Ahem – they just didn’t get lucky this time around.

In Barry Ritholtz’s blog post, Why Economists Missed the Crisis, he mentions as a whole, economists obviously misjudged the crisis.  He quotes Dean Baker in saying “incentives in economics profession, just as in finance, strongly encourage a lack of original thinking” – stemming from Keynes.  But so spot on for economists’ thinking. 

There are really effective, highly profitable money-making instruments out there, with all the derivatives growing in creativity.  And there are brilliant financiers and economists out there, but there’s too much information to comprehensively judge the outcome of investments, and the economy in general.

Personally, look back at my very first posting in 2007.  Spot on. *dust the shoulders off*

Wow – for god’s sake – wow.  

One reason I lose my patience so quickly is because of close-minded people.

I do not believe in protectionism.  I do not want to be lectured in the need for protectionism.  I do not need to hear that what happened in Mumbai was “small potatoes”, that rather they, as well as other major Indian cities, should be nuked.  What the FUCK.

Only those who are threatened by losing their jobs are for protectionism.  Rightfully so.  But immigration into this country has led to many advances, made our lives easier, and has been the foundation of our history.  Immigrants have enriched all of our lives, their lives, and their families.  Social economics deems that overall productive.  You lose your job to an immigrant?  Damn right you can be mad, you just lost your job to someone who is more competent, who most likely will work for cheaper.  Yea it sucks, but it only gives you the opportunity to pursue something different, something greater.  The immigrant has something that he wants, and you are entitled to happiness as well.  

Bitterness about losing a job to someone who will accept less pay is legitimate.  But think of it this way – these jobs that are already being done allows for more innovation, higher learning, and a greater entrepreneurial spirit.  Homegrown businesses thrive here in this country (and with the right fiscal policy, will continue to grow).  

Protectionism as a policy will only lead to overpaid workers, higher expenses for businesses, and will hurt overall innovation of thought.  

If it’s not evident that I’m a free market follower, I don’t know what is.

~house of cards ~ radiohead ~

I spend a lot of time watching the news, both at work and at home.  We all know what’s going on with our economy, how the fed and treasury are trying to help the financial system out, trying to help consumers out.  And then we see retailers increasing discounts during this time of looming depression to lure customers into relaxing their white knuckles on their cash.

But how has this economy really affected consumers?

Here’s how I see it so far – the banking system has crashed and is evolving into something never seen before.  The financial system is wiping out.  No longer do 150 year old companies exist.  More and more the sector is becoming an oligarchy.

And the news is reporting that it’s all about the credit markets.  Yes – well, it’s what caused it.  But it’s the banks’ problem.  I don’t really see it affecting consumers.  Their reaction to save more may be because of a perceived personal credit crunch.  But how many have you actually experienced a bank withdrawing your credit line on your card? 

I realize two separate points that go against this argument: 1) people are being denied new credit and loans, which cultivate growth in our economy and 2) people are losing jobs.

But for those not employed by the financial sector (about 94% I believe) – there’s still income.  Propensity to save is due to the fact that we see 6% of the job force is losing their jobs.  That we see foreclosures increasing.  That we hear banks not lending anymore.

Maybe I’m not making my point clear – consumers have money.  They have income.  They may not be able to move into a home – but they can still spend.  We still have credit, just not new credit.

Am I insane? I just saw someone on CNN saying they are choosing to use cash over their credit card.  But that means they have the ability to use credit.  I just think that the propensity to save and to spend shouldn’t be affected if you have a job.  You just can’t buy a house right now.

This point is not very refined – I just had to get it out there.

For the econ geeks out there – you know that the fed can do more than adjust short term rates with the FOMC.  And, with many previous discussions before, they’ve enacted a new tool – interest on reserves.

But in an article on the WSJ over the weekend, another tool was discovered, and I should have thought of – long term rate manipulation.  hmm, go figure.  Well since treasury now owns freddie & fannie, that seems logical to be able to do.  Purchase long term freddie/fannie bonds to manipulate long term rates.

Let’s think about that – yes that would normalize the yield curve a bit.  Yes that would increase liquidity on the market.  But would it really help?  In pushing the long term rates down – the fed’s goal ultimately would be to lower mortgage rates for the consumer.  Supply-side economics to stimulate demand.  I can see how that would work, but would it really work?  

Tell me, who wants to lend right now?  The best borrowers are still continuing to be lined up next to low grade borrowers.  The banks are hoarding cash due to increase loan losses.  More liquidity would just be more cash to hoard.  A good point was brought up to me – if a bank can buy high grade commercial paper yielding 7%+, why lend at 6%?  Residential and commercial loans have become an unwanted asset.  The banking model is developing – no longer is it borrow short to lend long.  It’s borrow short to lend even shorter.  It’s asking the question ‘how much can we ring out for our NIM’ rather than ‘how can we fund this ninja loan.’

Hmm perhaps the government should buy more commercial paper to loosen up that market.  Perhaps we should just let capitalism hobble along without the government’s crutches.  Let live and let go.

It was just announced, almost just in passing, that the rates accrued on excess balances at the federal reserve increased.  Instead of 75 bips below the target rate, it’s 35 bips.

Please – someone – realize that this is a big deal.

Maybe it’s just because I work at a bank.  Yay for us on increase interest, boo for the eventual increase in fed funds effective.

<<the outsider – a perfect circle>>

Interesting thought popped into my head today – indeed it’d be an unrealized self destruction.

One topic frequently, although on the back burner lately, is illegal immigration.  People coming through our borders, it’s a hot topic.  Especially with last year the development of the underbanked sector, where banks allow a way for the customer to obtain a tax ID number in order for them to open an account, get a mortgage, credit cards, etc. 

But what about foreign investment?  Direct or other…  I go into work each day thankful that I just bought into my 401k when everything is dirt cheap.  Yet it’s not just me that can see an opportunity.

With penny stocks in great supply now, it may seem like it’s a good idea to buy a lot for a great return later.  But it really only works in a developing idea.  Not so much when businesses have been publicly traded for years that have seen stock plummet.  Yet sovereigns and private wealth abroad, what will happen when they see an opportunity in established companies? 

If I remember correctly, it was reported that Saudi Arabia bought up stock in Citigroup.  Saudi Arabia’s FDI has increased steadily over the past 10 years, with last year being the largest foreign investor in the US.  Who’s to say that more investment won’t come?  In the form of buying up stock in undervalued companies?  Especially financial firms. 

Really, if bin Ladin wanted destruction of America, the financial markets would be the way to go.  Buy up firms to at least the point of majority vote, and reep the benefits!  Do what you want.  I begin to wonder why the stock crash in 2001 following 9/11 wasn’t fully taken advantage of by American-hating groups.

Illegal immigration may strain taxes, hospital care, etc.  But I can not possibly believe that it’s on the same level as a bailout plan for struggling banks, making it ideal for foreign investment to jump in now.

Am I correctly portraying this?  Is this an opportunity not realized by foreign investment?