The world is at severe risk of a global systemic financial meltdown and a severe global depression
The US and advanced economies’ financial system is now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms.
On the real economic side all the advanced economies representing 55% of global GDP (US, Eurozone, UK, other smaller European countries, Canada, Japan, Australia, New Zealand, Japan) entered a recession even before the massive financial shocks that started in the late summer made the liquidity and credit crunch even more virulent and will thus cause an even more severe recession than the one that started in the spring. So we have a severe recession, a severe financial crisis and a severe banking crisis in advanced economies.
There was no decoupling among advanced economies and there is no decoupling but rather recoupling of the emerging market economies with the severe crisis of the advanced economies. By the third quarter of this year global economic growth will be in negative territory signaling a global recession. The recoupling of emerging markets was initially limited to stock markets that fell even more than those of advanced economies as foreign investors pulled out of these markets; but then it spread to credit markets and money markets and currency markets bringing to the surface the vulnerabilities of many financial systems and corporate sectors that had experienced credit booms and that had borrowed short and in foreign currencies. Countries with large current account deficit and/or large fiscal deficits and with large short term foreign currency liabilities and borrowings have been the most fragile. But even the better performing ones – like the BRICs club of Brazil, Russia, India and China – are now at risk of a hard landing. Trade and financial and currency and confidence channels are now leading to a massive slowdown of growth in emerging markets with many of them now at risk not only of a recession but also of a severe financial crisis.
The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity were excessive leveraging and bubbles were not limited to housing in the US but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: an housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.
At this point the recession train has left the station; the financial and banking crisis train has left the station. The delusion that the US and advanced economies contraction would be short and shallow – a V-shaped six month recession – has been replaced by the certainty that this will be a long and protracted U-shaped recession that may last at least two years in the US and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown the probability that the outcome could become a decade long L-shaped recession – like the one experienced by Japan after the bursting of its real estate and equity bubble – cannot be ruled out.
And in a world where there is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation, debt deflation, liquidity traps and what monetary policy makers should do to fight deflation when policy rates get dangerously close to zero.
At this point the risk of an imminent stock market crash – like the one-day collapse of 20% plus in US stock prices in 1987 – cannot be ruled out as the financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown.
This disconnect between more and more aggressive policy actions and easings and greater and greater strains in financial market is scary. When Bear Stearns’ creditors were bailed out to the tune of $30 bn in March the rally in equity, money and credit markets lasted eight weeks; when in July the US Treasury announced legislation to bail out the mortgage giants Fannie and Freddie the rally lasted four weeks; when the actual $200 billion rescue of these firms was undertaken and their $6 trillion liabilities taken over by the US government the rally lasted one day and by the next day the panic has moved to Lehman’s collapse; when AIG was bailed out to the tune of $85 billion the market did not even rally for a day and instead fell 5%. Next when the $700 billion US rescue package was passed by the US Senate and House markets fell another 7% in two days as there was no confidence in this flawed plan and the authorities. Next as authorities in the US and abroad took even more radical policy actions between October 6th and October 9th (payment of interest on reserves, doubling of the liquidity support of banks, extension of credit to the seized corporate sector, guarantees of bank deposits, plans to recapitalize banks, coordinated monetary policy easing, etc.) the stock markets and the credit markets and the money markets fell further and further and at an accelerated rates day after day all week including another 7% fall in U.S. equities today.
When in markets that are clearly way oversold even the most radical policy actions don’t provide rallies or relief to market participants you know that you are one step away from a market crack and a systemic financial sector and corporate sector collapse. A vicious circle of deleveraging, asset collapses, margin calls, cascading falls in asset prices well below falling fundamentals and panic is now underway.
At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:
- another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;
- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;
- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;
- massive and unlimited provision of liquidity to solvent financial institutions;
- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;
- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;
- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;
- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.
At this point anything short of these radical and coordinated actions may lead to a market crash, a global systemic financial meltdown and to a global depression. At this stage central banks that are usually supposed to be the “lenders of last resort” need to become the “lenders of first and only resort” as, under conditions of panic and total loss of confidence, no one in the private sector is lending to anyone else since counterparty risk is extreme. And fiscal authorities that usually are spenders and insurers of last resort need to temporarily become the spenders and insurers of first resort. The fiscal costs of these actions will be large but the economic and fiscal costs of inaction would be of a much larger and severe magnitude. Thus, the time to act is now as all the policy officials of the world are meeting this weekend in Washington at the IMF and World Bank annual meetings.
Thursday midnite update: A few hours after I had written this note the market crash that I warned about is underway in Asia: the Nikkei index in Japan is down 11% and all other Asian markets are sharply down. This reinforces the urgency of credible and rapid policy actions by the G7 financial officials who are meeting in a few hours in Washington and the need to also involve in such global policy coordination the systemically important emergent market economies.
757 Responses to “The world is at severe risk of a global systemic financial meltdown and a severe global depression”
OMG. Dear Professor, what is a “systemic financial meltdown” in every day terms.
I was FIRST!!!
you muust force the parasites to stand down
I like your analysis, but i wish you would look at the global financial picture with a thought that governments are not to be taken for granted, ie the currency is something that cannot be controlled. I would love if you ran the numbers on the foreign held treasury debt and the global depression’s affect on that net wealth, and perhaps the inflation of the dollar. Perhaps you are mistaking the deflation of equities with the inflation of real goods?
Beautifully put Professor.I am from India and I have maintained for a long time that India is following the US with a 6 months lag.This is the very beginning of recalibration of Economy and markets (Indian as well as global). Things will get far worse and the process will be painful. People’s day to day life is going to be impacted; for some, very severely. However a time of great opportunity for the long term investor. A decade from now Indian economy will emerge far far more stronger.Key Drivers : Global Economy—————————–US in recession : the question now is not if so, but, how bad will it be and will the country go into a depression.Credit markets : in US and Europe have absolutely frozen out. Nobody is ready to lend to anybody. There is a deeps sense of mistrust. Banks, corporates and even government bodies are looking at severe cash crunch. If the liquidity situation does not improve in next month or so, US risks a complete economic shutdown, similar to the great depression of 1929.US financial markets: At best there will be complete restructuring and at worst a complete meltdown. More big names will go down underEurope / Japan : Europe and Japan already in recession like states. Japan Q2 GDP contracted 0.6% QoQ. Europe growth estimates for 2008 at 1.7% and falling.China – in slowdown mode, similar to India.Global impact of US and Eurozone meltdown/ recession : Economies across the globe would be impacted significantly though by differing degrees. Global slowdown certain, global recession likely.Key Drivers : Indian Economy————————-GDP Growth : 5% or lower levels over next two yearsSlowdown across all sectors. As is the case in all downturns , the hardest hit would be the cyclical and commodities sector.IT/ BPO : Margins coming down. Outsourcing will become more difficult as US/ Eurpoe jobless claims mount.Steel / Cement / Mining/ Refining /Commodities: Will be worst hit as the price cycle takes a downturn.Banking : Will be badly hit. Credit offtake falling , margins getting squeezed and defaults rising.Telecom / Pharma / Consumer goods : Not so badly hit. Though growth rates will come down with varying degrees.Capital goods : Badly hit. Corporate will hold off capital goods investments.Infrastructure : Growth will slowdown. Government will be short of cash to fund projects till the economy goes on a recovery path.Auto / 2 Wheeler : 4 Wheeler will be badly impacted. 2 Wheelers less so.Labor prices : Salaries, bonuses and increments would be adversely impacted.Labor market : Layoffs will start in H1-09.Land prices : Prices will come down. Distress sales likely by developers as even the big ones will run out of cash in 18 months. Some will go bankrupt.Interest Rates : Will start coming down. In a couple of years we’ll again see housing interest rates at 6% levels.Stock Market outlook (India)—————————-No change in my assessment. Given a 12K breach, there is now more than 70% chance of a 10K breachOn the upside , my estimates suggest that Sensex likely to go up to 40K (min 25K) by Sept 2013 and 80K (min 45K) by 2016
banks don’t lend (what remains of them)Corporate America lays off until it looks like the 30sNo stock marketthen you get strikes and rioting by the laborer against the capitalist because of the anger built up for bailing the capitalist out and for the blame of ruining America and then finally mobbings and marauding gangs. Yes it will get that far.
Why can’t the government become the exchange in these difficult markets? This means I actually buy (or sell) from the Exchange which in turn sells to the buyer on the other side. This used to be the way futures worked in Chicago before electronic insanity trading, and there was never a failure since the time it was started back in the 1850s. In other words every trade is guaranteed by somebody with limitless resources. Why not?
tequila …tequile trap..tequila… TEQUILA..TRAP…..candy…candy….more more more.TEQUILA!!!http://www.youtube.com/watch?v=eNdEu9s5qUU
Unfortunately, we have reached a point of no-return. Even though the Fed and the treasury department are belatedly making the right decisions (e.g. acquire bank equity, purchase commercial paper), their hesitancy and confusion has resulted in a complete lack of faith by Wall Street. Bernanke and Paulson have displayed such little confidence and proactiveness throughout this crisis. Professor Roubini’s recommendations above are entirely correct and will probably be agreed upon by Paulson/Bernanke at some point in the future, but we can expect the government to implement these changes only half-heartedly and far too late. The panic selling will continue and the crash will inevitably occur.Instead of trying to stave off a crash that is now beyond our control, we really need to start thinking about how to build a new economic world order. It will certainly be more conservative– much stricter loans and credit limits. A new global regulatory framework will need to be developed for derivatives, insurance, hedge funds, credit cards, etc. Let’s start building the future, since trying to maintain the current system is impossible at this point.
Amar, give your head a shake. 40K in 2013, 80K in 2016. It’s over. Emerging markets are disappearing.
@martinWhat is the panic level over there?Is Benny stockpiling canned food and ammo?
For newly-created money, conventional economics upholds the doctrine of the time value of money whereas binary economics, noticing that money is created out of nothing by the banking system, denies the time value doctrine. Consequently, binary economics rejects conventional financial savings doctrine (that there must be financial savings prior to investment) – no financial saving is necessary if money can be created out of nothing. Indeed, what matters is whether the newly-created money is interest-free, whether it can be repaid, whether there is effective collateral and whether it goes towards the development and spreading of various forms of productive (and the associated consuming) capacity.http://www.binaryeconomics.net/
Professor, like I said you are expecting the government to do something right that they haven’t done in decades, that’s not realistic. We’re entering a depression, not a 2 year recession.
Emerging markets have been driven by the same forces that drove U.S. markets to their high a year ago – excessive liquidity and low interest rates. Just as the levered hedge funds poured money into your market, they are now deleveraging and removing their money in droves. Economies are tumbling. To whom will India sell there products? This is not a short term phenomenon, the whole world of investing is being permanently changed. Sorry.
a cheery title for an article, perhaps the sub title could read (or the potential buying opportunity of a lifetime).
Professor, I have 2 remarks:”another rapid round of policy rate cuts”Why subsist on a path that leads to nowhere.”an agreement between lender and creditor countries … and debtor countries … to maintain an orderly financing of deficits …”This is the first time I hear you taking into consideration the “how to finance all this” question. It is also the first time I hear you talking about a “global depression”.Roubini, you are one of the best forensic and forecasting economists out there. But I find many of your recommendation difficulty implementable in the real world (usually for political reasons), and nobody can blame you for that, as this is not your job, you are already making titanic contribution revealing the real problems.So the question is, do you think/consider, a leadership change is necessary in order to bring any real solution to current problems?
Paulson borrowing a page from BuffetTreasury likely to get preferred shares in return for capitalBy Greg Robb, MarketWatchIsn’t this ridiculous? Yes, it is. I’m laughing, laughing…The secretary of treasury, with the whole US administration standing by to enlighten him, finally is forced to see the light…wahahahahahahaA greek tragedy of hubris and nemesis right before our eyes…
Since the rule book has been thrown out, it doesn’t make sense to continue to try and prop up the old system. Eliminate all counter party obligations immediately. Let each financial institution reconcile its own problems internally and supply, as NR has described, let the govt step in with any liquidity required. Seems like this is already implicit, however the market doesn’t appear to either trust or understand.
well now ..let’s see..without denigrating the british bankers..how this plan does any more than remove earnings from banks inthe form of an additional tax..i dont know..why not just give a tax holiday? let;s leave aside the complete lack of integrity and rational thought behind the pixies in ireland providing a bail out in the form of guarantees worth $600 billion (as if ireland could generate that much new revenue in 50 years) what would be a realistic solution. Governments used to run fiscal positions as a stabilisation of economic booms and busts. Of course, this has gone out the window because of the corruption of politicians and their collective dismal quality. How many politicians have even completed economics degrees let alone “felt” them workingin practise. Similarly, since central bank officials and regulators are trained..what use has their training been in preventing the build-up of excess. All care and no responsibility for civil servants is the norm here. Assuming the current batch of regulators has any clue about how to fix problems they have been part and parcel of creating is flawed logic. What we need is social engineering of the financial system so that can not run independently of the society it is supposes to serve at societies expense. Making profits by making people poorer simply is not sustainable during a period of diminishing resources and rising populations. Here’s an idea. It seems to me that, globally, around 60-70 trillion us dollars exists in “unnecessary” transactional debt. Assets for this debt dont exist, there is no balance in thebalance sheet. You can make up your own numbers and since the money has no value, the numbers are irrelevant. Why not come up with a banking solution by looking at what we want the solution to look like. That shouldn’t be too hard. The next step is ownership of the “gap” between what we think should be a solution and where we are now. I will leave aside the retributional aspects that should be brough to bear. That is for finger pointers. The “gap” is already owed by the taxpayers within global economies. It can be be dressed up as a lamb, but it is still mutton. It is a sunk cost. There may be a value, but blood/stone stone/blood. These transactional debts where there is no clear asset on the other side of the ledger, need to be removed from the balance sheets of all companies and parked in a recovery vehicle. The recovery vehicle cannot be staffed by bankers since we know that bankers do not have the ability to run banks with assets backed by transactional debt of this sort. Unfortunately, a new agency is required, along the lines of FEMA. Should help with the employment problem also. I think around 100,000 people will be needed to maintain the assets behind the transactional debts. Now, new institutions that are structured and capitalised according to the social good they provide need to be formed. That is, if an existing institution can demonstrate that is can provide valuable services to 500,000 people, then we know what a fair amount of equity and debt that new company should have on its balance sheet. Or we can work it out. We have the brains. In case you think that this is too radical, then develop some of you own themes, but keep in mind, the market is close to halving in six months. That sounds pretty radical to me. Having a government intervene in deleveraging and in markets, simply prevents and prolongs the agony. Socially re-engineering the rules, the faulty system and the faulty regulators is a much better solution.
Unbelievable, just unbelievable
Holy sh!t is all I can say. Good luck all. I know I need it. Not sure I will have a job next month..
Unfortunately we have no FDR to calm nerves and show leadership. At least for the large price of a depression the neo-con bible thumping, gated community incompetents who professed small government, deregulation and unilateral action will get their due in history. You can’t blame this on your predecessors.What a mess. We are still a nation of incredible resources but they must be channeled to long term success, savings and investment.The US Federal Government was once envied for its ability to get the job done. Look what has happened in the last 20 years. Disgraceful. VOTE ALL INCUMBENTS OUT. THEY ARE ALL CULPABLE.
A recent (last 3 days) meeting of high level IBank / Com. Bank /Hedge Fund Executives which took place in NY, had as a central theme, the excitement over how much money is going to be made in this Correction…..positively giddy. So I must disagree with your characterization of “complete lack of faith by Wallt St.”Whats left of Wall St. (the friends of the guys who have gone down) are now privy to a once in a lifetime opportunity, and they are ecstatic!! Its just a repricing of assets for the Banking Cartel. Who happen to be able to do something about this credit crunch, and yet choose not to….how convenient.
Right, Yankee. Good luck to all. We all will need it.
where is Cramer ?
“At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a *significant change in leadership of economic policy” and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster.” Emphasis mine.@ RoubiniAnd,”… a significant change in leadership [of economic policy ... ]” this, I say unto you, will not be permitted to happen – well, not at least for the best health of the World’s peoples in general; it is now about individual Nations, their politicians, their Bankers, their corporateers and the blessed bureaucrats first – ‘women and children last’.The Federal Reserve as permitted under that Paulson Bill just passed allows the FedRes to become the sole socio-economic Authority in the World. Note the IMF and World Bank and IBS already moving to joining the FedRes (this is my reading of the noise emanating from these inner sanctums..) ?With respect Professor, and I admire your efforts, we are now in a pervasively saturated environment of Ultra-moral hazard chaos (crasse opportunism), a priori:), now.A news radio announcement just stated that the Australian Minister of Finance is currently in the USA inspecting the ‘new floor of the New York Stock Exchange’ – I almost wet my pants laughing…Ho hum
Hey everyone, what’s up? I will make this short… Total default here we come, no recession, no bailout or rescue packages anymore (and frankly any foolish government that thinks it can borrow more money to somehow make the problem better is total foolishness!!! The Government got us into this problem by crowding out investment and crowding out borrowing, aka by borrowing too much… so why do they pretend that borrowing more money, e.g. 700 billion dollars will somehow solve their problems?! Borrowing more will worsen the situation, not make it better!)… who will bail out the Federal Reserve and the US Treasury?? The government is negligent! The FBI should make an investigation, and thus far, the FBI has been malfeasant! Everything’s gonna fail! The US Dollar and all Treasuries (conventional and inflation linked) will be declared worthless! Total default here we come! What are your thoughts?? Clearly, this may not materialize, but we could get a severe rapid depreciation of the US Dollar I think— which simulates a total default. We may have to get invaded by Canada and Mexico and the United Nations to keep the peace! Is the dollar a dead-cat bounce? I can’t even believe the US Dollar is rising lately? And rising after what?! After 8 years of US Dollars depreciating rapidly due to reckless, foolishness and malfeasant federal government deficits, who cares if the dollar is strong as of late?! The dollar has already lost 40 to 50 percent of its value on an exchange rate basis over the past eight years! Shitty times ahead here we come! Any thoughts?? ~ Andrew G. Bernhardt, St. Louis, Missouri
I have already decided to do that, based on the “stimulus” package on the federal level and the tax increases on the state level. Bob Barr 08!
my company lost 60% in the last month- eek. i hope it is an outlier, but i fear my company is just ‘up at bat’ sooner….
Ditched for a special, long fast money segment until 7pm et
WHERE WERE OUR PRESIDENTIAL CANDIDATES’ DEBATE ON THE STOCK MELTDOWN?Both of the “that ones” were too busy throwing mud at each other in a lame controlled manner. They should have been horrified and understandably “on edge” and clearly Presidential in their anxiety for this country’s grim future, seemed they were more concerned about their scripted lines and moot innocuous questions from the NBC media.I’m voting Nader. I may not agree with him on all issues, but at least Dr. Nader’s proposed change is real.
American Monetary Institute.http://www.monetary.orgAmerican Monetary Act.
Dylan Radigan and Maria Bartiromo bravely kept their positive rap going, alternating from looking at the Dow plummeting and engaging in useless patter to looking anywhere for something positive to say. They heroically invoked the IBM data as if it could counter a 600 point drop in the Dow. Finally Maria cheerfully inquired:”It’s 4 P.M. Do you know where your money is?” Meanwhile in London, Michelle Caruso Cabrera pointed to a ship going under a draw bridge, telling the viewers that it is a sign of good luck. Margaret Brennan, in a somber voice, told the viewers that S&P downgraded General Motors then gave the viewers a beautiful toothy smile. Fellini could not have written a more schizophrenic script.
well – it is no coincidence that i took my last paycheck and booked a few ounces of gold on kitco….i don’t trust anything anymore. for those who have read my posts before – they know i have a pellet stove and stash of stuff. i lived through the LA riots and I need to tell you – I am scared of what could possibly happen….and i am probably better positioned than 95% of the country….plus i put the odds of my job loss at 2:1.
We can’t invade from Canada. All our troops are in Afghanistan, slowly but surely being butchered.
China asking Aust to delay shipments of Iron Ore due to Economic Slowdown (6:50amd Oct 10 – HK)CNBC ASIA LIVE FEED
Was the draw bridge up or down?
Question: does a direct capitalization by the goverment of a bank implies that its stock price will near cero, as in the case of fanny, Freddy, AIG, etc. even if Gov buy non-voting shares of the bank ? Thank you.
candy – although it’s not funny anymore:This is a knife fight.http://www.youtube.com/watch?v=mZ8miTErh-o&feature=related
At least you didn’t say “first.”
no but the concern is dillution — like GE and Goldman when Buffet moved in
Well from what I know from the Argentina/Uruguay 2002 crisis:1) banks are closed for a few days to 2 weeks2) credit cards don’t work3) cash is king4) condo goes for a song if you have any cash5) people buy houses or condo with all the family coming together to a bank with large clothes full of pockets laden with us$ bills. Closing a sale means going in a small room at the bank and counting, then a bank clerk check if the bills are counterfeit or not and then the seller stuffs it in his safety box.3) if you were in argentina, while you are sleeping your us money in your us account is converted without your authorisation to pesos to a peso account by a new law/order of the government, and then a peso devaluation is immediately ordered and you’ve just lost 40% of your account. Those who believed in the “currency board” of 1 us$=1 peso equivalence lost. Those who didn’t trust the currency board system and prefered to keep all the money in us$ in a us$ account in an Argentina bank lost just as well. Those mistrustful hopeless “nutcases” who kept their money in us$ in miami had an uneventful sleep. As would say Andy Grove: only the paranoids survive.4) jobs are assigned on a “who you know” basis and salary are reduced to a subsistence level5) if you are unlucky and work in some poorer department government, you will not be paid for months (Rocha, Uruguay) but you will want to show up anyway because of fear you would be fired and because of the hope that one day they will restart to pay you and you figure it would be better to still be an employee when that time arrive to receive some money.
Hooligan, your comments would be more readable if you constrained yourself to paragraphs breaking about every 10 lines. A big blob like this is hard to read.
all good bear markets need a ‘puke moment’. the question is if this is the one…
This is my question. Does a systemic financial meltdown mean we go back to men (and women) selling apples on the street? We need a “New Deal” economic package. Let’s invest in our crumbling infrastructure and green energy. Those things will put people to productive work.
Equity Markets: DOWNCommodities : DOWNLong G. Bonds : DOWNCorp. Bonds : DOWNShort G. Bonds: UPGOLD & SILVER : UPHowever, the increase in the last two is quite limited. So the question is where all the money went.Can I put two postulates and ask whether they make sense? The level of delevering and hedged position unwinding is so fast and furious that huge amount of debt-laundered equity and money are disappearing with the corresponding (normal) zero-sum game rule. This is why the some of the money going out of equities are not appearing anywhere else.
I think that the biggest unsung factor in the current stock market fiasco is the role of past government manipulation of the stock market. The stock market is, or at least should be, a symptomatic mirror of the health of the economy–if the economy is good and profits are high, stocks should raise, and it there are problems in the economy and profits fall, stock prices should fall. But the government has been using manipulated stock prices as a propaganda tool. As a result, stocks were very overpriced and had gotten completely out of synch with reality–so much so that they could no longer be manipulated. So the stock market bubble has busted, and stocks are coming home to roost in their nest of reality; the results have been brutal.I think that all stock market manipulation should be universally prohibited by law with severe penalties, and the penalties should be double for government employees or contractors working under goverment supervision.
Gold and Silver are manipulated markets. They should be considerably higher. Rumor has it that two banks have short positions that could bring down the entire COMEX.
right. like the majority will capitultate – unless you bastards numb them enough.I suppose it is not that difficult – happy hunting.ugh, I would dresss you down but….spitting in the wind://www.youtube.com/watch?v=n2XmitTrZSc”Juliette”
Just in: A number of helicopters spotted at the Federal Reserve.Correction: Rumor of helicopters was incorrect. It was a flock of black swans landing.
Professor Roubini’s recommendations, informed by the lessons of the Great Depression and a sense of great urgency, could perhaps save the capitalist world from what increasingly looks as a free fall into economic and political collapse. Yet it is very unlikely that Western political and economic elites are capable of saving their system. The turnabout is just too sudden for them. Just yesterday they were full of hubris and confidence in the invincibility of Western capitalism. The neoliberal, hard-core reactionary capitalist elites that have steered its suicidal course for the last 25-30 years even psychologically cannot make a sharp turn to the left and nationalize the key banking and industrial sectors (not in a phony way they have done this so far, but in a real, popular democratic way). This is the only solution that can save liberal capitalism from a socialist or, what is much more likely, a fascist revolution.
Mark Shuttleworth is a Sudafrican venture capitalist and founder of the Ubuntu Linux distribution. He is an extremely sharp guy, but certainly not a macroeconomics of finance one. His latest blog is very good:
It’s a solvency problem, not a liquidity problemThe term “credit crunch” is very misleading for the current crisis. It suggests that the problem is merely one of confidence, that calm will return if liquidity is introduced to the system.My view, though, is that the real issue is one of solvency. This is the systemic bankruptcy of 2008….I’m nervous.The big question I’m asking is which sidelines don’t have landmines? My team and I are fortunate to have stepped out of many markets before the current flood of fear. We stepped right into a few problems, but in large part dodged the cannonballs. So far so good. But what does it mean to have cash in the bank, when banks themselves are failing? What does it mean to hold dollars, when the dollar is being debased in a way that would feel familiar to the Reserve Bank of Zimbabwe? These are very dangerous times, and nobody should think otherwise.
So, if there is not 150bps coordinated rate cut before market opening tomorrow, markets crash 20%?Did NR write this after today’s close?
Dear ProfessorYour forecasts have been first rate, but are your current solutions are radical or adequate?”another rapid round of policy rate cuts of the order of at least 150 basis points on average globally”Surely the time is past when rate cuts had any effect”- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;”A: Big creditors will force institutions into bankruptcy to get government refundsB: it will get too expensiveC: how easy is it to distinguish the insolvent from the illiquid at the moment?”- a rapid reduction of the debt burden of insolvent households”How exactly?”- massive and unlimited provision of liquidity to solvent financial institutions;”It aint working. Solvent institutions turn out not to be. Money pumped in does not come out again. There are not unlimited funds”- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;”YES!! – basically government taking over the core financial functions”- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;”YES again! Much better use of capital”- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;”you said this above already”- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.”This is the biggie. Can nations co-operate? Its not looking good so far (eg Iceland). We need a US President with real vision and leadership qualities. Not guys who lamely voted for the bailout and dont seem to want to discuss the real issues.
This sounds like a flipside version of the irrational exuberance witnessed during the dot com era and the recent housing boom. One must view with skepticism “new era” claims that the future is brighter and less certain than in the past. Similarly, claims of fundamental and permanent negative transformation in the very nature of the economy should be taken with a grain of salt. Emerging markets aren’t going to “disappear,” although they are certainly destined to atrophy for a while, as is virtually every other economy around the world.SWK
Dr. Roubini says:”This disconnect between more and more aggressive policy actions and easings and greater and greater strains in financial market is scary….When in markets that are clearly way oversold even the most radical policy actions don’t provide rallies or relief to market participants you know that you are one step away from a market crack and a systemic financial sector and corporate sector collapse. A vicious circle of deleveraging, asset collapses, margin calls, cascading falls in asset prices well below falling fundamentals and panic is now underway.”___This sums it all up. All of this government scrambling to shore things up at this late date may well be to no avail.SWK
Its only 7 minutes into Tokyo trading but at this point banks are Ask only.
- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;HA HA! SO YOU’VE FINALLY–FINALLY, AFTER TWO SOLID YEARS–ADOPTED MY POLICY OF STOPPING HOUSING EVICTIONS.BUT NO NO! NOT QUITE!! WHAT ABOUT THE RENTERS? WHAT ABOUT THOSE IN PUBLIC HOUSING?SORRY NOURIEL, YOU’RE NOT THERE YET! I WANT YOU TO COME OUT IN FAVOR OF A1. INDIVIDUALLY ENFORCEABLE2. PERMANENT3. COMPLETE4. ABSOLUTEBAN ON HOUSING EVICTIONS. HOW LONG WILL IT TAKE YOU TO REALIZE THAT ONLY A BAN ON HOUSING EVICTIONS WILL INCREASE ECONOMIC ACTIVITY? NOTHING–NOTHING–OTHER THAN THIS MEASURE WILL INCREASE ECONOMIC ACTIVITY.BY THE WAY, FOLKS, THIS BAN ON HOUSING EVICTIONS IS THE FIRST ACTION IN ENFORCING THE HOUSING PROVISION OF THE NEW BILL OF RIGHTS. WHAT NOURIEL DOESN’T TELL YOU IS THAT WHAT IS HAPPENING NOW IS THAT WE ARE IN TRANSITION, FROM THE ‘SCRUTINY’ REGIME OF WEST COAST HOTEL V. PARRISH (1937), TO THE ‘MAINTENANCE’ REGIME I DISCUSS IN MY BOOK: JOHN RYSKAMP, THE EMINENT DOMAIN REVOLT (NEW YORK: ALGORA, 2006).THIS CHANGE, BY THE WAY, HAS BEEN COMING FOR SOME TIME. ABOUT EVERY SEVENTY YEARS, THE UNITED STATES CHANGES CONSTITUTIONAL REGIMES. FOR HISTORICAL BACKGROUND, READ THE EXCELLENT, ONLINE ESSAY ‘HISTORICIZING JUDICIAL SCRUTINY’ BY PROF. G. EDWARD WHITE OF THE UNIVERSITY OF VIRGINIA LAW SCHOOL.FOR THOSE TRAINED IN THE LAW, LET ME SAY THAT, IN SCRUTINY REGIME TERMS, WHAT IS ABOUT TO HAPPEN IS THAT HOUSING IS GOING FROM MINIMUM SCRUTINY (LINDSEY V. NORMET) TO STRICT SCRUTINY. YOU WILL REALIZE BY THAT STATEMENT THAT I AM TALKING ABOUT–AND FOR THAT MATTER, CARRYING OUT–A CONSTITUTIONAL REVOLUTION. IF YOU ARE NOT A LAWYER, I STRONGLY SUGGEST YOU GET A LAWYER TO EXPLAIN THIS STATEMENT TO YOU. YOU WILL NEVER–NEVER–UNDERSTAND WHAT IS GOING ON IF YOU DON’T DO THAT.LET’S TAKE A LOOK AT WHY NOURIEL’S OTHER PROPOSAL INVOLVE, NOT AN ANDVANCE IN INDIVIDUAL RIGHTS, BUT RATHER, ‘ROUBINI’S CONTRADICTION.’NOURIEL HIMSELF IS FAMOUS AS THE ONE WHO SAID THAT NOW NOTHING CAN BE VALUED. AND YET HE PROPOSES ALL SORTS OF INTERVENTION BASED ON THE IDEA THAT SOMETHING CAN BE VALUED. OF COURSE, MARK TO MARKETING ITSELF DRIVES AWAY INVESTORS–THAT’S TO ONE SIDE. BUT ON WHAT IS THIS BANK RECAPITALIZATION BASED? WHAT ‘SOLVENT’ INSTITUTIONS IS HE TALKING ABOUT? THERE ARE NONE, BECAUSE NOTHING CAN BE VALUED.WHAT HAS HAPPENED IS THAT HE HAS MADE THE MISTAKE OF STEPPING OUT OF ECONOMICS AND INTO POLITICS. BIG MISTAKE ON HIS PART, BECAUSE HE KNOWS NOTHING ABOUT THE LAW, NOTHING ABOUT THE STRUCTURE THAT HAS LEFT SOME GROUPS FAVORED AND OTHER GROUPS DISFAVORED. WHY FAVOR HIS FINANCIAL INSTITUTION GROUPS?I FIND IT EXTREMELY SUSPICIOUS THAT IT TOOK HIM SO LONG TO ADVOCATE A FREEZE ON ‘ALL’ HOME FORECLOSURES–IT LOOKS TACKED ON, AS IF IT’S AN AFTERTHOUGHT. HE GIVES PRIORITY TO FINANCIAL INSTITUTIONS, BECAUSE THAT IS HIS BACKGROUND. THAT SPEAKS ILL OF HIS UNDERSTANDING OF THE ROLE OF THE ECONOMY IN THE LARGER SOCIETY.HE’S GOT IT BACKWARDS. FIRST YOU ATTEND TO INDIVIDUALLY ENFORCEABLE RIGHTS. THEN, AND ONLY THEN, OTHER ASPECTS OF THE SOCIETY HARMONIZE THEMSELVES WITH THOSE RIGHTS. DO IT ANY OTHER WAY, AND ITS SIMPLY AN ERROR CRYING OUT FOR CORRECTION.SO GET SMART: ADVOCATE A BAN ON HOUSING EVICTIONS. IT’S GOING TO OCCUR ANYWAY. DON’T INCREASE UNNECESSARY SUFFERING BY RESISTING IT.When in markets that are clearly way oversold even the most radical policy actions don’t provide rallies or relief to market participants you know that you are one step away from a market crack and a systemic financial sector and corporate sector collapse. A vicious circle of deleveraging, asset collapses, margin calls, cascading falls in asset prices well below falling fundamentals and panic is now underway.
The dollar is rising because everything is getting sold, and almost everything is denominated in dollars. That is the beauty and the benefit of being the world’s reserve currency. How much longer will that last?The dollar was a carry trade currency second only to the Yen. While massive leverage has been unwound the Dollar and Yen have been on fire.Once the deleveraging ends the dollar will become the dog once again.I expect to see a race to the bottom around the world – competitive currency devaluations and massive soverign defaults. Global evaporflation. Debtor nations are going to realize that is the only way out. What will the creditors do? It will be every nation for itself.If I were China I would recognize this as a golden opportunity (and possibly a last chance) to move decisively out of the dollar before I get left holding the bag. Will they dump out debt before we default?Any of our geopolitical rivals (Iran, N.K., China, etc.) are probably licking their chops, trying to decide when is the best time to pull the rug out from under the American Empire once and for all. The US is incredibly vulnerable right now, and we have nothing to blame but our own ideology, hubris, and greed (to quote Pat Buchanan).This is a moment of extreme danger.
I hope this post by NR will be considered a historical document one day.NR for Nobel prize in Peace!
The only way out of this is to actually nationalise all the banks. Then the blood will start to flow though the economies veins and it might be possible to for businesses to function.A definite fact is that the asset bubbles Nouriel comments on have to burst and many people will lose money, but many healthy businesses will then be able continue / function. Even in 2002 we couldn’t believe that asset prices kept rising! I stayed in the sidelines waiting for the crash and began to question myself am I wrong? People were making money on cheap money and by doing NOTHING.All actions so far don’t address the root problem, that the banks are trying to still maximise wealth and those of their shareholders. Wipe out the shareholders completely for the sake of the whole economy. We can then muddle along. If we don’t do this so many people will face hardship and poverty. When you have a rebalance and sensible practices the Govts can then sell stakes back to the investors.
Quit yelling…turn off the caps, please.SWK
folks,I’m sensing widespread panic about the credit market meltdown.Even the bears have shifted they attention from “will I short the market tomorrow at the open?” to “will there be a market to short tomorrow at the open?”.I feel I’m mostly prepared, but this escalation of the crisis appears to be a lot uglier than expected and much, much faster than expected.
Quit yelling…turn off the caps, please.SWK
In a recent interview, Dr. Roubini remarked [paraphrasing here] that the one thing that took him most by surprise was the speed with which everything has begun to fall apart.SWK
In these turbulent times, it is nice that some things don’t change. You are my rock, Ryskamp.
You too new here SWK?(J. Ryskamp was used to post here long ago and returned only recently. His mark is all caps)
I have been a lurker (and sometimes poster) on this blog for several years and felt somewhat prepared with the information that was given to me here. I was out of the market completely in January including all my 401k… and even with the penalty, I look like a genius now. I am just frustrated more of my family didn’t listen to my advice.Even with all the information I’ve read, the speed is still astounding. It is like an expodential decay model. Just amazing…everyday I watch in disbelief as TPTB try to hold on with more and more intervention, with less and less affect.Time to bear down and hold on.
ALL CAPS ARE TYRANNY.
Thanks for letting me know, Alessandro. I’ve seen some of his posts, but I’ve only been following this blog for about a year now. Still, I’m not sure caps is a very distinctive “mark” — our jewish contributor Ben “THE RUSSIANS ARE COMING” does the same thing. Even Peter’s “Ho Hum” gets a little tedious, but it doesn’t really dominate the rest of his posts like the use of all caps does.SWK
Ok, Ok…enough already! SWK
I’m not sure. I was too busy looking at Michelle’s assets.
I have about twenty bottles of different single malts. Should last a couple of months at this rate! SWK
Japan is in trouble – tune in to CNBC.com for live coverage
In his blog early this morning, Paul Krugman references Dr. Roubini:”Update: Nouriel Roubini has some of the back story on how the TARP came to include provisions that could be used to recapitalize banks. From early on, there was indeed a feverish push by a number of economists, myself included, to get some channel for public capital injections in return for equity stakes into the plan. I reluctantly called for passage of the final bill because it did include such a channel, although it didn’t require that Paulson use it. There were a lot of accusations against those of us who took that position — claims that we were caving in, or trying to have it both ways. But the equity issue was crucial — and may now be the thing that turns a useless plan into something that really does a lot of good.”SWK
On The Money?SWK
OK, here is it:The two words capitalism and capital letter, although etymologically being derived from the same word, it does not mean they have something in common.Hint: In order to decapitalize, please press the “caps lock” key at the left side of your keyboard. The “A” LED should be off.
Banks – Yen approaching 98 to dollar – Nikkei down 10% and still some banks not trading – circuit breakers in
The Nikkei is down nearly 11% in the first few minutes of trading! Ahhhhh!SWK
But Buffet is a private agent and the other way around is public: uncle Sam in person !
S&P FUTURES JUST HIT AS LOW AS 881…GOLD UP 43.20 PER OUNCE
You’ll get martial law before any of that.
Hang in there, Yankee. Adaptability will keep you going.Let’s all keep talking. This is so cliche, but none of us is as strong as all of us. There are great minds here and this is an ideal place to put forth ideas and thoughts. We are a community. We can help one another.
Um, let’s forget about the world and just clean up our own house. Haven’t we had enough of social and financial engineering yet?
This looks like this is the game over.Hope all of you are prepared.Good luck to you all.
Mr. Roubini,YOu say:”The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity were excessive leveraging and bubbles were not limited to housing in the US ………..”Baloney, Mr. Professor — WHAT YOU ARE REFERRING TO IS JUST THE LAST CHERRY ON THE CAKE SYMPTOM OF THE CRISIS, NOT THE CAUSE OF THE CRISIS…..You don’t bake a cake by buyiing a box of cherries, Mr. Roubini — you left out of your aforementioned analysis, the other ingredients… WHY?????Now if you went a little further back to Jekyll Island, and the creation of the Federal Reserve, then you may be making a little bit of a headstart into being what all these zombie sheeple think you are — most eminent economist in the world… ha, ha.YOu haven’t even mentioned Rep. McFadden, or Ron Paul (now that’s one hell of a g8***amn economist that would make one hell of a Secretary of the Treasury!!)And then if you really want to go deeper to the real issues of this crisis, you may wish to address the issues of USURY, GREED, CORRUPTION (a result of 99% of rat sheeple being led by the fiat currency and fractional banking, compound interest slave and cannon fodder breeding Pide Piper’s to the Disaster Capitalism ‘Buy when there is blood in the streets’ Rothschild, New York $lavery Exchange Slaughterhouse…If Osama Bin Laden had any brains, he should be calling on all Muslims to abide by the Quran and return to the Gold Dinar and Silver Dirhan…; to bring these fractional banking and fiat currency Tyrranny Towers crashing down, along with their $lavery Cannon Fodder Slaughterhouse Exchanges..JAGCorpSwan
CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!CIRCUIT BREAKER!!!!!
THE HIGH PRICE OF THE DOLLAR IS THE RESULT OF MASS LIQUIDATION OF $$$ DENOMINATED PAPER. IT WILL VERY SOON COLLAPSE.
Game Over?Who loses?Come on, let’s play a vengeance game.
Is that what happened to your brain?Just kiddin.
But not her face!
Fed should just print money and give them to people to spend.
IMO, the financiers’ “crisis” is bigger than they let on: bigger than they can handle.They’re in a hole and there isn’t enough value to bail them out, even if they only bail out their friends. And as it so happens, their friends are the ones deepest in debt. The rest of the world’s sliding in with them. Iceland is on the edge of total bankruptcy. One after the other, they’re going down. The reason is, Goldman Sachs and their friends were into all these guys. Goldman is wrapped up in all these trillions and trillions of fiat money schemes: that’s how they made their 70 percent.Now they’re struggling, going down, trying to pull everyone in the hole with them.The economy, IMO, is not that bad. It’s in recession, yes. The Fed’s real estate bubble turned back, turned down and kicked the economy down. It would get going again if the people didn’t have these gambling financials tied around their necks, dragging down their 401(k)s and equities, destroying jobs. Otherwise, most people aren’t that badly off.The problem is, the bankers are going broke. They gambled and lost. Now, they’re trying to pull us down with them. People, IMO, aren’t of the mind to do this. People are of the mind to let them sink.The financiers are in charge. But, bad news. The Democrats are staging hearings to describe how bad it all is: to get votes. Mainly, they’re bringing these Wall Street guys in front of them, finding how much money they took, how much they were paid, how many AIG $440,000 bailout parties they had… Things like that. The Dems are saying, we’ve got to have a little oversight to keep these guys from giving all the money to their friends (the Dems have friends, too): we want to know where this money’s going. The public’s getting in on it, getting riled.Now, here’s the question. How much do we need these guys? Do you need a shady brother-in-law who borrows from you every time he sees you and then tells you you’ve got to pay up because he’s suddenly rolling deep in bottomless debt? Why would you want to sell your house and put your family on the street to help him?You wouldn’t. Cut him off. Stop giving him money. It’s the only way to help an alcoholic.JJ
I have a solution that I’m sure would work. Its called the reverse interest rate: The Fed pays us to borrow. That’d get the credit flowing right quick.
And if you dig a little deeper, you will find that the real problem underlying all of this is the avenue of humans, these wicked unnatural beings, to the face of earth.Yet another sign of a crashing system … we have been warned of the doomsday false prophets … so far we have 2.
JAGCorpSwan, while not quite eloquent, really hit the nail on the head. Everyone wants to run around pointing the finger at each other, when really they should ALL be pointing at the Fed.Let’s get real. This isn’t a free market. A truly free market does need some (read: some) regulation, such as the FDIC and SEC. However, a free market does NOT involve a central bank that unconstitutionally sets interest rates! I suggest everyone read up on Article 1, Section 8 of the Constitution, as well as Jefferson’s and Hamilton’s debates about central banks, to gain some real insight into how lousy the concept of the Fed really is.Keep in mind that JP Morgan Jr, along with 11 other banking families, strongarmed (successfully) some unwise Democrats in 1913 to create the Fed. All because of their “panic” in 1907. And, sometime after Woodrow Wilson signed it into law (i.e. the Federal Reserve Act), he commented about how he had “unwittingly” placed our economy at the feet of credit. Not exactly a successful policy, to base an economy on credit more than anything else (~68% of our “growth” is credit, last I checked).I’d suggest everyone — liberal, conservative, Democrat, Republican, Independent — do their own research about who is to blame for starting all this mess. A nice data flow diagram would look something like Bankers -> Government -> Bankers -> Government…and so on and so forth, ad infinitum. The bankers cry for bigger government and socialism when they lose their rears; they scare the Legislative and Executive branches; buy the Legislative and Executive Branches via campaign financing and lobbying; and get bailed out by the very same government when all goes awry.Now naysayers will point to the fact that we have had panics before the Fed. The problem in the Free Banking Era was that we didn’t have good regulation like the FDIC and the SEC. Banks were generally more conservative than now, because they couldn’t rely on the Fed to bail them out, set rates, etc. However, on occasion we did have bank runs and bad lending practices. For instance, there was a panic back in the 1800s where almost 50% of banks went under due to speculation and easy lending. The answer to such problems is GOOD regulation, not over-regulation. The Fed was like dropping a nuke on an anthill that was leaking plutonium. It only exacerbates the problem and lines the pockets of its member banks. Think of it this way: our country is basically in the hands of a few dozen bankers. Now do you want to trust these guys? The same ones that are setting interest rates too low to bail out their own bubbles; lending to people that shouldn’t have the loan in the first place; and buying politicians to allow the process to continue?Even proponents of a central bank, such as Alexander Hamilton, believed that having one provides both efficiency and convenience. Look around you: When is the last time any of these corporate behemoths were convenient for you, the depositor? When have they been efficient? Even poor Hamilton would have shuddered at the notion that the Executive Branch, via appointments to the Treasury and Fed, would have control over the creation AND regulation of our money.Please folks, don’t take my word for it. Look to our Founding Fathers for more insight. Do NOT listen to lawyers and businessmen, who are apologists for their own kind; they have the most to lose in the long run. Also, research the constitutionality of the Fed. If you read the Constitution and our Founding Fathers’ debates, you will reach the same conclusions I have.
Not the Wall Street CEOs as they sail away on the mega yachts.
but eventually you need to come to a port
I wish. At the rate this market is melting, maybe 2 weeks. I am also somewhat surprised to see the speed of the meltdown but then again, with the bad policies of Paulson and Bernanke, subconsciously I was expecting it.By not addressing the issues that matter, those 2 bozos have put the whole system at risk and may bring down global markets and the USA. We are experiencing paradigm shift at particle accelerator speeds. There is just no way to stop it now.
Gold currently $US915 — what gives?http://www.kitco.com/market/
a liquid asset
Yeah, two months may be a bit optimistic for 20 bottles of scotch in THIS environment.I can’t blame the Treasury Secretary and Chairman of the Fed for “putting the whole system at risk.” That was accomplished over a number of years by myriad persons and events. They were late to recognize the depth and breadth of the problem, and the measures they have taken to try to stop the deterioration of the financial system and the economy have proved ineffective, but I’m not sure anyone else in their positions could have achieved a better result. As one poster suggested several days ago, we may simply be looking at a long-term natural economic cycle that no government intervention could effectively halt.SWK
Clearly so! SWK
Central bankers the government and well all bankers hate gold it threatens thier very existence they will stop at nothing to keep it down.
The NY Times is now reporting that Uncle Sam is considering taking direct equity stakes in banks via cash infusions, on top of the $700M commitment it has already made to bail out the bimbos of Wall Street.Can anyone tell me where-oh-where is all this money coming from when the govt is already running a large deficit on its ordinary operations? The sale of T-bills? Printing money? And all this on top of all the other obligations coming due to the most useless generation in American history — the baby boomers.Well, the chickens have come home to roost after three decades of speculation on Wall Street, London, etc, one bust after another, the Latin American debt crisis of the 1970s followed by the S&L crisis and 1987 crash and the Asian currency crisis and the Long-Term Capital Management Crisis and the dot-com collapse and on and on it goes. All the smart MBAs from Ivy League schools, car salesmen with pedigrees, getting rich off hundreds of billions of dollars in institutional money washing ashore lower Manhattan in search of a place to call home. Poor babies. Well, they all walked away rich, but, “quelle dommage,” they won’t be able to afford the fifth vacation home in Monaco now. Cheer up, son, by the time you grow up this will all have been tidied up and you can go to work on Wall Street and get the fifth vacation home for us. The speculation will begin anew one day, perhaps sooner than you think. You can bank on it!
Uh, I seem to recall that many of the Founding Fathers WERE lawyers and businessmen…The Federal Reserve Act of 1913, duly enacted by Congress and signed by the President, is constitutional. Why, exactly, do you believe it is not so?SWK
Bank of England Short-term rates and LIBORIt seems that there is unanimous agreement that the short-term credit markets being locked-up and non-functioning is the first priority problem in the economy that needs to be solved, and soon.In the U.S. those rates are determined by short-term Fed rates (1.5%) and the London-based LIBOR rate. LIBOR in London is influenced partly by Bank of England’s current short-term rate (4.5%). With Bank of England’s higher short-term rate, this is creating a substantial spread between short-term rates in the U.S. and LIBOR determined commercial credit and municipal rates in the U.S. This disparity, measured by TED Spread, is causing short-term credit to be too expensive in the U.S. and locking up credit markets. Furthermore, the extremely low Fed fund rate in the U.S. appears to be having counterintuitive unintended consequences for depositors and lenders.There should be closer coordination between U.S. and English short-term rates, probably meaning that BOE rates need to come down more. This would need to be done within a few days. If this does not happen, the Fed needs to coordinate a new standard of commercial short-term interest rate to replace LIBOR in the U.S. with a rate that brings down artificially high commercial lending rates in the markets so as to unlock those markets.
Not enough troops. Keep in mind that a battalion is about 800, a brigade is 3-4 battalions, and a division is 2-4 brigades.To really do marshal law throughout the country there needs to be way, way more troops. The US doesn’t have enough troops to adequately handle Iraq and Afghanistan, so any attempt at deploying them in the US can only be in specific locations.
Let me guess. You cannot even see the incongruence in this logic? Hfffffffffff. Ok; once again if you will; who is it who makes the laws?
I see Berlusconi has dusted off Mussolini’s 1929 rescue plan.
Credit Default Scams. By the way, the Hedge funds are pretty much all insolvent. The CDS naked short scam that inflated their books with phony paper profits will never pay off. They have no cash on hand, so everyones rushing to the exits. There is no out.
Late this afternoon CNBC reported that AIG needed more billions, after at least two injections. For me, this was a sign that AIG is going down.
Really tired of these PPT SOB’s. Found an interesting read that Bob wrote today. Quite illuminating on what is going on at the COMEX these days. This is not the only place I have heard this same observation as of late.http://news.goldseek.com/InternationalForecaster/1223566953.php
How long can the equity market be sustained?1) DOW: 8500 divided by 500 per day = 17 days2) DOW: 8500 divided by 200 per day = 43 daysThe way it is going now, at most it will take about one month. Mr. Paulson and Mr. Bernanke, would you please do something (just something, not necessarily a right thing) right a way as you have done with $700 billion bailout before presidentiaql election?
So you are here to say that any action enacted by Congress and signed by the President is Constitutional?That, sir, is ludicrous.Stop trying to obfuscate the truth.To the best of my knowledge, the federal reserve act was never contested and brought before the Supreme Court. I am sure that if it would have been that it would have been declared to violate the Constitution.Perhaps sir, you would like to bring it before the Supreme Court. Oh, sorry, I forgot, you are part of the problem. An attorney that is a CFR member.
I agree with you 100%.SWK
I am watching CNBC on the Credit Crisis, because everyother channel has the election banality and I catcha question that is directed by a viewer to Dylan Ratigan.The view was asking Dylan if he knew anything about the lehman settlement auction of Credit Default Swaps amounting to 400 billiom dollars. Dylan Ratigan looked perplexed and Melissa Lee made reference to tommorow morning, but they did not know much. Is this some kind of an Act? Could he really not know?
kilgores (2008-10-09 20:57:00)You are certainly entitled to your opinion on the alleged legality of the Fed. Res., signing a bill at 23:45 hrs in the middle of the night, over the Christmast holidays in 1914.. with a few Representatives and a corrupt gutless coward puppet pharisee President.:Should you however wish to make any further enquiries, you could study any of the following, and then consider if your aforementioned conclusion remains the same; and if so, based upon what corrupt conflict of interest, would you prefer to maintain the pharisee system…. you prefer being a hateful procreation slave and cannon fodder cannibal, feasting on death and destruction? That is what you are here for in this life? That is the aim of your purpose as a ‘human being’?THINK ABOUT IT!!Rep. L McFadden’s Formal Charges & Petition: Fed. Reserve Brd. of Gov’s; Compt’ of Currency & Sec. of US Treasury: Conspiracy, Fraud, & TreasonAmerica: Freedom to Fascism, by Aaron RussoPopulation, Arithmetic and Energy 101The Money Masters: How International Bankers Gained Control of the Federal ReserveThe Secrets of the Federal Reserve, by Eustice MullinsThe Gold Dinar and Silver Durham: Islam & The Future of Moneyamong many others…Alternatively, if your pharisee investment banking preference is to send others off to war; may I suggest you put your money where your mouth is, and sign up at your local Marine Corps Military recruitment station; tell them General George Peaches Patton’s ‘Honey’ sent you.
any hope of co-ordinated rate cut before market open?
Agreed, nationalization of the banks is needed now. Anyone who doubts your concerns about fascism inthe U.S. needs to re-read It Can’t Happen Here by Sinclair Lewis.SWK
Guest, I too second that motion, I too am sick and tired of SWF’s misleading and twisted statements on this blog. Anyone who has researched how the Fed act was passed in 1913, knows the sad truth of probably THE most sinister crime ever perpetrated on the American people in the entire US history of its existence, except for maybe what is going on today with the Bailout(s) that the American people almost unanimously were against, and our gross misrepresentation in Congress.
God, I hope you’re not a JAG lawyer…SWK
Deer in the headlights! LOL! These clowns are clueless paid shills,..what else is new? You think they are honest non-biased market reporters?
It may be prudent to close the banks and the markets for an extended period starting now. This is not an elegant choice, but who are we kidding now. It’s not like we can hide the problem under a rock any longer. The reality is that we are not at a low or a bottom. There is much grief to come. Let’s try to keep from throwing the baby out with the bath water.The first thing is to allow something like ATM access to accounts during this period. This would provide limited source of funds for sustenance. Decree that ALL bills will currently due or come due before the end of the year will be granted a 60 day grace period on top of the due date. Take this timeout to render the commercial banks back into a Glass-Stengel arrangement and purge them of the crap. Put the crap into a new entity for the time being. Combine the banks such that each surviving entity is strong in it’s own right and that each entity comprises less than 1% of all the assets in the commercial sector. Set a ceiling of 2% that limits the bank’s future growth. Gradually bring the banks back online in a 1-2 week time frame.Next cull the corporations to those that can function and survive and slowly allow their shares to trade. Limit Corporations to 0.5% of GDP in terms of gross profit with a 1% ceiling for future growth. Allow investors/entrepreneurs to bid on the assets of the culled companies.There are gapping holes in this short layout that would need to be fleshed out, but the end ideal is to separate out the crap and get the real economy back on its feet in a sound manner. The value of the crap can then be worked out by the CRAP Commission at a more leisurely pace.Please be kind this is back of the envelope stuff.
Desperate times call for heroic measures.There is no perfect solution, try and spread the losses, slow asset deflation.Asset deflation is the major danger, don’t worry about inflation for now.Protect asset values, moratorium on evictions, rate resets, renegotiate mortgage terms etc.States must back debt if private collateral fails.What is the use of having a debt free state if the domestic economy fails.Why keep a dog and bark yourself?Put the money in at the bottom, cut taxes for the middle and low incomes, raise pensions etc, more “rebates”, increase minimum wage, keep real economy liquid without increasing (private) debt levels.Do a deal with equity holders (give them bonds or something) and temporarily nationalize banks, do not let any more fail for the moment.No more vindictive desertions.Keep rates low, but don’t lend for speculation (try “responsible” banking).Punish uncommitted “smart money”, tax, regulate flows of “non commercial” money.Undermine commodity speculation and exchange rate, interest rate arbitraging.Engage in international, coordinated exchange/interest rate setting.Wild exchange rate fluctuation is killing international trade.Unwind wealth concentration.Lay off the demoralizing and manipulative peak oil, climate change crap, it affects confidence and therefore decision making.Ditto for confidence destroying “security” measures.Don’t postpone elections.Exercise restraint, don’t take advantage of the situation.Those who would emerge unscathed, at the cost of the community are shortsighted.Don’t be paralysed by ideological dogma, it must be obvious by now that what passes for the “free” market isn’t perfect.It’s only money, we still have each other.Read RYSKAMP!
Here! Here! Kilgores!
there’s physical warsthere’s financial warsthere’s information wars
Let’s invest WHAT? We’re flat broke! Unlike the “Happy Days Are Here Again” past, the US is massively in debt! At that time it also had vast sums of oil (at which time the US was the #1 exporter). The US has no capacity for forward momentum. Figure 25 years of nasty decline until there’s a semblance of stability (which shouldn’t be confused with prosperity or regaining current levels).This “feel good” stuff needs to take a back seat to reality.
Great explanation of the effect of Brit rates on LIBOR and the results. thanks for the explanation
The Lehman Settlement is going to crack the market. And if that doesn’t do it, October 23d will. Just a guess.
You lose me on the no recession call.From my perspective, in the long run we will only increase our dept, and the present flight to safety (USD) will be over. It’s the dollar that I am unsure of, and believe the value of said dollar is dependant on the rest of the world’s ability to continue to choke on it. Especially China.hlowe
Yawn…another pathetic resort to the ad hominem argument.The fact is that an act of Congress is presumed constitutional unless a court declares otherwise. If you’re going to argue about the law, you should take time to learn something about it. A little knowledge coupled with a know-it-all attitude makes for a dangerous combination.SWK
What is significance of Oct 23? Please explain thank you.
Malaysia is down only 2.8% so far.
With interest rates below the rate of inflation, we actually have negative real interest rates right now for those privileged enough to borrow from the Fed. So, you intuition is actually a reality for some. That still doesn’t mean that the banks are willing to pass on this “boon” to the rest of us.PKB
You are an ignorant idiot. That’s not an ad hominem attack, but a statement of fact.SWK
@Paco:They don’t want to hear. Don’t bother.
a little knowledge?? how do you know anon have little knowledge, he might be an attorney like you,ad hominem attack?? cant you just talk in simple english, without jargons..presumed constitutional??why suddenly youre posting a lot at the time when markets are crashing?? good timing??why previously attacked ryskamp??he SIR predicted the outcome of this debacle before you were even here
Them, or us.
Don’t be so gready
WaMu trades get unwound.
I find the easiest way to remove an ALL CAPS shouter is to press the PgDn key. I’ve always been under the impression that the all caps user is trying to say “please don’t read this.” Works for me.
Idiot, your the idiot! The record of what occurred surrounding the Deceptive Federal Reserve Act, and the admission of a president Woodrow Wilson on his death bed, requires no other statement of facts.”"I am a most unhappy man. I have unwittingly ruined my country.A great industrial nation is controlled by its system of credit.Our system of credit is concentrated. The growth of the nation,therefore, and all our activities are in the hands of a few men.We have come to be one of the worst ruled, one of the most completelycontrolled and dominated governments in the civilized world.No longer a government by free opinion, no longer a government byconviction and the vote of the majority, but a government bythe opinion and duress of a small group of dominant men.” “
Look, the U.S. engaged in massive deficit spending during WWII, and the national debt peaked at 128 percent of GNP in 1946. U.S. GDP (we don’t use GNP any more) last year was a little shy of $14 trillion. The current U.S. national debt (as of 30 September 2008) was $10 trillion, or about 71 percent of GDP.The problem is, we now need to engage in some Keynesian fiscal stimulus in the form of rebuilding public infrastructure to help the economy, but to do so could cause the national debt to surpass the 1946 percentage peak. Not good.SWK
“Protect … Put … raise … increase … Do … Keep … Lay off … Exercise …”Who is exactly the designated Subject for all these action verbs?Don’t get me wrong, some of your suggestions are quite good (some are quite dangerous, and others are totally off (topic, that is) – e.g. Lay off the demoralizing and manipulative peak oil, climate change crap, it affects confidence and therefore decision making)
Hey–please lay off SWK. I don’t always agree with him, but he is unfailingly polite, usually amusing, and he makes some very good points. United we stand, divided we — well, you know.
In fact, I would be sympathetic with your recommendations. They do make some practical sense, provided they would be a base/timeout to implement the real and most drastic solutions (like a public hanging of Paulson in some Manhattan plaza, preferably in front of the national debt clock)
Hyperinflation around the corner? Yes or No?In NR’s interview on 9/25(?) he said that his massive fiscal stimulation of the system would NOT be inflationary in the long run since the govt. could retract the cash infusion just like it injected it. Hence, no hyperinflation. He was not advocating a monetary package which he said would be inflationary.My question as a newbie economy watcher is “how realistic is this?” Isn’t it very likely that a massive multi-trillion $ injection will eventually be engrained into the system and it will be impossible to suck this cash back up? Americans spoil very easily – ever try to take back a gift? I get nasty looks from friends when I ask for books back that I loaned them months earlier. Any thoughts?
I don’t think you mean neo-con Bible thumping: perhaps you meant conservative Bible thumping? The neocons are Jewish.
I must say, you are a dedicated hyperbolist…and a paranoid one at that.SWK
Who is exactly the designated SubjectThe State.…totally offEasy to say, hard to prove.
Thank you, Average Jane, you’re always so gracious. A little secret: I don’t always necessarily agree with what I say, either! SWK
Yes, some people will be quite excited about the future opportunities, but these are certainly not the “IBank / Com. Bank /Hedge Fund Executives” types you mentioned. The entire hedge fund and private equity industry will collapse and the US commercial banks will be fully nationalized.The people who will most be able to prosper are people outside the US who are sitting on mountains of ready cash — in East Asia, the Middle East, Russia– people who will be able to acquire our assets at pennies on the dollar will swoop in when the markets have completely crashed.
Sounds like that would be quite bad. From Bob Chapman:”AIG could potentially take down the entire European banking sector due to swaps it had insured on European banks. To say that this is a huge problem would be the understatement of the century.”http://www.theinternationalforecaster.com/International_Forecaster_Weekly/Massive_Gains_Wiped_Out_in_Markets_Despite_Everyone_Being_Warned
I figured you had that kind of intellectual honesty, SWK. Stay safe.
I agree. I enjoy reading SWK.
There is an unsubstantiated rumor on the net that the Fed has warned of a coming one week shut down of the financial system. Maybe it’s true and they actually plan to do something worthwhile. Happy talk, keep talking happy talk…
Ole’ Ryskamp seems like he may have some interesting socialist ideas, but he’s awfully repetitive. I am not going to go by a book based on some weirdass interpretation of “COAST HOTEL V. PARRISH (1937)” and “LINDSEY V. NORMET”. Sounds boring as hell.Ryskamp– learn to express your ideas in plain language and you will get a better hearing on this blog.
I would vote for any incumbent who voted against the bailout package, especially if they voted against it twice (even though, unbeknownst to them and to us, the second version turned out to be better than expected, apparently.)That’s what I said at the time of the debates and blog discussions about the bailout, and I would stay consistent with that.
WHAT IF FED INCREASES INTEREST RATES (%10-14) TO KEEP/ENCOURAGE DOLLARS COMING IN? WILL IT COLLAPSE THEN?
IMO, the crash in the price of oil can give us a quick end to the war on terrorism.All of the countries that are the breeding grounds for terrorism, much of it govt. supported, will be in deep doodoo as oil prices collapse. Think Iran, Saudi Arabia (indirect support), Venezuela, and even Russia (arming & training Iran.) Their flimsy governmental systems have adjusted quickly to $100 oil, and any drop below that causes them immediate and serious pain. Their ruling parties could collapse quickly when they stop dishing out free dollars to their supporters.Most of these places depend on oil revenue for up to 80% of their income. Cut the price back down below $100 (now closing in on $80) and they will be too busy putting out the flames of civil war and chaos within their own borders to worry about exporting terror to the 1st world. Not only that, but because most of those governments are infants to the developed world, they will quickly become begging dependants of the support from the West. I read that once oil goes below $90 even Russia could implode and redirect their jets and cruisers back from the Carribean.Bottom line. If our next president puts this together he can use this time of turmoil to best advantage and threaten to take down any place that still directly or indirectly supports terror and forces the U.S. to stay in the Middle East to fight.
Hitch on the crisis. Clever analogy to Tinkerbell’s death.
Am I the only one who finds it distinctly weird to reflect that the last head of the Federal Reserve and the current head of the Treasury, Alan Greenspan and Hank “The Hammer” Paulson, should be respectively the votaries of the cults of Ayn Rand and Mary Baker Eddy, two of the battiest females ever to have infested the American scene? That Paulson should have gone down on one knee to Speaker Nancy Pelosi, as if prayer and beseechment might get the job done, strikes me as further evidence that sheer superstition and incantation have played their part in all this. Remember the scene at the end of Peter Pan, where the children are told that, if they don’t shout out aloud that they all believe in fairies, then Tinker Bell’s gonna fucking die? That’s what the fall of 2008 was like, and quite a fall it was, at that.
Yes, that is what I meant, the word “the State” refers to everybody and nobody. But if you are referring to the administration, then you can always wish, if you are pretending that the ones that got us here would take those drastic solutions against their own interests and reveal their incompetence.About the “off” parts. What peak oil and climate change has anything to do with all of this. What does “protect asset values” mean? Some states cannot back their own debt, let alone private debt…This is not an attack of any sort. Because I feel the climate is a bit charged tonight.
You, too, my friend! Goodnight!SWK
Has anyone heard any technical levels in the DOW and S&P ? I was thinking roughly 8,000 ish in Dow and next major long term 6,500 ? Just an amateur taking a pencil across bottoms of multi-year chart back to the 80s.
LEH settlement on Oct 11 and WaMu on Oct 23 – anyone know who is really exposed on these?
YANKEE GO HOME
We tried this before … but we couldn’t wean him off the thorazine.PeteCA
Frankly speaking, I doubt he will be able to fund any war.
What do exactly mean by “Thank you”?This is hellacious (I do not know what this word means).Kidding. I too sometimes do not agree with you, but that is not a reason to make personal. In fact, I cannot live without disagreeing with others and others disagreeing with me. As you said, hell, one has to always question his/her own beliefs instead of eccentrically holding to a position (by position I mean a point of view, not a job). And above all, there is always a way how to, respectfully, introduce one’s ideas; not by shouting and insulting the intelligence of everybody. Between unknown and unfamiliar community, the form of communication matters as much as content.
I’m gunna buy me a gun!
Does sticking a $3 Billion+ bill to taxpayers qualifies as a terrorist attack and foreigners money laundering buying of new US treasuries can be described as financing terrorism?
Again: In this historic crisis, it’s useful to gauge valuation histories. In the not-read-enough parts of Irrational Exuberance, Shiller provide just this. Here’s some plots from Wiki’s P/E article:Real S&P P/E, 1871-2006P/E as a predictor of 20-year returnsReal S&P price, earnings, dividendsA couple observations:1. Based on Shiller’s data, the S&P’s real P/E was around 25 in 2006. Based on this plot of historic data, that suggests zero real returns out until 2026, if the next twenty years are anything like the previous 136.2. If real P/E’s drop to around 10 like they were throughout the 70s and into the early 80s recession, that means that the S&P would drop to 10/25*1300 = 520 (!), and that’s assuming that real earnings hold at 2006 levels, a big if in a nasty recession. Oh, and that would be a DJIA of about 10/25*11500 = 4600.Not a prediction, but just some simple arithmetic from Shiller’s historical data. Does anyone know what these numbers were at the 2007 market peak? Any Dow 7000 bottom callers or technical analysts who’d like to take a whack at this?Shiller’s quotes from Irrational Exuberance (2005):
The stock market has not come down to historical levels: the price-earnings ratio as I define it in this book is still, at this writing , in the mid-20s, far higher than the historical average. … People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes.Long-term investors—investors who commit their money to an investment for ten full years—did do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well advised, individually, to lower their exposure to the stock market when it is high, as it has been recently, and get into the market when it is low.
Yes, I too have close numbers, using a less technical and more superstitious analysis. Dow for a 7,999 support, then a rally to 10K before crashing down towards 6,666.
A couple of weeks ago I warned that the market was showing signs that resembled the pre-1987 crash. The issue wasn’t just technicals. There was an underlying logic.This week one of the financial commentators picked up on exactly the same thinking. See Doug Wakefield’s comments at this link. And note the title … “Times Up”.http://www.bestmindsinc.com/documents/TimesUp.pdfNote especially his chart for $INDU (the Dow) that’s about halfway down the item. Mr Wakefield concluded also that there was a risk of a real imminent market crash.That is what we are experiencing right now.A major market crash is unfolding on Wall Street.There is no reason to think that we’ve hit bottom yet – and no firm guess as to where that bottom is located.What’s different about the on-going crash is that it’s a mutli-day event. Not just a “Black Monday”, because as I already explained we saw that at the beginning of this week. We’re really seeing something that looks like a “Black October” event and may stretch over a whole week (this week), or even longer.Let’s look at where we are:1) Fannie and Freddie are dead2) Bear and Lehman have gone belly up.2) Much of the US banking and financial system is being nationalized – or essentially backed by the Fed.3) The auto companies (Ford and GM) are rapidly nosediving into imminent bankruptcy4) The country of Iceland has gone bankrupt, and all its banks are likely to default.What does this mean????It means that the CDS market is almost certain to implode now.They just cannot stop it at this point.There are too many potential bankruptcies and defaults in the system.THAT is why the market is now plunging.The shadow banking system is imploding, and it’s happening so fast that they cannot stop it.It is reasonable to predict that emergency actions will be taken very soon by the PPT.This could involve closure of the US market, and other markets, for a period of time.It could involve some dispruptions in the system of banking.I did remind people to put away some emergency cash and food.If you haven’t already done so – it’s a good idea!If you can still get gold … do it.PeteCA
there is systemic warts
As Henry Hazllitt phrased it, “There is no safe hedge against inflation except stopping it.”Frankly, I don’t see how you can retract a cash infusion? Where does it go once it’s injected? Are these just temporary “injections” of tax money that will be paid back, with interest? I don’t believe it. If so, why put the foxes in charge of hen house oversight? I mean, we’re talking Hank Paulson and Greenberg here.Hazlitt says, “It is not even possible to halt an inflation, once embarked upon, at some preconceived point, or when prices have achieved a previously agreed upon level; for both political and economic forces will have got out of hand… The political pressure groups that have benefited from the inflation will insist upon its continuance.”Look at AIG? Paulson never shuts the door to Congress without saying, “I’ll be back.” How many times in the past have there been billions for the bankers and debts for the people, for their bad investments in Brazil, in Mexico, in Argentina, in the US… and indirectly through the IMF and World Bank? What does the rest of the world get in return? Hardship.Maybe someone else less suspicious than I has a better “explanation,” Friendship One.
BRING SOME BONDAGE
I THINK PRINCE ALWALEED EXPOSED HIMSELF DURING ORGIES WITH WAMU AND LEH.
And by the way …Jim Willie had some comments today that are worth reflecting on.Yes, I do understand that “gold bugs” like Mr Willie can be difficult to read and digest – at least for the average investor. But guess what … when the system goes crazy – that’s when these folks get their own day in court.Mr. Willie raises are very important point …It is conceivable that the gold futures market could DEFAULT on gold shipments at some point. What this means is that if you are a futures investor in gold, and you try to take delivery of real gold (gold COMEX bars) because you held a LONG position, the market might tell you that they cannot get the actual gold bars. And instead they would offer to pay you in cash instead. Which is OK if you want the money. But really BAD if you want the yellow metal!That, my friends, is a major problem if it happens.The point about commodities markets – is that they’re supposed to deliver a commodity.This would not be a problem for anyone owning gold.It’s only a problem for the powers-that-be who are trying to keep the price down.The gold price would explode upwards if this occurred.We’ll see what happens.PeteCA
PeteCA,Please refrain from making such posts after 9pm.On a more serious note, remember you said that when stocks rally on a no news day, it might be an indication of market manipulation or insider dealings. Today, the market was stable with low volatility (relatively speaking) – I guessed because of the short ban was ended – up until the last hour. Should that also be read as a sign something was broken, but we don’t know it yet, or was it just due to last minute stress?
REMINDER AGAINUSA. UNDER PRESIDENT OBAMA WILL ENGAGE IN WAR WITHIRAN AROUND FEB OR MARCH 2009. THIS WAR WILL BE THE MOTHER OF THE ALL WARS. WHICH WILL GIVE BIRTH TO ALL THE OTHER WARS AROUND THE GLOBE. EXAMPLES RUSSIAVERSES NATO, INDIA AGAINST PAKISTAN, AND SO AND SO,THE SAME WAY THE FINANCIAL CRISES STARTED IN PAST FEW WEEKS AND ENGULFED THE WHOLE WORLD. SO WILL BETHE IRAN AND USA WAR.HELLO PRESIDENT OBAMAGOODBYE AHMAGINEJAT
Pete, is there any chance that if the US markets are closed for a period of time, that small investors might panic regarding their investments in that there is such distrust of insiders and of manipulation behind closed doors? Perhaps if they are closed, a window will be open where you can get to your investments if you wish. Else might there not be another disaster when markets open? With recent actions by the SEC and the PPT, there seems little hope of fairness. I guess it’s a choice between possible meltdown of your holdings or being trampled by the big players when markets re-open.
If you can’t understand it, it’s not for Ryskamp’s lack of trying. Whether it’s correct or not — if you don’t make the effort, you wouldn’t know.I am not sympathetic to those who complain so much about style, where there is clearly substance to be debated in what he says.
Let me be frank. I’ve never seen anything like this. No-one has. I’ve seen hard recessions … and this is not one. There’s more going on here, and more rapidly, than anything I’ve seen before. At the start of the week I speculated that they would take emergency action by Fri. Guess what – they already did the coordinated central bank rate cut in the middle of the week. I can’t predict what they will do next – but be sure that Mr. Paulson probably has some sort of check list that he will go down if he thinks there is a possible global meltdown. If they do close the markets – thats it. No-one gets to make any moves. Certainly not any small investors, and probably no mutual funds or hedge funds either. There’s nothing to stop you walking into a gold dealer, or going to a bank and transferring money. But as far as the markets are concerned … you can’t rule out anything that these guys could do behind the scenes. They’ve already shown a determination to preserve the power structure on Wall St, so don’t be surprised if they do that. But there will be no temporary window of access. Do what you can when the market opens tomorrow. Be aware that if it gets REALLY crazy out there, your transactions may not be processed on a same-day basis. But, I just can’t say. Things might go a little more smoothly. Japan is down by over 800 points right now. So it’s fair to expect another significant drop. But it’s anyone’s guess really.PeteCA
Maybe Ryskamp is schizophrenic,and this is his other half.
@Nouriel”And in a world where there is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation”This is the system called Capitalism. People need this “glut of goods” but they can’t have them because there’s too much. There is abundance for them and debt peonage for the people who do the work.Capitalism is failing because of its inherent contradiction. The system was not deregulated. It was regulated, as it always is, so these monsters can feed on the blood and bones of people here and around the world. These boom-and-bust cycles will continue until we finally finish them off.As Malcolm X said: “When the plantation is burning, you pray for a strong wind; When the Master is sick, you hope that he dies.”
This is not an attack…Understood, and thanks for replying.
In four months, I think oil will be down around $50 since demand will have crashed. Iran depends on oil revenue for 80% of its income. Their country will implode as they won’t be able to afford supporting external insurgencies in Lebanon, Iraq, or Hamastan. They will go back to sewing fine and exquisite Persian rugs and their new, less power-hungry, leaders will be begging the Israelis to loan them some of their economists to help get their government running again – remember the Shah? BTW, NR is an Iranian Jew. Result: no war will be necessary. Even Hezbollah will go through withdrawal symptoms as its hot-blooded terrorists go cold-turkey without their Iranian candymen.Just like when the Red Sea engulfed the Egyptians, the quick sands in the Middle East will swallow up the sword-worshippers once Americans stop driving.
Low volatility might depend on your personal pont of view. Certainly, a lot of people were selling or going short. Ford and GM got hit really hard today, and my personal gues is that was the hedge funds jumping right on the opportunity to short those companies. But let’s be realistic. No-one shorts a company (professionally) without doing their homework. This process may be accelerating the fate of the auto companies, but it’s going to happen sooner or later anyway. I wouldn’t be surprised if they remove the ban on short selling again very soon. But I don’t see how they can undo the short positions that have already been taken – and that’s probably exactly what was on the mind of the hedge funds.BTW, sorry about the late postings. Take it one step at a time.PeteCA
I want to hear. Thanks Paco. The more details the better.We know that they can do whatever the f*** they want. I just want to hear all of the delicious permutations!! Gracias!
I feel offended.In fact, after thinking about it for a while, I find this post offending to almost everybody.
If you take it on a percentage basis, the DOW could have daily 5%-10% drops for infinity.
Be careful what you wish for…When the yankee dollar goes home, FrWaMu, you’ll get hyperinflation.
Artichoke:What do you mean its not for his lack of trying?He has never, as far I have seen, explained in plain understandable terms what is meant by the “scrutiny regime” and the “maintenance regime.” Nor has he related the significance of these concepts to the issues discussed on this blog, beyond the fact that it has something to do with a ban on housing evictions. He just keeps yelling at us to “buy the book” and “consult a lawyer.”But fine, I am downloading the article he suggests, and I will try to decipher what he is saying.http://law.bepress.com/cgi/viewcontent.cgi?article=1055&context=uvalwpsBy the way, what’s your understanding of the substance of what he is saying?
Looking back over the history of Fed/Treasury interventions over the past year, I am convinced that they have turned a bad situation into financial armageddon.Credit markets are locked up because there is a complete loss of faith in the system and no one trusts their counterparties.I keep asking myself, if they had handled things differently back in August 2007 things would have taken a much different course.The problem is a lack of transparency. Every action by the Fed and Treasury has been an exercise in obfuscation. The regulatory complex has been actively encouraging the banks to hide their losses. This has led to the loss of confidence which is the core of the current crisis.What would have happened had they brought all of the major players together in August 2007 and forced them to confess their sins, followed by a rapid triage of failing institutions? The sunlight chases away the darkness, but all the Fed and Treasury have done is draw the heavy curtains.This week has proven that they have totally lost control, and for good reason. They are a dangerous mixture of greed, incompetence, and cronyism. With all due respect to the professor, I don’t think the current status quo is worth preserving.The greatest scam in the history of mankind has been rendered naked and exposed for all the world to see.
“Moody’s says may cut Morgan Stanley, Goldman ratings”why dont cut USA rating??
Which post? The one that says a forthcoming war with Iran will be the “mother of all wars,” or the one that concludes “no war will be necessary?” If the latter, it could mean you don’t understand the meaning behind the metaphors.
By the way, here is Ryskamp trolling about the New York Times a few days ago:”In scrutiny regime terms, we are moving rapidly toward raising the level of scrutiny for housing from minimum scrutiny (Lindsey v. Normet) to strict scrutiny. Does this change anything? Ask any lawyer, judge or constitutional law professor. They will tell you that this changes everything.”http://economix.blogs.nytimes.com/2008/09/26/gdp-figures-revised-downward/Artichoke: please explain to us what you take to be the substance of the argument.
From Each His Ability To Each His Need. Arm the Proletariat.
I just read this online book review on HISTORY AND THE CONSTITUTION: COLLECTED ESSAYS by G. Edward White.http://www.bsos.umd.edu/gvpt/lpbr/subpages/reviews/white0607.htmThis book includes the chapter on “Historicizing Judicial Scrutiny.”Nowhere in this review is there a clear statement about the core arguments presented by Prof. White. There is however a lot of talk about how smart and “preeminent” Prof. White is.I don’t think the reviewer actually understood the book.
Next try:http://www.sclawreview.org/archive/57/1/57.1.historicizing.php“Historicizing Judicial Scrutiny locates and explains the historical origins of the Supreme Court’s scrutiny levels jurisprudence. The Article first sketches a historical account of the Court’s response to constitutionally challenged decisions of the other branches from Marbury to Carolene Products. It then explores the emergence of the Court’s modern approach to judicial scrutiny. In the process, the Article addresses two related sets of questions. The first set of questions focuses on the antecedents to the Court’s modern scrutiny levels jurisprudence. Particularly, the Article asks how the Court’s pre-Carolene Products approach to the other branches’ decisions should be understood, and why that approach came under strain in the early twentieth century. The second set of questions is connected to the collapse of the Court’s initial approach to the challenged decisions of the other branches’ and its replacement with an approach that established two categories of constitutionally challenged legislation that would invoke two different levels of judicial scrutiny. Among other questions, the Article explores how and why the current scrutiny levels jurisprudence approach emerged. “well, that certainly clears it up….
All European mkts down 10%Japan down 10%India down 10%The CREDIT DENIAL Theory persists!!!!!
Academic analysis is of little or no use to anyone at this point ! What is the world going to look like in 24 hours ? 24 days,months or years ? The speed and magnitude of this disaster makes it impossible to grasp. How is the average person going to adjust ?What about the kids graduating from High School or college in the next few months ? How can we helppeople survive and thrive if we cannot even fathom what comes next ?God have mercy !D
Seems as though the second domino to fail and fall after the US Dollar is declared worthless as well as the declaration of a default on all treasury securities (bills, notes, bonds, both inflation linked and conventional securities) will be Japan (the largest lender to the USA), then The United Kingdom (the second largest lender to the USA the last time I checked), then the last time I checked it was the Caymond Islands & Luxembourg next, and then China as fifth place! Those will be the order of all the dominos failing and falling as the USA fails miserably! I wonder… Will there be a humanitarian effort for the USA after a total default of treasury securities and the dollar?? Resembling Animal Control? Will there be total chaos (or I mean more of it), more violent crime, more armed criminal action, more rape and murder?? Once there is no government somtimes I wonder if society would be more peaceful and pleasant or if society would misbehave!? Any thoughs? Anyone? Anyone?? I see panic like the 1857 panic, many bank failures, bank runs, and the perception that the currency is not worth very much. Remember, we can always barter.
Does anyone think that the United States of America will actually make it to election day? Anyone?? … Anyone?? or will we have our default crisis, currency crisis, bank runs, and total chaos sooner rather than later? Anyone? … Anyone??~ Andrew G. Bernhardt
This overlooks balance. WHERE does the money come from, who loans the US this money to engage in infrastructural work? And when everyone is, or is in the process of contracting?As I’ve mentioned elsewhere, this is like getting a loan to remodel one’s home while one forgoes paying on one’s other debts. Compounded is that fact that loans really aren’t available.Boiled down to its base argument what we find is that we are enslaving future generations with “slaving on the railway.” It’s forcing these future generations to use precious energy on a lot of infrastructure that won’t be viable for them! For me it’s no big deal as I have no children, but for those who have children you should really think this through!
Yes – Cramer and MANY other Wall Street people such as Fuld (the former CEO of Lehman) had the day off today for Yom Kippur.
i work in a bank in and i tell you my friend/co-workers are either idiots or in dreamland,some of these guys are still busy securing deals/projects,OMG is this how NEO feels??? i just wanna scream WTF is wrong with you guys!!!I know they read the news, but theyre like NUMB!!!”i heard Japanese index fell by 10% today”, “yeah i heard about that too, whats wrong?”"maybe that credit crunch situation in US” “yeah..”"ok, i need to finish my paperwork,” “yup,me too”:Oi feel like strangling them
Amen bro.What a bank sell is confidence.No confidence, no bank. It’s as simple as that.
It is doubtful that the American election will be held in November; martial law will probably be declared by that time, and no election will take place.See: http://www.alternet.org/rights/101958/thousands_of_troops_are_deployed_on_u.s._streets_ready_to_carry_out_%22crowd_control%22/
There should be riots (armed, malacious, and violent riots) in the streets all throughout the USA! People should storm the Capital and get the legislatures, the White House to get the executives, and the Supreme Court to get those nerds too… and trash the FBI headquarters (the J. Edgar Hoover Building) too! I’m not trying to incite riots, but realistically, and logically, there should be some riots in the streets!
I’ve not read one sentiment on this blog saying buy for short term counter trend rally.This may indicate an opportunity for going long for counter trend rally over the next 8 to 10 days.Elliot wave analysis says were in a third wave of a third wave down.This is the most vicious setup for market sentiment.But,a fourth wave counter trend rally should occur during the completion of this sentiment displayed here.Than,a resumption of a fifth wave down.
Remember… tiolet paper is worth more than US Dollars everyone… two-ply is worth more than one ply! So wipe your hiney with US Dollars! Then pretend your house that you can’t afford (and that you know is worthless, since society is lame as hell and too malacious and pathetic) and don’t make payments on is yours, and make the bank let you keep it!
The crash of the USSR in the late 80′s is a great model to compare to our current US meltdown. We have a collapse gap.USSR-One party: Communism, Manufacturing Economy, State Owned Housing (with multiple generations under one roof), Traditions of: Home Cooked Meals, Recycling and Reusing everything (appliances, machines). A Coleman stove would become a family heirloom. And saving any Ruble you were lucky enough to earn.US: The Capitalist Party and the OTHER Capitalist Party, Service Economy, Private Housing (and sorry Grandma, it’s time to take you back to the nursing home), No one cooks; 5-6 meals a week eaten out (or waddles their way into the grocery store.), Throw Away Society (the coffee maker’s broke, let’s buy a new one Hon.), and teenagers with Mastercards before they have even worked a lick.How ready are we? The US Dollar will be worthless. A bartering system will emerge. A Survival of the fittest will be enforced through a new police/mafia/criminal union. (and the one who said their aren’t enough troops has forgotten about all the state controlled police/fire) Anyone who can’t compete can enjoy starvation.And how naive is the man who thinks we should pass more laws? We hate lawyers. We hate politicians. We put a black cloak on both of these figures, call him a judge and suddenly the lawyer/politician is worshiped? Have you ever been involved in litigation in this country? The only justice we offer is available for purchase. Sound familiar? Go ask any of the three million people we have locked up. One thing they all have in common: Poor! These crooks didn’t follow any written law. Just the oldest law: greed.(and now another classic: fear).Be afraid of the man in the Topsiders, wearing a Polo, talking on a cell phone and sipping on a Starbucks! I’ve always feared him more that any immigrant I’ve worked with.(And these criminals want us to fear immigrants…ha) Thanks for opening my eyes to that Tom Russell. “Whose Gonna Build Your Wall?” Vote? Please. Shoot, don’t vote! Two parties with the same bosses: corporations. One’s flavor is tech, the other’s is oil. They are just opposite sides of the same coin. Have you already forgotten the 2000 and 2004 elections!Don’t take a “terrorist attack”, pre election off the table. War has always been a profitable racket for this country’s economy. Remember the recession of 1991 and its ‘Gulf’ solution.The good news is in the kind of thinking Hooligan is doing. There are more of us than there are of them. Something is breaking and will fall apart completely before we can put it back together.. A sustainable collapse in the market economy will finally force people to seek the truth. We stand together and rebuild with the greatest minds fueling our labor. We will revert back to manufacturing and saving.Economics 101: Sell more goods and cut expenses. (Wars)Mother Teresa said we could use another Great Depression because it makes people realize how much they need each other.So if you are interested, study some history. (Particularly of the Economic Collapses) It always repeats itself.Have fun lighting those candles and keep your passports ready.
Like Chris Farley used to say on SNL (Saturday Night Live), everyone should ‘be living in a van down by the river!’
At this juncture what is a and/or the prudent man to do?
Today’s “terrorism” was primarily spawned (militarized) through the US’s attempts to repel the Soviet Union from Afghanistan (and to cause general disruptions into the Soviet Union itself).The price of oil during these formative years was depressed. Ironically, it was actually low oil prices that started all of this: oil companies needed easier/cheaper access to oil. While one cannot definitively state how this all mapped out, as it’s quite likely what was an initial plan that has morphed several times over, it’s clear that much has been accomplished by high-level political intervention (US).And for those that don’t understand politics, “terrorism” IS a political act. If you want to reduce “terrorism” then reduce the political meddlings and let markets work. The days of cheap oil are gone.
wow. this is really happening. I am in Houston – left Credit Suisse 2 yrs ago because I sensed the direction. wow, this is really happening.Won’t stay here long term though, Mexico will collaspe BIG TIME soon – cantarell.People down here are buying land, tractors and GUNS but none of that will matter when 20 million starving folks show up.I came to Houston to watch the collaspe – but can’t really believe it is happening. wow
You know, this all is almost comical (if not for the fact that people will go hungry). The value in gold is it’s value in money. If money is worthless then gold is worth a lot of worthless money OK, OK… yes, gold, or anything which is a lot harder to manipulate (such as fiat money/electronic bits) and is REAL has more viability as a trade medium.Anyway, we now return you back to the economic collapse…
western civilization was preserved by a bunch of monks and intellectuals who sought refuge on an island off ireland. The first king who knew how to read was Charlemagne – thats right – from the fall of the Roman until Charlemagne – 0the dark ages
Friendship One, I’m finding your posts to be highly xenophobic. Clearly there’s a disconnect from “friendship” and your divisive words…
are you insane? what a fantasy, are you a ZIONEST? sounds like a real sick fab=ntasy to meso sorry .. and … after a few more million Iraquis and Palesu=tinians are killed – sweet dreams mr maniac
Zionist wacko from hell -
“and in a world that’s gone insane they say I’m mad?”
Now you know why people go crazy- they find out this stuff and then can’t figure out how it can continue! Also says why some leaders appear insane. It takes an extremely strong person to handle this.My own brother is pretty smart and knows that this is all messed up and will eventually crash. BUT… he says, he just doesn’t think that it’ll happen soon. His reasoning? Because he was just retiring and he wants to go play golf!I’ve been the black sheep in my family, enduring near ridicule as I’ve run around claiming that “the end is near.” I lost a wife (of many years) over this (and funny, she now gets IT and is better prepared than I!). I have defied logic, I haven’t jumped!I’m not a follower of (modern) religion, but I’d have to say that the following writings address/speak to this and gives me some sense of comfort (1:32 esp):Proverbs 1:20-33http://www.biblegateway.com/passage/?search=Proverbs+1:20-33
me layman so mine is layman view. the real side of these of events – Real and hard assets like factories, plants & machinery, computers and the networks etc etc are there intact. Also real working capacity of the hands and brains of the earning members of the households are intact. Also the real capacity to consume “Roti, Kapda aur Makan” of the population are still there.Only thing which is in trouble is the ability of the society to mix al those real components in a healthy way and keep those running.Situation is like that the dinning table full of foods containing dishes and also surrounded by people having suffient appetite to consume those. But they were given spoons of length which can feed at the opposite end of the table but not himself. Till now everybody is trying to feed himself with his spoon
They now have super tasers for crowd controlhttp://www.infowars.com/?p=5171
YES this is what should be talked about before everything else. We all could have looked at it and made tv to talk about it. If we spent more time on this then we did wuth fighting the bailout we could maybe have found a solution. But in the end all of us just follow what tv tells us to do
From fantasy finance to global crashWhen corporations at the heart of American capitalism, Ford and General Motors, find themselves close to bankruptcy, there is no surer sign that financial mayhem is turning into economic disaster for the masses who actually work for a living rather than speculate with other people’s money and lives.As Wall Street crashed (again) yesterday, the car giants found themselves in the eye of the storm, their shares valued at next to nothing. Sales have slumped as lending to consumers dries up. Both Detroit corporations had their credit ratings reduced to “junk”, making it impossible for them to borrow. Bankruptcy looms as the unthinkable becomes reality.In Britain, the trade deficit between imports and exports is the biggest since the end of the 17th century. Paul Dales, UK economist at Capital Economics, said the data supported other evidence suggesting that Britain entered a recession in the past three months. Exports orders have fallen rapidly as the global economy goes into reverse.So as finance ministers from the major economies began to gather for an emergency session in Washington, we had this admission from Alistair Darling yesterday: “The world economy is changing. Sticking with the solutions of the past is not an option. Now, more than ever, we need new ideas.” But this is the man who has been a willing, even fervent promoter of the no-alternative school which holds that global capitalism is the only game in town.So all of their energy, as well as our savings, taxes, pensions, livelihoods, and council services, are devoted to the task of ensuring that the system survives. The “new idea” is that politicians pledge to work together to do “whatever it takes” to restore “stability”. The plan is that the bankers cash in and the rest of us take the pain. In that, all the major bourgeois parties are agreed in an outbreak of “bipartisanship”, which meant the House of Commons devoted an entire 19 minutes to the crisis yesterday. Democracy? It’s a luxury at a time of national crisis.Certainly there can be no effective action to prevent the descent into an unprecedented slump. And the market speculators know it, selling shares not just in banks but in retailers and manufacturers. The souring of relations between Britain and Iceland, with the government using anti-terror laws to freeze accounts, shows how the breakdown of the global financial system turns friends into enemies overnight.We at A World to Win are not alone in pointing out that following the 1929 Crash, it took a decade and a half of the Great Depression and the destruction of surplus productive capacity and tens of millions of human beings in a world war. Only then could the 1944 Bretton Woods agreement establish the basis for restarting the process of profit making and capital accumulation.The post-war period of growth induced by a controlled expansion of the money supply began to suffer a series of worsening setbacks and shocks from the end of the 1960s. Control had given way to uncontrolled inflation and the Bretton Woods arrangements broke down in 1971. This left the world prey to three and a half decades of naked credit-led growth. This produced global corporations and subservient governments which encouraged gross over-consumption.It had to end. More and worse financial shocks reverberated around the world throughout the 1990s. The bursting of the dot com bubble in 2000 was the writing on the wall. When the outpouring of commodities bought on credit overwhelmed the consumers’ ability to service their debts by 2004, the game was already up. (NB Chancellor Darling).Darling says that “All forecasters, including the International Monetary Fund, have been surprised by the profound impact of this shock.” Not us, chum. We wrote about it in 2004 in our book A World to Win. And we continued to study it until, at the end of 2007, we published A House of Cards, with its prophetic sub-title, from fantasy finance to global crash.But Darling is right about one thing, sticking to “solutions of the past” won’t do the trick. A revolutionary break with the past is needed in opposition to international plans for bailing out bankers while ordinary people suffer. We’ll be discussing our solutions in London on Saturday week, October 18, at the Stand Up for Your Rights festival.http://www.aworldtowin.net/about/standup.htmlAnd, we can promise you, we won’t be talking about how to save the present financial and economic system.
The food doesn’t magically appear. There’s only so much farmland (and so many wild animals).Most of that food has been generated through the use of fossil fuels, and it’s the decline of fossil fuels that we’re now starting to fully feel. Markets have run on oil, oil has lubed the gears. The gears are now starting to seize up as oil runs low.You’ve got one part right, and that’s that we have to step up to the plate, we’ve got to realize that WE have to work for ourselves: we’ve got to replace machines if we are to survive. We here have the luxury of intellectualizing, but most of the world’s population doesn’t (2/3rd of which lives on $3/day or less).We mustn’t fool ourselves that if we just take over the existing machinery that we can make it all work. The machinery is failing, it will NOT be able to sustain us…
Watch Jim Rogers on CNBCfdsdf on CNBC, he like so many of the posts and other comments suggests that right now we are in massive de-leveraging (deflation) that will be followed by significant inflation (money printing that’s going on now) – He is concerned about currency and bond breakdowns – He is in Yen and Swiss F. and agriculture commodities
that will come in due course in the form of higher interest rates
another option would be to copy the text, paste it to notepad and add a few line breaks to it yourself so that it becomes more readable. Then read it from notepad. But I agree with you that it would be better to have the line breaks there already.
it’s different this time
London Banker blog up: Turbulence and Trends
My friends, a few weeks ago, Germany’s finance minister stood before parliament to proclaim the death of the world financial order.”The US will lose its status as the superpower of the world financial system. This world will become multi-polar with the emergence of stronger, better capitalised centres in Asia and Europe”That’s what Peer Steinbruck said and he was spot on. The global markets right now isnt just a recession…its not even just the biggest recession in decades.What we are witnessing is nothing less than a massive realignment of global economic power. Economic and financial power is shifting eastwards faster than almost anyone could have imagined and its causing huge disruption in the finacial markets. We are about to see the biggest transfer wealth in history. By 2010 the Western economies will be in irreverisble decline. The Oil-rich Arab countries and Asian industrial powerhouses will move to the centre of the global economic universe.By 2010 Oil production by Non-OPEC countries will be in decline and this is terrifying for oil-dependent Western countries. It leaves OPEC in total power and Western leaders know this. Soemthing even more frightening is happening and mainstream media has kept quiet about the coming financial tsunami.On September 18th the Gulf Co-operation Council took the first steps towards setting up a common Gulf currency. They have been talking about this for some time. A few weeks ago GCC finance ministers approved a draft agreement on the general structure of the monetary union. They are now discussing the location of a central bank. Bit like the eurozone. A final agreement is meant to be signed the end of this year. The target date for the new Gulf currency could be around 2010. This will have an enormous impact on the world economy. The reason??You can bet the Gulf countries are going to price their oil in their own common currency. THE NAIL IN THE DOLLAR’S COFFIN. The almighty dollar receives a huge ammount of support from being the standard currency for international trade. Oil is prices in dollars, bought and sold. Consider the impact on the dollar when when those countries say they don’t want to be paid in dollars anymore? It looks like the dollar will have its legs kicked out from under it in the next couple of years.The great money merry go round has broken down. One of the clearest signs of that shift of power are the buy-outs and strategic investments that the Arabs and Asians have been making in Western assets recently. Nomura has snapped up Lehmans for $2.00 (yes just two dollars!) The Gulf state of Qatar is the biggest shareholder in Sainsbury’s and Barclays. Citigroup had to go to the Arabs and Asians to keep operating, the list goes on and on. All that money drains out of the West and undermines the economy. This trend has been gathering speed for a long time. But the smart chaps in Washington, Wall Street, London were able to ignore it for a long time. The reason? because a lot of that money made its way back to Western countries through the all powerful financial industry that has just collapsed.The US & UK governments whine about how the “global credit crunch” is at the heart of the problem but that is a flat lie. There isn’t a global credit crunch, this is just a Western problem. The Gulf is awash with capital. The banks are still lending in Asia. What about HSBC?? Their economies are growing and their profits are rising.When the dust settles and unless the West comes up with an answer… there will be a NEW EASTERN ECONOMIC ORDER.
So to save the system we need a strong man, a dictator. Someone who has the authority to make any decisions deemed necessary without needing approval from the Congress or the House.
Just now on CNBC 6am NYT (by the way at CNBC.com they offer a 7 day free trial for CNBCplus live streaming) the suggestion was finanicals are tanking not because of the shorts but money going to cash, gold etc. Bill Fleckenstein who has been short the market for months has cashed out for safety reasons.
Here here, This bog blob of writing hurts your eyes, so im skipping right through!
Prey tell, why Houston? e.g. alternatives such as Malibu, Aspen, Jackson Hole, Naples FL, Canada, Bermuda, a desert island somewhere
sounds like an invitation for the anti-chirst.
thank you for that Paco. It is useful as it gives a good picture of what could happen in the U.S.Of course I wonder what currency would be good to have in U.S. if the USD loses its value? Perhaps Euros, considering that it can be difficult to buy e.g. food with gold.
Here’s where reality sets in:From http://www.bloomberg.com/apps/news?pid=20601109&sid=aXCtv.lATO8I&refer=homeThe 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley’s chief economist. Two weeks ago, budget analysts said the measures might push deficit to as much as $1.5 trillion.—Finally I can see the end of the military-industrial-complex. It’s just too bad that it will take a collapse to realize it.
Overnight Libor way down 5.09 to 2.463 month Libor 4.75 to 4.81
TED slightly lower at 4.2
Thank you Sir for sharing your views with us. Yours and Prof. Roubini’s blog and comments gave me more insight into the financial system than I got from any other sources during all the 35 years that I spent this small planet so far. Thank you.
Libor has just gone up !!!! we are all doomed
Libor has just gone up !!!! we are all doomed
Nothing like humor to help make the point… violate the fundamental principles and, well, you’re “freaking doomed!”From http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG100908.html (the Great Magambo):Well, the estimate from (as I recall) the International Monetary Fund is that the global total of derivative contracts outstanding is $1.125 quadrillion, whereas global GDP is about $50 trillion, although both numbers are so big that I couldn’t make any sense of them even if I was sober, and being sloshed, I revert to more primitive responses, like screaming in fear and holing up behind the massive blast-proof door of the Mogambo Bunker Of Raging Panic (MBORP).Only here, safe amongst gold, silver, guns, frozen pizzas and stacks of adult literature of the “Hot, Nasty Ladies” variety can I finally relax enough to calculate that to make this $1.125 quadrillion yield even a lowly 1%, it would take $11.25 trillion just to pay the interest! Hahaha! We’re freaking doomed! A quarter of global GDP is needed just to pay a 1% yield!
and what would the a-c’s middle name be?
Fidelity Reserves – My default option for my 401K is Fidelity Cash Reserves (FDRXX) and Fidleity NY Muni Market (FNYXX) for my personal account.I am buying some FDLXX (Fidelity US Treasury MM) just to be safe. Just wondering what everyone else is doing and if anyone has better options. I know I could also buy CDs, but that would lock me up for 3 months.
Just make sure that they have opted in to the insurance program as that program is not mandatory.
Financial porn channels suggesting Bush at 10:25 est will actually have something to say e.g. Fed will back all bank transactions – (I wonder if that will apply to banks in Asia and EU)- of interest the premier analyst of General Electric had some serious things to say on GEs just released (in-line) results GE results analysis by Jack De Gan
OK.. I have reached the point where I seriously doubt the central banks’ and governments’ understanding of the problem. Its like they never took economics. THEY SHOULD READ THIS.DELEVERAGE REDUCES MONEY SUPPLYREDUCTION IN MONEY SUPPLY IMPLIES LEVERAGED ASSETS MUST DECLINE IN VALUEIt is the second point that matters most. This is why there is credit crunch in the wholesale banking system. There is just not enough USD out there to support the asset base at its current price. We need a write off of assets to fit the current M3, or inflate M1 to historical M3. The former would need nationalisation as banks would be insolvent, but this is not necessarily a bad thing. The government takes over the aseets at a heavily discounted level, in exchange for direct equity stakes. Futhermore, all vested parties other than depositors should take debt equity swaps at different levels (depending on their seniority) to re-capitalise the banks after the deleveraging. In exchange for this, the banks should get warrants to participate in upside by the distressed assets if they recover. This should, logically, put them in a position to lend in a new regulated environment. To ensure the public doesn’t panic, the state will guarantee ALL DEPOSITS for 2years. In order to prevent abuse, new regulations should be tighter. ALL LENDING MUST BE BACKED BY CAPITAL. Glass-Stegall should be reinstated to prevent the deadly mix of investment banking and commercial banking to combine again. This should halt the M3 destruction. And here, MONETARY POLICY can actually work, because now the banks have the capital to lend and restart the velocity of money.There is one alternative solution to this. However, it is a short sighted one which will lead, in all likelihood, to world war 3. That is to start the printing presses and print USD. This will lead to WEIMAR/ZIMBABWE styled hyperinflation and ultimately will lead to global conflict.THIS IS A USD PROBLEM. No amount of action from the ECB, BOE, BOJ or other central banks can solve the problem. This action needs to be taken by the US and the US only. The other central banks can support the program bu working with the US Administration to reduce USD based assets in their respective banking systems. BUT ULTIMATELY, THE US MUST TAKE THE LEAD.Lets hope we get to the right solution. Otherwise, we are heading towards a very dangerous and ultimately disastrous future.
In order to know what really happened last Friday you need the text of the legislation — as opposed to remarks by legislators in the Congressional Record that can be revised and extended (translation: changed). Roubini cited Moran and Frank in the House and Krugman cited Dodd in the Senate. Krugman writes better than he speaks — see the blather on a recent Bill Maher show.I thought one of the options that Paulson had was an investment in a bank in exchange for garbage aka troubled assets as opposed to an investment in a bank in exchange for let’s pretend these debits and credits in a computer constitute money. It would have been nice if our leaders had read the legislation and took some time to think before voting. Paulson did not save his competitor Lehman and the cost today in credit default swap insurance may be $350 to $400 billion.What makes anyone think Paulson or Bernanke or anyone can save the financial system from sinking?
Consumer debt in UK 177% of disposable incomeConsumer debt in US 144% of disposable incomeSuper Bull Richard Branson on CNBC says markets could be down for years a la Japan – US and Europe – entrepreneurs will be the saviours
I inadvertently posted this on the London Banker site so I also post it here – as it appears contextually compliant..”According to the most recent data, released June 30, 2008 by the Office of the Comptroller of the Currency, the three largest American bank holding companies, JP Morgan Chase, Bank of America and Citicorp, had current outstanding derivatives contracts, totaling $179.4 trillion dollars. The three banks combined have total assets of just under $5.6 trillion!As of Dec. 31, 2007, according to the Bank for International Settlements, the total over-the-counter and exchange-traded derivatives totaled more than $675 trillion. However, these “authoritative” figures are, according to Executive Intelligence Review analyst John Hoefle, grossly understated. The true figures, Hoefle estimated, are well-above a quadrillion dollars. “@ http://larouchepac.com/news/2008/10/09/derivatives-hyperinflationary-bomb-crushing-international-fi.htmlH'mmm, why don’t I disagree with Mr. LaRouche here?Ho hum
I respectfully disagree with Prof. Roubini here. A 1.5% drop (to zero in the U.S.) is further pushing on a string. NOT A WORD MENTIONED ABOUT SWAPS, PROFESSOR! The real problem is swaps. From today’s Bloomberg:Lehman Failure May Spark Record Payout for Credit Swap SellersAn auction to be held today will determine the size of the payments buyers of default protection can claim after New York- based Lehman filed for the largest bankruptcy with $618 billion in debt. Lehman’s $128 billion of bonds were trading yesterday at an average of 13 cents on the dollar, indicating credit swap sellers may have to pay 87 cents on the dollar.“That’s a big hit,” said Byron Douglass, a strategist at Credit Derivatives Research LLC in Walnut Creek, California.More than 350 banks and investors signed up to settle credit-default swaps tied to Lehman. No one knows exactly how much is at stake because there’s no central exchange or system for reporting trades. It’s that lack of transparency that has increased the reluctance of financial institutions to do business with each other, exacerbating the global credit crisis and prompting calls for regulation of the market.
In at least one prior post, I quoted Mark Twain, who reminded us that”It is probably not best that we should all think alike.”A wise man, Twain.Thanks, AfA. You’re right, the conversations here wouldn’t be interesting at all if everyone already held the same views (well, perhaps they’d be interesting to Republicans!). Moreover, adversarial argument (and by that, I don’t mean being abrasive and nasty) is the basis adopted by our judicial system for sorting out the truth.In my experience, Americans sometimes can be a lot more conformist and less tolerant of other views that all of our touted constitutional freedoms would suggest. I’ve found that Western Europeans, by contrast, sometimes tend to be more inclinded than Americans to accept that others may have very different points of view about politics, religion, economics, and so forth, and they ordinarily do not to allow those differences to interfere unduly with civil discourse or a spirit of friendship. I always try to be respectful of others who are respectful of me, but I’m perfectly willing to take off the gloves when confronted with ill-mannered insult-mongers.SWK
I’m betting that we will witness the worst depression in history. There is nothing the West can do without great help from the East and therein lies the problem.This is what Arab and Asian countries have wanted for a long long time. Its all designed to take America and the UK out of the game, not militarily but economically. Run these two countries into the ground. Arab/Asian interests snap up all the knockdown assets/companies as payment for the debts the US/UK have both run up and have no ability to repay.The new dawn will redraw the financial map of the world and the centre of the economic universe will no longer be Wall Street/London.The West will be then tamed/humbled and we will have new Masters whether we like or not.A brilliant strategy. There is nothing the West can do stop this, nothing short of a world war
Personally, I don’t think this Lehman settlement is not a big deal for anyone other than monolines, since CDS tradres post maintenance margin on large moves. Provided the settlement price is around yesterday’s mark there should not be big dislocations. It’s big for monoline since they (generally) didn’t have to maintain margin….but if you are interested, here is the schedule.Lehman CDS auction timeline9:00 Accounts submit physical settlement requests9:45 Dealers enter inside markets and physical settlement requests10:30 Inside mid-market and open interest published13:00 Deadline to enter limit orders14:00 Final auction price (clearing price to clear open interest) and trades published
Talking about a reality check, I believe that the US and the UK et al have done this to themselves from within and it certainly isn’t in the best interests on anyone specifically or in particular, to have brought about a global economic depression of this nature; shall we call it then, er, serendipitous >But, it’s really just incompetence and stupidity of the Western “leadership”, and ‘fatal conceit’ on the behalf of economists who put their faith in assumptions.And, the choice between you having a Master or not having a Master, is entirely yours.Ho hum
Does anybody know who the major credit swap sellers are?
The US will just hire all those unemployed folks to make a civilian peace keepers force, or they will bring in UN troops-
What help from the East? First, it’s clear that the hypothesis that other economies could effectively de-couple from the United States is false. Second, the G7 economies account for 75% of the world’s economy, so how much help can emerging economies provide when their main market for consumption — us — is dead? Gee whiz, the State of California has a GDP twice the size of India. I just don’t see that your concerns are merited.SWK
SWK you have not understood my comment, a few weeks ago, Germany’s finance minister stood before parliament to proclaim the death of the world financial order.”The US will lose its status as the superpower of the world financial system. This world will become multi-polar with the emergence of stronger, better capitalised centres in Asia and Europe”That’s what Peer Steinbruck said and he was spot on. The global markets right now isnt just a recession…its not even just the biggest recession in decades.What we are witnessing is nothing less than a massive realignment of global economic power. Economic and financial power is shifting eastwards faster than almost anyone could have imagined and its causing huge disruption in the finacial markets. We are about to see the biggest transfer wealth in history. By 2010 the Western economies will be in irreverisble decline. The Oil-rich Arab countries and Asian industrial powerhouses will move to the centre of the global economic universe.By 2010 Oil production by Non-OPEC countries will be in decline and this is terrifying for oil-dependent Western countries. It leaves OPEC in total power and Western leaders know this. Soemthing even more frightening is happening and mainstream media has kept quiet about the coming financial tsunami.On September 18th the Gulf Co-operation Council took the first steps towards setting up a common Gulf currency. They have been talking about this for some time. A few weeks ago GCC finance ministers approved a draft agreement on the general structure of the monetary union. They are now discussing the location of a central bank. Bit like the eurozone. A final agreement is meant to be signed the end of this year. The target date for the new Gulf currency could be around 2010. This will have an enormous impact on the world economy. The reason??You can bet the Gulf countries are going to price their oil in their own common currency. THE NAIL IN THE DOLLAR’S COFFIN. The almighty dollar receives a huge ammount of support from being the standard currency for international trade. Oil is prices in dollars, bought and sold. Consider the impact on the dollar when when those countries say they don’t want to be paid in dollars anymore? It looks like the dollar will have its legs kicked out from under it in the next couple of years.The great money merry go round has broken down. One of the clearest signs of that shift of power are the buy-outs and strategic investments that the Arabs and Asians have been making in Western assets recently. Nomura has snapped up Lehmans for $2.00 (yes just two dollars!) The Gulf state of Qatar is the biggest shareholder in Sainsbury’s and Barclays. Citigroup had to go to the Arabs and Asians to keep operating, the list goes on and on. All that money drains out of the West and undermines the economy. This trend has been gathering speed for a long time. But the smart chaps in Washington, Wall Street, London were able to ignore it for a long time. The reason? because a lot of that money made its way back to Western countries through the all powerful financial industry that has just collapsed.The US & UK governments whine about how the “global credit crunch” is at the heart of the problem but that is a flat lie. There isn’t a global credit crunch, this is just a Western problem. The Gulf is awash with capital. The banks are still lending in Asia. What about HSBC?? Their economies are growing and their profits are rising.When the dust settles and unless the West comes up with an answer… there will be a NEW EASTERN ECONOMIC ORDER.
Gold not doing much — currently $907
I just leave the money in equities. I am in my mid 30′s and the market isnt going to 0 – lots of time left. Trying to time the market with a 401k that is trading mutual funds is a waste of time. As long as you continue to contribute you are averaging down weekly anyways. There are numerous studies that quantify the losses and gains with a perfect strategy, the underlying point though is that it is near impossible to find the days you want to be out and get back in.
Make sure you have enough oil in your lamp for the journeyMatthew 25:1-10Parable of Ten Virgins1 “Then the kingdom of heaven will be comparable to ten virgins, who took their lamps and went out to meet the bridegroom.2 “Five of them were foolish, and five were prudent.3 “For when the foolish took their lamps, they took no oil with them,4 but the prudent took oil in flasks along with their lamps.5 “Now while the bridegroom was delaying, they all got drowsy and began to sleep.6 “But at midnight there was a shout, ‘Behold, the bridegroom! Come out to meet him.’7 “Then all those virgins rose and trimmed their lamps.8 “The foolish said to the prudent, ‘Give us some of your oil, for our lamps are going out.’9 “But the prudent answered, ‘No, there will not be enough for us and you too; go instead to the dealers and buy some for yourselves.’10 “And while they were going away to make the purchase, the bridegroom came, and those who were ready went in with him to the wedding feast; and the door was shut.
Welcome to the New World Order, circa 1939 H.G.Wells book.Next no buying or selling without the chip!
Our second amendment has resulted in a country where there is just about 1 firearm per person. Admittedly, many people own more than one, and some own none. We are a country that is not governable by force.
Two big differences: 1) In a year or two, the US GDP will be much, much smaller but our debt is increasing. Debt/GDP will reach an all-time high. 2) In 1946, the money was owed primarily to Americans; now it is owed primarily to foreigners (Japan, China, UK, Brazil), whom we depend on to finance our government. Hence, there is less policy freedom as we need to please the foreigners even at our own expense. To default on our debts or start a run on the dollar would bring far greater misery to the US than a depression.
I have been wondering for a while if the destruction of the $65 trillion derivatives market effectively reduces the money supply, by wiping out so much of the fractional reserve multiplied dollars. Does that make sense?If the money supply is actually decreasing, then are the gold bugs and inflation hawks all wrong? I see articles stating that the Fed is not increasing the money supply with all these capital injections. Very confusing to non-economists like me.
thanks for the link to Jim Rogers
Brilliant! ,” man the weapons…”
The problem is that this is just the beginning.Credit Suisse’s famous arm reset graph shows that arm resets continue through 2011.On financialarmageddon.com, its pointed out that there are a large number of vacant homes, and that as economic conditions worsen the average occupancy rate will grow larger than the low 2.6 per household. People will move in with relatives, take on boarders, etc. Occupancy can comfortable grow to 5 per household. This will result in a growing number of vacant homes, foreclosures, auctions, and a further reduction in home values. Abandoned homes will be stripped of appliances and copper, used as shelter by the homeless, and burned down by arsonists. The bailouts have the effect of a fart in a hurricane.
Brilliant!if $ = zero, then gold = zeroexcept in India, China, Mideast, Russia, Germany…USA would be LOST w/o $$$$$ and would collapse like Zimbabwe———funny, but Jim Rogers omits gold in telling people where he’s investing
who knows…some people would probably say something starting with “W”
Here’s a reality check for you- no one put a gun to the heads of the West to buy oil from the Arabs or (cheaper) products from Asia.I sense more xenophobia here- “Arab and Asian” countries, “new Masters.” There will be NO new world order. There will be no controlling countries/continents from afar.I feel that you’re applying the past to the future, and, like the general fighting the last battle, you’re getting it wrong. It’s one big game reset in which the new game will be nothing like the old.
From a technical perspective, S&P 7,600 and Dow 7,200 would be the pre-Armageddon support levels.Art Cashin pre market comments “today or Monday, could be a real bottom” “volume 2-3 billion shares” ” if it’s a classic bottom look for a freefall early followed by a mid day massive reversal” He cautions that “this is a credit situation and if credit markets don’t unfreeze, this will no longer be a story of financials but of household names, blue chips and government solvency”It would seem that the consensus hope amongst the pundits is for a G7 intervention and global guarantee of interbank loans this weekend. Personally I am confident that the G7 can indeed accomplish that, once they decide on the desert menu: will that be cake or pie?
I got a call from the hotel Honors program asking which vacation plan I would prefer- I said “aren’t you paying attention to what is going on in the world???” The reply- “well that’s why we’re calling, because during a recession people need to get a break from it all” She said this while laughing.She won’t have a job soon, and she won’t be laughing.
TED SPREAD AT 448 and STILL CLIMBING…S&P 870 or so and MELTING DOWN…
A fart in a hurricane? more like a hurricane of a fart.We have all been pooped on with immense force.
In the next millenium explorers will discover buried in the perma-frost something once referred to as the Credit Markets. Friends they are approaching absolute zero.
Fidelity opted in to the insurance program, but the money had to be in the fund on 9/19/08. Anything later than that is not covered – Treasury rules.
It’s one big game reset in which the new game will be nothing like the old.
That is what I think as well.
Not at all! far from it. I certainly do not have a fear of other countries, but fact are facts. Do your research. I have no problems with Arab/Asian countries after all I’m moving to Dubai.If im getting wrong then please enlighten me
Wow. That Kool Aid must be tasty.Believe the lies. They want you to continue to contribute because they need your money. Don’t worry. They will lose it for you if don’t pay attention.
one corrupt government.
Exclusive: Inside Account of U.S. Eavesdropping on AmericansDespite pledges by President George W. Bush and American intelligence officials to the contrary, hundreds of US citizens overseas have been eavesdropped on as they called friends and family back home……Kinne described the contents of the calls as “personal, private things with Americans who are not in any way, shape or form associated with anything to do with terrorism.”…In testimony before Congress, then-NSA director Gen. Michael Hayden, now director of the CIA, said private conversations of Americans are not intercepted.
Yes, this is pretty clear. And consider that many Western countries are home to peoples who are accustomed to having more people in a given household (primarily due to the fact that non-Western countries have historically been poorer).But keeping these dynamics in view are essential. Unfortunately most decision-makers miss such important (real) details.Just think, all those folks living in gated communities will end up opening the gates up and taking in boarders!
Why should I enlighten someone who implies that I am not doing my research? Sorry, but you cannot piss on my foot and then ask for enlightenment.Enjoy Dubai! hahahaha!
Tlhanks, Pete. Very thought provoking.
why is the bond market tanking?
flight to cash to cover positions – and bury in yard
they were listening for stock tips
Gold will be the next asset for Average Joe to lose money on
Hmmm! Beware the man who keeps his mount shut
John Ryskamp got it right. I just read a business week article that explains in layman’s term preemption. It is indeed a legal approach the Bush no regulation folks used to prevent states who knew of predatory lending and other shenanigans from stopping the run-away train. Since most of us are not lawyers on this site it was easy to not fully comprehend what he has been talking about.Here is the quote from the Business Week story (concerned two Attorney Generals from Iowa and North Carolina who sought to stop the madness)…One cause, though, has been largely overlooked: the stifling of prescient state enforcers and legislators who tried to contain the greed and foolishness. They were thwarted in many cases by Washington officials hostile to regulation and a financial industry adept at exploiting this ideology.The Bush Administration and many banks clung to what is known as “preemption.” It is a legal doctrine that can be invoked in court and at the rulemaking table to assert that, when federal and state authority over business conflict, the feds prevail — EVEN IF IT MEANS LITTLE OR NO REGULATION. CAPS TURNED ON DELIBERATELY.”Fundamental Disagreement”"There is no question that preemption was a significant contributor to the subprime meltdown,” says Kathleen E. Keest, a former assistant attorney general in Iowa who now works for the Center for Responsible Lending, a nonprofit in Durham, N.C. “It pushed aside state laws and state law enforcement that would have sent the message that there were still standards in place, and it was a big part of the message to the industry that it could regulate itself without rules.”I also now see why he was/is so adamant that we should stop foreclosures.
Dow just opened down 919, but now it’s only down ~500. It’s at 8000 exactly now.
Dow down by over 500 points in first few minutes of trading on Friday (Oct 10′th).This market is GONE.Major crash underway.Expect emergency actions to drop short selling and close markets.It’s probably going to happen.PeteCA
Yep. You got it right.WOW!!! This is really happening.PeteCA
Beware the head fake. All the pundits say early plunge followed by massive reversal will mark the bottom. If you subscribe to that ask the question: what constitutes an early plunge? The risk is that a 600 point drop that goes back to even may be a head fake
It could be coming a LOT sooner than anyone thinks.And if it does – kiss the prices of US bonds and treasuries goodbye.PeteCA
THERE IS NO WAY OUT OF THIS MESS NEITHER FINANCIALLY OR GEOPOLITICALLYNOTHING WILL HELP; ANY FORM OF INTERVENTION BY ANY ONE WILL NOT HELP.AT THE END OF ROAD KING MESSIAH WILL COME AND RESOLVE ALL THE PROBLEMS IN ONE SECOND.ALSO AVIAN FLU OR BIRD FLU WILL CAUSE A MAJOR PANIC TOO.
shorts going to cover today, not wanting to be in market over the weekend
I was following DOW on Google Finance with changes (“refresh”) every few swconds and I saw DOW went RED 1300 points. Now it is RED “only” 191.Can anybody tell me what happened?
There will be huge debates about how this thing developed. One aspect that will get a LOT of discussion … was the decision to first ban short selling, then to drop the ban. I thought the original ban was ridiculous. It was! But once they enacted it, and then took it off, it opened the floodgates to some serious short selling by the hedge funds. This just happened to come at the very worst time. I don’t blame the funds. But their actions did accelerate a process of financial decay, possibly contributing to the market crash.PeteCA
Not only that, but we’re out of coffee.
Looks like huge fluctations on the Dow.Probably desperate actions by the PPT to stop the selling – big injections of cash into the futures markets.I doubt it will stop the enormous flight to safety.I still think they’re likely to close the market if continued selling is going on.PeteCA
and ive just run out of sugar! lol
Also Yahoo was completely crazy. One thing I noticed is that the previous close price they report is not yesterday’s but two days ago. This is why > 1000 points losses were reported. I think
I can only tell you that something similar happened on Yahoo finance (-900 to -220 in seconds). The insanity on the markets is too much for those online gadgets.
It is a head fake, but elliot wave analysis says third of a third wave down.Third waves are the most fearful sentiment displayed on this blog.But a fourth wave counter trend rally for 8 to 10 days (head fake) before resuming fifth wave primary trend down to approx. DOW 7200.
The end of the world is coming and I’ve nothing appropriate to wear….
@Friendship One: “In NR’s interview on 9/25(?) he said that his massive fiscal stimulation of the system would NOT be inflationary in the long run since the govt. could retract the cash infusion just like it injected it. Hence, no hyperinflation. He was not advocating a monetary package which he said would be inflationary.”Sounds like make-up words for how to get taxpayer money. You need to understand just one thing — there’s only one source of the money and that’s from Americans who have the money, not from those who have debts. If you’re going to provide liquidity and/or buy debt you do it with it with Americans’ money. You don’t do it with magic.
Amending that comment. Looks like the Dow opened several hundreds of points down – due to futures markets. Probably the PPT tried to stop that immediate downfall with a big injection of cash. There will be continued volatility today – anyone who’s a fan of market manipulation can watch today’s market with fascination. Most normal investors wil still head for safety, IMHO.PeteCA
Tiny insignificant glitch, makes only a differnce of a few hundred billion dollars market value.
It’s a market for the tricksters today. It’s Friday. There’s no sign whatsoever where the markets are headed today. It’s big blocks moving one way or another. It’s going to be a ride, IMO.
bingo – wait till after W speaks around 10:30 NYT and then (unless he announces something specific) we’ll see some real selling and with that hopefully an opportunity to jump in the deep end – Don’t forget the NYSE Circuit Breakers that kick in
But you’re right about one thing. Updates from Google really DON’T make a lot of sense when the Dow is crashing PeteCA
So any guesses on the speech by Big Dubbya today ???”Don’t worry, the US economy is strong …”"Wall Street was drunk …”"If you guys think I’m gonna’ stop the war on terrorism, you’re dreaming!”PeteCA
Well, I’m just a bit skeptical. You could be right, but I haven’t seen enough evidence yet to convince me that this is inevitable or even likely.Thanks for expanding on your point. Very interesting perspective.SWK
Points well taken.SWK
Anybody know what the LIBOR and the TED Spread are doing today?PeteCA
This is what a massive reversal looked like in October 1987Close Friday October 16 — 2,246Open Monday October 19 — 2,164 — Intraday low 1,677 — intraday high 2,164 — Close 1,738Open Tuesday October 20 — 1,738 — Intraday low 1,616 — intraday high 2,067 — Close 1,841
Keep talking W – I’m short the market
Lehman auction – initial results 9.75 on the dollar — that’s 9.75 cents
You have been sold a bridge, sir. Remember, it took stocks almost 30 YEARS to recover from 1929. However, for the sake of everyone who bought into (was forced into) the scam I hope you are right and I am wrong.
.TEDSP:INDTED Spread4.5245 +0.2923 10:05 0.00US0003M:INDBBA LIBOR USD 3 Month4.8188 +0.0688 06:35 0.00 0V2X:INDVSTOXX Index74.859 +16.466 10:19 0.00 0VIX:INDCBOE SPX VOLATILITY INDX65.56 +1.64 10:33 0.00 0 ?VXN:INDCBOE NDX VOLATILITY INDX73.88 +4.22 10:34
3month TED = 451 bps. 3month LIBOR-OIS spread (much better indicator) = 362 bps.
He expects the innovative, industrious and resilient Americans to be able to pay back all this debt.We’re also smart enough that we will refuse to do so, unless it’s largely inflated away. Print, Ben!
The infrastructure will still be in place after a crash, i.e., food production, factories, know-how, etc. The question is: Will we allow this system and setup to continue? Will we allow the same parasitic class to organize society in their interests, or will we take a new road where the means of production and distribution are socialized for the benefit of everyone?The people who live off of us like to say this is the best of all possible worlds. Let’s see what America looks like when it is no longer able to plunder the wealth and resources of the people of the world.
Alright. You win. I am the messiah. I have come. What? Not better? Shit! I guess you were wrong. What the hell. I had as good a chance as anyone of being “the one”.Like the billions before you, you continue to give into your fears. There is no God who is coming to save us. Look inward – not upward if you want answers.
correction 3mth Libor 4.82
The Dow has bottomed, at least temporarily. There will be a massive short covering rally in the last 45 minutes of trading today, with the index closing up several hundred points.
OUCH! Not much happiness there. This thing ain’t nearly over.I wonder how many investors are willing to cover their short positions, when we’ve got these kinds of conditions still existing?PeteCA
Giraf. Yep. I wsouldn’t be surprised to see a massive cover of shorts either at the close of trades. But the real story is that enormous damage has been done to the Dow and S&P 500. Even in the best of circumstances it would take years to recover from that. The critical long-term level on the S&P500 was somewhere around 1,000. We’re over a hundred points below that now. Even if a shyort covering rally brings things back up, the long-term trend has been violated. For older Americans, it is vastly bad news. Peoples’ retirement plans and 401K’s are vaporizing, and anyine close to retirement is probably never going to get it back (if they didn’t protect themselves in the first place).PeteCA
From Naked Capitalism, possible commodity shortages in as little as 2 weeks:Not only are banks now leery of lending to each other for much longer than overnight, they are also starting to refuse to honor letters of credit from other banks. From the above-mentioned reader:At the end of the day, if every counterparty is bad then you don’t have a market and you don’t have an economy. I spoke to another friend of mine this afternoon, whose father has been in the shipping business forever. Pristine credit rating, rock solid balance sheet. He says if he takes his BNP Paribas letter of credit to Citi today for short term funding for his vessels, they won’t give it to him. That means he can’t ship goods, which means that within the next 2 weeks, physical shortages of commodities begins to show up. THE CENTRAL BANKS CAN’T LET THAT HAPPEN OR WE HAVE NO ECONOMY, LET ALONE A CREDIT SYSTEM.We spoke later in the evening and said he had heard of another instance of a trade transaction failing, different parties entirely, this a shipment of coal, again due to the unwillingness of the seller’s bank to accept an LC from the buyer.Update 12:10 AM: Confirmation comes from the Financial Post, “Grain piles up in ports” (hat tip reader Vox Sanus):The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don’t trust the financial institution named in the buyer’s letter of credit, analysts said.”There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit,” said Bill Gary, president of Commodity Information Systems in Oklahoma City. “The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy.”So far the problem is mostly being felt in U. S. and South American ports, but observers say it is only a matter of time before it hits Canada.http://www.nakedcapitalism.com/2008/10/international-trade-seizing-up-due-to.html
Another ouch!Was I wrong … is this really going to be a “fair” pricing?Or is this just the best they could do to fudge the assets?PeteCA
Warning to Workers With Money In State Pension FundsJust a quick note of warning … to anyopne here who is expecting to collect money from state pension funds.There are now at least 31 states in the USA that have budget problems. These problems range from mild to severe budget crunches. Some states are caught in a real dilemma because they need to borrow short-term, to bridge the gap before they get another payment from state tax incomes. BUT, some of these states are being refused borrowing – because their debt ratings don’t look so good.One avenue of approach is for the state legislatures to temporarily dip into the money set aside for state pension funds.My warning to you is … watch out! Don’t let them do this!!! It might be practical for those states who only have minor budget shortfalls, and whose legislatures are seriously trying to get the budget under control. But for other states that have enormous shortfalls, who says how long they will take to pay back your pension money – once they’ve got a hold of it???My advice is … DON’T let them get their hands on your retirement money!America is going bankrupt in a credit crisis.Don’t let them get their hands on YOUR money!!!PeteCA
One of the geniuses on CNBC just made this important point – we can’t have too many more 700 point down days because we’d be at zero — Thanks for that Melissa Francis of CNBC -
“Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”“The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”This is from Bloomberg. Any comments
The PPT will not let the S&P hit 666! That would betaboo!
He is nuts. Hopefully other European leaders know better. Not betting on it thou.
sounds like it would be evil as well
I don’t disagree with your comments. Anybody that thinks today, if it is the bottom, is the start of a new bull market is kidding themselves. Far too much damage has been done. All this nonsense that the retail investor is fed about stocks for the long term? The Dow is now back to its 1998 levels. If you didn’t sell (because you shouldn’t, market timing doesn’t work they tell us), you’d have had money at risk for 10 years with no return.Something big is coming from the G’s this weekend and I’m sure the pros don’t want to go into the weekend short.
Well … just how comfortable do you feel about the idea of letting the world’s political leaders re-write the rules of global finance? It seems a bit like putting the Girl Scouts in charge of the brain surgery unit at your local hospital. But I wouldn’t be surprised if they do shut down the global markets today.PeteCA
Actually a lot of the big dogs were getting out yesterday – the burst to even after the intitial plunge this morning can also be attributed to the shorts – don’t hold your breath that they will save the day – the smart ones are out and are burying their gold – Only a resident of Vegas would go into this weekend long
He even say not to sell specific stocks (not hos own Mediaset, strangely), because all is well.
Rich, Miss AmericaA little help please…a few comments on what tipped us over the brink, velocity of the fall, and a likely bottom.Belated thanks for your 2-part analysis. Many bitch; few actually invest in critical thought, fewer still make that investment for the betterment of all.
Politicians have done far more damage already so what is there to stop them to close the markets if that move can serve to their benefit?
I honestly still cannot believe that we’re in the middle of a major global financial crisis that was started by the United States – and yet the President and the US Congress are not even holding urgent discussions to balance the US budget. Unbelievable! If it was any other country in the world that had created this mess … what do you think the intl. community and the IMF would be saying at this point?Meanwhile … today Wall St leaders are trying to figure out a way to make the CDS market problem go away. But my interpretation of the CDS issue is simple. These instruments are legal contracts. If you sell CDS insurance … then you’re obligated to pay the other party (in the contract) if there is a bond default. End of story! The lawyers will take these agreements to court. And can you blame anybody – for not wanting to recover their losses that were negotiated in a free and fair agreement? I can’t. Therefore, in spite of all the shucking and jiving at the top of Wall Street, I don’t see how anybody gets off the hook here. A financial contract … is a financial contract. Ultimately the courts will have to decide this one.PeteCA
Lehman Swap Auction Initial Results Show Payout of 90.25 Centshttp://www.bloomberg.com/apps/news?pid=20601087&sid=aiMj9KoKg_CM&refer=home
@PeteCA, always find something interesting in your comments. I can’t understand WHY interest rates have not begun to climb (a la Volcker)? What must happen to force them to?
Miss in on holiday, supposedly away from computer and markets.TPTB have lost control. The stock market is not critical right now, can crash how it wants to.Credit market is what counts. And it’s frozen solid. That is the problem for them.
who can help Morgan Stanley ?
My two cents worth …1) What tipped uns into this crash was that the major indexes (Dow, S&P) broke through the bottom of the trading channel that they were in. That provided a strong signal that it wasn’t just a bear market – something worse was happening.2) Selling was aggravated when hedge funds started placing short positions again (ban on short selling was lifted), and when large funds panicked because very long-term trading indicators were violated.3) No-one knows a bottom. Sometimes closing markets tends to halt the momentum of downwards selling. But in this case … the next morning when we wake up – we’ve still got a credit crisis on our hands. Temporary fixes are not doing the job. No-one knows where the resolution goes on this.PeteCA
Although neither choice palatable, if I had to choose, I would put my money on the Girl Scouts.
expressed another way they are worth 9 cents on the dollar — quite a haircut
As a woman, I find Hitchens’s insult neither clever nor even a legitimate analogy. To blame Hank Paulson for being raised a Christian Scientist is unfair. We do not know if he actively practices that religion, which is far from being a cult. The press would not dare blame the crisis we see today on the “cults” of Judaism or Catholicism or Mormonism, so why bash the Scientists, who are, as far as I can tell, almost uniformly positive, intelligent, rational thinkers (for the record, I was raised a Catholic and am now a member of no church). In denigrating Mrs. Eddy, a profound metaphysician who argued against “sheer superstition and incantation” in all of her writings, Mr. Hitchens reveals his fundamental ignorance about the nature of her overarching assertion of the unreality of physical matter. Even Einstein greatly admired Mrs. Eddy’s achievement in spite of his revulsion that a woman could have conceived it, stating that what she had accomplished would not be fully appreciated or understood for at least another hundred years.
The question that nags at me is: Is the U.S. government big enough to do everything it is claiming it can do? Look at Iceland. Just one bank had debt 100 times Iceland’s GDP. Now think this through. If one investment bank, that is leveraged 30 times, invests in CDO’s issued by another investment bank , itself leveraged 30 times, etc., etc. What is the TOTAL LIABILITY? No one knows. It has always intrigued me that anyone that can create confidence, can create “money” I issue and sell a $100.00 bond, I have created “money”. I have the $100.00 cash and the purchaser has something “worth” $100.00. Hyperinflation coming, folks. Buy gold.
based on the levels i am looking for in the stocks not to be named in the DOW and where they have reached so far, i do not think this is over. maybe the market will be closed for a couple of days next week – if it closed for the entire week, i will file bankruptcy out of principle… i think 8,000 is going to go in the DOW, the long term trend line was missed in 2002 and 2003, NOT this time – we will hit 6,500 ish with a one day exclamation point 1,000+ day and then the dust may settle for a while…it was really neat to see markets on a 5 or 6 put 3 dollars wide this morning ! it was really fun when my trading app was slow sending orders in… if you are toying around with this stuff LIMIT orders folks… if you are in cash and would like to get long stuff at some point, pick the absolute cheapest levels around where you think things could go and place limit orders to buy the stock there. if this is obvious sorry – this is the equiavalent of the wild wild west. if you are really clever and want to “play” you can sell calls against the stock you buy. with the VIX at 74 ! (Mommy, i want my bottle. Great Great Grandmother of the 87 and 29 crashes.) the calls should have a lot of premium in them which you get to SELL and collect against your stock. you do have risk of the stock going down more against you, but the premium on the sale of the call offsets your downside. upside on the stock you buy is limited up to the strike price you sell the call at. this is AFTER the down 1,000+ point day in the DOW if it actually happens…in the event 8,000 is the level for now, some cash has been taken off the table for good. now does anyone else see the DIRECT parallels between investing and gambling? oh gee, look our entire system is based on a bet that prices always go up ? new system anyone ?
How come the news outlets are reporting a DJI decline of 660 points at the opening and the graphs of CNBC.com and bloomberg.com are only showing a 440 point decline? How come we can’t seem to get the figures on the current rate of mutual fund redemptions? (12:19PM EST)
Our lack of understanding of global economy interdependence, explain how far this financial crisis has gone.At this point of no return ,it is important to keep clear what the priorities are.At the same time, it is also important to make the distinction between what it is necessary, and what it is sufficient. Probably its is necessary to support banks at full extent.It is necessary full scale global coordination.It is necessary to design emergency Keynesian style programs, for critical months ahead .However those actions will no be sufficient, unless a clear leadership emerge to cope with the implementation and effective comunications of these actions to global markets.Too many variables at hand, make higher the probability of failure, therefore emerging economies should be considered once the first order actions are under full implementations.-
At least the Girl Scouts know how to run an organization in the black. Amazing markup on those cookies.
Too many people have been calling for a bottom all week. My fear is we have a long way down to go. This is not a normal “bear market.” This is a historic, systematic collapse in confidence in the global financial system. We’ll see the fruits of fractional reserve banking and fiat currency on a global scale, and it will not be pretty. The bubble will pop, and let’s hope we can rebuild with sound banking and a stable money system based on supply and demand rather than government decree.The Truth Shall Set You Free – Extreme Volatility
Are you A lubavitch Chassid?
Not even gambling is a correct analogy. Rigged gambling maybe. Government issues fiat currency (not gold based), government steps in when markets “correct”, government bans short selling when badly effected companies complain, government reimburses losses for selected players, government takes over ownership of some players when they lose. The casino might even have to close for awhile (see comments of Italian President this morning). Would YOU play in that casino?
Taking The Chopping Block To The Top Of the CompanyI was reading through some data from Contrary Investor this week, and got to thinking a bit. Their charts do a great job of showing the explosion in corporate buy-backs of shares since 2003. Literally, buy-backs of shares by corporate America grew enormously from 2003 to 2008, eventually exceeding $800 billion per year at the peak level. All this, so these companies could boost their share prices.Now think about it. Vast amounts of corporate profits were poured into these buy-back schemes, and guess what just happened this past week? It was all vaporized in the biggest US market crash we’ve seen in decades.Great job, corporate America!!!And we’d have to ask … why on earth did companies engage in such brilliant investment behavior? When US industry needed to re-invest capital in a critical bid to improve its competitiveness, why did they plough all their profits into share buy-backs? Well, I guess it must be because all those CEO’s and CFO’s get those big performance bonuses – whenever the shares of their company go up, right????What we’re seeing here … is a combination of outrageous greed at top levels of companies, a complete disregard for workers and staff at the production level, and ultimately an enormous failure in the way that our management schools have educated their students in America over the last two decades.PeteCA
well said thanks for clearing it up even more for me…
Ever read J.K. Galbraith’s book on the 1929 crash? It’s a howler – how all these political and broker types kept saying “What a great opportunity to BUY!” and “Everything is just great!”
it is said that MS is another Lehman…
NO JUST A SIMPLE YID.
There must be some inflation of the debt — I didn’t say hyper inflation. Otherwise the debt burden, contracted in nominal terms during a time of a bubble, is too much for Americans. American policy should not ignore the interests of American people who must not be left with overly burdensome foreign debt.
Yeah, I forgot, something to do with a mouse…
The geniuses at Ford Motor not only borrowed $23+ billion last year but also wanted a big piece of the US Government’s offer of the $25 billion “auto retooling” fund. Bye, bye Ford. And GM fervently says it is not considering bancrupcy. Hmmm what do their banks say? What is their current share price vs book value? Remember folks – something is only worth what someone is willing to pay for it. That was the principal behind “mark to market”. Of course some folks would rather value an asset based on what they think it is worth. Oh really?
this is simply amazing stuff you all see silver down 12% ?
It means Economic collapse ! when it happens prepare for riots then martial law
What other sort of behavior would you expect from folks whose compensation is 60% pegged to the share price? Look at the consistantly high rate of compensation for Fortune 500 executives. It was, to tell the truth, an aristocracy, wasn’t it? It certainly wasn’t based on performance. Apre’ moi, le deluge…indeed!
first deflation – then inflation
That’s silver digits, you mean…
Yeah. Ignore it. You know silver. It drops … and then it skyrockets. Today’s situation is tragic – America is marching towards its own version of economic hell. We’re facing a collapse of the US dollar. It could come through global negotiations, or it could cdome through massive financial turmoil. But it is inevitable.PeteCA
because it lasted for a nano second — Consider that the initial plunge may have been engineered so as to create a (false) bottom. The PPT is working overtime and getting creative — The talking heads are doing everything they can to talk this market up point out every two minutes that we are well of our lows and probably had capitulation. Total and complete manipulation — but the market will eventually get it right
anyone know a company that tracks silver very closely which has options on it that i can perhaps conider a buy write on ? i know SLV but no options
It will be interesting to know if, in the fine print of a CDS “contract”, there is a requirement for the buyer of the CDS “insurance coverage” to delivery the Lehman bond to to the seller of the coverage. I understand that there were something like $400 billion Lehman CDS contracts outstanding. How many Lehman bonds were there outstanding?
So what I”m wondering is if everyone in the West, China, India, Japan, loses tons of hypothetical money (relatively speaking) in terms of house value and stock market value and banks go under owing tremendous amounts of debt won’t the wealth that’s left be worth relatively what its worth today?I mean, by default if we’re all newly poor won’t the candy bar makers just have to reduce costs of the candy bar in order to have anyone to buy their candy or else be left with tons of candy and no buyers?We all still have to eat, have transportation, educate the kiddies, pay the doc etc…It looks like we’re seeing that now in retail (eg., Ann Taylor’s unprecedented 60% off fall sale and massive sales on autos and or autofinancing). Shouldn’t these companies just go back to their employees and cut wages so they can afford to cut prices?I do understand that without inflated house prices people won’t be able to get equity loans or get into $100,000 worth of credit card debt and that alone might slow the economy everywhere but at some point don’t the banks just have to get a grip expect lower profits, tolerate more risk and do their jobs (lend to business.) Yesterday they had a story about german banks that paid 4% and how there’s a trillion dollars worth of wealth in those little local banks. And of course the Germans export like maniacs and have I think a good standard of living (perhaps fewer uber riche). But isn’t that how you build a safe stable economy and then eventually folks have a bit left over for R&D and expansion?And if the US & Europe is essentially bankrupt isn’t the big loser going to be China for investing in us and the workers in the developing countries who will have to take paycuts on everything from raw materials to labor. The Chinese thought they’d make a big profit on us and we don’t pay so what happens? Doesn’t that mean they are out alot of $ that they might have used to send the kids to college and buy ipods but now they’ll still send them to college only the professors will make less but that should be ok because prices will drop too? And Steve Jobs will make less because Ipods will cost less but he’ll still make them and he or someone like him will make the next best thing too because that’s just what companies full of intellectually curious peole like that like to do?If the tax base every where shrinks I’m not sure why the solution ought to be to lay people off when you could instead cut every state employees’ salary so that services can keep plugging along. If salaries shrink won’t prices for stuff (even oil) have to fall? I say everything just needs to go on a massive sale-College tuition, physician salaries, executive salaries across the board.Or am I just horribly niave and there’s a HUGE pocket of wealth out there somewhere and we’re all going to be screwed and working for “them” in the future. Is there someplace else the Chinese can go to get returns? Essentially what I want to know is it a zero sum game or is it musical chairs with way fewer chairs and alot more people needing seats all of a sudden.And if it is a muscical chairs scenario why can’t we at least confiscate all the stuff bought by the bankrupt and sell it on ebay for something as a way to at least get a few more chairs…
How true! Should have invested in their business or paid real dividends.
You miss the point. The govenment is currntly printing money and issuing Treasury securities as fast as it can and literally throwing them into the market (it almost ran out the other day). The issuers of the CDS DON’T HAVE THE MONEY to pay. Losses will then be required to be declared on balance sheets, etc. Their goal right now is to keep the music playing (however slowly) and not stop. There are a hundred peple walzing around in this game of musical chairs and only one chair. If the music stops, everything comes crashing down, and a lot of people know it.
Speaking of the dollar some weekend readingAN INFLECTION POINT IN THE DEBT SUPERCYCLE
As an American of ethnic Jewish descent, I am beginning to be scared for the safety of myself, my family, and the overall Jewish community.History shows that in times of economic crisis Jews nearly always get blamed for the financial problems, and I feel like it is only a matter of time before large, organized anti-Jewish movements start to pop up in America and elsewhere, groups of very vocal (and possibly violent) anti-Semites who blame this economic turmoil on Jews in New York City or London or wherever.While it is true that Jews are involved in finance and economics in large numbers despite their small population, most Jews are not and yet still too many people fall for the stereotype of ‘Jewish economic parasites and market manipulators.’The ADL has already posted about the upsurge of anti-Semitism because of the financial crisis on their website: http://www.adl.org/PresRele/Internet_75/5366_75.htmGulp...
So let’s have some discussion of what I call “Roubini’s contradiction.” The idea that nothing can be valued, and yet he wants to recapitalize banks based on the idea that something can be valued. Are we simply substituting a fiat mark to market for a fiat currency. Isn’t this simply a command economy?And if command, then fine. But whose commands? And on what basis?The problem again is that the bourgeosie has only a very primitive understanding of rights, and their part of their ideology is to keep rights (to keep any inquiry) away.It may surprise your readers, but there is only a very primitive understanding of what in fact property is, in American law. You would think that it is very elaborately developed, but it isn’t.The reason is that with so much authority granted to the political system in the scrutiny regime, the other side of the coin is that1. individuals have very few rights so they cannot press factual inquiries in court;2. laws are written such that many facts are simply not admissible in court.It just shows that we have reached the end of the line with regard to our current power structure. Nobody likes to think that the stock market will go to 0, but that is exactly what will happen. No one likes to think that unemployment will rise above 50%, but that is exactly what will happen.Then you will have a revolution, a lot of misery, and guess what the survivors will do:ban housing evictions.Gee, can’t we get there now, without the misery? Guess not. Look at the ignorant self-satisifed neanderthals who post on this site!!
Options on precious metals are notoriously expensive. They are way over-priced. I would never tell anyone to waste their money on the market makers who dream up those option prices. If you’re looking for low-cost investment, what some people do is to invest in selected stocks of silver miners. I really couldn’t recommend any stock. But I do suggest that if you go this way, then choose a solid producer who has a good production history and good in-ground resources.PeteCA
Relatively speaking, we lose. The people who win are the ones who have been frugal, saving money a lot, and working very hard (for low wages). The people who lose are the ones who have been spending what they don’t really have, consuming more resources than they deserve, and getting paid too much. The adjustment is very painful.PeteCA
That had never occurred to me- but sadly makes sense in a perverse way. A silver lining may be that the blame for this may in fact be placed at the feet of “Americans” and some of their co-conspirators in the UK and a few other countries. An increase Anti-Americanism seems to me to be a greater risk.
Sorry. I don’t buy that. Back in ’29 the various manipulations were rampant, and I am sure there are much more sophisicated machinations going on now. There seems to be little talk of program trading (I haven’t heard of any “circuit breakers” cutting in lately). Why not? What is the aggregate amount of corp. buy back going on? Why not? Nobody is discussing the current rate of mutual fund redemptions. Why not?
Melissa Francis for President, she seems like a smart young lady lol
Ha! try being a mortgage broker right now!
Perhaps “priorities” vary according to one’s goals.Keynesian economics, declared long ago a failed system, promotes greater and greater inflation. It causes the depreciation of money. It results in great suffering in the lives of people. It ends in economic malaise, maladjustment and collapse. It diverts attention from the agents of inflation who work through government economic interventions, particularly central planners at the Fed and in the US Treasury.In brief, it is the system that gives the Fed and the Redistributive State power to expropriate money from Peter in order to lavish it on Paul. A bailout en masse of corrupt and powerful Wall Street international bankers in whose hands America has fallen, will cause — already is causing — great impoverishment admist plenty. It will seal America’s demise into serfdom.
This is the correct URL:AN INFLECTION POINT IN THE DEBT SUPERCYCLE
While I won’t suggest you are over-reacting as there is truth in all you say, I will urge scepticism toward voices in your own community with their own agenda. For a time in the 1930s the zionists cooperated with Nazis to promote emigration to Israel from Germany. Similarly, the likes of Netanyahu and US supporters of his agenda will use the current crisis to stoke fear to promote emigration now.I’ve had enough of fear-mongering, hate-mongering and divisive politicians of all ethnicities, religions and nationalities.I urge you to hope, to speak truth, to remain objective, to reach across divisions, to build a better nation for your children and for all Americans.
I’ve read some of these ignorant posts about “Gee can’t understand Ryskamp. Don’t want to think, don’t want to read, don’t want to learn anything new, don’t want to use my brain. What’s it all mean?”You would think that when a thoroughgoing technomaniac like Roubini comes out with a demand that “all”–repeat, “all”–home foreclosures be banned, these same readers would think, “Gee, even though I am a lazy ignorant bourgeois slob, it might actually benefit me to learn about the New Bill of Rights and to learn about the ban on housing evictions, since that seems to be the way things are going.”You know, it might actually benefit these same readers to actually live in the present and deal with the facts.Just a suggestion.By the way, I only use caps when I am responding to a comment and am putting that comment in my post. It’s to distinguish my reply from the comment.What’s the problem with it, anyway? The Romans did it.
1:24 p.m.U.S. exchanges considering temporary circuit breaker: WSJ
1:27 p.m.[MS] Morgan Stanley back near session lows, off 37% at $7.87
You missed the point. They did exactly what they were “incentivized” to do. Walk away with as much cash as possible. There was no reason to ever expect them to do differently. Remember, most Fortune 500 executives own a very small piece of their businesses. It’s the shareholders that took the risk and sheepishly agreed to everything. Of course, they were primarily represented by mutual funds, so it was a bit cirular.
hedge funds deleveraging – selling down the commodity complex to raise cash.
I gotta’ go for a little while.Dow is still steadily selling off.It’s nice to see John Ryskamp calling us all neanderthals again.I really miss that from the good old days on this blog.Where’s a tissue? I think I’m gonna’ cry. People might want to take a look at this chart – it just popped up on Chart of the Day.http://www.chartoftheday.com:80/20081010.htm?TThe losses for the first-year of the current bear market for the Dow are now greater than ever before – even in 1929! That’s a pretty strong warning that something very big is going on here. Be careful about getting caught up in the fervor of short-covering and buy-backs.http://www.chartoftheday.com:80/20081010.htm?TPeteCAP.S. By the way John Ryskamp. I’m willing to put up with all your normal cr**, because a long time ago you called it right. You voiced a concern about the Insolvency Issue long before anyone else pinpointed it. And you also said it would sink Wall Street. And it has.
thanks. however, looking to buy 100 shares for example and SELL the options to collect premium… i hope to never buy an option again for the rest of my life…
History says you are correct to worry. Two opposing factors exist. One is that we have a presidential candidate who is eblematic of America’s tolerance. Let’s see how he does. Second – where you gonna go? Peru? LOL Best of luck.
Do you really think 290 million americans have the ability to go buy gold and how would that relate to purchasing food and gas, even is if thier are shortages… gold is down and not moving… and will not move anyhwere until all markets crash totally…
Well, then please use your skills to educate the world on what really happened here with the investment bankers and private equity LBO deal thieves who believe they are entitled to game the system, cash out and then walk away when it blows up! The only problem is if you educate the masses on the real truth, you will certainly have a complete riot against all of wall street and the financial spinsters of whatever particular ethnic descent they may be.
Vix at 73 dow down 500 — doesn’t feel like we had a capitualtion earier, unless this market is capable of multiple capitualations
The American Anti-Defamation League (ADL) under Abe Foxman has made it a practice for decades to tail all Congressman – liberal or conservative — as brought out in allegations in the San Francisco trial of its head operative Bullock on charges of buying blackmail information from members of the San Francisco Police Department and reported by the San Francisco Examiner.There were no comments on this blog that would have necessitated a pre-emptive charge to innocent people that “American Jew” has leveled. But to use the ADL as some sort of authority on what may or may not happen is quite ridiculous.
John Ryskamp:Less berating, more explanation required.Try form your statements into logical sequences.I was trying last night to get through the dense legal arguments of Prof White. But both his analysis, and your analysis, are completely lacking in any “social actors”. That’s likely because you are trained, of self-trained, in the law. But for other social scientists, some kind of dicussion of the actions and motivations of actual people, or groups of people, or institutions, as social actors, is usually considered a good idea at some point.I take it that the “scrutiny regime” is based upon ever denser and more complex readings of constitutional law, which is done by comparing cases with.. previous rulings? (Not sure). This is as opposed to an understanding and interpretations of the rights individuals *should* have in a just society (the “maintenance regime”). Eventually the scrutiny regime collapses under its own weight of circular legal interpretations.Is that correct?You mention that the US changes constitutional ‘regimes’ every 70 years. That seems like an odd way of putting it. Why 70? Who changes it? Why? What brings an end to that power structure? Political-economic crisis? Caused by….lawyers and legal scholars who develop circular readings of the constitutional regime? Not clear.Which social actors have organised to overthrow and replace these rights regimes in the past?I see insufficient connection between your discussion of the inevitable replacement of the current constitutional rights regime, and the current situation with the economic spiral.By the way, many on the left disagree that a rights based regime is the most radical way forward. Put simply, in a rights based regime, the more wealth, and assets, property, that you have, the more rights are allocated to you.Who granted this authority to the political system.
I am ok with not tolerating anti-semitism, but then anti-Muslim sentiments should not be tolerated either. It is not acceptable that some warmongering Israeli politician distorts what some Iranian politicians say, for example.I am not a practicing member of any religion and certainly not a muslim, by the way. Just annoyed about how some “anti defamation” people always want to bring up this issue about anti-semitims, while ignoring that there are a lot of anti-[something] sentiments on this planet. Anti-semitism should not be in some privileged position.
Professor Roubini,I wonder what are the risks and opportunities for creditor countries such as China. Would they just see large part of their reserve diminish and experience severe contraction, or they can gain their political and economic standing by helping west countries?
Lehman auction done. Price is $8.625.
Rallying back again, dow just cut its losses in half! Only down 290 now. Going green before th eclose gauranteed!
Being “jewish” is sort of meaningless.1) does it mean being a Israel citizen?2) does it mean having 1 or 2 Israel citizen as parent?3) does it mean some sort of having statistically clustered genes to a group even though the similarity to the cluster “average” for any individual after a few generation can be indeed very weak except for some possible more visible phenotypes? irrespective if this group now lives or is citizen of Japan, Iran, France or the USA?4) does it mean anyone who loudly proclaim he is a “jew” sort of almost unconsciously wishful some reaction from others5) does it mean to be the descendent of someone who was mistreated or killed by nazis? Does that include anybody mistreated or killed by nazis or for that matter does it include anybody mistreated or killed in any war including non-nazi germans bombed or civil-japaneese nuked by the Usa?6) does it means someone who profess adherence to the jewish religion?7) does it means someone of is an israeli citizen who think the jewish religion is a stupid and potentially very dangerous superstition?8) what does it mean?If you answer this, then you should have solved your problem.For example, I am from a catholic family, yet I am not in any way shape or form a “catholic”.
Stock exchanges in Iceland, Indonesia and Russia remained closed Friday, while steep declines forced the halt of trading in Thailand, Austria, Romania and Brazil.
Has it been mentioned here already that Roubini, on this momentous day, is on Bloomberg’s front screen video picks?
Ho-ho, this Berlusconi is a laugh a minute:Everybody ENEL shares now!Nobody sell any shares, now!Everybody by ENI shares, now!I don’t have to talk to the opposition, I’m right!Politics don’t matter!Banks are going to cut off their local branches!Let’s capitalize a few banks, now!Suspend the markets, now!No, don’t suspend the markets, now!
The 690 point (8%) drop in the first seven minutes to 7,882 and subsequent rebound, had PPT written all over it. The final 90 minutes will tell the tale – one poster suggested short covering will drive prices higher in the final 45 minutes. I doubt too many will enter the weekend long.The market tested 8,000 just before 2pm hitting 7,980. Who knows what the “real” support level is. I suspect we won’t find out till Monday. But if we break 7,900 we will free fall into the close.
Canadian markets closed Monday. They will have all day to be bystanders to the biggest rally or most serious decline in modern times.
Americans are in DEBTThey will cash in, not buy stocks.Expect DOW to reach 5000 before end of the month and a continued deflation for a year or two
I wanna know who in their right mind keeps stepping in at Dow 8000 and buying this market?
I think you hit the nail on the head.Many seasoned traders are screaming for a local bottom based on abysmal market internal (VXO 101+ and VIX 75+ anyone??). But stock market is just a secondary character right now.The credit market collapse is center stage. Until that one bottoms stocks will be out in the cold.
Will deflation mean lower bond yields and gold going lower in your opinion?TIA
Gold at 846 — here’s your chance
2:33 p.m. Gold falls nearly $30 in electronic trading2:31 p.m.Futures Movers: Oil tumbles below $78 to one-year low, set for 16% weekly loss
Double bottom now in…going green!!
Deflation brings everything downthere is no escaping deflationJapan can tell you that
Sort of sounds like Deflation to me, at least in the immediate future.
Rallying off that damn level of 8000 again! SO whats the call, rally to close green or tank 1000 points????
rallying fast and furious once again!
Guest, you make me sick.
I think you’ll need to wait until Monday for that answer
About the outlook for dollar:there is a flight-to-safety drive that is keeping the cost to fund US deficit low. In addition, EU banks are buying dollar to reduce their leverage. These factors seem to argue a strong dollar.However, the US deficit is bound to increase.In this environment, what will happen to EURUSD? Does it mean USD will appreciate in the near term but will drop precipitately long term? Would the turning point coincide with the return of risk appetite?
I think the IMF should institute a fund where every reserve holder around the world (central banks, SWFs, private equity funds etc) can participate.With the resources that are collected, the fund should take care of the following 4 tasks suggested by Prof. Roubini:- massive and unlimited provision of liquidity to solvent financial institutions;- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.Every participant receives a stake in the fund which is proportional to the amount invested.This would allow:1) Transparency through self-selection: it would become immediaty clear which institutions are potentially solvent (the ones knocking at the door of the fund) and which ones are not2) Involvment of emerging countries in the recapitalization process3) Impartiality: the IMF, and not national governments, decides who is eligible and who is not4) Coordinated effort that would restablish confidence within financial markets
Dear DOW going green Guest,hope you didn’t feel too frustrated lately.Understand that stocks don’t count now. PPT is out working on the real thing, the credit market. The kids are free to play how they want.
And statements like this are destroying the blog. CUT IT OUT!!!!!!!!!!!!!!!!!
WOW!! it is like their is a wall of money sitting at or around Dow 8,000. That level seems to remind me of my first girl friends jeans…impenitrable!!!
I’ve only been reading this blog for the last 6 months or so but don’t you think you’d get your point across better if you weren’t so condescending? Most people here are pretty informed and interested in learning more….just my 2 cents
Ahhh yes…the witching hour is upon us! Which way do we run folks?????? After another test, we are once again ONLY down 390 LOLOL BUCKLE UP!
excellent point – I think you have called it right – the question is timing – Dollar Yen / SF might be best indicators – Euro and Pound are a mess. With all the central bank shenanigans currencies are disrupted right now.One thing that might be keeping the equity markets from tanking is the faint hope of a G8 banking agreement this weekend.
Dear Professor,as you proposed, the state should guarantee all the deposits and banks to undergo so called triage to separate illuquid from insolvent. What hapen if they find that all the banks are of the latter state?
3:03 p.m.[FNM] Fannie Mae to stop collecting on mortgage-backed securities
Giraf, I’m pretty sure that the contracts specifically allow presentation of “cash equivalents” in lieu of bonds. In other words there are many more CDS’s than bonds and they are all valid. I don’t know in the case of Lehman how many bonds there are. It also should be assumed that there are lots of off-setting positions within the $400b. Since there is no central clearing house nobody knows the net position outstanding.Bob is right though. There is little possibility that all the underwriters will be able to cover their obligations. So, nobody knows if their off-sets will work either. Does that help?
At least until OpEx.
HERE COME DA BUYERS-TAKES A BRASS PAIR TO BE LONG OVER THIS WEEKEND!!!
you mean DA PPT
Down less than 300 points…
Why do you guys cheer when the markets is going 500 pts down and when is going up everything is manipulated by the PPT?
here are the Lehman final auction results… and they represent just a fraction of the Toxic paper out therehttp://www.creditfixings.com/information/affiliations/fixings/auctions/current/lehbro-res.shtml
Because currently ALL indicators point to a falling market – so explain why it almost always rallies several hundred points at 3pm?
Is that the “good news” driving today’s rally???
Could someone please explain me what this means?SAN FRANCISCO (MarketWatch) — Fannie Mae said Friday it will stop collecting the principal and interest payments on loans from institutions servicing its mortgage-backed securities in a bid to free up additional liquidity for these institutions. The move comes in line with the Federal Deposit Insurance Corporation’s new policy which effectively safeguards these principal and interest payments.
Chance of what? buying gold?It could fall more, couldn’t it? especially with a 1000 point rally on the DOW next week.
THERE SHE BLOWS!!!!!GREEN ACROSS THE BOARD!
7 million share citi sell order at the closing bell… lol
Well, now the G7 will pull out ALL the stops this weekend and we will be up 2000 points on Monday!
.TEDSP:INDTED Spread4.6362 +0.4039 15:00 0.00 0 ? 10/08/2008 0.00 0.00 0.00 0.00US0003M:INDBBA LIBOR USD 3 Month4.8188 +0.0688 06:35 0.00 0 ? 10/08/2008 0.00 0.00 0.00 0.00V2X:INDVSTOXX Index81.034 +22.642 11:30 0.00 0 ? Multiple 0.00 0.00 0.00 0.0010/08/20080.00 @ 0.00.. .. .. 0.00 0 0.00 10/08/2008 0.00 0.00 0.00 0.0010/08/20080.00 @ 0.00.. .. .. 0.00 0 0.00 10/08/2008 0.00 0.00 0.00 0.00VIX:INDCBOE SPX VOLATILITY INDX72.89 +8.97 15:24 0.00 0 ? Multiple 0.00 0.00 0.00 0.0010/08/20080.00 @ 0.00.. .. .. 0.00 0 0.00 10/08/2008 0.00 0.00 0.00 0.0010/08/20080.00 @ 0.00.. .. .. 0.00 0 0.00 10/08/2008 0.00 0.00 0.00 0.00VXN:INDCBOE NDX VOLATILITY INDX78.85 +9.19 15:24
Its Down 6000 pts since the 14000….
No one wants to be short over the weekend either with the government capable of anything and $700 billion at Hank’s discretion. Shorts are covering to get clear before the weekend, spurring the rally.
I would agree that there is no reason to evict a paying tenant from a rental home where the owner is defaulting. I would also think that a rational foreclosing bank should be willing to give the former owner a lease. The property can be sold with a lease and the property won’t get trashed while vacant.As a small landlord (14 unit apt house) I have benefited from the housing crisis – rents are up in SF Bay area since former home owners have to find apartments.
I can just see the headlines to night…” Dow rallies over 1000 points from the abyss to close up 200 points”
Kudos to the poster who called for a rally of hundreds of points -
LOLOL DOW UP 300 POINTS !!!! THIS IS THE BOTTOM! CRISIS AVERTED!!!
This is a pattern that can be observed most days. No skill required.
BULLETIN DOW INDUSTRIALS TURN POSITIVE, REBOUNDING FROM NEARLY 700-POINT DIVE
Welcome to the new order – 1000 point daily swings
agreed but it was a pretty good call just the same – of course anything can happen in the next 20 minutes — i was so looking forward to a real crash today (so I could buy) — there’s still Monday I guess
quick, get the ppt back on the job – they left too soon…
100% long today and brass is hitting the floor.It’s fun to buck the herd and be right once in a while.Fear is not an option,faith is what is required.Although this counter trend is going to be short lived;not for investing just trading.So be careful.
40 million shares for sale at closing…. unbelievable.. going red… oops just went red
i think i am going to be sick… are we convulsing prior to 2,000 up or convulsing before 2,000 down ?
How’d you like to be the press trying to cover this market? lol
@ AlessandroLet me tell you how badly the credit markets are frozen up. Yves Smith had a post up this morning about how Letters of Credit were not forthcoming. How grain was sitting at port waiting for “financing” before it could be delivered. “Financing” is not exactly the right word. A L/C is not “finance” in the sense that a bank has to but its money at risk as some sort of bridge between buyer & seller. A L/C is a guarantee made by a bank as an intermediary. In effect, “this buyer has a credit at my bank and I guarantee his payment subject to the following terms.” He does this for a fee. A tiny one. Maybe $50. A bank doesn’t make that guarantee without having his own guarantee from the buyer.Anyway, it’s 99 – 44/100 % safe. There are only 2 ways anybody ever got hurt on one of these things. One is to not pay attention to the terms of the L/C because the bank is not going to release your money unless you dot every i. The other is to be accepting L/C’s on Nigerian banks. And there is a process of “confirmation” that can get you around that one.The point is that what’s broken is not the “finance”. What’s broken is the relationship that one bank has to another. To paraphrase somebody, “we are all Nigerians today.”
It’s down! No wait! It’s up! No, it’s down! Ahhhhh!!! Just make the voices stop!!!!
look at the after close decline… throw out the rules these days…
Is this what a stock market will look like in a hyperinflationary environment?
Welcome to the Hemalaya mountain chain. That view is so magnificently breathtaking … at least for someone like me who is just watching.Of course, I am talking about the DOW.People, I told you, I was out of the markets about 3 weeks ago. Although I missed on big profits (20%), I am happy I am out.This kind of bear markets destroys everyone and everything in its way, bears and bulls alike. And I am a financial chicken.Buffett said to never invest in what you do not understand. I just feel I do not understand even the equity markets. And for some “moral” reasons, if I stayed in the markets I would have been a speculator. From an “opportunistic” point of view, I am a vegetative person; I prefer to wait until all wounded bodies are dissected by bottom feeders and vultures, and that the remaining flesh and bones are consumed by worms and bacteria, before transforming them into new life form (vegetation). The thing is to have appropriate and enough seeds and marble soil when that time comes.Just a philosophy for few to consider.
Well … pretty interesting conclusion to trading today.The Dow still closed down by 120 points.A strong rally was expected at the end of the day due to short covering .It materialized at 3:30 pm – right on time.But amazingly, the peak from the short-cover rally was sold off againin the last few minutes of trading.As Yoda used to say on Star Wars:”The future … unclear it is”.Since Congress signed the “rescue bill” we must be down at least 2,000 points on the Dow. Anyone think they’ve got the message yet?PeteCA
Don’t sweat it. It’s just funds selling to get cash. If gold stays above 840-860, it’s still running in a long-term bull.PeteCA
No, it will go up nominally, but not in real terms
What happens next week?
Brave New World (Hellasious)October 9, 2008 — The US government announced that it may take ownership stakes in banks in order to promote lending. What exactly are they going to do, call out the Guard to round up the good citizens, frog march them to the bank and force them to take out overdrafts at the point of a gun? How incredibly, unfathomably short-sighted… Can’t these people see past their noses? (No, in fact they cannot).Rule one of finance (amongst many such number ones): never let them see you sweat. And the entire US banking/finance/government establishment is sweating so much that it is drowning the whole world in their worry.Take Mr. Bernanke, for example: he’s expanding the Fed’s actions on a daily basis – to no avail. He has entirely misdiagnosed what is happening as a severe, but transient crisis of confidence that can be overcome by piling on more and more government debt. In fact, however, we are at the starting point of a deeper, wider and radical transformation of the global economy, one that will ultimately lead us away from the faux riches of Permagrowth and towards a more sustainable future.Finance as practised in the last 30 or so years has no place in this brave new world. There is no room – or any need whatsoever – for chop-and-shop LBO strippers, asset pumpers, market operators, derivatives designers, financial engineers… No, this gallery of rogues has seen the end of their days. Instead, relationship finance will fast make a comeback, if only because the manufacture and placement of unprovenanced securities to faceless “investors” is no longer possible. From now on real investors – the only ones still left standing – will ask for every detail and reason behind their potential investments.And the market knows… The collective wisdom of millions acting in their self-interest has ground market prices of old-style financial companies into dust. That’s no coincidence and no “crisis”, either. It’s the most obvious sign that the Pony Express is no more… And like all major turning points there will be plenty of opportunity for those with foresight, once the dust settles;http://suddendebt.blogspot.com/
Based on the punditry it is all up to the G7 coming out with an announcment of unity. If the US Congress took two weeks to finally respond to the Paulson/Bernanke request (for a problem created in the US), what are the odds that the G7 can accomplish anything beyond an announcment for another meeting and some mild platitudes.Reuters G7Bloomberg G7
And turns out President Bush is more effective crying, “Wolf,” than giving the “everything’s okay” signal. Regarding this morning’s pep talk: Of thirteen Bush speeches to calm the equity markets during the current crisis, after seven of them the market averages continued to move lower.
I was watching the TV, they even predicted it about a half hour or so before. I don’t think they have any shame whatsoever…
Pete, you or some other thoughtful blogger posted the link to Krugman’s “Can Deflation Be Prevented?” (his reaction to The Economist article on deflation threats).I think I understand what he is saying — that “a large part of the world will start to look like Japan” and “will face deflationary pressures that cannot be offset simply by increasing the money supply” — and his concern at the paradoxical approach of fighting deflation by promising inflation.But other than by policy fiat and artificial asset propping up, what forces are at work right now to suppress a tighter inflationary Fed policy? In other words, why hasn’t Bernanke been forced to RAISE short-term interest rates instead of cutting them?I’m in favor or Volcker style tightening, why shouldn’t I be?I’m new to this and probably naive, but I’d appreciate your and others responses.Best,Hattie
Just heard Lou Dobbs on the radio; interesting quote: “ ‘A $150 billion sweetener’! I want Henry Paulson out of there. ‘Sweetener,’ they’re even starting to talk like the Mafia.”
I was searching for the G7 website but came up with this only. — this is the statement from September 22, 2008 which is cause for great hope that they will get this resolved…and if that doesn’t happen we can look forward to the G20 meeting on Sunday…. (should have shorted) G7 / G8 Website September 22, 2008_______________________________Statement by G7 Finance Ministers and Central Bank Governors on Global Financial Market TurmoilSeptember 22, 2008The G7 held a conference call today to discuss global financial markets. We reaffirm our strong and shared commitment to protect the integrity of the international financial system and facilitate liquid, smooth functioning markets, which are essential for supporting the health of the world economy.We strongly welcome the extraordinary actions taken by the United States to enhance the stability of financial markets and address credit concerns, especially through its plan to implement a program to remove illiquid assets that are destabilizing financial institutions. We also strongly welcome the measures taken by other G7 countries. Major central banks have been coordinating to address liquidity pressures in funding markets, which has been critical in addressing disruptions in global financial markets. Several regulators have taken decisive actions to combat market manipulation and stabilize financial markets, including a temporary ban on short selling of financial stocks.We recognize the importance of making regulation more effective and bringing investors back into a liquid and stable marketplace. We remain committed to full and rapid implementation of the Financial Stability Forum (FSF) recommendations to enhance the resilience of the global financial system for the longer term. We look forward to the FSF report this fall on progress made in strengthening prudential supervision and regulation, improving firms’ risk management practices, enhancing disclosure and transparency, and strengthening accounting frameworks.We pledge to enhance international cooperation to address the ongoing challenges in the global economy and world markets and maintain heightened close cooperation between Finance Ministries, Central Banks and regulators. We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system.http://www.g8.utoronto.ca/finance/fm080922.htm
a wise policy
kilgores on (2008-10-09 22:31:17)”I must say, you are a dedicated hyperbolist…and a paranoid one at that.”I must say, Mr. Kilgores, having more than a few personal friends, some of them former lovers, who were among others assassins for USMC, US Army Special Forces, Executive Outcomes, Blackwater, NSA, MI6, IRA, FFL, and the Mujahadeen; and secondly having spent over a year in an African prison cell, the only white face among at least 40 others of the darker green variety, all of them with murder records; all of whom were petrified of me (a pacifist in for contempt in facie curiae, for calling the prosecutor a stupid black ka**ir bitch)… and who has worked personally (as in their private home, living with their family) for two family members of the Committee of 300; your accusations of ‘paranoia’ are hilarious…Take a look at these financial wizards around the world’s paranoia Mr. Kilgores, and they ain’t ever spent one day in a Club Fed prison, with Big Black Bubba wanting his little weenie lubricated… And they are panicking like a bunch of chickens who just got their heads chopped off…FOR WHAT??? Pieces of paper worth ZERO!!!!!They are slowly painfully waking up (well hopefully for their sakes a few of them are) up to the illusion that they have bet their entire lives on, that is nothing more fancy than a children’s Alison in Wonderland financial existential fairytale, about the Seven Little Dwarves who take a bunch of paper and stick a few fancy little masonic stamps on it, and then call it ‘money’ something of intrinsic value, and like koolaid they drink the Reverend Seven Dwarves Jone’s Coolaid….And whose a little paranoid now??? You think the fella’s on the New York Slavery Exchange are confident in their little financial Wizard of Oz Cinderella fairyland financial story???? Or they being a bit PARANOID????As for hyperbolist…. THAT’S HILARIOUS…Spend a couple of days with some of my assassin friends, and hear some of their stories… and you will realize what I have been saying has been THE OPPOSITE OF HYPERBOLE…. it has been a massive UNDERSTATEMENT…But as Voltaire said, ‘It is difficult to free fools from the chains they revere’..From **1995**; With *1776*PS: Do you play RRRINT-POKER?
Oh my … you were doing so well.If you had only stopped yourself from writing that last sentence filled with insult and vitriol we might all be understanding your point of view clearly.Seriously, I want to understand what you do, but you always stop short of getting there and resort to throwing the adversarial insult tantrum.So, please continue with your reasoning and point the rest of us to all of the enlightening sources that have led you to your view.I am still waiting for your explanation from a previous thread of how the CFR & NWO are part and parcel. Please tell us how you got there (without judging others who post here as you do)!
Please define “pharisee investment banking.”
You’re a cunning linguist but hardly a master debater.
PROTOCOL OF ELDERS OF ZIONhttp://www.youtube.com/watch?v=7XrRyqses5U&feature=relate
Talking about Share Value:In the running of a publically listed corporation the share value first and dividend second are the most important factors and the major focus of the whole executive, and Board members, a priori. So it is natural that compensation is pegged in this manner.In main, executives of these companies are not selected for any particular skills sets but for their pedigree and social network in all regulatory, banking and political arena; ‘Old School Boy’ sort of stuff.Running a private company is completely different.I believe to blame “greed” is an emotional error, in hind sight, as it is just an expression of ‘possibility’ that is, ‘I can because I can’ and therefore why not? We humans should push the edge as that is what makes living worthwhile and if not, we are just “Waiting to Die”.No, the fundamental errors are far simpler than this question and are:1. A total non-comprehension of “economics” and an establishment of a Priesthood of dogma attending to all things socio-economics, that ignore the fundamentals of life through established Physics (science if you will).2. The adoption of faith-based solutions for the building of socio-economic structure, and3. The election of faith-based “leadership”4. The belief that it is wrong to question everything, including Authority and the promotion of that belief at “leadership” levels.5. The belief that all men are clones (for want of a better expression).6. The insistence that this ‘static’ system of control must be imposed on the ‘dynamic’ socio-economic system while ignoring the Laws of Physics and always propping the whole thing up as it continually collapses; in other words, failing to be “adaptive”.Apologies for being repetitive.Ho hum
I just read that the Lehman auction when well. The 8 billion that will be due is very manageable.DOES THIS NOT SEEM LIKE THE CRISIS IS OVER ?That maybe this is what will free up the banks ?
The final results are in from the auction held today to calculate those payments, Bloomberg News reports:Sellers of credit-default protection on Lehman will have to pay holders 91.375 cents on the dollar, setting up the biggest-ever payout in the $55-trillion market.An auction to determine the size of the settlement on Lehman credit-default swaps set a value of 8.625 cents on the dollar for the debt, according to Creditfixings.com, a website run by auction administrators Creditex Group Inc. and Markit Group Ltd.Based on the results, sellers of protection may need to make cash payments of more than $270 billion to the buyers, BNP Paribas strategist Andrea Cicione in London said. The potential payout is higher than the 90.25 cents indicated by initial results from the auction earlier today. Lehman bonds traded Thursday at 13 cents on the dollar, suggesting a payout of about 87 cents was expected.But most estimates I’ve seen suggest that the final cash payments will be modest — in the billions of dollars, not tens of billions.http://latimesblogs.latimes.com/money_co/2008/10/wall-street-has.html
Guest (2008-10-10 16:09:14)”You’re a cunning linguist but hardly a master debater.”Plausibly because I consider master debating beyond boring…. One of my former radical honesty guru’s said, if a man can’t ‘get it’, by saying whatever you have to say in blunt GI language, try a sexual analogy… If he still can’t…. he’s got the mind of a prole…In that context… ‘Master debating’ is like choosing to put your weenie in an emotional and psychological stinking dead corpse; radical honesty communion communication is like spending time practicing hours of playful emotional, psychological, sexual, spiritual multiple-orgasm sex…, where the simple soft touch of a feather, or a drop of ice, or similar, can result in one of many petit noir’s…
QUESTION: How could there be a G7 summit to solve the problem if most of those countries are debtor countries? And how could any solutions from there be successful or implementable without China, Russia, India and some ME representatives to, at least, approve the final recommendations.If you hear the G7 ministers talking about a road map and camp David, you should be sure our leaders will be as successful as in resolving the Israeli-Palestinian conflict.—————————————————————–#..Country….External Debt……GDP…….D/GDP…D&GDP as % of world—————————————————————–0..World……..$ 54,310……..54,311……100%1..U.S……….$ 13,773……..13,843…….99%2..U.K……….$ 11,502………2,772……415%3..Germany……$ 4,489………3,322……135%4..France…….$ 4,396………2,560……172%5..Italy……..$ 2,345………2,104……111%——————————————————————G5.Group 5……$ 36,505……..24,601……148%…..67%…..45%——————————————————————9..Japan……..$ 1,492………4,383…….34%12.Canada…….$ 791………1,432…….55%——————————————————————22.China……..$ 363………3,250…….11%——————————————————————The G5 countries sucks 67% of world debt to create 45% of world wealth.The G4′s debt represents, virtually, the rest of the world’s GDP (i.e. 60%). In other words, it takes 60% of world GDP to produce 40% of it.World-wide Disclosed Fees: 15.401 (6,890) (Q4 2004 report)World-wide Equity and Equity-related: 505 (3,628) (Q4 2004 report)World-wide Debt: 5,187 (16,439) (Q4 2004 report)US. Credit market debt: $49.6 trillion (349% of GDP)US. Domestic Financial sectors: $15.9 trillion (112% of GDP)http://en.wikipedia.org/wiki/Image:Debt_to_GDP_Forecast_Chart.png
Breaking NewsG7 says current situation calls for urgent, exceptional action; agrees to take all necessary steps to unfreeze credit, money markets 6:09pm EDThttp://www.reuters.com/
That is not a breaking news.This is a breaking news:Breaking news: some breaking news may be announced.
prepare for disappointment Bloomberg
One of the best comments Ive read on here (apart from mine of course) The markets always acts rationally ALWAYS.
But when are the settlements due?I guess that is the real question
G7 says current situation calls for urgent, exceptional action; agrees to take all necessary steps to unfreeze credit, money markets 6:09pm EDTyet another way to get at the American taxpayer, IMO
G7 Finance Ministers and Central Bank GovernorsPlan of ActionOctober 10, 2008, Washington DCThe G7 agrees today that the current situation calls for urgent and exceptional action. We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth. We agree to:Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.The actions should be taken in ways that protect taxpayers and avoid potentially damaging effects on other countries. We will use macroeconomic policy tools as necessary and appropriate. We strongly support the IMF’s critical role in assisting countries affected by this turmoil. We will accelerate full implementation of the Financial Stability Forum recommendations and we are committed to the pressing need for reform of the financial system. We will strengthen further our cooperation and work with others to accomplish this plan.http://www.g7.utoronto.ca/finance/fm081010.htm
This thread really needs to be expanded. I hope the professor does take this on and expand on the possible (reality) outcomes.I think at some point the true value of the dollar would have to drop to a fraction of what it is today.
But if you offer a subsidy for “childrens wooden arrows” maybe we can work something out.
same communique on the US Treasury Sitehttp://www.treas.gov/press/releases/hp1195.htm
are’nt the banks and govts already doing this?
so what is new here?
Weak, but what else did we expect. Nation-states are acting for their own interests. Those placing their hope in this group or global cooperation will, I think, be disappointed.
or a genius. the system is dead. lets make it better and lets make it for everyone.
It says nothing and in that it says everything. Monday will be another interesting day — Where can you buy gold on the weekend:
well lets just make it a really big chair that we all sit in. the music stops, we all sit in it, game over, and a new system of global financial harmony wins. there is just one side to the trade and everyone wins. the new game starts at zero for everyone.i love you guys.but listen, i may be kind of serious here.
the announcement is nothing new – just that the US govt will begin implementing the bailout package directive of buying assets or buying stock in financial institutions
Talking about reality and matters of real concern:”In reality, the situation is serious enough that federal investigators have been called in. “We’re not talking about hackers playing games or messing up our website,” insists a senior member of the bank’s IT department at its Washington headquarters. “It’s about the FBI coming last summer and saying, ‘You should take a look at your systems because we think something weird is going on.’ It’s about the intruders knowing what information they wanted — and getting to it whenever they wanted to. They took our existing data stores and organized them in a way that they could be easily accessed at will.”In plainspeak: “They had access to everything,” says the source. “They had the keys to every room at the bank. And we can’t say whether they still do or don’t until we fully and openly address what’s happening here.”The data raids are not a matter of stealing inconsequential bits and bytes. The World Bank’s data center is literally a treasure trove of vital financial information from around the globe. As a clearinghouse for financial data from both governments and companies, the bank’s computers could provide intruders with both a financial and intelligence gold mine — from inside information on bids and contracts to the minutes of confidential board meetings.”http://www.foxnews.com/story/0%2C2933%2C435681%2C00.htmlI have been observing 2 years and more of what is appearing as a methodical collection of privately held computer based data by persons and organization unknown and if I believe in conspiracies, which I don’t, I would tend to treat this report above rather seriously.But, then is probably just about the basic criminal elements er, “leadership”.Ho hum
The sound of a balloon deflating while wet?It’s what you get from “leadership” for your dollar.Ho hum
Hey Guys and Gals, with all humility from a Latin reader, welcome to a third world banking and financial system!!! Face the fact that this a secular trend of wealth shift toward the east, that the world is not going to pay for your Social Security and Welfare, that you will have to pay 100% for your guns by taking the savings from your children futures and not from the surplus of China,Japan,Russia and the Middle East. So Food, Housing, Savings and Progress or War, Poverty, and Despair? Where are you going to put what is left? And finally but not least, Crisis=Opportunity.
US confirms it will take equity position in certain US banks. — dilution?? — Paulson needed to save this announecment just in case the G7 dithered. Paulson states it would be naive to think a coordinated banking back stop could be accomplished.Nationalizing certainly did wonders for the UK markets.After hours market activity for the banks pre and post the announcment – very very slight movement to the upside once announcement made.Wells from 28.30 to 28.75Citi from 14.42 to 14.50BAC from 21.04 to 21.45etc etc
But will it thaw the credit markets and lower LIBOR and TED? The market was expecting this so it is reasonable to think it had already been discounted. What the market really wanted was global a deal and that is not in the cards.
PeterJB (2008-10-10 18:08:37)Your answers to remote REAL TIME ACCESS TO PRETTY MUCH EVERY SINGLE BANK AND MULTINATIONAL CORPORATION’S ALLEGED ‘SECURE’ DATA, by following the following…. (PS: HUMINT & SIGINT cognitive awareness required)1. PRAVDA: PPPINT: “The Financial/Economic 911 of 2008 was pre-planned”, Pravda2. PTECH / PROMIS SOFTWARE: All those financial wizard on the Cannon Fodder Slavery Exchange, may be very surprised to find out about Promis Software:PROMIS SOFTWARE4/4/05: Clarifications Regarding Ptech Software1/27/05: THE FAA KNEW! But Were They Set Up? – by Michael Kane- A newly released 9/11 Commission document reveals that between April and September 10, 2001, FAA leaders recieved some 52 warnings about the al Qaeda threat to US aviation. But now the story’s spin is pointing straight in the wrong direction.1/27/05: PTECH, 9/11, and USA-SAUDI TERROR PART II – PROMIS Connections to Cheney Control of 9/11 Attacks Confirmed – by Michael Kane- The FAA & Ptech- Debriefed by Secret Service – looking for a PROMIS- Muslim Brotherhood, Christian Cultists, and Nazis1/20/05: PTECH, 9/11, and USA-SAUDI TERROR, Part IPROMIS Connections to Cheney Control of 9/11 Attacks Confirmed. by Jamey Hecht, with research assistance by Michael Kane and editorial comment by Michael C. Ruppert.Wall St. whistleblower Indira Singh tells an insider’s story of corruption in the very highest places. Software of incredible power has been funded by confirmed Saudi terrorists and installed on systems in the FAA — and NORAD, and the FBI, and the White House, and the Navy, and the House of Representatives, and on and on. Its roots are in PROMIS, and its applications range from 9/11 to TIA to a chilling new brand of warfare that may soon be used to cripple Iran.3/3/02: Post 9-11 Microbiologist Fatalities Now as High as 14.New and Ominous Connections to DynCorp and Promis Software Connections Emerging. A Career In Microbiology Can Be Harmful To Your Health (Revised – updated)12/18/03: THE BACKGROUND IS OILA global oil crisis that cannot be postponed or evaded is upon us. Geologist Dale Allen Pfeiffer explains — in layman’s terms a context for recent events that makes the inexcusable actions of the Bush administration understandable. Some groups will do anything to avoid letting go of power, including killing millions of people. Who’s next?11/19/01: Osama bin Laden is likely in possession of software that can compromise the U.S. military, intelligence and financial systems.As established by court records and congressional hearings the government stole the software eighteen years ago. – [UPDATED, NOV. 19]10/26/01: Promis Software (Expanded Story)- bin Laden Inside DoJ and the FBI Computer Systems? – Connections to Threats Received By Air Force One – Britain Germany In The Lurch – Legal Crisis for the U.S. Government Which Stole The Software in the First Place – Money Laundering Investigations Compromised – An Inside Look at What Promis Can Do And Why There Is Reason to Worry.9/30/01: PROMIS Software History by Mike RuppertAnd Finally…PROJECT ICC-CAVIAR PROMISE JUSTICE….
OkI’m a little new to this site and I need a little clarification. What does PPT stand for? I can’t figure it out. Thanks!
Exactly! Crisis = OpportunityI bought the market near the close today, buying high-yielding dividend paying stocks. SO MUCH MONEY sitting on the sidelines just waiting to get back in the market. Something has to come from all these meetings this weekend, otherwise it’s CHECKMATE FOR THE ENTIRE GLOBAL COMMUNITY. I really wish someone would suggest a solution to all the counterparty CDS risk which is what is dragging this market down. I suggest a TEAR-UP session that parties can agree upon, noting that contract law exists but can be diverted if parties agree not to exercise their rights based upon the potential COLLAPSE OF THE GLOBAL FINANCIAL SYSTEM. Why isn’t anyone proposing this alternative? Don’t people know that the counterparties do not have the capital to withstand huge losses to which they are exposed? To me, CDS counterparty risk IS the primary reason we are in this mess. Hedge funds insure 32% of the 60 Trillion dollar CDS market. Do you think maybe, just maybe we should find a viable solution in order to save the world from collapse?
Here’s an intro: http://en.wikipedia.org/wiki/Plunge_Protection_Team
Thank you! That helps!
NopeWhat you have done is rather Crisis = Unmitigated Risk & outright uncertainty.Well, but then if you can handle it, then good luck to you.
Thanks for that, FT.
Prepare for robbery.
I’ve been the biggest pessimist I know and have been following this fiasco for years now. I’ve protected my capital, bought gold years ago, and understand that if everything goes to hell in a hand basket, my dollars aren’t worth anything anyhow. I feel there is a better than 50% chance that things will turn around, and at this point I’m willing to take that risk. If I’m wrong, we’re all doomed.Good luck to all.
The following is an excellent article that offers some interesting scenarios including a comparison to the depression of 1870 and some postive outcomes as well. It’s on seekingalpha.com which used to be a pretty good site but has become tainted with US partisan politics – so I ignore the comments and am very selective about the authors – as alot of stuff is crap. But this one is first class Where We Go from Here: Best and Worst Cases, by Cam Hui
@Guest on 2008-10-10 14:36:17THanks for the kudos. I do a fair amount of technical work to help with timing to support my fundamental work. 8,060 on the Dow was a support level, derived from a trendline extended from the lows of 1990 and 1994. I also do relative strength work. The 8 day RSI had touched zero twice since the beginning of 1987 (the date I started collecting daily data)in May 1988 and on September 21, 2001 (following the 9-11 sell off) both meaningful bottoms. I’d calculated that a close below 8,575 would create a reading of zero for today. I bought my first stock today in two years, picking up some DIA at 80.5. Given the sharp sell off this morning and the aggregate action of the last week, the impending G7 meeting, it was clear to me that the pros would not go into the weekend short. I must admit by about 1 p.m., I felt we were either going to get the rally or we would close down 1,000 points. We got the rally. I think we could easily see the Dow at 9,500 by Weds, just on some short covering panic. Where it goes from there, I have no idea.I was a reasonably regular contributor to this blog 5 or 6 months ago but faded away when OR went on vacation. I’ve stuck my head in once or twice but continued to read the one way, bearish commentary and the hate on for the U.S. government. I ducked out because I was tired of all the depressive nonsense. Guys, and gals, to be a trader, you’ve got to have a balanced perspective and treat everything at face value, rather than have your own personal biases.Apologies for the sermon. Good luck to you all.
Mmmyah…That, or grab as much cash as you can and run as fast as you can, without even turning back to look. [run away and out from USD that is, I find it is a nice exit point right now].See you the other side, and … best luck to all, sincerely.
But you still have to account for others’ personal biases Well, I am not a trader, but I am a fan of yours.
Watch out for the conspiracy geeks that lurk around, they’ll have you digging a bunker in your back yard and wearing a tin-foil hat.
My personal goals:1) Save more cash2) Buy a gun and know how to use it effectively3) Store two years of food/water4) Don’t but what I don’t really need to exist5) Read more about economics so I can understand some of the more intertwined and complex problems.
Finally, someone with a balanced approach.Here Here! My exact sentiments.Cheers!
Can somebody tell me if and how the Bretton Woods 2 system will collapse and what the implications will be, in layman’s terms? The good professor promised a post on it some time back but hasn’t gotten around to doing it yet. How will the Unraveling of the system affect the dollar, euro and asian currencies?
The oil dividend.Just did a little basic math and by my calcs the U.S. may have just received a potential dividend in our oil costs. How does $300 billion per year savings sound?The formula: The U.S. imports about 5 billion barrels per year. The price just dropped $60 from this summer’s price. $60 x 5 bil. and it’s reasonable to assume we may have that extra money we would otherwise be spending. But the benefits don’t stop there. The U.S. only imports 25% of the world’s oil, so the other 75% of this windfall savings goes to the rest of the world. That means the cost for food, fertilzer, factory operations, and everything else the less developed world uses oil for, will be 43% cheaper (as of today.)There’s another major benefit that I mentioned in some earlier posts. Many, if not most, of those oil exporters are not frieds of democracy and have been using their oil revenue as steroids to pump up their muscle-bound war machines. If we didn’t have to worry about those oil mafias trying to dominate the Persian Gulf, for instance, we wouldn’t need to be there. Centcom is there for one reason only, and it’s not to fight terrorists or insurgents in Iraq.The way things are going we could be heading back towards $40 oil – at least till the growth engines kick in again, but it will give us a breather. Of course, cheap oil has a lot of negative aspects in the short run, such as hitting Mexico’s income very hard.
@PeteCA: “Just a quick note of warning … to anyopne here who is expecting to collect money from state pension funds. There are now at least 31 states in the USA that have budget problems. …One avenue of approach is for the state legislatures to temporarily dip into the money set aside for state pension funds…”Pete. Roberts shares your concern, on a national level. Says Roberts:[H]ow is the trade deficit to be closed? One way is through the dollar’s loss in exchange value, which would reduce American consumers’ real incomes and leave them too poor to purchase the offshored goods and services.How is the budget deficit to be closed when jobs are disappearing and GDP (tax base) is being relocated offshore?Not by higher taxes. Higher taxes are problematic for a recessionary economy in which unemployment, properly measured, is already in double digits (www.shadowstats.com).Some people have speculated that the budget deficit will be closed by dismantling entitlement programs such as Medicare. However, considering the cost of medical insurance, this would be catastrophic for tens of millions of older Americans.The more likely avenue will be a raid on private pensions. The Clinton administration’s appointee, Alicia Munnell, as Assistant Secretary of the Treasury for Economic Policy argued that private pensions should face a capital levy to make up for the fact that their accumulation was tax free. I expect that the federal government, faced with its own bankruptcy, will resurrect this argument, as it will be preferable to printing money like a banana republic or Weimar Germany… Paul Craig Roberts, former Assistant Secretary of the Treasury in the Reagan Administration. ~ September 15, 2008http://www.vdare.com/asp/printPage.asp?url=http://www.vdare.com/roberts/080915_economy.htm
I sure hope they don’t do that. We’ll see how extreme the choices get as the Govt debts pile up in this credit crisis. Pension funds and 401K’s are the easiest target for the Wall St players.PeteCA
Raid pension funds while not cutting dividends! Maniacal! Dividends must be wiped out for shareholders of insolvent banks! Let’s see what Bugsy Bernanke’s crew hits us with through the weekend.
Dow Average May Be Poised to Fall to 7,000: Chart of the DayOct. 10 (Bloomberg) — The Dow Jones Industrial Average would have to fall about 18 percent more to reach its “trend line” since August 1982, when the 1980s bull market started, according to Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York.As the CHART OF THE DAY shows, the average is closer to the reading indicated by the trend line than it was in October 2002, when the last bear market hit bottom.Yesterday’s close of 8,579.19 was about 23 percent higher than the level indicated by its past performance — about 7,000, Boockvar wrote in an e-mail today. The Dow average’s earlier low was about 35 percent above the trend line.The Nasdaq Composite Index fell to its post-August 1982 line “almost to the penny” after the 1990s Internet bubble burst, he wrote. The index plummeted 78 percent between March 2000 and October 2002, when it reached a six-year low.Since Sept. 29, the Dow industrials have fallen 23 percent. The retreat started with a 777.68-point plunge, the biggest one- day drop in history.The Standard & Poor’s 500 Index would have to lose only about 6.5 percent more to hit its trend line, according to Boockvar. The reading suggested by the index’s swings in the last 26 years is 850. Yesterday’s close was 909.92.Stocks may hit bottom before the benchmarks drop to these levels, Boockvar wrote. “We certainly don’t need to get there in order to create a bottom,” the e-mail said.http://www.bloomberg.com/apps/news?pid=20601109&sid=amX076XhpyXk&refer=home
Is that before or after they confiscate private gold holdings.
This is not so much a “dividend” as it is a removal of a tax.We are still above levels from just 13 months ago. So, in effect, over the last year, the world got hit with a punishing new expense. That expense has been relieved.I wouldn’t go so far as to say there is any real stimulus from this. Doing math from the very brief “peak” price, which lasted less than a day, is certainly not reasonable.
I remember you posting in this blog months back. Welcome back and thanks for your valuable comments.
I remember you posting in this blog months back. Welcome back and thanks for your valuable comments.
Seneca, that’s a nice zen philosophy – “Wei ji” which translated from Chinese means what you wrote, “Crisis = Opportunity.” The rest of your philosophy may hopefully turn out to be less accurate, namely the “trend of wealth shift toward the east.”I think what you’re really talking about is the trend of Western consumerism being fed by Eastern productivity. But that intravenous tube may soon get disconnected and removed from our flabby arms. And the good news for the consumption-addicted West is that most of the things we bought were based on wants, not needs. The average American can downsize their lifestyle dramatically without losing anything of real value.Two thirds of us are overweight – many flat out obese. And not just our bodies, but our homes, cars, and wasted time on fun and games. Those guns that the Chinese have kindly loaned us the money to buy have been mostly used to make sure China, Europe, and the rest, can get a steady flow of oil. The U.S. only gets 10% of its oil from the Middle East.Those cheap goods from the East that have filled up our closets, cabinets, garages, and extra rooms have made life too easy and wasteful. Take the greatest innovation in 50 years, the internet, and notice how we use it: 50% on porn. We’re proud to show off our newly bought books, “… for Dummies” and “The Idiot’s Guide to …” We flock to movies like “Dumb and Dumber.” Many Americans are due for a thorough lifestyle cleansing and plenty of us won’t like it.I hope we take good advantage of the new “opportunities” coming soon.
Mostly true. But if you’re a believer of “peak oil” theory, then you’re aware that the projections were for $200 oil not far into the future. Had the global economy not been on a downsloap, the price might easily still be creeping up. China alone was adding to most of the annual oil consumption in the world.Add to that the potential war with Iran, Venezuela’s oil threats, Mexico’s production falls (25%), Nigeria’s insurgents, OPEC cutbacks, and Russian threats, and there were plenty of opportunities for more radical spikes, maybe even new plateaus.
I’m so confused.
So many phallicisms today . . . me thinks Dr. Slamdunk needs some special attention.
Its all smoke and mirros. They couldn’t find their own asses with a GPS.
Perhaps Seneca has read “The Shock Doctrine: The Rise of Disaster Capitalism.”Anyone who has not read that book should pick it up this weekend. (Disclaimer: I am not Naomi Klein, nor do I own stock in her publisher). The best book I’ve read in a while, with profound implications for this very moment in time.The implication in this reference is: Crisis = Opportunity (for the select few). Some animals are more equal than others
Pushing on a string?????I believe we are pushing on rubber bands.Rubber bands push back.
That’s cause I just bought some. i have a habit of standing under pianos. I just got done with school, and, got a job at a non profit. I don;t make a lot of money but I have extra each Month. So I bought some 90% silver coins. I can’t figure out where to save, so I thought it would be smart. We are talking only a few hundred dollars every two weeks.
My question is this. Will Paulson’s plan now to “recapitalize” do anything to get banks to lend to each other? Or is it a half measure really because they would need at least a 51% stake, or take them over outright? It seems to me that they are going to have a hard time getting people to borrow more money, regular consumers. I mean unless they give it away. Also can they just make billions and billions out of thin air and there is no downside? I think we are screwed. I mean that is my prognosis. I am not an economy type, but, just my gut. This is too big to bail. I mean F is a 2 dollar stock. C dipped under 13. GS at 88. GM at 1950 levels. FNM, FRE … I don’t need to rehash this, but, surely there is a huge downside to all this???
Certain market astrologers and numerologists*–I mean, “technical analysts”–claim that the DOW from 1929 to 1937 andthe NASDAQ from 2000 to 2008 are “identical” (up to vertical scaling). Here is such a chart, as of Sept 15 2008 (you have to pay for the latest, of course).I believe the gyrations of Oct 10 ruin the numerological progression.*It takes one to know one.
That was bizarre: the link in standard HTTP points back to RGEmonitor! Here is the URLhttp://www.markethistory.com/subscribe/best_of/content.html/14786.html
I’ll try again.
Sorry to post this twice but I really would like someone who knows something to answer. Not just from a biased perspective.My question is this. Will Paulson’s plan now to “recapitalize” do anything to get banks to lend to each other? Or is it a half measure really because they would need at least a 51% stake, or take them over outright? I have read two differing perspectives. It seems to me that they are going to have a hard time getting people to borrow more money, regular consumers. I mean unless they give it away. Also can they just make billions and billions out of thin air and there is no downside? I think we are screwed. I mean that is my prognosis. I am not an economy type, but, just my gut. This is too big to bail. I mean F is a 2 dollar stock. C dipped under 13. GS at 88. GM at 1950 levels. FNM, FRE … I don’t need to rehash this, but, surely there is a huge downside to all this???Are they just rearranging the deck chairs on the Titanic at this point?
Ok, since the government is getting involved anyway, and giving away$700 billion of our tax dollars in the process, but banks still willnot lend, why don’t they just make it a law that they have to lend orelse the overpaid managers will go to jail. Mandated market confidence,lend or go to jail.The government would have no problem sending any of us to jail if werefuse to pay for their $700 billion failout. That’s one thing youcould be confident about.
Also read about politics and history.The solution will be political as well as economic and the long term trends can only be discerned through historical thinking.
You forgot alcohol and antidepressants.
The G5 countries sucks 67% of world debt to create 45% of world wealth.
Do they really create wealth when for example US and UK do not have much manufacturing left? The GDP of US and UK seems to have largely come from creative financial instruments…so where does it come from nowadays…
In fact I think US and UK in particular did not “create wealth”. They created debt. As can be seen from how much debt is around in those two countries.Debt is not true wealth.
They could always reduce military spending to have money for the pension funds. But US would never do that.
Via Don Fishback’s blog – LB’s Survivor Bias in action:
What REALLY HappenedI hope my good friend Larry McMillan doesn’t mind me doing this. He has a terrific advisory service — The Options Strategist. In this morning’s hotline, He had this to say about the goings on yesterday:The selling has reached historic proportions. There literally is a “run on the market,” as investors worldwide are dumping stocks. It seems that the major catalyst for this selling is the fact that the newest large banks primarily J. P. Morgan, Goldman Sachs, and possibly Morgan Stanley as well — have issued massive margin calls to hedge funds and other professional traders who use these banks as prime brokers. These calls were not issued because of market losses, but more because the banks arbitrarily decided that they wanted their customers to use less leverage. Margin rates as low as 15% for broker dealers were raised to 35%; hedge funds who had been used to operating on high leverage were told that they had to bring accounts up to a much larger percentage of equity. In this illiquid environment, where all manor of exotic securities literally have no bids, the only place to raise the cash to meet margin calls was to sell stock. That is what really setthis market over the edge — as the first notice of these calls were issued on October 2nd and 3rd. There was something of a grace period to meet the calls, but funds realized they weren’t going to be able to meet themother than by selling stock. There are rumors that the most massive of the calls are due Monday (October 13th). If so, this market could continue to decline through then.There doesn’t seem to be any reason for this increase in margin. The most benign one is that the banks became overly worried that their prime brokerage customers could cause problems with leverage. A more sinister reason revolves around the fact that the banks issuing the calls will likely wind up the owners of some excellent inventory (relatively illiquid preferreds, bonds, etc., which are being sold at prices well below theoretical value). They are in effect confiscating from their prime brokerage customers.
America will get what it deserves…
The real disappointment is that Obama will likely have to deal with all of this sh*t created by the Bush and Clinton Administrations. Obama won’t have a chance to do much of anything except try to clean up their mess.
goddamit, where’s my cream!
“The reason for the sharp decline is massive selling from hedge funds — not because they want to, but because they have to reduce their leverage,” says Kenneth Heebner, manager of CGM Mutual. “It’s the biggest margin call since 1929.”
PPT = Plunge Protection Team (aka W.M.K.T.S.M.A.I.A.O.A.A.C.T = we must keep the stock market artificially inflated and overvalued at any cost team)OrProfessional Pullthewooloveryoureyes Team
I like the solutions mr Roubini are suggesting but I think I am on something better. It will for sure be the utlimate solution to this mess and it is failproof. It is based on the same ideas as Mr Roubinis but my solution is simpler and more effectiv it is called “The FED Lending Machine 2.0″.The Fed Lending Machine 2.0 will look like an ATM and many ways it is. The differenses between The Fed Lending Machine 2.0 and an ATM is that from an ATM you redraw money from your own account but as with the FED Lendng MAchine 2.0 you will lend money from The FED and you will be able to lend as much as you want with a zero or below interestrate.I prefer the “below” rate since it realy boost lending. Of course you have to apply for a FED Lendng MAchine 2.0 card but nobody is going to be rejected.This will not be a a costly undertake. The machine is easy to build and instead of money it will contain a fairly simple printer. All cost fo producing the machine will be covered by the machine itself. It will borrow money from itself.With The Fed Lending Machine 2.0 there will be no more foreclosures, no more autoloan failures. The shoppingmalls will once again be filled with the proud and fierce US shopper.Eternal shop-happines will flow with the boost of liquidity that The Fed Lending Machine 2.0 will give us.
Interesting readThe Real Great DepressionBy SCOTT REYNOLDS NELSONhttp://itulip.com/forums/showthread.php?p=52465#post52465″Our current episode has more in common with the 1870s depression.It was primarily caused by over-indebtedness in the commercial real estate sector, which mortgages were based on new forms of financing which were intermingled on the balance sheets of commercial banks with less rarefied assets that the banks added by making business loans” ~ NELSON
They all are now keynesians!!!
Think of it this way. Destruction of money supply first affect funded assets. If nothing is done, then we would face massive deflation. In the process of trying to fix the problem, governments will be tempted to print money to reinflate the economy. This is a short term fix. Eventually we will end up like Zimbabwe and Weimar Germany. The Great Depression was due to not reinflating the economy fast enoough. Weimar was the result of printing money to try to offset the massive slowdown. The ideal path will be to repair the system so that it can halt the destruction of money supply, without the resulting inflation, ie maintaining M1 and try to increase the multiplier, NOT increase M1 to compensate for the decline in multiplier. Clearly asset prices will not be returning to its previous highs but at least a depression is headed off. The world will be working from a lower base but that is just mean reversal from the last few years of excesses. There will definitely be pain. Its a matter of whether it will be a short one (1-3years) or a disastrous one (10yrs with likelihood of war).
Roubin your solution seems ok butwhere are you going to get the money?Are you going to print or lend?
I have experiensed a financial crash during the 90′s and taxrebats etc seems like a very bizar. During our crash taxes soured and the value of our currency plummeted. If US continue to spend more than it earns the US balancesheet will be a wreck. Who on earth will lend money to US?All solutions seems to end up in a orgie of bailouts etc but where will the money come from.
Talking about USURY:”In addition to collateral in the form of illiquid AIG assets for the $85 billion two-year bridge loan, which carries a **usurious** interest rate of 8.5 percentage points above LIBOR ” Emphasis minehttp://henryckliu.com/page169.htmlSounds like Australian Home Mortgage rates…. Oh, Usury, well, after the government has pumped up house prices through squeezing land releases… and can we add, etc., etc?Ho hum
It will depend on the interest rate — and that is just one of the many ‘pleasant’ surprises that the future holds -
Talking about living it – on the edge, that is, not “Waiting to Die”:”Experts note that each financial crisis is unique, which probably is true in detail. These experts also seek comfort in the observation that the identified excesses of past crashes have been dealt with through new regulatory measures, which is also undeniable. Yet financial crisis have persistent common threads in that they seem to defy precise anticipation and that their occurrence leave serious structural damage. Thus the requirement of a conservative debt to equity ratio is needed to protect the system from policy misjudgment. Yet the US system prospers on living on the edge through maximization and socialization of risk, thus building in failure or collapse that hurts no just the willing risk takers, but the general public who has been put into risky situations they cannot afford by the sales talks of sophisticated risk management.Will history compare Clinton to Coolidge and Bush II to Hoover? “http://henryckliu.com/page169.htmlHo hum
Fundemental problem is too little too late.Recapitalization required – just underwayAsset prices reversion to the mean – underway e.g. housing too much consumer debtDeleveraging – underwayRecognition of losses – stealth but not officially underwayThe delay has resulted in a cascade of secondary and now tertiary problems some of which will be as serious, in their own way, as the above. Moreover as each of those issues are addressed expected consequences will result e.g. housing and reduction of personal credit = reduced consumer spending. Printing money = higher interest rates = reduced consumer spending. Unexpected or unintended consequences will also result, which we will soon find out about.Recognition of losses is underway in a stealth fashion e.g. Libor and Ted are telling the tale. It many be that open recognition will have a pleasant outcome but more likely have the effect of a cluster bomb. Take a drive through Cape Coral Florida to see the effect of recognition of losses. No offense to residents of that lovely community but it has become a wasteland that would make TS Eliot blush.etc etc
Watch this — unfortunately it presents in a small video box that cannot be expanded so the charts are tough to see. Jeff DeGraaf analyis of bear Markets (video)
Did you ever wonder what the message in the upper right hand of this comment box meant allowed html tags: a, b, i, u, blockquote?It means that when you post a link to another website you can make it an active link that you just have to click on. How do you do that? It is simple. Lets say you want to make the URL http://www.bloomberg.com an active link.First but quotation marks on the URL “http://www.bloomberg.com”Next put this tag in front of the URL Next put this tag at the end of the URL “http://www.bloomberg.com”> This is the description of the URLFinally put it all together with the tag in front and the tag at the end and you have just created an active link that will increase the probablity that your reader will visit This is the description of the URL
military spending = bye bye Iraq = hello Iran = oil @ $300
And move into a “bastle” or better still build one. That way you can also keep livestock and at the same time keep your family safe while you fend off the throngs of the homeless and desperate.
I’m @Guest on 2008-10-10 14:36:17 – and didn’t buy what you were saying – to my loss – hopefully you keep posting – I have just discovered this site and find the tone and content superior to many. Having said that I will be interested to see what happens next week (my not so reliable instinct still sees a very difficult Monday)Thanks again Giraft
Great post! You are so right. This country has needed a good dope slap from the reality fairy for a long time. Time for everybody to put down the clicker, get up off the couch and do some REAL work.
Question, has the sub prime issue come about because the guys selling the loans to home buyers were not concerned with the probable defaults on these loans as they were on selling the risks as derivatives? Ie they disguised the risk, earnt a bonus, and the problems found their way up to Lehmans and Barclays, who had been sold a pup?
Could be difficult on Monday if the post at 02:14:43 below has credibility. If the sharp selloff last Friday were the margin clerks at work, rather than the capitulation of panicked retail investors, it presents a very different picture. Those forcibly taken out of the game won’t be back in a hurry. However, we are down six thousand points on the Dow and there are some that want to put their money back to work and I think that’s what we saw on Friday.While some co-ordinated activity will evolve over the next few days/weeks from the G7, many may be disappointed about the lack of any concrete plans. Guess it just means that we’ll have continued huge volatility in prices.
No matter what the solution is, money will have to be raised from borrowing from foreigners(if they still buy our Treasury bonds i.e.). I have been hearing that US credit rating may be cut in future – not sure how that will affect borrowing money from foreiners. Right now, the emphasis should be to bring some kind of normalcy in the credit and equity markets and then work on reforming the system, develop new infrastructures, job creation etc.
Hattie: Will get back to you. The Fed hates deflation. In spite of their talk about “inflation fighting”, they’ll do almost anything to re-flate the economy if they can. As you’ve seen, the forces of credit destruction have been more powerful than anything they can do over the last couple of weeks.PeteCA
BW2 is collapsing. That’s a big part of what you’re seeing right now. That’s just one reason why this recent statement by the G7 doesn’t address the fundamental issues. And as other people said here … if there’s a new global agreement then it needs to include China, Russia and other important players.PeteCA
Why would you expect interest rates to government interest rates to rise in this environment? In the Volker days, he cranked up rates to deal with a very serious inflation problem, making money tight along the way. Here we have a situation where the Fed and other central banks are pumping trillions of dollars (or equivalents in other currencies) into the global banking system. What we are facing is a chronic deflation. The Fed’s move to pay interest on banks’ reserve deposits was designed to help them achieve the Fed Funds target rate. For about two weks before last week’s cut, FF had traded at a daily average rate of about 1.3%, as opposed to the 2% “target”. (For the life of me, I don’t understand why the Fed thinks it can, or needs, to maintain a target rate for FF when it is pumping in so much liquidity. They can control the price (the rate) or the supply (the liquidity they pump in) but I wouldn’t have thought both. Besides, does the FF rate really matter, when you have T Bill rates down to where they are and LIBOR up to where it is?)Treasury bond yields are at risk on the upside to what Rick Santelli described as “drive by” auctions (completely unanticipated auctions of Treasury securities) and the fact that probably most of the people that represent the “flight to quality or safety” have already flown. But don’t let the supply fool you. Go back and look at the early to mid eighties, when North American govts were running huge deficits. One wold have thought that bond yields could only go up. In fact, over the next few years, bond rates halved! Now we were starting from 12 or 14% but there is still a lot of room between 4% and zero, as the Japanese have clearly illustrated.
Also my issue with Prof Roubini’s solutions. A lot of solutions to this problem all seem to assume that the USA has a magic piggy bank where we can just get a lot of money. What if we don’t? What if interest rates soar in America and no-one will lend to us?PeteCA
Top bank execs didn’t just wind up with this on their doorstep. This process you’re describing, called “securitization”, cut the risks out of the pricing scheme and allowed the banks to re-price these aseets at much higher levels than should have been possible. You can be sure that the top guys understood this – and saw a way to grease the system to make huge profits while they could.PeteCA
A few rambling long-term thoughts on the U.S. …IMO a GM/Chrysler merger is a bad idea. It smacks of nationalization. And where does it leave Ford?As much as bailouts reek it does make sense to me to protect what’s left of the U.S. manufacturing base. The production and sale of real goods adds real value to the economy, unlike, say playing clever games with capital and contracts.It is difficult for me to imagine any way out of the U.S. deficit black hole outside of direct or indirect default. Medicare alone is a monstrous pit awaiting us. IIRC the new prescription benefit alone will cost more than ALL of Social Security.If the U.S. is going broke anyway shouldn’t a default be used as an opportunity to salvage what we can?Many of our remaining U.S. owned (whatever that means now) manufacturers are saddled with legacy costs in the form of medical insurance and pensions for retirees which makes it difficult for them to compete regardless of how “affordable” or efficient their current workers may be. Instead of nationalizing the companies, and/or throwing more money at them directly, wouldn’t a widespread lifting of this burden give everyone a second wind?It may seem far afield in the current crisis, however I believe that when the dust settles, moving to single payer/Medicare for all health care system could be a crucial step in healing the U.S. economy as a whole. Medicare D is a piece of crap and should be junked or massively revised.That said, lifting the burden of current and legacy health insurance from U.S. companies should certainly give their bottom lines a boost without favoring any one company. And, also IIRC, the largest number of consumer bankruptcies are related directly to illness and medical expenses.The second and third large U.S. government investments should be in infrastructure and new technology/manufacturing to deal with global climate change and declining petroleum production. These investments will improve things in the U.S. and potentially abroad.A further devalued U.S. dollar should provide an additional boost to manufacturing and agriculture as it would simultaneously increase domestic consumption by making imports less affordable for U.S. consumers, while making U.S. exports more competitive globally. A debased dollar should work almost as a type of tariff without all the political fall out. Hence why China and other countries worked for so long to keep their currencies cheap in relation to the dollar.The obvious rebuttal is “where will the U.S. get the money?” I guess the answer is what will serve our creditors better, a complete default, or a partial default where the U.S. has a chance at repayment of some kind through the balancing of global trade.
U.S. BUYING INTO FINANCIAL INSTITUTIONSThis move, announced today, is absolute confirmation for me that this is an intentioned shut down of the economy. Each bank or financial institution that the Treasury buys into will give it (and Goldman Sachs) the power to shut each bank down and to decide when it shuts down. It couldn’t be more transparent. They’re going to turn out the lights in an orderly fashion and it’s obviously an attempt at a controlled fast crash. They’ve only got three months left in office. That would essentially make Barack Obama an economic janitor employed by the same firm. I can just hear Bush and Cheney cracking a joke about it.MCRc. 5 P.M. ESTUNDERSTANDING FRIDAY, Oct. 10th, 2008 — NO CAPITULATION AND WORRIES ABOUT THE ELECTION[DISCLAIMER:From here on out I will write under the assumption that those who read me are familiar with Rubicon, the FTW site and its archives, and my videotapes. I'll assume that you already know what GATA is and that you understand all of my/our previous work on gold, intelligence agencies and economics. The reason for that is that I am, and will always be, most loyal and responsive to the thousands --perhaps tens of thousands -- who have been with me and the FTW gang for years. I cannot and will not go back and rewrite what I spent years writing and waste the time or focus of those who just need/want to hear what my inisghts are today. We just don't have time to waste. For those willing to do a little homework, the FTW acrhives are there and available. The easiest thing to do is to go to the FTW search engine (not a great one) and, under Search Options select "Find exact phrase". Then enter whatever terms or subjects that we use here andyou will find a quick-study course to help bring you up to speed. --MCR]Bear in mind that everything that happened today happened in absolute silence about Citigroup. The latest there is that there is supposed to be a court hearing next week about a suit Citi may bring against Wells and Wachovia. Meantime, Citigroup has waived all claims to acquiring any of Wachovia’s assets (cash deposits). My suspicion is that out of fear Citi is hanging back for any kind of discussion about its stability. Then again, they just might be waiting for the right moment to break the bad news to achieve the worst effect: capitulation. Citigroup is in a worse position than it was two weeks ago. It is still heavily weighed by bad mortgage debt and “bailout options” are becoming an endangered species, especially when Citigroup would be the biggest bailout ever — by a wide margin. The seemingly blessed AIGwas/is nowhere near as big, especially in terms of impact.VOLATILITY –I have never seen such a volatile market as I saw today. I saw (maybe there were more) no less than eight swings back and forth between positive and negative in the Dow. Five of them were in the last hour of trading. Up by a hundred then down 800. Then back up to even. Then back down again to -600. And then back and forth by 200-300 pts five times. A key moment, when the Dow was down by 600+ was a sudden drop in the price of gold by around $50 an ounce — out of nowehere. When that happened, the 600 point loss evaporated to 128 or so points. The continuing blatant manipulation in gold prices is so obvious as to be ludicrous. It is sucking the last bits of cash out there into the markets. GATA has been right all along and I have said so consistently for many years. The panicked sheep who have been”looking at” gold (late, but not too late) will hesitate and leave their money in stocks, blindly believing we have hit the bottom on Wall Street.There is no bottom until there is CAPITULATION. Today’s volatility was anything but CAPITULATION. It looks to me like the violent, last-gasp throes before death which I have seen before in real life.Capitulation is when the market hits a bottom and just stays there…for days and weeks. When there are no signs of struggle or life. No heartbeat. No thrashing.When the Citigoup bomb is going to drop is anybody’s guess but I just don’t see how we can go through next week without major media starting to ask questions on the air and in print.I repeat that the U.S. government is doing everything it can to step on the economy like a cockroach. Every move by the Executive or the Fed has not helped, but hurt share prices. This is deliberate.MCR
Semi-rhetorical question: why should the “temporary” actions be so? Because Socialism failed? As badly as Capitalism? A Republican President – a rabid anti-Socialist, a “Castro and Chavez are Evil” monger – is nationalizing the banks for chrise sake! Prof. Roubini speaks of the need for radical action and leadership; here’s some: General Strike, seizure of the means of production (incl. finance), down-up leadership by industrial sector committees! But we’ll never learn: as a fisheries biologist I once worked with astutely (though bleakly) opined, all populations grow until they reach their environment’s carrying capacity, then crash, sometimes recovering, sometimes not – it’s that simple.
Was Sub-Prime good for America?This speech (below) by Bush almost exactly six years ago might help explain why the sub-prime mess has happened. And I realize that most Americans will see Bush as one of our worst presidents because of the meltdown – hindsight always being 20-20. But I’ll stick my neck out and say that had I listened to this speech at the time, especially knowing we were in the midst of a war that was about to get much larger, I’d probably have considered him an American hero. This speech is full of common sense and could have only been made by someone with guts and a vision for a better future. The fact that greed and optimism is part of our human nature is not really his fault.Bush’s Home ownership speech(excerpt)
All of us here in America should believe, and I think we do, that we should be, as I mentioned, a nation of owners. Owning something is freedom, as far as I’m concerned. It’s part of a free society. And ownership of a home helps bring stability to neighborhoods. You own your home in a neighborhood, you have more interest in how your neighborhood feels, looks, whether it’s safe or not. It brings pride to people, it’s a part of an asset-based to society. It helps people build up their own individual portfolio, provides an opportunity, if need be, for a mom or a dad to leave something to their child. It’s a part of — it’s of being a — it’s a part of — an important part of America.Homeownership is also an important part of our economic vitality. If — when we meet this project, this goal, according to our Secretary of Housing and Urban Development, we will have added an additional $256 billion to the economy by encouraging 5.5 million new home owners in America; the activity — the economic activity stimulated with the additional purchasers, the additional buyers, the additional demand will be upwards of $256 billion. And that’s important because it will help people find work.Low interest rates, low inflation are very important foundations for economic growth. The idea of encouraging new homeownership and the money that will be circulated as a result of people purchasing homes will mean people are more likely to find a job in America. This project not only is good for the soul of the country, it’s good for the pocketbook of the country, as well.To open up the doors of homeownership there are some barriers, and I want to talk about four that need to be overcome. First, down payments. A lot of folks can’t make a down payment. They may be qualified. They may desire to buy a home, but they don’t have the money to make a down payment. I think if you were to talk to a lot of families that are desirous to have a home, they would tell you that the down payment is the hurdle that they can’t cross. And one way to address that is to have the federal government participate.
NYT Article – Who Will Still Be Standing When The Game Is Over?I want to draw readers’ attention to the following article from the NYT. A few pieces in the article deserve serious contemplation …http://www.nytimes.com/2008/10/11/business/11global.html?ref=businessFirst, the title of the article states that “Rich Nations Pushing For Financial Rescue”. Has anybody noticed that most of the countries pushing for the rescue here – are the same ones that are threatened with major loss of wealth as money flows to Asia? Do you notice how Russia, OPEC, China and other countries are not a party to what’s going on in these negotiations? That’s interesting.But let’s dig deeper.Here’s an eye-catching quote from Page 2 of the article …”The Treasury has been soliciting feedback about capital injections from Wall Street chief executives, top hedge fund managers, and other big investors, according to a senior banker briefed on the proposal.One message the industry has given officials is that their plan should help strong banks, rather than save deeply troubled ones. They have suggested tying the eligibility for a government investment to a bank’s so-called Camel rating — a measure used by regulators to grade an institution’s financial strength. Only banks in the highest-rated categories would qualify for support.”GOT THAT?Things are so serious that they are not thinking about giving help to the struggling banks in America. Those guys are going to be tossed into the rubble. They are looking at throwing a lifeline only to the strong banks who they think will survive the crisis. This is damage control operating at a pretty strong level. They are planning who is going to still be standing – once the music stops playing.Now that’s some food for thought.PeteCA
I was thinking this past week about Sec. Trea. Paulson and Chairman Bernanke. They want “me” and the general public to trust them. On what basis have they earned that trust?I called up a picture on the Internet of Paulson speaking before the US Congress this past week. I said to myself, if I had $10,000(US)in cash on a table between us and Paulson requested that trust him with putting that money under his control with a promise that it would be returned — DO I TRUST HIM? or DO I NOT? with my funds.I looked at his photograph and determined — “NO” I don’t trust Paulson. I did the same with Bernanke.What basis have they given for the public to trust them?
It would be nice if these elected officials READ the documents prior to voting on them. And, they should understand what they are voting on as well as understanding and Constitutional law impacts.It amazes me that a 3 page document grab for power by Paulson suddenly, within days, was turned into more than 400 pages. Clearly, all of these other bill elements had been drafted months before because even a team of attorneys could not have created 400 pages of legal detail in less than 72 hours.Also shocking is that immediately after the House approved the Senate’s bill, it was rushed to the White House and Pres. Bush signed it within hours. ABSOLUTELY impossible for him to have read those 400 plus pages in that brief amount of time.So, it seems pretty clear that the economic system globally will collapse, I’d like some ideas on how to restore my nation to an honest, limited government. I don’t want to scrap the US Constitution — just the corruption that mushroomed up in the dark Halls of Congress.We know the crisis is upon us. WHAT are the post-crisis solutions to bring this nation back from the brink?
That’s what triage is all about. Roubini recommends this in his list of what we need to do (see the main article.)
- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;
It almost feels like we’re in a hurricane situation and the emergency wards have a long line outside. There are only so many doctors, nurses, and drugs available. Life and death decisions for banks will need to be made. Even economics is not above the laws of human nature.
In Australia our banking system is well regulated because greed, optimism and cleverness are part of human nature.Fortunately our two political parties are fighting for the middle ground, sound economic management and compotent social program (free/cheap health/presciptions, affordable childcare, properly funded schools, free college but with some debt to govt paid when you earn, compulsory 4 weeks pa leave, compulsory sick leave, safety net conditions) and fortunately we have a china driven mining boom.Our conservative (and now) opposition party have recently been decrying the unlivable aged pension, for an increase!Our last govt, conservative, was voted out for removing the exisitng employment conditions, that were arguably working fine.Conservatives govt failed to invest in university/training places, hence we sufferred a (probably inflationary) skills shortage – seems a false economy when skilled labour now drives the economy.We had a housing boom but without a big increase in supply, seems more of an increase in house size, so values have not plummeted once the bubble stopped.There is no defaulting on home loans, you owe the bank, you repay the bank. The banks make obscene profits as they do everywhere, ie many new home owners bought big when rates were low and now are working for the bank as rates go up.As you age you realise truth is relative rather than absolute – its not whether we go left or right, but trade offs between each that make a healthy balance.Ie healthy workers repay loans. Tax cuts for the rich are probably invested in china, and the bill for the rich mans war is going unpaid and the ordinary guys are the ones being shot at. A wealthy middle class spends and drives business. Profit motive in health insurance can have positive and negative results. Govt run health care is better than none. Private health insurance is a tax, but they are constantly looking for ways not to pay the most frequent ailments. An underpriveldged class causes crime for which everyone pays anyway. Handguns are stolen.
Also someone with a self professed weakness on the economy wouldn’t get elected.
Obama is facing a failed incumbent party and is playing a small target strategy, ie less is more.
>”- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;”>YES!! – basically government taking over the core financial functions>”- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;”>YES again! Much better use of capitalThe system has broken itself, govt supports the community by offering appropriate services. Bad investments get their payday.
How about govt bys the foreclosures, rents them to current tennants and, if there had been adequate regulation, fines the bank for breach of due diligence in making dubious loans.
How Bush’s messages fanned panichttp://www.washingtonpost.com/wp-dyn/content/blog/2008/10/06/BL2008100601139.html
In Aus we had a first home buyers grant, which simply pushed prices up, but you still had to save to start. No we have a saving home loan deposit assistance program. No deposit loans are problematic, no?
(except for the _q, that _ was an oversight.)Like “Nationalization” spelt with a zee
So these guys aren’t as rich as they claim, and have alot of debt, hence the solvency is the real problem comments. They cooked the books. Is there a level of fraud involved here?
Lend or lose your banking license, if the US had a banking license.
If you really want to hear…Tonight the world is aligning under the IMF. Based on experience, this is scarier than all the other financial news combined so far this year. IMF is the financial equivalent of combining the CIA, the KGB, and the Mafia.
interestign post found elsewhere:
zenwols Author Profile Page:Letting Lehman go bankrupt was the FIRST sign that Hank Paulson didn’t understand the extent of destructive power in CDSs. As an example, iflife insurance were constructed the same way, I could buy any number of life insurance policies on my neighbor, or anyone for that matter,limited only by my ability to pay the premium until they died! And in the CDS world there are no laws against me killing my neighbor and collecting onthe policy!Hedge funds short publicly traded companies after they buy massive volumes of CDS policies against their bonds. Downgrades by the rating agencies force the company to raise and retain more cash which forces bond defaults and bankruptcy which triggers CDS payment by institutions around the world!And it’s legal!BANKS KNOW THIS! BUT WHAT THEY DON’T KNOW IS WHO THE NEXT TARGET WILL BE AND WON’T LEND TO ANYONE UNTIL THEYARE SURE THEY WILL GET THEIR MONEY BACK!!!!!!!Everyone said Goldman Sachs and Morgan Stanley were too big and powerful to fail. Even Warren Buffett of Berkshire Hathaway didn’t know what he was getting into when he agreed to provide a publicly traded company Gldman Sachs $5 billiondollars and received preferred stock at a $10 discount and a 10% dividend in an attempt tosupport a stock his company had in their portfolio. He paid $115 a share for GS two weeks ago when it was publicly trading for $125 and he has options to buy $5 billion more at $115. That won’t happen since GS was trading as low as $80 Friday and, unless Paulson wakes up, headed forbankruptcy!The Paulson proposal Friday evening is the same thing Buffett did. Guarantee survival through the sovereign “wealth” of the U.S. government.Didn’t work for Buffett and won’t work for Paulson.Unless Paulson takes these companies private or makes the CDS/SHORT maneuver illegal and suspends “MARK-TO-MARKET” accounting he can’t print enough money to solve this problem. Part of a solution is to force CDSs out of business by regulating them and forcing ownership proof of the related debt instrument before insurance can be purchased or paid. CDS instantlydisappears. Only legitimate hedging activities would then occur.Oil had the same problem. Speculators who were never involved in producing oil or oil products were driving the price higher every week until this financial crisis forced them to sell their oil positions to raise capital to cover exposure to CDS contracts they had written.A small sliver of justice in an ironic twist of financial fortunes! And that brought a smile to my face this morning as I actually filled my cars’ tank with gas at $3.22 a gallonfor the first time in months!
I just listened to Bud Burrell interviewed on financial sense today. This is the same thing he is saying. http://www.thesanitycheck.com. I really think we are screwed. This whole shooting match, government and all is a criminal conspiracy. I hate to say it, but, it seems to be so. I don’t have any confidence in Paulson. I think he got blind sided. He didn’t know WTF was happening. He has no idea of how to “fix” it. Remember when it was FRE and FNM he had his “bazooka.” Didn’t seem to work. I think we are corned and I think the little guy will lose. Municipalities, States, pensioners, and people that put their cash in these 401Ks and let someone else make the decisions for them. I’ve been telling people I know to get their money out, but, the look at me like I am nuts. Maybe the are right and I am. I am not an economy person, or even an investor really, but, I read. A child could have seen this coming. I don’t know. I am buying more silver. I can afford it. I don’t have debt, and, i want a safe store of value. I don’t even have a bank account. I just cash the damn check, and get money orders.
India is following US with a 6 month lag. However we don’t have the kind of credit crisis that US is facing now .Nevertheless, growth would be significantly impacted across sectors. GDP to go down to sub 5% levels. Profit hit for nearly all Nifty scrips, with some going into losses.Also, we too have a liquidity crunch similar to the US, though not so bad. Unless the government acts fast, Indian credit markets risk a shutdown and the economy risks going into a recession/ near recession.US Government stayed on the sidelines for too long. The bailout and the rate cuts should have come around beginning of this year.Though we have very competent economist at the helm (and I have a great personal regards for them) , still the Indian government is doing exactly the same thing as the US government did 6 months back – stay on the sidelines – take half hearted measures – and provide optimistic sound bytes.Government to immediately do the following – (exactly Prof Nouriel Roubini recommendations for the US) – if India is to avoid a recession / near recession (significant slowdown is now certain) :– Immediate cut in CRR to 6% and to 4% in a months time. Will infuse liquidity. Also cut bank rates by 2% to 7% and SLR by 5% to 20% in a staggered fashion over 4 to 6 weeks.-Unlimited protection of savings in banks for the next two years without limit. Will create confidence for account holders and avoid a run on banks-Increase spending in Infrastructure. To boost incomes, GDP and keep economy in track-Direct funding to commercial enterprises and banks by opening a lending window against collateral of securities. Can be routed through any one of government’s funding arms.Yes, inflation will increase, but a recession/ near recession will be staved of.Will the government bit the bullet with elections not so far away? US government did not do it 6 months back. Now with its back to the wall, election or no elections , it has just no choice. Hope the Indian government learns from this.http://taxationindia.blogspot.com/
The Professor has said deflation will be the worry rather than inflation, which seems counterintuitive given all the money that will need to be printed to cover the bailout. While in the relative short term deflation due to asset oversupply, manufacturing overcapacity, and slackening demand makes sense. In the long term, it would seem that hyperinflation would have to rule the day. I hope the Professor will write about the inflationary/deflationary aspects of the financial crisis. It seems there are opposing forces here.
I agree. I have searched for his views on this issue but unable to find anything. Hopefully he will comment.
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