The Battle For Economic Primacy

[jimcav]

When I did the project in Sardinia to turn the NATO base over to the Italians, we left a enormous barge crane, some LSTs, and a barge with a six man hyperbaric chamber..

man that is frustrating to hear. I was accepted into a PhD program for hyperbaric research and between my application in 2001, (repeating the application in 2002 as the program start date was delayed), getting accepted, and starting in 2003; by then budget priorities and promised funds completely changed and the hyperbaric chamber that was supposed to be installed never happened. They strung me along a full year telling me it would happen, and then they cancelled the PhD program on me. I had to dumb-down my thesis and get a masters.

[bigbill]

man that is frustrating to hear. I was accepted into a PhD program for hyperbaric research and between my application in 2001, (repeating the application in 2002 as the program start date was delayed), getting accepted, and starting in 2003; by then budget priorities and promised funds completely changed and the hyperbaric chamber that was supposed to be installed never happened. They strung me along a full year telling me it would happen, and then they cancelled the PhD program on me. I had to dumb-down my thesis and get a masters.

During the salvage operations, we had four chambers in operation. Two on barges, one on the tender, and the fourth on the USNS Grasp. We were doing recompression dives so the guys would drop their gear and get in the chamber while the next team would put on the gear (surface supplied, hard hat, weighted boots). The UMO was getting his steps in.

[jclay]

How about we keep the focus to this thread's subject area?

From Truthout:

In his first interview after the collapse of his cryptocurrency empire FTX, founder Sam Bankman-Fried made the surprising admission that he had donated as much to Republicans as he had to Democrats—just that, as he put it, “All my Republican donations were dark.”

Bankman-Fried hasn’t volunteered more details, but it’s likely that he made his donations to one of the “dark money” nonprofits that are affiliated with super PACs aligned with Republican Party leaders in the U.S. House and Senate. The now-indicted mogul said he may have secretly been the second or third-biggest Republican donor in the midterms.

Donors are increasingly steering their political giving along these secretive paths. The four super PACs aligned with congressional leaders received more in contributions than ever last election cycle from their largest dark money affiliates, according to a Sludge review of Federal Election Commission data.

The four super PACs that are endorsed by congressional leaders, though technically independent from them, have come to dominate spending on congressional elections in recent years, spending far more than national party committees like the National Republican Congressional Committee (NRCC) or Democratic Congressional Campaign Committee (DCCC) to help elect their party’s candidates. In the 2022 cycle, these super PACs became the four highest-spending outside groups on federal races, according to OpenSecrets.

More here: https://truthout.org/articles/congre...ore-than-ever/

The corporations are winning; and thank you Citizen's United!

[gregl]

The corporations are winning; and thank you Citizen's United!

In 100 years, Citizens United will be viewed as the worst Supreme Court decision since Dred Scott. That is, if factual, accurate history texts are still permitted by the ruling junta.

Greg

[vertical_doug]

How about we keep the focus to this thread's subject area?

From Truthout:

In his first interview after the collapse of his cryptocurrency empire FTX, founder Sam Bankman-Fried made the surprising admission that he had donated as much to Republicans as he had to Democrats—just that, as he put it, “All my Republican donations were dark.”

Bankman-Fried hasn’t volunteered more details, but it’s likely that he made his donations to one of the “dark money” nonprofits that are affiliated with super PACs aligned with Republican Party leaders in the U.S. House and Senate. The now-indicted mogul said he may have secretly been the second or third-biggest Republican donor in the midterms.

Donors are increasingly steering their political giving along these secretive paths. The four super PACs aligned with congressional leaders received more in contributions than ever last election cycle from their largest dark money affiliates, according to a Sludge review of Federal Election Commission data.

The four super PACs that are endorsed by congressional leaders, though technically independent from them, have come to dominate spending on congressional elections in recent years, spending far more than national party committees like the National Republican Congressional Committee (NRCC) or Democratic Congressional Campaign Committee (DCCC) to help elect their party’s candidates. In the 2022 cycle, these super PACs became the four highest-spending outside groups on federal races, according to OpenSecrets.

More here: https://truthout.org/articles/congre...ore-than-ever/

The corporations are winning; and thank you Citizen's United!

I often observe that articles published on left-leaning websites often mirror those found on right-leaning websites, as they heavily rely on biased language, weasel words, and other disparaging tactics. The recurring narrative that "corporations are winning" is, at this point, tantamount to disinformation. While it is true that corporate funds have traditionally been used to influence politicians, Citizen United really allowed the Wealthy to cement their influence in funding a slate of candidates for the purpose of wielding power.
It is crucial to make a distinction among corporations. The most aggressive and ideological corporate players in politics, one will typically find a single individual with substantial wealth and a strong ideological bent. While certain figures, such as SBF, may be held up as examples, their political spending is often wasted and naive. To truly understand the influence of corporate money in politics, we must identify those who are actively seeking to change the system. A particularly egregious example is that of Private Equity groups, who gave targeted donations to Senator Sinema in order to ensure the Carried Interest Tax Deductions repeal was omitted from the 2022 Inflation Reduction Act. This serves as a concrete illustration of the power of targeted donations.

It is probably more important to focus on specifics and objectives of the donors, instead of just 'hand waving' the corporations are winning. The DNC and RNC are both at the center of cementing power with a duopoly. We really are in a system of our democracy is you can vote for anything you want on the menu. Except, someone gets to decide what is on the menu. This is what needs to be focused on.

[jclay]

I often observe that articles published on left-leaning websites often mirror those found on right-leaning websites, as they heavily rely on biased language, weasel words, and other disparaging tactics. The recurring narrative that "corporations are winning" is, at this point, tantamount to disinformation. While it is true that corporate funds have traditionally been used to influence politicians, Citizen United really allowed the Wealthy to cement their influence in funding a slate of candidates for the purpose of wielding power.
It is crucial to make a distinction among corporations. The most aggressive and ideological corporate players in politics, one will typically find a single individual with substantial wealth and a strong ideological bent. While certain figures, such as SBF, may be held up as examples, their political spending is often wasted and naive. To truly understand the influence of corporate money in politics, we must identify those who are actively seeking to change the system. A particularly egregious example is that of Private Equity groups, who gave targeted donations to Senator Sinema in order to ensure the Carried Interest Tax Deductions repeal was omitted from the 2022 Inflation Reduction Act. This serves as a concrete illustration of the power of targeted donations.

It is probably more important to focus on specifics and objectives of the donors, instead of just 'hand waving' the corporations are winning. The DNC and RNC are both at the center of cementing power with a duopoly. We really are in a system of our democracy is you can vote for anything you want on the menu. Except, someone gets to decide what is on the menu. This is what needs to be focused on.

I disagree with your “weasel words et al.” and “tantamount to disinformation” comment.

We can have multiple winners (actual legal corporate entities and the extremely wealthy) wrt overarching battle for economic primacy. As the extremely wealthy are generally to be found attached to or made by large and/or powerful business interests (often corporations) I think it reasonable to lump them together for this sort of general sketch of the situation.

We can also have side wars, like the current cultural battle between “traditional values” and those who advocate acceptance of a broader spectrum of acceptable human behavior. That doesn’t diminish the reality of the larger Main Event.

In my view you comments about Sinema and “who gets to decide” on the menu is consistent with the larger thesis that the battle is between corporations (and the extremely wealthy) and the nation state (government in general really). The notion that some spending (aka “effort”) is naive or wasted is part and parcel of the human condition; in any area of endeavor some “efforts” are naive or wasted; but the intent of those efforts remains and is informative.

I think it crucial that the electorate understand the fundamental reality of the over-arching battle between corporate entities and the extremely wealthy, and government by and for “the people”, and what the ramifications to the lives of regular working folks and the globe in general, are. If one doesn’t “get” the Cliff’s Notes summary of what’s going on, then promoting deeper analysis will, I think, yield little progress (for the electorate anyway).

[jclay]

Re Silicon Valley Bank Failure

Article Intro: Michael Hudson gives yet another meaty take on the recent spate of bank implosions in the US, with the spectacle of sick man Credit Suisse taking a big heave adding to rattled nerves. We’ll take the liberty of providing some additions and qualifications: https://www.nakedcapitalism.com/2023...-failures.html

Pretty interesting though some of the comments are even more interesting, like this one by Karl which I find pretty compelling:

"Karl
March 16, 2023 at 10:33 pm

Roberts calls the actions of the bankers “stupidity.” The pattern of SVB’s actions suggest they were smart. I mean, the outcome turned out pretty well for the VC, so how “stupid” could they be?

There’s the old saying: if you owe someone a little, they own you; if you owe them a lot, you own them.
The VC and the SVB Execs understood this. They are not stupid. They know ventures and they know risk.

Here’s my scenario of what heppened. In early 2022, the SVB execs could see that their MBS portfolio was going to blow up if interest rates kept increasing. What to do? Do the responsible thing and hedge? Or do you decide to deliberately set the bank up for such a huge mess that you have to be and will be bailed out? Knowing the political influence of the VC community, their understanding of the DC game, and how to apply pressure, they knew they’d be able to engineer such a bailout.

Little problem: you know what the Chief Risk Officer would say. There is no way she could be kept out of the loop. So, what do you do? You get rid of her (on April 2022), and YOU DO NOT HIRE A REPLACEMENT until the damage is done (January 2023). That’s what SVB did. In the meantime, you write nothing down, and speak to the General Counsel or other execs only in dark alleys. You let your interest rate hedges expire on their own in 2022, which adds gasoline to the coming fire. Just before the conflagration, you give all the lower level staff their bonuses to keep them quiet. You get some of the insiders (e.g. Peter Thiel) to start the conflagration by saying “get your money out now” so it will be heard far and wide and start a panic. You get one of your insiders, the California Governor, to demand a bailout of this bank and save these essential “job creators.”

The signs point to this being deliberate and well orchestrated. These guys are all way too business savvy for “stupidity” to be credible, and they all had the motivation.

Will the Fed find any evidence of deliberate “financial sabotage” in its investigation of SVB? Almost certainly everyone involved was smart enough to cover their tracks, so my guess is “no”, but there could be leaks."

[vertical_doug]

Re Silicon Valley Bank Failure

Article Intro: Michael Hudson gives yet another meaty take on the recent spate of bank implosions in the US, with the spectacle of sick man Credit Suisse taking a big heave adding to rattled nerves. We’ll take the liberty of providing some additions and qualifications: https://www.nakedcapitalism.com/2023...-failures.html

Pretty interesting though some of the comments are even more interesting, like this one by Karl which I find pretty compelling:

"Karl
March 16, 2023 at 10:33 pm

Roberts calls the actions of the bankers “stupidity.” The pattern of SVB’s actions suggest they were smart. I mean, the outcome turned out pretty well for the VC, so how “stupid” could they be?

There’s the old saying: if you owe someone a little, they own you; if you owe them a lot, you own them.
The VC and the SVB Execs understood this. They are not stupid. They know ventures and they know risk.

Here’s my scenario of what heppened. In early 2022, the SVB execs could see that their MBS portfolio was going to blow up if interest rates kept increasing. What to do? Do the responsible thing and hedge? Or do you decide to deliberately set the bank up for such a huge mess that you have to be and will be bailed out? Knowing the political influence of the VC community, their understanding of the DC game, and how to apply pressure, they knew they’d be able to engineer such a bailout.

Little problem: you know what the Chief Risk Officer would say. There is no way she could be kept out of the loop. So, what do you do? You get rid of her (on April 2022), and YOU DO NOT HIRE A REPLACEMENT until the damage is done (January 2023). That’s what SVB did. In the meantime, you write nothing down, and speak to the General Counsel or other execs only in dark alleys. You let your interest rate hedges expire on their own in 2022, which adds gasoline to the coming fire. Just before the conflagration, you give all the lower level staff their bonuses to keep them quiet. You get some of the insiders (e.g. Peter Thiel) to start the conflagration by saying “get your money out now” so it will be heard far and wide and start a panic. You get one of your insiders, the California Governor, to demand a bailout of this bank and save these essential “job creators.”

The signs point to this being deliberate and well orchestrated. These guys are all way too business savvy for “stupidity” to be credible, and they all had the motivation.

Will the Fed find any evidence of deliberate “financial sabotage” in its investigation of SVB? Almost certainly everyone involved was smart enough to cover their tracks, so my guess is “no”, but there could be leaks."

Over 30 years, I've seen some blowups first hand and there is never that much thinking and planning going on. Hedging costs money in general, and the bank senior management wanted more earnings to get paid more. They never conceived of a scenario of group think with their depositors would all want to exit in a run. Frankly, you give the management team too much credit for being very smart when all they were was blind to the risk,and just greedy.

These types of convoluted conspiracies which require great planning and manipulation, just are never the case in blow-ups. They got in trouble and used that old strategy called hope. They just hoped it would all work out. It's human nature. You want to give these people master of the universe properties when maybe they were just lucky at some point and the luck ran out.

As for share sales, options vest at the start of the year, and management sold shares as part of that in 2021, 2022, 2023... no change in behavior. It's all there in filings.

[jclay]

Over 30 years, I've seen some blowups first hand and there is never that much thinking and planning going on. Hedging costs money in general, and the bank senior management wanted more earnings to get paid more. They never conceived of a scenario of group think with their depositors would all want to exit in a run. Frankly, you give the management team too much credit for being very smart when all they were was blind to the risk,and just greedy.

These types of convoluted conspiracies which require great planning and manipulation, just are never the case in blow-ups. They got in trouble and used that old strategy called hope. They just hoped it would all work out. It's human nature. You want to give these people master of the universe properties when maybe they were just lucky at some point and the luck ran out.

As for share sales, options vest at the start of the year, and management sold shares as part of that in 2021, 2022, 2023... no change in behavior. It's all there in filings.

You may well be right and I’m not often guilty of thinking that folks are that smart but for sporting purposes I’ll go out on a limb here and posit a few fundamentals:

1) Most individuals and organizations do what they’re incentivized to do (especially financially).
2) Folks in the upper echelons of those sorts of sandboxes desire and work towards truly serious wealth (aka greedy).
3) If one or a few in relevant management areas were smart enough to think up that strategy then I have no doubt that they’d at least wonder "could we really??"; maybe play it out over drinks even if just to the point of “the feds won’t allow us to fail and we’ve made some pretty good dosh...so, wtf if SVB is skating on thin ice?”. I haven't the industry specific knowledge to come up with it, but it doesn't sound like a terribly difficult or abstract idea to come up with for those who well understand how that industry works.
4) There have to be folks in the banking industry who are that smart, knowledgeable, connected and willing to take the associated risks (which post S&L crisis fallout don’t seem to be great, i.e. few have gone to prison).

In the universe of organizations who pay large dollars for legions of lobbyists to warp regulations to their financial benefit there absolutely must be folks who are that savvy; as far as I can tell the notion not only doesn’t violate any first principles of human/organizational behavior, it’s rather consistent with’em. Whether or not that’s what happened I can’t divine but I wouldn’t reject it out of hand and it’s certainly an interesting consideration.

Cue Rick Scott as CEO of HCA when it committed the largest Medicare fraud in history; he did rather well out of it and I won't buy that he had no idea of what was going on! I'd rather believe that these sorts aren't that smart and devious but history makes clear that some actually are.

An interesting read (I think I shall) just recommended to me by a brother: The Best Way to Rob a Bank is to Own One ( https://www.amazon.com/Best-Way-Rob-.../dp/0292754183 )

William K. Black is Associate Professor of Economics and Law at the University of Missouri, Kansas City, where he teaches White-Collar Crime, Public Finance, Antitrust, Law & Economics. He covers markets and regulation with his speech "Unsound Theories and Policies Produce Epidemics of Fraud and Regulatory and Market Failures."

https://en.wikipedia.org/wiki/William_K._Black

[vertical_doug]

It's really simple. They were in the center of the bubble from 2020-2022. So much of the 20-22 VC investment was malinvestment, it's no wonder the deposit base was bled dry.
Their deposits grew from 50bln at the start of 2020 to 200bln dollars at the end of 2021, all from the same type of correlated client dependent on VC investment. Just take a look at the high flying startups thar went public via spacs from 2020-2022 , I can't think of one doing well. SIVB is just road kill.

They were raking in money so fast, they weren't even thinking about what they should do. They weren't upgrading systems, they were way over their skis.

Fast forward to 2022 when interest rates start rising, and VC flow stops, they are not even thinking about changing direction because they are true believers in their brilliance because they have grown the bank so fast.

2023, when they let Goldman Sachs inside to help. The situation is bad. Goldman sees an opportunity to help by 'buying' a 28billion dollar portfolio of securities at discount which causes the bank to book a large loss and the rest is history. I suspect the whisper mill at Goldman buried these guys in March.

[jclay]

It's really simple. They were in the center of the bubble from 2020-2022. So much of the 20-22 VC investment was malinvestment, it's no wonder the deposit base was bled dry.
Their deposits grew from 50bln at the start of 2020 to 200bln dollars at the end of 2021, all from the same type of correlated client dependent on VC investment. Just take a look at the high flying startups thar went public via spacs from 2020-2022 , I can't think of one doing well. SIVB is just road kill.

They were raking in money so fast, they weren't even thinking about what they should do. They weren't upgrading systems, they were way over their skis.

Fast forward to 2022 when interest rates start rising, and VC flow stops, they are not even thinking about changing direction because they are true believers in their brilliance because they have grown the bank so fast.

2023, when they let Goldman Sachs inside to help. The situation is bad. Goldman sees an opportunity to help by 'buying' a 28billion dollar portfolio of securities at discount which causes the bank to book a large loss and the rest is history. I suspect the whisper mill at Goldman buried these guys in March.

You know more about banking than I; I don't see any first principles of human/organizational behavior being violated in your description; Ocam's Razor is a happy fit. I don't know; maybe we'll find out one day but the electorate will be too bored and anesthetized to pay attention, never mind revisit their politics and choices on voting days.

Public Banking? Like a national, tax funded single payer, cradle to grave health care system? I won't hold my breath for it! Still, interesting perspective here: https://truthout.org/articles/the-sv...ublic-banking/

As far as it goes, I totally subscribe to this statement: "This crisis was preventable. The Fed should have started inching rates up when the Fed first got religion, in 2014. Even if over time it amounted to only a half a point a year, the US would have gradually starved financial speculators of cheap leverage and have spared homeowners serious pain.", and "With getting this late start, the monetary authorities should have recognized even more that it would not take that much in the way of interest rate increases to produce meaningful bond losses, which would inevitably hurt at least some, and potentially many, banks. Yet the regulators were caught with their pants down.".

Everybody was drinking the equity price trajectory happy juice fermented during the years of near zero interest rates, thinking that the party could never end. It's smelling kinda rancid now.

Article, which I haven't finished reading, here: https://www.nakedcapitalism.com/2023...-freakout.html

That ^^ and serious evaluation about reinstating Glass Steagall.

So much to learn; so little time in a life.

[vertical_doug]

You know more about banking than I; I don't see any first principles of human/organizational behavior being violated in your description; Ocam's Razor is a happy fit. I don't know; maybe we'll find out one day but the electorate will be too bored and anesthetized to pay attention, never mind revisit their politics and choices on voting days.

Public Banking? Like a national, tax funded single payer, cradle to grave health care system? I won't hold my breath for it! Still, interesting perspective here: https://truthout.org/articles/the-sv...ublic-banking/

As far as it goes, I totally subscribe to this statement: "This crisis was preventable. The Fed should have started inching rates up when the Fed first got religion, in 2014. Even if over time it amounted to only a half a point a year, the US would have gradually starved financial speculators of cheap leverage and have spared homeowners serious pain.", and "With getting this late start, the monetary authorities should have recognized even more that it would not take that much in the way of interest rate increases to produce meaningful bond losses, which would inevitably hurt at least some, and potentially many, banks. Yet the regulators were caught with their pants down.".

Everybody was drinking the equity price trajectory happy juice fermented during the years of near zero interest rates, thinking that the party could never end. It's smelling kinda rancid now.

Article, which I haven't finished reading, here: https://www.nakedcapitalism.com/2023...-freakout.html

That ^^ and serious evaluation about reinstating Glass Steagall.

So much to learn; so little time in a life.

The idea of a a public bank as utility which may be appealing as a narrative, doesn't really work in practice. The closest thing I know is Yucho (Japan Post Bank which is former banking arm of Japan Post Office). It was the largest bank in the world from a deposit base up until about 2019 when JP Morgan went past it. The 'loan book' is restricted to 35% of Deposits by regulations, but in reality it doesn't even get that large. The loan book is about 20% of deposits so for a utility which should provide credit to the public good, it completely fails. It has also had its fair share of scandals in the past 5 years- everything from mis-selling insurance, stealing money from customers accounts, changing dates on transactions. So the issue not whether the bank is capitalistic or public, it is people involved sometimes have different motives. Both banks will have scandals, and which is actually better for the public is a question. I think a public bank which will immediately because a political piggy bank is just as if not more likely to make mal-investment as a greedy capitalist. The recipients are just different. It's not our crook, it's your crook. But crooks are crooks.

Susan Webber as a blogger on Naked Capitalist (aka Yves) can be insightful when speaking about regulations and bank fraud. But when looking at broader economic trends, she gets over her head pretty quickly.

The narrative of the FED should have started hiking in 2014 is not really relevant. They did start in early 2015, and if you look at the economic data at the time (CPI, 10 Year, GDP etc) they did not do a bad job. They maybe did not need to cut so aggressively in 2019, but former President Trump was really banging the drum because the economy was slowing and he was afraid he would not be re-elected with a slow economy.

But none of this really mattered because COVID hit in early 2020, and with a crash in the economy, unprecedented job losses, the FED really had no choice but to cut rates to essentially zero and inflate their balance sheet. The bond buying and fiscal stimulus from congress was also needed.

If you look at the archives of 2020, Naked Capitalist is not really complaining about any economy stimulus, they are just like the rest of us and wondering how many people will get sick and die. If the economy will recover, how long will it take to recover. What will happen to the airlines..... etc etc

Fast forward to now, we finally have to pay the bill. Considering how extreme everything was in 2020, the fact that SIVB failed really doesn't seem that big of deal or cost. All in all, I'd say the FED did a pretty darn good job. They maybe could moved faster on hiking rates, but politically it was difficult with everything else going on, and the Russian invasion of Ukraine was a real curve ball.



US Generic 10 Y rate,
FDTR Fed Fund Target Rate upper bound
CPI YOY