18 February 2009

Primer from Russ Winter ~ The players

Basic concepts of plutocratic or crony capitalist systems:

Corruption - public corruption entails the use of state power by a government official to benefit himself or herself at the expense of the public. Examples of public corruption include (1) siphoning off public funds (tax revenue or borrowed money) into a private bank account or into other private uses, (2) accepting a bribe or a “kick back” from a rent-seeker in return for the unwarranted special privileges, (3) demanding bribes or “kick backs” from individuals for the performance of normal job functions such as granting a building permits or performing inspections. Private corruption occurs when an individual takes advantage of an information advantage in an illegal or immoral manner. Examples of private corruption include (1) insider trading where corporate insiders buy or sell stock based on information not available to the investing public, (2) companies withhold information regarding poor financial performance from their investors, (3) companies sell products or services based on fraudulent information

Transparency - a condition where the activities and the financial condition of public and private organizations are open to public scrutiny. Examples of transparency include: (1) a bank (or business firm) that regularly makes its financial condition known its investors, its creditors and its depositors (2) a government agency that makes its rules and procedures clear and known to all those who use its services (3) government agencies that make available regular reports on their revenues and expenditures.

Moral hazard - the propensity to engage in risky behavior when insurance or other guarantees protect the actor from the natural consequences of that risky behavior. Examples of moral hazard include (1) an individual fails to lock his car routinely after he buys insurance that will cover the loss of the car if stolen, (2) a bank loan officer loans out depositors’ money to a high-risk project at a high interest rate knowing the bank’s depositors are covered by a government-sponsored deposit insurance program, and (3) foreign investors, assuming the host government will “bail out” failing banks, loan money to a bank the financial condition of which is suspect due to a lack of transparency.

B&B: Berserkers and Bubblelonians: discussed in side bar here

Bully or Bullies, Bully Wannabees : This a metaphoric reference to Von Mises theory on inflationary boom and Bubble economic winners and losers, which he defined as earlier receivers, late receivers, and non-receivers. Typical of all plutocracies, this has led to large wealth and income gaps and disparities or Gini coefficient.

Flat Earther: One, typically a Keynesian, who believes the solution to any economic weakness is printing money or providing easy credit. The chief flat earther in the world today is the Bank of Japan, who allows Riskloves and Pig Men to feed at the free Ponzi finance money trough, and with barely an interruption. The resulting carry trade is the genesis for creating a vast array of overpriced and economically unjustified securities and assets, maladjusted economic activity, and inflation.

a Gente: Portuguese for people, folks, the people. I use it over the English word as it imparts a global scene, rather than monocentric American.

Godfather Protection Racket: a system which encourages, fools, bribes, or intimidates foreigners into “investing” in Old Maid Cards on a massive scale.

Joe Soccer Mom: An individual (little gender distinction, in fact a new rather blended gender), almost always American, whose life revolves around automobiles (usually several, including at least one SUVie, example of “rent seeking” , see above), long commutes, and debt based consumption using housing as a financial and Risklove speculative vehicle and ATM. As described here ad nauseam JSMs are usually “in over their heads”, and well on their way to serfdom. James Kunstler has fully developed this concept in his Clusterfuck Nation writings.

JULS: Joe Ultra Light Sixpack, buyer of housing near or at the peak in Bubble or Map Of Misery locales, often with little or no money down, no or low documentation. “Victimizied” and lured by the financial sphere into a myriad of scam and toxic financial mortgages including exploding ARMS, interest only, pay options, negative ams, subprime cannonballs and other notice arrives in the mail “surprises”.

Land of Oz, the Matrix, or Alice in Wonderland: market participants who actually believe or pretend to believe the Ministry of Truth, and trade accordingly..

Mad Max: Road Warrior economics where there is so much economic distortion that the basic means and material of production outstrips the output price.

Map of Misery: Visable on this map, the red or reddish area where JULS was particularly aggressive in the market.

The Milky Way: Subterfuge, lies, hiding things, failure to account for losses, but from the private or corporate sector, as opposed to official (Ministry of Truth). Example would the subprime transactions conducted in March, 2007.

Ministry of Truth: From George Orwell, refers to government, special interests or plutocrat lobbyists, or in the common parlance “spinmeisters”. Also controlled or complacent/lazy media is used to manipulate public opinion. Take special note of the term “rectification”.

Q que aconteceu?: Portuguese for “what is happening?”, or literally “What do you account for?”.

Old Maid Cards: US debt in general, but asset backed securities in particular.

One Trick Pony: Dependence of the US Treasury and states on Bubble and speculative excess generated tax revenues.

Peking Duck: The ability of China to dictate interest rate and monetary policy for the US.

Pig Men: The financial sphere, typically brokers, banks, Fed dealers.

Pinocchio Theory: markets reaction to Ministry of Truth lies.

“If you fake the funk, your nose will grow.” — Bootsy Collins, The Pinocchio Theory

Ponzi finance or units discussion

Riskloves: Often hedge funds, speculative pools, or proprietary trading desks of financial institutions. Leverage or gearing is almost always used. Can also refer to smaller players, such as real estate flippers. Really anyone who gambles largely based on moral hazard and Bubble gains, as opposed to sound economic returns. Example: buying a house for $500,000 using a toxic loan (phoney initial interest rate) and then renting it out at $1250 a month (for capitalization rates half of Treasury bill returns).

Sheeple: the “victims” of the housing Bubble collapse who corporate welfarists claim to want to “save”, along with associated Ponzi finance of course.

Volkssturm: The fight the Russians to the bitter end to defend Berlin mentality among key players and supporters of the Ponzi regime. These Boyz have everything to lose should the market start another big wave down. I also suggest that their vulnerability lies with one or more abandoning ship or going under. This very aspect was discussed by Charles Kindleberger in his classic Manias, Panics and Crashes.

Wildcat Finance

Wiley Coyote: The incentive system for hedge funds and LBO Riskloves to ignore risk and the Prudent Man rule and gamble with other people’s money. The cause of this is their ability to be paid up front for “doin’ the deal”, or their cut of the gains, but not the losses. They have no skin in the game, and have succeeded in conning endowment and pension funds as fall guys.

Winston Wolfe: The problem solver in Pulp Fiction brought in to clean up the brain tissue and blood from a botched hit. In the context of a Winterism means somebody brought in to tighten up credit conditions and get rid of or hide dicey securities.

Wizards: central banks

Wizard of Oz: US Federal Reserve Bank, and US Treasury


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