Friday Financial Briefing, PM Edition

Friday trading ended with a shrug as the Dow closed basically unchanged at 10,143.81 and the S&P 500 at 1076.76.

His Majesty cannot be bothered to listen to the nattering of common peasants! There is a world to be saved! Now begone, and let His Majesty rest; for the weight of the world rests heavily upon his noble brow.

If you answered "Romania" as the next European country to collapse into (further) financial and social disarray, please step forward and claim your prize! The Italians came in a close second, though.

The adults are not only not in the room; they abandoned the kids in Branson outside the How-Dee Kountry Komedy Klub and went to blow the family fortune over in Hot Springs.

Some juicy background on Orszag's ignominious retreat from His Majesty's court the White House. It turns out that Obama's pledge not to raise taxes on people who make less than $250K per year (about 98% of Americans, in other words) might have been just a tad ill-considered, given the spending-spree he's gone on since. When Obama has to break this promise -- and he will, guaranteed -- out will come the torches and pitchforks and the yokels baying for blood. And so in the classic "better a live rat than a dead lion" calculus, Orszag bailed.

Dios mio! No es bueno!

The good news: You'll have twice as many dollars! The bad news: They'll only be worth half as much. Maybe less!

The Chair of the Joint Chiefs of Staff experiences what the military calls a BGO: a blinding glimpse of the obvious. Remember, kids: a robust and capable military costs a lot of money, and right now, we don't have any.

Looks like foreign central banks are catching gold fever. This should serve as a caution to fiat-money fans who have gotten used to the USD's role as the default reserve currency. Remember: we're only the de facto reserve, not the de jure reserve. It can (and will) change.

FinReg slouches towards passage. For all the sound and fury, FinReg will ultimately have the same fate as every other bloated piece of government financial legislation over the years: waste, futility, and failure. The ultimate outcome of this, I suspect, will be that Wall Street turns into a ghost town and the big financial firms and investment banks move to Asia: Hong Kong, Shanghai, Dubai. I'm not sure if that's necessarily a bad thing.

One of the Democrats' favorite strawmen over the years has been the "predatory lending" businesses that "prey on the poor": the check-cashing joints, the payday loans, and the pawnshops. Katherine Mangu-Ward puts some knowledge in the form of a review of Gary Rivlin's Broke, USA. The basic fact is that poor people are horrible credit risks, and their financial options are severely constrained. The lending institutions who cater to them are operating in a very high-risk environment; they're not social-welfare agencies. Democrats, predictably, find a profit-making enterprise of this sort to be completely offensive. (Broke, USA is a deeply meretricious and financially-idiotic book, by the way. Ms. Mangu-Ward's review is much more entertaining than the book itself.)

China: paper-rich but cash-poor. Chinese banks are going to fail soon, mark my words. They have a huge overhang of shitty debt from bad loans forced on them by the Commie government. If the Chinese export business shrinks as much as I think it's going to, the stench off of that pile of shit is going to be strong indeed. I have a feeling that the strategy behind letting the Yuan float was to drive it lower, not higher, and thus stimulate the export business even more. But Europe's new passion for austerity and American broke-ness means that there aren't many buyers. Don't buy the China hype -- they're in deep shit.

It can't all be ouzo and bouzouki music, as the Greeks are finding out. Stories like this are why I'm convinced that there is no way in hell that Greece is going to actually pay their debts -- the people simply won't stand for it. It's not in the Greek nature. So there'll be a period of awkwardness, a period of face-saving lies, and then Greece will default.

"Leave Barack alone!", sobbed Steven Pearlstein. "The economic crisis isn't his fault! Why are you blaming him? He wishes only for our happiness!" At that point several Morons stepped, forcibly revoked Mr. Pearlsteins man-card, and made him write I'M A GREAT BIG PUSSY on his own forehead with a Sharpie. His increasingly-hysterical weeping left them unmoved.

I would love to give you the most current GDP data, but it burned up in a fire. It's not like that last time when my dog chewed it up, or the time before when my psycho ex-girlfriend flushed it down the toilet, or the time before that when my idiot cousin Floyd used it as rolling-paper for some bomber joints. What I'm trying to say is, it wasn't my fault. At all. Incompetence has nothing to do with it.

Here's the thing about algorithms and equations: they're only as good as the data you feed into them. Feed them bullshit as input, and you're going to get bullshit right back. It's a variant of the old statistician's credo: if you torture numbers enough, you can make them confess to anything. More detail here for those interested (with bonus Johnny Cash tie-in!).

Helicopter Ben needs another $3 trillion or so to get his mojo working for reals. That will bring the Fed balance sheet to a cool $5 trillion, which is real money even in D.C. Maximus asks: Are you not stimulated?

posted by Monty at 06:04 PM

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