The Ignorant Investor

So there's going to be a blowout sale of U.S. government debt, and something tells me that the U.S. is going to have to start to raise rates to attract the massive amount of funds it will take to fund our spending:

The US Treasury on Wednesday opened the floodgates of government bond issuance, revealing plans for a record debt sale in February and more frequent auctions in the months to come. . .

In recent years, demand for US government debt has been stoked by developing countries running huge trade surpluses with the US and recycling dollars by buying Treasuries. However, many are facing growing pressure to stimulate their own economies and are seeing their current account surpluses decline as global demand diminishes.

Foreign lenders have problems of their own, and so the credit available to the U.S. government is going to be reduced. To attract borrowers, we will have to raise rates. That's my prediction.

Update: Okay, it's now November and people are still buying our debt in truckloads. I'm not sophisticated enough to understand who is buying all our bonds, but rates are still low, so this prediction turned out to be wrong.

Surprise, surprise:

(Bloomberg) -- Paul Volcker has grown increasingly frustrated over delays in setting up the economic advisory group President Barack Obama picked the former Federal Reserve chairman to lead, people familiar with the matter said.

Volcker, 81, blames Obama’s National Economic Council Director Lawrence Summers for slowing down the effort to organize the panel of outside advisers, the people said. Summers isn’t regularly inviting Volcker to White House meetings and hasn’t shown interest in collaborating on policy or sharing potential solutions to the economic crisis, they said.

Volcker is one of the few guys around D.C. who has lived through the economic nightmare of the 1970s and still has his reputation intact after the financial debacle and easy money policies that spawned it over the past 20 years. Larry Summers is a creature of the Wall Street/D.C. axis whose job it is to protect the interests of his big bank friends. He's not an outsider, not a reformer. What he wants is for things to go back as they were before. No wonder he wants Volcker out of the way. TPM notes that Summers is emerging as the Dick Cheney of the new administration when it comes to the economy. Terrible news.

The rate is annualized based on January's sales, but it's even worse than it sounds because our population is 30% bigger now than it was then. The drop was worse for Ford and GM, but even the top Japanese brands were hit with drops in the area of 30%. Only Subaru and Hyundai saw gains, and Hyundai's success was due to a risky promotion where they promise to take back the car if the buyer loses his or her job or something in the next year. Something tells me that 12 months from now that promotion will come back to bite Hyundai on the ass. In the meantime, party on my South Korean industrialists friends!

One problem the automakers have is that modern cars are so much more durable than those we used to see in the 1980s. The engines work better, the lubricants do a better job of protecting moving parts, the bodies don't rust so quickly. Customers often buy new cars today because they want to, not because they have to. And as soon as people are worried about their jobs, it's a natural thing to extend the life of a car out when money is short. This will make the recession that much more severe.

Sources in the Ninawa Governorate have said that the National Al-Hadba List has made a landslide win in the Mosul city garnering 90% of votes, not to mention scoring high in other cities in spite of rigging attempts against it. The sources said that the list won more than 60 percent of the seats in the governorate, noting that the big turn out of citizens to vote was meant to preserve the civilian identity."

I'm trying to get past the idea that any set of candidates in a democratic election could get 90% of the vote in a fair election. In any given population, at least 20% of the electorate will vote against any issue or candidate just because other people are for it.

DAVOS, Switzerland: This was supposed to be the year the United States came in from the cold at the annual gathering of world leaders here. But instead of receiving a warm embrace, American policies were rebuked again and again in rhetoric that recalled the anger of the Bush years - except the ire this time was mostly directed at Washington's economic failings, rather than its diplomatic ones.

World leaders are lining up to slam the United States. I don't take it too seriously. Western leaders are politicians, and they're going through their own economic nightmares at home. Who better to blame than us for the world's problems even when everyone with half a brain knows that the modern financial system is so globalized that there is really no such thing as an American, or European, or Asian financial system. It's all interlinked, and it's not like the European bankers were complaining for years that a huge meltdown was coming and that their own bankers needed to be reined in. Picking on the U.S. financial system for its myriad of failures is like pointing to one identical twin sister and declaring "she's too ugly." However, the most absurd news is here:

The criticism did not come only from the usual suspects, like Prime Ministers Vladimir Putin of Russia and Wen Jiabao of China, who both decried a long pattern of excessive consumption, risky borrowing and inadequate regulation in the United States.

Being lectured on China about "excessive consumption" is a gas. Who sells the U.S. consumer more crap they don't need than China? Who goes out of their way to lend money to U.S. debtors to buy said crap? The joke must go over great in Shanghai.

Also, am I the only one who finds it's a little bit creepy that nobody in the media notices that events like Davos symbolize the dominance of finance in our political culture?

“I think President Obama painted everyone with a broad stroke,” said Brian McCaffrey, 55, a Wall Street lawyer who was on his way to see a client. “The way we pay our taxes is bonuses. The only way that we’ll get any of our bailout money back is from taxes on bonuses. I think bonuses should be looked at on a case by case basis, or you turn into a socialist.”

It’s Theirs and They’re Not Apologizing, New York Times, Jan. 20, 2009

If you spend any time around Wall Street, these sentiments wouldn't surprise you. Many people working in and around Wall Street can't manage to reach this level of assholosity, but mostly they aren't in charge. Instead you get guys like this. Many of these folks believe they are geniuses when they have successful trades, not realizing that most people are succeeding in an up market or when macro forces are in their favor. So they're having a little difficulty adjusting to the fact that they don't deserve giant bonuses when they're in a down market. Notice that when the market is down, suddenly it's the fault of the macro situation rather than their own trading that caused the losses. Neat how that works.

Also, keep in mind that many people in the financial services industry have jobs that depend on people doing something stupid with their money. So they're used to using bluster and declarations of their own intelligence and talk of "socialism" to get what they want out of people. I'm not talking about the tons of back office people here and the ones working on infrastructure or in personnel- just the leaders, bankers, lawyers, and traders.