Kevin Drum

Getting it Right

| Fri Jan. 2, 2009 2:32 PM EST

GETTING IT RIGHT....How many people figured out that the U.S. financial system was headed for disaster before the disaster actually struck? Just for starters, I think that if you want credit for "getting it right":

  • You need to have really gotten it right. For example, predicting a dollar crash due to our expanding trade deficit with China doesn't count, since that's not what actually happened.

  • You need to have figured this out in 2004, not 2007. By 2007 the storm clouds were overhead, the Fed was in full panic mode, and it was too late to do anything useful.

  • You need to have a decent track record, not merely one of being a chronic doomsayer. After all, if you're always predicting disaster, you'll always be right eventually.

That said, the Wall Street Journal profiles "The Doomsayers Who Got It Right" today, and given my bullet points above, I have to say that fund manager Bob Rodriguez seems pretty spectacularly prescient:

He saw storm clouds gathering in 2005 when newly minted pools of supposedly high-quality "Alt-A" mortgages began acting oddly....He quickly dumped the holdings, reckoning that by the time he figured out what was actually going on, whatever disaster the odd behavior foreshadowed would have already occurred.

....He stopped buying Fannie Mae and Freddie Mac debt and took giant insurer American International Group Inc. off the list of approved commercial-paper investments. He refused to invest in financial-services companies because of what he saw as "a pandemic collapse" in the rules by which lenders approved mortgages.

As of 2004, he began moving his fund to more than 45% cash, even as one big shareholder yanked out $300 million because of his bearish stance.

Not bad! You can read more about Rodriguez from Money magazine, who called him "the best fund manager of our time." So what's he concerned about now?

Looking forward, he, too, sees "a massive bubble in Treasurys" forming. "Quite frankly, we do not trust government," he says, as the U.S. government adds more debt to pay for economic-revival measures. He's not buying Treasurys because "We will not lend long-term money to a borrower that capriciously erodes its balance sheet."

His real concern, he recently told shareholders, isn't the next two years, "but period three through 10." In an interview, he says it will be punctuated by inflation, and he expects real GDP growth of no more than 2% a year, possibly less.

I too am concerned about years three through ten. As Barack Obama prepares his stimulus plan for years one and two, I hope his economic boffins also explain what they're doing now to prepare for what they think the economy will be like in 2010. That dollar collapse might still come someday, after all.

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Watch Your Tongue

| Fri Jan. 2, 2009 1:54 PM EST

WATCH YOUR TONGUE....The Washington Post reports that a Muslim family was tossed off a flight to Orlando yesterday. AirTran spokesman Tad Hutcheson explains:

"At the end of the day, people got on and made comments they shouldn't have made on the airplane, and other people heard them," Hutcheson said. "Other people heard them, misconstrued them. It just so happened these people were of Muslim faith and appearance. It escalated, it got out of hand and everyone took precautions."

"It just so happened" indeed. But it gets even worse. Apparently after making these comments that "shouldn't" be made on an airplane and freaking out some high-strung passengers, the flight was delayed:

As a result of that report, federal officials made the decision to order all 104 passengers from the plane and re-screen them and their luggage before allowing the flight to take off for Orlando — two hours late and without the nine passengers.

So everybody was thoroughly rescreened, luggage was rechecked, and presumably it turned out that the Muslim family didn't have so much as a nail file on them. But they were kicked off the flight anyway. And TSA's reaction? Apparently they think the system worked exactly the way it was supposed to.

Welcome to 2009.

*Quote of the Day - 01.02.09

| Fri Jan. 2, 2009 1:30 PM EST

QUOTE OF THE DAY....From Jon Chait, commenting on — well, just click the link to see what he's commenting on:

That's the problem with Marxists. They're everywhere you don't want them to be and nowhere you really need them.

Noted. Of course, I'd be churlish too if I were stuck being a Michigan fan this year, so this should all be taken with a grain of salt.

To the Moon!

| Fri Jan. 2, 2009 1:17 PM EST

TO THE MOON!....Bloomberg reports that the space race may be heating back up. Only the players have changed:

President-elect Barack Obama will probably tear down long-standing barriers between the U.S.'s civilian and military space programs to speed up a mission to the moon amid the prospect of a new space race with China.

....The potential change comes as Pentagon concerns are rising over China's space ambitions because of what is perceived as an eventual threat to U.S. defense satellites, the lofty battlefield eyes of the military.

I'm not sure which is worse: that this suggests Obama is buying into an arms race with China, or that Obama is buying into the zillion-dollar manned moon landing boondoggle. If this report is true, I guess the only question left is which strained excuse he'll use for continuing the moon program. Helium-3 mining? Staging site for mission to Mars? The Chinese will throw rocks at us if we let them colonize the place? Or will he use the excuse du jour: it's great stimulus for our broken economy? Feh.

Make 'Em Sweat

| Fri Jan. 2, 2009 12:13 PM EST

MAKE 'EM SWEAT....The Washington Post reports that Barack Obama's upcoming inauguration has struck terror into the hearts of corporate wrongdoers:

The Justice Department has reached more than a dozen business-related settlements since the presidential election, with more in the pipeline for January, prompting lawyers and interest groups to assert that companies are seeking more favorable terms before the new administration arrives.

....A review of 15 agreements involving corporations since early November suggests that much of the alleged misconduct dates back five years or more, provoking questions about why the cases took so long to mature and why resolutions are coming with only weeks left in President Bush's term.

"What they obviously are trying to do is take advantage of an administration that's deemed to be more friendly to business," said Cono R. Namorato, a Washington defense lawyer who ran the Internal Revenue Service's office of professional responsibility earlier in the Bush administration. "I know of no tax reason for doing it now."

This is good news. It means that real corporations, with real money at stake, think that Obama's unity talk isn't worth banking on. When push comes to shove, they really do think he's going to drive a harder bargain than the Bush administration when it comes to dealing with charges of corruption, pollution, and overcharging.

Good.

Fight On

| Thu Jan. 1, 2009 3:34 PM EST

FIGHT ON....Today is for football, not blogging, so how about some football blogging to combine the two? Consider this an open thread.

I'll be cheering for USC in the Rose Bowl, of course, and for those of you who wonder why I'm a Trojan fan even though I never attended school there, the answer is on the right. A couple of months ago my mother dropped off a few baby pages from one of her scrapbooks, and my USC junior alumni card was right there. So as you can see, I've been a fan literally my entire life. As for the game today, Penn State has a decent team but I'll take Pete Carroll's crew by three touchdowns, wrapping up a 5-0 bowl record for the Pac-10. Not a bad finish for a conference that otherwise had such a dismal season.

UPDATE: Well, it would have been three touchdowns if USC hadn't played like a bunch of guys afraid to beat the point spread in the second half. But I'll take it anyway. Congratulations, Trojans!

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*Nanny State Update

| Thu Jan. 1, 2009 1:28 PM EST

NANNY STATE UPDATE....Attention California readers: just in case Will Smith's recent 2-hour PSA on the subject didn't convince you to stop, it is now illegal to text while driving here in the Golden State. Oddly enough, however, it's still legal to text while bicycling. Also, it's legal to send a text message to a company or other non-human entity while driving. It's only illegal to text a person. This sounds like a traffic court nightmare in the making to me, but there you have it. Details here.

In other legal news, cyber-bullying is now illegal; it's a crime to counterfeit carpool stickers; penalties have been increased for nitwits who call 911 for nonemergencies; the Office of Emergency Services and the Office of Homeland Security have been merged, probably because this worked so great on the federal level; it's now illegal to use radio waves to read another person's identifying information, so no scanning of other people's RFID-equipped passports; and safety rules have been stepped up for operators of wave pools at amusement parks. More details here.

Remember: ignorance of the law is no excuse. Unless you're Scooter Libby.

Happy New Year!

| Wed Dec. 31, 2008 10:00 PM EST

HAPPY NEW YEAR!....As you can see, Inkblot is gazing confidently in the direction of 2009. Or something. You sort of have to use your imagination here.

(I gotta tell you, it's hell getting these cats to do something visually interesting on holiday occasions. If it's not dinner, they're not interested. Maybe I need a parakeet or something.)

In any case, Happy New Year from both humans and felines here at Chez Drum. It's just about 6 pm here on the west coast, guests are starting to arrive, dinner will be on the table in a little bit, and it's time for me to write my final blog post of 2008. So here's hoping that 2009 turns out to be better than any of us expect. Huzzah!

My Blogosphere Whines For 2009

| Wed Dec. 31, 2008 1:59 PM EST

MY BLOGOSPHERE WHINES FOR 2009....Today is New Year's Eve, so here are my top ten whiny, blog-related pet peeves. They are in no particular order:

  1. Blogs without comment sections. Or, blogs with comment sections that require you to go through some kind of painful registration process just to leave a one-sentence note.
  2. Bloggers who don't put their email addresses somewhere on the blog. I don't mind looking around for it a bit (keeps the mind sharp, you know), but put it somewhere, OK?
  3. Blogs that provide only partial RSS feeds. See also point #5, which actually bugs me a lot more.
  4. Bloggers who are too damn lazy to check their links after they post something. Come on, people.
  5. "Teaser" blogs that put only the first paragraph or two on the main page and force you to click "continue" if you want to read the whole thing. This is both annoying and pointless. It only takes a second or two to scroll past a blog post you don't want to read, after all. (Yes, I'm talking about you, Felix Salmon.)
  6. People who say "blog" when they really mean "blog post."
  7. Blogs with lousy (or nonexistent) search capability. Mine, for example.
  8. Top ten lists that are plainly larded with filler because the listmaker couldn't actually think of ten things to write about.
  9. Bloggers who can't count.

I fully expect these problems to be completely resolved starting tomorrow — or, at the very least, on January 20th. If they aren't, a blue ribbon commission will be appointed to deal with them. You have been warned.

Fun With Rebates

| Wed Dec. 31, 2008 1:46 PM EST

FUN WITH REBATES....Felix Salmon thinks the Obama economic team is showing its behavioral economics roots. Why? Because their proposed tax rebate will come a little bit at a time by reducing tax withholding in paychecks:

The point of a stimulus package, of course, is to boost spending. And hiding a tax rebate in slightly higher take-home paychecks seems like a good way of doing that: even people who save a certain amount of money every month still tend to spend the rest.

I guess that's true. Send me a $1,000 check, and there's a good chance I'll use it to pay down my credit card. Reduce my withholding by $20 a week for 50 weeks, though, and I'll probably just blow it on beer and fritos. And that's consumption, my friends!