The New Soviet Union - Surprise, Surprise...

I am not concerned about AIDs (or herpes, which someone else brought up BTW if you have bothered to read the entire thread). I am just refuting some Russian guy here that says its not an issue in Russia's population decline, when almost every article on the subject says it is. I've noticed you are still ignoring the population problem there SA.

As for the dollar. its looking damn good to me at the moment. Its bottomed imo. I have been expecting this for quite some time.

Clinton had nothing to do with the surplus, the tech boom created massive receipts. There was no decline in spending under Clinton, just an implosion of revenue. He was very lucky to enter office just after the 91 recession, and the emergence of the internet on a grand scale. Clinton wasn't even a proponent of a balance budget until Newt and company FORCED him to be. THEN he claimed it as his idea, when in fact, it was the PLATFORM of the Contract with America, and the 1994 landslide republican takeover of Congress. (specifically, the platform was a balanced budget amendment and line item veto). If you don't know this, then you don't know anything about US politics. Then again, your statement as fact that Gore IS going to be the next president on countless occasions tells us all we need to know there. BTW, you stated as fact that Obama would lose (I believe this is quite possible also), but you also stated as fact that when Mac wins he will start WW III. I hope you have your bunker built.

And finally, although it is true that Bush and the republicans got absolutely ridiculous with spending, the current Congress has been even worse. Democrat congress.

 

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August 10, 2008

SouthAmerica: Here is the real reason Clinton was able to turn the US government budget deficits around.

He had the courage of increasing taxes in 1993 against most experts opinions and the result was the reduction of the government budget deficits until it turned it into a surplus.

If you don’t understand that then you are completely clueless about the reason that turned the finances of the US government around during the 1990’s.

Bill Clinton turned the country to the Republicans in great financial shape but it did not take long for the Republicans put the United States into the path of bankruptcy once again.

The Republicans motto since Ronald Reagan has been: “budget deficits doesn't matter”

The reason why the US government was able to put its house in order under President Bill Clinton administration it is because Clinton had balls to raise taxes in 1993.

If you don’t understand that then you have no idea about what really happened here in the United States during the 1990’s.


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Dick Gephardt - Supported Clinton 1993 tax plan, despite it being unpopular
Q: As president, what would be the least popular, most right thing you would do?

GEPHARDT: I will do what I did in 1993-the Clinton economic program wasn't popular. We raised taxes on the wealthiest Americans, we cut taxes on others, we cut spending in some areas that were tough to cut, and we raised spending and invested money in other areas. It was the proudest moment of my time in the Congress, because we lost the Congress because we did the right thing for the American people.
Source: Debate at Pace University in Lower Manhattan Sep 25, 2003

http://ontheissues.org/2004/Dick_Gephardt_Tax_Reform.htm


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After President Bill Clinton's 1993 tax bill passed, deficits declined and budgets were in surplus within five years…
http://mediamatters.org/items/200609240001


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Jayford: You also stated as fact that when Mac wins he will start WW III.

I did not say that he would start WW III.

I said that there is a good possibility.

Why that is a possibility?

Because that will be one of the few ways to restart the US economy as the US economy descend into the black role.

Starting WW III then he can turn the US economy into a war economy and get all Americans involved in such endeavor – including the sacrifices that people need to do during a time of war.

And not the type of war that George W. Bush has been running since 2003 – he sent the poor kids to be killed in foreign lands and told the rest of the population to go shopping and have a good time.

Regarding the US Congress a large number of the members of that institution are completely worthless. (from both parties)
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No offense, but it sounds like you are confused about a few facts.

The judicial system is not able to impeach presidents or vice presidents in the US.

I am actually very familiar with these companies and there is no comparison with Yukos. If you understand debt tranching, Freddie and Fannie are basically the equity tranches of a huge structured bond deal where the mortgages are the collateral. Holders of their debt are the senior tranches, with some preferred stock and subordinated debt in the middle.

The arrangement between Freddie and Fannie and the government is basically that F&F shareholders are in a first loss position if things go bad in exchange for some benefits that allow them to make more than a normal company in the same business would if things go well. The main but not only benefit to F&F shareholders is that the govt relationship lets them lever cheaply.

The govt protects the bondholders in the event that F&F burn through their equity cushion. If they step in the stock is already worthless by that point, no real worries about expropriation because there is nothing left to expropriate. If you are remembering something about their accounting scandals that was different. At worst you could claim that was good old fashioned expropriation by management, I don't see how you could blame the govt. for anything other than not catching it sooner.

If you think that the government promoting homeownership by subsidizing mortgages is good policy (which is debatable but besides the point) then this is actually not a bad way to do it. The govt gets shareholders to take first loss position ahead of taxpayers, and the debt they are guaranteeing in return is debt they would be responsible for in any kind of direct subsidy program anyway. And they get a huge capital base this way b/c many investors that would not hold mortgages directly will hold F&F debt after shareholders and the govt have taken on some of the risk.

 

Again I think you are misunderstanding. You initially talked about Russia's prospects of becoming a financial center, and my comments were about how the legal system protects investor rights. The examples you point to are related to how the system protects taxpayers, a country we were(are?) at war with, and companies competing for government contracts. Even if these are marginally related, finding and sensationalizing examples of some shortcomings does not constitute a comparison - investors have to go somewhere and nowhere is perfect.

Here is a link to some related research with investor friendliness rankings of different legal systems and discusion of their capital markets. Unfortunately they did not include Russia b/c they considered it transitional, but you can see where they rank the US. You may not agree with their evaluation criteria or think they are out of date, but they are pretty transparent about it so you can make your own adjustments if you care to - I trust the US will move up in your version . There is similar research showing that the things they consider in these rankings are related to measured/estimated costs of capital.

 

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August 10, 22008

SouthAmerica: I thought you were implying that we have a good legal system in the United States – and one that works.

Impeachment in the United States is an expressed power of the legislature which allows for formal charges to be brought against a civil officer of government for conduct committed in office. The actual trial on those charges, and subsequent removal of an official on conviction on those charges is separate from the act of impeachment itself: impeachment is analogous to indictment in regular court proceedings, trial by the other house is analogous to the trial before judge and jury in regular courts. Typically, the lower house of the legislature will impeach the official and the upper house will conduct the trial.

At the federal level, Article Two of the United States Constitution (Section 4) states that "The President, Vice President, and all other civil Officers of the United States shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other High Crimes and Misdemeanors." The House of Representatives has the sole power of impeaching, while the United States Senate has the sole power to try all impeachments. The removal of impeached officials is automatic upon conviction in the Senate.

Impeachment can also occur at the state level; state legislatures can impeach state officials, including governors, according to their respective state constitutions.

Example:

July 23, 2008
NADER RELEASES LETTER TO CONYERS ON IMPEACHMENT HEARING
http://thirdpartywatch.com/2008/07/24/nader-why-cant-i-testify-on-bushcheney-impeachment/


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Black diamond: But I don't think anything like the Yukos scandal could happen here.


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SouthAmerica: Then I am giving you another real example.

I worked for GAF Corporation for a number of years in the 1970’s and at that time we still had in the office some of the old German files.

GAF was nationalized by the US government around 1940 or 1941 and they took that corporation from the Germans.

The US government became the owner of GAF at that time and they nominated a US General to run that corporation. Finally in the mid-1960’s the US government sold shares of GAF back to the public.

The nationalization of GAF by the US government was no different than the nacionalization of Yukos by the Russian government.

They both claimed national security as the basis of these nationalizations.

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SouthAmerica: What do you think the Fannie and Freddie is?

Without US government massive interference and bailout of these 2 financial institutions the US stock market would have gone down at least another 30 to 40 percent from current levels resulting in widespread losses and further hardship for everyone.

And the de-leveraging of the US economy probably would have landed it in the First Great Depression of the New Millennium.

The power of leverage works great in the way up, but also work in a devastating way in the way down.

Many people still playing games in Wall Street and they are trying to minimize the losses caused by de-leveraging of their bad bets and this process will continue until the system is clean and people start having trust in the system once again.

Right now only fools are throwing good money after bad and they are investing in those financial institutions that still have a long way to go before their finances are stabilized. They are real money pits.


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SouthAmerica: Here is some further information about the confiscation on US soil of a foreign corporation by the US government. The US government thought they were confiscating a German company, but it turned out it was a Swiss company.

"Founded in the late 1920s under the auspices of an originally German-backed Swiss banking house (Ed. Greutert & Co. of Basel) as the holding company for Farben’s foreign operations, I. G. Chemie was not owned formally by the German enterprise but was tied closely to it by a series of binding contracts. These guaranteed investors in I. G. Chemie an annual dividend equivalent to Farben’s and reserved to the German concern an option to purchase the Swiss company’s possessions at any time for their book value.

In May 1940, as I. G. Chemie’s (formerly Farben’s) U.S. operations came under increasing pressure from American government agencies, Farben agreed to nullify the contracts. Its apparent intent was to make Swiss ownership indisputable and thus to insulate the subsidiaries from seizure for the duration of the war, after which the old arrangements could be restored if Germany won. In December 1945, seven months after the collapse of the Reich put paid to such calculations, the Swiss firm was renamed Interhandel. It was subsequently recognized by the Swiss authorities as an independent enterprise, not subject to the treaties of 1946 providing for the liquidation of German-held assets in that nation.

Since 88 percent of I. G. Chemie’s holdings consisted of the valuable properties grouped under the General Aniline & Film Corporation of New York (GAF), which the United States had continued to regard as German controlled and therefore confiscated as enemy property in 1942, the Swiss decision opened the door to a quest to assert title to GAF on the part of Interhandel and the Swiss banks that later acquired dominance over it.

That increasingly acrimonious dispute was settled in the early 1960s, when an agreement divided the proceeds from auctioning GAF’s assets on a 60:40 ratio between the U.S. government’s War Claims Fund and Interhandel, bringing the latter some $122 million.

Twenty years later, however, the I. G. Farben in Liquidation company reopened the controversy. A publicly traded entity founded in the 1950s to administer and wind down the residual assets and obligations of its dissolved namesake, the liquidation company had become the object of stock speculators, who now tried to prove in German courts that the transfer of I. G. Chemie to Swiss control in 1940 had been a mere “trusteeship.” If this gambit succeeded, the company would be declared the rightful owner of the
proceeds meanwhile acquired by Swiss entities. By 1988, this effort had failed, but in the late 1990s, the German aspirants made headlines once more when they launched a publicity campaign reviving their claims under the pretext of seeking access to the proceeds for the benefit of Farben’s victims, a reference to the numerous forced and slave laborers employed at the concern’s installations…

Source: http://72.14.205.104/search?q=cache...n+++nationalization"&hl=en&ct=clnk&cd=3&gl=us

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Now it sounds like you are arguing just for arguments sake, but I'll respond anyway.

You made my point about impeachment - legislative branch, not judicial. Unless you don't recognize the separation you can't blame the judiciary for not impeaching someone. And frankly the "system" gives the legislature the discretion to impeach if they want to, so the "system" has not prevented the impeachment you think should have happened, it was the judgement of the individuals currently in congress to decline to exercise a power they have been given. And what relevance do you think that has to how well our legal system protects investors anyway?

On your examples about nationalization there are huge differences. First, Yukos was a Russian company, with most of the assets sold by the government to investors. Foreign investors lost money invested in a Russian company when the Russian government seized it. When Russian companies seek capital from foreigners or Russian exchanges seek foreign listings and foreigners consider their risks then Yukos is relevant history. You talk about the US nationalizing foreign companies, not US companies. Second, you give good examples of the risks in investing in a country about to lose a war, or in a company with very close ties to a country about to lose a war if you want to split hairs. Unless you think the US is about to really lose a war anytime soon (I mean get conquered, not withdraw) then I don't think these apply. Finally, what matters here is investor confidence and overall impression, not technical details about obscure incidents. I think on the balance there is less confidence in legal protections in Russia than in more developed markets, and if they want to become a financial center like you suggest then they have to overcome that and it won't be easy or quick. IOW, Russia has to overcome Yukos and GAF is a non-issue for the markets.

On F&F, I don't know what you are talking about with regards to a bailout or anything Yukos-like. The government has not put any money in or seized anything. The bailout I think you are referring to was just the government spelling out details of an arrangement that the markets already thought existed. Reassured some agency bondholders but that was all. F&F had pre-existing credit lines with the Treasury that had never been used and still haven't. Agency bondholders pretty much assumed there was a bigger government backstop all along, otherwise they would not have been able to borrow sub-libor. Treasury debtholders probably knew too, or else I would think there would have been a bit more of a market reaction to the US suddenly agreeing to guarantee a few more trillion in debt. But maybe they are fools like you say and just didn't notice.

The only Yukos-like scenario I could possibly imagine is if the government takes over (to protect bondholders or the housing market) claiming one of the GSE's is bankrupt based on a low valuation, when shareholders are actually having valuable interests taken. But unless/until that happens I don't see how you can mention F&F and Yukos in the same breath.

And I don't see how you claim any involvement is "government interference" when these are GSEs and have been from the beginning! That's Governement Sponsored Enterprise, basically public-private partnerships with charters from congress, presidential appointees on the boards, special tax status, designated regulator, etc. Anyone who has gone near these companies cannot help but expect "government interference".

But I hate to be harsh and focus on our differences. So I compliment your ability to predict 30-40% declines in the market and depressions, I wish I could do that. And I like your observation about how leverage works on the way up and on the way down, that's the part of your post I agree with.

 

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Black diamond: That's Government Sponsored Enterprise, basically public-private partnerships with charters from congress, presidential appointees on the boards, special tax status, designated regulator, etc. Anyone who has gone near these companies cannot help but expect "government interference".


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August 11, 2008

SouthAmerica: These enterprises showcase to the world the American concept of free markets and how they work in real practice. Investors can make a lot of money in the way up, and in the way down the taxpayers pays the bills.

There is about US$ 1.5 trillion dollars in foreign money invested on these enterprises including about US$ 400 billion in Chinese money. It seems to me that the US government is also bailing out Fannie and Freddie because of these foreign investments in these institutions.

I guess if enterprises such as Freddie and Fannie are backed by the US government guarantees then you don’t need to use common sense when making financial decisions regarding these enterprises since you know that the taxpayers would pick up the pieces.

The Fed bailout of Bear Stearns, and now of Fannie and Freddie have major consequences to the soundness of the American financial system since the US government is not letting the system to adjust itself and the bailout it is just distorting the system even further.

Without the artificial floor placed in the US stock market by all kinds of US government financial intervention the Standard & Poor’s 500 Index would be at around 800 right now.

It does not matter if I predict a decline of 30 to 40 percent in the stock market averages as I did in 2005 and 2006 or even the coming new great depression when Ben Bernanke and the Fed has placed a floor on the down side of the US stock market and they are trying to push the day of reckoning forward as far as they can.

Then the shit is really going to hit the fan with the biggest international monetary system meltdown as never seen before with the US dollar at the center of the Perfect Storm.

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No you said it as a fact, as you always do.

 

Per usual you have no idea what you are talking about.

The Soviet Union does not operate on Capatalist principles, if you believe it does gogole Yukos and read about what is currently going on at BP there.

The soviet economy is completely dependant on the price of commodities and guess what? Commodity prices are dropping and so is their production just like your other hero Hugo Chavez.

At least be honest with everyone and admit up front you hate the United States and would love to see it fail, although you live here and enjoy our freedoms which is perplexing.

SA per usualy you will jump on the bandwagon of anyone that challenges the US no matter how bad or evil they are.

Your unbridled hatred and ignorance of all matters just reinforces my belief that the US will rise from it's current slump to regain it's prominence on the world stage.

 

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August 11, 2008

SouthAmerica: Reply to John Wensink

Funniest part of your posting was: “…just reinforces my belief that the US will rise from it's current slump to regain it's prominence on the world stage.”

You also said: “The soviet economy is completely dependant on the price of commodities and guess what?”

A year ago when commodity prices were much lower and the price of oil was around US$ 70 dollars per barrel the economies of the BRIC’s looked very good with great prospects for the future. Then commodity prices skyrocket and now that they are going through a period of correction from a much higher level, and the prices still higher than a year ago – according to the experts the BRIC’s economies are in trouble.

The fundamentals of the Brazilian economy if anything it is better today than a year ago – but in the 2 months the hot money left town even faster than when they arrived in Brazil.

I am not an expert on the Russian economy, but I know they have a lot of oil and gas and many other natural resources.

Right now Russia has a war to take care of and it would be for their benefit to escalate the war to see if the United States has the capability to come to the rescue of its ally.

If the US does not come to the rescue of its ally then that would open the door for other potential conflicts such as in Taiwan if the rest of the world realizes that the US war machine is already stretched to the breaking point.

The other thing that Russia can do is send a few thousand military people to mark a military presence in Cuba and also in Venezuela – and wait to see the United States reaction to such a military move.

That it would be fun to watch.

You said: “SA per usualy you will jump on the bandwagon of anyone that challenges the US no matter how bad or evil they are.”

I don’t jump on anybody’s bandwagon. I just think that Americans can’t grasp that the world it is too big for the US to even try to put its nose on everybody’s business around the world. But the US is everywhere trying to play superpower as its infrastructure at home is crumbling and the economy is becoming very quickly obsolete and in the verge of a massive collapse.

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