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17 July 2019


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I agree with you that we have been living with some aspects of MMT for quite some time. But now some would like to turbo charge it and I am not so sure that it will work. It may even break the system and then we have a real problem. There is some historical data that shows the fed always cutting rates at the peak of economic performance and now they have very little room to operate, since rates are rather depressed. I don't think negative rates will go over well politically in the US. As you point out, the world economy is slowing down and there is little the Fed or the government can do about it.


hard to see the ethics in knowingly selling an aircraft with inherent unstability. Trying to compensate with poorly designed software just compounds the problem. And how ethical is it to blame the pilots, as Boeing did knowing that the problem was their dangerous aircraft?



I wasn't referring to him personally.


Walrus I thought there was a training issue, in that 737 to 737Max conversion course did not fully explain the operation of the faulty unit or what, if anything, the pilot could do should it behave as it seems to have done.

LA Sox Fan

Here’s a Forbes article laying it all out for you. If you have any questions after reading it, please let me know. https://www.forbes.com/sites/jessecolombo/2018/08/29/the-u-s-is-experiencing-a-dangerous-corporate-debt-bubble/#171afde1600e

John Minehan

Selling the PP&E is the final escape hatch, but it mitigates losses . . . .

John Minehan

Thank you, it's good and it's says a lot in a few words.

John Minehan

Sorry, meant your point 3 ("Transactions are where you make money if you do. Infrastructure; factories, people, company towns or country clubs, etc. should be taken down as soon as the transactions that they support are no longer making money.")



when I was in the clandestine ops course, we went to the Bethlehem Steel Plant at Sparrow's Point. The amount of PPE was staggering.

Eric Newhill

Right. No company wants the reputation for producing cheap junk that is priced maximally. And I agree that sometimes there is a need for govt to step in and impose some regulations on the market, especially where safety is concerned. I'm just saying that while business goes after maximum profits, the market/consumers force them to develop quality and safety too. Checks and balances. Consumers shop for quality.


MMT is all sophistry and defies common sense. There's no instance in history where sustained prosperity was achieved through untrameled bureaucratic expenditure financed through monetary emission. Not that it hasn't been tried over the centuries. From John Law to Rudolf Havenstein they've all proclaimed grand theories and proceeded to inflate the monetary unit at gargantuan scale. Once the initial high wears off, the scale needs to be continually amped up as the law of diminishing returns kicks in until the currency system implodes. This has been the fate of all fiat currency in history including our own continental dollar.

No doubt we're doing it again, with similar results. The scale of monetization keeps getting bigger just as the junkie needs higher & higher doses. We know how this movie ends. That's why the saying - history repeats itself.


They didn’t explain it to American pilots either. The roller coaster technique of both pilots pulling like mad then releasing pressure and winding the trim wheel like crazy isn’t taught either.



So Mr. Colombo, the 'investment advisor' and author of the piece, says the Federal Reserve is to blame for causing "When conducting its quantitative easing programs, the Fed created brand new money out of thin-air (in digital form) and used it to buy Treasury bonds and mortgage-backed securities (MBS). "

The federal reserve does not operate under Deleware law. These actions by the FED were started in 2008, after the collapse of mortgage backed securities. Neither he nor you name an actually company that used loans for the purpose of buying back their shares.

John Minehan

"A few things I learned in my ten years in international business. 1. The business of business is making money, not the products. They are just the means for making money.. 2. Resources are not free as they are in government. Someone has to pay for them. 3. Transactions are where you make money if you do. Infrastructure; factories, people, company towns or country clubs, etc. should be taken down as soon as the transactions that they support are no longer making money. 4. There are profit centers and there are cost centers. Remember that."

And now for something completely different: https://www.vox.com/policy-and-politics/2019/7/19/20700654/elizabeth-warren-private-equity-wall-street-looting-act. What Sen. Warren seems to miss is that these are last-ditch attempts to turn around dying companies.

For a valid analogy, if you look at the outcomes of a world class cardiac surgeon, they are not too good on the surface (a lot of the patient either die or get sicker). But, if you do something called "case mix adjustment," you see that the patients in the census were a lot sicker than most and almost all would have died absent the intervention.

You might not like how, say, Bain Capital sells off the PP&E to mitigate the loses on companies that are too far gone to be turned around. You might not like the management fees charged to companies by Blackstone, but that is the price you pay to keep something with potential as a going concern. When it works, Bain Capital and Footlocker comes to mind, some business gets a renewed lease on life . . . and when it doesn't resources tied up in the failed venture get put to productive use.

As both Milton Friedman and Bob Heinlein used to say, "There ain't no such thing as a free lunch.

blue peacock


This is the view that Mitt Romney & Henry Kravis would like to sell you.

The reality is quite different. They don'y buy sick companies and turn them around. That's too much work! They buy companies with free cash flow that can take on massive debt to pay them the "special dividend" on the front-end of the deal. The PPE sale and labor retrenchment comes later when the cash flow no longer supports the debt service and as the company gets "restructured". If the restructuring works out and they can sell the parts of the company or do another IPO then they get a double-hit.

Mike Milken got the ball rolling in the 80s with his insight on junk bond delinquencies. This has all been part & parcel of the hollowing out of the US industrial base.

John Minehan

People have been teaching ethics courses with great seriousness in B-Schools for more than 30 years, probably since the time of "Boesky Day."

It is tough to see that it has had a lot of effect.

Unlike Legal or Medical Ethics, business ethics do not have their own code and means of enforcement. Instead, it seems to be based more on civil and criminal law.

It seems more like things that should have been learned as a child for the criminal matters and listening to the lawyers for the civil issues.

John Minehan

The business of business **IS** to make money; there is no other, better reason to do anything. HOWEVER, doing it through illegal or unethical approaches creates a real risk of losing money and market share.

This is why Milton Friedman said: "That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom."

This last part has often been lost in the 49 years since these words were written. However, Chief Judge Cardozo complained about the same things in meinhard v. Salmon decided in 1928: "Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the "disintegrating erosion" of particular exceptions (Wendt v. Fischer, 243 N. Y. 439, 444). Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court."

John Minehan

Nassim Nicholas Taleb has some interesting ideas on this as a retired Derivitives Trader, a semi-professional student of risk management (a "flâneur') and as someone who grew up in Lebanon where Islamic restrictions on debt (as opposed to equity) financing are a strong influence on business.

John Minehan

It seemed to work better for Bain than it did for Milken (or Drexal Burnham Lambert in general).

From everything I have seen of the issue, Michael Milken had genius for figuring out which Junk Bonds would finish "in the money" (pay out before or instead of default). He could do this with new companies and with "Fallen Angels."

However, after Drexel Burnham Lambert tried to "merge with Mike" (who was the source of most of that mid-sized bank's revenue) by trying to make him a "merchant banker," Milken discovered being able to find good deals and sell the debt was a different skill set than **CREATING** good deals.

Bain has been able to d that on at least some occasions ("Footlocker, Office Depot) but not on others. Selling off the PP&E is an effective way to manage the losses and occasionally turn a small profit. It also puts these resources to productive use

David Martin

Very Nice Article

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