My housemate Terri posted this ridiculously cute video of her cat Gelly:

“Backing paper money with mortgages is nothing new. The French tried it in the late 18th Century, and it lead to hyperinflation.”
- Peter Schiff


Peter Schiff makes some interesting — and alarming — observations about the mortgage crisis in America:

This week, as the financial sector began to give way under the unbearable weight of bad mortgage debt, the Federal Reserve stepped in to save the day. At least that’s what it says in the script.

In a surprise move, the Federal Reserve announced its intention to swap $200 billion of treasury debt for $200 billion of potentially worthless mortgage-backed securities. The Fed may have been partially spurred to take the step as a result of the rapid collapse of Carlyle Capital Corp. a publicly traded private equity firm that is a subsidiary of the Carlyle Group. The Dutch firm could not meet margin calls on its depreciating collateral of AAA-rated mortgaged-backed securities guaranteed by Fannie Mae and Freddie Mac. On Friday, the Fed then took the unusual step of providing emergency “non-recourse” funding to Bear Stearns, collateralized by that firm’s similarly worthless mortgage debt. Apparently the Fed now stands willing to assume any mortgage-related risk that no other private entity would touch.

… According to the Fed, its new plan does not amount to buying mortgages but simply accepting them as collateral for 28-day loans. However, will the Fed really return these ticking time bombs to their true owners in 28 days, inciting the very collapse its actions were originally designed to postpone? Why does the Fed believe that the mortgages will be marketable next month; or the month after that?

… The problem with these mortgages (other than the borrowers lacking any means or desire to repay them) is that the underlying collateral is worth a fraction of the face amount. With recent foreclosure recovery rates amounting to less than 50 cents on the dollar, it is no wonder that no one wants them. The real estate bubble allowed borrowers to leverage themselves to the hilt using inflated home values as collateral. However, now that the bubble has burst, mortgage balances far exceed current property values. It is a trillion dollar time bomb that no one can possible defuse.

Paper dollars are technically Federal Reserve Notes, which means they are liabilities of the Fed. When it puts newly minted notes into circulation it does so by buying assets, usually U.S. treasuries, which it then holds on its balance sheet to offset that liability. By swapping treasuries for mortgages, the Fed effectively alters the compilation of its balance sheet and the backing of its notes.

… Backing paper money with mortgages is nothing new. The French tried it in the late 18th Century, and it lead to hyperinflation. Assignats, which were first issued in 1790 to help finance the French revolution, were backed by mortgages on confiscated church properties. Although the stolen underlying collateral did have some value, the revolutionaries saw no reason to limit how many Assignats were printed, which resulted in massive depreciation. Within three years, price controls were introduced and failure to accept Assignats, initially an offence subject to six years in prison, was made a capital crime. By 1799 the currency was completely worthless.

- Peter Schiff @ For Sou 15 Mar 2008: Link.

- Prise de la Bastille by Jean-Pierre Houël: Link.

“I sell garbage.” - Justin Gignac

Justin Gignac sells garbage: carefully picked, artfully arranged New York City garbage. As Art.

You might say, “I wish I’d thought of that ….” And who could blame you? I think we all wish we’d thought of that:

I sell garbage.

I scour New York City streets picking up trash. After filling bags with subway passes, Broadway tickets, and other NYC junk, I carefully arrange plastic cubes full of the stuff. Each box is unique and won’t leak or smell. The cubes are then signed, numbered, and dated, making them perfect for anyone who wants their own piece of the NYC landscape. Just get one now before they clean up this city.

- Justin Gignac, NYC Garbage Sculpture: Link.

I like his home page — great rollovers. Most sites, if they have rollovers, each rollover swaps only one image, the moused-over image. NYC Garbage Sculpture uses multi-image swaps for jumbo-sized extra-splashy rollovers.

Thanks, Kim!

“Local stations are wary of NPR’s embrace of podcasts and other new ways to deliver its news programs.”
- The Christian Science Monitor

Public radio stations make millions from pledge drives that intersperse the two hit news shows [”Fresh Air with Terri Gross” and “All Things Considered”], and NPR hasn’t wanted to undercut local stations’ fundraising by giving fans another way to hear the programs. But that could change, as NPR considers whether to fully embrace “new media” technology at the risk of bypassing some public-radio stations.

“The fear in its raw form is that NPR will market itself directly to consumers and … and completely eclipse their local stations,” says media consultant Michael Marcotte, a former San Diego public-radio news director.

The debate within NPR became public last week after the network’s board fired CEO Ken Stern. Mr. Stern, who’d been in charge for 18 months, had pushed NPR to offer its news through mediums other than terrestrial radio.

News reports blamed the firing on Stern’s embrace of technology initiatives, but NPR officials deny that. A larger factor, says Mr. Marcotte, may have been Stern’s inability to persuade member stations to trust his plans for delivering programming via technology other than old-fashioned radio.

- Randy Dotinga, The Christian Science Monitor: March 14, 2008: Link.

Disclosure: I work for Minnesota Public Radio (MPR) as a software guy. The events at NPR don’t directly affect me or MPR; but MPR is in a similar market niche, so I’ll be following this issue closely.