Here is a bit of an interview with David Stockman who was at one time the budget director for President Reagan (with Bernard Condon of Associated Press). Stockman comes across as the shill for the old-money seigneurs:
Stockman: We’re stalled, stuck.
Condon: What will 10-year Treasuries yield in a year or five years?
A: I have no guess, but I do know where it is now (a yield of about 2 percent) is totally artificial. It’s the result of massive purchases by not only the Fed but all of the other central banks of the world.
Q: What’s wrong with that?
A: It doesn’t come out of savings. It’s made up money. It’s printing press money. When the Fed buys $5 billion worth of bonds this morning, which it’s doing periodically, it simply deposits $5 billion in the bank accounts of the eight dealers they buy the bonds from.
Q: And what are the consequences of that?
A: The consequences are horrendous. If you could make the world rich by having all the central banks print unlimited money, then we have been making a mistake for the last several thousand years of human history.
Here are two mutually supporting economic tropes on display: the first being the ‘good money- bad money morality play’ the second is the ‘monetization (or hyper-inflation) myth’.
Savings or retained earnings are simply debt that has been laundered: it is funds borrowed then given to another in exchange for some product or service. The borrowed funds are ‘earnings’ on the account of the seller. These are presumed to be the good money as opposed to debts created without any regard by out-of-control money authorities. Mr. Stockman asserts that the sales-transaction process by itself is ennobling, that it alters the fundamental nature of borrowed money. Carrying on with this idea, there are virtuous enterprises with organic returns that produce good money while the non-virtuous, out-of-control central banks and governments produce the bad.
This is a long-running drama: it’s also complete nonsense. The enveloping idea insists that our enterprises are productive but are constrained by debt. Practically every ‘Brand X’ economist uses as a starting point the assumption of the productive industrial enterprise that returns good money.
In the real world these enterprises do not exist. Products are unimportant, they are given their fifteen-seconds of fame then exit into well-deserved obscurity (landfill). What matters is the degree to which the collateral worth of enterprises can be enlarged so that debts can be taken on against them by their entrepreneur-owners. Whether a firm can provide good-money returns is immaterial if the same firm has credit enough to monetize its costs and provide profits. Entrepreneurs do not become rich by the sale of goods and services, they borrow billions against the accounts of their firms, using debt to expand or support their enterprises, leveraging against their holdings and their customers’ accounts. The customers in turn are responsible for retiring and servicing the debts taken on by the firms.
Stockman sanctifies the process by hauling out economists’ fairy tales about money-morality. He endorses the virtuous old money held by ‘deserving rich’ who (logically) possess the bulk of it.
“The consequences are horrendous. If you could make the world rich by having all the central banks print unlimited money, then we have been making a mistake for the last several thousand years of human history.”
You can make a handful rich by having banks print limited money and giving this handful access to it, leaving to the rest the obligation to repay.
Congress can ensure U.S. remains world’s most entrepreneurial nation
By Steve Case, President Obama’s Council on Jobs and Competitiveness (The Hill)
For all the talk about how broken Washington seems to be these days – and there is a lot to fix – considerable progress has been made over the last few months around the issue of improving the environment for entrepreneurs to start new businesses, grow existing companies, and create jobs. There is broad bipartisan agreement that entrepreneurs have played a critical role in creating the leading economy in the world, and that we need to double down on our nation’s commitment to our entrepreneurs. Now’s the time to push pro-entrepreneurship legislation over the goal line, so we can ensure the United States remains the world’s most entrepreneurial nation.
Here is a buzzword salad: the Administration promotes ‘opportunities’ for entrepreneurs to stuff more credit into their own pockets.
Ford Awards Mulally $58.3 Million in Stock for Turnaround
Keith Naughton (Bloomberg)
Ford Motor Co. awarded Chief Executive Officer Alan Mulally $58.3 million in stock as a reward for the automaker’s turnaround.
Ford paid the stock to its top executive as part of an incentive plan for 2009, according to filings yesterday with the U.S. Securities and Exchange Commission. Ford earned $29.5 billion in the last three years after $30.1 billion in losses from 2006 through 2008. The shares, which traded as low as $1.01 on Nov. 20, 2008, closed yesterday in New York at $12.09.
Mulally will receive other compensation for 2011, including salary and benefits, which will be revealed in a proxy report in the coming weeks. Dearborn, Michigan-based Ford withheld some of the stock award to cover Mulally’s income taxes. After taxes, Mulally received $34.5 million in stock. Ford has awarded him stock worth more than $100 million the past two years.
“Our compensation philosophy is to align the interests of our leadership with those of our shareholders,” Todd Nissen, a spokesman, said yesterday in an e-mail. “Ford’s stock was $1.96 a share at the time of the 2009 awards, and is over $12 a share today. That is a more than a 500 percent increase, which benefits all stakeholders in the Ford turnaround.”
Last July, United Auto Workers President Bob King assailed Mulally’s compensation as “outrageous” and “excessive.” Last year, Ford rewarded Mulally with $56.6 million in stock. The executive’s 2010 compensation rose 48 percent to $26.5 million.
Options, Restricted Stock
In his new awards, Mulally, 66, also received 1.28 million stock options with a strike price of $12.46, which he can begin to exercise next year, and he was awarded 376,016 restricted stock units that can be converted into shares in 2014.
Executive Chairman Bill Ford, 54, received 595,238 stock options with a strike price of $12.46, the first of which he can exercise next year, and he was awarded 175,473 restricted stock units that can be converted into shares in 2014, according to a separate filing with the SEC.
Talk about being on the right street-corner at the right time! Who knows who this Mulally character is, no doubt another rent-an-executive who migrates from company to company borrowing massive paydays for himself. Another version is ex-Home Depot, ex-Chrysler, ex-Cerberus cockroach Robert Nardelli.
In March of 2009 most of the stock prices of US companies were beaten down. Mulally had nothing to do with Ford’s stock price increasing any more than he had to do with the increase in any other company’s stock. Ben Bernanke and the Treasury Department introduced moral hazard without end. This, discount-window cash and timely capital increased demand for all kinds of companies’ stocks including insolvent finance firms and real-estate investment trusts (REITs). Maybe part of Mulally’s $100 million haul was for approaching Fed Boss Bernanke with begging bowl in hand:
Note the auto-beggars lined up for TALF handouts from the Fed soup kitchen:
|Ally Master Owner Trust (ex-GMAC)|
|American Express Credit Account Master Trust|
|AmeriCredit Automobile Receivables Trust 2009-1|
|ARI Fleet Lease Trust 2010-A|
|Bank of America Auto Trust 2009-1|
|BMW Floorplan Master Owner Trust|
|BMW Vehicle Lease Trust 2009-1|
|Cabela’s Credit Card Master Note Trust|
|CarMax Auto Owner Trust 2009-1|
|CarMax Auto Owner Trust 2009-A|
|Chase Issuance Trust|
|Chesapeake Funding LLC|
|Chrysler Financial Auto Securitization Trust 2009-A|
|CIT Equipment Collateral 2009-VT1|
|Citibank Omni Master Trust|
|CNH Equipment Trust 2009-B|
|CNH Wholesale Master Note Trust|
|Discover Card Execution Note Trust|
|FIFC Premium Funding LLC|
|First National Master Note Trust|
|Ford Credit Auto Lease Trust 2009-A|
|Ford Credit Auto Owner Trust 2009-A|
|Ford Credit Floorplan Master Owner Trust A|
|GE Capital Credit Card Master Note Trust|
|GE Dealer Floorplan Master Note Trust|
|Great America Leasing Receivables Funding, L.L.C.|
|Harley-Davidson Motorcycle Trust 2009-2|
|Honda Auto Receivables 2009-2 Owner Trust|
|Marlin Leasing Receivables XII LLC|
|Navistar Financial Dealer Note Master Owner Trust|
|Nissan Auto Lease Trust 2009-A|
|OCWEN Servicer Advance Receivables Funding Company II LTD.|
|PFS Financing Corp.|
|SLC Private Student Loan Trust 2009-A|
|SLC Private Student Loan Trust 2010-B|
|SLM Private Education Loan Trust 2009-B|
|SLM Private Education Loan Trust 2009-C|
|SLM Private Education Loan Trust 2009-CT|
|SLM Private Education Loan Trust 2009-D|
|SLM Private Education Loan Trust 2010-A|
|U.S. Small Business Administration|
|Volkswagen Auto Lease Trust 2009-A|
|WHEELS SPV, LLC|
|World Financial Network Credit Card Master Note Trust|
|World Omni Auto Receivables Trust 2009-A|
|World Omni Master Owner Trust|
According to the NY Fed the amounts borrowed were just south of a half-billion by auto ‘services’.
Consider there are primarily four levels of debt acceptance:
– There is debt taken on by a firm’s against its customers’ accounts.
– There is debt taken on by a firm against its own account, such as the firm’s own bank line of credit or access to stock and bond markets. In a debtonomy there is no difference between stocks, bonds or non-currency derivatives because all are forms of collateral, none being more ‘virtuous’ than others.
– Debt is taken on by firms against public accounts: either by way of (borrowed) subsidies, direct public loans such as TALF or by way of regulatory/tax ‘adjustments’.
– Debt is also taken on by firms against international accounts of trading partners by way of advantageous currency exchange- or interest rates.
Consider the pool of borrowed funds that is available for Mr. Mulally’s company to tap:
– The 2009 ‘cash for clunkers’ program: $2.88 billion
– The remaining year of the 2005 Transportation funding SAFETEA-LU: $60.8 billion
– Highway transportation funding for 2010 and 2011: $80 billion
– Highway transportation component of Stimulus Act: $49 billion
– Depreciation allowance for the business purchase of new vehicles (subsidy for the purchase of SUVs and gigantic pickup trucks): $1 billion
– Oil depletion and other tax expenditures for the oil and gas industry since 2009: $8 billion
– Funds made available by Ford customers 2009-10: $240 billion (revenue includes sales of parts and Ford dealer warranties).
The total available is approximately $442 billion, all of which is borrowed outright or from customers. There is some overlap: the entire auto industry makes use of available highway space, all the other makers gain credit subsidies. Subsidies such as borrowing for real estate development are not included. Neither are ‘soft subsidies’ infrastructure such as hospitals and graveyards to manage the flow of corpses that flow from the use of Mr. Mulally’s products along with the insurance companies to manage the related costs.
The ‘Death Tolerance’ subsidy is one the nuclear reactor industry observes with anguish. How its executives wish that its products’ death rates could be as tolerable as those of the car makers. Sadly for them, it is not possible to make radiation sexy.
The cost of US wars represent another indirect subsidy for the car makers who need the flood of cheap(ish) fuel in order to have a market. Leaving out ‘black budget’ military operations in areas such as Colombia and Uganda, the total amount of debt-subsidy available for the Nardelli-Mulallys of this world to steal is over two trillion dollars.
How does it all end? How it is ending already: the little people refuse to pay, refuse to perform as trained seals for the rich. Consequently, the rate of credit expansion slows and deflation takes hold. As debt unravels so does wealth … whether it is virtuous or not.