Archive for April 5th, 2009

Money and “Money”

April 5, 2009

Econo-blogger and member of the Knights Who Say, James Kwak weighs in on the recent change in accounting rules for banks:

Investors and regulators are not idiots. They know what the accounting rules are. If banks claim they were forced to mark their assets down to “fire-sale” prices, investors can look at the facts themselves and apply any upward corrections they want. Now that banks will be able to mark their assets up to prices based solely on their own models, investors will [make] the downward corrections they want.

In other words, the fact that a thing has a certain value on paper doesn’t make that value a reality.  Market goods are worth what somebody is willing to pay for them, not what somebody’s model of that market says they’re worth.

Over the past 10 years, Wall Streeters invented a lot of models and created a lot of paper wealth based on them.  But none of it was real.  It’s still not real, but they can’t seem to comprehend that.  They think changing the accounting rules will suddenly make their paper wealth real.

We need our financial sector to come back to reality if we’re going to recover.  This is not a good sign that that’s happening.

Rix Pix

April 5, 2009

Tom Ricks picks 10 books anyone interested in military history should read.  He quotes from his pick on the Korean War: “You may fly over a land forever, you may bomb it, atomize it, pulverize it and wipe it clean of life — but if you desire to defend it, protect it and keep it for civilization, you must do this on the ground, the way the Roman legions did, by putting your young men into the mud.”

My friends, Evan Bayh is a wanker.

April 5, 2009

Lotsa chatter these days about the formation of a Senate equivalent of the House Blue Dog caucus — the group of conservative, budget-hawking Democrats.  The leader of the pack in the Senate is Evan Bayh.  (Of note to some here, both Arkansas senators are members.)

Ezra Klein has the best summary of Bayh in 3 posts or less.

Personally, I find Bayh a mirror image of John McCain: he puts on an eye-catching, centristy show, but it’s really all about him.  McCain’s colleagues have long disliked him for being The Senator Most Likely to Score Cheap Political Points on Everyone Else’s Dime.  McCain likes to be the lone no vote on unpopular legislation he supports but can oppose without imperiling.  While his colleagues hold their noses and vote for it because it has to be done, McCain sees that the necessary-but-unpopular legislation will pass without his vote, so makes a big show of voting against it.

It gets him a mavericky reputation and makes David Broder swoon, but truth be told, he’s just a wanker.

It looks to me like Bayh is bucking to be the Dems’ John McCain — make himself look like the responsible one without having to take actual responsibility for anything.  In this case, he gets to oppose deficits — always popular, downright heroic to the Beltway press — while also praising all the (equally popular) things Obama’s budget spends on, and supporting a huge tax cut.  (If this sounds familiar, it’s how the GOP governed for much of the past 10 years.)  Bayh gets to do all this without having to propose an alternative budget or suffer the consequences that would ensue if the Senate actually failed to pass Obama’s.  In other words, with no responsibility.

He’s a freerider.  A McCain.  A wanker.

Like McCain, Bayh has long-harbored presidential ambitions.  He briefly took a run at it last time around.  Is he setting himself up to challenge Obama from the right in 2012 if the economy doesn’t recover?  Wouldn’t be a bit surprised.  Or maybe he just wants to be the Democratic senator the media praises as the responsible centrist.  Either way, it sure looks like he’s full of crap.