2006 and 2007 IMF Speeches by Roubini Predicting the Recession and the Financial Crisis…And the Five Stages of Grief…
Following the publication of the New York Times profile article about me as Dr Doom a number of readers have asked me for the text of the two speeches – cited at the beginning of the NYT article – that I gave at the IMF, one in September 2006 and the other in September 2007, where I presented – early on – my views about the housing bust, the credit crunch, the likely banking crisis and insolvency of Fannie and Freddie, the oil shock and the severe recession and financial crisis that would follow those shocks.
Here are below links to the full text of those speeches:
The 2006 speech is not – for some reason – available on the IMF website. But courtesy of ECRI (where Anirvan Banerji, the discussant of my talk, is based) you can find that speech on the ECRI web site.
The two speeches are a bit long but – hopefully – still informative while being premonitory.
And here is the beginning of the New York Times Magazine article where the reactions to those two speeches are mentioned:
Two years ago, Nouriel Roubini predicted the current economic crisis. Now he sees things becoming far worse.
BY STEPHEN MIHM
Published: August 15, 2008, New York Times Sunday Magazine
On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.
The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.” People laughed — and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a “permabear.” When the economist Anirvan Banerji delivered his response to Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.
But Roubini was soon vindicated. In the year that followed, subprime lenders began entering bankruptcy, hedge funds began going under and the stock market plunged. There was declining employment, a deteriorating dollar, ever-increasing evidence of a huge housing bust and a growing air of panic in financial markets as the credit crisis deepened. By late summer, the Federal Reserve was rushing to the rescue, making the first of many unorthodox interventions in the economy, including cutting the lending rate by 50 basis points and buying up tens of billions of dollars in mortgage-backed securities. When Roubini returned to the I.M.F. last September, he delivered a second talk, predicting a growing crisis of solvency that would infect every sector of the financial system. This time, no one laughed. “He sounded like a madman in 2006,” recalls the I.M.F. economist Prakash Loungani, who invited Roubini on both occasions. “He was a prophet when he returned in 2007.”
A repeat of that cycle of skepticism followed by acceptance occurred at the World Economic Forum in Davos: in January 2007 I presented my bearish views about the US economy to a skeptical audience and panel in a plenary session on the global economic outlook where I was the only bear among five speakers.
In January 2008 instead the panel moderator – Michael Elliot of Time magazine – started the session by reminding the audience that a year earlier I had spoken at the same panel about three bearish forces – housing bust, credit crunch and high oil prices – that would trigger a US hard landing and that I had been proven right; then he gave me the floor and asked me to provide my updated views. Unfortunately the video of that 2008 panel – shown live on CNBC – was never made available publicly.
So it looks like it usually takes 12 months for delusional beliefs to get a reality check. Indeed a year ago the liquidity and credit crunch erupted; then the consensus view was that this was a temporary and contained problem that Fed easing would soon resolve. At that time (summer of 2007) I wrote several pieces arguing that this was not just a temporary illiquidity problem but a deeper and more persistent credit/insolvency problem that would lead to a systemic crisis that Fed policy could not resolve; that this was very different from the temporary 1998 liquidity crunch following the near collapse of LTCM because of solvency problems in the economy; that the problems in financial markets had to do with unpriceable uncertainty rather than priceable risk as the financial markets and the new financial instruments were very opaque, illiquid, exotic and impossible to price; that the Fed would be unable to control and reduce those sharply rising liquidity and credit spreads.
Now a year later interbank spread and credit spreads are as wide as they have been since the beginning of this crisis and after all the actions of the Fed and of policy authorities have – as predicted here a year ago – done nothing to dampen this liquidity and credit crunch. Indeed:
· spreads in interbank markets are sharply widening in a situation that is becoming very severe as financial institutions are scared of counterparty risky;
· spreads in credit markets are sharply widening and given the refinancing needs of financial and non-financial institutions these firms are facing a refinancing time bomb;
· all the drastic monetary policy actions by the Fed (Fed Funds easing and creation of new facilities such as TAF, TSLF, PDCF) have done nothing to ease the liquidity and credit crunch as financial markets suffer of massive problems of insolvency and credit risk, not just illiquidity;
But it has taken a year for senior policy makers – that a year ago were dowplaying the severity of the incoming financial problems at Jackson Hole – to recognize them now at the latest Jackson Hole meeting a week ago. As Stan Fischer put it at Jackson Hole this year (as reported in Bloomberg): “The financial crisis has revealed ways to “to listen better and filter warnings better in the future,” Fischer said. The turmoil was “widely expected,” he said, citing economists including Nouriel Roubini, a former Treasury official known for his bearish views. “Nouriel was only off actually by a year and a half or so,” Fischer said.”
Stan Fischer even agreed with my view that the financial crisis is “the worst since the Great Depression” even if he pointed out that, so far, the economic contraction has been much more modest. In my view the second round effect that he referred to in his Jackson Hole remarks will now lead to a significant economic contraction in the few quarters ahead, both in the US and in the other advanced economies as the US recession is now spreading to all of the G7 and to other advanced economies;
So maybe a year from now when the current US recession (yes we are already in a serious recession in spite of the 3.3% growth in Q2) will be officially recognized by the NBER as having started in Q1 of 2008 the current delusional belief that we will avoid a recession will also fizzle away.
So it looks like that in the five stages of grief (Denial (this crisis cannot be true!), Anger (why is this meltdown hurting me?), Bargaining (God please avert this crisis!), Depression (I don’t care anymore if markets collapse or the economy contract), Acceptance (I’m ready for whatever comes)) agents need about a year to go from the denial stage in which most policy makers and market participants were stuck for a while to the depression and acceptance stage that signals a reality check and a turning point in the crisis.
175 Responses to “2006 and 2007 IMF Speeches by Roubini Predicting the Recession and the Financial Crisis…And the Five Stages of Grief…”
@SWK from int’l relations dialog of previous threadYou are quite the gentleman to continue to reply to multiple Anonymous guests who have levied absurd assessments of your well articulated positions. I always enjoy reading and learn from your posts and encourage those who wish to make claims about your position (like the those in the last thread) to at least adopt a consistent name/alias for signature.This is a rare and excellent forum for interchange/furthering understanding of complex affairs and there is everything to gain from valid critical assessment. But somehow that excellence becomes diluted by multiple Anonymous entries that clearly need to re-read the postings of the contributor they are criticising before making invalid comments. Hoping for the best…Respectfully,
Does anyone else here buy that GDP number? I didn’t think so.
@ Medic”Does anyone else here buy that GDP number?”No, I don’t and I can’t. I have no cash for that. And I doubt people have access to their HEW to buy anything, even with the ridiculous GDP deflator.
SWK made three points about my comparison of Russia’s recent action in Georgia with Israel’s action in the Six Day War:1. We aren’t talking about Israel.2. The Six Day War was over 40 years ago.3. Israel was and is wrong to keep the territory it still holds.My answers:1. Now we are, it’s about time somebody broke the silence.2. Irrelevant, other than the fact that Israel still holds that land after so much time makes it a permanent annexation.3. OK, so Russia is willing to be equally wrong and hold onto the territory it has gained.Are you sure I am not reading his comments carefully? I read them carefully and with penetrating insight! I won’t be sidetracked by comparisons to less relevant and much older short-lived annexations made by Hitler.
the economy situation is not the main concern now,NATO/Us, Russia and friends should stop playing around,this is turning into a dangerous gamethey better stop their rhetoricshttp://www.thisislondon.co.uk/news/article-23545668-details/Military+help+for+Georgia+is+a+%27declaration+of+war%27%2C+says+Moscow+in+extraordinary+warning+to+the+West/article.do#readerCommentsMilitary help for Georgia is a ‘declaration of war’, says Moscow in extraordinary warning to the WestMoscow has issued an extraordinary warning to the West that military assistance to Georgia for use against South Ossetia or Abkhazia would be viewed as a “declaration of war” by Russia.The extreme rhetoric from the Kremlin’s envoy to NATO came as President Dmitry Medvedev stressed he will make a military response to US missile defence installations in eastern Europe, sending new shudders across countries whose people were once blighted by the Iron Curtain.And Moscow also emphasised it was closely monitoring what it claims is a build-up of NATO firepower in the Black Sea.http://english.pravda.ru/russia/politics/28-08-2008/106240-russia_topol_missile-0Russia’s strategic and space troops successfully tested an intercontinental ballistic missile Topol (RS12M). The missile is designed to avoid detection by anti-missile defense systems. The launch was performed at 2:36 p.m. Moscow time from Plesetsk space port, RIA Novosti reports.Russia test-fires Topol missile, Georgia desperately cries for NATO membershipBREAKING NEWSHypocritical West stands up against RussiaGeorgia declares war on South OssetiaRussian strategic bombers scare NATOGeorgia hides behind NATO warshipsMore…The missile successfully covered the distance of almost 6,000 kilometers and hit a hypothetical target on the Kamchatka Peninsula.“The missile warhead accurately hit the hypothetical target, having thereby exercised its ability to strike pinpoint targets,” a senior spokesman for Russia’s strategic missile troops, Alexander Vovk said in a statement.
Why is the GDP deflator so low?? (hat tip, James Hamilton):A practical example in a fictitious country.In 2007, Islandia produced 500 coconuts, which residents sold to themselves for $1 each, and imported 1 barrel of oil, which cost $100… Nominal GDP in Islandia for 2007 was $500. If you wanted to describe that in real terms, you’d call it 500 coconuts. You don’t count the oil in either nominal or real GDP because Islandia didn’t produce any oil…Here are the numbers for 2008. We grew 510 coconuts, sold them for $1.01 each, and still imported 1 barrel of oil, paying $125 for it. So nominal GDP was $515.10 (a 3% increase) and real GDP was 510 coconuts (a 2% increase). The change in the implicit GDP deflator would be the change in the ratio of nominal GDP to real GDP, namely, +1%…But wait a minute, Islandia’s pundits decry. How can your crummy accounting claim that inflation was only 1%? Last year we bought 500 coconuts and 1 barrel of oil for $600, but this year if we tried to buy the same thing it would cost us $630. The inflation rate, they tell you, is obviously 5%, not 1%.Ernst
Inflation is really 5%. But the GDP deflator is only 1% (crrectly calculated).Ernst
Does anyone else here buy that GDP number? I didn’t think so.
Notice if you will even here the descrepency in logic.read thru this while thinking
Details of Q2 real GDP growth:- personal consumption expenditure: 1.7% (adv 1.5%); gross private domestic investment -12% (adv -14.8%) (residential: -15.7%; adv -15.6%); exports: 13.2% (adv +9.2%); imports: -7.6% (adv -6.6%); Govt consumption expenditure: 3.9% (adv 3.4%)Net Exports were the biggest contributor to GDP (3.1% out of 3.3%)
Paribas: As impact of tax rebates fade, growth will slowdown again in Q3 and hit a trough in Q4-08 and Q1-09 as economic and financial weaknesses continue
See the disconnect? We could go on. The point is not that one part of the balance is leaning left or right. At issue is exactly what is used as a scale. Think about it for a moment. I am in a place where things are certainly slowing (I am in manufacturing). The only real increases I can point to are export related. These sales may very well be slowing also (at this point that is up in the air due to the short notification vis build to ship, but certainly orders are not what they were quite recently). If we are seeing a blip then hurray! Else you do the math. I suspect the former based on news from oversees. Again, think about it. The point I am trying to make is the GPI and GPD numbers are easily manipulated and therefore trail reality twice.
Why is the GDP deflator so low?? (hat tip, James Hamilton):ErnstWritten by Ernst on 2008-08-28 20:13:25
Does this have anything to do with the surge we have seen in export demand? If this is some (hate to say it nowadays) long term possible trend due to a(n)(odd) technological advantage (i.e. we can build machines they (who ever they are) simply need and cherish (*like the “good old days”*) well then we are …. on top!?!? and there is momentum. Can carry you far I hear…;Think about the case statement and rebut as is fit….
QUOTE by Written by PhilT on 2008-08-28 18:35:53You are quite the gentleman to continue to reply to multiple Anonymous guests who have levied absurd assessments of your well articulated positionsUNQUOTELet me add that I chuckled when I read that NR was called Eeyore (the cute Donkey in Winnie The Pooh series who is always pessimistic and followed by a raincloud) by an influential person in the financial world sometime ago.I knew at that time that this person would have to eat his words.NR throughout the last two years was professional, calm and objective whenever he went on Bloomberg and CNBC and other guests were literally calling him sensationalistic and even “crazy” without so saying.NR has done a great service to the profession of ECONOMICS and any company in this world who needs to use economic statistics should hire one huy to analyse all the info in RGE monitor and put in a briefing for the CEO everyday – just to give the CEO a non-conventional view.Your website is of great value to the financial world.And, I have a 70% annual return in two of my portfolios (I use leverage). I am ahead of Soros and many other hedge funds as of now.And I thank you for your work.Eeyore!
No doubt NR has been the beacon in a haze of disinformation for years now. How can anyone possible begin to thank him in this context I really don’t know. Regardless, thoughts need to be independent. I am curious why it is no one is ‘recoupling’ export demand to Asian slowing ect. with future fiscal projections. It is being vaguely summarized but hey it is of direct impact if the GDP numbers are built on exports no?
About that GDP, check out Karl Denningerhttp://market-ticker.denninger.net/archives/558-Economic-Numbers-Can-Any-Be-Trusted.html
S-Q-U-E-E-Z-E TIME. Convention, long weekend, irrationality will reign. Can you say, Margin Call?
Word of CautionPeople beware of chasing and distorting news and information so that it suits our preconceived opinions and theories.We don’t need to see in every data that does not fit our beliefs a source of manipulation and in every lipstick a sign of hedonics.To paraphrase one of my Statistics professors, numbers are like political prisoners, if you torture them long enough they will confess whatever you want them to. And this works in both directions, for all camps (not, if they did it is bad, if we do it is good).If (y)our theories are correct, then they will shine and become self evident that no amount of cover up would hide the truth of it.The economy and markets are a rusty big old machine. It takes time between the moment you press a button and the moment we touch the bottom. As well, graph in real life are not seasonally adjusted or Moving-average Smoothed so that data in any particular point in time are consistently following the trend. When you have outliers, it is not necessarily (merely) because someone is fudging the numbers. It is just a fact of life.
I just don’t believe that you can have an economic recover by just saying you’re having an economic recovery. If Bernanke says this is not a recession, well, he’s said that before. It was a lie then and it’s a lie now.Forget Dr. Bernanke’s voodoo quackery. Take the patient’s pulse – as Menegatti and Roubini have in “Life With Home Equity (Withdrawal) — Down to $24bn in Q1 2008.”The pundits say “the U.S. is a consumer driven economy.” Right?Well, then, if that’s right, the DOW is on bogus life support.Personal consumption, which zoomed from 67% of GDP in the 1990s to 71% now – about one-fourth of world GDP — was juiced in Menegatti’s opinion by HEW, a sort of economic steroid that “had a temporary effect on consumption,” as well as by the “wealth effect” illusion brought on by the opium of inflation. “The relaxation of borrowing constraints coupled with rising home prices created ground for strong equity extraction.”Now, say Menegatti, HEW has plunged from a high of $714.5bn in Q3 2005 (annualized) to an estimated $24bn (annualized) in Q1 2008. And that’s in spite of a gigantic influx of population that needed houses, subsidized mortgages, and a building frenzy that would put the industrious ant to shame.All built, alas, on bubbles and paper and illusion.Says Menegatti, “[W]hether HEW is the driver or not, the slump in demand is evident not only from the slowdown of the growth rate of consumption…” but from the (negative) growth rate of imports…“Over two-thirds of the GDP growth in the Q2 (2008) was due to the ‘decline’ in imports.”If there’s no new bubble to resuscitate the DOW, what’s holding it up?
Click 4 entire article: Putin suggests U.S. provocation in Georgia clash
Putin suggests U.S. provocation in Georgia clash Proper URL for article:http://iht.com/articles/2008/08/29/europe/29putin.phpl
Beware the Titanic Economy!!!http://www.cnbc.com/id/15840232?video=826837531&play=1
Third time’s the charm ! Putin suggests U.S. provocation in Georgia clash ==> http://iht.com/articles/2008/08/29/europe/29putin.php?page=1
@AfaIf the truth always eventually shines through, and conspiracy theory just feverish overworked minds conjecturing–then please explain thoroughly.(1) The JFK Assassination(2) The demolition of the Twin Trade Towers and Building 7Thank you and wise up!
If Putin is correct – i.e. Bush engineered the Georgia crisis to help McCain, then Bush must be the stupidest and most inept guy to ever to play big geopolitics from the way things turned out. And you know, Putin is a hell of lot smarter than Bush.
@Guest – 21:04:32Higher or lower exports have nothing to do with the GDP deflator. They are mainly the result of increased or decreased international competitiveness and increased or decreased economic growth in the export markets.Ernst
Dear Guest”If the truth always eventually shines through, and conspiracy theory just feverish overworked minds conjecturing–then please explain thoroughly.”I was talking more about “theories” specific to market manipulations, which, I believe are subject to different dynamics than in geopolitics. Markets, in the medium-term, are genuine voting machine, where, every economic agent is FORCED to participate driven more by intrinsic (needs) and extrinsic (environment) factors rather than egocentric (wish) and eccentric (manipulation) factors. In this environment, whoever challenges the will of voters (consumers, investors …) will eventually be vetoed out. The same thing cannot be said in politics.The degree and length of involvement of voters in each process make of big difference. As a consumer/ borrower/ lender/ investor … you are making decisions continuously, weighting the pros and cons of each candidate (a new product, service, stock, mortgage, currency …) that put these candidates under scrutiny, the power of the economic agents is just overwhelming.Contrast this with the political arena. You only have a chance to vote for a candidate once in a while, and that decision is influenced by promises rather than results. You do not actually have a say in what decision your leaders impose on you, and through passive citizenry, you cannot do much about it.In all cases, I guess you do not want to put all said theories in the same basket, as some theories are righteously more equal than others. There is a difference between an allegation, a rebuttal, a refutation, a disagreement, a hallucination … not all pass the test of a theory. And if you are familiar with statistics, even for a well grounded objection, here, the difference is between Type I and Type II errors: The fact that the other party is wrong does not automatically make you right.The short answer is that I do not have an answer to your 2 examples. My point was: You don’t need to be wrong for the data to refute your theory. And you don’t need to be right for the data to confirm your conclusions. Go past what you like to see, not to see what you like, but to know why you see what you see. The reason why I said so because I sensed a willingness of some to refute all GDP data by all means, explain every movement in the DOW by the magic of PPT and the movement of the currencies by mere interventions.
@AFA BACK IN JUNE WHEN I POSTED THIS BLOOMBERG ARTICLE ALL OF YOU;INCLUDING PROFESSOR RUBINI SCREAMED THIS ARTICLE DOES NOT BELONG TO THIS BLOG. AND YOU ALL LAUGHED. I AM GOING TO POST lt;;THE BLOOMBERG ARTICLE FROM JUNE OF THIS YEAR AGAIN.Russia Risks Armed Clash in Abkhazia to Stop Georgia NATO Bid;By Henry Meyer;June 24 (Bloomberg) — Almost 20 years after the Cold War ended, Russia’s neighbor Georgia has become a new flashpoint for tensions with the West.Russia wants Georgia, its former Soviet possession, to stay out of NATO so badly it is risking armed conflict to support the breakaway region of Abkhazia. In the past two months, Russia has sent almost 1,000 troops into Abkhazia, established direct economic ties with it and downed an unmanned Georgian spy plane. An outbreak of fighting between Georgia, a U.S. ally, and Russia would provoke the worst crisis in East-West ties since the Soviet Union collapsed in 1991. It also would undermine Russia as it prepares to host the 2014 Winter Olympics in Sochi, 30 miles from the Abkhaz border. “The risk of the high level of brinkmanship exploding into conflict has gotten higher,” said Andrew Kuchins, an analyst at the Washington-based Center for Strategic and International Studies, in a phone interview. “Russia has upped the ante. Russian President Dmitry Medvedev and Prime Minister Vladimir Putin see the expansion of the North Atlantic Treaty Organization to Georgia and Ukraine as a U.S. bid to usurp Russia’s influence in its backyard. The two leaders also are in conflict with the U.S. over a planned missile shield in former Soviet bloc countries Poland and the Czech Republic, which they see as a threat to Russia’s nuclear capability.`Negative Confrontation’ Moving Georgia “artificially into NATO” would “certainly lead to another spiral of very, very negative confrontation,” Medvedev, 43, told Georgian President Mikheil Saakashvili, 40, at a meeting in St. Petersburg on June 6. Officials in Georgia, the route for a pipeline carrying Caspian oil to Western European markets, have denounced what they call Russia’s “annexation” of Abkhazia. Georgia is stepping up preparations for an offensive, said the Brussels- based International Crisis Group in a report this month. The most recent confrontation occurred on June 17, when Georgian police detained four Russian soldiers, confiscating what they said were 20 anti-tank missiles. The Russian military said it would respond with force to further “provocations.”Since the U.S. and its European allies in NATO promised Georgia and Ukraine, another former Soviet neighbor, eventual membership at an April summit in Bucharest, Russia has taken a series of military steps that have angered Georgia. Russia deployed 400 troops to Abkhazia on May 31, saying they were needed to rebuild a railway track. In April, Russia bolstered its UN-sanctioned peacekeeping force in Abkhazia with an additional 550 troops equipped with heavy artillery, on top of the 2,000 peacekeepers there already.On April 20, a Russian fighter jet shot down a Georgian unmanned reconnaissance plane over Abkhazia, according to a United Nations investigation.Abkhaz border guard Tengiz Manaka saw the wreckage fall to the ground. The 23-year-old raced to the top of a watchtower on the seafront to keep a lookout for Georgian warplanes. “We thought war was about to break out,” he said. Abkhazia, slightly larger than the U.S. state of Delaware at 3,300 square miles, is a subtropical Black Sea territory dotted with palm trees that was once a favorite playground of Soviet dictator Josef Stalin. Since the territory split from Georgia in 1991, sparking a two-year conflict that killed up to 20,000 people and the exodus of 240,000 Georgian refugees, Russian peacekeepers have been policing an uneasy cease-fire.“The Russians are trying to destabilize Georgia and prevent us from joining NATO,” said Georgia’s State Minister for Euro-Atlantic Integration, Giorgi Baramidze, in an interview in Tbilisi. “We are doing our best to stay as calm as possible, especially now when aggression is continuing. Russian Foreign Ministry spokesman Boris Malakhov said in a phone interview that Russian forces stationed in Abkhazia for more than a decade have “succeeded in keeping the peace and avoiding a resumption of hostilities. The U.S., which has trained and equipped Georgia’s military and in 2006 approved almost $300 million in aid over five years, says Russia’s tactics will backfire.“The longer that Russia remains so provocative and that Georgia remains so responsible, we’ll see support for Georgia’s NATO membership will grow,” said U.S. Undersecretary of State Matt Bryza in a phone interview. The official U.S. position on the breakaway conflict calls for restraint on the part of Georgia and negotiations with Abkhazia.Eventual Members Georgia and Ukraine failed to win fast-track NATO membership status in April because of opposition from Germany and France. As a compromise, the Western military alliance agreed that both countries will eventually become members. For its part, Abkhazia is on a war footing, with 30,000 reservists who keep weapons at home and can deploy with hours’ notice in response to any attack.“Our armed forces are on a constant state of alert,” Deputy Defense Minister Gari Kupalba said in an interview in the capital of Sukhumi. Nina Khrushcheva, the great-granddaughter of ex-Soviet leader Nikita Khrushchev, says she is concerned that Putin and Saakashvili won’t show the same restraint as Khrushchev and President John F. Kennedy did during the 1962 Cuban Missile Crisis. The deployment of Soviet missiles to Cuba brought the U.S. and the Soviet Union to the brink of nuclear war. “Who can promise that it won’t get to the point of the Cuban missile crisis?” said Khrushcheva, a professor of international affairs at the New School in New York. “Both sides are escalating.– With reporting by Helena Bedwell in Tbilisi. Editors: James Hertling, Anne Swardson. To contact the reporter on this story: Henry Meyer in Sukhumi, Georgia, through the Moscow newsroom at Hmeyer4@bloomberg.net. Last Updated: June 23, 2008 16:00 EDT. HELLO RUSSIA GOOD BYE NATO. Written by MASHIACH BEN CHANAWritten by MASHIACH BEN CHANA on 2008-08-28 08:22:40
Dr. Roubini,I may be a little more pessimistic than you. As regards to the situation in South Ossetia and Abkhazia in what we in the “West” recognize as Georgia, I believe ultimately South Ossetia will merge with North Ossetia and become part of the Russian Federation.The best we can expect is that Abkhazia becomes an independent state not part of the Russian Federation.The west has neither the power nor the will to prevent this.Nationalization of Freddie and Fannie has been delayed until after the election.No surprise here.The current ‘recession’ has lessened the demand on crude, however we are at ‘peak oil’ and therefore ‘energy per cap pita’ will decline in the long term.This means a lowering of worldwide living standards, as everything translates into energy consumption.We need to transition to a more energy efficient life style ASAP.This problem coexists with that of the Federal Reserve. We can ‘fix’ the Federal Reserve with an act of congress. No such ‘fix’ exists for our lack of energy.
@Ernstthanks for the very clear and concise explanation of the GDP deflator.Looks like the proper way to think about it is as a ‘domestic-only price inflation’, very nice. And this makes the low readings of the GDP deflator of late much more plausible. Everybody knows that CPI inflation is driven by oil and food prices, so the divergence is just fine.
There should be a new term for the hordes of senseless asset managers, investors and traders out there: the Credulous Crowd. There has been enough smart analysis and anecdotal evidence out there to indicate that most of the economic number in recent years have not been truly reflective on the state of the economy in the US. And yet, it never ceases to amaze me at the reaction of the markets to such spurious data. CPI, the Unemployment rate, the GDP, and so on and so forth. In my close to 20yrs in the market, I have never seen number massaged in such a way before, even by the most corrupt and deceitful of governments. It is strange that with so many smart people in the market, no one actually dares to question the authenticity or the realism of the data.Investors, in particular, should be up in arms. The old adage still holds through: Garbage in, Garbage out. If your analysis is based on bad data, then clearly you cannot make the right decisions. If so, why would anyone invest in the US, which is quickly becoming the largest banana republic in the world?
Speaking of Obama and the comment the other day that I made that he was a “blow-off” – see:http://www.independent.co.uk/opinion/the-daily-cartoon-760940.htmlcool.I also commented that McCain was a “jerk-off” however, I don’t want to see this cartoonistized.Ho humPeterJB
“If so, why would anyone invest in the US, which is quickly becoming the largest banana republic in the world?”@ Wolf in the Wilds on 2008-08-29 03:45:24Money (profits) has no morals and shall be invested where and wherever profits are seen to be had; risk or less risk, it shall be invested and really, money doesn’t care about if its the USA, Russia, Zim, China or Mars. Money can be made in banana republics – its easy as the cost is known – whereas in so-called the less corrupt countries (“The West” – Hah!;), the true costs are always hidden and infinitely more; and they are always there and are found in the political and bureaucratic arenas.Drop the emotives as it isn’t reality.Ho humPeterJB
@Wolf in the WildsIn the short term it’s a voting machine. In the long term it’s a weighing machine. IMO we are Japan, complete with a mummified banking system and a government manipultated market. IMO we’ll get to Dow 5000 or worse. When the government fights hard against the tide it just makes for a long slow ride down.
Consumer spending and personal income were both down in July, and inflation moved higher.Personal incomes fell 0.7% last month, the biggest drop since August 2005, as extra cash from government stimulus checks dried up, the Commerce Department reported.At the same time, consumer spending decreased 0.4% on a real, or inflation-adjusted, basis, the lowest since June 2004.Real spending on durable goods fell 1.6% in July. Real spending on nondurable goods also fell, off 0.9%, while real spending on services was flat.The declines in income and spending were worse than economists had expected. The increase in core inflation matched economists’ expectations.
“De-Americanization” continues…The Securities and Exchange Commission signaled the demise of U.S. accounting standards, kicking off a process Wednesday that could ultimately require all publicly listed American companies to follow an international model instead.Introduced in two steps, the shift could eventually cut costs for companies and smooth cross-border investing. At the same time, investors worry it will create confusion, especially during the transition. Other critics worry that the international system offers too much wiggle room for companies, compared with the more precise rules enshrined in U.S. standards.The SEC’s proposal would allow some large multinational companies to report earnings according to international accounting beginning in 2010. The SEC estimates at least 110 U.S. companies would qualify based on their market capitalization, among other factors. The agency also laid out a road map by which all U.S. companies would switch to International Financial Reporting Standards, or IFRS, beginning in 2014, at the expense of U.S. Generally Accepted Accounting Principles, the guiding light of accountants for decades.The proposals will be open for public comment for 60 days and could be finalized later this year.
Out of almost 2,100 diversified retail U.S. stock mutual funds that are open to new investors, just 17 have positive returns for both the past 12 months and year-to-date, according to investment researcher Morningstar Inc.
WOW!! 3.3% GDP, booming stock market and now this! WHAT FRIGGIN RECESSION???9:48 a.m. U.S. Aug. Chicago PMI 57.9% vs 50.8% in July
recession… maybe…, but not in the usa!!
9:57 a.m. U.S. Aug. UMich consumer sentiment 63 vs. 62 expected:report
My latest is up. Is the FDIC another troubled monoline?
Hurricaines Gustav and Hannah sure look bad for the Gulf of Mexico oil platforms and pipelines. Both could be direct hits on the offshore oil fields if they continue on current trajectories. That would send oil well up again, as well as wreaking havoc on the South during the GOP convention, reminding everyone of Katrina.Bush and the GOP better hope the pumps in New Orleans hold. They were installed by a former business partner of Jeb Bush, and have already been the subject of six investigations for defectiveness and poor installation thanks to whistleblower in the Corps of Engineers.
Russia to Cut Oil Supplies to Europe In Response to SanctionsRussia’s government may prompt at least one oil company to cut supplies of crude oil to Europe in response to the threats to impose sanctions in the wake of the conflict with Georgia.It is rumored that supplies via Druzhba pipeline that meets oil requirements of Poland and Germany will be probably reduced and that the LUKOIL leadership has been given the notice.The reduction might happen already starting from September 1, the sources speculate. People in LUKOIL, however, say they know nothing about the plans to cut down supplies, and people in the Kremlin declined to comment.French Foreign Minister Bernard Kouchner declared yesterday that the EU was deliberating whether to impose sanctions on Russia in the wake of events in South Ossetia and Georgia. Russia’s Foreign Minister Sergei Lavrov called the idea the product of deformed imagination, while the RF Envoy to the EU Vladimir Chizhov warned that the sanctions could negatively affect the EU and the extent will be equal or event bigger than for Russia.http://www.kommersant.com/page.asp?id=-13142
Our first female president??
Why? Because Sarah takes over when McCain gets shot down again?
sorry, I meant crash landing of McCain. Then Sarah takes over
ECRI weekly leading index falls sharply again! Growth rate lowest since May 1980!!!
McCain is 72 years old and if he wins, this will be one of the most stressful times in his life…Odds of our first female president become much more probable.
Perfectly fit to follow Cheney. This is leadership America needs:Sarah Palin hunts, eats moose hamburger, ice fishes, rides snowmobiles, and owns a float plane. She holds a lifetime membership with the National Rifle Association. She admits that she used marijuana when it was legal in Alaska, but says that she did not like it
@Guest: “De-Americanization” continues…The Securities and Exchange Commission signaled the demise of U.S. accounting standards… that could ultimately require all publicly listed American companies to follow an international model…at the expense of U.S…”This shift into cost cutting for companies – the big 110 multinationals first — and smooth cross-border investing is just one more unfolding event that is de-Americanizing and dismantling freedom into an Orwellian one-world high-tech feudalism. It’s no longer a matter of conjecture who is orchestrating these events: these “central planners” have been unmasked many times by RGE Monitor bloggers.The on-going banking crisis, the massive inflation, the collapse of the economy, the destruction of the dollar as the ‘reserve currency,’ the internationalization of America’s assets and markets — all fit the plan for destroying the wealth-making apparatus of Americans.Private bankers want an international “regulatory” environment so they can escape the limitations of representative government. The American system created a form of economic justice for citizens previously unknown in the world. We must not permit it to be destroyed.I foresee our financial “masters” announcing soon the issuance of a new world-wide monetary unit to accommodate the proposed mandate of international cross-border investing—far from the reach of the “will of the people.”The name of this monetary unit proposed by John Maynard Keynes at the Bretton Woods Conference, where he co-authored the IMF and World Bank, is the Bancor.
@ Guest “Perfectly fit to follow Cheney. This is leadership America needs:..Sarah Palin hunts, eats moose hamburger, ice fishes, rides snowmobiles, and owns a float plane…”Yes, a perfect fit with our Jackson Hole elite…Which brings me to my point. Nouriel Roubini is hot property – the only economic messenger with the correct economic messages. In 2006 he shot a perfect 2008 bull’s eye — the most difficult economic target since the 1920s. He’s in Barron’s, the New York Times, on CNBC: the press is good to him.He’s a coveted person for the likes of Harvard Business School.He can refer back to his total speeches, back to 2006, without any embarrassments; it’s all in there. There are some here that can remember what others were saying in 2006, how they missed the target: Roubini”s predictions were straight as an arrow and hit dead on. A profound economic feat by an economic champion.So why wasn’t he featured at Jackson Hole for the big annual conference on monetary policy? Or is Buiter right, Bernanke is only interested in Wall Street and the devil take the economy?Sondra
YET ANOTHER MID-DAY FALL IN OIL PRICES! OIL ALMOST UNCHANGED NOW!!
Stocks going to rally green as well!
What a miracle!1:04 p.m.Oct. crude pares gains, up 30 cents at $115.98/brl on Globex1:04 p.m.Oct. natural gas down 0.8% at $7.98/mln BTU on Globex
Don’t count on Sarah Palin to be “on deck” for Prez. McCain just sealed his fate with this brain fart of a VP choice–his “Harriet Miers” moment.Now Bush will def. have to start a war and declare martial law to keep the Republicans in power.
TOUGH LOVEIts also time to get this debt crisis controlled ASAP to prevent another Great Depression run on the banks.Giving the subprime mess organised crime banks “bailout” welfare may delay the inevitable; but in the end, in my opinion, the foreclosures will go forth anyway and the delay “just makes it worse” as today’s bad loans get added into the next wave, then the next wave, etc…Let’s not be codependent with America’s organised crime bankers, let free enterprise clean up the mess in its own time and much quicker too, rather than making the debt crisis get worse to temporarily get better, only to get far worse than it would if we’d left it alone.I suggest tough love.
Just re-read the 2006 presentation, and was reminded how difficult it is to figure out the economy from a top down view.I’ll give my simpleton method of evaluating shocks back in 2005. First I’ll say that I’ve always felt that interest rate policy is overrated as an influence on the economy, especially in the direction of “fixing it”. But then we did have Volker, so we can’t get too sanguine about the Fed. But if we ignore outlier moves like Greenspan’s 1% and Volker’s 15% to 20%, then in 2005 I saw two shocks.The first was my gasoline bill went up about $300/year. Then at my California residence I got a pre-approved home equity credit card in the mail for $100,000.With the tech wreak still fresh in my mind, I knew we were in trouble sometime in the not too distant future. I tore up the credit card and sold my house.I can’t help wondering why this never sounded any alarms among policy makers.
@Gloomy: “When the government fights hard against the tide it just makes for a long slow ride down.”Yes, as Roubini says: “So maybe a year from now when the current US recession (yes we are already in a serious recession in spite of the 3.3% growth in Q2) will be officially recognized by the NBER as having started in Q1 of 2008 the current delusional belief that we will avoid a recession will also fizzle away.“So it looks like that in the five stages of grief…agents need about a year to go from the denial stage in which most policy makers and market participants were stuck for a while to the depression and acceptance stage that signals a reality check and a turning point in the crisis.”Unfortunately, government denial can become dangerous when it rationalizes self-serving misrepresentation…Softwarengineer suggests “tough love.” As Software says, it’s “time to get this debt crisis controlled ASAP to prevent another Great Depression run on the banks.”
Does the enormous inflation in orange juice prices over the last couple of years mean that we are seeing the tangible effects of “Peak Orange” ?PeteCA
GDP = 3.3?You can’t have a recession with GDP at 3.3%!Then this news from an alternate reality:Gauge of yearly US economic growth at fresh 28-yr low-ECRIFri Aug 29, 2008 10:30am EDTNEW YORK, Aug 29 (Reuters) – A measure of future U.S. economic growth fell to a more than five-year low and its annualized growth rate hit a fresh 28-year low, sign that a business cycle recovery may not happen in the near future, a research group said on Friday.The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 125.5 in the week to Aug. 22 from 125.8 in the previous period, revised from 125.9.Its annualized growth fell to negative 11.8 percent to match its lowest mark since the week to June 13, 1980. The previous week this gauge was at minus 11.5 percent, revised from minus 11.4 percent.http://www.reuters.com/article/economicNews/idUSNAT00432620080829“Welcome to the real world.”
PeteCAPeak Orange is real.I heard there was a problem of supply destruction of not only California oranges, but the orange trees as well. Experts advise it takes a long time to grow orange trees, and prices need to stay high to encourage investment in this area.I’ve tried economic substitution with grapefruit juice, but found there seems to be some sort of economic linkage in prices there that we don’t seem to fully understand yet. So for the time being I’ve switched to lemonade and a vitamin pill. This was working well, but then the water bill just went up.So then I was left wondering if conservation may be the answer for the consumer. After all, economics is supposed to be the allocation of scarce resources. But then we got the stimulus checks.
Wolf in the Wilds, I meant to compliment you on your excellent view on what the future may hold and how to approach the changing global geopolitical landscape, posted Aug. 27. Out of town, so late, but thanks.
Great post from Yves:GDP Release Signals Further Decline into Banana Republic StatusLast year, we put America on Banana Republic watch, and sadly, things appear to be playing out as we feared:I’m certain you’re familiar with the expression “death wish.” I am beginning to wonder whether America has a banana republic wish. The country has been taking steps towards being a small-minded, elite-dominated, sham democracy.Mind you, I am pointing to a tendency, not an established fact. The US isn’t Haiti, or even Argentina. But we are moving in that direction on a variety of fronts, and the devolution seems so concerted that I wonder if there is some unconscious mass desire to give up on the messiness and ambiguity of an open society and surrender to the certainty of one with institutionalized inequality, more authoritarianism, but more predictability, and perhaps an illusion of greater security.http://www.nakedcapitalism.com/2008/08/gdp-release-signals-further-decline.html
Want some straight talk? John McCain has failed the ultimate first test that any presidential candidate must face in picking a running mate: Selecting someone who is unambiguously qualified to be president.Two years ago, Sarah Palin was mayor of a small village of 8000 people in the remote state of Alaska. McCain’s choice of Sarah Palin is both irresponsible, disingenuous, and a massive failure of duty.
Get Real About Real Estatehttp://www.financialsense.com/fsu/editorials/schiff/2008/0829.html
Can’t wait to see how the polls go.Will Biden as VP assuage voter concerns about Obama’s lack of foreign policy experience or will Palin’s lack of experiance assuage voter concerns about McCain’s longevity?Are the Republicans going for the Hillary swing vote?Or are they just trying to confuse us?It’s working.
Bullet 4 of 13 bullets on RGE’s “Spotlight Issues” under “U.S. Consumers on a Tightrope as Headwinds Only Get Worse” says:Households are facing loss of net wealth (net worth fell most since 2002 by 3.6% or $1.7 tr in Q1-08) on declining home prices, job loss (of 438k in H1), erosion of returns from stock market, pension and mutual funds; Personal income grew 4.6% in Q1-08 compared to 10% in Q1-07 w/ significant slowdown in income in states hit by housing and financial sector crisis while oil and agro-based states still hold up (Global Insight)It is interesting to note that for Q1 2007, James Kennedy of the Federal Reserve Board in the FEDS working paper no. 2005-41 has calculated Net Equity Extraction as $84.0 Billion, or 3.4% of Disposable Personal Income (DPI). Equity extraction for Q4 2006 has been revised upwards to $109.1 Billion.It is always wise to know exactly what goes into the mix of DPI, and why, when making one’s own judgment on the state of the economy, IMHO.
O.K., 4 pm has come and gone and we have a 3 day weekend ahead. Will the FDIC will go after a big fish tonight?
FFF: First on FDIC Friday!Integrity Bank, Alpharetta, GA August 29, 2008 August 29, 2008http://www.fdic.gov/bank/individual/failed/banklist.htmlHope it’s not your bank.
I just double checked the Unoffical Troubled Bank List, Integrity Bank was number one troubled bank with an effective tear 1 leverage ration of -14!!http://firstname.lastname@example.org/troubledbanks.htm
THE RUSSIANS ARE COMINGMoscow denies rumored Kremlin plan to use oil weaponAugust 29, 2008, 11:30 PM (GMT+02:00)Russian energy minister Sergei Shmatko and LUKOIL denied Friday, Aug. 29, rumors circulating in Moscow that Russian oil companies were told to stand ready to cut off supplies to Europe Monday, Sept. 1 in retaliation for any sanctions passed at an emergency European Union summit in Brussels and NATO’s actions in the Black Sea. “We are doing everything we can to keep European consumers with enough oil,” said the minister in Dushanbe, capital of Tajikistan. LUKOIL is delivering the same amount of oil and oil products to Western Europe as before the Georgian crisis flared.Any such step by Russia, the world’s second-largest oil exporter, over Georgia, a key oil and gas transit zone, would further escalate inter-power tensions and cause mayhem in global energy and financial markets. Fuel prices would shoot up. Russian foreign minister Sergey Lavrov called this talk the product of a “sick imagination.”Print PrintCopyright 2000-2008 DEBKAfile. All Rights Reserved.HELLO RUSSIA GOODBYE NATO
Speaking of incompetence and stupidity in the USA:”McCain’s choice of Sarah Palin is both irresponsible, disingenuous, and a massive failure of duty.”@ Guest on 2008-08-29 14:07:29If you really want ‘irresponsible, disingenuous and a massive failure of duty’ wait until after he is elected – but i suggest that you be careful in what you wish for:-)Ho humPeterJB
THE RUSSIANS ARE COMINGRussian admiral: Our Black Sea fleet can destroy NATO’s group in 20 minutesDEBKAfile Special ReportAugust 29, 2008, 7:56 PM (GMT+02:00)Russian Navy missile practice in Black SeaRussian Navy missile practice in Black SeaFormer Russian Black Sea Fleet commander, Adm. Eduard Baltin was quoted by Moscow media as saying Friday, Aug. 29: “Despite the apparent strength of the NATO naval group in the Black Sea… a single salvo from the Moskva missile cruiser and two or three missile boats would be enough to annihilate the entire group. Within 20 minutes, the waters would be clear.”Adm. Baltin added: “We will not strike first, and they do not look like people with suicidal tendencies.”The Russian Fleet deploys 16 warships in the Black Sea compared with 10 NATO vessels – three American, Polish, German and Spanish frigates, and four Turkish warships, soon to be augmented by another six, including the USS Mount Whitney, which is considered one of the most advanced warships in the world.In Washington, White House spokeswoman Dana Perino rejected Russian prime minister Vladimir Putin’s assertion that US personnel were in the combat zone during the war in Georgia and “someone in the United States” provoked the conflict to help one of the candidates in the American presidential race.In his first major remark since the Georgian crisis erupted, Putin quoted information provided by the Russian military but offered no evidence. Perino called his allegations “patently false and “not rational.”HELLO RUSSIAGOOD BYE NATO
Talking about applied neuro-linguistics and what you see, isn’t what you get – but you are happy, Warren Buffet, et al.http://www.nakedcapitalism.com/2008/08/are-you-sure-you-want-what-you-want.htmlWatch the video. The consider the economic data announcements, MSM headlines, paid talking-heads noise, and political speeches.Talking about political speeches, can you believe Barrack Obama? The new Messiah – another reborn job just like George. Free cigarettes… anyone????Oh boy are you Americans’ dumb!Speaking of Banana-republics and making easy (cheap) bucks:http://www.nakedcapitalism.com/2008/08/gdp-release-signals-further-decline.htmlIf it was so pathetically sad, it would be hilariously funny.Ho humPeterJB
Talking of the individual and why the masses are always duped by the few:http://www.mises.org/story/3076Ho humPeterJB
The naked capitalism neuro-linguistic programming contribution today was very timely.Why did Yves chose to highlight this today? What we have now is not issue politics. What we have now is the use of Edward Bernays’product to its maximum potential. Our democracy has become a war of competing subliminal subconscious messages and competing archetypes. The Deliverer versus the Amazon. All women want to be Mrs Palin and Mccain is reinforcing his Teddy Roosevelt myth through her. She is the vehicle because he is boring, and they have burned out the Hotel Hilton theme. Obama has sold himself as Moses leading all Americans out of the Wilderness, and Biden is the hero who has managed to turn tragedy into success which reaffirms Obama’s Image. Obama is the illegitimate son Job and Biden is Job personified. We are the nation who talks in hollywood cliches, because Hollywood is all about myth. We have the myth of the American Dream that the Bankers used to securitize supersubprime mortgages. The american dream lulled all into a hypnotic property flipping nirvana that was never going to end.Everybody wake up! Like in “Shallow Hal”, the economy will not look like Wynneth Paltrow anymore, and politics is not about issues anymore! We should all make a list of real emergent issues and email all members of Congress. If you don’t think this Kabuki Theater will have no impact in economics, you are sadly mistaken!We voted for W on the myth of the pious fallen religious redeemer and look where it got us.
@ BEN CHANAcc. PeterJBI was trying to build an argument-reply to what I meant last time. Then I read the article linked by PeterJB above that touches one of the aspects I wanted to stress. I cannot say it better than the author, so I advise you to read the article hoping you would understand my point.Here is the link again (Hat tip PeterJB):http://www.mises.org/story/3076“The Fallacy of We [and I]“Although I would apply the same concept to a more microscopic level; the individual and beyond (the different personalities, moods, opinions … that a certain person can have concurrently or subsequently).
Don Coxe of the BMO group, whom I usually respect, uses his weekly broadcast forum to bring up the topic of Putin, which ergo leads to a mention of William Ayers, which ergo leads to Ayers’ supposed connection to Obama. Coxe reveals himself as a slimeball. If he’s worried, I’m glad. It means Obama is getting under the conservatives’ skins.
@Guest – 21:04:32Higher or lower exports have nothing to do with the GDP deflator. They are mainly the result of increased or decreased international competitiveness and increased or decreased economic growth in the export markets.ErnstWritten by Ernst on 2008-08-28 23:41:02
Huh? So you are saying higher or lower exports have nothing to do with… international competiveness? Ahhh, what an exception business lesson that is. Let me guess, it also has nothing to do with foreign demand either right? Phttt. Don’t stress yourself with them deep thoughts there yah?
@Guest 19:39:46 : read Ernst’s post again please, carefully this time. You’ve got it exactly backward.
Somber words for thought: Did I mention ‘moral hazard’?”This debt capitalism cancer is caused by a failure of central banking.In the face of a broad systemic collapse of debt capitalism where capital has become dangerously inadequate and new capital hazardously and prohibitively scarce, having been crowded out by massive debt collateralized by overblown assets of declining value, with a credit crisis that clearly requires systemic restructuring and comprehensive intensive care, those in the US responsible for the financial well-being of the nation seem to have been reacting tactically from crisis to crisis with a script of adamant denial of obvious facts, symptoms and trends, with no signs of any coherent grand strategy or plan to save the cancerous system from structural self-destruction. This band-aid short-term approach to artificially pop up share prices in the collapsing equity market and to keep insolvent financial institutions with technical life-support will lead only to long-term disaster for the whole economy. “http://henryckliu.com/page164.htmlHo humPeterJB
Talking and reading from the above linked article: last paragraph.”The argument for Third World debt forgiveness contains large measures of lender liability and predatory lending. Debt securitization allows predatory bankers to pass the risk to global credit markets, socializing the potential damage after skimming off the privatized profits. The housing bubble has been created largely by predatory lending without any lender liability. The argument for forgiving Third World debt is applicable to low- and moderate-income home mortgage borrowers in the US as well. Lets hear some proactive commitments from the presumptive candidates of both political parties instead of empty populist campaign rhetoric.”Indeed, Sirs et Mesdames, agree in full and emphatic agreement, I do.And, as I stated much earlier here, the level of house prices at their top, ie, asking prices, was driven by the ‘demand’ – not for houses – but for mortgages. Or, as the houses were an incidental to the ‘mortgage transaction’, the stated house prices were, in fact, the ‘value’ of the mortgage; the house was / is worth nothing, or damned near!Did I mention incompetence, stupidity, arrogance and er, “moral hazard”?Ho humPeterJB
Alessandro on 2008-08-27 16:39:01-
User Obseedian over on tickerforum.org has assembled an unoffcial troubled bank list that might be interesting for people with money in small US banks. The list is elaborated starting from public information from the FDIC and doesn’t cover all US banks. As always perform your due diligence before you believe what you read on the internet.http://email@example.com/troubledbanks.htm
Well Obseedian was right on. His number one pick, Integrity Bank of Alpharetta, GA failed today!http://www.fdic.gov/bank/individual/failed/banklist.html
I think Medic posted a reference to this, but I did not see the link so here it is for those who might have missed it…Take A Load Off Fannie and You Put the Load Right on Me!http://www.youtube.com/watch?v=712kRqri2No
@ PhilT 08:35:53Thank you kindly for taking the time to post these observations and sentiments. Unfortunately, I’m afraid there will always be some folks who cannot help but read what one posts through the distorted prism of their own firmly established, though perhaps seldom questioned, assumptions and conclusions about the world.SWK
Rod Stewart sings Maggie_Mayhttp://www.youtube.com/watch?v=7T5hYlUsQ0shttp://en.wikipedia.org/wiki/Maggie_MayErr..no, it’sHenry Paulson singing Fannie Maehttp://www.youtube.com/watch?v=LqAb_rxZick
Hi SWK, if you missed it, here was my reply to PhilT at 18:35:53 . It embeds no “assumptions and conclusions that may be distorted”, in case you care to address it. Thanks.SWK made three points about my comparison of Russia’s recent action in Georgia with Israel’s action in the Six Day War:1. We aren’t talking about Israel.2. The Six Day War was over 40 years ago.3. Israel was and is wrong to keep the territory it still holds.My answers:1. Now we are, it’s about time somebody broke the silence.2. Irrelevant, other than the fact that Israel still holds that land after so much time makes it a permanent annexation.3. OK, so Russia is willing to be equally wrong and hold onto the territory it has gained.Are you sure I am not reading his comments carefully? I read them carefully and with penetrating insight! I won’t be sidetracked by comparisons to less relevant and much older short-lived annexations made by Hitler.Written by Anonymous on 2008-08-28 19:26:41
It’s Friday..Another Bank Fails.http://www.bloomberg.com/apps/news?pid=20601087&sid=a7dn3iRmUDCQ&refer=home
In consistency with and talking about … “I’m afraid there will always be some folks who cannot help but read what one posts through the distorted prism of their own firmly established, though perhaps seldom questioned, assumptions and conclusions about the world.” SWK @ kilgores on 2008-08-29 21:47:29I would like to voice my most biased and humble opine that, within the context of the collapse of the looming and imminent global economic, financial and monetary system that:1. Technically, not only can the global system can be, er, fixed, shall I say ‘reformed’ (?), without the necessity to enter into the dark side of a demographically induced depression with armed and insane revolution wrought on every corner,and it could be done quite easily,but,2. The money pools which are revolving around the Banks and the bodies politic, bureaucratic and the massive private corporates, have suddenly seen extreme highs of huge no risk profitability for those with access to leveraged credit across the Globe, er, such as themselves. And these giants, with untold and unlimited access also to the global power influence are now feeding in a frenzy never before in written history ever considered.There is a bull market now, in no cost, no risk bottom dredging by a large number of under-the-horizon bottom feeding sharks; these parasites will ensure that the global system collapses, not by intent but by their very nature.As you look for logic in the emerging patterns; consider this posit. Those of the “leadership elite” now only serve as the “faithful servants” to these agents of change – unknowingly, er, did I mention incompetence and stupidity?.Ho humPeterJB
Talking about Banana Republics, the USA and making profits; cost and risk free:As I earlier intimated, making money in banana republics usually means negotiating the costs where the risks are usually fairly small as long as you are close to the real decision makers and they are in on “the-kill”.What appears to be happening is that money pools – where they carry no morality baggage (everywhere), is actually creating a “banana republic” situation out of the USA.I don’t believe in conspiracies so what is inferred here is: is the fact that those responsible as regulators of the USA economy have got it all wrong and are just creating ideal conditions for a feeding frenzy on profits; the net effect of this, of course, will be, in high probability, the USA becoming a broken banana republic.But what a prize! Everybody can feed off the USA in its Caveat Emptor cum predator / Vulture Droid state for quite a few years to come. A lot like what the USA did to the Philippines, if you need an example.Also I might add that the quality of the US political “leadership” certainly suggests that any essence of integrity that the USA did have, has fled to higher ground quite some time ago.Back to the Exxon Valdez and free cigarettes. You will be able to buy suitcase nukes for every occasion – at a corner shop near —–> You. Nuke-a-grams for every occasion.Yes, there certainly is much, much advantage in bringing the USA to its knees and that advantage is profit and weirdly, it is doing it all to itself as those money pools are mainly in the USA!Ho humPeterJB
PeterJB,Could you kindly explain a bit more? What are these bottom feeders feeding on?Investment banks? Well Lehman will be happy to sell parts of itself relatively cheaply, but still the price is too high. They’ll sell to anyone with the money.Real estate? There’s lots of foreclosed real estate now. Are they going to buy that?I’m just not sure how they enforce their conspiracy and precisely what they are doing in your theory.
“Could you kindly explain a bit more? “@ whateverWell surely real estate is a prime no risk and almost costless source of profiteering or opportunism at fire-sale prices and fairly easy to understand. It has been reported that there are numerous syndicates in the preparation that are building mechanisms to take advantage of the available properties. Is this too difficult to understand?Ok… now extrapolate using the principle that if you have the resource, credit, capital, access and influence to get to where the deals are. There, the answer is everywhere where there is financial stress; everywhere. Its just a matter of sorting the better from the good.How about high end exotic motor vehicle? Yachts? Jets, horses, art, commercial property?I am “told by a source, close to the matter, who overheard it from someone close to one of these groups” that much money is heading to the new banana republic. Of course, they believe that it will all bounce back in ten years or so and everything will be alright again.And, the USA is the Land of Opportunity and a place where dreams are built. Amen.Agree, I do.Ho humPeterJB
@ ptm;Wish I could take credit for the link, but it was Mark who originally posted it (and thanks again Mark).
FT Lex column: Since the beginning of 2007, Merrill Lynch has lost $14bn, after tax. This is equivalent to about a quarter of all the profits, adjusted for inflation, made in the course of the bank’s history as a listed company since 1971 – the highest ratio of recent losses to historical profits among its peers.Full article: http://www.ft.com/cms/s/2/499a37be-7536-11dd-ab30-0000779fd18c.htmlMerrill LynchPublished: August 28 2008 23:32 | Last updated: August 29 2008 08:50In the long run, we are all dead, noted John Maynard Keynes. It took remarkably little time to savage the accumulated profits and standing of US financial groups. Since the beginning of 2007, Merrill Lynch has lost $14bn, after tax. This is equivalent to about a quarter of all the profits, adjusted for inflation, made in the course of the bank’s history as a listed company since 1971 – the highest ratio of recent losses to historical profits among its peers.That mirrors the precipitous growth in profits preceding it. Between 2003 and 2006, the bank racked up $21bn in profits, more than a third of its total between listing and the credit squeeze. Backed by a buoyant global economy, investment banks could buy up, repackage and sell on assets, while deploying little capital and pushing profitability and leverage to historic highs.The standalone investment banking model is being tested as never before. Goldman Sachs – whether by virtue of sophisticated risk management, collaborative culture or sheer luck – has so far weathered the credit storm. Citigroup, meanwhile, even with its vast retail business, has sorely suffered. Investment banks are now focusing on extracting more from asset management and private banking businesses. They have also set their sights on building up their businesses in emerging markets.Such revenue streams cannot fill the void left by securitisation and cheap debt. Wall Street is hamstrung by the need to rebuild balance sheets but, when crisis conditions subside, the regulatory vice will tighten. That will constrain the entrepreneurship and avarice on which banks rely. Bankers will not be allowed to place the big bets that generated the unprecedented returns of recent years. Investors in for the long haul must be prepared for a humbler future.
“Wall Street is hamstrung by the need to rebuild balance sheets but, when crisis conditions subside, the regulatory vice will tighten. That will constrain the entrepreneurship and avarice on which banks rely. Bankers will not be allowed to place the big bets that generated the unprecedented returns of recent years. Investors in for the long haul must be prepared for a humbler future.”@ RedCreek on 2008-08-30 06:49:12Sad but true. It is most unfortunate that when the politicians, bureaucrats and other regulatory priests have allowed the system go to hell due to their lack of responsibility, sentience, eptitude and basic intelligence, (etc.) they always retaliate with an over-kill – until next time.Ho humPeterJB
Even Cramer says the market is manipulated.http://www.youtube.com/watch?v=SptB3STL5rs&eurl=http://alles-schallundrauch.blogspot.com/When mainstream media tells the sheople its all manipulated the market should be dead.
Two Morons: Bush and Saakashvili”President Bush, Will You Please Shut Up?”By PAUL CRAIG ROBERTSThe neoconned Bush Regime and the Israeli-occupied American media are heading the innocent world toward nuclear war. ….I recommend reading this stuff.http://www.counterpunch.org/roberts08132008.html
@Peter JB: “What appears to be happening is that money pools – where they carry no morality baggage (everywhere), is actually creating a “banana republic” situation out of the USA.”Exactly.@ RedCreek: The standalone investment banking model is being tested as never before. Goldman Sachs – whether by virtue of sophisticated risk management, collaborative culture or sheer luck – has so far weathered the credit storm. Citigroup, meanwhile…Sophisticated risk management? Collaborative culture? Sheer luck? Let’s opt for collaborative culture if by that you mean Goldman Sachs controls the finance of the U.S. and is moving to control the finance of the world. Goldman’s operatives control:The U.S. Treasury via Henry PaulsonThe Federal Reserve Bank of New York via Stephen FriedmanThe World Bank via Robert B. Zoellick, former executive vice president of Fannie MaeThe IFC via Robert B. Zoellick (The International Finance Corporation is the United Nations agency that invests directly in companies and guarantees loans to private investors)The Securities and Exchange Commission via John A. Thain transferred to bail out Merrill (temporarily)Citigroup via retiring chairman Robert RubinBank of Italy via governor Mario DraghiBank of Israel via governor Stanley Fischer of CitigroupWhite House Chief of Staff via Joshua B. BoltenThese are just a few of the Goldman people who decide who gets what. Big surprise that Goldman Sachs, as you say, is doing better than the others. Any surrogate, such as SEC’s Chris Cox, obviously is part of the coalition of the willing.
And there’s more on Goldman Sachs’ pivotal position in U.S. banking.It was Goldman under Hank Paulson who arranged collateralized mortgage obligation and sold the toxic waste to investors on a scale of billions – one of the top 10 sellers. As Ben Stein writes in the N.Y. Times: “[G}oldman was injecting dangerous financial products into the world’s commercial bloodstream for years…“The point to bear in mind…is that as Goldman was peddling C.M.O.’s, it was also shorting the junk on a titanic scale through index sales – showing, at least to me, how horrible a product it believed it was selling.” (NY Times 2007/12/02)It should be noted what control of the New York Fed Bank means. The New York Fed has a permanent seat on the Federal Open Market Committee (FOMC) – the top monetary policy-making group of the Federal Reserve. The New York Fed conducts open market operations on behalf of the Fed. The New York Fed engages in foreign exchange operations on behalf of the U.S. Treasury and the Fed, as well as for some foreign central banks and international institutions. The New York Fed stores the monetary gold for dozens of countries.The Board of Governors of the Federal Reserve System in July granted the New York Fed the authority to lend to Fannie Mae and Freddie Mac…Let’s just pick one Goldman alumnus to identify — Stephen Friedman, the New York Fed chair who currently is a board member of The Goldman Sachs Group — what he’s done, where he sits.Chair Friedman is the retired chairman of The Goldman Sachs Group and currently serves as chairman of Stone Point Capital, LLC.He joined Goldman, Sachs & Co. in 1966 and became a partner in 1973. He was vice chairman and co-chief operating officer from 1987 to November 1990, and co-chairman or chairman from 1990 to 1994. Friedman is chairman of the President’s Foreign Intelligence Advisory Board and of the Intelligence Oversight Board. From December 2002 to December 2004, he served as assistant to President George W. Bush for Economic Policy and director of the National Economic Council…
I wonder why there is so much written about the government by those that oppose all regulation ? If the market without government regulation is so great, why not expect the wonderful market to solve all the problems of the credit mess without resort to government action ? Certainly the last 7 years have seen regulation reduced to the minimum seen since 1929.But, of course, he private sector got us into this mess by very unwise decisions. Those decisions, in aggregate, are called “the market”. And the outcome is similar to what happened in 1929 for the same reason, excessive unregulated leverage. Curious that.
Written by Anonymous on 2008-08-28 19:26:41Written by Anonymous on 2008-08-29 22:31:50OK, “Anonymous,” since you’ve gone to the trouble to re-post your fascinating comments in response to mine to impress the world with your self-described “penetrating insights,” I’ll toss you a bone. Here, boy! >SWK made three points about my comparison of Russia’s recent action in Georgia with Israel’s action in the Six Day War:>1. We aren’t talking about Israel.>2. The Six Day War was over 40 years ago.>3. Israel was and is wrong to keep the territory it still holds.>My answers:>1. Now we are, it’s about time somebody broke the silence.Silence? Where have you been? Israel has been condemned roundly for its violations of international law, including its illegal annexation of land, for decades (e.g., Resolution 497 (17 December 1981) declaring the annexation by Israel of the Golan Heights to be “null and void” and calling for immediate rescission by Israel of its decision to do so). From 1967 to 1989 alone, the U.N. Security Council adopted nearly 90 resolutions against Israel, and the U.N. General Assembly adopted well over 400 resolutions against Israel.>2. Irrelevant, other than the fact that Israel still holds that land after so much time makes it a permanent annexation.Actually, I only mentioned that it had been over 40 years as an aside, not as a critical element to any argument I was making. Incidentally, contrary to your apparent suggestion, the passage of time alone does not serve to legitimate an illegal annexation incident to a military occupation. Article 47 of the Fourth Geneva Convention prohibits the annexation of militarily occupied territory, period. There is no codicil to this provision that says, “Oh, but if you manage to hold onto it for 40 years by military force, it’s yours.”Once upon a time, annexation by force was accepted under international law as an adjunct to the right of a sovereign to wage war. Modern international law, however, which developed in the 20th century and is largely informed by fundamental treaties such as the U.N. Charter and the Geneva Convention(s), expressly rejects the right of a state to engage in “free warfare” and “free annexation” and adopts instead the prohibition of violence (see, e.g., U.N. Charter, Paragraph 2, Article 4) and of annexation by the use of force (see Fourth Geneva Convention, Article IV). The latter was really just a codification of what have already become a well-accepted change in international legal norms, as it had already become commonly recognized that annexations during a war or in occupied states were ineffective to vest territorial rights.China, for instance, has occupied Tibet continuously since the 1950s. Although it’s territorial control over Tibet has lasted more than 50 years, China’s domination of Tibetan territory remains illegal. The world community has never recognized China’s claim to Tibet. The passage of time alone cannot cure an illegal annexation.>3. OK, so Russia is willing to be equally wrong and hold onto the territory it has gained.Didn’t your mother ever teach you that two wrongs don’t make a right? Russia should be condemned for any attempted annexation of territory by force, just as Israel and China have been, because it would constitute a gross violation of international law. Indeed, I note that virtually all members of the world community, including countries ostensibly allied with and sympathetic to Russia, thus far have declined — understandably — to join Russian in recognizing the independence of South Ossetia and Abkhazia, which are, and remain, Georgian territory.There is no question that the United States, Georgia, and Israel deserve criticism when they violate international law, but nobody should give Russia and others a free ride when their actions are every bit as egregious and illegal.>,,,I won’t be sidetracked by comparisons to less relevant and much older short-lived annexations made by Hitler.As I have stated previously, I believe the annexation of the Sudetenland by Nazi Germany is a closer parallel to the circumstances of the Russian-Georgian conflict than the annexation of, say, the Golan Heights, the Sinai Peninsula, the West Bank, and other foreign territories by Israel as a result of the Six Day War. In 1967 Israel was faced with a threat of imminent force against the integrity of its own territory, whereas neither Nazi Germany in 1938 nor Russia in 2008 faced such a threat. I don’t mean to say that Israel’s actions in annexing these territories are any less illegal or that they were somehow justified, but merely that the facts are facially distinguishable from those attendant the referenced annexations by Nazi Germany and Russia.SWK
@ bytheway on 2008-08-30 11:50:29>http://www.counterpunch.org/roberts08132008.htmlTake this Counterpunch piece with a big grain of salt. This sort of sloppy, slanted “analysis” — Counterpunch’s self-styled “muckraking with a radical attitude” — is really no different than the sort of fear-inducing tripe put out by the Fox News Network on the other end of the political spectrum. Both Counterpunch and Fox News Network use half-truths and shrieking rhetorical styles to convince gullible members of their audience that they have some sort of special monopoly on truths about which other media sources won’t talk. Baloney.The Wall Street Journal reported this morning that Mikeil Saakashvilli and other Georgian officials remain “deeply disappointed over how little the U.S. and European Union did before the crisis.” Mr. Saakashvilli himself was quoted to have said “It looked like the West didn’t want to get involved.” The United States and Russia are not about to engage in nuclear war with one another over Georgia.SWK
Well I’m sure that God placed those men from Goldman Sachs in such a position of power and authority over us, because they are the kindest and most worthy men to bear such awesome responsibility, and we should trust them implicitly.But still for some reason I’m not quite willing to roll over and play dead yet.
@PeterJB 2008-08-30 00:01:52Technically, not only can the global system can be, er, fixed, shall I say ‘reformed’ (?), without the necessity to enter into the dark side of a demographically induced depression with armed and insane revolution wrought on every corner, and it could be done quite easily,…Greetings Sir from Up Over …How easily?Sincerely,
PeteJB:) That was my weekly rant. I understand that money has no morals. Which is precisely my point. Because money has no morals or ideology, which mean it should never be taken in by mis-information. It is when there is other than economic objectives does money become misleading. In the case of US, the markets should indutibly be discounting the reliability of the doubtful data, not celebrating on a clearly off-print. Another way to look at it is that no one in the market cares where the economy is heading, as long as they can get a sucker in for the day trade. If I were a foreign investor, iI would boycott the market because it is a rigged game. No point getting involved if you know you are going to be taken to the cleaners. It is sort of like playing the tables long term in a casino. The house always win.What the US is risking here with the clearly fudged data is further loss of trust in the integrity of the statistics and economic indicators (if it has not been lost already). Trust lost is hard to regain. That is the last thing you want when you need foreign capital.Being in Asia, we see the hypocrisy of the US in imposing so called free-market principals in Asia during the 1997 crisis. The US actions today is totally opposite of what they tried to implement here. Ironic, and somewhat disgusting. Going forward, the US is losing more than its economy. It will lose the respect and trust of global markets. End of days……
I manage a global program to help developing countries prepare for an influenza pandemic. I am trying to get a copy of NR’s speech from Sept 2006 to the IMF to draw a parallel for governments and humanitarian aid workers in speeches I am making. I could not find NR’s speech on the ECRI web site. Can someone email to me or recommend something. I need it before 31 March. Thanks,
I can’t acces to the 2006 speech!!! Did somebody could? I’d really apreciate if you could help me
I can’t acces to the 2006 speech. Could someone help me?
Dear Sir,I would like to have the Professor Roubini’s 2006 Speech at the IMF about the incoming crisis but I could not manage to find it in the ECRI web site (I admit that after searching for, but not finding, a “button” for “Speeches”, I don not know how to search further in the above web site).Could you please help me?Gratefully,Minas Pediaditakis
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