NPR's pet toxic asset is dead

NPR's Planet Money bought a toxic asset for $1000 and named it "Toxie" and followed it closely, as a way of unravelling the recent econopocalypse. Now, less than a year later, Toxie is dead, killed by loan modifications. Though once a mighty producer, Toxie delivered less than 50% of her face-value in her short life on the NPR balance sheet.

Toxie's Dead (via Consumerist)

I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.

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Anonymous

Yes!
VICTOR JIMENEZ

Great animation! I have never seen a cuter toxic asset in my life, itÂ´s like Gizmo, itÂ´s cute until you realize that any contact with with the most available liquid on the planet (water) turns it into a bunch of crazy shit.

Mmmm, I just realized that Gremlins is metaphorical movie about savage capitalism.

PD: Ernunnos, itÂ´s me or is Wall Street just the Wild West of global Economy? Dont they have any kind of law enforcement in the USA?
- mdh
  
  Sure we do, but we also had the Bush Administration diluting the enforcement agencies for 8 years.
Anonymous

You say “face value” when you should say “purchase price.”

If it had returned half of face value, I think they might have been rich ;-)
ackpht

So you bought an asset that was backed by loans to questionable borrowers, and the value of said asset tanked when those borrowers did not repay the loans. This then lowered the value of the commodity involved (houses), giving more questionable borrowers motivation to walk away from THEIR loans, causing other assets of that type to tank, and the whole process snowballs.

I don’t see the mystery.
- turn_self_off
  
  Mostly the issue was that this was rarely sold on its own, but more often included in some kind of hedge fund package. So you ended up with 3+ levels of redirection before it hit the end investor. With each level of redirection having managers, that skimmed the flow of money no matter what way the market ended up going.
Anonymous

Ok.. so animating the issue is cute, very cute… but the problem with personifying this issue/system is that people may not realize that the problem is the system. And the system is capitalism.

Capitalism is actually the problem. As long as markets are determined by bullies there will be unrest and unpredictability. But if certain markets were isolated, for instance, food and energy, and capital could only be used for obtaining non-foods and property then there would never be true depressions–ever. And to clarify, it’s not a depression if you can produce for your family and keep warm/eat something.

We need a national standard but with local communities to regulate these necessities (foods, health care, energy etc) so that the working man/woman can play capitalism all they want but only with luxuries, superflous goods, property, personal transportation, and entertainment technologies. Basically, I think something like a universal ultra food stamps program and free efficient renewable energy would basically prevent any market collapse. Taxes would be about the same if the united states could export some of this energy too. Hey mexico want some of our excess free energy? Give us some capital. See… its like the best of both worlds. Socialism and capitalism sitting in a tree. K-I-S-S-I.. sorry. But you know what I mean (i hope).

Anyway, If people were still allowed (encouraged even.. why not) to work as much as they like, in order to obtain more wealth to buy non-necessities, then so be it–we would have more stuff again (and as long as stuff is completely biodegradable and nontoxic then who cares, thats basically compost right!?) but anyway, if we all actually worked less and wasted less and consumed less energy then we could focus the energy that we actually make to produce necessities. And who wouldnt want to work less? Life isnt about over consuming the planet.. We already claimed domain on this earth. We do not have to struggle anymore, unless we want to.

Anyway, back to working for non-foods: So what about “stuff” and technology? What is to happen with our precious “stuff” if the capitalism engine slows down? Well there would certainly be a push from manufacturers to start producing actual useful goods that last long opposed the junk today that is built to be thrown away.

Yea, bla bla bla i am such an idealist… um, no. Its possible. It just takes thought. For instance, think:
Dont use imaginary money. If you dont have it dont spend it. Dont buy to buy. If you dont need it dont buy it.
Dont work a job that produces cancer to the world (pollution, waste, destruction, and/or unnecessary construction).
Grow something.
Breath.
Dont be a dick.
And most importantly see the ripples of the waves you create. Some people just are genetically less inclined for introspection and awareness. Those people will need some exemplification and patients. They are just not as aware of their surroundings. Think about it, some waves take a long time to reach their destination so if you do not see the impact of your decisions right away you might not believe you have an impact. So to be aware of your “waves” or “ripples” is the most important step in making a decision towards a connective investment vs destructive one.

Too Ekchart Tolle-ish for Boingboing?

You are prob not going to post this Mr/Ms Moderator are you?… Yes, its a little off topic, and I tangented and went on and on, but you know, some times you just gotta say what you gotta say. Ciao, Happy Saturday everyone! Enjoy it, do nothing! :)
- Anonymous
  
  “Some people just are genetically less inclined for introspection and awareness.”
  
  Hmmm… perhaps with genetic testing and reÃ«ducation camps, ve could take care of zese people. :p
  
  I actually agree with you and really like hearing this stuff from time to time (it’s easy to get jaded), but I’d jettison the “people with a genetic flaw ruining society” line of thinking.
- turn_self_off
  
  Something like the Scandinavian model? That btw a whole lot of people seems hell bent on dismantling…
Sweet Zombie Jesus

This is a delightful animation, but it seems to serve no educational purpose whatsoever. What is a toxic asset? What does it mean for it to “die”? How did they destroy the economy? (I know the answers, more or less, but the animation seems like it would be of no use to anyone who didn’t).
Anonymous

This was one of the most pointless informational videos I’ve ever seen. I have no problem with exploring new ways of making information accessible, but there isn’t really any insightful information contained in the video. They didn’t give any meaningful detail about the structure or life events of their asset, beyond an extremely-basic overview of how it was constructed. But anyone who has been paying attention for the last two years really should know that by now. Otherwise, it was just a cartoon of a fuzzball that makes cute noises and gets sick.

The written article was a little better, but it wasn’t even 1000 words long. If I had turned in their news story as a high-school report, I would have gotten an F. There is just no depth in the information it contains. If you try to submit a 750-word-long article to a scientific journal for peer-review, it had better contain the most amazing experimental data or theoretical explanation ever. Otherwise it will not get any real consideration by the editors. This is not due to a bias against short and clear explanations, but it is because it is next to impossible to explain the basics of _any_ complicated issue within 1000 words. Even 10,000 words often isn’t enough, if you want to give a really good overview of a topic. What is the point of this kind of reporting? I am so tired of the lack of depth and seriousness in reporting today. Some of us don’t need information dumbed-down, oversimplified, and repackaged as a cartoon to learn. We are called _adults_.
mdh

Cory, you really is a poet sometimed.
Anonymous

Such foolish ideas have been tried before and failed miserably. Ludwig von Mises in “Economic Calculation in the Socialist Commonwealth” in 1920 showed why it is impossible for your ideas to work. Socialism in an industrialized economy can’t calculate profit and loss. It has no way of knowing the most efficient use of resources. As such it is impossible.

The problem is NOT capitalism. The problem is socialism. Central banks with a Soviet Commissar arbitrarily setting interest rates. Governments choosing what industries get special privileges and protections via legislation and regulation. Governments constantly changing rules while the game is in play, like the elimination of mark to market accounting. Government bailing out failing institutions and preventing smaller competitors from taking up that market share.

Capitalism has none of those. The problem is government picking the winners and losers. Capitalism wants to put the big banks and other companies out of business for their mismanagement. Capitalism wants smaller competitors to come and buy up those assets and restructure them and put them to profitable use. It’s the government that prevents that.

You cannot “isolate” food and energy markets from the rest of the economy any more than you can isolate your hand from your body and have it continue to function. Food and energy don’t appear out of the air. They are both capital intensive processes that are dependent on the rest of the economy. John Deer can produce farming equipment, construction equipment, consumer lawn mowers, any number of things. The steel it uses to build those things can be used to build the farm equipment, bridges, cars, any number of things.

The government tried to regulate the food and energy markets in the 1970′s. The results were no gas and no food. The Soviet Union had similar problems.

Utopian Socialists, as Marx himself called people like you, need to open your eyes and see the tremendous destruction such ideas would and have wreaked across the world.
- aquathug
  
  What do Mises and Greenspan have in common besides their disdain for the worker and the clear failure of their economics? Rand loved them both. It is not surprising that Mises would equate the fall of the Soviet Union with the death of socialism. It’s interesting in this context how well socialism is currently serving Austria and it’s neighbors, dontcha think?
  
  What is foolish anon is the belief that the set of economic ideas embraced by Pinochet, Thatcher, and Reagan have any value today. The economies and political systems espoused by these three have all been seen to fail miserably. There is nothing Mises could possibly say about the global collapse of capitalism except to possibly apologize for his early role.
  - aquathug
    
    Sorry, I meant to say: “that Hayek (Mises star student) would equate the fall of the Soviet Union with the death of socialism.”
    
    Here are two bonus quotes from von Mises. The roots of Libertarian racism and contempt for their fellows runs very deep.
    
    “It is perfectly legitimate to assume that the races are different in their cognitive abilities and in their willpower and accordingly are unequally suited for the task of setting up societies, and that the better races are characterized in particular by their special ability to strengthen social bonds.”
    
    “The masses do not think. This is precisely the reason why they follow those who do think. The intellectual leadership of mankind is a position held by the very few who are able to think.
Ethan

Actually it isn’t on the NPR balance sheet… The reporters made a point of purchasing it with their own money.
Norman

The video is cute, but is the most roundabout way of saying you can’t get something for nothing.
michael holloway

Great to see NPR experimenting with multimedia; it will make them leaders again in the future world.

On Toxies, missing in the autopsy is how these vehicles were used as part of a strategy to spread US debt around the globe, thus indenturing many economies and spreading US power.

Also absent was the history that these Toxies were the result of ‘it’s the economy stupid’ logic that necessitated a booming economy so we would be more likely to sell your souls on the Iraq war in trade for a life-long responsibility to a mortgage.

Bad deal anyway you look at it.
- Eicos
  
  That’s very nice, but I think you have it in reverse. How does making foreign countries the holders of US debt “indenture” them to us? It is we who are mired in debt, to both domestic and foreign creditors.
  - Anonymous
    
    Eicos: It’s complicated, but here’s the short version.
    
    The US dollar is the world’s reserve currency. That means countries with reserves build those reserves in dollars, because that’s what they’re able to purchase on the world market, where other countries pay in dollars. And really what they’re buying is Federal Reserve Treasuries. And that’s them buying our government debt, which they’re to some extent forced to do in order to build reserves.
    
    So countries buy and sell dollars, which drives demand, which keeps the dollar worth more than it would be otherwise. They subsidize our high dollar value when they purchase reserves, in other words.
    
    This situation has all kinds of knock-on effects and benefits for America, of course. It’s helped America to have a trade deficit for 24 years and counting. It’s part of why America has such a high-dollar economy. Money has been flowing into America for years, and the dollar is ‘artificially’ high.
    
    It’s unstable, of course. Eventually another currency will replace it, but until then America reaps the benefits.
    
    An excellent read about this is the book Empire of Debt; it’s funny as well as fascinating.
    - turn_self_off
      
      Lets not forget that oil is traded in dollars (the claim is that iraq got invaded because it got permission from UN to sell their oil in euros instead. And i think iran currently trades their oil in euros).
    - Eicos
      
      Yes, I am familiar with the international currency trade. But the idea that securitization of private debt somehow enslaves other countries seems absurd; other countries and corporations don’t buy dollars because they’re forced to; but because it is a mutually profitable arrangement for all parties involved. It’s hardly a case of creditors being “indentured” to the United States, in fact it’s quite the opposite: the unparalleled recent expansion in the public, and especially private debt burden makes us less, not more powerful.
      
      Witness the case of China, who has loaned the US government a significant fraction of the money it’s relied upon to stabilize the economy, fight two wars, and support expensive entitlements. Rather than being weakened by the more than $1T in dollar reserves it holds, the Chinese government has felt strong enough to persistently thumb its nose at furious American lawmakers by keeping the value of its currency artificially low, hurting American exports and preventing the moribund American manufacturing sector from being able to compete in what will soon be the largest market in the world.
      
      Although Obama and Geithner have ended a brief period of detente to become increasingly aggressive in their statements on the issue, America now has little leverage, because engaging in economic warfare against the Chinese could be ruinous. America relies on the continued sale of debt to meet its fiscal and financial obligations, including debt service. For the moment, although even the most optimistic forecasts show that the US’s debt as a share of its GDP will skyrocket in coming years, American debt is still considered among the safest investments, and so raising further cash is not a problem.
      
      However, if the Chinese government were to stop purchasing American debt, it could raise serious questions about the US government’s ability to meet its obligations to future creditors. We have seen the the results of such crises in Greece and Portugal. If the specter of European-style contagion is remote now, even the richest countries are beginning to pay attention; witness the harsh cuts in public services that the new British government has found it necessary to make. Of course, the British have a much larger debt in proportion to their GDP than the Americans, but considering the parlous state of the American economy and the ascending arc of Chinese power, it is difficult to imagine that the American government would want to tussle with China, beyond a few, doubtless politically-motivated jabs.
  - turn_self_off
    
    Perhaps its “borrow 1000 and they own you, borrow 1000000000 and you own them”?
mindysan33

This series has been interesting and illuminating.

#5 Anon- Some of us might agree with you, about the root of the problem, others won’t and will fight to the end to the defend the system that so benefits them. The defenders of the system seem to have most of the money and guns, so… yeah. I don’t know… :-(

Oh, and they so need to have stuffed Toxies for the fall pledge drive this year. I want a stuffed Toxie!
- EH
  
  Oh, and they so need to have stuffed Toxies for the fall pledge drive this year.
  
  Why would NPR offer a Toxie when they can offer gifts that hew more closely to the heart of the NPR organization, like Newsweek subscriptions?
  - mindysan33
    
    OH! But it would be so cute and cuddly! Newsweek subscriptions, not cute and cuddly. See. More people like cute and cuddle than let on…
semiotix

Well, this is why you’re not supposed to name them. You get attached, and then when they die, it’s nothing but tears.
Anonymous

I have to say that while this story was enlightening, I absolutely hate it when NPR does cutesy shtick. Susan Stamberg is maybe the best (worst) example of this, but the impulse seems to increasingly pervade the broadcast. I like my news dry and authoritative, thank you very much. I can get cutesy from E! Oh, and get off my lawn!
Big Daddy

Planet Money is one of the finest podcasts out there. They tackle some pretty sticky issues, always with humor, always in their “laymen’s terms” approach, and they have significantly increased my personal understanding of the financial world, and of this crisis.

I’ve branched out into less entertaining, but more hard-core and focused podcasts/blogs, and am learning so much more, but they were the gateway to my understanding.

If you have any friends who don’t what’s going on right now, PM is a good place for them to start.
Anonymous

Planet Money is pretty good, but for me they jumped the shark when they turned on Elizabeth Warren a year or two ago. It wasn’t just wrong, it illustrated a bad subtext for their endeavor. (Anon #3 again)
- mindysan33
  
  Can you elaborate on how they turned on Warren (who is awesome!)? I wasn’t aware of that…
jeligula

Funny, in a money-disappearing sort of way. I will continue to barter.
Ernunnos

…but since mark-to-market accounting requirements were suspended in April 2009, we can keep it on our books at the full purchase price! We’re not only not broke, we made record profits this quarter! Bonuses for everyone!