June 23, 2009, iTulip

Why did the government take so long to comment? Why did government representatives say so little? Why were the perpetrators Japanese? Why did the Italian authorities let them go? Why has the mainstream media said so little about it? No secrets revealed!  More …

June 18, 2009, iTulip

What happened: In a time when public trust in government and media are at an all time low, conspiracy theories flourish, creating a broad platform for demagoguery. The recent story of the $134.5 billion in fake U.S. bonds is a case in point.

In News of the Weird: June 10, 2009 we were the first U.S. website to cover the case of the $134.5 billion in fake U.S. government bonds after one of our readers located the story on a German site. We posted the first video about it the same day, June 10. Other sites picked it up the next day and put various conspiracy spins to it. Since then the story has been picked up by hundreds of sites around the world. Conspiracy theories quickly took the limelight.  More …

June 2, 2009, iTulip

Back when we started talking up gold in August 2001 when the metal traded at $270, if we suggested that some day a large insurance company will buy hundreds of millions of dollars worth of gold to “hedge against further asset declines” we’d have been laughed off the Internet. And then…

Northwestern Mutual Makes First Gold Buy in 152 Years
June 1, 2009 (Bloomberg - Andrew Frye)

Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines. 

AntiSpin: Today, with this announcement, gold officially exited the Early Adopter stage of market development and entered the Early Majority stage.  More …

May 29, 2009, iTulip

Throwing new potential buyers into the maw of ARM resets and rising interest rates is a formula for a second housing disaster

We receive frequent reports that housing is “recovering” and hear anecdotal stories about potential home buyers looking to take advantage of “low” housing prices and the government’s tempting $8,00 HUD tax credit for new home buyers. Readers are reminded that government subsidy of the housing industry is what got us into this mess in the first place, and luring unsuspecting new buyers into a falling market will not correct the trust problem created by years of permissive lending.  More …

April 28, 2009, iTulip

Mexico City taking cover as deadly swine flu outbreak hits
Saturday, April 25, 2009 (The Dallas Morning News - By LAURENCE ILIF)

Mexico City Mayor Marcelo Ebrard said public and private mass events would be suspended in coming days but suggested that nightclubs or similar private businesses would not be affected.

“I’m asking the population to avoid contacts to the extent possible and activities with agglomerations of people. We are not going to suspend economic activities, but we are trying to avoid greater contacts,” he said at a news conference.

“What we have to do is avoid the propagation of the virus, its exponential growth, because it’s a new virus,” he said.

“The next 10 days will be strategic in order to win the battle.”

AntiSpin: The Mayor in his statement repeated that phrase “economic activities” at least six times in his one minute speech. In doing so he made his government’s priorities abundantly clear: public health risk be damned, tax revenue generating economic activities must go on.  More …

January 24, 2009, iTulip

Japan’s post bubble economy is held up by many economic commentators as a model of America’s deflationary future. Aside from major differences between the US and Japanese economies, the assertion that Japan has experienced a continuous deflation does not hold up to examination of the evidence.

Looking at the actual changes in the money supply, inflation, and economic growth after application of monetary and fiscal injections, rather than only whether CPI or GDP were positive in Japan, is key to understanding what happened in Japan over the past 18 years since the stock market and property bubbles collapsed there. In fact, the response of the economy to stimulus offers a far more relevant lesson for anyone looking to Japan for lessons on deflation and inflation.  More …

January 13, 2009, iTulip

Jan. 12, 2009 (Jane Sutton - Reuters)

A pilot wanted on financial fraud charges parachuted out of his plane over Alabama and allowed the aircraft to crash in neighboring Florida in an apparent attempt to fake his death, sheriff’s investigators said on Monday.

Authorities launched a manhunt for the pilot, who survived and checked into an Alabama hotel, and then fled, the Santa Rosa County, Florida, sheriff’s office said.  More …

November 7, 2008, iTulip

November 06, 2008 (Peter Foster, Financial Post)

As Barack Obama climbs that steep learning curve on the economy, let’s hope aides of shielded him from the latest issue of Harper’s. A series of articles on “How to Save Capitalism” in the latest edition of the magazine invites as much skepticism as would, say, a series on “How to Save Communism” in The Wall Street Journal. Still, at least it amounts to some kind of acknowledgment that capitalism is here to stay, even if Harper’s ideas of salvation would be toxic.

The reflexive liberal reaction to the current financial crisis has been to recommend lots of new regulations without considering either whether these regulations are now necessary, or bothering to reflect on why regulatory regimes have failed so conspicuously in the past.

In its introduction, the magazine displays its misapprehension of the issue at hand by suggesting that “capitalists” have done a bad job of meeting their “responsibility” to save capitalism. However, as my colleague Terence Corcoran noted on this page earlier this week, capitalists are often the very last people who should be relied upon to defend capitalism. Neither is it the job of “eminent financiers” to “protect us from economic shocks.” Meanwhile the “masters of our economy” identified by the magazine are not capitalists but politicians and bureaucrats, thus what has arguably been undermined is not the case for capitalism, but the case for “economic security.”

Such a way of thinking, however, is beyond most of Harper’s contributors, with the sole exception of Eric Janszen, a businessman, who identifies the key role of the government in promoting bubbles, and is the single correspondent who even acknowledges the existence of Fannie Mae and Freddie Mac. Mr. Janszen wants to end subsidies to industrial dinosaurs such as the auto sector, and recommends the greater use of public-private partnerships! How did this guy get in here?  More …

October 30, 2008, iTulip

Central bank says it will cut rates as needed to boost economy

Last update: 4:52 p.m. EDT Oct. 30, 2009

WASHINGTON (MarketWatch) — The Federal Reserve on Wednesday slashed overnight interest rates and left the door open for more cuts — all part of an effort to return confidence to investors so that a cratered economy doesn’t crater further.

AntiSpin: Note the date, one year in the future. Zero percent is where we are headed and likely sooner than a year from now. Then what? Would you believe a government issued debit card?  More …

July 1, 2009, iTulip

The reporting of today’s auto unit sale numbers reminds us that most people still don’t understand that this is not just a bad recession

The collapse of the FIRE Economy caught most mainstream economics reporters and editors by surprise. Since then the quality of coverage of economic data has improved somewhat. Sure we still hear “green shoots” sold hard, as if the load of debt that hold the economy back can be wished away, yet we also see more skepticism and less willingness to accept assertions by industry analysts and economists at face value. Reports on economic data still lack historical perspective, and at least most don’t read like press releases anymore, but readers are still being set up for major disappointment.  More …

June 26, 2009, iTulip

• Slowed by green parachutes
• Bond market suspends disbelief
• Why China is nervous

We have all heard that the U.S. economy cannot go the way of Argentina in 2001 when foreign investors expressed lost confidence in the government by refusing to roll over maturing short-term government bonds. Money fled the country as foreign currency reserves dwindled. A balance of payments crisis facilitated by investor panic led to the very outcome investor’s feared: the world’s largest ever sovereign bond default, a collapsing currency, and hyperinflation.

That can never happen here in the U.S., we are told. The U.S. owes its foreign debts in its own currency. U.S. lenders will never shoot themselves in the foot by allowing a dollar debt and currency crisis to develop because they depend on the U.S. for trade to support their own domestic economies; foreign central banks will continue to step in for the U.S. where the IMF failed Argentina. They will keep buying U.S. debt forever no matter how large U.S. fiscal deficits become or how much bad debt the Federal Reserve takes onto its balance sheet.

But this no more than an argument that an exact replica of an Argentina 2001 debt and currency crisis is unlikely in the U.S., and of course that is true. But that does not mean that a related, equally unseemly but fundamentally different catastrophic result may follow from similar causes and triggers. Evidence abounds that the U.S. is trapped in a cycle from which a kind of Argentine style default with U.S. characteristics is all but inevitable.  More …

June 17, 2009, iTulip

• Cyrillic letter depicts the FIRE Economy Depression
• Defusing the Dollar Bomb
• What mixes like oil and water? Deflation theory and $70 oil.

Forget the boom bust cycle. This economic crisis spells the end of the FIRE Economy. The elongated process of devolution has many components, from the FIRE Economy debt hangover that drives the Debt Deflation Bear Market to Peak Cheap Oil. Going into midterm elections in 2010 with U-3 unemployment over 10%, the political component looms large.  More …

June 11, 2009, iTulip

Last year’s financial crisis ripped out the thread of credit that held the fabric of our global economy together. Our new iTulip weekly feature of chronicles the unraveling through stories submitted by our readers from around the world. This week’s theme: We demand!

• Spendthrift government demands spending limits on itself
• European socialists demand American try free markets
• American and French companies demand to not “Buy American’’
• Japanese smugglers of $134.5 billion in US Treasury bonds demand… wait, what?  More …

June 5, 2009, iTulip

The following fictional conversation never occurred in June 2009 between Treasury Secretary Tim Geithner and a Chinese negotiator named Cheng for the sale of U.S. assets, at least not that we know of.

The first fictional meeting July 3, 2007 between Cheng and America’s representative broke off without a deal. Maybe Geithner did better on his latest trip to China.

Cheng: You’re back.

Geithner: I’m here to represent the government of the people of the United States of America…

Cheng: Of course you are.

Geithner: …and I’d like to begin by saying that I cannot speak to commitments made by the previous administration by my predecessor…

Cheng: This is the difficulty with your “multi-party� system. Leadership change there between your two political parties controverts the principle of accountability that is supposedly the chief benefit of your so-called “democratic� system. The system is supposed to replace ineffective leadership with more effective leadership. Represent the will of the people? In truth both political parties in the United States are captives of  your finance, insurance, real estate, weapons manufacturing, and pharmaceutical industries that finance elections there. The leaders they choose constantly rotate in and out of power, avoiding blame for the problems they leave behind. Voters chase one meaningless promise for “change� after another. The latest administration is not held responsible for the previous administration’s mistakes. There is no continuity or sustained effort toward a goal for the nation and its people. Errors accumulate.

Geithner: I do not hope to get into a political argument…

Cheng: I’m getting to my point. The greatest accumulated error of all? Foreign government debt.  More …

June 1, 2009, iTulip

A recent GQ article quoted Nassim Nicholas Taleb as saying that in the falling market he “made $20 billion for our clients, half a billion for the Black Swan fund.� I checked with Nassim Taleb regarding the $20 billion in gains and asked if he were misquoted. He responded via email: “The quote is inaccurate. The $20 billion might correspond to the face value of positions.�

This response is both vague and different in character from the mythical $20 billion in gains inaccurately quoted in GQ’s article. The total gains could be a tiny fraction of what Taleb loosely describes as “face value.â€�  More …