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GE is one of the great American crony companies. Jeff Immelt, once head of Obama’s “jobs council” and current CEO of General Electric, has played the crony game extremely well. First in securing emergency financing courtesy of the American taxpayers because it screwed up royally. And then he was able to exploit various Obama era boondoggles which funneled money GE’s way on an ongoing basis. (Think wind turbines etc.)
Now Mr. Immelt is stamping his feet because it looks like GE may permanently lose the the sweetheart deals it has at the taxpayer underwritten Export Bank. This is crony capitalism full on.
Yesterday we asked whether the EPA (or some other regulatory agency) would have gone after GM like the EPA is going after VW, had GM done what VW is alleged to have done. We argued that it likely wouldn’t have. In the back of our minds was the recent GM ignition switch scandal which the US government didn’t seem very concerned about. Well, actually the government was concerned, but not for the public. The Obama administration didn’t want to make a big stink because GM, Government Motors, was a chosen “winner.” The administration had bailed out the Detroit based company for political reasons and it didn’t want to be embarrassed by a high profile example of incompetence. So what if over 150 people died?
Another good one from David Stockman – and now he has a beard! What’s up with all the Wall Street guys wearing beards these days?
Now I know I am getting older. There is quite a lot to be said for having an advisor who at least knows what rising interest rates feel like.
Robert Shiller, not always our favorite economist here, is warning that the stock market is looking particularly bubbly. This isn’t a huge story except that talk of a bubble is now coming from one of the accepted shamans of Keynesianism. Shiller also called the tech bubble and housing bubbles accurately. His book Irrational Exuberance is a classic.
Oil got hammered over 8% today. Stocks in the US 3% roughly.
This is largely driven by reality hitting China, the Ultimate Crony Capitalist State, and reality hitting investors around the world who have ridden the Fed driven asset inflation of the last few years. As we have said there are huge, massive, pockets of monetary cotton candy in markets which will collapse sooner or later.
But don’t worry, supposedly China has another dose of “stimulus” on the way. That ought to make things better.
Below are a few of the articles we have done on markets and China in the past 6 months or so for your information.
We say often that fundamentally there is little real difference between the establishments in the Democratic and Republican parties. The below graph sums it up pretty well.
So it makes sense to have a lobbying firm which is comfortable dealing with whomever. Because in the end, Republican or Democrat it really does come down to just getting paid.
(From The Intercept)
The founders of Rokk Solutions, a new political consulting firm that serves corporate trade associations and other lobbying ventures, offer their clients an unusual value proposition: whichever party triumphs, they’ll have had a hand in a big-money group that can claim victory.
While bipartisan political consulting firms are a dime a dozen in Washington, D.C., what makes Rokk noteworthy is that it is comprised of campaign operatives with major roles in two big-money groups — one Democratic, one Republican — expected to play major roles in the 2016 elections.
Calls to reform, audit, and even eliminate the Federal Reserve have been growing in recent years. We certainly call for an end to the Fed and I encourage anyone interested in monetary policy and the Federal Reserve to read Free Prices Now by ACC co-founder Hunter Lewis. Hunter is a scholar of the highest order and a remarkably successful financier. If you want to understand the sins of the Federal Reserve read his book.
But many people already understand the sins of the Fed and many of these people gathered in a counter summit to the party the Federal Reserve was having this week in Jackson Hole Wyoming. One of the people criticizing the Fed was Benn Steil who, believe it or not, is a director of international economics at The Council on Foreign Relations.
China is, as we say, The Ultimate Crony Capitalist State. Business and government are an amalgam. Long a crony paradise where a premium was placed on compliance and government favor and not on real pricing.
It looks like reality is finally starting to hit however.
About 6 months ago I was talking to a China energy markets analyst and he explained the complexities of implementing a carbon tax regime in the country to me. One bit I found particularly interesting. He explained that no one knew what the real price of energy coming from a particular plant actually was. A mandate from Beijing had been handed down, that energy would cost X amount, and that was the number used for “business.” Everyone knew the official price was way below the actual market rate but it sounded like no one really knew what the market rate was.
One can’t keep running a country like this. One must have real pricing for long term prosperity. The problem is that real pricing can create problems for the political establishment, anywhere, but particularly in China.
It could have been a whole lot worse. The Dow opened down over 1000 points this morning. Then markets rallied. Then they fell off again. Massive shifts in markets. Craziness.
Now the world looks to Asia.
China down 8.5% FOR THE DAY. Europe down broadly, 3-4% on huge volume. And on Bloomberg everyone is asking, why?
Why? Because China (just China?) is in deep trouble. Because the Chinese central bank has intervened big time and has failed. The market has overwhelmed a large central bank and that is new.
I’m guessing that there were more than a few meetings at the Federal Reserve over the weekend.
August is supposed to be quiet.
Why is the stock market turning down now? Why the current carnage?
It’s hard to overstate how important it is that despite massive, massive, intervention from the Bank of China and huge political pressure from Beijing the Chinese market continued and continues to sell off. This is the first instance of a central bank post-2008 really losing control. And this is happening in the world’s second largest economy and arguably the world’s chief engine of growth.