Friday, September 19, 2008

Did Putin Blink?

Russian minister says war with the United States not possible

Russian Deputy Foreign Minister Alexander Yakovenko said on Friday there was no possibility of a war with the United States and Russia wants the European Union to guarantee security in Georgia.
"Regarding the possibility of war between the United States and Russia, this possibility is ruled out," Yakovenko told reporters in Moscow.
"We hope that the European Union will guarantee security" in Georgia, he said.  TEXT

Has the meltdown of the Russian stock market, and the plummeting price for crude, caused Vlad to reassess his Georgia gambit, as well as the other 'stick in the eye'  tactics directed towards the US past few weeks?  Who knows.  But it will be interesting to watch how this plays out.

Stay tuned.

Blacks Against Obama

Have you seen or heard about this from any of the Main Street Media?  
Probably not....

Russia's just rewards?

Is the free-fall plummet of the Russian stock exchange global market retaliation?
Or, is it just an element of the global financial crisis?  At this point it's not obvious, but Putin's chess game initiatives may be facing a defensive action and situation that he had not factored in to his Georgia gambit.

Aug. 8, Russia went to war with Georgia. Fearing a new Cold War, foreign portfolio investors took fright, selling the ruble and Russian bonds as well as stocks.
By the beginning of September, says Evgeny Nadorshin, chief economist at Trust Investment Bank in Moscow, the panic had spread from foreigners to locals. Fearing a further slide in the ruble, Russian investors also began piling out of ruble assets. "The times when the dollar was considered a much safer investment aren't that long ago, so many people just had a reflex reaction," he says.
As often happens in times of market panic, the collapse has been self-reinforcing. Having taken out loans to buy stocks, many investors suddenly found themselves forced to put up extra collateral as stock prices began to fall. The only way to raise cash in a hurry was to sell more stocks, creating an unstoppable vicious circle. "Once things start, you get automatic mechanisms that kick in. People don't know where it's going to stop," says Richard Hainsworth, general director of the Rus-Rating credit-rating agency in Moscow.
For Russia, the biggest fear now is that the chaos on Wall Street will deepen the global economic slowdown, pushing oil prices still lower. They've already fallen 35%, to the current $95 a barrel, after peaking at $147 in July.  MORE....
There's more to the story as well.  In this morning's Wall Street Journal, Gary Kasparov details other specific actions that have ignited the global investment community:

This week's global market catastrophe kicked the Russian economy when it was already down. On Wednesday trading was suspended for a day and a half. An unprecedented 1.126 trillion rubles (around $44 billion) has been allocated to rescue three major Russian banks. One, Gazprombank, is controlled by Yuri Kovalchuk, Vladimir Putin's closest partner.
The market's collapse, down 57% since May, is linked to the dysfunctional nature of the Russian state and economy. Nearly every aspect of commerce in Russia is deeply entangled with state power, if not with Mr. Putin personally. This, for obvious reasons, does not comfort most investors.
One famous investor in particular was worried about the security of doing business in Mr. Putin's Russia. Rupert Murdoch, speaking on News Corp.'s earnings call on Aug. 5, had this to say: "The more I read about investments in Russia, the less I like the feel of it. The more successful we'd be, the more vulnerable we'd be to have it stolen from us, so there we sell now."

But, unless the West - NATO and the US, present a strong, unified and determined opposition to Putin's dictatorial and fascist regime, it may not make much difference.  Kasparov presents the reality of European politics that make this approach fragile:
The hoped-for liberalization under new Russian President Dmitry Medvedev has turned out to be another case of wishful thinking both in Russia and the West. There's no doubt in the business community about who's really in charge. After his cronies' takeover attempt of steel and coal giant Mechel was rebuffed, Mr. Putin's public outburst of criticism in late July was enough to destroy the company's market value.
Mr. Sarkozy has just one more trip to go before he completes his imitation of Neville Chamberlain's infamous trio of visits to Germany in September 1938. Perhaps Georgia should not be as nervous today as Czechoslovakia was then. But one parallel is real: If there is anything an authoritarian leader cannot abide, it's a power vacuum on his borders.
Dictatorial power demands to expand into every available space. Establishing effective penalties will require great political will, especially in Europe. There Mr. Putin has defenders like Silvio Berlusconi, who boasted last week about how he prevented the EU from levying sanctions against Russia over its actions in Georgia. The Kremlin also has many influential employees, including former EU leaders Gerhardt Schroeder of Germany and Paavo Lipponen of Finland, who both took plum positions with the Russian energy giant Gazprom immediately after leaving office.
With their reliable business partners in the West, the Kremlin has opened up a lucrative market for what could be called democracy offsets. In exchange for oil and gas from Russia, they provide democratic credentials and pretend Mr. Putin and Mr. Medvedev are elected officials rather than mafia bosses.
Until Russia has a government that is accountable to its citizens, no company or individual will be safe here. The silver lining of the meltdown will be the weeding out of so many of the foreign and domestic profiteers who greedily abetted Mr. Putin's drive to turn Russia into a dictatorship. But there are still many who hope that all will be back to business as usual once the dust settles. Apparently they think the show must go on, even though many of the lead actors have left the stage -- and the theater itself is ablaze.

Startle Reflex Clue to Politics


Hmmm.  Here's the latest study findings: people who react to survival threats tend to align themselves with conservative groups, and people who don't react to threats tend to aggregate with liberal groups.

That's interesting.  Could it be possible then, that as societies become increasingly stable, providing protection to those who in a less stable environment would have perished in Darwinian fashion, that the society's overall population then evolves towards liberalism? Ultimately, as that liberal population outnumbers the conservatives, could the society then become overcome by adversarial threats that the conservatives would have protected against?  Nah!

Anyway, it's an interesting study result that some of the talking heads in the media may have fun with...
Why do people have the attitudes they do toward social issues such as welfare, abortion, immigration, gay rights, school prayer, and capital punishment? The conventional explanations have to do with their economic circumstances, families, friends, and educations. But new research suggests that people with radically different social attitudes also differ in certain automatic fear responses. Political scientists say the work is evidence that certain attitudes are conditioned by fundamental traits of temperament, which could help explain why it's hard to get a donkey or an elephant to change its coloring.

Quite a bit is known about the physiology of response to threat, and some of this can be measured by simple noninvasive tests. So the researchers, headed by Douglas Oxley of the University of Nebraska, Lincoln, decided to test the idea that liberal and conservative (or "protective") social beliefs are related to individuals' sensitivity to threat.
The researchers found that both of these responses correlated significantly with whether a person was liberal or conservative socially. Subjects who had expressed a high level of support for policies "protecting the social unit" showed a much larger change in skin conductance in response to alarming photos than those who didn't support such policies. Similarly, the mean blink amplitude for the socially protective subjects was significantly higher, the team reports in tomorrow's issue of Science. Co-author Kevin Smith says the results showed that automatic fear responses are better predictors of protective attitudes than sex or age (men and older people tend to be more conservative).

How are body and belief connected? The authors point out that family and twin studies have revealed strong genetic influences both for liberal-versus-conservative views and for people's sensitivity to threat. They speculate that the correlation could have something to do with the patterns of neural activity surrounding the amygdala, the seat of fear in the brain.
"These findings are extremely important," says political scientist James Fowler at the University of California, San Diego, who has been doing research linking certain gene variations to political activity. "In essence, the authors have filled in a 'missing link' between genes and brains on the one hand and psychological personalities and political attitudes on the other."

"To Autumn"

It was on this day in 1819 that John Keats wrote the last of his odes, "To Autumn," which the critic Harold Bloom called "as close to perfect as any shorter poem in the English Language." The ode begins:

Season of mists and mellow fruitfulness,
Close bosom-friend of the maturing sun;
Conspiring with him how to load and bless
With fruit the vines that round the thatch-eves run;
To bend with apples the moss'd cottage-trees,
And fill all fruit with ripeness to the core

Now, think about that.  The world isn't coming to an end.  It's Friday - plan a rejuvenating weekend.

Go out into the country, find an orchard, pick some apples, buy some fresh cheese, a good bottle of wine, and enjoy your life.  It's a very precious gift.

How to Save the Financial System

When he speaks, you should listen....

Think a guy who was Chairman of the FDIC might know something about averting financial disaster?
I do...

Mr. William Isaac, was chairman of the Federal Deposit Insurance Corp. from 1981-1985.  He's written an article in today's Wall Street Journal that moves aside from the "blame game" being engaged in by both clueless Presidential candidates and many other politicians (who created the damn problem to begin with).  

He too is calling for the elimination of a number of suicidal requirements that were hastily enacted into law or regulation, following the Enron debacle, by our less-than astute Representatives.  

It hasn't been greed, or corruption, that has caused the current situation (although I'm sure that there's enough of that anywhere you want to look - it's called the human condition), instead it's been bad regulations.

The biggest culprit is a change in our accounting rules that the Financial Accounting Standards Board and the SEC put into place over the past 15 years: Fair Value Accounting. Fair Value Accounting dictates that financial institutions holding financial instruments available for sale (such as mortgage-backed securities) must mark those assets to market. That sounds reasonable. But what do we do when the already thin market for those assets freezes up and only a handful of transactions occur at extremely depressed prices?
The answer to date from the SEC, FASB, bank regulators and the Treasury has been (more or less) "mark the assets to market even though there is no meaningful market." The accounting profession, scarred by decades of costly litigation, just keeps marking down the assets as fast as it can.
This is contrary to everything we know about bank regulation. When there are temporary impairments of asset values due to economic and marketplace events, regulators must give institutions an opportunity to survive the temporary impairment. Assets should not be marked to unrealistic fire-sale prices. Regulators must evaluate the assets on the basis of their true economic value (a discounted cash-flow analysis).

If we had followed today's approach during the 1980s, we would have nationalized all of the major banks in the country and thousands of additional banks and thrifts would have failed. I have little doubt that the country would have gone from a serious recession into a depression.

 If we do not halt the insanity of forcing financial firms to mark assets to a nonexistent market rather than their realistic economic value, the cancer will keep spreading and will plunge the world into very difficult economic times for years to come.must take three immediate steps to prevent a further rash of financial failures and taxpayer bailouts.
 First, the SEC must suspend Fair Value Accounting and require that assets be marked to their true economic value. Second, the SEC needs to immediately clamp down on abusive practices by short sellers. It has taken a first step in reinstituting the prohibition against "naked selling." Finally, the bank regulators need to acknowledge that the Basel II capital rules represent a serious policy mistake and repeal the rules before they do real damage.
We are almost out of time if we hope to eradicate the cancer in our financial system.

As I write this article, I am seeing proposals by some to create a new Resolution Trust Corp., as we did in the 1990s to clean up the S&L problems. The RTC managed and sold assets from S&Ls that had already failed. It was run by the FDIC, just like the FDIC. We needed to create the RTC in the 1990s only because we could not comingle the assets from failed banks with those of failed thrifts, because we had two separate deposit insurance funds absorbing the respective losses from bank and thrift failures.
I can't imagine why we would want to create another government bureaucracy to handle the assets from bank failures. What we need to do urgently is stop the failures, and an RTC won't do that.

 Here's the rest of the story....

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