Political Economy category archive
Exit, Stage Right 0
The Washington Post recently explored the exit of top aides from the Current Federal Administration:
All the more so in a White House beset by an intractable war, a hostile Congress, a shipwrecked domestic agenda and near-historic-low approval ratings. The long-term ideals that many of them came to the White House to pursue appear jeopardized, even discredited to many. They tell themselves that they have acted on principle, that the decisions they helped make will be vindicated. But they cannot be sure.
A number of the persons quoted in the article expressed regrets of various kinds.
But nowhere did they express regret for betraying the ideals of the founders and dragging the sacred honor of this nation in the dirt.
Sub-Prime 0
Robert Reich on bailouts. Read the whole thing. It’s worth three minutes of your time:
The real moral hazard in this saga started when Fed Chair Ben Bernanke cut the Fed’s discount rate (charged on direct federal loans to banks) and announced that the Fed would take whatever action was needed to “promote the orderly financing of markets.” Translated, this means that lenders, credit-rating agencies, financial intermediaries, and hedge funds will be bailed out, one way or another, because they’re simply too big to fail. Note that behind every one of these institutions lie thousands of well-paid executives who would have lost big if the Fed didn’t come to their rescue. Even though they had more information and experience at risk-taking than the suckers who borrowed their money, and even though executives at the top of these instutions typically earn more in a day than the borrowers do in a year, moral hazard somehow doesn’t apply to them.
Oil and the Commodities Market 0
Andrew Cassel had a fascinating column in Wednesday’s local rag about the commodoties markete as it affects oil prices. Since all of us are feeling the pinch (or pincers) right now, I recommend it for the light it sheds on how the oil markets work:
Yesterday, such futures contracts were trading about $74 a barrel. Of course, the hedge fund has no intention of actually buying 13,500 barrels of crude (roughly $1 million worth) – the fund is betting that by next month, the price will be even higher and it can sell the contract at a profit.
As more investors bring more money to the table, prices can tend to rise – not just in the futures markets, but at your neighborhood gas station. That’s what has some critics calling for curbs on “rampant” speculation.
(snip)
The point is that markets don’t make prices rise or fall – rather, they make it possible for prices to move quickly, in either direction.
In other words, the market reflects what is going on in the larger world; it does not create what is going on in the larger world (assuming the marketers are honest, of course).
He supplemented it yesterday.