Decline of the Empire

The $50 Billion Deal From Hell

Jon Stewart lambastes Bank of America (BOA) in a recent video called Make It Rain. It seems that BOA is screwing their credit card customers in anticipation of new rules that will make it harder for them to screw those customers in the future. Very late in the 10:33 minute segment, there is one allusion to Merrill Lynch's losses, which BOA is still trying to cover after they "acquired" Merrill late in 2008, a deal that was closed on January 1, 2009.

Who was responsible for this $50 Billion Deal From Hell? (Wall Street Journal, January 22, 2009)

Mergers often prove troublesome, but few have set the land-speed record for disaster as fast as Bank of America’s $50 billion acquisition of Merrill Lynch.

It is official. In Bank of America’s acquisition of Merrill Lynch is a candidate for the title of “A Deal from Hell.” You might remember that this is inspired by a book from Robert Bruner, dean of the Darden School of Business at the University of Virginia, “Deals From Hell: M&A Lessons That Rise Above the Ashes.” Bruner’s requirements for consideration included destruction of market value; financial instability; impaired strategic position; organizational weakness; damaged reputation; or violation of ethical norms and laws.

Check, check, check, check, check and mate. 

Bank of America and Merrill Lynch arranged the deal in less than 48 hours, and the hasty work shows. Thain’s departure Thursday is the clincher, particularly on the matter of the culture clash to come between Bank of America and Merrill Lynch. Dealbreaker has the internal memo here.

When BOA CEO Ken Lewis became aware of the impressive size of Merrill's losses, he wanted to back out of the deal. But that wasn't going to happen—this was a shot-gun wedding.

What happened last winter?

The House panel's questions about the BofA-Merrill deal stem from separate probes by the New York Attorney General's Office and the Special Inspector General for the Troubled Asset Relief Program, the $700 billion bailout program enacted last October.

In December, Bank of America CEO Kenneth Lewis approached regulators, including Paulson and Fed Chairman Ben Bernanke, and threatened to scuttle the acquisition after discovering the scope of Merrill's losses, according to records released by New York Attorney General Andrew Cuomo.

In his prepared testimony, Paulson said he believed that the economy, the financial markets and firms were "fragile" at that point. He was worried that there wasn't enough money in the federal bailout program to "respond to the financial chaos" to result from the collapse of the BofA-Merrill deal. He also wrote that he and other regulators believed that if the deal failed, the markets would question the health of BofA and put the bank's shareholders and the nation's financial system at risk.

After behind-the-scenes wrangling, BofA received $20 billion in aid in January on top of $25 billion it received last fall as part of TARP. The bank also got loss guarantees on $118 billion in assets to help the company absorb its purchase.

Paulson defended the extra bailout funding, saying he had made it clear since October that the government would act to prevent failure of systemically important firms.

"It was clear that if the merger proceeded, and the combined Bank of America-Merrill Lynch entity needed financial support, the government would work to provide such appropriate and necessary support," Paulson said in his prepared remarks. Last month, when testifying before the House panel, Bernanke denied accusations that he threatened to replace Bank of America managers if they didn't go through with the purchase of Merrill.

Lewis told lawmakers that he felt pressure to go through with the acquisition.

Ken Lewis felt pressure? If he wanted to keep his job, that is. From Mish's Let The Criminal Indictments Begin: Paulson, Bernanke, Lewis—

New York State Attorney General Andrew Cuomo's letter to the SEC and Senate Banking Committee on the Bank of America, Merrill Lynch Merger provides strong evidence of coercion to commit securities fraud by former Treasury Secretary Paulson and Fed Chairman Ben Bernanke, and actual securities fraud by Bank of America CEO Kenneth D. Lewis...

It's crystal clear from the letter that a strong case can be made that Paulson and Bernanke coerced Lewis to carry out a merger agreement that was not in Bank of America's shareholders best interest. Lewis arguably did so only to save his own job and the board.

The quid pro quo is clear enough. If Lewis does the deal, he gets the bailout money. If Kenny resists, he and his board gets fired by the government. Life is not nearly as complicated as it is often portrayed. Of course, Kenny should still refuse the deal because it is his fiduciary responsibility to maintain the financial integrity of the bank, but here he put himself above that sacred obligation. And Paulson, and perhaps Bernanke, should be under investigation by a Grand Jury which, if the American Justice System were operating correctly, would likely produce criminal indictments for illegal coercion.

So it's easy enough for Jon Stewart to skewer BOA for screwing its customers, but the Comedy Channel's report actually misses the point by a wide margin. And the rabbit hole goes much deeper than I've described here. Why did Paulson (and now Geithner) feel so strongly that it was so important to "prevent [the] failure of systematically important firms"? The story you're told is that the economy could never "recover" until, once again, credit flowed like wine at a Roman Orgy, which meant to neutral observers like former Goldman Sachs CEO Henry Paulson or former New York Fed chief Tim Geithner that the Really Big Banks could not be allowed to fail.

Plainly, since each new dollar of GDP has required more and more private debt to support it, this rationale "makes sense" in so far as it upholds business as usual. Not mentioned is that business as usual is insane. And just coincidentally, business as usual ensures that a huge amount of money flows towards banks that are Too-Big-To-Fail. Another flaw in this otherwise stellar reasoning was the failure to foresee that a shitload of small- or medium-sized banks would be crushed under the weight of their bad investments, especially in commercial real-estate. Nobody saved them. (Fannie and Freddie are absorbing most of the housing losses now.) The predictable result is that lending has been falling at an epic pace—

U.S. banks posted last year their sharpest decline in lending since 1942, suggesting that the industry's continued slide is making it harder for the economy to recover.

While top-tier banks are recovering at a faster clip, the rest of the industry is still suffering, according to a quarterly report from the Federal Deposit Insurance Corp. Banks fighting for survival, especially those plagued by losses on commercial real estate, are less willing to extend loans, siphoning credit from businesses and consumers.

Besides registering their biggest full-year decline in total loans outstanding in 67 years, U.S. banks set a number of grim milestones. According to the FDIC, the number of U.S. banks at risk of failing hit a 16-year high at 702. More than 5% of all loans were at least three months past due, the highest level recorded in the 26 years the data have been collected. And the problems are expected to last through 2010...

So when you see heartbreaking videos like the one below, I hope you will remember what the Real Story is. It is the sordid tale of an Empire In Decline, a place where fairness no longer exists and corruption taints all things.

Remedy du Jour -- February 27, 2010

Good for what ails us. First up is Melody Gardot's original song Worrisome Heart, followed by Ben Webster doing Billy Strayhorn's jazz classic Chelsea Bridge.  Finally, as I'm sure you're aware, there are plenty of people in Central Services that would love to get their hands on Harry Tuttle ... a great clip from Terry Gilliam's Brazil.

Beware the Double Dip!

Both Mish at Global Economic Analysis and Bill at Calculated Risk are hammering us with bad news. Despite the fact that the BEA revised 2009 4th quarter GDP upwards to 5.9%—will wonders never cease?—most of the current indicators are looking bad. Surprise, surprise!

I'm simply alerting you to what's going on here. Read Calculated Risk on distressing housing indicators like existing home sales, which plunged dramatically last month. Yes, I know it was January, and I know it was snowing, but ever since the first-time home buyers credit expired, and even though it was extended, existing home sales are trying to find a bottom.

Cliff Diving in Home Sales from Calculated Risk

Mish looks at some gloomy data in Nascent Recovery or Nascent Economic Collapse? That article doesn't include the rise in weekly unemployment claims. Finally, Calculated Risk critiques 2009 4th quarter GDP, pointing out that most of the rise came from an inventories boost and, most critically, he notes that personal consumption expenditures (PCE, final demand, 71% of GDP) was revised downward.

Changes in private inventories are transitory (only lasts a few quarters at the start of a recovery), and although the headline number was revised up, final demand was weaker than in the advance estimate. 

Here at Decline of the Empire, we don't believe that short-term indicators are a reliable guide to the longer term future, but the timing of events is unknown. A new downturn in the economy would provide quick confirmation of what we already know. We know this because our deeply flawed past determines the present, no matter how much stimulus you throw at the economy to boost final demand or how much public debt you accumulate. The Fed is still buying mortgage-backed securities, but the housing market is a shambles. These latest indicators are a bad sign. They portend a downhill slide that will occur sooner rather than later.

Well, it's Friday afternoon as we conclude another great week in America. It's time for a refreshing pick-me-up.

Beware the double dip!

Basically, It's Over

86-year old Charlie Munger, Warren Buffet's long-time investment partner, has decided that Basically, It's Over. The article, subtitled "a parable about how one nation came to financial ruin," was published in Slate Magazine on February 21, 2010. No doubt Charlie is not a reader of Decline of the Empire, so it's gratifying that he and I have arrived at the same conclusion independently.

If Charlie was in the middle of his life rather than near its end, I suspect he would not fess up to the Empire being basically over. In fact, like most investors and economists, he would be optimistic about the future despite the obvious warning signs. But this octogenarian has been there, done that, and has made far more money than he could ever spend, so it's Truth & Reality Time.

In his parable, Munger calls his fictional country Basicland. I suggest you read his not-so-subtle critique of the United States for the obvious details, but this quote will give you an idea of what's he's saying—

But even a country as cautious, sound, and generous as Basicland could come to ruin if it failed to address the dangers that can be caused by the ordinary accidents of life. These dangers were significant by 2012, when the extreme prosperity of Basicland had created a peculiar outcome: As their affluence and leisure time grew, Basicland's citizens more and more whiled away their time in the excitement of casino gambling. Most casino revenue now came from bets on security prices under a system used in the 1920s in the United States and called "the bucket shop system"...

The winnings of the casinos eventually amounted to 25 percent of Basicland's GDP, while 22 percent of all employee earnings in Basicland were paid to persons employed by the casinos (many of whom were engineers needed elsewhere). So much time was spent at casinos that it amounted to an average of five hours per day for every citizen of Basicland, including newborn babies and the comatose elderly. Many of the gamblers were highly talented engineers attracted partly by casino poker but mostly by bets available in the bucket shop systems, with the bets now called "financial derivatives."

Charlie Munger (left) and Warren Buffet (right) flank the Governator

Marketwatch's Paul Farrell, who is fast becoming my favorite collapsitarian, provides a long overview of Munger's doom prophesy in his Munger warns 2012 is our tipping point on 'road to ruin'. Although he doesn't use the word, it's clear that Farrell is talking about a declining Empire—

But we also know, as we said earlier in "The Death of the Soul of Capitalism," that over the long-term, through many centuries, historians give nations an average of about 200 years before they burn out. Why? Because the "blind optimism" that makes a nation great in the early years of its rise to power and glory becomes, paradoxically, its worst enemy in the end-days.

Their arrogance traps them in a self-sabotaging cycle that weakens their resolve, makes them vulnerable to new, unpredictable challenges, ultimately destroying them from within. That happens over and over throughout history, even as their optimistic brains tell them they're still the greatest.

I'm not so sure about Farrell's diagnosis. Blind optimism—also called denial—is certainly a key to our Decline. A decaying, over-extended, bankrupt Empire falls apart from within, due to venality and spiritual exhaustion. Suicide, not murder. Power corrupts, absolute power corrupts absolutely. The Executive has been assuming "special powers" for some time now. For example, Congress merely rubber stamps Imperial wars. The Empire's vital institutions, such as the Two Party System and Congress here in the United States, cease to function.

But this is a complex subject. See my The Wheel of Suffering or Part I of my Charlie Rose discussion for some other thoughts along these lines. Joseph Tainter wrote a book about it called The Collapse of Complex Societies. I found his discussion too academic, too generalized, and thus lacking in the juicy details I enjoy reporting here or reading elsewhere. (Try Goldman Sachs 666.)

And what about Munger's 2012 prediction? Here at Decline of the Empire, we are far too humble to make calendar forecasts. No doubt some of you will note, as I did, that the Mayan Calendar ends on December 21, 2012... Just kidding!

Not Out Of The Woods

There is no cause to worry. The high tide of prosperity will continue
    —Andrew W. Mellon, Secretary of the Treasury - September, 1929

The worst is over without a doubt
    —James J. Davis, Secretary of Labor - June, 1930

The depression has ended
    —Dr. Julius Klein, Assistant Secretary of Commerce - June, 1931

The Chicago Fed's National Activity Index indicates the "Great Recession" is ending.

And I quote:

The index’s three-month moving average, CFNAI-MA3, increased to –0.16 in January from –0.47 in December, reaching its highest level since July 2007. January’s CFNAI-MA3 suggests that, consistent with the early stages of a recovery following a recession, growth in national economic activity is beginning to near its historical trend. When the CFNAI-MA3 value moves below –0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. Conversely, when the CFNAI-MA3 value moves above –0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended.

Let's look at some details. They use the phony Bureau of Labor Statistics jobs numbers.

Employment-related indicators contributed –0.01 to the index in January, up from –0.26 in December. Payroll employment decreased by 20,000 in January after declining by 150,000 in December; and the unemployment rate declined to 9.7 percent in January from 10.0 percent in the previous month.

Consumption and housing are weak, but they're happy about housing starts.

The consumption and housing category continued to be the weakest component of the index. This category of indicators contributed –0.45 in January, up modestly from –0.49 in December. Housing starts increased to 591,000 annualized units in January from 575,000 in December. Partially offsetting this was a decrease in building permits to 621,000 annualized units in January from 653,000 in the previous month.

From Calculated Risk's Housing:The Best Leading Indicator of the Economy
Housing starts since 1968

Etc. When you see complex measurements of our impending prosperity, remember that there are many, many reasons to think we're not out of Dante's Dark Forest yet, and won't be for a long, long time—

Midway upon the journey of our life
I found myself within a forest dark,
For the straightforward pathway had been lost.

Ah me! how hard a thing it is to say
What was this forest savage, rough, and stern,
Which in the very thought renews the fear...

I cannot well repeat how there I entered,
So full was I of slumber at the moment
In which I had abandoned the true way.
   — The Divine Comedy, Canto 1

So full of slumber was I when I entered there, having abandoned the true way. And to show you just how unimpressed I am with our Divine Economic Comeback, I have included this excellent video for your viewing pleasure.

The Gasoline Price Is Not Right

PennEnergy  sent me an e-mail alerting me to the French refinery strike. The interesting part of this story was reported by Gainesville.com (Florida).

Disgruntled workers in France may force gas prices to move higher in Florida and around the United States. In the weekly news release issued by AAA, officials said the slight rise in gas prices that began with the overseas strike are likely to continue.

“Depending on how long the strike in France lasts, it could shorten future supplies at the same time demand starts to pick up in the coming months,” said Jessica Brady, a AAA public relations specialist. “We saw retail gasoline prices inch up slightly in the latter half of last week and it’s very likely we will see prices continue to increase in the coming week.”

Jessica Brady specializes in the gasoline markets in the Southeast U.S, and gas prices did indeed rise in those states over the last few weeks. PennEnergy reports that "Georgia’s average price of $2.55 increased by five cents in the past week and Florida’s average price of $2.68 increased three cents."

The strike is driving up the gasoline contract says Bloomberg.

Gasoline surged to a six-week high as a strike by refinery workers in France threatened to reduce U.S. imports of the motor fuel...

“The longer this goes on, the more concerned the market is going to be about potential product shortages,” said Tom Knight, vice president of trading and supply at Truman Arnold Cos. in Texarkana, Texas. “And historical data is there to show that every year regardless of economic conditions we do have a spring rally in gasoline.”

Gasoline for March delivery advanced 3.01 cents, or 1.4 percent, to settle at $2.1158 a gallon on the New York Mercantile Exchange. It’s the highest settlement since Jan. 11. Gasoline’s gains today follow an 8.1 percent increase last week, the largest weekly jump since the period ended Oct. 16, on indications that the U.S. economy is improving.

From the AAA Fuel Gauge Report. Self-Serve Regular

You know I have a reason to tell you this stuff, you know it's a zinger. And here it is—

• You are paying way too much for gasoline, and you have been for months

It's absurd. You may know that the Energy Information Agency (EIA) of the Department of Energy (DOE) publishes a U.S. Petroleum Balance Sheet each and every week. This report includes year-over-year demand (supply minus the inventory change) for oil and its products, including what the EIA calls "finished gasoline." Total gasoline stocks (inventories, EIA data) are 16 million barrels higher than last year, decreased very slightly last week—a 900,000 barrel draw—after a build-up in recent weeks, and are far above their historical average range. In fact, the latest American Petroleum Institute (API) data contradicts the EIA data. Their survey indicates that gasoline inventories increased 1.7 million barrels last week. So we're not sure what's going on with inventories. Here's the bottom line—

The EIA said that stocks of crude oil and petroleum products remain at unusually high levels for this time of the year, a problem that continues to plague refiners. U.S. refiners continue to operate around historically low rates but last week they were at their highest level in more than a month.

In other words, we've got plenty of gasoline lying around at the moment. OK, let's combine the EIA demand data with the AAA price data, shall we?

• Price for regular unleaded now:  $2.678
• Price for regular unleaded one year ago:  $1.900
• Demand for finished gasoline now:  8.741 million barrels per day
• Demand for finished gasoline one year ago:  8.771 million barrels per day

Got it? The price is 77.8 cents higher, while demand is 30,000 barrels lower. Maybe Mr. Market thinks no one will look at the data, maybe no one will notice that Mr. Market has gotten it wrong again. Liquid fuels prices are distorted, and have been for years. Most of the time, the price differential between what the price is and what the price should be—whatever that is—is not in your favor. But of course—I remember now!—the price is what the price is. Markets are efficient. The price is not wrong. In principle, the price can never be wrong! Yeah, sure, right.

So I don't believe this bullshit about a refinery strike in France driving up U.S. gasoline prices, which  have been, and are now, "wrong" anyway. You are paying way too much for gasoline during the worst recession since the Great Depression. How does that make you feel? Do you feel taken advantage of? Do you feel ripped off?

And then there's this, repeated from above—

Gasoline’s gains today follow an 8.1 percent increase last week, the largest weekly jump since the period ended Oct. 16, on indications that the U.S. economy is improving.

If the U.S. economy is improving so damn much, why is gasoline demand down 30,000 barrels per day from a year ago, which everybody agrees was the low point of the recession?

All this stuff they tell you, it's all just nonsense, isn't it? Just a bunch of happy talk.

Speaking of happy, Happy Motoring!

The Debt And The Deficit — Part I

This is the first of two (or three) posts about the recent roundtable discussion of the Debt and the Deficit on the Charlie Rose Show, aired on February 18, 2010. The discussion was free ranging, but not free ranging enough as far as Decline of the Empire (DOTE) is concerned.

The participants were:

• economist Paul Krugman
• South Carolina congressman John Spratt
• Pimco CEO Mohamed El-Erian
• former comptroller of the United States David Walker
• economist Alan Auerbach

Krugman introduces the key concepts. "Well, the deficit is the extent to which the government is spending more than it’s taking in in the way of revenues. The debt is what accumulates after you have done a number of years of that. So the debt is the amount of money that the government owes. The deficit is the extra money the government has to borrow this year, which adds, of course, to the debt." Introducing the subject, Rose notes that "The Congressional Budget Office recently projected that total debt this year would climb to nearly $9 trillion, or 60 percent of GDP, the highest level in nearly 60 years" (the years just after World War II). David Walker notes that "we have $38 trillion in unfunded (off-balance sheet) promises in Medicare alone." If you throw in Medicaid and Social Security, our future unfunded debt obligations are around $60 trillion, which is more than 4 times our nominal GDP.

So let's jump into it at page 13 of the transcript, where things get interesting. I have cleaned up the text a bit for clarity. Selected entries are presented in discussion order. I use blue text for highlighting.

DAVID WALKER: I think one of the problems -- I have been to 46 states doing town hall meetings. And the fact is there are a couple of reasons why the American people are really concerned right now. Number one, we have gone from billions to trillions, just like in the 1930’s, we went from millions to billions. It’s 1,000 times the other, and people are having difficulty with it. Secondly, it’s the off balance sheet obligation. It’s not our current deficits or debt. It’s the fact that when you add in the unfunded promises that have been, made this country is in a $60 trillion-dollar hole. Just Medicare and Social Security, pensions and health for civilians and military. That’s three times what it was when George Bush became president. The debt has doubled, more than doubled, since George Bush ... became president. That’s what they’re concerned about.

Frankly, we have a dysfunctional democracy. And the problem isn’t so much the partisanship, although that’s an issue, it’s the ideological divide. It’s the fact the country is more in the center but a disproportionate share of representatives are on the poles and you can’t get a deal done on the poles.

Now we're talking! Actually, with the new Supreme Court mandated changes in Campaign Finance, we don't have a Democracy at all. Or we could say we have a weighted Democracy, where J.P. Morgan Chase's vote is several orders of magnitude more important than your vote according to their ability to buy Congressmen. I guess that would qualify our political system as "dysfunctional."

Mohamed El-Erian's not buying this "dysfunctional" Democracy stuff. He prefers to call the Hell we're going through a "paradigm shift." We are still far, far away from the notion of a declining Empire here.

MOHAMED EL-ERIAN: It’s not that our democracy has become dysfunctional. It’s really that we’re going through a paradigm shift. We have a seen a 20 percent increase in the debt to GDP ratio in a very short period of time. We have seen unemployment go up to levels that were unthinkable and are likely to stay there. And this is in a system built on the assumption that unemployment cannot stay high for a long time... That’s why our safety nets are so weak.

We have seen major questions being raised about institutions, about the Fed, about the banks. This is a paradigm shift. But when the paradigm shifts people fall into ... being hostage to their prior internal commitments. You do something but it’s really doing more of what you have done before... And the way we see it, not only in the United States, is this paradigm shift has taken the system by surprise and the system is still trying to adapt and react. And I think it will take time. And I don’t think as much a question of the democracy no longer functioning as it is that democracies or any systems don’t deal well with paradigm short.

CHARLIE ROSE: Before anybody answers that, what are you referring to, making sure I understand you, the paradigm shift that you’re talking about.

MOHAMED EL-ERIAN: What I’m talking is there are things that are happening that were unthinkable. It was absolutely unthinkable that we would have a 20 percent increase in the debt to GDP. It was unthinkable one in six would be under or unemployed. It was unthinkable that the growth potential of the U.S. economy would come down from three percent to two percent...

Major questions being raised about institutions. Unthinkable unemployment. A rapid, large increase in the debt to GDP ratio. And by the way, our safety net is not weak because the system assumes full employment. The safety net is weak because our heartless, corrupt Federal Government whittled it away in various Social Darwinist "reforms" over the last few decades. All the while, Wall Street was getting bailed out over & over again—no survival of the fittest for them!

But it is the last part of El-Erian's remarks here that are the most insightful, even if he himself does not address the full implications of what he's saying. We are hostage to prior internal commitments. What does this really mean?

In energy, but particularly for oil, the United States did nothing in the previous 25 years to alleviate our growing dependency on imports, despite the fact that it was clear that domestic production had peaked in 1970 and has been steadily dwindling ever since. The prior internal commitment now stands at 19 million barrels each and every day, though it used to be about 20.5 before the Great Recession. (During the later bubble years, it actually exceeded 21.) We are held hostage to past policy mistakes and consequently, future oil price shocks.

What did we do instead during all those years? We expanded our military commitments to keep foreign supply chains open, especially in the Middle East—for example, we invaded Iraq—instead of finding ways to reduce our oil consumption. And now, regarding oil, we are toast.

Another way in which the past determines the present is in the economy. Here, our prior internal commitment was to destroy our industrial base, outsource good paying jobs in software or manufacturing, handicap our export capability, gear our economy toward consumption (instead of production) and most importantly, base our future growth on ever-higher private debt levels to support that consumption. I described some of this in my blog post Keynesian Delusions.

And here again, in the economy, we are toast.

Oh, Yeah, I almost forgot—we're also broke.

Finally, there is El-Erian's remark that you do something but it’s really doing more of what you have done before. Exactly! As I said in Decline of the Empire—Now What? quoting Einstein, insanity is doing the same thing over and over again and expecting different results. On this important theme, see my post The Wheel of Suffering.

All of this is not a paradigm shift, it's an ongoing catastrophe. America's deterioration has been going on for a long, long time. That's enough to chew on today. Stay tuned for additional posts on this Charlie Rose discussion.

Alan Greenspan Bags Dynamite Prize

The Real World Economics Review blog announced yesterday that long time Fed chairman Alan Greenspan was awarded the Dynamite Prize in Economics. The award went to the candidate who was—

... judged the economist most responsible for causing the Global Financial Crisis. He and 2nd and 3rd place finishers Milton Friedman and Larry Summers, have won the first–and hopefully last—Dynamite Prize in Economics.

They have been judged to be the three economists most responsible for the Global Financial Crisis. More figuratively, they are the three economists most responsible for blowing up the global economy.

When I first alerted you to the competition, I noted that "it's hard to see how Alan Greenspan loses this contest." Indeed, that turned out to be the case. Dr. Greenspan, who was clearly a shoo in all along, received 5,061 votes out of the 18,531 cast.

Dr. Alan "Bubbles" Greenspan

Needless to say, this award, which was well deserved and long overdue, comes despite the fact that the former Fed chairman has now repudiated his long held opinions about how economies should actually work. Of course, it's too late to change past mistakes now—it doesn't do any good to close the barn door after the horse has left, and regrettably, Time Travel is not an option.

“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

Let's remember that nobody's perfect. Congratulations, Dr. Greenspan!

The Comeback Kid

This story is about Tim Geithner, but I better make doubly sure you know who he is. It's very unlikely if you're reading here that you don't know all about him, but on the off chance (Wall Street Journal) that a few new readers are among the 54% for whom ignorance is bliss, I give you the following—

Mr. Geithner has room to maneuver: He may be caught in Washington's cross hairs, but that appears to have had little impact on public opinion. A January Wall Street Journal/NBC poll found 54% saying they either didn't know Mr. Geithner's name or were unsure of their opinion, up from 51% a year earlier, despite rising public discontent over bailouts and bonuses.

Geithner is Obama's Secretary of the Treasury. He was instrumental in facilitating the initial round of bail-outs to insurance giant A.I.G. and its bank counter-parties during the Financial Crisis of September/October 2008 while serving as the head of the New York Federal Reserve Bank. It is widely reported that he is Jesus-like in so far as his prompt actions during the fall of 2008 are said to have averted an economic collapse. From the WSJ again—

The bank rescues he helped engineer averted economic collapse. Yet to some lawmakers, Mr. Geithner looks weak. His association with unpopular financial bailouts has become an albatross. His neutral rhetoric on bankers' bonuses—the fat payouts are "very hard for people to understand," he recently told CNBC—spurs talk that he coddles Wall Street...

Mr. Geithner's approach to stabilizing the financial system, particularly the "stress tests" to measure bank health, helped put a floor underneath the crisis, something even critics concede. "It's true that we've avoided Armageddon," says Anil Kashyap, an economist at the University of Chicago Booth School of Business and initial critic of Mr. Geithner's plan.

"People sometimes forget, we were on the precipice," says David Cote, CEO of Honeywell. "You get little credit for the problem you avoided."

I would comment on our having "avoided Armageddon" but every time I try, I can't stop laughing.

Note that the Wall Street Journal reports that there is a "perception" that Geithner favors Wall Street. As Henry Blodget says in the video below, "Geithner does put Wall Street first, he has all the way through..." Democrats see Geithner as a political liability because of the "perception" that he "coddles" Wall Street, so he is now The Comeback Kid.

To boost his image, Mr. Geithner is waging a charm offensive. On Friday, he toured a supermarket in Philadelphia with first lady Michelle Obama to showcase efforts to reduce childhood obesity, an unusual event for a Treasury secretary. He demonstrated how a Treasury program offering tax credits in low-income communities can bring in businesses selling more nutritious food.

Geithner looks over the lettuce...

His job is secure.

In interviews, top White House officials—including Rahm Emanuel, the president's chief of staff, and senior political adviser David Axelrod—said Mr. Geithner's job is secure. "The president's view is that Tim is one of the stars," Mr. Emanuel said. "Tim was an essential and a key player in developing a strategy that helped restore confidence and turn the whole country around."

I wasn't aware that our confidence is now overflowing and that the whole country has been turned around. Silly me! Live & Learn, that's what I always say...

U.S. consumer confidence plunged 10.5 points in February, raising concerns about the outlook for consumer spending, according to a report from the Conference Board, a private research group... The reading of 46 was the lowest since April 2009 and far below economists' expectations...

Watch the video below from Yahoo's Tech Ticker. As always, the freewheeling discussion between Aaron Task and Henry Blodget is frank and on the money. Anything else I might say here would only provide a more cynical DOTE interpretation of what Aaron and Henry say. I recommend these guys in general. It's obvious that no one at Yahoo is looking over their shoulder telling them what to say.

If there's a Loving God who cares about us, now would be a good time for Him to put in an appearance...

Return of the Wackos

Well, OK. They never went away. Let me explain.

First off, this blog is only 37 days old but there's been a great response. That has been very gratifying to me. I hope you'll keep coming back. Decline of the Empire (DOTE) has a point of view and I'm still in the process of telling you what it is.

This is not a partisan blog. I am not a Republican, I am not a Democrat. I am not a Libertarian. In a  Declining Empire, we've got to transcend such mind numbing, divisive affiliations. It's not always easy to do. Liberal? Conservative? Progressive? Ultra-conservative? Left wing? Right wing? You can toss all these categories out the window as far as I'm concerned. If somebody wants to frame a debate in these terms, walk away.

I wouldn't be caught dead Inside The Beltway. Who in Washington, D.C., basking in their Imperial glory, playing their money & power games, feeding at the trough, could possibly understand what's really going on? Very few.

Wackos come in many flavors, but it just so happens that most of them—not all, that's for sure—are labeled "right wing" or "ultra-conservative" or whatever. But the people I'm talking about here, who are generously represented at FOXNews, are essentially not political at all. At heart, deep down, they are really just bat shit crazy. These loonies will tell you anything—I mean anything, no lie is too fantastic—to bump their ratings and feed their endless Narcissistic desire for power & celebrity. Some of them, including Rush Limbaugh or Larry Kudlow, have well known substance abuse problems. That should be a big tip-off to you right there. For more insight, consult the Diagnostic and Statistical Manual of Mental Disorders (DSM IV). I keep a copy handy at home.

If I told you that an Imperial society had been in Decline for decades—just like ours—what would you predict about the evolution of that society? What would your default hypothesis be about the state of its political discourse? I'm sure you would predict that that discourse would be going downhill rapidly. And of course, that is exactly what we find—FOX is The Most Trusted Name In News.

Fox is the most trusted television news network in the country, according to a new poll out Tuesday.

A Public Policy Polling nationwide survey of 1,151 registered voters Jan. 18-19 found that 49 percent of Americans trusted Fox News, 10 percentage points more than any other network. Thirty-seven percent said they didn’t trust Fox, also the lowest level of distrust that any of the networks recorded.

There was a strong partisan split among those who said they trusted Fox — with 74 percent of Republicans saying they trusted the network, while only 30 percent of Democrats said they did.

“A generation ago you would have expected Americans to place their trust in the most neutral and unbiased conveyors of news,” said PPP President Dean Debnam in his analysis of the poll. “But the media landscape has really changed, and now they’re turning more toward the outlets that tell them what they want to hear.”

We could not expect a different outcome. The only problem with this story is that Fox is not a "news" network. Anyone with just a minuscule awareness of the world around them knows this already.

BIll O'Reilly, Sean Hannity and other "commentators" on FOXNews, which is owned by Rupert Murdock, or Rush Limbaugh or Anne Coulter, are simply fatuous whack jobs. Scary creep Dennis Miller was funny for about 5 minutes in the 80s. Murdock knows that mean, stupid & deranged sells. FOXNews does not report the news, they are selling themselves by appealing to the worst in people. Round up the Muslims? FOXNews is all for it. Torture 'em? You betcha! We might hope that most people would be able to resist temptation, but apparently 49% of them have taken Satan's bait. With these people, the lights appear to be on, but nobody's home. These Americans want someone, need someone, to tell them what to think. That's what FOXNews does.

I know perfectly reasonable people who become apoplectic if they hear Rush Limbaugh on the radio. They want to argue with him! Tell him what's what, get him to shut the fuck up! One of the more useful Rules Of Life goes like this—

• Never, ever, argue with a crazy person

And why not? Because it's sure to make you crazy. So if you wake up & discover that you are surrounded by crazy people, get outta there as fast as you can!

Bat Shit Crazy

These FOXNews people are dangerous, but not because of their political "beliefs." They're a threat because they are loose on the airwaves whereas they should be straitjacketed in a mental ward. During the times we live in, these wackos are the most trusted people in America. That's a sad commentary on how far gone we are.

Now in 2010, with the political backlash against Obama about to get nasty, it will be all we can do to keep these lunatics at bay. It's the Return of the Wackos, and for you, it may be a lot like the 2004 remake of Dawn of the Dead. I'm sorry to report that the outcome does not look good.