How Often Should We Expect a Financial Crisis?
In a recent WSJ OpEd, Elizabeth Warren chairman of the TARP Congressional Oversight Panel, states “J.P. Morgan CEO Jamie Dimon recently explained this brave new world, saying that crises should be expected “every five to seven years.” He is wrong.”
I agree with the point that Dimon overstates the case — but Warren makes a market history error when claiming “laws that came out of the Great Depression ended 150 years of boom-and-bust cycles and gave us 50 years with virtually no financial meltdowns.”
I am a fan of Preofessor Warren’s, but she is factually incorrect when she claims “virtually no financial meltdowns” over that time period.
Market wise, as the 1968-82 period showed us, we had 5 major boom and bust cycles in the 1970s alone.
And as Jim Bianco points out, there is a long list of financial meltdowns from the 1970s forward:
• Franklin National Bank Failure on 1974
• Penn Square Failure of the early 1980s
• Gold bubble in 1980
• The Nifty Fifty stock market boom on the early 1970s
• The 1958 bond carry trade
• The Steel Tariffs of 1962
• The Stock Market Crash of 1987
• The S&L crisis of the 1980s
• The RTC
• The bond carry trade of 1994
• Mexican Debt crisis of 1982
• Mexican Debt Crisis on 1994
• The Asian Financial Crisis on 1997
• LTCM of 1998
• The Tech Bubble on 2000
• The Credit Crisis of 2006
The history of the 20th century is a tale of many meltdowns. And as we have learned, they have grown increasingly more expensive and dangerous as we have become complacent. We are getting used to collapses, and each one makes us fear the nex a little less . . . Until the big one hit.
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February 12th, 2010 at 11:01 am
Well, seeing that there’s little to no interest in real reform, then I would say we should expect it every 2-4 years now. The gap between crises gets smaller, while the scale of each subsequent crisis grows larger.
February 12th, 2010 at 11:26 am
Glass Steagall was passed in 1933. So Elizabeth Warren was mostly correct. 50 years from 1933 would be 1983. Most of your list disappears if you use that 50 year time frame. The ones that occured in those 50 years were really not that significant. They posed little systemic risk.
February 12th, 2010 at 11:34 am
[...] Come now, Ms Warren…did we really have 50 years without a financial crisis? (TBP) [...]
February 12th, 2010 at 11:37 am
While Joseph Schumpeter talked of “creative destruction”, 45 years of deficit spending & inflation has produced “creative construction” of one debt-induced craze after the other. Simply put, more debt = more meltdowns.
February 12th, 2010 at 11:38 am
How about passing a law that states there can be no financial instruments /derivatives that cant be summed up in a few paragraphs and that doesn’t take a quantum mathematician to understand. Makes too much sense? I remember Warren Buffet saying that he has dozens of bean counters and math whizzes on his payroll that couldn’t make heads or tails of some of those instruments.
Those instruments are just a legal Russian Roulette .
February 12th, 2010 at 11:42 am
The larger the scale of the bailouts, the worse the next crisis is going to be.
And the greater the overall level of debt in the country, the worse the next crisis is going to be.
But the next financial crisis won’t hit until after the next Presidential election. So why worry?
February 12th, 2010 at 11:48 am
Gots to agree with Robert B, was around and an active investor for all the incidents you cite, Barry, and do not believe any of them could be called a “meltdown”…”Great Recession”, nor did any of them arouse widespread fear of a second “Great Depression” like this last. Read the whole piece and most of her thrust was against Wall Street’s (and their CEOs) spending hundreds of millions trying to defeat the proposed Consumer Financial Protection Agency. She also properly blames the Regulators for the crisis, referring to them as “the lookouts at the bank robbery”!
One other cute metaphor came across while checking out the story…”Blaming Wall Street for the crisis is like a vegetarian getting angry with tigers because they eat meat”…loved it!
February 12th, 2010 at 11:50 am
Professor Warren obviously had a senior moment or cerebrum flatulence…
February 12th, 2010 at 11:50 am
Agree with RobertB and Mannwich each. Those crisis that occurred in that 50 year time range may have disappeared from our recent memories, so that their severity seems less. But I think it’s actual, not just perceived, that the most recent financial crisis have had more impact. More in our world is hinged on instant information, so the speed at which information moves and bad news is absorbed makes reaction times so much more vitally important. How quickly we went from DOW 14,000 to Bear Stearns collapse? From there, to total chaos and Lehman’s failure? In the span of 12 months, we went from market all time highs to talk of great depression 2. The speed, impact, and severity of these crisis seems to be growing.
February 12th, 2010 at 11:55 am
Soon enough we’ll be in a constant state of “crisis” sort of like we are always fighting the “war” on drugs. This will serve only to magnify and concentrate power in Washington, which will, of course, be its purpose. The ongoing “crisis” won’t be over until all economic freedom to act has been completely usurped by government bureaucrats. That will hearken the end of the financial crisis, and the beginning of the sovereign crisis. It is already happening/has happened in Old Europe in some places, e.g., the old Soviet Union, now Greece, again, etc. The sovereign crisis will ultimately result in the wholesale failure of civilization, as very nearly happened in the old Soviet Union after the fall, and did happen in Greece during and after WWII.
I expect the beginning of the voluntary disintegration of the union (i.e., the US) w/in the next half-century, if not sooner.
February 12th, 2010 at 11:57 am
@DL: I think the next one will come much sooner than you think. I think “W” thought the same thing but he couldn’t stave this one off until after he left office. I think O will come up even shorter in his attempts at kicking the can.
February 12th, 2010 at 12:02 pm
’68 was a good place to start..
“…How much silver was “payable on demand”? Well, if you had a one dollar silver certificate, you could have traded it for a silver dollar coin at a bank. A silver dollar contains about 3/4 of an ounce of pure silver. At today’s silver price, that makes a silver dollar coin worth approximately $9.
Can silver certificates be redeemed somewhere for their “silver” value? The answer is no, not for silver dollars and not since the Congress of the United States stopped redemption of silver certificates on June 24, 1968; but the “legal tender” part of the Obligation is still valid, and all the $1, $5 and $10 silver certificates can be spent as regular money…”
http://www.coinsite.com/content/faq/small_size_arcert.asp
but, then again, as we have learned, the “US Gov has never Defaulted”..
February 12th, 2010 at 12:04 pm
Curm,
We’ve, always, been at War with Eastasia, no?
February 12th, 2010 at 12:27 pm
Next crise-let is after O’B meets with the Dali Lama and our Chinese bankers send us a message
February 12th, 2010 at 12:30 pm
Investable money has to come from somewhere. Poor people do not inflate stock bubbles. Rich people do. The top tax rate was 70% in the US from 1933 until Kennedy dropped it to 60% in the 60′s. Then you have your nifty fifity bubble. The rich had to put that money somewhere (not intended in an evil rich people sort of way) and bubbled the safest stocks.? The other early examples were smaller examples of criminal operations that were rooted out and jail time delivered.
After Reagan dropped the top tax rate from 60% down to 34% the crap really began to hit the fan as a massive boost of investable dollars had to go somewhere and the big bubbles grew and popped?
Then encourage investing by lowering capital gains taxes to 20% and you blow another money bubble.
Along the way you lower interest rates and then homeowners and Governments and Business’s refinance and there is even more new found money to bubble with.
Ignore derivatives and allow increased investment bank leverage and you have even more new found money to invest and reinvest and you build the biggest bubble yet.
With income taxes at 34%, capital gains at 20% and interest down to zero where will the next round of bubble money come from?
Lower taxes? Investing SSI? Mandatory health insurance premiums? Cap and Trade?
Building business’ that provide goods and services people need and want and can afford?
That last was funny wasn’t it?
February 12th, 2010 at 12:37 pm
[...] How often should we expect a financial crisis? (Big Picture) [...]
February 12th, 2010 at 1:03 pm
Jeff Rubin predicts oil will rise to $100 this year and produce an economic cataclysm.
See the article: High Oil Prices May Soon Threaten the Economy! at: http://www.aesopinstitute.org
As unlikely as it seems, ordinary water can replace oil. See the article to understand why and how.
February 12th, 2010 at 1:04 pm
Exactly WHAT constitutes a “meltdown” or “crisis”?
Is it merely a significant drop in the stock market, say 20% – 25%, or is it something that brings economic growth to a screeching halt and threatens the stability of the system in its entirety?
Is the current situation close to anything following the 1930′s? Was the stability and long-term stability of the Bananamerican economy threatened by the collapse of the S&L industry circa 1980? Or by the oil price shock and infinitely wrong-headed goobermental response of wage and price controls in the mid-70s?
I don’t think so. And if you watch and see how this mess unfolds over the next 3-4 years or so, with absolutely no economic recovery whatsoever, you may come to see things this way as well.
I kinda believe that both Dimon and Warren are correct.
Now that we have removed all the guard rails and safety nets put in place in the 1930s, I believe we can expect bone-jarring calamities, with great waves of banking failures and really huge economic disruptions, to resume with about the same frequency that they did in the entire prior history of this nation — about every 5-7 years. Thus Mr Dimon’s point is well made.
And I also believe that Elizabeth Warren is correct in that we have never experienced anything like the current and ongoing situation since the Great Depression. Those who look back on the Great Bounce and confuse it with economic recovery are sadly mistaken.
February 12th, 2010 at 1:05 pm
Kinda like a Crocodile Dundee line, “THAT’s not a financial crisis, … THIS is a financial crisis!”
February 12th, 2010 at 1:07 pm
Dimon is correct that we should expect periodic crises from Financial Innovation, because there are two ways to increased wealth – one is to plant the financial apple trees and nurture them until the fruit blooms (commonly referred to as lending to grow businesses that actually produce something – Wealth Production), and the other way is to periodically kick over the apple cart and steal other people’s apples (Financial Innovation Wealth Transfer). Dimon says the apple cart is going to keep getting kicked over. Maybe that is why they are lobbying against reforms.
February 12th, 2010 at 1:14 pm
I’ve got to go with Warren. Yes there have been “crises” in the world every few years. But from the perspective of a long term (40 plus years) investor from the US, this one feels completely different, you might say “THIS TIME IS DIFFERENT”.
Over the forty years I only panicked once for a very short time and that was in October 19, 1987, when the market (DJI) dropped 22 1/2% in one day. But this last episode feels completely different and although I didn’t really panic this time I have huge unease with where we are as a country (and more and more as a western world). There are no “easy” answers now, the level of debt is too high. So the options to me don’t look good.
In Greenspan speak from his book AGE OF TURBULENCE,
“…in a market economy, rising debt goes hand in hand with progress. A rising ratio of debt to income for households, or of total nonfinancial debt to GDP, is not in itself a measure of stress.”
Our whole system is built on ever increasing amounts of debt relative to GDP. When the mountain of debt gets so high it can never be paid off (which is where we are), something will give, and it won’t be pretty, it is going to get ugly IMHO. We have either the option of debt right down ala Great Depression or a rip roaring inflation.
February 12th, 2010 at 1:39 pm
”Blaming Wall Street for the crisis is like a [tiger] getting angry with [other] tigers because they [steal] meat”.
Fixed that for you.
February 12th, 2010 at 2:21 pm
BR, she was referring to the kind of 19th/early 20th-century events now called “The Panic of 18XX” — very different in scale from the mini events you reference pre-early 80s. S&L crisis, Continental Illinois, LTCM — yes — a good case can be made that they foreshadowed of 2008. But 1933 – 1983-ish… not so much.
February 12th, 2010 at 2:30 pm
First let’s kill all the ZIRPs. ZIRP means unlimited credit creation, but in practice only for banks to buttress their balance sheets while they cop a feel wherever they can sneak one. Credit for the little guy is North of 25%, and they’ll pay you ZIRP for loaning yours to them as in Demand Deposit. As long as credit is blown away by design, the game is rigged and the real Tea Party would be patriots dressing up like Indians and tossing the Banks ZIRP cash off the wharfs of Boston, instead of the new party of whining and no radical action.
February 12th, 2010 at 3:21 pm
Your list proves Warren’s point. Of the 16 incidents on that list, fully ten of them happened in the mid 80′s or later, with the frequency and severity getting much worse over time.
The 80′s is when we put trickle-down in place. These are policies of rolling back laws and policies that mitigated income inequality, and of rolling back restrictions on financial marketeering.
The others just weren’t the same kind of problems. I mean, one of them isn’t even a financial market problem at all, but bad TARRIFF policy.
The era from 1935-1980 and from 1980 to the present are two extremely different eras in American economic history. This idea that financial panics are inevitable is simply false–when markets aren’t over-flooded with unregulated capital, they don’t freak out this way. That isn’t to say that things are perfect–but there aren’t self-generated financial market catastrophes dragging down the real economy.
February 12th, 2010 at 3:37 pm
@MEH 12:04
No, East Asia is our ally. We have been at war with Eurasia.
February 12th, 2010 at 3:44 pm
Out of that list how many of them happened because there was a run around of the regulations and a willful blind eye of the regulators? In other words did they happened because the spirit of the regulation was violated or because the regulations did not keep up with the changes?
February 12th, 2010 at 4:26 pm
scharfy, good lad, thank you, mistakes like those can have one thrown out of the Party..
~~
http://www.sparknotes.com/lit/1984/summary.html
“…Mr. Charrington, the proprietor of the store, is revealed as having been a member of the Thought Police all along…”
–
RFID chips, tiny tracking devices the size of a grain of dust, can be used to secretly identify you and the things you’re carrying–right through your clothes, wallet, backpack, or purse.
Have you already taken one home with you?
For information about CASPIAN’s opposition to RFID, see our new web site:
http://www.Spychips.com
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Shoppers+Club+Card+Spychips
February 12th, 2010 at 4:35 pm
[...] nice list from the Big Picture of a few crises from 1970-2000 (which I have edited [...]
February 12th, 2010 at 5:22 pm
Mexico hasnt been able to have long term growth for over 2o years now… the 1982, 1986, 1994 and 2008 crisis just as soon as the economy is bouncing back, a crisis strikes.
The american bailout is very similar to the mexican bailout in 1994, that like the american one HAD to be done because legislation and greedy CEO and investors keep rolling the money around without caring for the social crisis it created. Capital leaved the country and cause a mayor economic breakout, people losing houses, cars, business going bankrupt so the goverment HAD to get their hands dirty and aproved the FOBAPROA, a measure that “save” the savings of common people and ended up bailout the people who cause the trouble. Making the taxpayers pay for the mistakes in wall street while claiming it for main street benefict that just, well an old tale. And the american people had it told.
There are diferences in the method of the bailout between the 2 countrys but I have got to admit I didnt expected to see corporative america bullsh24 blue collar america so well.
February 12th, 2010 at 6:22 pm
And half of those crises listed above occurred in the 1990s and the last two occurred in the 2000s and thus after the 50-year period Warren mentions. Actually, she was probably thinking of 1929 for the date of the Great Depression, so 50 years from then would be up until 1979. In addition, clearly the S&L crisis is what she was referring to in regards to deregulation. So this is a waste of time. Basically, if she had said 40 years instead of 50 years, this article would be completely pointless.
And you know very well that the financial meltdowns that Warren is talking about here do not encompass crap like the Mexican Debt Crisis of 1982 (whatever that is). Most of those stupid so-called “crises” did not cause financial meltdowns in the US at all.
A good example of a financial meltdown is the one that just occurred, you know, when the housing market crashed (for the first time in 60 years), Lehman Brothers went bankrupt (the largest in US history by a couple hundred billion dollars) and the federal government spent upwards of a trillion dollars bailing out our economy.
Warren makes a valid point. With proper bank regulation, there will not be a crisis every 5-7 years. Dimon is an idiot and he’s trying to act all smart now that his firm avoided the whole mess. And he’s just buying into the whole “fat tail” mantra that everyone and their mother these days is preaching. So many people are saying this crap it’s starting to make me expect some skinny tails for the future.
In reality, Dimon’s dumb comments actually make the case for bank regulation. If he expects a sever financial crisis every 5-7 years, there’s no reason the banks should even exist. That is way too much risk (unless he expects the market to return 35% to compensate). With that kind of risk, JP Morgan should not have any leverage and should thus liquidate. Right now. At the very least Dimon should short the hell out of the market. Unless it’s a defensive stock, he should short every single stock possible, and after that, he should take positions in every possible derivative bet he can to play his newfound theory.
February 12th, 2010 at 8:21 pm
Let’s think about this: was it a particular type of human that caused this? A particular investment or activity that is usually the cause of busts?
You can create laws to stop the LAST type of behavior that may have caused the last busts, but if you look at history, the next bust is always different. Glass Steagall may have been instrumental in preventing THIS type of bust we have just had, but it certainly did not prevent the real estate problems of the early 1990′s. Booms and busts are seen everywhere humans can allocate capital. They are the result of human behavior, in general. Looking back, small guys who were flipping real estate, fibbing on loans and projecting increases in RE values through perpetuity were were acting on the same desires/motives as any “greedy banker” or hedge fund manager.
The reason it takes 5 years or a bit more, as Dimon says, is because that is how long it takes people to forget a major incident. Most humans are pretty ignorant of history, so they will not recognize patterns that have caused problems in the past and then they will repeat them. Not just in banking, but in RE, gold, oil, Florida RE, tulip bulbs, whatever. The next big one will not have anything to do with what caused the last one. At the current rate the next one will sneak up because we are still worrying about preventing the last one…again.
February 12th, 2010 at 8:23 pm
Thank you Barry/Jim Bianco for correcting Prof. Warren’s factual error.
It needs to be added that (1) Prof. Warren is manifesting the illusion of political reformism (in the shape of state remedy for capitalism’s excesses); which is neatly refuted by the one financial crisis admitted by Warren (the last one). Capital controls the political state, in the long if not in the short run. The fate of Glass-Steagall exemplifies the pattern. Liberal academics such as Warren have a great opinion of their capacity to tweak the world for everyone’s benefit.
(2) Jamie Dimon’s “every five to seven years” for financial crises should be taken as confessional and prospective: What the predator class anticipates from their necessary predation. Would anybody on this website be so bold as to claim that there will not be reaped another crisis in Dimon’s time frame?
February 12th, 2010 at 8:31 pm
It’s all about debt overhang and the duration and severity of unemployment. That’s it. The last two big unemployment episodes were in 1974-1975 and 1981-1983… but the former had an oil shock to explain that one and we had a real V-shaped recovery anyhow… the latter was the result of nasty inflation that had to be licked and brought under control (public enemy #1 at that time), so the joblessness was taking our medicine. NOW?? Bankers have fleeced the treasury and prey on everybody with no interference?? So, we are supposed to swallow that?? I don’t think so, and it’s not going to wash. This is a game changer a la 1933, it is just going in slow motion.
February 13th, 2010 at 12:20 am
The break point of 1980 is a great observation.
But there was one that deserves more weight: the RTC days: the first gov bailout under George SR. The little guys went bang in the night. The little guy investors got flushed. The big guys got rescues. Props with positive cash flows were absconded by the gov and sold for $.10 on the dollar. Yeah a few guys went to jail only because of one turncoat. They’ve learned how to cover that.
Care to guess who was in the middle of that as an attorney? HRC. Hillary.
So Dem vs Rep is a sham. It’s about the money.
Sound familiar?
Set the stage for the last one.
February 13th, 2010 at 5:26 am
It is funny (not really though) how most of those have also occurred after the US went off its golden anchor.
That allowed the gamers of the system to create real problems.
The real problems, of course, are the fact that you have a hyper leveraged system that is ruled over by corrupt central bankers controlling interest rates. The only hope here (because I doubt they will fix the problem voluntarily considering that is where the bonuses are coming from) is that Americans continue eliminating debt. Not only once they are in the safe zone but altogether. If they can fundamentally change their debtor ways and thus completely take away the power of the lords of leverage, they can go a long way to solving the crisis-every-decade problems that are plaguing them
February 13th, 2010 at 5:31 am
alfred e,
toward your point(s)..
“…Beginning in 1990, the profits of the financial sector began to increase relative to the rest of the economy. This, of course, did not happen by accident. It happened because Alan Greenspan, the maestro of America’s demise, began to allow Wall Street more “freedom” during his tenure as Fed chairman; and, as we all know, freedom is a good thing—except, of course, when, in the name of freedom and free markets you turn the keys to the country over to thieves and robbers for ideological reasons, e.g. Republicans, and financial contributions, e g. Democrats.
This is what happened when Bill Clinton sold out America to the bankers. Because Wall Street already owned the Republicans, when Bill Clinton and the Democrats entered into their time-share agreement with the bankers, the fate of America was sealed.
Under the tenure of “Easy Al” Greenspan who never saw a problem easy credit couldn’t delay and the “welcome to the henhouse” policy extended by Bill Clinton to Goldman Sachs and their Wall Street cohorts, the stage was set for the climactic economic gang-bang of America that was to happen under Republican George Bush, Jr.
It was truly a bipartisan effort where both Republicans and Democrats united to give Wall Street carte-blanche to bet and lose the savings of Americans and allow bankers to obscenely profit no matter the outcome of their bets.
CELEBRATION DAVOS 2007
CONCERN DAVOS 2008
SHOCK DAVOS 2009
FEAR DAVOS 2010
The days of ostentatious celebration at Davos are over. Attending bankers and politicians are no longer smug and confident, their arrogance now replaced by vacillating indecision and enervating fear; and, today, if they don’t use enough deodorant, most would be politely asked to leave public areas. In Davos, despite its lofty altitude, the smell of change is in the air and it isn’t pleasant.
The present system of debt-based money and debt-based markets introduced by England’s bankers in 1694 is beyond redemption. Paul Volker, the hero of the 1980 clampdown on credit which gave capitalism one last putsch (1982-2007), has suggested reforming the banking sector in order to extend their now flagging run; and, as much as its victims would wish for it to succeed, it won’t. It’s too little, too late. The pumpkin is already waiting outside.
DO YOU KNOW WHERE YOUR CENTRAL BANKER IS?
Just five days after the bankers left Davos, the world’s top central bankers secretly reconvened in Sydney, Australia to discuss in emergency session the deterioration of global financial markets. On February 6th the Australian news media reported:
Representatives from 24 central banks and monetary authorities including the US Federal Reserve and European Central Bank landed in Sydney to meet..at a secret location…the two-day talks are shrouded in secrecy with high-level security believed to have been invoked by law enforcement agencies…”
http://www.kitco.com/ind/schoon/feb092010.html
~~
“The Great Highway Robbery Continues: How The FDIC Is Legally Transferring Billions In Taxpayer Money To Hedge Funds
Submitted by Tyler Durden on 02/10/2010 13:57 -0500
It is not a secret to anyone who has been closely following the FDIC’s quasi criminal bank takeover practices over the past year, that acquirors of failed banks end up receiving a massive and risk-free gift in the form of taxpayer benefits via the FDIC when it comes to funding losses on a given bank acquisition. Should there be a short sale resulting in a loss to the full principal (not the cost basis mind you)? Not to worry, Sheila Bair is there to hand out taxpayer money to the hedge funds/banks owning the newly transferred assets. A recent example of this was the glaring insider trading which preceded the acquisition of failed AmTrust Bank by New York Community Bancorp, in which both NYB and those who bought calls in advance of information being made public, made massive illegal profits. And as the SEC continues to pretend like this episode never happened, we remind the intellectually subprime Mary Schapiro to finally pursue those involved, and will continue doing so for as long as it takes. But back to the FDIC: the folks at Think Big Work Small have compiled a terrific video detailing exactly how several hedge funds, currently owners of recently created shell holding company OneWest Bank, are picking apart the carcass of failed IndyMac, all the while encouraging short sales (instead of loan mods) as only that way do they get to benefit fully from the taxpayer funded FDIC loss-share arrangements which makes the IndyMac transaction an immediate slam dunk for everyone involved…except America’s taxpayers, and the FDIC’s ever depleting DIF reserve.
As the authors appropriately title the video, this is indeed a slap in our face. And this goes on every single bailout Friday when the FDIC continues handing out billions of dollars under the guise of “loss sharing” arrangements, which is simply a guaranteed profit from the acquirors’ cost basis to 90% of the original loan value: an instantaneous 30% risk free IRR….”
http://www.zerohedge.com/article/great-highway-robbery-continues-how-fdic-legally-transferring-billions-taxpayer-money-hedge-
~~
and, better than penny-ante ‘Shopper’s Club’ Cards..
“…Tice said his information is different from the Terrorist Surveillance Program that Bush acknowledged in December and from news accounts this week that the NSA has been secretly collecting phone call records of millions of Americans. “It’s an angle that you haven’t heard about yet,” he said.
—AT&T Invents Programming Language for Mass Surveillance
For years, my guess has been that this other angle of the mass intercept program is related to persistent geosurveillance of targeted individuals. At a minimum, this is probably a component of the MAIN CORE system.
In the article below, Declan McCullagh writes, “Cellular providers tend not to retain moment-by-moment logs of when each mobile device contacts the tower, in part because there’s no business reason to store the data, and in part because the storage costs would be prohibitive.”
Just a few days ago, another of McCullagh’s articles made a similar, limited hangout argument about the retention of URLs.
Focusing on the network operators misses the point. The beam splitters don’t discriminate; they send a copy of everything, every single bit, to Uncle. So, sure, the carriers don’t want to spend money on archiving all of that surveillance data, but what is the state doing with its copy of the stream?
The answers is: We have almost no idea, and the Obama regime is determined to make sure that it stays that way.
Via: Cnet:…”
http://cryptogon.com/?p=13648
February 13th, 2010 at 9:08 am
By themselves most of these “crisis” are nothing. It is the connective tissue of constant interventions preventing the curative from working that will bring us down. Today’s near depression is not solely caused by sub primes or whatever excuse is timely, rather it is the cumulative, straw by straw, Keynesian interventions that ultimately lead to the big kahuna. All for votes.
The greatest bubble of all time continues to form–Keynesianism. Something for nothing.
February 13th, 2010 at 6:57 pm
@MEH: Good notes.
Our cook has been goosed.
February 13th, 2010 at 8:23 pm
Well yikes, it depends what you call a meltdown.
Things got *way* better post-WWI. Here’s the picture:
http://www.asymptosis.com/wp-content/uploads/2010/02/Untitled.gif
February 13th, 2010 at 10:21 pm
>> The greatest bubble of all time continues to form–Keynesianism. Something for nothing.
You might be correct, if we adopt the definition of “Keynesianism” to be “spend with reckless abandon”. But, I can’t believe Keynes himself would sanction our policies. After all, he did say to save while times are good.
Anyway…
Vying with the “Keynesianism” bubble is the fraud bubble…seemingly still unpricked.
February 13th, 2010 at 11:51 pm
@MEH: BTW. Many, many years ago when I was a switching architect at Bell Labs, I was approached by research people wanting to know if the switch could be turned into a mass of signal processors (voice and speech recognition). Which was possible.
A few years later there was a classified switching project called White Noise that no one has ever spoken of.
And after that there was an organization, rarely spoken of, that was mastering voice and speech recognition. On-going I suppose. Just like the micro-lenses in everyone’s cell phone. Care to guess how prevalent they are in the surveillance world.
I used to tell people the AT&T advertised “True Voice” feature was nothing more than a signal processor attached to every phone call in America capable of voice and speech recognition.
Big Brother? Duh.
February 15th, 2010 at 11:20 am
As others have already pointed out there is a really BIG difference between a generic
financial “crisis” or bubble, and a total meltdown of the financial system.
The Dot.com+ENRON bubble breaking did not cause a collapse of the financial
system, as painful as it was to many investors, both individual and institutional.
Likewise the Nifty Fifty bubble did not freeze-up the financial system.
The biggest similarity between the 1930s Depression and our current woes
is that they were both bubbles caused by extreme leverage and were centered
in the financial system. When the financial system breaks down – as it very nearly
did in the Fall of 2008, the ensuing recession will be much longer and deeper than
normal, because without a working banking system there is no money for business
or consumers to start spending again and get the economy growing and end the
recession.
The savings and loan bubble did not crater the financial system because it was
confined to a tributary. The LTCM blowup almost spilled over – and it should have been a
warning about hedge funds and complex, opaque, and un-regulated financial inventions
of mass destruction, but it was ignored.
Speculative boom and bust cycles are constant throughout history, but it takes bankers
and crazy leverage to really screw things up.