28 September, 2008

Closing the Collapse Gap

Here is a striking article comparing the possible -- inevitable -- collapse of USA with the collapse of USSR. This was a presentation made in 2006 and events over the past decade have been propelling USA in an ominous way.

It doesn't necessarily assert that the USSR was, by deliberation, better prepared. But that the US isn't in as strong a position should it's economy collapse.......

The author keeps updating his blog.

16 September, 2008

How Risky Are American Assets ?

Michael Lewis pointedly says "this is the day that American financiers, from the point of view of the Asians who sit on top of the world's biggest pile of mobile capital, became a bad risk. " and concludes with "For 25 years Asian financial firms have been amazingly indulgent of U.S. investment bankers. What do you think they're saying about them -- and us --now? "

Regulation, Oversight, Risk Management, Controls

What do we think of when we hear words like "Regulation" or "Oversight" ? Who is responsible for "Risk Management" and "Controls" ? How are "Assets" to be valued ?

Welcome to the land of the brave and free where each of these words have seemed to mean nothing. From the DotCom crisis to Enron and WorldCom to the Housing Crisis to Bank Failures. Welcome to the land of Enterprise and the Individual being more important than the Society.

And that is the sort of Economy that the U.S. wanted / still wants the rest of the world to be ?

Jonathan Weil frames the situation well "Cops Get Caught Eating Doughnuts". "Never has it been more evident that the SEC and other government agencies think their job is to protect financial companies and financial executives, rather than the investors they rip off. "

How Sound are 'Free' Financial Systems ?

The first set of fears about the U.S. Housing market emerged in March/April 2007. Those fears were ignored. There was a panic in August 2007. Hundreds of Billions of Dollars were "pumped" into the Financial System then (by the US Federal Reserve, the European Central Bank and the Bank of Japan). Did that money get invested in worthwhile assets, building up real portfolios, loans to worthy borrowers, better asset classes ?
Suprisingly, while Stock Markets were still optimistinc, the price of Oil and other commoodities continued to rise at a rapid rate.
This year we've had Bear Stearns collapse. Then "Fannie Mae" and "Freddie Mac" {why can't we know and use their proper names ?} had to be "rescued" from colossal incompetence. Next goes Lehman Brothers. Merrill Lynch is "rescued" by Bank of America.

The DotCom collapse was quickly followed by the scandals of Enron, WorldCom, Tyco and others. Sarbanes Oxley was supposed to improve controls. Like DUH ??!! The very auditors and credit rating agencies couldn't see how bad were the investment "bankers" {have we all forgotten what a "banker" was supposed to mean -- "reliable, true to his word, knowing the value of money and assets" ?} at their jobs ?

How strong is the "Free Markets" system ? How resilient is it ? How could hundreds of billions in portfolios be allowed to disappear in less than a year without anyone really knowing the "Why" of those write-offs ?

In 1997 the US, the World Bank and the IMF were critical of Asia. This year it has been Asia that has been called upon to "rescue" those masters of money management and fiscal responsibility.