Tuesday, August 14, 2007

Housing Busts and Hedge Fund Meltdowns: A Spectator’s Guide

Housing Busts and Hedge Fund Meltdowns: A Spectator’s Guide: Nice image from the New York times helps explain some of the action in the subprime/ hedge fund markets. Crack open a tinnie and pull up a chair - this could be fun to watch.

It seems to me to be a classic george/hoyt/harrison 18-yr land boom and bust cycle, with a few features that could make it special. First, the Conservative Reaction against Socialism and the Sixties means we have had a good couple of decades of deregulation, privatisation and laissez faire behind us to help prepare for the big bang. Bascially, stagnant or falling wages, increased profits/surpluses and less regulation and control. Second, fancy new thingummies like computers, securitization, hedge funds and derivatives means we don't know how much credit has been created, what the risk is, who owns it or how to control it, or if it can be controlled. This has led to a land boom that the Economist magazine has described as the biggest bubble in history. Put it all together and the bust could be like the good ole days of 1890 or 1929. Third, the US army is doing a slow motion Barbarossa and Stalingrad with their Operation Iraqi Liberation (OIL) and Battle of Baghdad. Fourth, US current account deficit, dollar, budget deficit and economy could all go bust in a historic realignment of global hegemonic power - nothing less than the end of white power after 500 years of war and colonialism. And I haven't even mentioned peak oil and global warming.

Dr Strangemoney adds some thoughtful comments on the affair:

dr strangemoney: Or How I Learned to Stop Worrying and Love the Bubble

General "Buck" Turgidson: General Ripper called Strategic Air Command headquarters shortly after he issued the go code. I have a portion of the transcript of that conversation if you'd like me to to read it.

President Merkin Muffley: Read it!

General "Buck" Turgidson: Ahem... The Duty Officer asked General Ripper to confirm the fact that he *had* issued the go code, and he said, uh, "Yes gentlemen, they are on their way in, and no one can bring them back. For the sake of our country, and our way of life, I suggest you get the rest of SAC in after them. Otherwise, we will be totally destroyed by Red retaliation. Uh, my boys will give you the best kind of start, 1400 megatons worth, and you sure as hell won't stop them now, uhuh. Uh, so let's get going, there's no other choice. God willing, we will prevail, in peace and freedom from fear, and in true health, through the purity and essence of our natural... fluids. God bless you all" and he hung up.

General "Buck" Turgidson: Uh, we're, still trying to figure out the meaning of that last phrase, sir.

President Merkin Muffley: There's nothing to figure out, General Turgidson. This man is obviously a psychotic.

General "Buck" Turgidson: We-he-ell, uh, I'd like to hold off judgement on a thing like that, sir, until all the facts are in.

President Merkin Muffley: General Turgidson! When you instituted the human reliability tests, you *assured* me there was *no* possibility of such a thing *ever* occurring!

General "Buck" Turgidson: Well, I, uh, don't think it's quite fair to condemn a whole program because of a single slip-up, sir.
...

[discussing the Doomsday machine]
President Merkin Muffley: How is it possible for this thing to be triggered automatically and at the same time impossible to untrigger?

Dr. Strangelove: Mr. President, it is not only possible, it is essential. That is the whole idea of this machine, you know. Deterrence is the art of producing in the mind of the enemy... the FEAR to attack. And so, because of the automated and irrevocable decision-making process which rules out human meddling, the Doomsday machine is terrifying and simple to understand... and completely credible and convincing.
...

[Strangelove's plan for post-nuclear war survival involves living underground with a 10:1 female-to-male ratio]

General "Buck" Turgidson: Doctor, you mentioned the ratio of ten women to each man. Now, wouldn't that necessitate the abandonment of the so-called monogamous sexual relationship, I mean, as far as men were concerned?

Dr. Strangelove: Regrettably, yes. But it is, you know, a sacrifice required for the future of the human race. I hasten to add that since each man will be required to do prodigious... service along these lines, the women will have to be selected for their sexual characteristics which will have to be of a highly stimulating nature.

Ambassador de Sadesky: I must confess, you have an astonishingly good idea there, Doctor.

----
Decoder ring for the kids at home:
nuclear weapons -> derivatives
post-nuclear war survival -> bailout


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