The Bank of England today decided to inject another £50bn into its asset purchase facility. Since February, it has already spent £125bn buying bonds from UK investment banks to try and support the credit markets.
Thanks to this and other quantitative easing by the Fed (spending $1.25tn on MBS alone), the ECB (won’t say how much its spending) and other central banks, this has been the best six months ever for investment banks’ fixed income teams.
JP Morgan, for example, made $2.2bn in investment banking fees in the second quarter, which is a record on Wall Street. Goldman Sachs made about $6bn in fixed income trading in the first six months. Barclays Capital made £1bn in profit in the second quarter. Its head of investment banking, who I interviewed a few weeks ago, told me ‘It’s been a phenomenal six months for fixed income.’ HSBC also made the most its ever made in investment banking, making $6.3bn in profit in the first six months. Happy days are here again.
So our present economic system is quite simple really: central banks print money, then give it to private investment banks.
And no one criticizes this enormous free lunch. No one is really even aware it’s going on. Evan Davis on the Today show this morning discussed the BoE’s asset purchase facility, and his two interviewees were a person from the British Chamber of Commerce, and the UK economist of Goldman Sachs. Both were in support of the programme, surprisingly enough. At no point did Davis suggest the facility was a huge free lunch for investment banks. Instead, he concluded ‘it doesn’t seem to do any harm’.
In fact, the only criticism I can find of the asset purchase facility comes from the unlikely source of the head of fixed income research at Schroders, Jamie Stuttard, who says in passing that one of the unintended consequences of the facility will be:
New sellside profits as a direct result of government policy (riddle me this: what will happen to bonuses of RBS traders linked to trading book performance when those traders should be making very neat turns out of the gilt & corporate bond programs ??)
A former Blackwater employee and an ex-US Marine who has worked as a security operative for the company have made a series of explosive allegations in sworn statements filed on August 3 in federal court in Virginia.
The two men claim that the company’s owner, Erik Prince, may have murdered or facilitated the murder of individuals who were cooperating with federal authorities investigating the company. The former employee also alleges that Prince “views himself as a Christian crusader tasked with eliminating Muslims and the Islamic faith from the globe,” and that Prince’s companies “encouraged and rewarded the destruction of Iraqi life.”
“Mr Prince intentionally deployed to Iraq certain men who shared his vision of Christian supremacy, knowing and wanting these men to take every available opportunity to murder Iraqis. Many of these men used call signs based on the Knights of the Templar [sic], the warriors who fought the Crusades.”
“Mr Prince generated substantial revenues from participating in the illegal arms trade … [including] on Mr Prince’s private planes.”
The other deposition goes on,
“When I first arrived in Baghdad, I was asked to assist with unloading bags of dog food into the Armory. As I unloaded the bags of dog food, another Blackwater employee opened the bags and pulled out weapons from the dog food. Blackwater was smuggling weapons into Iraq.”
See also this.
New York magazine offers some hope for people who like a sensible discussion, in a new profile of Barack Obama:
Despite his agility in skipping from topic to topic, the president is clearly most comfortable when he can drill deep into one. During the presidential campaign, when Reverend Wright’s antics threatened to steer Obama clear off the rails, his advisers had varying ideas about how to handle the situation. Ultimately, though, it was Obama who decided on the solution: He’d give a 37-minute speech about race.
In the days when just a handful of media outlets drove the news, such a move would have been politically contraindicated, if not outright suicidal. The speech contained no pithy or rhyming sound bites (“Mend it, don’t end it,” “Read my lips”). It practically defied quoting. It demanded, rather, to be heard or read in its entirety. Yet within 48 hours, more than 1.6 million viewers tuned in, making it the single-most-watched video on YouTube for that period.
There’s a reason for this. Sound bites, says Clay Shirky, the NYU new-media philosopher and recent author of Here Comes Everybody, were a product of media scarcity, when public figures had a finite amount of time and space to make their points. Now we live in a world of “Publish, then filter,” he points out, rather than “Filter, then publish,” a time when the question is “Why not film this?” rather than “Why film this?” This makes Obama our first post-sound-bite president. If he wants to give a 37-minute speech about race, he can give a 37-minute speech about race, knowing that millions of Americans (now more than 6 million) will eventually hear it, even if they fail to catch it in real time. Not only is ubiquity strategy in a world of unlimited content, volume is too.
Reviving the long-form address may seem strange in an era when the 140-character tweet and two-sentence blog post form a major part of our communications repertoire. But Nate Silver, the founder of fivethirtyeight.com, points out that the long form may, in fact, be a natural part of it. “If you speak and leave out details,” he notes, “bloggers will fill them in.” And for those who despair at the telegraphic nature of Twitter and blog posts, Obama’s long speeches—like long books and long movies—are a canny form of counterprogramming.
During his presidency, Obama has repeatedly chosen a long speech over staccato remarks or scattered statements by surrogates. When the Senate refused to include funding in an appropriations bill to shut down Guantánamo Bay, he spoke for over 50 minutes at the National Archives about civil liberties. When he made overtures to the Arab world in Cairo, he spoke for 55 minutes. When congressional Republicans first began to mount their resistance to his health-care bill, he flew to Green Bay, Wisconsin, and conducted a 62-minute town hall. Laurence Tribe, Obama’s onetime mentor at Harvard Law School, says that the president’s speeches remind him of “carefully worded judicial opinions—he avoids overreaching, he carefully states opposing arguments and considerations. He gently leads the viewers or readers or listeners to their own conclusions rather than ramming one down their throats.” Lincoln used to do this in his debates with Douglas, which raises a tantalizing possibility about the future: Perhaps the post-sound-bite age will seem more like the pre-sound-bite age, when most politicians could hold their own in a debate.