March 28, 2024 / by 

 

Do They Think Cheney Makes a Better Supplicant Than Bush?

So they’re shipping Dick off to Saudi Arabia to beg King Abdullah to let loose the oil so the economy doesn’t nosedive under Bush’s Cheney’s watch.

Q Will he repeat the request to the Saudis to ask OPEC to raise oil production, a request which was made by the President and turned down by our friends, the Saudis?

MS. PERINO: I’ll refer you to the Vice President’s office for exactly what he will bring up. But certainly the position of the United States and the President is that we believe that more supplies should be out there on the market. And the President does want OPEC to take into consideration that its biggest customer, the United States, that our economy is weakened, and part of the reason is because of higher oil prices; we think that more supply would help. And I don’t anticipate that the Vice President would have any other message than that one.

Q So he will, obviously, then, have that message.

MS. PERINO: I’m not — I can’t tell you exactly what the Vice President is going to say and I’m not going to — I’ll let him have his meetings and then they can read them for you while you guys are on the road.

It seems like it was just two months ago that Bush tried to beg for more oil, only to have Abdullah blow off the request.

I’m curious precisely what kind of leverage Dick Cheney might have over the Saudis that Bush doesn’t have? Does the fact that our economy has gotten worse and people are beginning to talk about a Citibank failure change things for the Saudis? Or is Dick just going to beg again because Bush suddenly realized that we’re getting close to $4/gallon gasoline? 


And So the US Economy Picks Up Where It Left Off in the 1970s

Newsweek has a couple of articles on stagflation you might want to read. From the first:

Inflation is generally on the rise throughout the world, and the rate of inflation is higher in many parts of the world than it is in the U.S. But Americans may feel they’re getting hurt more by the current outbreak of inflation than many of our trading partners. Inflation is being driven by rising energy and food prices. Commodities-wheat, gold, oil, you name it-are getting more expensive. Another way of thinking about it, however, is that the dollar is losing ground against wheat, gold, oil, and other commodities. As the U.S. has pursued fiscal and monetary policies that debase the currency, the dollar has weakened significantly against many of the world’s currencies. Consequently, when a commodity that is priced on a global basis in dollars, like oil, goes ballistic, the chumps who have all their assets in dollars will get hurt disproportionately. Americans today pay about $100 for a barrel of oil. But if you’re French, and you’re buying oil with the Euro, which has increased by about 16 percent against the dollar in the past year, the blow has been substantially cushioned. What’s more, many of the countries that have pegged their own currencies to the dollar, including China and the Persian Gulf states, either subsidize gas or use price controls. American consumers and businesses are, in some ways, uniquely exposed to the twin ravages of a weak dollar and expensive oil.

It has been clear that Bush has mismanaged the economy in fairly spectacular fashion. But it’s nice to see the press beginning to bring out the dreaded word "stagflation" so we can brand Bush and his chosen successor with the term.

But I’m more struck by this stat, from WorldChanging:

It finally happened this week. The price of oil passed the all-time inflation-adjusted peak of $103.76 that was set in April 1980—and is now three times what it was just four years ago.

What’s going on? This is a record that virtually none of the world’s oil experts predicted, particularly at a time when the world economy is slumping and the demand for gasoline is now dropping in the United States.

And it’s going to get worse from here.

Some of the blame may go to speculation and the decline of the dollar. But the roots of the problem run deeper.

World crude oil production has actually fallen from 73.8 million barrels per day in 2005 to 73.2 million barrels per day in the first ten months of 2007, according to the U.S. Energy Information Administration. This makes 2005 the peak year for world oil production so far, though it is too early to know if this will turn out to be the all-time high.

In 2007, crude oil production declined in some of the world’s largest oil-producing countries— including Indonesia, Mexico, Norway, Nigeria, the United Kingdom, Saudi Arabia, and Venezuela—due to a combination of geological and political factors.

Whether that means we’re at Peak Oil or not is unclear. But it does mean all the gimmicks the US has used since the 1970s to sustain an unsustainable economic hegemony–making the dollar the reserve currency and neo-colonizing the world through global "free" trade agreements–have done nothing more than get us back to where we were in 1980.

Though, in 1980, we were already recovering from a long, expensive, senseless war. We’re still deeply mired in one now, one that is squandering what little cash we might use to fix the fundamentals of our economy.


Meet Our New Sovereign Wealth Fund Overlord

The NYT offers us a much-needed look at our new sovereign wealth fund overlord, the Abu Dhabi Investment Authority (ADIA), the guys who just bought a big chunk of Citibank.

Abu Dhabi has about 9 percent of the world’s oil and 0.02 percent of its population. The result is a surfeit of petrodollars, much of which is funneled into a secretive, government-controlled investment fund that is helping to shift the balance of power in the financial world.

After decades in the shadows, the fund, the Abu Dhabi Investment Authority, is turning heads on Wall Street and in Washington by making high-profile investments in the United States and elsewhere.

[snip]

[ADIA’s $650 to $700 billion in] riches, coupled with the more aggressive stance being taken by ADIA and other sovereign funds, has raised concern that these investors will wield their wealth for political as well as financial reasons.

ADIA’s secrecy is also drawing scrutiny. The fund has no internal communications department, although it says it is in the process of setting one up. When sovereign fund leaders from around the world descended on Davos, Switzerland, last month for the World Economic Forum, no one from ADIA saw fit to show up.

Unfortunately, the article kind of reads like the NYT’s Vicki Iseman article on McCain–it reflects unease, but doesn’t state clearly the reason for the unease. Big money, secrecy, what’s wrong with that, if they want to bail our biggest banks out of the shitpile, right?

One place to start might be to further develop the connection between the al-Nahyan family and their past involvement in secret big money ventures, BCCI.

The fund’s chairman is Sheik Khalifa bin Zayed al-Nahyan, the president of the United Arab Emirates and the ruler of Abu Dhabi. He has a cautious and reserved disposition and does not take an active role in ADIA. When Citigroup’s chairman, Robert E. Rubin, traveled to Abu Dhabi last November, his courtesy call was made to Sheik Mohammed bin Zayed al-Nahyan, crown prince of Abu Dhabi and the point person for the United States-Abu Dhabi relationship.

[snip]

One view is that ADIA’s penchant for secrecy stems from its experience during the scandal at the Bank of Credit and Commerce International in the early 1990s, during which ADIA is said to have lost hundreds of millions of dollars. The al-Nahyan family became embroiled in regulatory investigations, although no charges were ever brought against them.

But people who worked at ADIA from its earliest days in the late 1970s and 1980s say that the fund’s reticence dates to its formation. Some see this as a reflection of Abu Dhabi’s small size, insular culture and geographical vulnerability, a sense that the less that is known about the specifics of ADIA’s hoard, the better.

Khalifa’s father, Sheikh Zayed, largely bankrolled the corrupt network of banking and money laundering known as BCCI. He also served as a front for at least one of BCCI’s successful attempts to illegally buy American banks (and bankrolled another). When BCCI started to fall apart, Zayed’s attempt to stave off financial losses and embarrassment persuaded the Bank of England to hold off on shutting it down.

Now, Zayed was not the mastermind of BCCI, and as the NYT article notes, he lost buckets of money when it collapsed. But his wealth–and a secrecy excused by comments about Abu Dhabi’s natural reticence, much like the one the NYT repeats here–made it possible. ADIA is accomplishing openly now what it accomplished through secrecy in the 1980s (admittedly, it can do so largely because of our banks’ own cupidity for more shitpile), but we still know very little about the who or why or what.

To some degree, this is no different than Japanese companies buying us up in the 1990s and then Chinese and now Middle Eastern. But given the history, it does deserve a wary approach.


Still Trying to Read Poppy Bush’s Lips

Am I the only one that finds it especially ironic that Poppy Bush endorsed McCain one day after McCain came out with a "no new taxes" pledge? If the timing was unintentional, I’d consider it a rather inauspicious coincidence if I were McCain.


Time to Throw the Payday Moneylenders out of the Christian Conservative Temples

con_paydaylendermaps_google.jpg

I can’t vouch for their underlying research, but two professors just completed a study showing a strong correlation between the number of payday lenders in localities in the US and the prominence of Christian Conservatives (h/t The Consumerist).

Payday lenders, creditors that charge interest rates averaging about 450 percent, are more prevalent in Conservative Christian states, according to a new study coauthored by University of Utah law professor Christopher Peterson. The study, which is based on the most comprehensive database of payday lender locations yet compiled, maps a surprising relationship between populations of Christian conservatives and the proliferation of payday lenders.

“We started this project hoping to find out more about the spatial location of payday lenders and were surprised when a pattern reflecting a correlation with the American Bible Belt and Mormon Mountain West emerged,” said Peterson, who conducted the research and coauthored the article with Steven M. Graves, an associate professor of geography at California State University, Northridge. “The natural hypothesis would be to assume that given Biblical condemnation of usury there would be aggressive regulation and less demand for payday loans in these states, but ironically, the numbers show the opposite is true. It’s sad that states with a pious and honorable religious heritage now disproportionately host predatory lenders.”

Peterson and Graves’ article, titled “Usury Law and the Christian Right,” is forthcoming this Spring in the Catholic University Law Review. It profiles states all around the nation examining the unprecedented spread of payday lenders during a time of growing Christian engagement in the political process. “A generation ago, populist Christian leaders were among the most aggressive opponents of usurious lending. But today many Christian leaders take large campaign contributions from the credit industry and no longer support the Biblical injunction against usury in public life,” Peterson said. [my emphasis]

In the context of primary discussions about how President Hillary or President Obama will fix Bush’s clusterfuck economy without turning the US into Argentina, I find this detail really fascinating. The people preying on the financial insecurity of working people are also some of the people bank-rolling the preachers who give Republicans moral cover for their immoral ways.

All the more reason to make this kind of predatory lending illegal.

Update: Here’s what PastorDan has to say about this (see his h/t to selise, too):

Now, correlation is not causation, of course. Even if it were, none of these are perfect correlations. But my hunch is that with a little investigation, we’ll discover this study describes the cultural creep of Southern mores hitting a roadblock in the Northeast and in a few other places with effective usury laws on the books.

To the "faith and politics" point, though, it seems to me that the best use of these maps might be to suggest places for local reform of lending practices. There’s no reason why states like Michigan or Wisconsin should have anywhere near as many payday operations as they do. We have the political and religious resources to put an end to that form of predation. It’s the right thing to do, and it’s a great springboard into a broader progressive economic agenda.

Speaking from MI (and PastorDan is speaking from WI), I’d love to see us have the resources to put an end to predatory lending… 


Chuck Schumer: We Will Fix the Bankruptcy Bill

We just had a panel on economic issues, with Byron Dorgan, Chuck Schumer, and Sherrod Brown. It took until the last question–mine–for anyone to bring up the Bankruptcy Bill.

From these three Senators, there was little dispute: the Bankruptcy Bill was a bad bill and it needed to be fixed. There was also the recognition that the part of the bill that pertained to protecting houses had exacerbated the foreclosure crisis.

That’s the good news.

The bad news is that we’re not going to do anything about it until 2009. Senator Schumer explained that he didn’t want to pick around the edges, he wanted to make a real fix, and we’re not going to be able to do that until we get a bigger majority.

It seems I have heard that before.

Update: Added video of Matt Stoller interviewing Debbie Stabenow on this topic. 


Market Fun

The world markets have responded to Bush’s plan to put the country further into debt to put $800 of spending money into each American taxpayer’s pocket in much the same way they responded to 9/11.

Stocks across Asia took precipitous falls Tuesday for the second day in a row, reflecting fears that a weak U.S. economy could derail growth worldwide.

The drops were even more severe than those on Monday and several markets hit multiyear lows. Indian shares plunged so quickly — nearly 11 percent — that its stock markets halted trading soon after opening. In South Korea, volatile futures prices prompted the main Kospi market to briefly suspend program selling orders at midday. The Australian market suffered its worst one-day fall ever, while Japan’s Nikkei fell to its lowest since 2005.

Globally, the sell off has involved some of the worst market declines since Sept. 11, 2001 and has erased more than $5 trillion from stock markets this year.

Granted, much of this panic was also caused by the news that the insurers that are supposed to be insuring nice stable municipal bonds but instead are insuring the Shitpile can’t really insure the Shitpile.

But I can’t help but think of what this panic is going to do for our efforts to get a bunch of foreign investors to bail out our over-exposed financial system. More and more foreign banks are having to write off their chunk of the Shitpile. That can’t really be a selling point for them to buy more of it. And meanwhile, when Bush went to Saudi Arabia and asked, as politely as Barbara taught him how, that they please forgo oil revenues so the poor American consumer can continue to drive her SUV, Saudi Arabia, just as politely, told us to fuck off.

The Saudis may give Bush little comfort: Saudi Oil Minister Ali al-Naimi said in Riyadh that more crude would be pumped only "when the market justifies it.” The minister noted that economies are still growing with oil higher than $90 a barrel and said his country wants to avoid "cycles of volatility.”

Saudi Arabia supplies the U.S. with about 1.4 million barrels of crude oil a day, one-seventh of U.S. imports and second only to Canada’s 1.9 million barrels. Saudi clout in production shapes the world oil market, and its policies will weigh on the Feb. 1 meeting of the Organization of Petroleum Exporting Countries.

As Bush’s trip unfolded, U.S. dependence on Saudi Arabia was further illustrated when Saudi Prince Alwaleed bin Talal, Citigroup Inc.’s biggest individual investor, disclosed that he had put more money into the New York-based banking company. The increase was announced the same day Citigroup posted a $9.83 billion fourth-quarter net loss, the biggest in its 196-year history, tied to the mortgage meltdown.

(Our attempts to get Saudi Arabia not to wield the oil weapon are probably not helped by the fact that Israel, in the face of Saudi demands to make peace with the Palestinians, are themselves wielding the oil weapon.)

I know that US economic failure is not in the interest of the rest of the world, as efforts to decouple from our own collapsing Shitpile suggest. But the next couple of months may determine whether others in the world decide–either out of necessity or impatience with our own unwillingness to make important changes–to stop propping up the US.


Bank of America Buys a Big Chunk of the Shitpile

There are several things that concern me about the news that Bank of America has agreed to buy a big chunk of the shitpile. First, there’s this bit, which sounds to my non-expert ears like it could become a real problem.

By purchasing Countrywide, Bank of America would combine its 5,800 branches with the mortgage lender’s coast-to-coast network, helping Mr. Lewis achieve his goal of becoming the biggest player in every major consumer finance category.

Bank of America would brush up against a federal cap that prevents a bank holding company from controlling more than 10 percent of the nation’s deposits. Because Countrywide Bank is a federally insured savings and loan, the rule does not apply.

Seeking to ease any regulatory concerns, representatives for the companies were in Washington on Thursday to brief regulators.

Given the financial situation of this country, I’m not sure it’s a good idea for anyone to hold 10% of the nation’s deposits. Now match that detail with this speculation from Herb Greenburg, via Calculated Risk.

We’ll know it soon enough, but with the leak that Bank of America is near acquiring Countrywide, several things would appear apparent (at least while we’re playing the guessing game):

1. The Fed is behind the deal.

2. The Fed is behind the deal because the rumors yesterday of a near bankruptcy were probably true.

3. As part of the deal, the government likely agrees to guarantee BofA against Countrywide-related losses.

4. Lost in the in the noise yesterday was that Moody’s downgraded the ratings on 30 (count ‘em — THIRTY!) tranches of Countrywide’s mortgage debt by more than a few notches. They did something similar before American Home Mortgage filed for bankruptcy.

[snip]

8. BofA gets a free bank and a put to the government.

By Bank of America, do they mean that America owns the risk but the Bank owns the upside?

And, as always seems to happen with these things, the guy who built the shitpile floats away in a golden parachute.

Mr. Mozilo is expected to remain as chief executive of Countrywide until the deal closes, probably in the third quarter, people briefed on the transaction said. After that, he would serve on a transition team and would remain with the combined company on an interim basis.

He could be entitled to an exit package of roughly $72 million. That would be on top of the $410 million in pay, including $285 million in option gains, that Mr. Mozilo has taken home since he became Countrywide’s chief executive in 1999.

I really wish the Federal Government would instead help out people who are in foreclosure–like the people who owned the two houses on my street that foreclosed and brought the value of my own house down by 20%–rather then prop up an apparently rickety structure while those who built that structure get rich in the process.


2008, the Year of $100/Barrel Oil

As freep pointed out, the price of oil has officially topped $100/barrel.

Surging economies in China and India fed by oil and gasoline have sent prices soaring over the past year, while tensions in oil producing nations like Nigeria and Iran have increasingly made investors nervous and invited speculators to drive prices even higher.

Violence in Nigeria helped give crude the final push over $100. Bands of armed men invaded Port Harcourt, the center of Nigeria’s oil industry Tuesday, attacking two police stations and raiding the lobby of a major hotel. Word that several Mexican oil export ports were closed due to rough weather added to the gains, as did a report that OPEC may not be able to meet its share of global oil demand by 2024.

Light, sweet crude for January delivery rose $4.02 to $100 a barrel on the New York Mercantile Exchange, according to Brenda Guzman, a Nymex spokeswoman, before slipping back to $99.15.

I’m not surprised in the least that this symbolic limit has been passed (however briefly–this was just a single transaction). It’s just kind of creepy that it happened on the first business day of the New Year (along with a 200 point decline in the Dow).

We started last year with the hope that somehow we could scale back Bush’s disastrous imperialism. A year later, Bush’s policies and the developed world’s addiction to oil continue to destabilize the world. Only now, the economic impacts of those policies are taking center stage.


Tommy K’s Everywhere

This was a story I was expecting to see: a report that, in recent years of lax oversight, a large number of people have been defrauding mortgage companies.

The number of mortgage fraud cases has grown so fast that government agencies that investigate and prosecute them cannot keep up, lenders and law enforcement officials have said.

Reports of suspected mortgage fraud have doubled since 2005 and increased eightfold since 2002. Banks filed 47,717 reports this year, up from 21,994 two years ago, according to statistics from the Federal Bureau of Investigation and the Financial Crimes Enforcement Network of the Treasury Department. In 2002, banks filed 5,623 reports.

“I don’t think any law enforcement agency can keep up with mortgage fraud, because it’s such a growth industry,” said Chuck Cross, vice president of mortgage regulatory policy for the conference of state bank supervisors, an organization of regulators and bankers. “There’s too many cases, not enough agents.”

Mortgage fraud covers crimes like false statements on mortgage applications and elaborate “flipping” schemes that involve multiple properties and corrupt appraisers, title companies and straw buyers.

What I’m waiting for, now, is news of what these people used their fraudulent money for. Are these tens of thousands of cases of mortgage fraud just con men getting rich in the easiest way possible? Or were they funneling their ill-gotten money to something or another. In the case of Tommy K, he used his fraudulently gained money bribing Republican Congressmen. Was he the only one capitalizing on the corporatists’ refusal to regulate industry to funnel more money to corporatists?

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Originally Posted @ https://www.emptywheel.net/economics/page/72/