The Big Picture

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• Conversations with Great Minds with David Stockman
• Will Greece Pull an Iceland?
• 7 Billion: How Did We Get So Big So Fast?
• Mid-Week PM Reads
• Should You Invest in Groupon IPO?
• The UN Predicts The World’s Population Explosion
• More on FOMC
• NASA: Working on Tractor Beams
• FOMC speaks, Evans says do more
• Mike Mayo’s Exile on Wall Street

Conversations with Great Minds with David Stockman Posted: 03 Nov 2011 03:08 AM PDT Tonight we have a special edition of Conversations with Great Minds is David Stockman. He is a former United States congressman – representing the state of Michigan – who was elected to three terms before stepping down to head up the Office of Management and Budget under President Ronald Reagan in 1981. He is credited with writing the Reagan Budget – and continued his work on federal budgeting through 1985. After leaving politics, David Stockman pursued a career in investment banking and joined Blackstone Group as one of its earliest partners. He is the author of the book, “Triumph of Politics: How the Reagan Revolution Failed” and his new book – tentatively titled “The Triumph of Crony Capitalism” – will explore how crony capitalism reached a peak during the recent financial meltdown. David talk to Thom about Reagan would be raising taxes right now, the Republican party has gone crazy and we need to get control of the Fed. Part II

Will Greece Pull an Iceland? Posted: 02 Nov 2011 10:30 PM PDT Iceland Told the Banks to Pound Sand … And Thereby Saved Its Economy Iceland told the banks to pound sand. And Iceland's economy is doing much better than virtually all of the country's who have let the banks push them around. Barry Ritholtz noted in May: Rather than bailout the banks — Iceland could not have done so even if they wanted to — they guaranteed deposits (the way our FDIC does), and let the normal capitalistic process of failure run its course. They are now much much better for it than the countries like the US and Ireland who did not. Bloomberg pointed out in February: Unlike other nations, including the U.S. and Ireland, which injected billions of dollars of capital into their financial institutions to keep them afloat, Iceland placed its biggest lenders in receivership. It chose not to protect creditors of the country's banks, whose assets had ballooned to $209 billion, 11 times gross domestic product. *** "Iceland did the right thing by making sure its payment systems continued to function while creditors, not the taxpayers, shouldered the losses of banks," says Nobel laureate Joseph Stiglitz, an economics professor at Columbia University in New York. "Ireland's done all the wrong things, on the other hand. That's probably the worst model." Ireland guaranteed all the liabilities of its banks when they ran into trouble and has been injecting capital — 46 billion euros ($64 billion) so far — to prop them up. That brought the country to the brink of ruin, forcing it to accept a rescue package from the European Union in December. *** Countries with larger banking systems can follow Iceland's example, says Adriaan van der Knaap, a managing director at UBS AG. "It wouldn't upset the financial system," says Van der Knaap, who has advised Iceland's bank resolution committees. *** Arni Pall Arnason, 44, Iceland's minister of economic affairs, says the decision to make debt holders share the pain saved the country's future. "If we'd guaranteed all the banks' liabilities, we'd be in the same situation as Ireland," says Arnason, whose Social Democratic Alliance was a junior coalition partner in the Haarde government. *** "In the beginning, banks and other financial institutions in Europe were telling us, 'Never again will we lend to you,'" Einarsdottir says. "Then it was 10 years, then 5. Now they say they might soon be ready to lend again." Even the IMF praises Iceland's strategy: As the first country to experience the full force of the global economic crisis, Iceland is now held up as an example by some of how to overcome deep economic dislocation without undoing the social fabric. Greece Faces the Same Choice As Robert Reich notes, the same choice – telling the foreign banks to pound sand or caving in – is now faced by Greece: Greek Prime Minister George Papandreou decided in favor of democracy yesterday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out. (Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans – not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.) *** We've been here before, remember? Here in the United States, at the end of 2008 and start of 2009. Wall Street had made lots of bad loans, and the question we faced then was whether to bail out the Street. The difference is, we didn't hold a referendum. Instead, the Bush administration told Congress the nation risked "economic Armageddon" if it didn't immediately authorize a giant bailout of the Street – with no strings attached. [Our comment: Indeed, Paulson threatened martial law if the bailouts weren't approved.] Of course Congress hastily agreed. Hank Paulson, Ben Bernanke, and Tim Geithner (as head of the New York Fed) then doled out the money. And the Obama administration (with Geithner installed as Treasury Secretary) gave out more. So instead of allowing the Street to live with the consequences of its negligence, we bailed it out – and allowed the Main Streets of America to suffer the consequences. If Americans had been consulted about the bank bailout, I doubt it would have happened the way it did. [Our comment: Polls showedthat Americans were overwhelmingly against the bailouts.  And see this.]  At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They'd be required to improve the capitalization of small banks in communities across the country. They'd be forced to accept stringent new regulations, including resurrection of Glass-Steagall. [And see this, this and this.] But Americans weren't really consulted. It was an inside job.

7 Billion: How Did We Get So Big So Fast? Posted: 02 Nov 2011 02:30 PM PDT It was just over two centuries ago that the global population was 1 billion — in 1804. But better medicine and improved agriculture resulted in higher life expectancy for children, dramatically increasing the world population, especially in the West. As higher standards of living and better health care are reaching more parts of the world, the rates of fertility — and population growth — have started to slow down, though the population will continue to grow for the foreseeable future. U.N. forecasts suggest the world population could hit a peak of 10.1 billion by 2100 before beginning to decline. But exact numbers are hard to come by — just small variations in fertility rates could mean a population of 15 billion by the end of the century. Produced by Adam Cole Cinematography by Maggie Starbard

Mid-Week PM Reads Posted: 02 Nov 2011 02:30 PM PDT My afternoon train reading: • Lowenstein: Corzine Forgot Lessons of Long-Term Capital (Bloomberg) • ‘Zombie’ Properties Come Back to Life (WSJ) see also Consumer Bankruptcies Decline (Real Time Eonomics) • Fast cars and loose fiscal morals: there are more Porsches in Greece than taxpayers declaring 50,000 euro incomes (Telegraph) • China Pushes Electric Car Market with Hefty Subsidies and More (GreenBiz) • Obama Wrote 5% Fewer Rules Than Bush While Costing Business (Bloomberg) • Big Brands Like Facebook, But They Don’t Like to Pay (WSJ) • INSIDE GROUPON: The Truth About The World’s Most Controversial Company (Business Insider) • Who’s behind the ‘information attacks’ on climate scientists? (Southern Studies) • Book Review: Thinking, Fast and Slow by Daniel Kahneman (Businessweek) • Elizabeth Warren's winning formula (Washington Post) What are you reading?

Should You Invest in Groupon IPO? Posted: 02 Nov 2011 01:00 PM PDT Hilarity courtesy of BetaBeat: > Hat tip Josh

The UN Predicts The World’s Population Explosion Posted: 02 Nov 2011 11:30 AM PDT Click on countries to select: Source: The UN Predicts The World’s Population Explosion The Guardian, October 26, 2011

More on FOMC Posted: 02 Nov 2011 11:00 AM PDT Two more things on the FOMC. With all the tough talk from Fed Pres Fisher on current Fed policy and his stated distaste for QE2, timeline on a near zero fed funds rate and OT, he decided not to dissent today. Neither did Plosser and Kocherlakota. Thus, any hawkishness and reservations that they have expressed with their previous dissents doesn’t square with their vote for current policy. Also, with Bernanke’s press conference, the Fed will reveal new economic forecasts on growth and inflation for the next few years but if there is one thing everyone should know by now, never pay attention to them because they are rarely correct.

NASA: Working on Tractor Beams Posted: 02 Nov 2011 10:29 AM PDT ‘Tractor beams — the ability to trap and move objects using laser light — are the stuff of science fiction, but a team of NASA scientists has won funding to study the concept for remotely capturing planetary or atmospheric particles and delivering them to a robotic rover or orbiting spacecraft for analysis. This animation shows how a hypothetical future mission might eventually employ tractor beam technology.’ Date- 31st Oct 11 Source- http://www.nasa.gov/centers/goddard/home/index.html Hat tip boingboing

FOMC speaks, Evans says do more Posted: 02 Nov 2011 09:21 AM PDT After saying that economic growth remains slow in Sept, the FOMC today said “growth strengthened somewhat in Q3, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year.” They also cited household spending that “increased at a somewhat faster pace in recent months.” Other comments on the economy are similar to the Sept statement. On inflation, they still have no worries and said again “inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks.” Thus, the Fed is on record saying that $93 crude oil is not inflationary because its below its 2011 high of $115. They should explain that to main street. On OT and MBS purchases, they remain on track with what as announced in Sept. Evans, wildly dovish, wanted more accommodation and that reveals nothing new about him as he hinted at it in a talk a few weeks ago. What he thinks more accommodation will do is worth asking but Turullo, Dudley and Yellen are close to QE3 too and be sure Bernanke is also. QE3 is thus a matter of time, not if with this Fed. Two more things on the FOMC. With all the tough talk from Fed Pres Fisher on current Fed policy and his stated distaste for QE2, timeline on a near zero fed funds rate and OT, he decided not to dissent today. Neither did Plosser and Kocherlakota. Thus, any hawkishness and reservations that they have expressed with their previous dissents doesn’t square with their vote for current policy. Also, with Bernanke’s press conference, the Fed will reveal new economic forecasts on growth and inflation for the next few years but if there is one thing everyone should know by now, never pay attention to them because they are rarely correct.

Mike Mayo’s Exile on Wall Street Posted: 02 Nov 2011 09:00 AM PDT Mike Mayo, bank analyst at Credit Agricole Securities USA, talks about his new book, “Exile on Wall Street: One Analyst’s Fight to Save the Big Banks from Themselves.” He speaks with Tom Keene and Christine Harper on Bloomberg Television’s “Surveillance Midday.” Source: Bloomberg Nov. 1 2011

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