Who Remembers February 2007?
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2024-02-06 07:00 by Karl Denninger
in Macro Factors , 872 references Ignore this thread
Who Remembers February 2007?
[Comments enabled]

Nobody, right?

This time its different.

Uh huh.  Sure it is.

What prompted me to start writing this column was an "unexpected" very serious downward move in the Chinese stock market, for which there was no obvious (to me at the time) cause.  Of course I hadn't been paying that close of attention to it -- and when I did, what I found was that it wasn't China-local -- it was everywhere.

Go read this article.  Like all the rest its still here and this one I exempted because I had a suspicion that somewhere down the road I would be looking at the rhyme -- not the exact same thing, but a similar thing.

Powell had his nice "sit down" with 60 Minutes over the weekend.  In it he claimed that The Fed has "never" been political (ha!) and further, that fiscal policy is "unsustainable" and yet its not his wheelhouse, therefore he won't comment in detail.  I suppose that pointing out that while everyone (hello Elizabeth Warren!) screams about Social Security the MTS says that last fiscal year that was 85% funded with concurrent tax receipts.

CMS, that is Centers for Medicare and Medicaid Services, was 15% funded with current tax receipts and in fact block-granted close to double said tax receipts to the states for Medicaid!  That's right -- CMS is 85% unfunded -- and that is a trend I have written about for the entire time this page has been in publication and in fact my pointing this out in public and the trend thereof goes back to the 1990s when I ran MCSNet.

Over 100 years ago Congress came to the conclusion (on the back of the Long Depression, you know, the one nobody ever talks about) that "capitalism" was perfectly good right up until people could abuse it to force others to do as they demand by shutting down conversation and competition.  They passed a series of laws, codified in 15 USC Chapter 1, starting with The Sherman Act that criminalized (in other words, prison) monopolization, price-fixing and restraint of trade both within the US and internationally if the US was touched by same.  When firms and people claimed that they had attempted it and failed in their own defense Clayton was passed to extend the penalty to the mere attempt, removing the argument that "well, we might have tried it but lookie here, we didn't succeed as proved by a price that wasn't fixed."  Robinson-Patman followed which made clear that price discrimination when the item sought is of like kind and quality was also illegal.

I would not have even contemplated having lunch with a competitor when I was running MCSNet because that mere sharing of a beer and a bite might be seen as an attempt at collusion or divvying up a market and/or attempting to put together some cohesive element of policy to then be sold and enforced by a government edict (or even just all of us deciding "that's how it shall be!")

May I present to you the various conferences that now do exactly that and yet not one indictment is anywhere to be found.

Indeed I think its a fair assessment that virtually everything wrong with our business, economic policy and society today can be traced to the willful and intentional refusal to bring these charges and prosecute despite it being the law of the land for well over 100 years, and worse, since both political parties and all political subdivisions namely the States, all of which have similar laws to 15 USC on their own legislative books also have refused to bring said charges there is no political solution to be found at the voting booth.

Tennessee, for example, not only considers any attempt to restrain trade or fix prices a criminal felony the state goes further and claims that if a corporation does it not only do the people involved go to prison the firm's corporate charter is void (either firm's foreign registration in the state or, if registered in Tennessee, the charter itself!) in TCA 47-25-101 through 104.  So where are the criminal indictments, trials, and following convictions the revoked corporate charters and foreign corporate registrations (without which you can't do business in the state!)

The laws of thermodynamics, as I have repeatedly observed, do indeed apply to economics despite many so-called "analysts" claiming otherwise.  In 2007 we got a warning out of China, and it was about another year and a half of denial and refusal to do anything about it before it all blew up in our faces.

Well, take a look at the Chinese market over the last couple of months, and specifically in the last few days.

Oh by the way, Evergrande, the poster child for China's property bubble, has been ordered to liquidate just a few days ago and the number of commercial properties here in the US that are either in trouble or have already sold wildly below their last known values, is picking up steam.

No folks, this time is not different and the bad news is that the embedding of entire industries that treat 15 USC Chapter 1 as a joke for decades and imbue themselves into the Federal Budgetary process to the point that over 20% of GDP and roughly one third of all federal spending now implicates them, and both Congressional and State Legislature's decades-long wild-eyed refusal to deal with it, means we're in a lot of trouble -- in fact more trouble than we were in early to mid 2007.