If hypocrisy was money, the recession would end today

Juiced up by Rick Santelli's myopic rant, conservatives are getting ready to throw "Tea Parties" to protest "all of this fiscal irresponsibility", referring to the huge Obama budget and its ensuing deficit.

What a joke.

It is true that the deficit is historically high, as a percentage of GDP, akin to deficits right after WWII. It is also true, that we are in an economic emergency equivalent to, or close to, that of the Great Depression. It is also true that Obama and his team are focused on solving the massive problems left to them, and are doing so in a manner so open it contrasts violently with the secrecy and Enron-like accounting practices that were hallmarks of the previous administration.

The big joke is that Santelli didn't rant during the 8 years of fiscal irresponsibility that brought this mess upon us, and I didn't hear him rant last October when it became absolutely clear that the deficit under the next president would reach these heights in order to avoid a total global catastrophe, thanks in large part to George W. Bush's "guns and butter" fiscal train wreck.

The joke is that these people are masquerading as patriots when they should be treated as traitors. These "patriots" continue to do the only thing they know how, stir up anger and division, during a time when level-headedness and cooperation are the call of duty.

Not funny in the least.

In Ponzi We Trust

Right after the Madoff scandal I wondered aloud, via Twitter, to Paul Kedrosky if all of Wall Street was a Ponzi scheme. He replied that the Madoff scandal would severly damage trust in US markets.

Today, a Citywire article quoting Bill Gross, famed bond-fund manager at Pimco, says he finds Ponzi-like schemes across the entire US economy.

It reminds me of a quote I heard on CNBC (I can't remember who said it) late last year when a guest analyst said "C'mon. The entire US economy is based on lending people money they can't afford to buy things they don't need".

By any other name would smell as bad.

"What's in a name? That which we call a rose
By any other name would smell as sweet."

Shakespeare would have had much fun with the names of today's tragic heroes that now litter the hollowed canyons of Wall Street.

At Enron, they pulled a Fastow and made a Skilling. Word on the Street is, everyone there was getting Lay-ed.

Yet the party raged on. Capulets slept with Montagues and Montagues with Capulets, late into the night, weaving the fabric of high society. And in the morning, as Wall Street slumbered 'neath its incestuous wool, no one ever imagined that one of their own had Madoff with all the money.


Got another? Post it here!

Bush Shoe Bomber

It seems both small and not small.

That Bush's war is penetrated by a couple of size tens from an Iraqi journo at the end of it all. His Presidency, that is.

The Way the Cookie Crumbles

Mike Shedlock's piece on the Madoff madness underlines the fundamental reason why faith in the "powers that be" is crumbling like a dry cookie.  

It's a house of lies.

Let's consider a few items, shall we?

The CIA never imagined that terrorists would fly jetliners into buildings.

Alan Greenspan never saw the looming credit crisis in 2007, even though a newbie mortgage broker saw it coming in 2005, the minute he joined the industry, and blogged about it.

"If BS were poetry we would all be millionaires. That’s what my aunt would say."

No one could see Enron coming.

And no one on Wall Street could see the Madoff debacle coming...except the "smart money".

Barron's wrote about the mystery of Madoff's returns in 2001.  Sophisticated investors reverse engineered the strategy and said the returns just didn't add up.

But the insiders kept investing with him.  Why?    

Because, as Shedlock points out, they got the lie wrong.  They thought insider trading, made possible by Madoff's huge market making business, was facilitating the fraud, not a simple Ponzi scheme.  Had it been insider trading that would have been just fine with them because the money would have been there and they could cash in on the lie too. 

And so it goes.

But truly, we owe these liars a debt of gratitude for finally imploding the old and broken system so we can replace it with something new.  It's been a long time coming.

I leave you with lyrics to a collaborative poem, "That's the Way", by Tom Waits and William Burroughs:

That's the way the stomach rumbles
That's the way the bee bumbles
That's the way the needle pricks
That's the way the glue sticks
That's the way the potato mashes
That's the way the pan flashes
That's the way the market crashes
That's the way the whip lashes
That's the way the teeth knashes
That's the way the gravy stains
That's the way the moon wanes

Twitterfeed Setup

Ok. So I think I set this up right. I am so spoiled by technology that I'm frustrated it took all of five minutes and didn't cost me anything.

Homer Simpson said it best, "Five seconds?!! I want it NOW!!!"

Mad Mad Mad Madoff World (Update)

Wall Street Manna reports on a Barron's story back in 2001 that was onto Madoff's "don't ask, don't tell policy". The Barron's piece elucidates so nicely how Madoff plucked the social strings of the wealthy elite to lull them to sleep as he robbed Peter to rob Paul (See It's a Mad Mad Mad Madoff World). And after the story came out everyone looked the other way for another 7 years. Well, almost everyone.

This quote from one investor whose eyes began to itch says it all:

"What Madoff told us was, 'If you invest with me, you must never tell anyone that you're invested with me. It's no one's business what goes on here,'" says an investment manager who took over a pool of assets that included an investment in a Madoff fund. "When he couldn't explain \ how they were up or down in a particular month," he added, "I pulled the money out."


As for Ponzi schemes, I wondered aloud after this story broke if all of Wall Street is a Ponzi scheme. It may be a stretch but, in a way, doesn't the current situation prove this? If the money was there then there would be no problem. But the money isn't there. Lots of it isn't there.

But don't listen to me. I am not an economist or a hedge fund manager. I'm just a lucky dummy who got scared of the market last summer and put all my savings into cash.

It's a Mad Mad Mad Madoff World

A Paul Kedrosky tweet informed me of today's arrest of Bernard Madoff for perpetrating perhaps the largest Ponzi scheme...ever.

What's so not funny is Madoff's central role on Wall Street over nearly five decades. He was Vice Governor of the NASD (among numerous high profile regulatory roles), which is supposed to keep an eye on wrongdoers, though anyone who knows a little bit about the ins and outs of Wall Street knows that this dog never had any teeth.

It's so not funny because everyone knows that trust is central to healthy markets. And when trust goes away so do investors. But my guess is that if not everyone, most people had a little voice in the back of their heads that told them to look the other way whenever little things, like the non-disclosure around hedge funds, CDSs and myriad other "instruments" of high-finance , threatened to turn market believers into skeptics.

And why not let a few items slip past the collective ethical gatekeeper? After all, nearly all of us has a good portion, if not all, of our nest eggs invested somewhere around "The Street", right?

And who wouldn't place their money with Bernard Madoff? Turns out the rich and powerful, those most likely to know more about those sniggling little items slipping past the ethical gatekeeper, trusted their millions to Bernard. Of all people, Mr. Madoff was likely tuned to the gatekeeper's little secret more than most, so he placed his own little devil above his door to whisper sweet nothings into the ears of the unconsciously suspecting millionaires and billionaires he fleeced over the years:


“In an era of faceless organizations owned by other equally faceless organizations, Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner’s name is on the door...Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark.”


But Mr. Madoff is surely the exception to the rule. Don't you think?

Day One

It's difficult to scour the news, blogs, and other sources without wanting to chime in. Whether it's the Plame Name Blame Game and marketing the War in Iraq or Seth Godin's increasingly annoying (remarkably so) postings, there is plenty worth chiming in on, and plenty worth ignoring. The big question is where to begin, and how to make this particular voice in the discussion worthwhile.

Since I have no answer to this big question just now I will take a moment to step back and think about it some more.