I mentioned The Great American Bubble Machine, Matt Taibbi’s brilliant savaging of Goldman Sachs last week.

Saw it, read it, posted on it — see Goldman Sachs: The Great American Bubble Machine.

That hasn’t stopped 100s of you from emailing it to me:

I would like to bring to your attention the article “The great American bubble machine” by Matt Taibbi in Rolling Stone where he discusses the Goldman Sach’s market manipulation. Please point your readers to this fantastic article. I always enjoy reading your analysis of the US financial system, a matter of fact, your blog is my primary source of financial news. Keep up good work.

(You mean its not The Daily Show? )

OK, I give, here it is a 2nd time: Goldman Sachs: The Great American Bubble Machine.

Category: Corporate Management, Credit, Derivatives, Politics, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

23 Responses to “The Great American Bubble Machine (Redux)”

  1. alfred e says:

    For those of you that weren’t dialed into the following post yesterday:

    Most Subprime Lenders Weren’t Covered by CRA

    there was an extensive thread underway already on this topic as it related to the fifth Goldman Sachs bananamerica bubble: cap and trade speculation under the energy bill passed by the House and under consideration now by the Senate.

    Another relevant opinion by a Congressman:


    This is a great time for gathering some more input.

    So if anyone cares to pick up where we left off, or would like to catch up on that, or share some new thoughts, go for it.

    Thanks Barry for reposting.

  2. gregh says:

    maybe too late since thousands have read it and emailed you, but the following format is MUCH easier to read, someone scanned the pdf to text:



    BR: I don’t like to do a full “cut & paste” on someone else’s copyrighted work (it will generate a takedown nastygram) — but buried in a forum, they may not notice it.

    The PDF has great graphics, and thats why I pointed to it.

    BTW, if you don’t want to get a nastygram, try to name the Scribd PDF something innocuous

  3. Cursive says:


    Twice as nice! Maybe like me, these folks don’t know how to use TBP search feature because they are using IEv.8 in compatibility mode and can’t see it. If I make it down to NOLA anytime soon, I’m going to pick up a Lloyd Blankfein voodoo doll….

  4. km4 says:

    Kudos to Matt Taibbi who has to write for Rolling Stone because US MSM is complicit in promoting bubbles and ponzi schemes.

    The US financial ponzi scheme is a racket…..Obama and his Wall St bought and paid for economic team have put all their chips on the Banking Oligarchs. It is conducted for the benefit of the very few ( The 19 too big to fail banks ) at the expense of the very many ( the American taxpayers). Obama’s objective with his Wall St bought and paid for economic team is to pump up great chunks of the Big Shitpile that’s essentially worthless unless the peak real estate values of the bubble can be miraculously restored.

    This will fail because America and Americans are swimming in debt

    Most Americans had better start making the gradual adjustment that the party since Reagan in the 1980’s where deficits did not matter is over and there will be a leveling of the global playing field.

    And I suggest that most should be recalibrating their American dream ;)

  5. constantnormal says:

    The Daily Show covers areas of the news that TBP’s narrow financial focus prohibits it from covering.

  6. constantnormal says:

    We are but a simple sheeple — we like our answers to be simple, one-number solutions, and our villains to be singular in nature. If if gets more complicated than that, the sheeple become confused, and look to their Fearless Leaders for guidance and hope.

  7. CNBC Sucks says:

    alfred e,

    I just realized you keep posting a link to an article by Pete DeFazio about why he is opposed to cap-and-trade. You do realize that DeFazio is probably the most progressive Congressman in the House of Representatives, correct? The man moonlights on The Rachel Maddow Show. DeFazio would prefer to regulate and fine the living sh*t out of carbon emitters. If you truly believe in anthropogenic climate change and doing something about it, you would do as DeFazio proposes, but DeFazio is completely out of touch with a right wingnut America. Cap-and-trade is an attempt by liberals to set a “market price” for carbon, so that conservatives and Libertarians would go along. Of course, liberals as usual have their heads in the clouds because conservatives and Libertarians would never go along with such a thing.

    I see you haven’t been able to get anyone to bite on your “let’s not do cap-and-trade because Goldman Sachs will make a lot of money” debate. I was at least expecting Mark E. Hoffer to hook us up with another member of the 3% of climatologists who don’t think anthropogenic climate change is real:


  8. alfred e says:

    @CNBC: Correct. I knew about De Fazio. FWIW, he’s my Congressman. That’s why I was fascinated by his being against cap and trade speculation. He’s also something of an independent thinker that seems to make his own mind up about things. And I don’t have to agree with him on everything. I just happen agree with him that cap and trade speculation is a really bad idea. Apparently he has some info from the European experience to date that the MSM here seems to have buried.

    I’m picking up on an oft-used code word that is starting to raise my hackles: “set a Market price”. Back before Clinton etal in their infinite wisdom squirreled things, that was left to producers and “manufacturers”. Pure speculators were not allowed. At least that’s my understanding. And that was a good thing. If cap and trade of carbon emissions were confined to the emitters and “collectors” it might work just fine. I don’t have an opinion on that. Just the outside speculation part.

    Yeah, I’m kind of disappointed no one else took the bait either, either way. Maybe MEH will show up in a while. It’s been a quiet day.

  9. CNBC Sucks says:

    alfred e, DeFazio strikes me as someone who might be in the 450 ppm (serious climate change) or even 350 ppm (very serious climate change) crowd, so if he were King DeFazio as opposed to Representative DeFazio, he might dictate the price of carbon at $30 per ton CO2 equivalent, or maybe even $50 per ton, with zero market pricing. Here is a historical graph of carbon prices in Europe, http://greeninc.blogs.nytimes.com/2009/01/21/carbon-prices-tumble-as-global-downturn-bites/

    Given that you say you are for “all for clean air and water” (http://www.ritholtz.com/blog/2009/06/most-subprime-lenders-werent-covered-by-cra/#comment-187546) but are suspicious of “market pricing”, what price per ton CO2 equivalent would you set if you were King Alfred?

  10. CNBC Sucks says:

    Scratch that. If DeFazio is in the very serious climate change crowd, which he might be, he might dictate a price of $115 per ton CO2 equivalent, ZERO MARKET PRICING. That is what James Hansen recommends if we are “very serious” about climate change, http://www.columbia.edu/~jeh1/2009/WaysAndMeans_20090225.pdf

    Since you are “all for clean air and water” but want to eliminate cap-and-trade speculation, what price per ton CO2 equivalent would you dictate, King Alfred?

  11. alfred e says:

    @CNBCL Sorry. I’m not one of those people that considers a fart an insight. And there are certain places I will not stick my fingers looking for the truth.

    I would view with suspicion anyone that thinks they have the knowledge or power to set carbon prices.

    That said, what producer-manufacturer model fits the carbon market when everyone produces carbon?

    Perhaps a model is the producers are the coal miners and the manufacturers are the power companies. Except carbon is a liability, not an asset. People are pricing the absence of carbon, which is squirrelly.

    Who wants carbon from a power plant?

    I suppose the only rational choice, since having the government set carbon price is an irrational choice, would be to create a carbon sequestration industry, say forestry. If the government wants to mandate carbon sequestration of so many tons, let the carbon producer-sequesterer industries set the price for sequestering a ton of carbon between competing sequesterers.

    I don’t want govt or Wall Street setting price. That’s all.

  12. alfred e says:

    Oh I suppose the other part is if you want to limit carbon output, let the carbon producers bid for the rights to produce carbon. Not the govt or Wall Street. Kind of like the old crop allocations. Govt set the allocations and the the farmers bid for them.

  13. alfred e says:

    Bid for the rights amongst themselves (carbon producers).

  14. Transor Z says:

    I worry about Cap-and-Trade as an artifact of Clinton’s move to the center — IOW as a “crafty” liberal sheep-in-wolves clothing response to a now-debunked efficient markets belief system.

    Plus, the timing is awful. This market is fucked right now in terms of price discovery .

  15. alfred e says:

    @transor z: agree totally.

  16. CNBC Sucks says:

    alfred wrote: “I don’t want govt or Wall Street setting price. That’s all.”

    So, if we can just clarify, you just don’t want carbon emissions regulation, period, correct? If you don’t want government or anyone setting a price for the penalty, there is no penalty, and no regulation, or is there some penalty-free regulatory scheme that I am missing?

  17. CNBC Sucks says:

    Transor Z – since you talk about timing being awful, when do you think cap and trade would begin?

  18. alfred e says:

    CNBC- We’re kind of bordering on sophistry here. I suppose government can do whatever they choose to do, and we get to eat it. Rational says government should limit emissions industry wide, or mandate sequestration industry wide, or both. And let the industry sort it out.

    I don’t want speculators setting carbon price.

    You keep trying to put words in my mouth that I’m really interested in some other kind of issue and I’m using speculation as a cover. Wrong.

    If you’re trying to bait some others, good luck. Isn’t going to work with me.

  19. Transor Z says:

    They’re giving the permits away for free initially and their permit releases start for 2012. Regs have to be in place for the cap-and-trade system 24 months after final passage, which will probably coincide with starting the program in late 2011.

    Companies will be able to buy/trade future “vintage year” permits. What strikes me as odd is that you will be able to play compliance games for up to 15% of emission holdings where you can be cleared for current-year compliance if you’re holding a permit good for up to 5 years into the future.

    So that makes me think they’re going to be auctioning permits 5 years out (i.e., 2012-2016/17) starting in 2011.

    I’m skeptical that the equity markets and the economy generally will be healthy enough to be able to figure out the system and valuation by then.

  20. alfred e says:

    @Transor Z: Thank you.

    If memory serves me correctly, there’s more to it than that. From the Taibbi article, the game is being rigged to guarantee that the price will only go up. A guaranteed return.

  21. Transor Z says:

    I’m sure there’s a lot more to it than that. I was just going through Section 721 to try and hazard a guess about the timeline to answer CNBCS’s question.

  22. alfred e says:

    @transor Z: Thanks for dialing in. I have to sign off now. My head hurts.

    We can pick it up again this AM.

  23. CNBC Sucks says:

    @ Transor Z: That’s a fair estimate, if a bit optimistic on 2011. Even if a cap-and-trade bill gets through in late 2009 or early 2010, the earliest projected start date that I am hearing for the program is 2012. However, if you look at history with cap-and-trade on SO2, the Clean Air Act was passed in 1990 and trading didn’t start until mid-1994, so I would not be surprised if your “price discovery” (in terms of trading, since alfred is worried about speculation and market bubbles) does not begin until 2013 or even 2014. I personally don’t think the economy will recover even by then, but the fundamental question to me is: Do we want to regulate carbon emissions or not? If not now, when? I think the current bill is so weak that it doesn’t matter, but then again, I am not convinced what effect our carbon emissions will have on climate in the first place. I just want people to talk honestly about their own beliefs on climate change one way or the other, without bringing fearmongering, the Bilderbergs, ghosts and goblins, or Goldman Sachs into the discussion of why we should do nothing. I want people to say “I don’t believe anthropogenic climate change is enough of an issue that government should do something about it”, or the other, because frankly, the fundamental question of climate change is still so murky that we don’t need to bring sidebar swipes such as how Goldman Sachs will profit to make things even murkier. If we collectively decide that anthropogenic climate change truly threatens our existence, I think we can collectively agree Goldman Sachs’ profits on speculation would be a small price to pay. That is assuming government would not somehow regulate financial services trading on carbon.

    @ alfred: First off, the price of carbon will definitely go up, because it is zero right now. Then the government will set a low price because that is what industry, the Republicans, and coal state Democrats will allow. Of course, the price of carbon will go up. Go long, alfred, go long – you don’t have to leave all the profits to Goldman Sachs.

    Second, about me baiting you: Originally, you said you didn’t want the market to set the price because you worry about speculation, and I said fine, what price should the government set? Then, you wrote “having the government set carbon price is an irrational choice”, which I found bizarre because government sets the price of penalties all the time for regulations (like parking tickets). So, if neither the market nor the government sets the price, I had to ask whether you wanted anyone to set a price at all. I don’t think that’s baiting – I wanted you to make your position clear on whether to regulate or not regulate, and if to regulate, how.

    Finally, I think you were a little confused about cap-and-trade. You wrote: “Perhaps a model is the producers are the coal miners and the manufacturers are the power companies. Except carbon is a liability, not an asset. People are pricing the absence of carbon, which is squirrelly. Who wants carbon from a power plant?” alfred, nobody is trading carbon or taking delivery of carbon. They are trading allowances – the right to emit – and yep, those are assets.