First again brotherps

Speaking of “off-topic”, blogs and other such stuff, there was an enigma that made Microsoft richer (and Mr Gates), quicker. This was the illegal copying and distribution of Microsoft O/S and other software. If it had not been for this phenomena, I wonder where Microsoft would be today? Be careful what one wishes for and don’t discount that which comes your way too easily.Yes, the arguments consisting of the reasons why, present sometimes interesting debate but more oft are slow, historical and boring. The reasons (of this global economic collapse, that comes without any doubt at all) are well known; what the discerning reader / poster avidly seeks are new insights from the belly of the beast; as you all well know, the bowel and all that hangs off it, consists of as many neurological responders as that which is commonly referred to the brain; the latter being that unused portion of the human anatomy, which you learnt about in high school botany while disecting that frog). The course of evolution is, of course:) to raise stomachs to brains; it’s only basic physics really.Ho humPeterJB

Add to Roubini’s 12, the uncertainty of an election year, which creates wait ‘n’ see paralysis; plus, the wild card of a war breaking-out in any number of oil-important places, plus the posibility that inflation might not be under control, plus the possibility of large bank or i-bank failure(s). oy vey!

Nouriel,Great post. In addition, the torrent of coming bank collapses should really strike fear into the hearts of consumers, decreasing consumption markedly. Nothing seems to capture the imagination of the public quite like a long line at an FDIC closed bank. Plus bank closings will not be orderly as the FDIC doesn’t have the resources to close 700 banks over the next year or two (5-10 banks per week).

“Hyperdebt Strategy of the United States”With absolute respect for your post I must take task and exception with the term “Strategy” you used in the context of the above extract. How can stupid have ‘Strategy’? Sorry, this term is incorrectly used and positioned here, immho, as is evidenced… shrieks of laughter (SOL) and no cigar.;-)>Ho humPeterJB

The recession is here but I think the aftermath is taken as granted, but the us gdp growth will be very under potential as the debt burden will have to be unwind for many years as creditors will be reluctant to lend to a country that looks like a banana republic.

Written by mammon on 2008-09-03 16:24:26″The gist of my argument is that Capital seeks safety and Capital Flight from conflict areas is slowly accumulating.”I agree with your comment. If my preferred candidate Obama should win and help bring peace and a working relationship with a better part of our world, the dollar would no longer have this flight to safety.My point is I see no good outcome.Also,price to earnings ratios of U.S. stocks has risen to more than 25. When will market participants react?hlowe

@ guest 17:04:55 todayThere is a reason I stated Hyperdebt Strategy. Secretary of the Treasury Rubin began to perceive the famous “glut of savings” that was caused by the Central Bank accumulation of dollar reserves after Asian Crisis and figured that this could be channeled to the U.S. for productive use.The problem is that it was not channeled for productivity and was wasted on financial speculationin inflated assets. Greenspan also stated that the “glut of savings” was a cause of the money flow into treasuries and GSE debt. Just because a strategy caused unintended consequences does not mean it is not a strategy.I do agree that it was a foreseeable consequence that the financial Masters of the Universe would pounce on the glut of savings and try to corner the Mortgage Market of Securitization that used to be the realm of the Savings and Loan Industry. They took the idea to the ultimate unregulated extreme, and here we are sitting on the largest Ponzi pyramid in history!@guest 17:24:01You caught the essence of my comment! This World Instability is a nighmare and a Dollar Crisis would also be a nightmare. We are now in a “fork in the road” with no good destinations.

Anonymous on 2008-09-03 19:17:30 – Any idea about commercial real estate? I am holding the ultra short real estate and getting crushed in the short term. Any idea of if I am right waaay too early or just dead wrong?I think it fair to say as a whole, this group (we) did not consider the ferocity with which the status quo would hang on by it finger nails. You name it: stock market, bond market, precious metals, and just a dribble of bank failures. But just wait for a couple more months. After the election, my guess (for what it’s worth) is that the damn will burst.

anon above,if i told you, youre going to lose 30-60% of your investment value and that the probability of the outcome is about 80-90%, plus the time to recover the losses will take at least 5 years, what would you do?thats why the rumours (e.g.Lehman) are so effective, its not like they carry much weigh, its just what people wanna hear..

Why believe your LYING eyeshttp://wakeupfromyourslumber.blogspot.com/2006/02/why-believe-your-lying-eye_113912330468729378.htmlWhen you can believe the LYING media, instead.

The nation’s unemployment rate dropped to a 4 1/2 year low [and] employees’ average hourly earnings climbed to $16.41 in January, up 0.4 percent from December.Are these people on crack? Don’t they read the news?* Ford lays off 25,000,* Kraft cuts 8000 jobs,* Dell hires 5000 in India,* GM trims $4B from budget,* Visteon shifts resources offshore,* OfficeMax closes 110 stores,* Toys R Us closes 75 stores, lays off 3000And this list is by no means exhaustive!Either these people are hopelessly stupid, or they think that WE are.”The economy fired on all cylinders in January,” said economist Sung Won Sohn, president of Hanmi Bank.”There’s no question we’re getting back to better days for job creation,” said Ken Mayland, economist at ClearView Economics.Payrolls grew by 193,000 in January, up from 140,000 in December.Yeah, right. Tell that to the 24,175 applicants who were turned down by Wal-Mart last Friday!

The amount of job applications at Wal-Mart is referred to here, among other places:Wal-Mart gets 25,000 applications for Evergreen Park storehttp://www.chicagobusiness.com/cgi-bin/news.pl?id=19286

The new Wal-Mart Stores Inc. location opening Friday in suburban Evergreen Park received a record 25,000 applications for 325 positions, the highest for any one location in the retailer’s history, a company official says.

Above article attempts to spin the large amount of job applications to something positive but I think it is indicative of the sad state of the U.S. economy rather than the greatness of Wal-Mart as an employer.

guest 2008-09-03 22:28:44,a lot of other stocks are in YoYo mode too…relax.. anyway why quote MBI and ABK, better mention Bearstearn

Wait for this Friday. The birth/death model adjustment will likely blow you away, well over 100K added. Result, it’s that time of the year just before elections that yes, jobs will be materially higher, possibly close to 0 lost. With the recent GDP figures amongst many others, I really am expecting this. It seems the pattern these days. Very much aware that sounds incredibly cynical, yet the more counter-intuitive the figure is, the higher the probability is of actually seeing it in the headlines. Add to this, a drop in the unemployment rate. Watch for it.

If the consumer is on his deathbed, please explain the amazing strength of the retailing stocks.I really don’t understand.(look at RTH, WMT, TGT, HD, SHLD, etc…)

Latest from Gross is out. He is still worried about deleveraging/asset deflation/debt liquidation.http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/Investment+Outlook+Bill+Gross+Sept+2008+Bull+Market.htm

Please forgive me. I agree with all NR has said here which he has said many times both here and in the media. What I want to know is ……is it really going to matter to the markets???? So far, it has not……TPTB have done very creative things to keep the markets from tanking more than a token few hundred points MAX! Then, they pump the media from multiple directions to goose things back up. Unless we have a cataclysmic event that shakes peoples mindset, I think this will continue for years. Remember, TPTB have shown they will do whatever it takes to keep the markets from tanking.NR keeps saying this will happen and that will happen. well. what if TPTB change the rules of reporting (like they have done in the past). The average investor will never know the truth.I would like to see what NR has to say about these things from this point of view.

what ever happened to separation of state and church?http://news.yahoo.com/s/ap/20080903/ap_on_el_pr/cvn_palin_iraq_warUnited States sent troops to fight in the Iraq war on a “task that is from God.”hope American will not be so XXX by voting for Republican candidates. This is nuts. America will be doomed if church extremists are elected into office.

don’t get me wrong. I’m sure we are all worried about our financial position. I just don’t think Gross should get the Bloomberg soapbox to spout off unless others with dissenting views get the same. It seems everyone is trying to keep the bubble inflated instead of doing what is right. Let the “free” markets deal with it.

I’m currently reading the book “the creature from Jekyll Island” about the creation of the federal reserve. It is a very interesting read and I will post a summary when I’m through. It’s 600 pages and I’m half way there…..:>

US stocks in free-fall!

Standard & Poor’s announced yesterday that the spread — or the difference between the rate for a Treasury instrument and a corporate bond of equivalent maturity — on speculative-grade bonds widened to 796 basis points, outside the 775 to 790 basis point range these issues have traded within for most of the year.Signs used to advertise additional details on for sale signs are seen as Jacques Brevery puts out signs May 27, 2008 in Miami, Florida.Spreads on securities rated triple C, the bottom rung of the credit-rating ladder, just hit a five-year high. The speculative-bond spread, according to Diane Vazza, head of global fixed income research at Standard & Poor’s, is up from 757 basis points at the end of July and 366 basis points a year ago.Meanwhile, spreads on investment-grade debt have also widened to 283 basis points, 88% higher than the five-year moving average and 39% above the beginning-year level. The spread on investment-grade debt through August was 272 basis points, versus 165 basis points in the year-earlier period.Spreads are important because they indicate risk: The wider the spread, the more risk associated with the corporate bond, and the costlier it is for companies to issue debt. Rising credit spreads are just as damaging to corporate America as higher taxes, and are confounding efforts by regulators to supply liquidity to banks and borrowers.

Looks like a global sell-off in everything with money going into the USD (and Treasuries) and the YEN! Are the boys still intervening in the currencies?

I agree. The USD and Yen are up big while all other currencies are tanking.

@randy on 2008-09-04 09:30:16

that means bear stearns…..should have failed…If they were worth it..someone would have bought them…

Towards your point as well as other postings with the same frustration, this article was published on Aug. 28, 2008. The Bear Stearns issue is alluded to near the end, but the first part of the article concerning the currency and metals markets is also relevant to posts in previous threads.From MISH: Conspiracy Theory PsychologyOR => http://globaleconomicanalysis.blogspot.com/2008/08/conspiracy-theory-psychology.htmlBest …

Professor,Great post. You are correct in your call for the demise of the US consumer. I have the fortune of working with people in all income brackets and here is what I hear them talking about on a daily basis:- The lowest earners are tapped out. Not only do they not have money for things they don’t need, they have difficulty buying groceries. One co-worker has now become a borrower of cash on a regular basis from other employees. She borrowed $20 from me not long ago for gas money to get home after work. She is among the worst off – she’s stressed, broke and depressed. She and her family are in serious trouble.- The middle earners have cut back. They have invested in pellet stoves, wood stoves and various other alternatives for heat this year. Some have ceased investing in retirement plans to keep more cash in their pockets. Many have made cuts in entertainment spending, dining out and frivolous purchases. For now, just the necessities are being bought.- The high earners are different. While some have made adjustments to their lifestyles, many have thus far been immune to the pain. They have no idea about people who are struggling at the bottom. A few of the docs I work with are still taking several expensive vacations, but they have cut back on length of stay. That’s their impact though – so far. Prices at the pump have not moved the high end folks to buy smaller cars, nor have many of them jumped into alternative energies. Many are looking, but not in a hurry to change anything just yet. These are the folks who still have access to credit.All of the above categories will be affected by the demise of the credit industry.The high earners who have access to easy / cheap credit will have to become more creative like those below them. They had better have money on hand, or they will become just like the rest of us. The middle earners know they can cut more, but have some idea left of a lifestyle they want and have been reluctant to give it up completely. The low end folks will be the ones who bear the largest painful brunt of this disaster.The talking heads can bloviate all they want. I am down here, knee deep in reality, and I can see what is happening. The view from down here is very different than the view they see. I doubt they talk to the little people, so for them, life isn’t really that bad…….yet.

What will you guys do if:A) Obama is elected presidentB) McCain is elected president

Nouriel hasn’t justified his claim for US improvement after a “recession”. How does Nouriel reconcile his timeline for the erosion of BW2 with a double-dip “recovery”? This consumption contraction is near term but inflation a persistent and longer term problem.The collapse of dollar hegemony will be devastating blow. Energy constraints and financial chaos will weaken the US position and eventually the US military. Nouriel does not believe US can sustain its reach for more than a “couple decades”, but does he expect China, Russia, Venezuela, Iraq, Iran, etc. to wait that long?So either his position on US recovery is incoherent or he needs to fill in more details.Darkie

sorry everyone. as you can see i can’t type!

PPT gonna be REAL busy in the next 40 minutes…11200 MUST hold or else…

THE SINKING SHIPSept. 4 (Bloomberg) — The U.S. government needs to start using more of its money to support markets to stem a burgeoning “financial tsunami,” according to Bill Gross, manager of the world’s biggest bond fund.That’s right throw some more lead on that (soon to resume) sinking ship, the US dollar. Gross is looking for a bailout for his bond funds, and he and the rest of the crowd with their hands out will get what they want. But be careful what you ask for, you might get it. He and the rest will get their requested bailouts and our countries currency will appropriately sink in the process as we enter the netherworld called hyperinflation. Down we go, down we go….

First the Asians blackmail Treasury to backstop Fhoney & Freaky…Then Pimco’s Gross blackmails for add’l banking system bailouts…Strong hands to take from weak hands. Weak hands? taxpayers, retail investors, small fry. Heart of the Republic to be ripped out to feed the hyenas and ravens of Wall Street. Just watch! Financial tsunami!! — one way or the other it is coming. Large bank failures or taxpayer revolts…it is gonna get ugly before it gets remarkably bleak.http://www.cnbc.com/id/26547623

@randy on 2008-09-04 14:04:39I think that Alessandro has interpreted MISH precisely. For the sake of clarity, I believe that in his attempt to explain the Psychology of Conspiracy Theory, MISH has made the case that many people confuse conspiracy for manipulation. The JPM/BSC example, allows MISH to further implicated denial and subsequent need for blame in the whole warped process.Here is an excerpt:Of course there are conspiracies and manipulations. I have listed many of them.Blatant Manipulations* Term Auction Facility TAF* Primary Dealer Credit Facility (PFCF)* Term Securities Lending Facility (TSLF)* SEC rule changes options expiration week* Selective enforcement of naked shorting rules* Discount window changes in options expiration week* Shotgun marriages arranged by the Fed* The bailout of JPMorgan / Bear Stearns…So, people take credit for everything that goes right, regardless of how lucky they might have been, while absolving themselves of blame for everything that goes wrong, no matter how convoluted a theory it takes to do so.Cheers!

(cont’d) from MISH

Thus, Bear Stearns is an example of an outright conspiracy, with public perception twisted a complete 180 degrees from reality! The Bears Stearns manipulation happened in plain sight and people still got it wrong as to what happened and why.

Speaking of “Be Careful What You Wish For”BY CHRIS PUPLAVAFor those interested in the dollar/precious.http://www.financialsense.com/Market/wrapup.htm“The US dollar has been in a secular bear market since 2002 and we are currently seeing a cyclical bull market counter trend bounce as the rest of the global economies recouple with the US, which is likely being discounted in the currency markets currently. As foreign central banks bring down their interest rates they will near the end point of their easing as our central bank did earlier this year. The point when foreign central banks end their easing programs and our Federal Reserve may even raise interest rates to combat inflation will likely be discounted in advance in the currency markets, and mark the next leg down in the secular dollar bear market.”

Bill Gross is one of the most respected financial experts in the worldChina is buying USA bonds – so what’s left?Keep it simple:the US Government buys stocks and real estate and F and F and Banks Too Big To Failthe guaranteed support of the US Govt will obviate the need to do soall assets will bottom and rise!

BANK CHECKMATE?This may have been the biggest bomb of the day. Maybe the time has finally come when banks will no longer be able to find money. Supportive of this notion is the Wells Fargo debt offering that was done today at over 10%.”Pimco’s legendary bond investor Bill Gross said during “Street Signs” Thursday that his firm would be staying out of any and all bank offerings for the foreseeable future.Banks the world over have raised $400 billion in capital, Gross said, and may need to raise much more. The problem, though, as yesterday’s $1.5 billion preferred offering at Wells Fargo [WFC 29.67 -1.34 (-4.32%) ] showed, is that the institutional buyers are full, leaving only small investors to pick up the slack.As Gross said, “There’s only so many billion and a half small investor bank capital deals that can be done from this point forward.”So if Fannie Mae [FNM 6.42 -0.90 (-12.3%) ], Freddie Mac [FRE 4.95 -0.43 (-7.99%) ], Citigroup [C 18.30 -1.31 (-6.68%) ] and Merrill Lynch hold offerings to raise capital, Gross and Pimco will be sitting them out.This puts Henry Paulson and the Treasury Department in position to have to act. Washington has been holding on any kind of bailout, hoping that buyers like Gross will keep struggling banks afloat. But by refusing to take part, Gross, the biggest bond buyer in the world, is in effect calling the Treasury’s bluff.”http://www.cnbc.com/id/26547623

Did I mention stupid?It seems that big dick (cheney) has a strategy a’fore he leaves office and that is total middle east, south-west Asian and sub-continent instability with what he t’inks is russia on its back foot. Add to this multi-big-time telco mergers(re) blessed by alfred e pneumen:) of what-me-worry fame and fotune and you septics as well as we foreinors, appear to be, in. for some turbulent times; drones abound – keep you battery out of your handphone and dig deep into the earth as you ain’t invited to thum big-deep-bunkers of the elite (ensuring the continuance of civilization) – Ho ho ho – SOL.Now big-dick thinks russia’s credibility at stake but I say, ‘big dick, you and your lot have the proven integrity of a fleet of vegetarian sharks and wethinks that Mr. Putin has more integrity, credibility, prowess, skills in the various spectrum of the socio-economic arenas than you lots of burnt out rats ever considered possible’.Now McCain lady running mate obviously talks to God too, just like George – Wow, the USA is now the favoured race – how convenient. Did the septics misplace the Semitics of Israel and thereabouts – then thar ‘chosen folks’? Or, is it just all the same game?Project for the New ‘Merican Century (PNAC) eh? Big dick should have been Pope!SOLHo hummmmm – we are now agoin towards resonance..PeterJB

@MedicThank you for supplying that number. I believe that your post taps on very relevant socio-economic issues, and the following excerpt from your earlier post has inspired the questions that follow:

The high earners who have access to easy / cheap credit will have to become more creative like those below them. They had better have money on hand, or they will become just like the rest of us.

Concerning the high earners for a moment, how leveraged (on average) do you think they are?Are we talking 2-SUV’s for the husband/wife plus 1-2 more for the teenage/college age kids, plus the private school tuition, etc. type of life?{I am not sure of the geographic domain that you are referencing. I assume USA, but not a Tier 1 metropolis.}I am also wondering if the folks that you categorize in the middle earners segment actually have greater positive cash flow than the higher earners, and if access to credit facilities is actually working against the higher earners?Best…

“What will you guys do if:”A) Obama is elected president : WHY HIM? BUT WE MAY CHANGEB) McCain is elected president: WHY HIM ? BUT WE ARE STABLE

Is there some sort of a multi-government operation going on pushing some currencies up (and some down) and oil down?

Stuart,they are telling US they want out (gotta read between the line).. IT IS OVER…of course they knew the impact, they were willing to participate as long as it benefitted themNow the joyride is about to end

@ Phil T;The average higher income folks are about what you have assumed – perhaps for different reasons though. One physician I know has nearly $200K in student loans and another owns three homes in another state that may soon become “jingle mail” homes. Yet another is a staunch conservative and has money in the bank, owns his home and is thoughtful about expenditures.As for the middle folks (of which I am one), cash flow is tight. I have one vehicle I own and one I make payments on, some debt and a reasonable mortgage, but my wife and I had another conversation tonight about where we can cut to save some money. We have already stopped dining out, buying things we don’t absolutely need and we are driving MUCH less than we used to in order to save on gas.We do live in the Sates – in Maine.

@Guest on 2008-09-04 19:47:40From Chuck Butler in the Daily Pfennig a few days back:”Finance officials form the U.S., Japan and Europe, in mid-march drew up plans to strengthen the dollar following troubles at Bear Stearns.” The story which originally appeared in Nikkei English News went on to report that: “the intervention designed by the U.S. Treasury Dept. Japan’s Finance Ministry and the European Central Bank, called for the central banks to purchase dollars and sell euros and yen, with Japan providing the yen needed for the currency swap if the greenback’s value dropped significantly.The three groups, which considered making an emergency statement through G-7, did not stipulate a specific exchange rate for the potential intervention, nor did they detail the amount of money to be used. So… Now we know! There was no way the dollar turned on a dime like that without something like this happening… The fundamentals are so anti-dollar strength, and yet the dollar was gaining strength… Well, we know that the Bank of Japan has a treasure chest of yen that they have collected over the years… And they have an even bigger treasure chest of dollars (most of it held in dollar denominated Treasuries), but now they have even more dollars! I bet they are just happy as pigs in slop to own all these dollars!”

Randy: “Bill Gross is more worried about his financial position that anything else IMHO.”No kidding. There was a time when it was worthwhile to read what Bill Gross had to say. That time is gone. Now all he’s doing is talking his own book. And if that totally screws up America – apparently he doesn’t care.Comment: “Looks like a global sell-off in everything with money going into the USD (and Treasuries) and the YEN! Are the boys still intervening in the currencies?”Foreign investors are dumping Fannie and Freddie, and buying US Treasuries. Fannie and Freddie are doomed, and countries that invested billions in their bonds will lose their shirts. By the way – that’s also part of the motive for the intervention to boost the dollar. If the dollar sinks and the GSE bonds tank, then countries like China take enormous losses. So it’s a game they’re playing.Trouble is … the central banks are now a long way behind the curve. They can’t stop the system from going insolvent.PeteCA

@ GLOOMY on 2008-09-04 19:22:10Thank you very much for that link. Remember MA’s cryptic post a while back about trouble brewing in a “high savings” society that was going to get very ugly?Sounds like there is big trouble in China. The central bank needs capital? The stock market has done a cliff-dive. Their economic indicators are suddenly worsening. This is going to get interesting.Regarding the possibility of them dumping Treasuries or agencies in favor of higher yielding assets I think they are on the horns of dilemma. They have to do it very slowly and quietly or they put their export based economy and remaining dollar holdings in jeopardy. Besides, where else are they going to put their money? Stocks? Real Estate? Wealth is being destroyed left and right. In my opinion there is no true safe haven. However, I would enjoy it very much if they decided to dump dollars for gold . . .Regarding the strong moves in the dollar and yen: there is a lot of deleveraging going on. The yen carry trade is unwinding again – investors (hedge funds) who borrowed yen at insanely low interest rates (and dollars also at low interest rates) to invest in higher yielding stocks or currencies are unwinding their trades. They are selling their FX, commodities, and stocks and buying Yen (and dollars) in order to unwind the trades. When the stock market heads north again the Yen will weaken and give way to the underlying strong dollar momentum.It is interesting that the Swiss Franc has not strengthened along with the Yen, as has been the recent correlation.

well makes you wonder aint it…with the colossus problem we are facing now, we are still not (OFFICIALLY) in a recessionwhy the heck was it so much easier to get into 1 previouslyyou guys have wondered about that? is it taboo to discuss??

Written by P1AQL on 2008-09-05 01:34:42:Europe is toast.Some in Europe may be toast like those Alpha buyers that mimicked the reckless American consumer behavior as described above in “the 12 Reasons Why the US Consumer is in Serious Trouble and Faltering”.The others are doing rather well. Perhaps, some of them will have to change from Mercedes-Benz to one of the many fuel-efficient cars available in Europ, but that wouldn’t be a big problem, I guess. Not so many foreclosures in Europe due to less reckless consumption behavior. Many of them prefer a modest joy of living above the meaningless shop till you drop mentality that an obtrusive industry is trying to feed them up with. Less debt slaves in Europe, I think. Most of them will continue enjoying their modest morning toast without worries about the Wall Street greed and failure.

P1AQL: “The merchantilist Chinese will fight Renminbi appreciation tooth and nail to ward off a revolution – they’re good at that.”What is China economy falters for real? The yuan will not look so strong after all. It might even… fall?And what will the PBoC do in that case? Sell dollar reserves, that is reserve are made for, be sold to prop up a currency.Do you get the base of the dumb USDCNY monetary cycle?Weak USDCNY -> China buys tons of USDCNY -> Chian buys treasuries with dollars -> dollar rates fall -> USDCNY even weaker -> iterateNow look at it in reverse: strong USDCNY -> china sells tons of USDCNY -> China sells Treasuries -> dollar rates shot higher -> USDCNY even stronger -> iterateGuess where the rate of your ARM loan would be headed?

Alessandro on 2008-09-05 03:10:09 asked:

Guess where the rate of your ARM loan would be headed?

Once you’re done with the fixed rate tenure of an Hybrid ARM, you’re on a floating rate – could be a spread to short Term Treasury products such as 1 year CMT i.e short end of the curve. The Fed has reasonable control over the short end of the curve. So if Ben prints like nuts by buying up lots of short term FI products to target an ULTRA low Fed Funds rate, rates on now floating ARMs would remain low.http://mortgage-x.com/general/indexes/cmt.asp and navigate to “1-Year Constant Maturity Treasury index “. I quote:

This is the most widely used index. Roughly half of all ARMs are based on this index. It’s used on ARMs with annual rate adjustments. It is also referred to as the 1-Year Treasury Bill

P1AQL.

@P1AQL”By USDCNY do you mean USD/CNY i.e. 6.8445?”Right.”What does ‘dollar rates’ mean? Only the 10-year bond yield will fall. i.e. LONG end of the dollar yield curve will fall.”All US rates, long and short, have benefited (have been lower than they would have otherwise be) from the buying binge of foreign central banks over the last several years.”a stronger dollar. But this is exactly what the Financy Ministry in China wants – to continue with the exports engine! Why should they sell USDCNY i.e. sell dollars? Why would they want to kill the exports engine by selling dollars?”Look further than that. If China slows down for real the yuan may easily fall more than government official would like and that might even ignite a flight of the monster speculative capital out of China, making the fall faster. Remember that China needs to buy natural resources and they secured huge dollar denominated contracts (i.e. dollar future liabilities). If the dollar goes up they will meat their dollar liability by selling dollar assets.Contrary to what seems your belief economy is about real stuff. Paper counts only marginally.

@P1AQLBTW: this is how a currency crisis of an ex-strong-export country looks like:http://business.timesonline.co.uk/tol/business/economics/article4648549.ece

@Alessandro on 2008-09-05 04:44:15 wrote:

If China slows down for real the yuan may easily fall more than government official would like and that might even ignite a flight of the monster speculative capital out of China, making the fall faster. Remember that China needs to buy natural resources and they secured huge dollar denominated contracts (i.e. dollar future liabilities).

I find this contradictory. Why would China buy more natural resources if China slows down? Why would there be ‘a flight of the monster speculative capital’ if China has huge reserves and surpluses to boot? It just doesn’t make sense. The very reason the Asian tigers built up large reserves was to avoid against the black swan of capital flight that the Koreans experienced in the Asian Financial Crisis.I am sorry for harping on this but I can’t find one good reason why China would be offended by a highly depreciated yuan. The Finance Ministry cares less about inflation than growth, the exact opposite of what the Central Bank in China wants.P1AQL.

I’ve been travelling a bit, but have managed to post my Friday blog just now:Weaning the banks off the Old Lady’s teat

@ P1AQL on 2008-09-05 05:13:36With respect to Alessandro, I have to agree with your question since China has heaps of that US funny stuff to get rid of: -BUT, as I posted some time back, I strongly suspect that all is not right in the Central Government [of China], or, I believe that there is some internal crisis / division / ? happening; whatever, China is now an unknown! This unknown concerns me very much and I think that whatever it is, it will soon appear.I also suspect that it may not be viewed as favourable to the USA.Ho humPeterJB

U.S. Payrolls Fell 84,000 in August; Unemployment Rate at 6.1%http://www.bloomberg.com/apps/news?pid=20601087&sid=aqO7vRxRSJ_4&refer=homeThat’s a clear signal, methinks.

Game of Chicken?@Alessandro, thanks for the link on Korean Won problems.————————————————@All and Prof. Roubini,It would interesting to discuss game theory. Bill has asked for ‘new balance sheet’ support. Alternatively, can capital be raised by liquidation of some ‘other sovereign balance sheet’? After all, some of the sovereign wealth funds have been just saving and not putting reserves to productive use since they don’t have investment banks to match investors with entrepreneurs.Now if the KDB does not help Lehman, how would the Koreans feel if there is no one later to support the Won? Politics drives Economics. Bear gave no quarter during the LTCM bail-out; it received none in return this time around. Lehman and KDB (and the Korean Won) seem to be in the same situation now.———————————————-@PeterJB, China has effectively outsourced central banking to the US. Witness the fact, that they used a blunt instrument of reserve ratios due to lack of central banking experience and expertise compared to the combination of repo rate and reserve ratio hikes undertaken by the Reserve Bank of India which has a long history of central banking given its British heritage.So I agree that with flaky financial institutional infrastructure, China will find it interesting if its economy hits a major bump. More like a Meteor hit?Enjoy the ride!Best,P1AQL.

“Regarding the possibility of them dumping Treasuries or agencies in favor of higher yielding assets I think they are on the horns of dilemma. They have to do it very slowly and quietly or they put their export based economy and remaining dollar holdings in jeopardy. Besides, where else are they going to put their money? Stocks? Real Estate?”A good point. I’ve wondered this before, and I suspect that China has several “off-ramps” for their dollar assets. You’re right, they have to do it slowly so as to gradually transition their export-dependent economy to a big domestic demand-driven one, thus avoiding the blunder that sank Japan after the Louvre Accord in 1987– when the Japanese allowed their currency to appreciate too quickly without developing enough domestic demand, with Japan basically being played for a sucker by the USA with our own dollar problems. (Summary at http://blogs.ft.com/wolfforum/2007/02/history-holds-lhtml/ )I think the key is for China to make sure they get real, tangible goods for their savings and dollar holdings rather than worthless US Treasury documents. Several ways to do this:1. Ramp up investment of China’s savings into domestic infrastructure, education, technology, venture capital and environmental improvements. This is probably the best approach, though it’ll take a few years to get it fully ramped up.2. Commodities (fuels, minerals, precious metals)Inflation has hit different dollar-denominated commodities to varying degrees, and China could still use much of its dollar stash to soak up and store up at least some commodities that haven’t appreciated too much.In fact, if the price of oil really does plummet (due, say, to the presence of a globalized recession), then China would be very wise to buy up large quantities of oil and accumulate a decent-sized oil reserve while the price of low, and before it goes back up again. They’d be remiss not to do this and as always, the best time to prepare for a rainy day is when the sun is shining bright.3. Using China’s dollar-denominated stash to get real dollar-denominated assets in the USA and dollarized countries. Despite the Unocal flap, there’s ultimately not much that even hyper-protectionism could do to thwart Chinese ownership of some ships, ports, factories, mines, even land, since we depend on them so much. Also, Ecuador, Liberia, Panama and some other countries use the dollar, another place that China could shop for real goods depending on inflation levels. Plus, the yen and some other currencies haven’t appreciated too much against the dollar. China could indeed exchange many of its dollars for yen (in anticipation of yen appreciation) or get real goods with e.g. pesos, reals and rubles.China in any case needs to diversify a lot more. Hitching China’s economic wagon to the USA would be incredibly stupid at any point, especially now. They need to have their assets in multiple places.

what we need IMHO is for the markets to really crash, for china, japan, and russia to say “no more” to buying the toxic crap from F&F and dump what they have on the market. This will begin the cleansing process the markets needs to begin to function rationally again.However, I do NOT think this will ever happen unless their is an exogenous event that is out of TPTB control like another terror attack, someone starts a war with IRAN, etc

PPT! PPT! PPT! PPT! Dow should be below 11,ooo right now and odds are we go green today WHAT A JOKE. THe household survey showed a loss of 492,000 jobs last month!!! 492,000!!!

If China is still buying U.S. treasuries, I suspect that is not so much just because they “have to”, but because they are also concerned about large-scale imbalance.

I repeat: How does the collapse of BWII relate to an expected US recovery in 18 months? What about inflation and changed energy conditions?Is “Dr. Doom” too optimistic? The timelines don’t match up.Darkie

I believe the markets will end green today. There is not enough pressure on the downside today. All this bad news and we’re at about 100 points down. I’ve seen that amount get wiped out in 5 minutes in the past.Mark my words………..we’re green today. Unless, of course, Israel bombs Iran or something……

LOLOL Stocks surging UP now!!!

DOW ALMOST GREEN!

I’ve read that there are several primary dealers that the FED and the treasury “use” to place their orders in the markets. I would guess since Goldman pretty much controls the FED, that it’s Goldman and of course, JP Morgan. Did you know that JP Morgan himself was a front man for the Rothschild empire back in the day?

@Guest on 2008-09-05 10:54:11my take of Miss America’s take is that there’s no real coordinated effort, but many synchronized moves between big players that try to do the same moves all together, each one for his own benefit. He described is as “everybody going in and out of the pool at the same time”. You just need to know which pool is the next one. GS is the one of the heavy splashers (Hank anyone?) so the others naturally follow them.

Someone is selling silver digits…http://www.kitco.com/charts/livesilver.html

I will put my Jet on e-bay

I mean peter jb

Guest on 2008-09-05 13:44:36Good news are for wimps only.Get a reality check yourself. Otherwise I can recommend Russian Standard Vodka, vely good!

More big numbers:The total amount of outstanding derivatives in the world economy has reached a guesstimated $800 trillion, about 15-20 times the annual world GDP. Much of it has been financed through the yen carry trade. That is why this is the No.1 financial news story of the day. To top that, the Dow Jones would have to lose 20% in one day.http://theautomaticearth.blogspot.com/2008/09/debt-rattle-september-5-2008-cement.html

This just about sums up the lunacy (where are the fundamentals?):U.S. Stocks Advance as Rally in Banks Overshadows Drop in Jobshttp://www.bloomberg.com/apps/news?pid=20601087&sid=apcAFrA5Cg.A&refer=home

“That guy peter bj [PeterJB] is the most depressing person on here. Peter, try therapy@ Guest on 2008-09-05 13:44:36Mr. Guest: FYI and IMMHO, I am neither depressed nor am I intentionally depressing; I am indeed mostly happy and well balanced and my intention is to bring people out of Plato’s Cave so as to gaze on the magnificent future we could build en route to the stars.How?My attitude is focused on reality. I see things as they are. I do not believe that these elected and non elected ones are going to do me good en automata by making my everyday Xmas, nor do I believe that God is going kiss it all and make it better. No ughhamms here.God is indeed great and gives us all the equal opportunity to learn our lessons which cannot be learnt in warn, comfortable, dark and dank milieux wombs or suckling on the pap. However, being suddenly and unexpectedly, ripped off the teat and thrown out into the cold; raped, pillaged and generally and specifically removed from your preferred place of dreams and sweet candy, is depressing; which obviously you have yet to experience or perhaps most likely, consider.OTOH, in becoming human, ie sentient, or Homo sapien sapien, which scientifically you are described as being innately as, at least, potentially as, then the veils of ignorance are lifted and that kind, warm, gentle atmosphere is replaced with invigoratingly cool breezes, that bring the future and mental stimulation, good health and good cheer; IOW, tomorrow.I respect your rights to remain on the teat, but out here, is reality; it is good and indeed wonderful.Where ‘waiting to die sucks, like paying taxes for morons to kill people they have never met and will never know! This is your norm.No man can be trusted: This is humanity’s greatest strength.The denial of this fact is humanities greatest weakness.Ho humPeterJB

@ MedicYour post suggesting that the ER might fill up with people seeking warmth reminded me of the real reason Britain has so many pubs. Until Thatcher most houses in the UK did not have central heating. As late as the 1970s only about 30 percent of homes had central heating. The pubs were essential to the community as a warm place to gather and socialise in the days before central heating and television in the atomised individual home.Perhaps a sharp and lasting recession which puts heating fuel out of reach for many will promote the revival of pub culture. Worse things could happen. Pubs built communities, shared culture, common cause.

“This bright new system, this practice in the United States, this practice in the United Kingdom and elsewhere, has broken down. Growth in the economy in this decade will be the slowest of any decade since the Great Depression, right in the middle of all this financial innovation. It is the most complicated financial crisis I have ever experienced, and I have experienced a few…Changes are going to have to be made” to the global financial system.”-Paul Volcker, former Federal Reserve Chair, 1979-87Allow me, for just one moment, please, to scream out loudly, that the most dangerous moment in the whole socio-economic game is rapidly skidding across the tracks to a corner, near ——–> You.”Changes are going to have to be made”.My Warning: Age old words Yes, but necessary words to consider for that which certainly will come and soon.Whankers and bureaucrats and politicians, all of which were once categorized under one class termed “Priests” (” a most troublesome group”) circa 4 millennium before present, will now tend to KILL, LIMIT, CONTAIN and otherwise destroy the spirit of man by bringing the global economic, financial and monetary system, ie the free-market economy, under their most tiresome, boring and grey (I hope you get my point, here) and incompetent control in applied superficial “black-holed” (where the Sun don’t shine any more) economics where nothing moves and everything is taxed until do us Part, er, death.This situation must be avoided! At all costs!Fixing the current system merely needs some minor fundamental changes as I have already outlined whereas giving Ben or Hank or George and that ilk, free reigns to preside over decades of depression will be like burning off, that which has already been razed, to ashes!We need to go forward so dump Obama and McCain, the FedRes and the CB system and let’s move on:”To Infinity and Beyond”. Your mileage will vary”.Vivre la Revolution >Ho humPeterJB

@ LB

Perhaps a sharp and lasting recession which puts heating fuel out of reach for many will promote the revival of pub culture. Worse things could happen. Pubs built communities, shared culture, common cause.

Additionally, Sweat Lodges might accomplish the same altruistic points and provide health benefit!@ MedicThank thank you for your kind words earlier … as far as the Moose comment goes … it seems that many have O.D.’ed on Palin !Cheers !

@mrskeptical

- by supporting the dollar/supress the yuan in the past, the foreign central banks have poured a pile of money/yuan (ie austrian call forced savings) into their banking system.. and via the fractional reserve banking, a pile of credit on top of credit is created…

To be more precise FCBs have printed tons of money and have poured it in the hands of the exporters (indirectly via the FX manipulations). The exporters have then channeled the money into the banking system. BTW this is the modus operandi of a CB, print money and give it to a friend so he can buy more than it produces. The friends usually are banks, but in the case of FX-manipulators they are the exporters.Be careful, this produces inflation (lots of it), but not forced savings.

- the central bank will try to sterilise the liquidty (but according to Prof Roubini, in his May 2007 Asian paper, the sterilisation is hardly effective at all)

All FX sterilized-interventions are completely ineffective long term. Since you cited the Austrian economics it should be easy to see why: keeping the output of an economy fixed (or growing) the only long-term way to lower the value of a currency is growing its supply, that is, printing more of it.As an additional mid-term strategy the FCBs also hold the dollars they acquire in the FX and “invest” them in “safe” bonds like treasuries and agen… ok, let’s say just treasuries. This is nothing else as a deferred payment denominated in dollars. This is only a mid-term scheme because you can’t accumulate FX reserve forever. Even if China is attempting to prove the contrary.This is where forced savings come in. The FCBs are printing moeny (i.e. stealing wealth from every worker and saver) and lending it to the US. The wealth is forcibly saved from Asia and transferred to the US under the promise of future wealth.

The British Museum in London has a great exhibition on Hadrian, who became emperor of a decaying Rome and went to give it temporary revival – one of the things he did was withdrawing his troops from… Iraq.A Continental European newspaper recently wrote an article about the exhibition and compared Rome with the USA and Hadrian with Obama.See http://www.britishmuseum.org/whats_on/all_current_exhibitions/hadrian_empire_and_conflict/videos_about_hadrian/hadrian_a_new_emperor.aspx

from NYTimes!:BREAKING NEWS 9:01 PM ET: Government Preparing Plan to Seize Fannie Mae and Freddie Mac, Officials Sayholy crap

WARNING shorts!Prepare yourselves for your periodic squeeze next week! The F&F bailout will be coming in small doses, to be administered when needed.Best Regards.Signed: TWCBN

Alessandro,Thanks for the detailed explanation..But what i have trouble understanding or convincing myself is – why suddenly the USD is getting more valuable?.. is it simply becoz of the credit crunch leads to a shrinking amt of dollars despite all the fiscal and bailout problems of the USA treasury?..Or is it just short-term money flow of the deleveraging process?mrskeptical

Is it just me, or am I now on the hook for like, I dunno, six trillion F&*@ING Dollars! Holy God I don’t believe in……Is anyone outside the US accepting new immigrants? We have skills….could be very useful…..my wife is cute….anybody? Hello?

@ Medic on 2008-09-05 21:41:28The US Emmigration Dept. has informed me that you are free to leave as soon as you pony up your portion of the US forecast debt which stands about 70 – 80 Trillion! Once the money and paperwork are processed you will have 20 min. in which to exit this great land.Ohh, I get the pellet stove!

Mr Skeptical on 2008-09-05 15:02:25 wrote:

capital will want to exit the bubble country, forcing them to defend their currency (selling dollars to buy up yuan), running down the yuan money supply further

Mr. Skeptical, I am not sure the above sequence applies to China (because of its military power); but it might apply to other export merchantilist models. A China slowdown will help in not encouraging much needed fresh dollar capital to enter China.So I believe that the Finance Ministry (Chinese Govt), to continue to promote employment and remain politically relevant, will force exports on the rest of the world much like the British Empire. Therefore, any yuan depreciation will only make them happy.With such a huge takedown in credit, the USD would have emerged the king anyway. The Fed has been the first to recognise the problem while the ECB continues to strangle Europe. Take a visit down to the the Inland Empire in California or Miami-Dade to see the magnitude of the problem.P1AQL.

Medic on 2008-09-05 21:41:28 asked:

Is anyone outside the US accepting new immigrants? We have skills….could be very useful…..my wife is cute….anybody? Hello?

In most countries outside the US, they take accident victims to the hospital in taxis. You have skills that nobody needs outside the USA (they don’t value life) but the nearest is taxi driving while simultaneously giving CPR.I recommend that you talk to the hard working immigrant taxi drivers in New York City. They will give you first hand information about these great nations and the fantastic compensation for taxi drivers there who also double up as Medics.After you’ve left, we’ll need an H1-B visa to get one of those super quants (read high tax payers) from Tsinghua or IIT to pay up for getting the benefit of access to an ambulance in 90 seconds flat.Cheers!P1AQL.

Medic on 2008-09-05 21:41:28

Is anyone outside the US accepting new immigrants? We have skills….could be very useful…..my wife is cute….anybody? Hello?

They might accept your wife but not you, ha ha:-)

Down the Rabbit Holehttp://www.europac.net/externalframeset.asp?from=home&id=13906

In recent months, investors have been unjustly chastised for their lack of consistency. In truth, they have an unblemished record of drawing the wrong conclusions. Last week’s 2nd quarter GDP report provides the freshest evidence of market cluelessness.In its report, the Commerce Department stunned economy watchers by showing a 3.3% annualized increase in 2nd Quarter GDP. The robust growth apparently wrong-footed those expecting further recessionary signals, lent further strength to the current dollar rally, and encouraged previously cautious investors to take another look at U.S. stocks. The strong number also bolstered claims by the Bush administration and the McCain campaign that a recession is primarily a psychological phenomenon. These conclusions would be at least quasi-logical if they were not based on a complete misreading of the report.Without raising an eyebrow on Wall Street or in the press, the GDP deflator, used in the report to downwardly adjust GDP to account for inflation, was shown at just 1.2% annualized…. the lowest deflator in ten years. In other words, to arrive at a 3.3% growth rate, the government assumed that inflation is running at a ten-year low! In contrast, the latest reading on consumer prices (CPI) in the second quarter shows year-on-year inflation running at a 5.6% rate, a seventeen-year high! In fact, for the second quarter, the same time period measured by the GDP deflator, prices actually rose at an even faster pace of 8.0% annualized. How can it be that inflation is simultaneously running at a seventeen-year high and a ten-year low? Welcome to the Alice in Wonderland world of government statistics.You would think that this statistical bombshell would raise the hackles of the press. Think again. Not only did the hawk-eyed media completely miss the story last week, they have totally ignored our subsequent attempts to show them the light (with the exception of the N.Y. Post’s John Crudele – who has long suspected a ruse). Although none of the reporters we spoke with could explain why inflation could run at a 10 year low and a 17 year high at the same time, they did not deem the anomaly sufficiently noteworthy. Having been ignored by reporters, I then tried the opinion pages. Unfortunately the piece that we prepared on the subject was rejected this week by all the leading national newspapers.Reporter Michael Mandel did note the head scratcher on a Businessweek blog posting last Friday. As a partial explanation he pointed out the CPI measures the prices of what we buy, and the GDP deflator measures the prices of what we make. Although this certainly sheds some light, it offers no real explanation. Excluding imports and exports, both measures are determined by the same forces, and should move in relative harmony. If anything, the costs of what we make should be outpacing the costs of what we buy. Producer prices are now rising faster than consumer prices (the latest annual reading of the Producer Price Index ‘PPI’ being 13.2% annualized from the 2nd quarter), which helps explain why corporate profits have fallen drastically. In addition, from July 2007 through July 2008 (the latest data available) import and export prices have risen 21.6% and 10.2% respectively. In other words, no matter what numbers you use, the 1.2% GDP deflator simply doesn’t add up.I have often argued that government statics are dubious, particularly those related to inflation. But here is an example where they are not even consistent! If we simply use second quarter CPI to adjust nominal second quarter GDP for inflation, the number would have registered a 3.5% annualized decline.Such horrific GDP numbers are much more consistent with the anecdotal recession evidence that Wall Street and Washington want us to ignore (confirmed by today’s weak jobs report which included the unemployment rate spiking to 6.1%, a five-year high). However, with Orwellian propaganda, our government fabricates GDP growth out of thin air without the smoke and mirrors traditionally required for such an elaborate illusion. All that is required is to put out ludicrous statistics and hope no one notices. Given that this strategy appears to be working, expect future government numbers to get even more outrageous. After all, if they can get away with this, they can likely get away with anything.

Here is a link to Georgia’s formal request to the ICJ for provisional relief against Russian actions:http://www.icj-cij.org/docket/files/140/14689.pdfMakes for very interesting reading. Russia has not yet filed a response, but that should be interesting, too. I’ll try to post it for anyone who may be interested when a link becomes available.SWK

Did anyone else notice how large the drops were on the European markets today? Geesh! Over 7% in the UK, over 4.5% in Germany, and over 6.3% in France. It’s starting to look like Asian market volatility there…SWK___BRITAINFTSE 1005,240.70–7.02%–395.90GERMANYDAX6,127.44–4.59%–294.86FRANCECAC 404,196.66–6.38%–285.94

Speaking of Asian markets – some of Friday’s closes:JAPANNikkei12,212.23–6.58%–860.64HONG KONGHang Seng19,933.28–6.25%–1,328.61CHINAShanghai2,202.45–8.13%–194.92Can’t wait to see what happens Monday after Sunday’s anticipated announcement of the takeover of Fannie and Freddie. Not to mention Hurricane Ivan, which appears to be on a course to strengthen, perhaps from its current Cat 3 status to a Cat 4, before heading into the Gulf of Mexico. Woo hoo! I’m starting to feel dizzy…SWK

AfA on 2008-09-05 23:47:14 asked:

Did you ever crossed the borders of New York State?

Yes. Perhaps you will deign to tell me why this question crossed your mind?P1AQL.

@ P1AQL on 2008-09-06 03:07:06My bad…it IS 3:00 in the morning! Yes, those are weekly, not Friday-only figures. Still pretty significant drops, even for a 5-day period…”Sorry, sorry everyone.”"This is supposed to be a happy occasion. Let’s not bicker and argue about who killed who…”Alright. Time for bed now.SWK

Karl Denninger aka Genesis, a rock hard Republican voter, gets slightly upset at the Republican party. Can you blame him?

Republicans Proved Liars – Vote DemocratThat didn’t take long.The Republican Party adopted a platform that said:”At the same time, government action must not implicitly encourage anyone to borrow more than they can afford to repay. We support energetic federal investigation and, where appropriate, prosecution of criminal wrongdoing in the mortgage industry and investment sector. We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself.”You lied.”Fannie dropped $2.25, or 32 percent, to $4.79 at 5:50 p.m. in New York Stock Exchange trading after the Wall Street Journal said the Treasury is close to completing a plan to help the mortgage-finance companies. Freddie slumped $1.40, or 27 percent, to $3.70.The plan may involve a “creative use” of the Treasury’s new authority to pump capital into the companies as well as changes to senior management, the Journal reported on its Web site today, citing a person it didn’t name.”So you adopted a platform earlier this week which said you wouldn’t bail anyone out or support practices that involve unsustainable loans which is exactly what Fannie and Freddie have done over the last eight years.But by the end of the week, you have already, by the officials in your own party, who currently occupy Treasury and The White House, made clear that you are rank LIARS.Absolutely nothing in your platform – not your stand on foreign policy, not your stand on human rights, not your stand on trade, not even your stand on abortion and family values can be taken at face value.YOU HAVE JUST DECLARED THE ENTIRE PLATFORM TO BE ONE GIGANTIC DOCUMENT OF LIES.By extension, I must take every promise that McCain and Palin made at the Convention to be lies, when you are unable to avoid going back on your word for even one calendar week.Attention RNC – you have just lost my vote, and any person with more than two firing neurons in their head that votes for John McCain and Sarah Palin this fall is both certifiably insane and is voting for the intentional destruction of our nation’s financial security.If your party does not step in prior to this “fait accompli” being announced and squelch it, I will burn in effigy my Gingrich Speaker’s Gavel, make a Youtube video making clear how I feel about The Republican Party, and will be filing a party affiliation change Monday morning.That’s a promise.Foreign policy and military prowess is immaterial if you have no money; The Republicans have spent the last eight years practicing fraud and theft upon the public, and now, less than one week after saying that it was antithetical to the party principles your standard-bearers go do exactly what you said is unacceptable.Irrespective of what the “change” is you get from Obama (and how good or bad it might be) at least you’re being told up front what they’re going to do, instead of being lied to so blatantly that your party can’t even wait one week to go back on its word in a way that can bankrupt our children and grandchildren.Republicans disgust me.

http://market-ticker.denninger.net/archives/568-Republicans-Proved-Liars-Vote-Democrat.html

Alright, after 5 1/2 hours of bad sleep and a 4 mile run this morning, I feel……yeah, no different. So let me pose this:Would it make sense for the dollar to rally Monday on the Fed actions? My instinct is to say of course not, but since TPTB have kept the smoke and mirrors up this long, I believe it to be a possibility.How about gold? Again, TPTB may be able to keep the smoke up for a short time, but my guess is that, as I have felt for some time, October is the big drop in the markets and the launch of PM as too many currencies start to lose too much value for investors.And hey, the RNC must be getting very concerned. I received and email yesterday (from someone who should have known better) questioning Obama’s funding. It claimed to be a column by Maureen Dowd of the NYT, but since it did not sound like her usually articulate prose, I checked and of course, she never wrote it. The column suggested that large amounts of Obama’s funding was coming from foreign governments and even terrorists. Sowing the seeds of fear is what they do better than anyone – now if only they had governed better than anyone……we might be talking about a better future for our kids than the lousy legacy we shall give them.

U.S. House Price Decline Could Be Worse than Great Depression, Economist Shiller Sayshttp://finance.yahoo.com/tech-ticker/article/53094/U.S.-House-Price-Decline-Could-Be-Worse-than-Great-Depression

Eight years ago, Yale superstar professor and MacroMarkets chief economist Robert Shiller famously called the top of the stock market in his book Irrational Exuberance. Then, a year before the housing bubble peaked, he predicted the colossal bust we are now experiencing.If you recognize Shiller’s name, it’s because the Standard & Poor’s/Case-Shiller home price indexes, which he developed with Wellesley College economist Karl Case, have become the nation’s most authoritative source for home price trends.In part one of my one-on-one with Shiller, we discuss the grim outlook for U.S. housing, which he tackles in-depth in his new book The Subprime Solution. Highlights of our first discussion include:* Home price declines are already approaching those in the Great Depression, when they plunged 30% during the 1930s. With prices already down almost 20%, it’s not a stretch to think we might exceed that drop this time around…. …

Lots of good comments in this thread; thanks all. Too bad we can’t link documents somehow ’cause there are a couple of thoughtful multi-part explanations above that would really benefit from a flow chart of some kind.Medic, if you think you might leave maybe you should pursue a nursing license. In my research it appears that every developed country will happily take a nurse.

Where is the U.S. Attorney General? I want federal indictments, jail time and renumeration of compensation for/from these thieves who have run fannie and freddie over the past decade. What a farce! JP Morgan as an adviser to the UST on how to “construct/manage” the nationalization?, hard to fathom. Look to see who profits from here. They are the crooks.

Paulson Plans to Bring Fannie, Freddie Under Government ControlBy Alison Vekshin and Dawn KopeckiSept. 6 (Bloomberg) — Treasury Secretary Henry Paulson is preparing to announce plans to bring Fannie Mae and Freddie Mac under government control, seeking to halt the crisis of confidence in the companies that make up almost half the U.S. mortgage market.Full story: http://www.bloomberg.com/apps/news?pid=20601087&sid=azJ2NQoKxMnE&refer=homeSo, the fear that we’d feel after being pushed off a cliff would be defined by these bozos as a crisis of confidence! Pay no attention to gravity (fundamentals)!Won’t this tend to piss off the Chinese government?Mark

Guest on 2008-09-05 13:44:36It has become markedly more doomy here of late, but not all of us really live by that philosophy. I read this blog for its interesting links and insights. I’ve enjoyed the summer, camped, kayaked, and made love to my boyfriend; I live simply and with no debt; I still have a job; I still love life. Life is still good to me. I am not oblivious to the suffering of my fellow citizens, even though in this particular bright Western city the effects of the recession are felt dimly if at all admidst a sprawling panorama of half-built condominium towers. Even though I watch the unfolding economic events like any other bystander, with dismay and a touch of fear tinged with awe at the scale of the slide, life here goes on much like before. We cook dinners, play mancala or cribbage, watch movies, stroll in the sunshine, even take Friday night drives.Work, love, and friendship need to be cultivated and built more than gold reserves, wealth, and success in reading the financial future. The simple fact is all of us, rich and poor, will be affected by the decline of this empire. Even if the economy fails really spectacularly, even if we have food shortages, gas lines, and power outtages, people will continue to get up and work and help each other get through it. In spite of my acceptance of hard times ahead for the nation, I also know that we’ll muddle through it on the hundreds of thousands of local levels — in neighborhoods and blocks of streets. There is much comraderie to be found in community organizations as well as in old friendships.”Reality” is something a bit twisted and distorted on these blogs. Reality is found outside your door, not in electronic faceless exchanges of opinion or even fact. Reality is the face of your neighbor or lover or friend. Several posters here believe they have a bead on the future, but the future is wholly outside of our control. Accepting that allows one to enjoy the life given to us right here and now.

If anyone is having problems getting all the comments to show up (blank or blacked out) I think that I’ve figured out a fix:Scroll to the bottom of the page and click on the Preview button. This will result in a warning that you need to provide a comment. Dismiss this and then scroll up and you’ll now see that all of the comments now appear.Perhaps this is only a problem for Firefox users (which I am one). Anyway, hope this is of some help to others.Mark

So we taxpayers are now “officially” on the hook for Fannie and Freddie. I am absolutely incensed. Incensed.

There are times when it is useful to look at the basics, and it is certainly one of those times.It is imperative to understand the monetary system, what it used to be and what it is. It used to be a commodity-based system with gold and silver the only items the states could make legal tender. The Fed. gov’t had no authority to make anything legal tender per the 9th and 10th amendments – but that is circumstantial to the argument here. The point here is that a commodity-based monetary system, without fractional reserve lending, needs neither inflation nor deflation of the money supply to stay viable. It is what it is, and the people will be able to determine with a fairly approximate determination what the rate of expansion or retraction (in relation to goods and services) will be over time.However, with our current system, a truly faith-based fiat system, a certain entity must determine how much supply is appropriate. How can they determine it? Only by best guesses approximated by mathematical models or someother such methods. What potential limitation can be used? The answer appeared to be the creation of potentially harmful debt equal to the credit/money created. I am somewhat confident that at some point, the idea was that surely people would only incur debt for the purposes of investment (expansion of capital) versus for pure consumption. This would have the self-regulating effect of limiting the money supply. I can’t say for sure as I obviously wasn’t privy to the discussions involving the impetus behind the Federal Reserve.Nonetheless, the massive problem is that once the debt goes beyond a certain limit, the issue becomes so large that the only option becomes cascading defaults on a systemic scale or inflation(devaluation of the currency) on a scale where the effects become deleterious – to use a Mr. Greenspan term.Therein lies the problem. We’re apparently past that point, as a recent article in the WSJ noted – as originally proposed by Adam Smith.The answer goes back to the basics. It is faith-based. One has to convince the users of the system that everything is sound. In other words, there is no crisis. Sun Tsu wrote extensively on the principles to use in these circumstances. It is unequivocally about deception.Bernanke and Paulson have both said it is beyond a monetary solution. That relies on money/credit being created by fractional reserve banking. The problem is that there is too much debt. They have both said that fiscal policy is needed. That is a euphemism for more Fed Notes being created directly by the purchasing of more Treasury debt. They’ve done exactly what they said they were going to do with the conservatorship of Fannie and Freddie.Folks ask where the money comes from, and it is right there in plain sight. Either the expansion occurs from the fractional reserve side – monetary, or from the fiscal side. Monetary side is broken, so here comes the fiscal side.

Maggie you said it well. I went from 150,000 to less then 50 in under a yr . With it came many adjustments. I have two young boys and have been able to talk with them without bringing resentments. They have stayed happy and healthy and I now see that even if I have to cut more of what is left from the way we lived, everything will be great.I am 48 yrs old and own nothing but have everything because of our happiness.If the day comes that I need help with rent or food and have to go to those agencies that do that kind of stuff, well I hope I can still smile as I have been, and realize that it has all been a blessing because I have been forced to see what life is really about.If the u.s.a. is no longer the worlds leading power then so what. Flags are made of thread and if there is a need to stay warm that is the first thing I will burn.I have no money or wealth of any kind but I have my kids, myself and my brothers and sisters with a few good friends.Someone gave me 4 Yankee tickets for next week that are now selling for 1,500 a piece. My kids will have memories that will last forever of that game. Its moments like those that have no price as long as i can see their faces.I really do enjoy reading all this stuff but balance is good

Folks, great discussion.

@ Guest on 2008-09-06 18:40:55Yeah, what can you do? I’ve been hit up for gas money a couple of times in the past. Once in a fast food parking lot and once in a pizza joint. It was a guy the first time and a youngish lady with kids the second.@ Anonymous on 2008-09-06 15:54:09Hang in there. It’s damn hard to go to nothing no matter where you start from. Speaking from experience it’s like your whole life blows up.It isn’t just having more debt and less stuff; less ability to purchase like you are used to (even the little stuff like your favorite brand of coffee) – though that is a difficult adjustment. What really stinks is the social isolation. Perhaps your experience has been better, but I found it impossible to maintain many ties once I was no longer able to afford to participate in regular social activities, modest though they were. And I feel sure that your self-image has taken a hit. Having to go to the county emergency room for medical care was a real low, not just because the experience itself was lousy, but because it was hard to accept falling so far.I survived unemployment for 2 years and had been living hand-to-mouth before then so could only fall back on debt as a way to squeak through. I sincerely hope that your injuries are such that you may recover and re-start a life that gives you a sense of self-satisfaction and community. In the meantime focus on the positive, sacrifice what you must, and salvage what you can.