Here is a rule thumb for modern times: never put anything in an e-mail you wouldn’t mind seeing on the front page of the New York Times. We learned over night that while running the New York branch of the Federal Reserve, now U.S. Treasury Secretary Tim Geithner told the bosses at insurance AIG to limit some of the details about its credit default swap settlements with large U.S. banks.
To be fair, Geithner was only being prudent. He wouldn’t want the public to know that Goldman Sachs and other banks were paid nearly $62.1 billion for their swaps, or about one hundred percent on the dollar. Remember these swaps were tied to subprime loans. That means they were probably worth a lot less, in which case Goldman got a pretty sweet deal at a time when things were going sour at AIG.
Yep it’s pretty clear that Geithner wouldn’t want the public to know its money was being used to make Goldman whole. But putting that in an e-mail was pretty stupid. The easy prediction from here is that if Friday’s labour report in the US, it will be just the pretext President Obama needs to make some “needed changes” and get a new Treasury secretary.
Not that a change of face would help the dollar in its losing public relations battle with the rest of the world. But gold and oil took a rest, at least for a day, and both were down slightly overnight. Stocks on Wall Street were mostly indifferent.
Here in Australia, John Garnaut at the Age reports that, “Australian resource exporters are struggling to keep up with surging Chinese demand, pushing prices to levels not seen since before the financial crisis.” The article is called “Panic Buying by Chinese fuels surge in commodity prices.”
That might sound bullish. But it probably isn’t. Panics are short lived and unpredictable. Besides, we’re sticking with the position we outlined yesterday. This is the year the Chinese bubble pops.
“What did you think of America?”
We were asked the question standing in the sun at the St. Kilda Bowls yesterday. It came from another American. He told us that people seemed really unsettled and unsure of themselves when he was back for Thanksgiving.
“It depends on how good the economy is I think. If you’ve got a job things are fine. But I agree, people seem very political and very unhappy.”
We got to wondering about the Americans who settled the continent. The fur traders, the pioneers, the families that set out across the country in covered wagons. These people were risk takers…and independent…and self-sufficient…and skilled.
Would they recognise today’s Americans? Probably not.
In the same context, you wonder what anyone on the First Fleet would think of today’s Australians. What virtues would they recognise and value? And what vices would seem comfortable and familiar? Hmm.
That’s it for the week. We apologise for a less than rigorous accounting of the markets. Some kind of cold/flu is again making its way around the office. Until next week!
for The Daily Reckoning Australia