WWTBAM Bored

Vladimir Putin warns the US against socialism, and gives US a lesson in capitalism.

Never would have thought I'd see the day!

http://patdollard.com/2009/02/putin-war ... socialism/

Russian Prime Minister Vladamir Putin has said the US should take a lesson from the pages of Russian history and not exercise "excessive intervention in economic activity and blind faith in the state’s omnipotence".

"In the 20th century, the Soviet Union made the state’s role absolute," Putin said during a speech at the opening ceremony of the World Economic Forum in Davos, Switzerland. "In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated."

Sounding more like Barry Goldwater than the former head of the KGB, Putin said, "Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state."

Some more of his speech- very spooky. He was channeling my own thoughts! Especially the paragraph I've highlighted. Watching that CNBC special House of Cards, every time I heard one of those financial engineers they interviewed talk about "ramping up production" of MBSs, and CDOs, I wanted to scream. These guys talking about these complex derivatives as if they were true value-adding goods like refrigerators or cars was almost too much for me to take!

Ladies and gentlemen, unfortunately, we have so far failed to comprehend the true scale of the ongoing crisis. But one thing is obvious: the extent of the recession and its scale will largely depend on specific high-precision measures, due to be charted by governments and business communities and on our coordinated and professional efforts.

In our opinion, we must first atone for the past and open our cards, so to speak.

This means we must assess the real situation and write off all hopeless debts and "bad" assets.

True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalisation, bonuses or reputation. However, we would "conserve" and prolong the crisis, unless we clean up our balance sheets. I believe financial authorities must work out the required mechanism for writing off debts that corresponds to today's needs.

Second. Apart from cleaning up our balance sheets, it is high time we got rid of virtual money, exaggerated reports and dubious ratings. We must not harbour any illusions while assessing the state of the global economy and the real corporate standing, even if such assessments are made by major auditors and analysts.

In effect, our proposal implies that the audit, accounting and ratings system reform must be based on a reversion to the fundamental asset value concept. In other words, assessments of each individual business must be based on its ability to generate added value, rather than on subjective concepts. In our opinion, the economy of the future must become an economy of real values. How to achieve this is not so clear-cut. Let us think about it together.

http://online.wsj.com/article/SB123317069332125243.html

This is exactly true. We HAVE to write down those debts- whether or not it seems like we're rewarding bad behavior, it has to be done.

AND we have to move our financial system away from being a parasite back to what it was intended to be. Our ways of measuring and rewarding economic activities are badly flawed. I don't know what the answers are, but it's something that HAS to be done.

It's just too bad that everything that's being done so far seems directed solely at preserving/resurrecting the system that was.

The more I think on this, the angrier I get. Some people estimate $20 trillion in wealth has evaporated due to this crisis.

$20 trillion! 1.5 times the US GDP! Half of the world's GDP!

Think of what good could have been done- what LEGITIMATE economic activity could have been financed- with that amount of wealth!

That's funny! Putin is an unreconstructed Communist (aka Thug) who wouldn't know free enterprise if it bit him on the zhopa. This is a guy who pays Russians to have children. Can't get much more state interventionist than that.

Thousandaire wrote:That's funny! Putin is an unreconstructed Communist (aka Thug) who wouldn't know free enterprise if it bit him on the zhopa. This is a guy who pays Russians to have children. Can't get much more state interventionist than that.

And despite that, he correctly identified what had to be done.

That's what makes it all the more richly ironic.

Jeemie wrote: The more I think on this, the angrier I get. Some people estimate $20 trillion in wealth has evaporated due to this crisis.

$20 trillion! 1.5 times the US GDP! Half of the world's GDP!

Think of what good could have been done- what LEGITIMATE economic activity could have been financed- with that amount of wealth!

If $20 trillion can disappear in less than six months, it wasn't real wealth in the first place. It couldn't have financed anything lasting.

Putin is pissed off because the crisis caused oil prices to drop, which was the only thing propping up his economy.

Thousandaire wrote:

Jeemie wrote: The more I think on this, the angrier I get. Some people estimate $20 trillion in wealth has evaporated due to this crisis.

$20 trillion! 1.5 times the US GDP! Half of the world's GDP!

Think of what good could have been done- what LEGITIMATE economic activity could have been financed- with that amount of wealth!

If $20 trillion can disappear in less than six months, it wasn't real wealth in the first place. It couldn't have financed anything lasting.

Putin is pissed off because the crisis caused oil prices to drop, which was the only thing propping up his economy.

I know- I jumped the gun- but it was still a hell of a lot of real wealth invested in nothing but people's (worthless) promises to repay.

And it doesn't matter if Putin is pissed off...he still made many salient points.

putin also criticised the mafia for going off course.

Thousandaire wrote:

Jeemie wrote: The more I think on this, the angrier I get. Some people estimate $20 trillion in wealth has evaporated due to this crisis.

$20 trillion! 1.5 times the US GDP! Half of the world's GDP!

Think of what good could have been done- what LEGITIMATE economic activity could have been financed- with that amount of wealth!

If $20 trillion can disappear in less than six months, it wasn't real wealth in the first place. It couldn't have financed anything lasting.

Putin is pissed off because the crisis caused oil prices to drop, which was the only thing propping up his economy.

In the good old days, there were two ways to make money in finance. Either you loaned money to someone who paid you back with interest, or you bought something (in whole or in part) that became more valuable while you owned it.

We have become obsessed with coming up with more convoluted ways of "making money" that consist solely of buying and selling pieces of paper, divorced from anything real. People get huge bonuses for making paper profits that make these pieces of paper more valuable or for making money selling these pieces of paper. It's only when the world finally wakes up to the fact that they are dealing in worthless paper that the value of the paper goes belly up, taking a lot of other things with it.

The subprime mess is the 21st century equivalent of the tulip craze in Holland, where speculators bid the price of tulips up to ridiculous levels, not because people really wanted tulips to beautify their gardens or give to their wives, but because they assumed they would be able to turn them around and sell them at even more ridiculous levels.

The sad fact is that houses aren't worth what they were selling for, and nothing that any presidential administration does can change that fact. They got bid up to these levels because financial firms were chomping at the bit to put together mortgage packages that were as big as possible, and since there is a relatively limited pool of potential home buyers, the key is to throw as much money as possible at every single one of them. This in turn encouraged home builders to inflate prices knowing the market would bear it, and buyers were either gullible or stupid enough to go along with it.

This is not a slam on Obama, but I'm not sure what any president can do right now. Refinancing mortgages will help in some cases, those in which people have ridiculous mortgage payments AND they can afford the house they are in with a more realistic interest structure. I don't know how many of those mortgages there are out there. There's a lot that the people who bought the homes can't afford under any feasible repayment plan. The only way to keep them in the houses is just to flat out subsidize their payments, which in essence rewards the worst excesses.

There's also a lot of people out there who bought intelligently and are living in homes they can and do make payments on now who are probably wondering why they can't get the government to help them out a bit as well. These people are one layoff away from disaster; they can't sell their house and get back what they put in it (or afford to buy a new one), so they are locked into an overpriced property with no help in sight.