Obama's second term and the Bank CEOs' compensation

1.6 billions to the Bank Execs in 2007 and we still do not know how much money the bank CEOs will get for their wonderful job of destroy the economy and their reluctance to revive it by lending the money out, which they got from the government.

If after next January, the bank CEO's 2008 compensation and how the banks used the bailout money still cannot be revealed, by then the president Obama will have a lot to do to prove his changes are really that we can believe in and he will have a hard time to get his second term.

On the other hand, will the bank execs fly back from their holiday vacations and start to cook the books?

The second mistakes

Since October of 2008, the motivation behind the effort in rescuing Wall Street thus the economy follow closely to the idea that the U.S. policy makers should avoid making the same mistakes during the Great Depression again. In terms of monetary policy, Ben Bernanke has by now cut the federal fund rate close to zero and the balance sheet of the Fed has ballooned in all possible ways that Ben can think about. On the fiscal policy side, the President-Elect Obama's stimulus package is in the making and Paul Krugman has suggested that the size of the package should be similar to the size of the financial rescue plan.

Both kinds of policies are aiming at the increase spending, directly or indirectly through increase in lending (leviating the credit crunch). While in avoiding a second mistake like the government made during the great depression, Jim Hamilton pointed out that we should also try to avoid a second mistake which lead us to the current situation, namely, very low savings thus investment in the U.S. economy. Hopefully, the future investment plans can pay off. One concept need some clarification is that the government spending in this situation should be considered and should be investment into the future, not just buying bombs and drop them in the middle east desert. On the other hand, Paul Krugman put his bet on the spending from the super rich class, not the middle class. Traveled too much Paul?

Another man found swimming naked

After all, you only find out who is swimming naked when the tide goes out.

----Warren Buffet

Madoff’s madness (from the Financial Times)

This newest financial fallout on Wall Street just further hurt the bleeding heart of investors who had suffered quite enough losses these days. The abuse of trust and regulation failure in this case is just astonishing. Quite a few commentators said they expect more cases like these to be revealed. Another round of hedge fund redemption can help to put the market into further distress. Financial managers in many cases neglected basic rules such as diversification and transparency.

The basic problem behind this is a flowed reasoning. The world, including the Americans, think that the U.S. is so rich because the Americans must did something right. This reasoning transformed to a belief that the Americans did the right thing so that the U.S. is so rich. Yes, the American way is the right way and the ONLY way. No questions should be asked.

The endowment of natural resources, geographical location and unique history contributed to the wealth of the U.S. as well as many right institutions for some time in history.

What's next for Detroit

It seems that the White House is about to do something to help GM and Chrysler. The problem is that after they spend tax payers' money, they will be gone. Nobody can be held for responsible for tax payers' money.

The American auto industry need a revolution through proliferation of innovations from many smaller firms. Give money through a incompetent government to incompetent management teams is not a solution to the long-term problem of energy and environmental challenges.

Introducing the U.S. Corruption Hall of Shame

Voice of America taught me that one should watch one's government. This is of the same importance for both China and the U.S.

Click here to see it.

I don't think I need to include Bill Clinton and George W. Bush in it. The similarity between the two is that Bill lied about where his sperm died abnormally and George lied then thousands of people died abnormally.

Can more money save the Detroit 3?

9 billions more, this is what the Detroit 3 automakers are now asking for after their CEOs have sold their private jets and cut their own salaries. The question is whether this $34 billion can really recreate a successful U.S. auto industry. Even if this round of bailout can prevent a current pending economic disaster, who can guarantee there won't be a future round of pending crisis like this if a totally new transportation industry is not built? With the old managers, engineers (or engineering visions) and industrial organizational form, plus a non-watching U.S. government, it is hard to see that this can be accomplished. Give the money directly to the auto workers or state governments (next in line) if the government want, which can at least help to boost the holiday sales.

I think Michael Moore has a point on the public transportation.

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Michael Moore: President-Elect Obama has to say to them, yes, we're going to use this money to save these jobs, but we're not going to build these gas-guzzling, unsafe vehicles any longer.

We're going to put the companies into some sort of receivership and we, the government, are going to hold the reigns on these companies. They're to build mass transit. They're to build hybrid cars. They're to build cars that use little or no gasoline.

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I agree that people need their own spaces but I think the cars, single family houses and long roads separating Americans from each other cause mental problems for them as well.

Is Black Friday black enough?

The turnout for this black Friday was big but this worries me since more people are seeking the but then they will shop less after black Friday till Christmas time. Also, lower prices (deep discount) boost sales but profits may not improve as the profit margin is lower, translating this into economics, the price elasticity of demand during this holiday shopping season may not be large enough.

Here are some newspaper headlines:
Most Retailers Report a Dismal November
Deep Discounts Draw Shoppers, but Not Profits

Krugman on the Real Balance Effect

See Krugman's thoughts on deflation and its possible (no) effect to boost the economy. I have to say I like his wonkish works.

Fixing the Financial Crisis with Paul Krugman

Fixing the Financial Crisis