Down the road, not across the street.

Didn't know Felix was British. Go figure. I really like his blog. He does a great job of posing good questions and gathering up some good answers (as opposed to giving the same answer over and over to every question).

two more new people! thanks, bob. great talk, guys. both of you definitely know your stuff. thanks for all the insight.

Quoting kidneystones: Two white guys criticizing Obama. Tell me this isn't racism.

This wasn't racism. I'm not at all surprised you couldn't tell the difference, though. ========== Idiocy from kidneystones aside, thanks to Felix and Jesse for a discussion with some substance to it, however gloomy the subject.

Quoting claymisher: Pretty distasteful title.

Yeah, it was really more of a financial discussion than an economic one, wasn't it? ;^)

"Idiocy from kidneystones" Give him/her credit for consistency...

Quoting claymisher: Pretty distasteful title.

Agree. Furthermore, I'm not taking these guys seriously, or at least I hope they don't take themselves seriously. Listen again to the last segment. First off, the US is not Japan or Sweden. It does not necessarily hold that our future will be like their past. Also, I fail to see why Obama was elected too early into the current financial turmoil. The Republic has survived worse trials in the past. So far this financial downturn is mostly noted for the hoopla over the failure of some well known Wall Street names. Perhaps the NYC-centric view of the diavloggers have colored their mind? When (if) unemployment reaches double digits, and stays there... then this period of US history will ascend to more than footnotes in future history books. For now, the banking system illiquidity is the fruit of pursuing deregulated banking excesses combined with an excessively consumeristic citizenry, many of whom thought they could buy new toys because some slicksters (operating under such names as "Realtors") convinced said consumers they were automatically rich without doing any work. It will pass. What the diavloggers ignore is the structural changes to our underlying industrial revolution that

Quoting claymisher: Pretty distasteful title.

You realize it is an allusion to the movie Wristcutters: A Love Story, right?

Quoting Nate: You realize it is an allusion to the movie Wristcutters: A Love Story, right?

Yeah, I know. I even read the story it's based on. It's just me. I'm sensitive in that department.

It was reverse sarcasm.

Quoting claymisher: Yeah, I know. I even read the story it's based on.

It's just me. I'm sensitive in that department.

Aaah, ok. (I assume you found both the film and story "distasteful"-ly titled as well?) There are lots of provocatively titled works out there; Someone will always find some titles "distasteful" I would assume, but I don't think BH.tv should self-censor themselves because of it, especially if it is based on an allusion to another work. (Within reason, of course.)

Quoting Nate: Aaah, ok. (I assume you found both the film and story "distasteful"-ly titled as well?)

There are lots of provocatively titled works out there; Someone will always find some titles "distasteful" I would assume, but I don't think BH.tv should self-censor themselves because of it, especially if it is based on an allusion to another work. (Within reason, of course.)

The story was called "Kneller's Happy Campers". But this is boring.

Quoting claymisher: The story was called "Kneller's Happy Campers". But this is boring.

Aaah, ok. Obviously I didn't read it. The movie was good, though, haha.

Quoting claymisher: Didn't know Felix was British. Go figure.

You must have missed his previous foray into art criticism.

Quoting InJapan: Also, I fail to see why Obama was elected too early into the current financial turmoil.

I take the overall point of your comments, but here, I did think Felix or Jesse was in some sense correct to say this. IIRC, the context was a discussion of how to deal with the problem of so many financial institutions in such dire straits. If one believes that there is a better way to deal with the situation than simply handing them trillions of dollars in bail-out money, then this statement is a sad recognition that such an alternative is not politically feasible at the moment; i.e., that the severity isn't (yet?) apparent enough for the proposed solution to receive serious consideration. I don't know enough about the intricacies to be sure, but I do often worry that at some point in the future, we're going to look back at this time and say, "If only we'd nationalized the banks back then, we'd have saved a lot of pain and money." I think that's what the "too early" statement reflects.

So much gloom and doom, although Felix (=happy) did end on a hearty British note, "Cheers, cheers," so perhaps all's well that ends well. When the economy is in the doldrums there is always a bias towards doomsaying among commentators, just as there is a bias towards pollyanish optimism when the economy is booming. That indeed is a large part of the problem, as economists from Keynes on have been pointing out. Expectations feed on themselves and produce self-fulfilling prophecies, both on the way up and on the way down. That is why the market is rarely what freemarketeers think it is: a self-regulating mechanism. Perhaps a return to the proverbial optimism of Americans will save the day... but if you can believe that I can probably sell you the Brooklyn Bridge.

The stimulus bill has passed. There was a 3 day weekend for people to mull over the how good or bad the times we live in are. The market opens in 15 minutes. After listening to this diavlog I say it will go down but I hope it doesn't. John

Felix:
1. There is no way you can argue that Preferred Equity is an Asset. Equity and Liabilities are on one side of the balance sheet. Assets are on the other side. It is an accounting identity. 2. There is no way you can argue that John Thain did more harm to Merrill than Stan O'Neal. Stan O'Neal loaded up the balance sheet with toxic crap and set the company on fire. John Thain came in with the company on fire and raised a boatload of equity from SWFs and the public markets to put the fire out (i.e. he outsmarted them all). Then he managed to sell the smoldering carcass to the morons at BofA for an outrageously high price. The million dollars he spent redecorating his office is utterly insignificant compared to the $50bn or so of equity he raised to save Merrill.

Seems to me I saw some chatter somewhere on this site about the supposed secret money market sell-off and narrowly averted "global meltdown" back on 18 September 2008, but I can't find it at the moment, so I'm posting this here. Anyway, if you're interested, Felix has a post up, debunking it. Short version -- a rightwing media outlet starts the lie, Rush, Politico, etc., pick it up and amplify it. No one could have predicted, because that never happens. h/t: Andrew Sullivan, who, it must be said, was one of the spreaders of the myth. (I sent him an email chastising him after that post; amazingly, he did not acknowledge it.)

Anyway, this was a really, really great ep. I have questions. If, as they talked about, the bank shareholders are wiped out (as they should be), and the preferred shareholders are wiped out (ditto), why not the bondholders? Who was loaning the big banks all this money? Is it a trillion dollars in money market accounts? China? The Fed? If the bondholders get a haircut, who is it exactly getting the haircut? These are the people the bank bailout is trying to save (The equity holders and managers are already pretty much toast). It would be good to know the actual people we're trying to save here.

Please, don't hold your breath on the stimulus to stimulate the economy. The 300 point drop today is the kind of stimulating we don't need. I have heard talk that if the bill was couched to ignite the economy now it may have done something. Unfortunately, many items on it won't take effect until next year or later. No, like all the pols who voted for or against it I haven't read the 1,000 page package. John

Quoting bkjazfan: Please, don't hold your breath on the stimulus to stimulate the economy. The 300 point drop today is the kind of stimulating we don't need.

Making decisions and evaluating policies and actions on the basis of one-day reactions in stock market indexes is a big part of how we got the problems we have today.

Great podcast. Very happy to see felix on the show.