I’ve men­tioned my appre­ci­a­tion for Yves Smith’s naked cap­i­tal­ism blog often, but for those of you who haven’t been fol­low­ing along at home, here’s a selec­tion from her com­men­taries on recent eco­nomic events.

+ On Obama’s appoint­ment of Tim Gei­th­ner as Trea­sury Sec­re­tary (Smith wanted Paul Vol­cker for rea­sons she explains here):

The prob­lem is that the Bush Admin­is­tra­tion has so low­ered stan­dards that some­one who is com­pe­tent is applauded as a good choice, as in ide­ol­ogy and past record are ignored if you have a respectable back­ground and are not a patron­age choice. Com­pe­tence is a min­i­mum stan­dard, folks. What does the can­di­date stand for? The MSM ducks that issue, choos­ing to char­ac­ter­ize Gei­th­ner as a tech­no­crat. That is incom­plete and inaccurate.

+ On the pos­si­bil­ity of a default on U.S. debt or a deval­u­a­tion of the dollar:

The US was a mas­sive cred­i­tor before the Depres­sion and ran a very large trade sur­plus, to the point where the gold accu­mu­la­tion by the US was desta­bilz­ing to the world finan­cial system. Sound famil­iar? That is the role China plays now, not the US.

What hap­pened to the nations that were in the US’s shoes at the onset of the Great Depres­sion, the over­con­sum­ing, indebted Euro­pean cus­tomers of the US? They deval­ued their cur­ren­cies, defaulted (or par­tially defaulted and forced a rene­go­ti­a­tion) on for­eign debts, and suf­fered milder down­turns than the US did.

But the author­i­ties are not even con­sid­er­ing the pos­si­bil­ity of debt default or a dollar crisis in their plans. And if you think recent dollar strength argues against it, think again. The mas­sive dollar pur­chase are due to unwind­ing of dollar based debt.

+ On the role of finance in the economy:

In 1980, finan­cial firms accounted for 8% of S&P earn­ings. During the peak of our last stock market cycle, their prof­its were over 40% of the total.

Now con­sider: finance is a nec­es­sary func­tion, but is rep­re­sents a tax, a drain on the pro­duc­tive econ­omy, just as defense and lawyers do (aside: I had a lawyer from an entre­pre­neur­ial family who was refresh­ingly aware of that issue, and would write off hours before send­ing bills to clients, rec­og­niz­ing that the amount of time her firm had spent on cer­tain mat­ters simply wasn’t worth it from an eco­nomic stand­point to the client). It is ironic that free market fun­da­men­tal­ists have so vocif­er­ously argued for unfet­tered mar­kets, with­out under­stand­ing (or per­haps under­stand­ing all too well) that the house always wins.

+ And, finally, from the same post (the whole of which is really worth a read) on the Citibank and (prob­a­ble) GM bailouts:

The media. and to a lesser degree, soci­ety at large has bought into the con­struct of the impor­tance, value, and virtue of the finan­cial sector, even as it is coming vio­lently apart before our eyes. Why, for instance, the vitu­per­a­tive reac­tion against a GM bailout, while we assume Citi has to be res­cued? A GM bank­ruptcy would be at least as cat­a­strophic as a Citi fail­ure. but GM elic­its attacks for the incom­pe­tence of its man­age­ment and the sup­pos­edly unrea­son­able pos­ture of the UAW (the same free market advo­cates recoil at a deal struck by con­sent­ing adults). The par­tic­u­lar target for ire is the autoworker pen­sions and health plans, as well as their work rules. But the pen­sion plans being under­wa­ter is the fault of GM man­age­ment for not pro­vid­ing for them in the fat years; I per­son­ally have trou­ble with the idea that health care should vary by class; and for the work rules, German and Swedish automak­ers have strong unions and yet can com­pete. I see the UAW as having cor­rectly seen GM man­age­ment feed­ing at the trough and doing a good job at extract­ing their share.

And yet the specter of incom­pe­tent, and worse, DIS­HON­EST man­age­ment elic­its far less anger. GM may not make the best cars, but Citi and other banks sold prod­ucts that were ter­ri­ble, destruc­tive, that resulted in huge losses and are wreck­ing economies, damage crappy cars could never inflict (envi­ron­men­tal­ists might quib­ble, but never has so much seem­ing wealth evap­o­rated in so little time, and with the main cul­prits read­ily iden­ti­fied). They paid huge bonuses, yet their 2004-mid 2007 earn­ings have been wiped out by sub­se­quent losses. But while UAW work­ers will have to give up on deals cut ear­lier, in terms of health care and pen­sion promises (entered into, by the way, to bridge dif­fer­ence over wage levels), I guar­an­tee no Wall Street denizen of the peak years will have to cough up one penny of his bonus from those days.