March 24, 2009
|We Been Tranched||Economy|
Collateralized mortgage obligations (CMOs) work something like this. A large number of mortgages are put into a trust, and the mortgages are then sliced into horizontal layers, or tranches. In a very simple example there might be three tranches. The top tranche might contain 70% of the mortgages by dollar amount, the middle tranche 20%, the bottom tranche 10%. The trick is that as payments come in on the mortgages, the top tranche gets first claim on all the incoming cash flow. People figured there was no way 30% of the mortgages would default so the top tier was definitely going to get paid, and so it got a triple-A rating, basically as good as money. The middle tranche got first dibs on the remaining cash flow, so it was golden, too, unless more than 10% of the mortgages defaulted. That made it more risky than the top, so it paid a higher rate of return, but it still seemed pretty solid. The bottom tranche was the last to get paid, so it was the riskiest, one of those toxic assets we hear so much about.
So I watch what's happening with the "bailout" plans, and it strikes me that it's tranches all over again. The top tranche consists of the likes of AIG, Citigroup, Bank of America, and JP Morgan Chase. They get paid first. If there's money left over, the middle tranche gets paid. That's GM and Chrysler and a bunch of smaller banks. The bottom tranche? That's us.
Actually, it's worse than that. Not only do we in the bottom tranche get paid last, we're the ones, collectively, who are doing the paying. The top tranche, meanwhile, consists of the firms most responsible for the mess we're in. They made the biggest, riskiest bets and raked in the largest returns until the bubble popped, and now they're first in line for payouts from us taxpayers. They, and their problems, are all we ever hear about.
What a hustle.
|Tuesday Gumpagraph||Gumpagraphs 2009|
|© Kent Tenney|
|Today's Joke||Humor & Fun|
Beautiful day in New York City today. In fact, it was so nice, the AIG executives were counting their bonuses in the park. — David Letterman
March 17, 2009
|That "Surprisingly Strong Housing Report"||Economy|
CNN says a "surprisingly strong housing report" was one factor causing stocks to go up again today.
This graph puts the housing report in perspective. It's that tiny little uptick at the end.
[Via John Robb]
|The Threat Of A Good Example?||Iran|
On the occasion of the 30th anniversary of Iran's Islamic Revolution, Ervand Abrahamian, author of A History of Modern Iran, asks, in Middle East Report, why has the Islamic Republic survived? His answer may surprise you. It surprised me (excerpt):
The real answer lies not in religion, but in economic and social populism. By the early 1970s, Iran had produced a generation of radical intelligentsia that was revolutionary not only in its politics — wanting to replace the monarchy with a republic — but in its economic and social outlook. It wanted to transform the class structure root and branch. The trailblazer was a young intellectual named Ali Shariati, who did not live to see the revolution but whose teachings fueled the revolutionary movement. Inspired by the Algerians, Che Guevara and Ho Chi Minh, Shariati spent his short life reinterpreting Shi‘ism as a revolutionary ideology and synthesizing it with Marxism. He produced what can be termed a Shi‘i version of Catholic liberation theology. His teachings struck a chord not just among college and high school students, but also among younger seminary students...Most of those who organized demonstrations and confrontations in the streets and bazaars during the turbulent months of 1978 were college and high school students inspired mainly by Shariati. His catch phrases — which had more in common with Third World populism than with conventional Shi‘ism — found their way, sometimes via Khomeini, into slogans and banners displayed throughout the revolution. Typical of them were: [...]Islam belongs to the oppressed, not the oppressors!
Oppressed of the world unite! [...]
Islam is for equality and social justice!
Islam represents the slum dwellers, not the palace dwellers! [...]
Islam comes from the masses, not the rich! [...]
Islam will free the hungry from the clutches of the rich! [...]
The poor die for the revolution, the rich plot against it! [...]
This populism helps explain not only the success of the revolution but also the continued survival of the Islamic Republic. The Republic's constitution — with 175 clauses — transformed these general aspirations into specific inscribed promises. It pledged to eliminate poverty, illiteracy, slums and unemployment. It also vowed to provide the population with free education, accessible medical care, decent housing, pensions, disability pay and unemployment insurance. "The government," the constitution declared, "has a legal obligation to provide the aforementioned services to every individual in the country." In short, the Islamic Republic promised to create a full-fledged welfare state — in its proper European, rather than derogatory American, sense.
In the three decades since the revolution, the Islamic Republic — despite its poor image abroad — has taken significant steps toward fulfilling these promises. It has done so by giving priority to social rather than military expenditures, and thus dramatically expanding the Ministries of Education, Health, Agriculture, Labor, Housing, Welfare and Social Security. The military consumed as much as 18 percent of the gross domestic product in the last years of the shah. Now it takes up as little as 4 percent. [...]
In three decades the regime has come close to eliminating illiteracy among the post-revolutionary generations, reducing the overall rate from 53 percent to 15 percent. The rate among women has fallen from 65 percent to 20 percent...The percentage of women in university student populations has gone up from 30 percent to 62 percent. Thanks to medical clinics, life expectancy at birth has increased from 56 to 70, and infant mortality has decreased from 104 to 25 per 1,000. Also thanks to medical clinics, the birth rate has fallen from an all-time high of 3.2 to 2.1, and the fertility rate — the average number of children born to a woman in her lifetime — from 7 to 3. It is expected to fall further to 2 by 2012 — in other words, Iran in the near future will achieve near zero population growth.
The Islamic Republic has bridged the chasm between urban and rural life in part by raising the prices of agricultural goods relative to other commodities and in part by introducing schools, medical clinics, roads, electricity and piped water into the countryside. For the first time ever, villagers can afford consumer goods, even motorbikes and pickup trucks. According to one economist who, on the whole, is critical of the regime, 80 percent of rural households own refrigerators, 77 percent televisions and 76 percent gas stoves. Some 220,000 peasant families, moreover, have received 850,000 hectares of land confiscated from the old elite. They, together with the some 660,000 families who had obtained land under the earlier White Revolution, form a substantial rural class that has benefited not only from these new social services but also from state-subsidized cooperatives and protective tariff walls. This class provides the regime with a rural social base.
The regime has also tackled problems of the urban poor. It has replaced slums with low-income housing, beautified the worst districts and extended electricity, water and sewage lines to working-class districts. As an American journalist highly critical of the regime's economic policies admits, "Iran has become a modern country with few visible signs of squalor." What is more, it has supplemented the income of the underclass — both rural and urban — by generously subsidizing bread, fuel, gas, heat, electricity, medicines and public transport. The regime may not have eradicated poverty nor appreciatively narrowed the gap between rich and poor but it has provided the underclass with a safety net. In the words of the same independent-minded economist, "Poverty has declined to an enviable level for middle-income developing countries."
Not exactly the picture we get in mainstream media.
Some things just can't be said out loud. Not in American public life. We are fed a cartoon version of history and current affairs. It makes us coarse and stupid.
Not to say that Iran is a paradise or the Iranians saints. But neither is Iran a hell and the Iranians devils. But there's a taboo against saying so.
|Tuesday Gumpagraph||Gumpagraphs 2009|
|© Kent Tenney|
An oldie, but a goodie.
|Today's Joke||Humor & Fun|
According to the New York Times, President Barack Obama plans to nominate Dr. Margaret A. Hamburg, a former New York City health commissioner to be the new head of the Food and Drug Administration. See, I think this is a chance for President Obama to step across party lines. You know who he should nominate for this job? Rush Limbaugh. No, no, think about it. Who has had more experience with food and drugs than Rush Limbaugh? — Jay Leno
March 13, 2009
|Follow pastpeak On Twitter||Media|
Miss me? I've been busy. But multiple times per day I read or think something that I'd post if I had the time.
So I'm going to try something new. We'll see how it goes. I've taken the name pastpeak on Twitter, and I'll try to "tweet" when I come across something interesting that can be stuffed into 140 characters or less. Links to interesting pages, but other things, too, hopefully.
I hope to get back to some real blogging, too, in the relatively near future. But in the meantime, sign up to follow me on Twitter. Let's see if anybody's still out there.
|Jon Stewart Plays Hardball||Economy Media|
You've probably seen this wonderful, wonderful bit from The Daily Show a little over a week ago:
CNBC's Jim Cramer took exception, and last night Stewart had him on the show. Stewart starts out funny, but then he plays some real hardball, in parts 2 and 3 especially. Unedited, uncensored version. Watch:
Why does it take a fake news show to ask real questions? (He asked rhetorically...)