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January 06, 2010

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Hi Choke,

Scott here. I am in Delhi, India, drilling wells in an economy with 7.9% GDP growth (2nd quarter 2009). I see Asia closing the gap on the US on many fronts, autos, steel, software..etc. There is, however, one area where the US still reigns supreme. No other country in Asia or anywhere else even comes close. That product is propaganda and I see you have bought into it again, hook line and sinker.
You seem to be concerned about the current financial crisis, and have framed it as free market conservatives vs. liberal, socialist stupid poor people. I am sure your position brings a smile to Karl Rove and Obama’s handlers. You have bought into the diversion, once again. Is it those pesky poor people that want homes, or the greedy bankers that made the loans? There is a third point of view that says it is neither. Houses have value. If every bad home loan was liquidated today it would be about a 200 billion dollar problem. Not that big of a deal in the era of the worthless dollar. The real problem is the derivatives insuring the bonds that were issued based on the bundled mortgages. One does not have to own an insurable interest to buy insurance in the world of swaps. If choke owns some bonds, and buys insurance against default, Scott and crash can buy insurance on the bonds too, so if the bonds fail, the insurance payoff can be 1000000 times the value of the insured interest. This is where the debt was created, on paper via derivatives. Oh,,I said the D word…I hope I did not offend your Rovian sensibilities. Let me rephrase in CNN and Fox Newspeak.”Toxic Assets” How Orwellian is that? Toxic Assets? Do those words go together? You see, just like war is really peace, an asset is really toxic. Fox, CNN ..etc won’t touch this subject. They will not even say the D word…you see, what we really have here are “toxic assets” and the free market vs . Socialists. Don’t even think about the fact that Wall Street wrote swaps that were leveraged to the point the system had to fail, and failure would insure a government bailout to pay off the insurance. How could they not know? They knew. The government bailout paid off the swaps, It went in the pocket of people. Oh once again I violated the rules. I talked about where the money went. Sorry choke, sean, rush and Keith…It won’t happen again. You see we are free and have a free market so we need to really need keep being free so lets talk about our freedom some more and the other arguments framed by that beautiful American propaganda machine.

Hey Scott... great to hear from you. Good luck in your drilling sojourn in India. I do have to ask, did you read what I wrote to the end? Did you read it thoroughly? Your response seemed very reflexive here and it really seemed to miss what I write, which is normally not the case with your responses... not that we agree often... in any case, be careful and good luck.

Choke, I do acknowledge you mentioned the “insurance” aspect at the end, but it seemed to be an afterthought in the style of the American media. The piece seemed to be centered on two opposing points of view, which were developed in great detail. I find it fascinating that the word ”derivatives” has been cleansed from the lexicon of the American media.
Wall Street created a situation that had to fail and the government had to bail them out. They knew what was going to happen. It was simply a transfer of wealth. This group purposefully sold us out, and to discuss it challenges our standards of patriotism, capitalism and government.
Equally fascinating is that nobody is talking about it. The subject is artfully diverted in to the well worn argument of socialist vs. free market. America loves this stuff and it seems we cannot get enough.
My post was intended to be a statement on American propaganda and how and why it affects our dialogue.
Thanks for your well wishes. I enjoy reading your stuff. India, as you can imagine has a serious demand for gas. There only 14000 wells in the country and none have been stimulated in earnest. There are tight gas reservoirs galore. It will get a capitalist all foamed up!!

Tight gas...look for ALL of the unconventional players over there real soon. Cabot, Devon, CHK, Anadark-hole, XTO. Wait, not XTO, they're dead in the water, but the rest will be there! They have to push their stock around.

Meanwhile, here's your analogy of the day (I heard this, didn't come up with it myself): I'm in the business of selling cars with faulty brakes, and I'm also in the business of selling insurance betting the car will crash, and I have a crack team of idiots telling the buyer the car CAN'T crash, while my analysts tell me when the car will crash. I'm a f'n investment banker. Oops, too many cars crashed at once and I can't cover all the losses (insurance losses) so I need the government to bail me out because if I fail, the financial world as we know it will fail!

After a short cooling off period, I will do it again. While I wait for the faulty car market to improve, I'll lobby the SEC to change the way my oil company portfolio counts its molecules of gas and further screw the unsuspecting pensioner.

Ah...America! Hey, Scott, watch out for that curry or you'll experience what I call the "ring of fire".

I heard a great quote the other day.

"A Business that is "Too Big To Fail" is Too Big."

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