Thursday, April 29, 2010

Playoff Predictions from First Round Winner + Economics

As the winner of the prediction contest for the first round of the playoffs, AJR79 gets to write up his predictions for the second round and post a little about a political issue that interests him. So, here are his thoughts.

Remember, get your predictions in before 9 PM eastern time to be eligible for the same prize after the second round. I need winners, and the amount of games. Post your predictions as a response to this post or the one before it.

While there was lots of exciting hockey in round one, it should be noted that the Washington/Montreal series was the most exciting, and watchable. Jaroslav Halak deserves his props for being outstanding in the last three games, but the Habs as a whole played extremely gritty (over 40 blocked shots in Game Seven!), and are playing better defensively then I’ve seen in Montreal for over a decade. If they could keep playing this way, they would be serious contenders for Lord Stanley’s Mug…

Pittsburgh Penguins vs. Montreal Canadians

Unfortunately I don’t believe they can keep playing that way. While they no doubt got a boost from winning the series, it probably took a lot out of them emotionally and physically to face three elimination games in a row. They are facing a much more proven team, and will not have the luxury of firing pucks at Semyon Varlamov.

Pittsburgh Penguins in six.

Boston Bruins vs. Philadelphia Flyers

Picking Philly is probably the reason I won the pool. I’ll be sticking with them this round. They are big, physical, and skilled. They’ve been playing to their potential these past couple of weeks, and will be too much for the Bruins. Brian Boucher is making great strides towards being considered a legitimate #1 NHL goaltender. Looks good on him.

Philadelphia Flyers in six.

San Jose Sharks vs. Detroit Red Wings

I have to believe that the “choking dogs” will be showing up in San Jose this round. It’s just a hunch. I am assuming that Detroit’s goalie Jimmy Howard is the real deal, and I have no reason to think he isn’t.

Detroit Red Wings in six.

Vancouver Canucks vs. Chicago Blackhawks

I think this will be the most entertaining hockey of the round. There is some serious bad blood here, and my Canucks are out for revenge. With Vancouver’s offence being more high-powered this year then last, I don’t think they’ll have the same trouble putting pucks in the net. Unless catastrophe strikes the Canucks’ blueline (possible), I think this will come down to the goalies, and special teams. Getting centre Ryan Johnson back will be huge plus for Vancouver’s penalty kill.

Vancouver Canucks in seven.

I’m sure all the hockey talk has half the people reading this bored, so I’ll do my best to bore the other half with my political topic: financial reform in the U.S. I’m interested what different commentators think about the causes of the economic collapse, and what can be done to fix it.

Conservative types usually like to point to the government, and the Federal Reserve as the problem.

My view is that there is more then enough blame to go around in the Private banking sector. Just in case your eyes aren’t properly glazed over yet here is an esoteric but informative article about how private banks manipulate interest rates and monetary supply through the derivatives market.

The “money shot” (pun intended): “We have taken future tax streams similar to "receivables" and turned them into securitization products. The government gets upfront cash today along with tax streams going to cover needed principle/interest payments. They face balloon payments in the future. The real benefit to the banks is they get the full value of the asset today which they can use as capital ratios along with ability to fractional lend out 10 times the value of the deposit streams. The deposit streams would be similar to the deposits you make from your payroll and then spend. The banks float is increased and thereby its lending facility is increased. PRESTO - Money is created into existence!”

Reading this has given me a better understanding of how the derivatives market went from 273 trillion in 2004 to over 600 trillion today, and the looming economic disaster towards which we are headed.

Thanks for your thoughts AJR79! Everyone else, get your predictions in!


  1. The spark that blew up the US and European economy was a housing collapse in the Southwestern US and a similiar collapse on the edges of Europe in places like Ireland, Spain, and the Baltic states.

    Easy money from central banks, soverign wealth funds (especially China!), and poor lending standards/low capital requirements for banks had created a giant asset bubble just waiting to pop.

    $100+ oil and rising interest rates helped with the popping, although a correction was overdue anyways.

    Meanwhile the world financial architecture had became completely interconnected. Derivatives allowed mortgage companies to bundle the value of their loans into products to sell as investments to banks, hedge funds, and the average investor in the form of triple A rated bonds.

    Credit default swaps (a form of insurance) spread the exposure to firms like AIG.

    The entire banking system, which was highly leveraged, went belly up when housing went down and a credit freeze occured that caused the economy as a whole to go into recession.

    Who's to blame ?

    Probably the government for providing easy money, lax oversight, and not enough regulation.

    Blaming wall street is like blaming a dog for biting someone - the person with ultimate responsibility is the guy who should have kept the dog on a leash.

  2. Shadow,

    That seems a reasonably fair assesment. I'm all for getting a leash on the angry dog, and perhaps a muzzle as well. I don't appriciate people trying to destroy the global economy just so they can feather their own nests.

    A backround article, about what's going on in Congress at the moment.

    A very good (and readable to the layman) one on derivatives.

    The way the market it set up is scary. I don't know what the full consequences will be if we do get a peek at whats going on with them.

    For some perspective the global GDP is about 50-60 trillion. This market is 605 trillion. That seems crazy to me. Not enough value has been created in these past 6 years, to justify the 300 trillion dollar increase.

    I believe something like the Glass-Steagal Act will have to be in the final bill as well, for me to consider it effective reform.

    As it looks now, I'd say this debate is looking in the right direction, but may end up being too weak. (due to both parties being heavily in the bankers pockets)

  3. AJR79 you make an important point about BOTH parties being paid off by bankers.

    I chuckle when the media and Obama paint the Republicans as shills for corporations or bankers.

    In reality democrats, including Obama, have recieved far more donations from the financial industry than republicans.

    The states where these industries are located also tend to be heavily democratic. NY has wallstreet, Connecticut has the insurance industry, and Massachusetts is full of venture capital.

    And deregulation occured as a joint effort of republicans and Clinton in the late 90's.

    But I think the mood in America is such that action WILL be taken.

    Central clearing and transparancy of derivatives will be good. I think they'll probably end up increasing capital requirements for banks (that's what saved us, besides a lack of exposure our banks are the least leveraged in the world). And as you say the Volcker rule will make a come back to be sure.

    PS - Nicole Gelinas is a gem. She sometimes posts over at The Corner on National Review Online.

    NEVER AGAIN seems to be the attitude towards the prospect of future bailouts.

    But at the same time derivatives, credit defaul swaps, and shorting are still GOOD things when properly regulated.

    There's a lot history of hating banking, hating Jews, and hating the concept of money.

    Understanding the concepts of finance requires a certain amount of mental sophistication that much of the population lack.

    A steelworker busting his back is never going to understand how a guy in a suit and tie making bets at a giant casino (wallstreet) is doing a public service.

    So I hope nobody cuts off their nose to spite their face in all of this. Its a delicate balancing act.

  4. You forgot the sample of readers who like hockey AND politics. This post delivered


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