deference in a war that is his and his alone to declare and end. Now when you consider that, in Cheney's view, these war-powers are limitless, and that war is declared not by the Congress but by the president, and can be defined against a broad, amorphous enemy such as "terrorism", and never end, you begin to see what a dangerous man he is, and how much danger we have all been in since he seized control of the government seven years ago.

...the vice-president long ago became an enemy to the Constitution and to all it represents. He should have been impeached long ago; and the shamelessness of his exit makes prosecution all the more vital. If we let this would-be dictator do what he has done to the constitution and get away with it, the damage to the American idea is deep and permanent.

Courtesy cafiorello; The New York Times editorial staff finally, finally, at this late hour, admits the obvious reality: torture is, in fact, torture - though they still use weasel words regarding their legality, which is equally unambiguous, and always has been. Still, let's see if they'll call torture that in new stories and not just editorials. I have my doubts. The best thing they say, I think, is this:

A prosecutor should be appointed to consider criminal charges against top officials at the Pentagon and others involved in planning the abuse.

But there's still a politiical-class consensus that none of these war crimes and other criminal acts should be prosecuted, and that:

...what's most crucial here is ensuring that these mistakes are not repeated. In the end, that may be more important than punishing those who acted wrongly in pursuit of what they thought was right.

I like the use of the word "mistakes" to describe "torture," "murder," and "massive and blatant violation of international treaty and domestic law." Apparently that's all just "policy matters" (or that's been the line of the defenders of torture and supporters of ignoring the crimes) and shouldn't be prosecuted. Just a little tsk-tsk and "we won't do that again" and that's all just fine; limits of law and prosecution for violations of that law are for the little people, after all. Glenn Greenwald, as usual, does a nice job of disassembling the inanity of this argument, but really, it boils down to the fact that laws with no penalty are optional, and laws that are optional aren't laws. And, of course:

By telling political leaders that they will not be punished when they break the law, the exact opposite outcome is achieved: ensuring that this conduct will be repeated... All of these laws and safeguards were blithely disregarded and violated. Other than making sure that leaders know they will be punished -- like all Americans are -- when they break the law, how and why does anyone imagine that we can ensure this "never happens again," especially as we simultaneously affirm -- yet again -- that political leaders will be exempted from the rule of law if they do it? What's the answer to that?

eta: Apparently the euphemism "physical pressure" has been becoming more popular again to mask torture. The pro-torture apologists keep picking badly, because just as "enhansed interrogation" was the exact term the Nazi regime used to pretend torture wasn't torture, "physical pressure" was the preferred term of Stalin and his secret police.

eta2: The Asia Times thinks the Pentagon and Bush administration are trying to sabotage the US-Iraq Status of Forces Agreement (SOFA) and Mr. Obama's withdrawal plans through mass reclassification of combat troops as support:

The [New York] Times story also revealed that Pentagon planners were projecting that as many as 70,000 US troops would be maintained in Iraq "for a substantial time even beyond 2011", despite the agreement's explicit requirement that all US troops would have to be withdrawn by then.

So, keep an eye on that.