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“G-7 Commit to `All Necessary Steps’ to Stem Meltdown”Yes, my mother loves me forever.

The FT seems to think that there was an agreement to a coordinated action by the G7 – they must be drinking the from the same Kool-Aid glass that the American media has been drinking from. G7 ministers agree

This article suggests that Hank the Hammer’s Treasury(a member of the executive branch)had its way with Gentle Ben’s “independent” Federal Reserve.

And he draws some of the best commentors, such as yourself, on the web: truly, a hot property! On the road or off the road, I never miss Roubini.

I would think that the “solution” searched for this issue and the ecological issue is population reduction.

If you look at the timing of the crisis it is truly the October surprise and just as effective as a nuking of a city With a army brigade in pace to impose martial low no less.but they can’t make me shop for any thing i don’t need.perhaps those militia nuts were right at least in a small way

Next World War is “Financial War”, not Cold War or Hot WarsNext World War will be much more vicious and will be devastating for humanity, civilization, governments, morality and political process. The world has survived past Cold War and Military Wars, but the next World War will be filled with more pain and suffering due to greediness, deception, violence, and insanity and lead to a dystopian society and disorder for several decades. However, the world will triumph again with a rebirth of idealistic system resulting in the world government and unity under the pedagogy of a colossal philosopher.The western domination under the leadership of American will end after coming economic crisis precipitated from the flagrant violation of sound capitalism by the Wall Street greediness, lax and complicit government regulation, and excesses of few riches with proportionate increase of poor populace. The breakdown of current capitalism is anticipated and will be a justified outcome. Since America has the highly educated and innovative people, natural resources, philosophy of freedom, respect for humanity and balanced political system, she will rise again as the leader of the New World Order.In that context, we have to understand what will be a main focus of financial war. It will be world domination and hegemony rooted from selfishness and power to control others. It is my contention that the confrontation will be between free world, which will be allies made of America, Europe and Japan, and axis power, which will be made of China, Russia and perhaps Germany.No doubt the emphasis of massive globalization has weakened the United State and gradually destroyed the financial basis of our country by reckless pursuits of financial interests by few Wall Street elites, elected government officials and employees, and Congress in power.We need a change through a new philosopher. I see that in Professor Noriel Roubini.

And why would this be done deliberately, par example?

It can be solved with CDS (carbon derrivative Swaps)

preening little ego

The reason our politicians cannot solve this crisis is because they are all looking backwards. They keep proposing “solutions” that try to put America back where we were – before all this began. There is NO backwards. We can’t restore the old days of economic greatness – because we have exceeded the level of debt that the country can withstand. There will be no effective solutions – until we replace our leadership with men and women who can look forwards. And so far … I’m far from convicned that either McCain or Obama understand what that really means.PeteCA

MAIN STREET IN THE CROSS HAIRSThis week the attention of everyone has been focused on the collapse in the Dow (and other global indexes). Not much consideration has been given to what happens next on Main Street. But that’s where all of us live.The Dow has now gone through it’s biggest ever downwards correction in the first year of a bear market since 1900 (measured in percentage terms). A bigger relative drop than even what happened in 1929!Let’s put it this way. Picture youself standing on a beach in Thailand on Dec 26, 2004. You’re looking at a really big ocean wave that’s heading for the beach. And everbody is commenting … “this looks pretty interesting. Biggest wave we ever saw”.Yeah … right before the water hits the beach and fish are flopping!We are headed for a big wave of business failures, corporate bankruptcies, major unemployment, and bank failures. How can it be otherwise???Get ready. Main Street is not immune.PeteCA————

Thoughts du jour:IMF (and Roubini) says that the world is on the edge of a systemic collapse (I agree),Iceland says it is every Nation for itself,Bush says that the World must act in a co-ordinated manner (for US interests),Another says that Paulson has intimidated Benanke and takes the lead in the Global US fix, while Ben just does what he is told (? – I have no idea)),All agree that the Banks which with great and indubitable certitude, don’t trust each other as if they alone know what is coming and therefore refuse to allow liquidity to flow and thus screwing the whole World, to be sure, to be sure,And, the end of the World is nigh so never mind, just how long will this massive Dark Age last so we can all do some survival packing?Firstly, we must note that whatever we call “it”, “it” is still “leadership” that exists within each Nation, those little political men and women which hold the controls, whereby, on the Global fronts, nobody exists except the glorious one, George W Bush (almost fully expended) and his proxy (or GS proxy?), Hank Paulson – two of the most untrusted personalities on the global stage today.The USA crumbles as does Europe and the UK and the latter in far worse terms than the former; to be followed by China in the East, then Australia and then South America. Did I forget anybody? Oh yes, Africa and the Middle East.So? Where is the World “leadership”?The G-7, the G-8, the G-14, the IMF? the World Bank? The United Nations? Okay, if this is the lineup, then the suicide moment has arrived… No…! Let’s not go here!We must remember that there is massive liquidity out there looking for stability and security with a hope of profits and even reduced losses would be welcome.It is clear that the Banks have folded and “leadership” will not question their treachery nor will they come to terms with the realities of the moment. Put them all into Bankruptcy protection and re-organize them into what they are supposed to do, now!In the meantime, our innovative technologies are screaming ahead into the 21st. Century and Beyond, as Buzz Lightyear would say – at lightspeed..It is clear: this round of “leadership” and all its ilk is done: New Leadership must be condensed from the large corporates of integrity – and there are many BUT where we must remember that from those financial industries from where Hank comes forth; they believe in “stone soup”, where profits are generated ex nihilo (from nothing – “it’s a miracle”), as long as the peoples eventually pay them , a posteriori.What we are experiencing, I hope, is a necessary leadership shift, which is absolutely necessary, as this crisis is simply a “leadership” crisis; nothing more and nothing less and where the rest is in the details of ‘moral hazard’.And, as I have often posted here and elsewhere, for many years, where better to invest than in the World, itself; in the future; for our children and their children’s children, by building real infrastructure in terms of rail and copper communications connecting every corner of the World, over a period of 100 to 150 years forward and funded by public loans and supported by the holders of the massive pools of liquidity and led by leaders of integrity and vision extracted from large industry?Yes, and put the current “leadership” to work (for a change) washing dishes.. or whatever… “they are done”.”Freedom is minding your own business and keeping your hands to yourself” and therefore we don’t need intrusive political regimes of saturated moral hazard and wars.”No, you cannot have my children to kill and or be killed!!!, Are you Mad?”. This must be our attitude for the future!Ho hum

Hasn’t the world experienced one of its coolest years in modern times? Temps in southern Ontario rarely got over 30C this ummer. Quite unusual.

I want to say something to all of you. I want what I say to be taken seriously, to be optimistic, erudite and wise. As I observe the current crisis I’m struck with the realization that I don’t have a damned thing to say! I just needed to say something.

Mr Scaife told the BBC: “What’s happened now is that La Nina has come along and depressed temperatures slightly but these changes are very small compared to the long-term climate change signal, and in a few years time we are confident that the current record temperature of 1998 will be beaten when the La Nina has ended.”Remember 1998?

Good one.

As banks and hedge funds go bankrupt, holes will open up in the huge fabric of global derivatives. Right now large numbers of funds are de-leveraging. Some must fail. The total global derivatives market for OTC trades (private deals with no public info) is over $600 trillion. Let’s take this figure. Assuming leverage of 30 to 1, that means actual money invested is around $20 trillion. Most deals would cancel out, and net losses would be sustainable – but only IF the financial system is intact. It’s not!!! Counterparty risk is now real – some players will not be ablwe to pay. Real losses … anyone’s guess. But certainly climbing into trillions of dollars. Maybe tens of trillions. That’s global financial meltdown. This is why the darkest possible outcomes go way beyond the Japanese crisis in the 90′s. I’m not saying this is going to materialize immediately. More likely … the G7 will announce some sort of “breakthrough”. But will it hold?PeteCA

More like EU or USA than a stock symbol.

I was just reading the post by Toby below with which I agree and the thought just struck me, that maybe we just get new leadership, courageous and innovative, etc., from our adversity, or specifically, from the needs of these massive funds of liquidity to find a home?In other words, the placement of funds into new arenas where risks are reasonably computable and profit probabilities are also a reasonable expectation, may and just maybe, this surge will just stampede the existing clowns into the dirt and establish a new bridge of captaincy and stewardship, in some form of logic and accord?Free-market shift?

2-3 years ago, they formed a special financial emergency team in Washington. The goal was to make plans in case of a global economic crisis. Paulson is the leader of that team. At the time, it was seen as strictly precautionary. No-one thought that a real crisis would ever really occur. Now it has. You can be sure that they have a list of emergency measures that they will tick off … if things get progressively worse. That team is probably now meeting on a very regular basis, and deciding future actions. That is what George Bush means when he says … “we have more tools at our disposal”.PeteCA

I would recommend looking back to see what the colonies did after gaining their independence. Re-read the Constitution and the Federal Papers if it’s been a while – this debate has already occurred. The currency in use was the continental. It wasn’t the global reserve currency, but it was debased substantially to finance the war, and it ruined the currency – hence the phrase “not worth a continental.”The people at the time were students of natural and moral law. They understood the dangers of creating money/credit through fractional reserves versus through real savings. They won the war, but nearly destroyed the economies of the colonies in the process.They made a conscious decision – through honest, intelligent, and logical debate – to opt for a commodity backed monetary system without a central bank.We are searching for solutions when the answer has already been given. Of course there are consequences. They understood that too. They rejected the collectivism of a central body doing the planning for the production and distribution of goods and services – or the Fed determining the price of money. How does that even pass for acceptable in a society that claims to love freedom? We wouldn’t accept a single, central body determining the price of a car, yet we accept a body determining the price of money which ultimately determines the price of everything.They opted for a system based on liberty, or free from arbitary authority. Yes, some will fail. They must. To leave no one behind implies that someone is being held back. How is that liberty? I suggest states simply return to their constitutional authority and make gold and silver legal tender. Don’t even bother with worrying about the central bank. If they provide a better service than gold or silver, people will use their notes. If not, they’ll be out of business – as they should be in a system like ours if they can’t provide the service they are supposed to do.

Toby great thinking gave me some ideas to write from. Thanks

This board has gotten all conspiratorial lately–the usual stuff about 911, concentration camps in Indiana, conspiracies to surpress the price of gold, etc. Meanwhile, we haven’t heard from London Banker or OR. Could it be that they are put off by the tone that has developed? What good does it do to talk about possible conspiracies since you can’t possibly know if that is what is happening? What if you are wrong, like the Evangelical Christians who thought the world would end in the year 2000? Of course, nobody will call you on it because people in America never remember anything from one day to the next. All these conspiracy theories do is elicit an emotional reaction without giving a sole peg to hang your hat on. Should I quit my job, put all my stuff in a warehouse and make a beeline for some remote place in the world to avoid being thrown into a concentration camp because it might be discovered that I found Steve Bell’s cartoons of George Bush in the Guardian funny? Please, conspiracy theorists, put your money on the line and state that you have packed your bags and are leaving the US and that you advise anyone else to do the same.

Sorry, that “suppress”. Ah, the French!

Haven’t heard from OuterBeltway, either. Dood, where are you?It’s frightening to me that the G8 are meeting secretly at the White House to craft a Master Plan. Anybody else scared? They keep trotting out GWB to soothe We the Nervous People and I for one am not one bit soothed.

There are some tremendously thoughtful posts about the need for new leadership, etc. I struggle, however, to understand how we can get from here to there.

Pecos is not whining, he is right. A whole bunch of nonsense has been contributed to this blog in recent months. Let’s stick to the issues, not the hair brained stuff.

Just heard on Fox News (Huckabee): an accurate analysis of the trading in the stock markets in the last days, is showing anomalous computer trading in the last hour of trade, very likely due to terrorists attack!!!!!!!!!I have no comments, I just need a shoulder to cry on.

Couldn’t have said it better myself. Unfortunately, I’m not sure many of our elected leaders have *ever* read the primary documents that were generated at the founding of our country, and so they don’t even understand what authorities they possess – although Paulson seems to be pretty clear on what “authorities” he’s recently been granted!

It is consistent with Policy and had to come to this; blame it on the terrorists. SOLHo hum

Surely what happened in the last hour of trade on Friday was simply a short-covering rally. If it wasn’t … then terrorists are buying the Dow Jones and taking LONG positions. That would be remarkable – Osama Bin Laden has decided to call a market bottom!PeteCA

You know what? I bet that Benjamin Franklin, John Adams and Thomas Jefferson said exactly the same thing at one time.PeteCA

got a bit carried away – rather something like 6k. but hey, who knows what will happen if “they” dont get banks to function again soon ?

Sorry Pete. Much too deep for my limited interlect.

PeterJB, what I have a problem with is the emotional stuff because I have a tendency to be that way myself. Nouriel has some perfectly disheartening and awful things to say about the direction we are taking, but he lays things out with sound reasoning and never tries to hook the reader emotionally. Conspiracy theorists tend to be like Erik von Daniken in “Chariots of the Gods,” a book that was popular in the 70′s or 80′s; von Daniken asks a lot of rhetorical questions in an effort to convince the reader that, for example, the Nazca lines in Peru were put there by space aliens. He “adumbrates” without actually stating anything as a fact. It is this that I object to in conspiracy theories–the fact that you can’t know with certainty any of the details in particular, but infer a pattern anyway, usually based on an emotional predisposition. You accuse me, in effect, of being a fascist. However, fascists tend to appeal to the emotions rather than reason–when they aren’t twisting arms or worse.

I believe that Mr George W Bush called the US Constitution – 3 times “Just a goddamn piece of paper”.Me? I believe it to be one of the greatest Charters every prepared by mankind until this date… and just look at the marvelous results it brought until the nibbling of censorship, amendments, presidential rules, opening up mail, snooping, whining, faith-based initiatives and impositions, etc., etc., until this date – and now look and the mess that was once the greatest Nation the World had every seen…Yes, just ignore the FedRes and all that hangs off it and start again.Yes.

No, my apologies; I don’t accuse you of being a fascist, but merely imitating – most innocently, I’m sure, that process which brought to the original Constitutional Republic of the United States of America; that every change to constrain and limit freedoms to levels of individual preferences, that the masses of politicians and fruit-caked religious and weirdo freak groups have brought until this day, where the USA is not even a shadow of its former self – and I find this fact, rather disturbing, to say the least.How, when you are a citizen of and live in and enjoy the rights of this country, can you allow it to be destroyed by petty preferences that you wish to be imposed on everybody else, because you have influence?That is not freedom. It is the frog in the pan on the fire scenario; denial.If people want to write trash and believe in conspiracies, you can’t stop them you can only make rules and then enforce them. And that ain’t freedomn either because they also can do the same and then you don’t like it and then…Is not logical for one to just ignore and move on – for crap usually, when ignored, has a habit of just bobbing off over the waters and beyond the horizon until it sinks from sight…?Freedom is very important to me and I have suffered from the hands who would have their preference felt and I cry at what has become of the USA. I am not American but I was educated there and I know the processes by which it has been eroded.No conspiracies, just people who can’t mind their own business.Let me say this, please do not take me personally but please think about trying to control others to the point of your preferences – would you like others to do this to you?Now, I believe the tendency, er, “solutions” that “leadership” will dream up will be higher taxation, higher intrusion, and higher regulation – on the unwashed masses – as they believe that their tenure comes first and they banks protect that position, particularly the Central Banks and specifically the fractional reserve banking system and fiat currencies.As Mark said, it is time to personally become “leadership, or words to that effect.respectfully and thanks for bring this out into the open.

BTW Those boring and horrific sales pitches which never get to the point and go on endlessly, evoke in me a sense of helplessness so I just press the delete button. I understand what you are saying. I also walk out of meetings when this starts – I am not very popular when it comes to being an ardent listener of crap.

I saw a short report 2 days ago on CBC (just by accident, I don’t watch TV) about Iraqi Stock Exchange. It has increased some 20% over the last few months. Transactions were recorded on a whiteboard and investors were physically on the “floor” bidding, nothing is electronic, not even paper based.I remember, while going through some new behavioral finance “theories” some time ago, there was a study made showing how that the introduction of online trading was coincident (not to say resulting in) an increase in more risk taking, trading frequency and larger losses to both individual and professional investors.Maybe, just maybe, if NYSE to make transaction execution more time-consuming would yield better results than any “resolutions” taken by G7.

The current managing director of the International Monetary Fund (IMF) since 2007 is Dominique Strauss-Kahn (DSK), a leader in France’s Socialist Party. Strauss-Kahn was an activist member of the UEC (Union of Communist Students) before joining in the 1970s Socialist Education Studies and Research (CERES). After the election of President François Mitterrand (PS) in 1981, he decided to stay out of government. He got involved in the Socialist Party (PS), at the time led by Lionel Jospin and founded Socialisme et judaïsme (“Socialism and Judaism”). In 1999, he was accused of corruption in two financial scandals related to Elf and the MNEF, a student mutual health insurance, and resigned as Minister of Economics and Finance in Prime Minister Jospin’s Socialist Party government. He was acquitted in November 2001, and was re-elected in a by-election in the Val-d’Oise. (from Wikipedia).Robert Zoellick, president of the World Bank, previously was managing director of Goldman Sachs, United States Deputy Secretary of State (resigning on July 7, 2006) and U.S. Trade Representative, from February 7, 2001 until February 22, 2005. Zoellick was apppointed by President Bush to replace Paul Wolfowitz. (Wikipedia)

Attention All:Richard Branson (The Virgin) just commented on Bloomberg that a major US bank may go bankrupt this weekend.

Conspiracy — a secret agreement between two or more people to perform an unlawful act; a plot to carry out some harmful or illegal act (especially a political plot); a group of conspirators banded together to achieve some harmful or illegal purpose.Okay. Let us not call it conspiracy. Instead, let us just say that alleged representatives of the people get together in secret and agree to do two things:1. Pretend they have authority of the people, and2. Agree to act together for the benefit of themselves personally and their friends instead of the people.For example, Bush and Merkel, parroting the lines given them by the private interests controlling them, can say we’ve given the people a just financial crisis package…and then all the wheels of these sovereign nations begin to turn in unison – for the benefit of the private interests.And none here dare call it conspiracy.

As I have posted here I tend to believe that the Federal Reserve is being set up to become the sole Global Economic, Monetary, Financial Authority which will have in its domain the IMF, World Bank and BIS and eventually, the rest of the United Nations and shall not have to suffer oversight and / or judicial review from any Authority or Nation on this Planet.Under this papal regime of global fascism based on similar structures, organizations and belief system dogma (faith-based) of the Church of Rome headquartered in the Vatican Corporitized Nation-State within the Sovereign Nation of Italy, all Central Bankers of every member Nation, will become National Representatives and be subservient to the Federal Reserve under Pope Benanke the First and thereafter carry the title of Cardinal.Yes, what is going on at present at these rounds of meetings certainly looks like vows of Loyalties and Obedience may be given by those Nations present; we shall see. Frightening is the wrong word.The Bishops will be the ‘enforcers’ and consist of GS, ML, JPM, Citi, BoA, etc, whichever is chosen to survive, by er, by Mr Paulson.The whole lot will be run by the United States of America in theory, but in realty, the Holy and Divine Council of Worldly Affairs aka The Office of the Inquisition will be drawn from the top and most influential Bankers of the World.Primary Questions:1. Will China, Russia, EU and UK join?2. Can they prop “it” up before “it” collapses?I have my doubts… but, Congress is no longer needed; it approved its own irrelevancy last week, so now it is all up to the trembling hands and wet panted members of the G-7, G-8 etc., etc., etc.Treachery is the game for all political “leadership”.My opinion.Ho hum

A better bank bailout?Why not give the shareholders and bondholders of yore exactly what they bought. Yes, they get the bank as is. Next a new bank is formed under the old name with new bondholders and shareholders along with existing depositors. The old bank gets fair value for the name and physical assets given to the new bank. The new bank goes on about business, while the old bank gets wound down with any proceeds going to the old investors. Nice, clean, simple, and fair! Not to mention fast! Let’s call it the illiquid extraction plan (Crap in — $hit and fresh water out!)

I would appreciate comments/thoughts on the following:$55 trillion of CDS outstanding. I’m assuming most of it is speculative (meaning buyers of CDS do not actually holding the bonds).Scenario 1if the Gov’t comes out and says that you will be paid for the loss only if you held those bonds (or by showing proof), wouldn’t the losses be a lot less (couple of trillion) for the sellers? That would punish speculators and save the banks trillions!Scenario 2if the Gov’t says that all CDS contracts are null and not enforceable….what is the actual loss? It should be the premium paid by buyers (couple of billion) and for those who actually held the bonds (it would be the bond loss + premium). So in essence, it still will be a lot less than the $55trillion CDS outstanding? However, the trust in banks would be lost and the “system” may collapse due to that. But still…banks will survive!Any thoughts?

AFA, have we reached the event horizon yet?

Branson was careful not to leave a hint of a name, so I have no idea. I’m sure that Bloomberg will rerun the caption soon as usual. I wish I knew.

Prefer experience in the energy sector.****PLEASE NO BANKING BACKGROUNDS****this is the sentiment in Houston want ads

I respectively point out that you left out “communism”: does it mean something different over there also? Did we misinterpret Trotsky all along?

iNnOsInZ, Sometimes it’s not so straightforward. An institution may buy up some lower quality bonds, then they may purchase insurance (CDS) against those bonds from a AAA rated institution. Next, the lower grade bonds get repackaged as ulta-high grade bonds via the CDS.Who gets the payoff? Depending how they we repackaged (resold, or basically used as collateral) the lower grade bondholder may get reimbursed, but the AAA bondholder may get diddly!

Don’t see how Scenario 2 is remotely possible. A CDS contract is exactly that … a financial contract. If they void those, what’s to stop anybody defaulting on any financial contract? A decision like this would be immediately challenged in court, and would be tied up for months. I doubt the Gov’t would have a chance. If they even ventured down this path … it would show total desperation.Scenario 1: Sounds interesting, but still full of pitfalls. They should never have allowed CDS contracts to be written … except for investors holding bonds in the first place. The fact that the situation spiralled so badly out-of-control just goes to prove the Gov’t regulators were idiots in the first place. Still, this option also amounts to voiding legitimate financial contracts. On what authority can they do that? Unless Hank Paulson’s powers now exceed the Supreme Court, then I don’t see how.Tough luck. If people hold CDS – they should pay.Scary thought for the day – what if some of the players who sold CDS contracts are in fact not funds or banks, but just private speculators (who don’t have the $$ resources to pay up for a large loss)??? Whenever there is a large bubble, expect fraud.PeteCA

Holy Toledo! (Yes, Toledo beat Michigan – Do you think Rich Rodriguez will be at the next game?)No really, this Fannie, Freddie to Buy $40 Billion a Month of Troubled Assets$700B here $150B there, pretty soon we could be talking serious money!

This was a really interesting piece in the New York Times today:http://www.nytimes.com/2008/10/11/business/worldbusiness/11charts.html?_r=1&scp=6&sq=banks&st=cse&oref=sloginOFF THE CHARTSThe World’s Banks Could Prove Too Big to Fail — or to RescueBy FLOYD NORRISPublished: October 10, 2008____The article is accompanied by some charts for the U.S. and various European countries. First, there is a comparison of the size of bank short-term debt as a percentage of each country’s GDP. Second, total short-term bank debt is compared to each country’s national debt. Finally, for each country there appears a leverage ratio of total bank assets to the net worth of the banks.By these measures, as bad as things are, the U.S. appears to be better off than a number of other countries in the industrialized world.SWK

I saw that too, 2cents. What a circus.

hey kind of sounds like comments sections on blogs – people spew lots more shXt from there mouths before thinking it through – plus they got the anonomous thing going for them and that is empowering.gettin’ all reckless with the mind and the keyboard -its no theory – it is the truth! computers did it. lets smash ‘em

And you know this to be true how?Manhattan ProjectOperations NorthwoodsIn the end it really doesn’t matter because it’ll be what it is, conspiracy or not.

Waiting for the BarbariansWhat are we waiting for, assembled in the forum?The barbarians are to arrive today.Why such inaction in the Senate?Why do the Senators sit and pass no laws?Because the barbarians are to arrive today.What laws can the Senators pass any more?When the barbarians come they will make the laws.Why did our emperor wake up so early,and sits at the greatest gate of the city,on the throne, solemn, wearing the crown?Because the barbarians are to arrive today.And the emperor waits to receivetheir chief. Indeed he has preparedto give him a scroll. Therein he inscribedmany titles and names of honor.Why have our two consuls and the praetors come outtoday in their red, embroidered togas;why do they wear amethyst-studded bracelets,and rings with brilliant, glittering emeralds;why are they carrying costly canes today,wonderfully carved with silver and gold?Because the barbarians are to arrive today,and such things dazzle the barbarians.Why don’t the worthy orators come as alwaysto make their speeches, to have their say?Because the barbarians are to arrive today;and they get bored with eloquence and orations.Why all of a sudden this unrestand confusion. (How solemn the faces have become).Why are the streets and squares clearing quickly,and all return to their homes, so deep in thought?Because night is here but the barbarians have not come.And some people arrived from the borders,and said that there are no longer any barbarians.And now what shall become of us without any barbarians?Those people were some kind of solution.Constantine P. Cavafy (1904)

Not sure the NYT article gets exactly to the heart of the problem. It really depends on how much risk is attached to the banking liabilities, rather than just the total liability. I hope someone researches this a bit more … and posts an updated chart.PeteCA

Prof. Roubini, sorry to go a little astray from the main subject of the blog (sin of which I’m in good company), but let me post this piece appeared on Corriere della Sera from Giovanni Sartori, Professor Emeritus in the Humanities at Columbia University. As you can see it’s well adapted and timely to the discussion on leardership in these daring times.Prof. Sartori, in case you read this blog, sorry for the bad translation into English and for not requesting your consent. It’s too good to keep it off from the bloggers.THE BIGS OF THE WORLDCommon sense and cretinismThe theme of common sense of which I was writing on Friday of last week has stimulated several readers. One asked if an intelligent person without common sense is equivalent to an idiot. Another if common sense is the antidot against stupidity. A third if the disappearence of common sense results in unstoppable raise of cretinism. Finally, is common sense wisdom and, conversely, is wisdom common sense? They are all pretty questions.Intelligence is extremely difficult to define. The word comes from latin intelligere and so it means, etymologically, an ability to understand. But this doesn’t give the criteria to ascertain it.Practically, in all fields of knowledge and expertise, intelligence is attributed or negate by peers, the experts and academics in the same field of competence. It’s not the best criteria (even in academia there are stolen fames and awards wrongly denied), but we cannot surely accept the self proclaimed genius, self appointed as such. Here, anyway, we are not interested in the speculative intelligence which was originally the intelligere of the philosopher, of whom “who loves knowledge”. Here we are interested in the practical intelligence which engages with facts and doings. It is this “down to the ground” intelligence that gets close to common sense.The greatest English constitutionalist of ’800, Walter Bagehot, explained that the system of government of his Country was based on the “deferential stupidity” of the English people. By stretching of that text, I would dare to say that deferential stupidity is, can be, a form of practical intelligence. If you know that you don’t know, you know that you can’t understand, it’s intelligent to be deferent. Instead we are watching more and more at an increase of “armed idiots”, and so of arrogance of ignorance, which represents a perfect and devastating practical cretinism.Let me then answer the questions at the beginning. Yes, for me an intelligent person without common sense will easily transform in an idiot, I mean, a practical idiot. Yes, common sense can correct stupidity and helps “decretinize” idiots. Yes, disappearence of common sense brings a world more and more populated by stupids whose feature, said ironically Carlo Cipolla, is not just of making his own arm but the arm of everybody else. And, finally, yes to the fourth question: common sense is such as it incorporates wisdom, the wisdom that preliterate societies transmitted with proverbs.In my piece last Friday, the two examples of insanity where Alitalia and the “new cold” in Bush-Putin relationships. By chance, the following day it was the 40 anniversary of the Encyclical Humanae Vitae, and pope Ratzinger got the chance to reaffirm his drastic No to contracception. A No whose terrible result is the Yes to the demographic explosion that is buring all of us, and with us the whole planet Earth. On this subject, and on the doubious theology that justifies this “furor” of catholic church religion (and of no other else) I’ve written several times. I will say here that I consider in any case that No an extrem, colossal violation of any common sense. Like Saint Tommaso, I believe in a “ratio confortata fide” and cannot trust a faith without ratio.

Just like Miss America postulated over one year ago. Survivor Wall St.

You are optimistic, erudite, and wise.

Some behavioral theoricians tried to explain why such recurrent and systematic errors (errors in statistical meaning) occur (as opposed to random errors, which according to most other theories, for the sake of simplicity, are assumed to cancel out on the macro level). They mostly explained this by some types of behavioral and cognitive biases that most investors are subject to and which are compounded with short-time available for reflection before decision making. Such behavioral biases tended (and tend) to diminish if the decision making process is longer. Such biases include bounded rationality (limited processing abilities, information, time and cognitive biases) coupled with prospect theory, loss aversion effect, disposition effect, illusion of control, overconfidence all playing similarly for most investors that it determines an overall market behavior (such as panic, greed …) and skewed (and sometimes irrational) prices.

Unfortunately it appears as though the knowledge society may be eclipsed by the end of cheap and easily obtainable energy. That’s why I am waiting for a good buying opportunity for a couple dozen acres of good soil. The agrarian society could be the wave of the future.One positive note, the collapse in demand in the coming global depression will probably buy the world some more time to try to solve the energy problem.

SWK,Perhaps we have a misunderstanding on the definintion of conspiracy, or perhaps theory. Words have power, and the misunderstanding of words can have a powerful effect.What do you use to define conspiracy? I am surmising that conspiracy has quite different meanings to many different people. I use it to mean: more than one person doing acts which are treacherous, immoral, or illegal. It apparently has quite a perjorative connotation to some. What is your defintion?

What about Investment Banking, Brokerage, and Gambling?Com’on, I need that job

Yes I did (hoping you would not remark it )My point was, seeing where you are heading, to add some salt. As a free-market fanatic, I have, a priori, no objection against some measures or policies that could be qualified as “socialist”, as long as that adjective, when used, refers more to its etymological root word, as opposed to its ideological rout world.

The people alone are the force to benefit their own freedom.Here are the words of a future secretary of the treasury: “The circumstances that endanger the safety of nations are infinite, and for this reason, no constitutional shackles can wisely be imposed on the power to which the care of it is committed.” Alexander Hamilton in Federalist 23And here is John Yoo’s memoranda within the Bush Administration: “The President may deploy military force PREEMPTIVELY (caps mine) against terrorist organizations or the States that harbor or support them, whether or not they can be linked to the specific terrorist incidents of September 11.”In short, governments and constitutions can be manipulated by men. The quote of Hamilton carried through to Bush and those behind him that have assumed sole power to do… anything. Only the people, with the power that Jefferson bestowed upon them, can provide for their own liberty.

AJ, if it is action that you are afraid of, then worry not. If these diplomats are good at something, it is jawboning and agreeing to disagree. If you are counting on these people, then prepare yourself for the economic version of the Road Map.You should be more afraid of unilateral decisions!

Goldman Executive Offers $55 Million Ocean ViewThe economy may be down, but surely someone will want to buy 5.9 acres of prime Nantucket real estate. At least, that’s what Jon Winkelried is hoping.Mr. Winkelried, Goldman Sachs’s co-president and co-chief operating officer, is shopping his two lots on the tony Massachusetts resort for $55 million, The Daily News Tribune reported. Mr. Winkelried’s listing agent confirmed a memo sent to members of the Nantucket Association of Real Estate Brokers saying that the property was for sale. She would not confirm that Mr. Winkelried was her client.The property, which faces the Monomoy waterfront, was purchased by Mr. Winkelried for nearly $7 million in two separate transactions in 1999.If it sells at $55 million — no sure thing — it would beat the previous record for Nantucket property sales, according to The Daily News Tribune. That was for 9.5 acres at $26.5 million in August 2007.(The reported asking price edges out Mr. Winkelried’s 2006 salary of $53.1 million.)The property is being offered for sale privately and isn’t being listed with NAREB members, the paper said.http://dealbook.blogs.nytimes.com/2008/10/10/a-55-million-ocean-view-courtesy-of-goldmans-winkelried/

The beauty of anarchism is that its primary (I’d say only true) tenant is that it opposes centralized/concentrated power.Those not familiar with anarchism should read the following:http://www.spunk.org/texts/intro/practice/sp001689.html

@ PecosIt’s hard to keep up with events, but you can place me in the conspiracy camp now. On October 2nd and 3red, as the EESA was passed and signed, JPM, GS and maybe MS too (all major prime brokers) issued a coordinated global margin call on hedge funds. They raised margin required from an average of 15 percent to over 30 percent. This was a massive liquidity shock to the global capital markets, requiring rapid liquidation of a huge amount of assets to meet the calls.As the only way to raise cash for stressed hedge funds in these times is to sell quality assets, we’ve seen in the ten days following a collapse in global equities, bonds and commodities.The margin calls are due tomorrow and Tuesday. Defaults will be revealed later in the week. fuelling further instablility.In the meanwhile the big prime brokers have access to Paulson’s $700 billion and an equivalent $500-900 billion being raised through these margin calls. They will be able to come in and start an amazing bear market rally, scooping up deflated quality assets at deep discount in the markets and through seizure of defaulted hedge fund collateral.Until now we suspected the markets were being rigged by orchestrated action. Now we see the mechanism. Now we can guess the timing of the next big upswing.If Rich H/Miss America weren’t too busy paying homage to Mickey Mouse, I’d ask him for confirmation. This fits beautifully with his description of the “shake out” starting in November of 2007 here.

Really nice tool!And if you look at the googling history of Roubini in single countries, you can see the professor globalizing:In 2007, with Roubini as the only bear in Davos and the unfolding of subprime crisis, Google could only find significant Roubini-googling in the USA, the rest of the world just didn’t care (and maybe most of the Roubini-googlers in the USA were his students).The first appearance abroad was in February 2008 in – Italy.The next country to follow was Canada in August 2008.In September the Roubini trend reached UK, Germany, France, Spain, Portugal, Netherlands, Sweden, Australia. The rest of the world is still uncharted territory for Roubini-googling – so there’s still a long way to go before this bubble bursts…

I’m going back to Venezuela. We nationalize things that work there: Energy, medicine and oil. .12 cents a gallon while you Western economies were taking it at 4.50 in the coulero. Conspire on that theory academia! Enjoy your misery.

Pete,I hold the Blackrock gold fund. The fund just keeps going down, no matter what gold does. I Have lost 35% so far this year, not counting on friday´s selloff. Fund hold mining cos and barricks. Any help would be appreciated.Jose, Spain.

too easy. goldman wont make money on the transaction.

The reason why you hear all these news of what the U.S. government needs to do is not because there is a real need for the government to do something. It is because the U.S. government wants to alter the economical system and needs to justify its actions to the public.

Mark:Guest’s stated definition of the term ‘conspiracy’ is pretty good (although I might add that the conspiracy itself can become an illegal act by the fact of the collective planning for an illicit purpose).I don’t mean to suggest that conspiracies never happen, but I simply take the Ockham’s Razor approach to evaluating the genesis of an event. Prosecutors, for example, often resort to bringing conspiracy charges when they can’t make a case otherwise. Sometimes these charges have merit, and other times they don’t.In my experience, a lot of stuff just happens through a confluence of actions by like-minded individuals without any actual plotting, and this often provides a more accurate explanation for why things turn out the way they do. If the folks running the government, for example, are all of like backgrounds and embrace the same basic political and economic assumptions, they will often appear to be acting in concert even though they’ve never sat down together and spelled out an express plan to do so, like a twisted version of Adam Smith’s invisible hand.Moreover, these folks are frequently, I think, blind to the assumptions that inform their decisions. The Treasury Secretary had spent the better part of entire working life in the financial industry when he entered his federal post and his paradigm of the economy was undoubtedly informed largely, if not exclusively, by the corporate culture in which cut his teeth. As a consequence, his notions of what would be best for the American economy could have been so conflated with his notions of what would be best for the financial industry, the investment banking sector, and for Goldman Sachs that he: 1) failed to recognize early on the problems that Dr. Roubini and a few others had apprehended; and 2) was constrained, and remains constrained, in his ability to develop effective solutions to the financial meltdown because of a myopia of which even he himself remains unaware. I don’t think Mr. Paulson thinks to himself, “Now, in dealing with this crisis, how can I help my friends at Goldman Sachs?” Rather, I think he is striving to do what he honestly believes is in the best interests of the country, but he is a product of the rarified corporate environment from which he comes, and simply makes decisions through the filter of his experience and consequent world view.As you say, in the end, it really doesn’t matter because it will be what it is, conspiracy or not. That is the reason I prefer to focus on the merits of what is being done, rather than the motives of those who are calling the shots. To my mind, concocting endless Conspiracy Theories is generally a waste of valuable time and intellectual effort that could be better directed elsewhere.SWK

Kerk:As I noted in my immediately preceding post in response to Mark, I generally accept the definition advanced by Guest in the post preceding Mark’s. You are absolutely right that we need to be on the same page when it comes to the meaning we attribute to the words we use in discourse.Again, to me, that is not the issue here so much as the question of whether the assertion of a conspiracy is not an unduly complicated and unnecessary means of explaining the government responses to the events we are witnessing, and whether such an assertion does not distract us from a focus on critically assessing the merits of these responses. We can waste a lot of time speculating as to whether key players in the crisis, such as Secretary Paulson, have been “conspiring” with others to achieve some sinister ends, noting their involvement in this or that organization as “evidence” of the conspiracy (really just guilt by association), etc. when we should be concentrating on what his happening and what, if anything, should be done to ameliorate the problems we are now facing together.BTW, a great moniker, Kerk. I’m sure you’re probably already aware it is the Dutch word for “church” and similar to ‘kirk’ in Gaelic.SWK

Peter:As long as there has been a human civilization, there have been powerful elements that have risen to control society and manipulate politics and the economy to aggrandize, consolidate, and maintain control. The whole American notion of sharing and distributing political and economic power among the people runs contrary to the general historical trend. Perhaps we are like salmon swimming upstream: ultimately destined to die after a long fight, but not before planting the seeds for a new generation to continue the struggle one day.(Sorry if I wax poetic…)SWKP.S. – I do love to read Nim Chimpsky…uh, Noam Chomsky.

LB:So the bailout funds a super bear market rally, ultimately resulting in an even larger crash down the line? Great. :-/Can’t wait to suffer through all the short-sighted traders issuing knowing nods and claiming we’ve hit bottom. They’re already primed for this coming upswing. They just don’t think it won’t last.SWK

Our oath taken is to no man but to the Constitution.

Here’s another conspiracy – The US was going implement Martial Law if the bail-out bill did not pass.This conspiracy was so well financed that they even prepared a YouTube Video that emulated a C-SPAN broadcast of Congressional proceedings with an exact look alike of US House Representative Brad Sherman (D California) making that Martial Law statement.

LBI have seen lots of articles on the margin call topic and understood that was a major contributor to last week’s sell-off. If I am to understand you correctly, are you suggesting the early part of the week of October 13 will see an even greater unfavourable impact from these margin calls, followed by defaults / hedge fund blow-ups? That helps to explain the VIX persisting at such high levels.

Bear Stearns default would have had even worse effects than Lehman’s.All critcisms? In these extreme conditions, mistakes will always be made. Reference please.

The sky is falling. No, it really is.

Kerk for President. Or, at least Governor of Ohio. Writing in Kerk on Nov. 4.

Hi, I’m still around. Although I am making large amounts of money on my leap puts, I have sunk into a deep depression and find it difficult to write. I find it hard to be elated when there is tragedy and pain all around me. Thanks for asking.

FABULOUS POSTDuring the 700 billion bailout discussions, the media blared out the fact that the banks are bust and our economy is in serious trouble. Consumers (70% of the economy, suddenly got the point and have gone on a buying strike. The real economy just had its legs chopped off. Here is a great post from Fabius Maximus:”The economy is in shock. The effects of this will soon become visibleSummary: Nothing has happened, yet something has happened. A financial shock is an elusive event, largely psychological in its immediate effects. We can fight through this by staying cool and rational, and working together. As America has in past times of crisis.Look around after the events of last week. America’s industrial plant remains undamaged. It’s great natural resources remain. America’s greatest resource, its skilled and hardworking people, remain in place.Yet something has happened. It is a financial event, the real-world effects of which we will see in the coming weeks and months. Continuing to use the medical analogy of previous posts, the economy has suffered shock. More specifically, this is like circulatory shock, which Wikipedia defines as follows:{Shock} is a serious, life-threatening medical condition where insufficient blood flow reaches the body tissues. As the blood carries oxygen and nutrients around the body, reduced flow hinders the delivery of these components to the tissues, and can stop the tissues from functioning properly.We can carry the analogy one step farther. This is like Cardiogenic shock, caused by the failure of the heart to pump effectively. The US economy went into cardiac arrest early last week, as the flow of money (the blood” of the economy) slowed due to a near-collapse of the financial system (its “heart”, but not its soul). If not restarted, the economy will slide into a depression (GDP decline of 10% or more) in a few weeks.The impact is great, but only slowly becoming visible to the general public from articles like these:“Grain piles up in ports“, Financial Post, 8 October 2008 — “international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.”“Capital One Ends Financing of NY, NJ Car Dealers“, Bloomberg, 10 October 2008 — “”Banks are seeing the bottom fall out of the dealership business and they don’t want to be caught sitting there owning a bunch of Chevys, instead of getting cash.”http://fabiusmaximus.wordpress.com/2008/10/11/shock/

Yeah. I heard he bought Costa Rica from AIG – they were using it as a summer resort for their top execs. Must be tough for those AIG guys to lose those privileged parking spots.PeteCA

As a proximate example of the problem … what is the immediate prognosis for Ford Motor Co. ? Their stock has plunged to around $2 per share. Do they go belly up, or does the US taxpayer give them a string of bailouts to stay in business? Does anyone believe that auto sales are going to make a spectacular recovery in the next 6 months? Hardly.The fate of the US auto companies is a good example of a thermometer measuring the health of your patient. Since the US Gov’t can only save the strong banks, it’s hard to see how Detroit survives this mess.PeteCA

It’s one thing for Hank with his goulish demeanor to frighten the American consumer into submission, but if GM or Ford to go down all bets would be off on what the future holds. Such an event would rock America to its core and bring the economy to a dead stop.

Indeed, AfA, that is my fear.

Socialsm or no socialism, a society better guarantee that no citizen is without education,healthcare,shelter and food. Otherwise that society is anything but enlightened.

I love “Conspiracy Theory”. Gott’a go rent that again! How long do you think Roubini’s blog will stay in existence before someone here inadvertently discloses an idea that forces the Gov’t to shut down the site? Don’t laugh. It seems possible.PeteCA

Since we’re low on the subject of conspiracy theories today, let me post this link. The guys over at EconomicRot are discussing what kinds of things could trigger the US Government to unleash martial law.http://economicrot.blogspot.com/2008/10/martial-law-in-our-future.htmlThe initial article is short. But check the readers’ comments below. Interesting stuff.Personally, I thought we were pretty safe in this country until I read the comments … that one possible trigger for emergency measures would be “US citizens causing violence and damage to financial institutions”. Heck, the way the US public feels right now – that could happen almost any day.I’m surprised that some people didn’t take bricks out of WaMu banks when they collapsed. It’s kinda’ like the collapse of the Berlin Wall – it’s a part of history. Who knows? Maybe one day all this stuff will be selling on E-Bay. Same thing goes for pieces of Bear Stearns and Lehman. Real collectors editions.PeteCA

I posted above – If it weren’t on C-SPAN in the House of Representatives you would never believe it.US House Representative Brad Sherman (D-Califorina) Speaks on the House Floor October 2 and says Martial Law was threatened if Bail-Out not passed

Finally, a step in the right direction. Next step should be allowing SWFs to hold preferred shares in US financial companies.Wealth funds, recipients adopt investing principles12 Oct 2008 | 01:02 AM ET Text Size WASHINGTON, Oct 11 (Reuters)Government-owned wealth funds and the countries that accept their investments agreed on Saturday to a set of principles aimed at ensuring that both sides play by the rules. These wealth funds, worth more than $2 trillion and fed by excess reserves in countries such as China and the oil exporting powers, had been a source of angst in some Western countries because of concern that they would base their investments on political, rather than economic, goals. The funds themselves have said that because they have long-term investment horizons and deep pockets, they can serve as a stabilizing force in turbulent markets, and they have expressed concern that Western countries would discriminate against them. The International Working Group of Sovereign Wealth Funds, made of up countries such as Qatar and Russia that hold large funds as well as recipient countries including the United States, established 24 voluntary principles. Hamad Al Suwaidi, director of the Abu Dhabi Investment Authority, said the principles sought to “ensure that the international investment environment will remain open.” The principles call on wealth funds to have in place a transparent and sound governance structure, to comply with regulatory and disclosure requirements in countries in which they invest, to ensure that they base their decisions on economic considerations, and to help maintain a stable financial system.

As the NYTimes said Friday: The stunning collapse in oil markets accelerated Friday, sending a barrel of crude plunging below $78 as investors grow more pessimistic about resolving a mushrooming global economic crisis.Oil hasn’t been this cheap in 13 months — a rare silver lining for consumers amid a rapidly imploding financial landscape.Crude prices have almost been cut in half since surging to a record near $150 barrel over the summer.But guess what, Hugo? The gas at the pump where I live in Californa is still between $3.69 and $3.75 a gallon. When oil was rising, the pumps stayed in step. Now that it is falling, the pumps are out of rhythm. Can’t blame that one on the Arabs, can we?

GM, Ford and Chrysler were toast before this financial debacle. With all the legacy costs of extremely generous pensions and health insurance for its retirees in the U.S. and Canada, they haven’t be able to compete with the Japanese and Korean car companies for years.

Good to see you are here!!!

I’m afraid that I agree with Giraf. The US auto industry is a really good measure of exactly what’s wrong with our economy. The real issues are global competitiveness and “global wage arbitrage”. A cute way of saying that US workers are getting paid too much money – compared to their foreign competition. The US Gov’t cannot work its way out of this problem simply by nationalizing eveything and printing money. That is impossible. We truly would wind up with hyperinflation and a depression (we might anyway).PeteCA

That’s the beauty of martial law, you don’t need permission.

And under capitalism both the rich and paupers have the right to sleep under bridges.During the Second World War, 90% of the Nazi divisions fought on the Eastern Front; you can thank Uncle Joe for the fact that you’re not learning the goose step. One of the ironies of history, I guess.

Brilliant essay. Conspiracy theorizing, the last repository of the Enlightenment. “The Lone Gunman”more explosive than a hundred essays by Chomsky. How low we’ve sunk. But Reason is cunning. Either It perishes, or we along with It.

You are silly, HK “Fun” Manager

UK PlanUK Government to spend 500 billion pounds to take over a majority interest in Royal Bank of Scotland and Halifax-Bank of Scotland, another 50 billion pounds and acquire interest ins in other banks.Never knew that the UK had so many billions to throw around.

Returning to the current crisis,what references are out there on the pros and cons of US gov’t guarantees of interbank lending (the second part of the UK plan).Why did the US decline this option yesterday?

George Soros and Paul Krugman among others recently called into question competency of Paulson as Treasury Secretary. Indeed, Paulson should be fired immediately. Paulson being from the same community of investment bankers that caused this financial crisis is incapable of taking of right measure to fix the credit mess.

Erm, maybe not so silly after all!The Guardian (Labour mouthpiece) reports that many UK rail, water and power companies are likely to go bust.I suppose Eurogroup is quite relieved that Britain never joined.

It would be wise for Americans to take note of the differences in America’s economy at the time of the Great Depression versus now as Roubini’s outlook for the US economy hits. Says Roubini above, the short and shallow V-shaped recession of 6 months’ duration is out the window with the more severe U-shape of 18-24 months’ duration he predicted lengthening likely into three years, with meaningful risk of going into an L-shaped economic stagnation such as Japan’s.Here are some dire economic realities listed by Paul Craig Roberts:The nice thing about 20th century recessions was that the jobs returned when the Federal Reserve lowered interest rates and consumer demand increased. In the 21st century, the jobs that have been moved offshore do not come back. More than three million U.S. manufacturing jobs have been lost while Bush was in the White House. Those jobs represent consumer income and career opportunities that America will never see again.In the 21st century the US economy has produced net new jobs only in low paid domestic services, such as waitresses, bartenders, hospital orderlies, and retail clerks. The kind of jobs that provided ladders of upward mobility into the middle class are being exported abroad or filled by foreigners brought in on work visas. Today when you purchase an American name brand, you are supporting economic growth and consumer incomes in China and Indonesia, not in Detroit and Cincinnati.In the 20th century, economic growth resulted from improved technologies, new investment, and increases in labor productivity, which raised consumers’ incomes and purchasing power. In contrast, in the 21st century, economic growth has resulted from debt expansion….The income gains of the 21st century have gone to corporate chief executives, shareholders of offshoring corporations, and financial corporations.By replacing $20 an hour U.S. labor with $1 an hour Chinese labor, the profits of U.S. offshoring corporations have boomed, thus driving up share prices and “performance” bonuses for corporate CEOs…Financial companies have made enormous profits by securitizing income flows from unknown risks and selling asset backed securities to pension funds and investors at home and abroad…He asked, “[W]hat if the $700 billion doesn’t stem the tide and another $700 billion is needed? At what point does the Treasury’s assumption of liabilities erode its own credit standing?…“The US Treasury does not have $700 billion on hand with which to buy the troubled assets from the troubled institutions. The Treasury will have to borrow the $700 billion from abroad.“The US is not a superpower. The US is a financially dependent country that foreign lenders can close down at will…”http://www.vdare.com/roberts/080923_deregulation.htm

Roubini has been a draw in the USA quite a while, averaging up to 1000 comments a week when I discovered him For me, it was like finding water in the desert. One of the early qualities that attracted Roubini to me was his courage in saying the opposite of what big time Wall Street investors wanted to hear. I dare say, that is spurring his popularity worldwide.In short, as Finley Peter Dunne would say, Roubini comforts the afflicted and afflicts the comfortable — at home and, now, abroad. Thanks for post!

can’t seem to find anything on the news wires to this effect – I did find this Reuters article but it does not indicate that such a plan has been adopted.

On the subject of conspiracy theories…I have followed this blog for almost two years. It seems clear to me that the regulars here are a kind of information elite who are struggling to understand and model the economic situation. We could see that official sources were getting it wrong and were even putting out disinformation. We did our best to use the methods of open-source intelligence to better model the situation. (Thank goodness for Dr. Roubini and this blog.) I say we are an elite because most most people don’t have the skills, or the motivation, or the background knowledge, for this project.I feel strongly that diligent practitioners of open-source intelligence should stay up to date on conspiracy theories that relate to whatever they’re investigating. It will be clear enough to the diligent which conspiracy theories are merely forms of propaganda. And even the most tinfoil conspiracy theories will contain useful information about the psychologies and goals of discontented shadow players.Part of the problem is that, too often, the diligent are required to act on, or prepare for, situations about which too little is known. Before I retired, I was responsible for the design and operation of complex computing platforms that were robust enough and redundant enough for a large business to depend on. Even a brief failure at the wrong time could lead to millions of dollars in losses and costly damage to reputation. Thus, to me, worrying about what might go wrong, close monitoring, tough probability decisions in the face of insufficient information, and the maintenance of contingency plans were a habit of mind. Experience teaches that transparent systems with even casual redundancy can keep working when only one thing goes wrong. But when two or more improbable things go wrong at the same time, and something confounds the variables, watch out! Analyze any airline accident, and you’ll find that it is an improbable series of failures, not a single failure, that leads to serious accidents.I don’t know about the rest of you, but in spite of my efforts, my internal model of the economic situation is full of gaps and, no doubt, errors. I find it deeply troubling that there are potentially so many of what I call “evil coincidences.” For example, is it an evil coincidence that economic near-panic is coinciding with the American election? Or was it planned this way, as some have suggested? Is it an evil coincidence that this financial unwinding is happening on the watch of an administration that has sponsored epic levels of other mischief with pretty much the same winners and losers? Or is it part of a larger project, as some have suggested? It would not be diligent to fail to give thought to these possibilities and to see if there is any information out there that might help us tune the variables in our models. I have too little information to even guess at the probabilities, but the part of me that worries too much is worrying that the period between now and Nov. 4 is potentially a very dangerous time. We know too little about what’s going on.Remember, when the California “energy crisis” happened, there was very little information, and a great deal of disinformation, on what was causing it. That someone was gaming that market, that there was criminal fraud behind it, could not have been known at the time. It was a just conspiracy theory. It has the same smell as what’s happening now — shock and awe, with a few big winners and lots of little losers.I’m not suggesting that we should flood this forum with conspiracy theories. But I don’t think we should make conspiracies theories off limits if the knowns fit the facts and the unknowns are plausible.

I can see it now! The GM “Peoples’ Car!”SWK

guest you should just continue praying. shut out the real world. and scoff at better men with better minds.

Speaking of conspiracies. Suppose the PPT has let the markets crash since the bailout was approved by Congress. Short sellers with inside information make billions, while at the same time crashing gold/oil & keeping the dollar propped up as the only perceived safe haven. All the while, sucking the remaining assets from the sheople and conveniently setting up an “event” just 3 weeks from an election.

The loss of civics in the standard school curriculum is indeed grave. Given the dumbing down of the citizenry over the last 50 years, in which a sense of social responsibility has been displaced with an endless appetite for the goods and services of corporate America, its no wonder we’re in trouble.SWK

Further to your point SWK, during the Congressional deliberations prior to the second TARP vote, Rep. Marcy Kaptur (D-OH) eloquently pointed out (paraphrasing here) that what was happening at that moment, was that the nation was directly experiencing, not a legislative process, but the strong arming (do-what-I-say) narrow attitude and behavior of Wall Street as channeled through Paulson to the nation/world.For some reason, it is extremely difficult (for a minority) to stand up and defeat this type of behavior. It’s as if Wall street is a spoiled rotten child that kicks and screams when it doesn’t get its rate cut, bailout, toxic asset dump – and, like a poorly skilled parent the TPTB give in – and the whining and wailing continues to the next level of it’s not enough- we need more! A vicious cycle indeed.Displacing atrocious behavior is a core defect in our nation’s collective psyche, and it seems that no matter what legislation, plan or idea is on the table, it will not be effectively implemented until we are able to grow-up, recognize this disease and purge it, both on an individual and collective basis.

If you don’t want to accept my word that I meant no disparagement, that’s fine. I don’t, however, have to prove myself to rude, self-important, pseudo-intellectual pissants like you. State his thesis and summarize it yourself, chief, so you can show us all how superior you are. I have better things to do this afternoon than waste my time in a battle of wits with an opponent who is obviously underarmed.SWK

Next few hours crucial for stabilizing markets: IIF Sun Oct 12, 2008 1:27pm EDTWASHINGTON (Reuters) – Failure to quickly announce “bold measures” to restore confidence among investors will result in “further deterioration” in financial markets, the world’s leading bank lobby warned on Sunday.”Tonight, tomorrow morning are very critical moments,” Josef Ackermann, chairman of the Institute of International Finance told reporters in Washington.”I think we have to do whatever is needed to bring confidence back, even if it is a little artificial with some state help and guarantees,” added Ackermann, who is also CEO of Deutsche Bank.(Reporting by Walter Brandimarte)

Daltoni:I agree with your assertion that conspiracies may exist. Of course they do, or Sherman anti-trust laws would not have been necessary. And that was nearly 100 years ago. Surely the art of conspiracy has advanced since then.Please see my post below. Conspiracies only work in the absence of good information. We are exchanging good information. What’s missing is good action.

Very interesting, Daltoni, and well said.Having mixed backgrounds between science (esp. theoretical ones) and business (including internal audit), and probably also because of some personality attributes, I tend to follow the adage “plan for the worse, hope for the best”, or if I could better say it “consider for the worse, prepare for bad, plan for the good, and be exposed to the best”.If I learned anything from diverse theories from exact and social sciences, and especially exact science theories applied to social science, it is that no one theory can be ever universal enough to explain everything by and of itself, and by consequence, no theory that discards competing ones is worthwhile enough to be the exclusive philosophical ground or window to reality.In our quest, seeking the truth, and to keep it methodical, one would need to organize all possible (and impossible) explanations (that is, theories) according a bell-shaped (normally distributed) histogram, with each theory represented with one bar, according to the (somewhat subjective) probability thereof, with p(x)>0But seeking the truth is not our only motivation. We also seek simplicity, comfort, victimization, folly (escaping the truth) … These are sometimes inconsistent with our quest of truth, which leads to a skewed bell-curve.To cluster different types of theories (according to me), I can distinguish three, or if you wish, there are 3 main criteria on which, each theory should be graded. These 3 components are facts (different levels of premises), logic (or rules) and conclusion (consequence). Importance and scope accorded to each component are not the same for each theory, and depends, among other things, on the objective of the theory. If one is to grade each component on a 3 point scale (weak, good, solid) and according to its importance relative to the other components (1st, 2nd, 3rd), we end up with 27 theory-profiles (3x3x3) ranging from an (1)all-solid deductive theory to an (27)all-weak and abductive theory.Of course one would wish to give the highest probability to (1) and less of it to (27). However, because both these extremes are so rare and difficult to come up with, from an occurrence point of view, both (1) and (27) would appear in the extremities of the bell-curve.Conspiracy theories tend to be based on the third group of theories (i.e. abductive). Reasoning by abduction starts with the consequence or an observation (e.g. WTC collapsing at the speed of free fall) and inferring the real causes and preconditions (controlled demolition) BY using a set of proved and known logic or rules (building design and structure). This type of reasoning is totally sound and legitimate if it is played according to the rules. Conspiracy theorists, in general, tend to do quite a good job in elucidating the “what just happened” question (consequence) and sometimes present solid logic and rules (how it happened), but they tend to go astray when it comes to answering the “who did it” question (cause). Compare, the above example to the following theory: Building 7 collapsed (what?), controlled demolition (how?), an inside job (who?). I would tend to believe in the first example, rather than the second. although, strictly speaking, in this case, we won’t be talking about “conspiracy” or at least, not at the same level.My point is, when faced with a conspiracy theory, any kind of it, as a rule of thumb, I would consider its “what and how?”, but I would need to do my own homework when it comes to “who and why?”

Let me get this straight so far the Fed and government has spent over 2trillion dollars on plugging holes in failed banks which doesn’t even begin to take care of the real problem; foreclosures. 2 trillion is enough to reduce 100 thousand in debt for 20 million home owners so plan on this bailout being 5 or 10 trillion or more. Untill they hit the source they won’t stop the feed back loops from happening.I don’t understand how bailing out banks helps the real economy which is about to collapse and cause further banking collapses. Firefighters know to aim the hose at the base of the fire our politicians would make terrible fire fighters.

SWK: “blind free market ideology”The intruder in this sentence is “market”. That might be blind, free (as in costless) or ideology, but it has nothing to do with free market, blind or seeing. Free market and ideology are in fact antonyms.Just to clear my point. If refusing to “inject capital directly into banks” could be qualified as “blind free market ideology”, does that mean that usurping unaudited power to buy toxic assets at inflated prices is “seeing free market ideology”?From a free market perspective, the second proposition is much^n (where n is a big number) worse plan

TEXT -Draft statement from euro zone summit in ParisSun Oct 12, 2008 5:31pm BSTPARIS, Oct 12 (Reuters) – Leaders of euro zone countriesheld an emergency meeting on Sunday to discuss specific,pan-European measures aimed at propping up the batteredfinancial sector and halt market panic. Here is the text of a draft statement being studied by theleaders which was handed out to reporters shortly after thesummit got underway.DECLARATION ON A CONCERTED EUROPEAN ACTION PLAN OF THE EUROAREA COUNTRIES1) – Financial systems contribute essentially …

That is the question I was asking myself. It appears that the “developed” countries are getting into the insurance business with sovereign bonds being inverse-CDS contracts.Here is the deal. If an SWF wants to invest it would buy the stock of Goldman for example and sell US treasuries (SDS) as a hedge. If Goldman defaults, the SWF would be having free guarantee and gain from its sold treasuries. The only technical problem is to be able to short or sell treasuries.The question is not one of the value of the guarantee, but that of the insurer.

I am not advocating for any particular theory. Obviously I don’t have enough information for that. I am only responding to earlier comments that brought up some conspiracy theories. The factlet that I find most disturbing, though, is the CSPAN video of Rep. Brad Sherman of California saying that members of Congress were told that there’d be martial law if they didn’t pass the bailout bill. I think it’s unlikely that Sherman made that up. If it’s true that the administration is talking about martial law to members of Congress as a matter of urgency, then I see that as quite a big deal and a quite important piece of information which we ought to be slow to ignore or discount. It implies that they’re ready for martial law, which dovetails with other conspiracy theories about preparations for martial law which are all over the Internet. In this dark theory, the election would be suspended. Do some Googling for the appropriate terms and you’ll find this material on the Internet. Comments here in this blog have made some references to dark theories and included some links, so if you’ve missed some of the comments here you might go back a few days.

It sounds to me like a permanent pipe from the “real” economy (taxpayer) to the “secondary” economy.That could mean that you permanently have deposits with the Banks – which can be called upon ad infinitum a the pleasure of the Banks.I wonder what sort of future that is for our children? Plugged in to be milked by the Banks from birth!You point noted; interesting

Keep waiting. I don’t respond to goading, at least not in the way an instigator would like me to respond. Nice try.Not sure why you seem to feel you are on a divine mission to show me up here, but feel free to continue on your own. I’m sure you’ll be terribly impressed with whatever you have to say about me and whatever judgments about my intellect or character you may care to make.SWK

US deficit for 2009 now forecast to be at least $2 trillion. That’s $2 trillion for just one year!One week ago … I was forecasting thus number to be just $1.3 trillion. Guess I was suffering from a bad does of optimism.Quoting Bloomberg on Sunday …” “I always assumed they would be asking for more money along the way if it was necessary, and it looks like it’s going to be necessary,” said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington. “At the moment, there’s nothing happening here that’s positive for the budget. Nothing.”The 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. “PeteCA

Well, Phil, at least Dodd cleverly managed to include in the TARP legislation language giving the Treasury Department the power it never wanted, i.e., the option to purchase equity in banks. Now that Secretary Paulson has come around, there won’t be delays from having to amend the original statute. There is more than one way “to stand up and defeat” stubborn opposition.SWK

Those are a scary numbers, Pete. Wish we had the option of spending that borrowed money on something the public could benefit from in the future, like refurbishing the nation’s infrastructure. What a bloody mess we’re in…SWK

Well, a trademark is used to identify the source of goods, and a service mark is used to identify the source of services, so this really applies to branding. Rights in marks are acquired when first used in commerce, and may continue so long as they continue to be used in commerce. Probably a good market out there for Fascistas-brand T-shirts and so forth bearing slogans like, “Socialize the losses, Capitalize the profits!” If it’s federally registered (circle-R), presuming it’s being used in interstate or international commerce, federal court jurisdiction and the ability to recover attorneys’ fees and costs for infringement would be covered.Trouble is, I’m not sure who’s going to be left with any money to buy this stuff…SWK

Going short on VIX from tomorrow till the 16th is a good trade!!!!Cheers!

Well, on another note, the futures are all up (at the moment) for Dow, S&P & Nasdaq.SWK

Are the masses finally awakening and seeing that the banking and political systems are naught but an illogical and unfounded scam and this new reality awareness, is bringing the focus that is the cause of the global economic collapse.After all, the secondary economy is the result of the toil of these unwashed masses and so the free-market cow rises and shakes the fleas and ticks off its back as it proceeds to kick the $hit out of the milking shed.Methinks all will be well, as this beast rises and bites into the fabrics of global well-being. Life begins when one begins to think:”What has unleashed the crisis is .. an overall lack of trust in what organisations say,” Thierry Libaert, scientific director of International Crisis Watch, a French think tank, told AFP.”In times of deep mistrust, a stampede can be triggered by a small event, he said.”Comment: And justified too, it seems LOL”For instance, if tomorrow some people start to form a queue outside a bank, that can prompt a rush by everyone, especially if the TV cameras show the lines on the evening news.”Robert Zarader, an economist at a Paris consultancy, Equancy, said that for many investors, the financial sector had become a fearful Pandora’s Box.Comment: And so it is by all accounts now appearing.They found it impossible to weigh risks, given masses of interlinked transactions among banks that remained to be unraveled, he said.”Irrationality is playing a big role in the crisis. There’s a feeling that no one’s in charge and the known problems are just the tip of the iceberg.”Comment: No! I believe that the use of the term “Irrationality” in the above statement is invalid and should be “rationality” as the unwashed masses appear to become aware of the nonsense going on around them; and on their supposed future behalf.”Didier Sornette, a physicist by training who is professor of entrepreneurial risks at the Swiss Federal Institute of Technology (ETH), said the imitative “herd” reflex was rooted in Darwinian survival and was not necessarily irrational.”Comment: Hahah validation: What is happening is happening on behalf of our survival; natural revolution; vindication at last ”Biology has made us evolve as survival machines,” he said. “You can get useful information by looking at what your neighbours are doing.”"Flocking among traders, analysts and fund managers also bore responsibility for today’s market woes, creating a dangerous culture of mono-thought, said Sornette.”"In the same way that a husband and wife start to look similar after a while, traders who are constantly in contact with each other and talking about the market start to behave similarly,” he said.”"Analysts and fund managers also tend to herd to a very significant degree, firstly by the way they collect information, but also because it’s better to be wrong with the herd than to be right alone,” he said.”"You’d rather be wrong most of the time together, because that way you can say, ‘everyone’s like me’. If you are wrong alone, then you are killed, you lose your job.”http://www.physorg.com/news143012732.htmlHo hum

Take a snapshot of that chart of the VIX, frame it, and put it on your wall. You are looking at history.PeteCA

Prof RoubiniI draw your attention to the headline of the following article. I will repeat it here:”WORLD LEADERS OFFER UNITY BUT NO STEPS TO EASE CRISIS” by Washington Posthttp://www.washingtonpost.com/wp-dyn/content/article/2008/10/11/AR2008101100268.htmlDo you see now why I am encouraging you to become more constructively involved in formulating a solution to the world currency problem? We urgently need a new proposal that will move the world off Bretton Woods II. We have got to get past the obstacle of the US dollar functioning as the global reserve currency.But it is clear that politicians don’t want to face the political pain of such a transition, and central bankers are far too occupied right now with bailing out their own banking systems.I believe that key academics could play a very helpful role in offering workable alternatives to BW2. They have the advantage of being able to take a top-level view and to look at this thing objectively. Someone has to soon. If a constructive way isn’t found through this mess … then you will find yourself in the middle of the global depression that you have been forecasting.Very respectfully, can I suggest that you talk to colleagues that you know … and perhaps get some discussions going?PeteCA

Pete, from what I’ve read, their plans are as specific as they can be. A line has been drawn in the sand: there will be no more bank failures. As SWK just pointed out, futures are stronger. The test will come with the Asian and Australian openings. (By the way the latter today guaranteed all bank deposits and interbank lending).Why would your govt bail out GM? For the simple reason that the company employs hundreds of thousands of workers.

I spoke to a firend today – he’s 90 years old and remembers the economic collapses in Britain and Europe after WWII. He pointe dout to me an incidence of a strike by coal miners in the UK, because the Gov’t had nationalized the industry and then demanded that workers reduce their wages. If GM is nationalized, the same thing will likely happen to US auto workers. But does the Gov’t even know how to run the auto industry? Anyway, i know you’re in agreement with the points I am making. The degree of economic pain in the USA has reached the point where the Gov’t must make extremely unpalatable choices.PeteCAPeteCA

PeteCA,Absent some international agreement (very unlikely to me), the US has 2 options: default or monetize (with default being the end result in both cases), the only option politically acceptable is monetization (subsequent to a treasurization of private debt) up until the seigniorage value becomes negative.All this credit crisis smells to be an avant-goût (“foretaste”) of the sovereign crisis.

Pete, I believe that you answer your own question.I am quite sure that no solution can be agreed upon by all parties, no matter how good that solution can be, for the simple reason that these politico-diplomatic animals cannot agree on a new system that preaches their own demise or results in losses to theirs, strings I see should be attached to any solution that could be qualified as … workable.Need leadership that is not afraid to work against its own existence.

There is nothing to fight about, Matador. The only “assertion” I made (going back to my original post in response to Peter JB) was that I do love to read Chomsky. What “backup” do I need to provide for how I feel about an author’s works?That I have always found it cute that a bunch of linguists investigating primate language potential would have named one of their animal subjects Nim Chimsky after Noam Chomsky, one of the best-known linguists in the country, and that I would, in turn, refer to Noam Chomsky playfully as Nim Chimpsky whenever I hear his name should not cause any rational person to become as irate and obstreperous as you have become over this non-event. I tried to explain this to you immediately after you took umbrage with my post, and my “lighten up” comment to you was merely intended to suggest that perhaps you were being a bit too serious about the whole thing. In spite of this gesture, you continued to try to bait me into “proving” that I understood something about the substance of Chomsky’s writings. Under these circumstances, I find your excessive reverence for Chomsky and your concomitant obsession with defending his name and works to be just plain weird.SWK

Bloomberg interviews Pimco’s El-Erian 2008-10-12 (Video – WMP)

By the way, if it makes you feel any better (and if it will help end this silly back and forth), I will say that I tend to agree with Professor Chomsky on this one (the theme of the piece cited by PeterJB). The Bretton Woods regime was, indeed, weakened substantially when Nixon took the United States off the gold standard in 1971.I don’t know what Professor Chomsky’s source is for the proposition that the U.S. Treasury regards the free movement of capital as a “fundamental right,” and I’m not sure to whom such a right would be thought to belong. The effect of the free movement of capital globally, however, has been to diminish the power of individual governments, democratic or otherwise, to control and regulate meaningfully sometimes pernicious corporate activities. Richard J. Barnet and Ronald E. Müller wrote about this in their book Global Reach in 1974, which I read when it first came out, long before I had ever heard of Professor Chomsky.SWK

Ohh Giraf. One other thing. I guess the economic stats don’t show major pain for the US consumer yet. But what you can’t see is the economic stress level that people are working under. So many people with almost no savings, and just waiting for that next paycheck. I know two people in my neighborhood who have lost their jobs, and both are doing part-time temp work and just getting by to support their families. They aren’t counted on unemployment stats. But they are one step away from having to move back in with their aging parents as a last-ditch move if things fall apart. It’s happening.PeteCA

Where is LIBOR standing?Futures are up sharply. Does anyone know how the European plan to bail out banks has effected the LIBOR rates? If the LIBOR has not budged, then the Europeans and the Fed have truly lost control.

Early indications suggest a bullet has been dodged. Let’s hope it’s not an automatic weapon. Of interest the move by the Eurozone is highly significant as they appear to have taken the lead in addressing what needs to be addressed, whilst Ben and Hank doddle. This may go down as the turning point for for the US as leader of the global economy.A guest on CNBC Asia (Ben Pedley from LGT) just suggested that Asian Central Banks may start thinking about what to do with their US treasury holdings – e.g. gold – Interestingly Pedley also suggested that if an individual wants to own gold (for safety reasons) in a world where counterparty risk is high, a paper certificate is subject to those risks in comparison to owning the real thing.Japan markets closed for stat holiday Monday but US futures are soaring. (like that hasn’t happened in the past few weeks)

PeteCA-Some problems don’t have solutions, and I’m afraid this is one.

Heard the professor today at the Euro50 forum. He rejected the “no bank will fail” policy: “Saying ‘we will let no bank fail’ is not a policy.” We know his policy recommendations from his Oct. 9 essay so I won’t repeat them except to say he wouldn’t accept vague platitudes and called for specifics on triage, pecking order of shares and other things, such as programs to help the less fortunate. The central bank reps from Europe were saying it may take time, but they have the tools and will use them. After a few rough quarters things will get better, etc. NR would have none of it. Shiller spoke of the continious workout mortgage and his futures market for real estate prices. The hedge fund reps expressed the scope of what’s going on. One said that if Lehman can fail then every bank in the world is potentially insolvent because of credit default swaps. Another said the global financial losses from this crisis were between $23 trillion and $25 trillion, with $2 trillion coming out of banks and $8 trillion coming out of stock markets.I may have finally convinced someone to pull out of the market after taking heavy losses as it looks as though the hedge funds will be forced to sell for months to come. Any suggestions from traders out there how to do it? First thing in the morning? Try and wait for an afternoon rally or a big snapback in the days ahead?

Sweetie, we had that back in the ’70s and ’80s–the “K” car.

Pleased to see you back, OB.

Aye AfA, did the photon go through just one slit or both?

@SWK – From an earlier post, you commented about the higher leverage of the foreign banks you said, By these measures, as bad as things are, the U.S. appears to be better off than a number of other countries in the industrialized world.In this case appears is the appropriate word. It would be akin to saying that JP Morgan/Chase’s leverage applies only against New York State’s GDP. Just as it is wrong to say that JPM’s leverage against America’s GDP. JPM’s leverage is applied worldwide and in many markets. It’s not relevant to New York’s GDP or America’s GDP any more than it’s appropriate to compare UBS’s leverage against Switzerland’s GDP.In short, they’re all in deep doo doo and we’re arguing over who’s doo doo stinks worse.

I posted this yesterday, and I wanted to come back an add to it.Holy Toledo! (Yes, Toledo beat Michigan – Do you think Rich Rodriguez will be at the next game?)No really, this Fannie, Freddie to Buy $40 Billion a Month of Troubled Assets$700B here $150B there, pretty soon we could be talking serious money!First, this kind of explains why Paulson may have ratcheted down his rhetoric about being against direct bank investment via the $700B bailout. If you look at it, F&F are now fulfilling a great deal of the original impetus of the bailout bill. Hanky got that through the back door, so now he has $700B left to do something else with! Give Hank an inch and he’ll turn it into a mile!My questions are what do you think, and do you think that there are other back door schemes up and running that we aren’t even aware of?

thanks for the response…the swings were so big on friday…was that computer selling?…i trade, since august only and very little, with scottrade and it has taken a while to execute trades on the open…as price drops… a quiet session might be good for someone trying to get out…place the order…have it go through…may be better to sell sooner rather than later though…given the credit crisis…

The gorilla in the room tonight is if the Europeans and others are going to stand behind depositors and interbank lending then why the heck would anyone leave any at risk deposits in the US? Plus, if you could get your funding through a European bank and not from a US bank, why wouldn’t you? Then, if everything is so on the edge of a cliff, why would you risk anything in the markets, when you could stuff it in a European bank (safe and sound).Wow, Europe (and others) are going to recapitalize their financial institutions, and we’re going to provide the capital! Hey, Hey Hanky don’t you hear that big sucking sound? It’s the life of the American financial system being off shored!Maybe that’s the plan all along. Let the big money holders offshore their assets and then crash the dollar. At a latter point the monies can be repatriated at significantly more relative value and these big monies can buy up the USA! Folks, the plan is in place, the destiny is known (by some) the only variable now is whe

Ahh … that last word was when.

2 cents, at first your comment seemed offhand. On second thought, it isn’t.I was thinking more along the lines of requiring the USA to eliminate its budget and trade deficits as part of a currency and stabilization agreement. BBut the fact is that China and others will be in the position to demand political concessions as well. Someone in Beijing is thinking what you’re thinking. Not exactly the “new world order” as we imagined it! There are some other unthinkables in global politics that may become realities, as well

@ Daltoni – re conspiracy theory.One U.S. Senator stated, at a meeting about 4 years ago, that the Bush administration’s plan was to drive up the deficit as much as possible, so that it would be impossible for the next Democratic administration to institute national health care or additional social security benefits. It is interesting that this huge increase in the deficit comes at the end of Bush’s 8 years, right on schedule If I were a conspiracy theorist, I would believe that this massive last-minute deficit pile-on is part of a pre-conceived plan. Wall Street has already walked away with all of that money.

It’s to offset the Post Peak Oil armageddon (Energy Descent). The World’s Oil Supply situation hasn’t changed 1 bit. Demand has collapsed because of this Financial Meltdown. What better way to orchestrate demand destruction for oil?www.BeWarned.org

Well now that Paulson is being nice to US taxpayers in how he applies the TARP, it basically tells the banks that they can get recapitalized but they will have to pay us to do it. Paulson has turned patriot, apparently, and I couldn’t be happier or more thankful.The Europeans don’t get such a good deal. They are going to have to indemnify all the interbank loans for the next year or so, and get nothing in return.I would hardly say that Ben and Hank are doddling. Finally they are doing their jobs indeed. There is however the aspect of “regulatory competition”. If the Europeans will guarantee interbank loans, then the banks may choose not to be recapitalized beyond the bare minimum here (and do everything to reduce that minimum including moving operations elsewhere) and do their interbank lending in Europe where they get a free guarantee. This is why a unified program should have been presented to the banks, but it seems that won’t happen. So there may be some movement overseas with these risky interbank transactions.In which case I say: Europe, you’re welcome to them.

Afa, my eyes are hurting now. Will you please send the nurse.

How does the recent quiet announcement of the removal of N.Korea from the terror watchlist fit into the big picture as you see it?

Remember how Rich H described the “shake down”? It is an orchestrated pattern of deflation, stage by stage, with government and a highly selective slice of Wall Street carefully coordinating together to export pain beyond US borders and position key US players for profitable survival.

Mike Shedlock over at globaleconomicanalysis is livid. Hoping he won’t mind, here’s a quote from him:”Hells bells, why pussyfoot around with this stuff? Let’s just have every country guarantee everything forever. And if it comes to that (which it rapidly seems to be doing), one must stop and think about the value of those guarantees.”Indeed.

and one diaper for 2cents

the Woman Who Could Have Prevented This Financial Mess Was Silenced by Greenspan, Rubin and SummersBy Katrina vanden Heuvel, TheNation.com. Posted October 11, 2008.A sad tale emerges of willfully arrogant behavior designed to undermine a wise woman’s good judgment.More stories by Katrina vanden Heuvel>”Break the Glass” was the code-name high-level Treasury Department figures gave the $700 billion bailout; it was to be used only as a last-resort measure.Now millions have been sprayed and damaged by broken glass.But more than a decade ago, a woman you’re likely never to have heard of, Brooksley Born, head of the Commodity Futures Trading Commission — a federal agency that regulates options and futures trading — was the oracle whose warnings about the dangerous boom in derivatives trading just might have averted the calamitous bust now engulfing the US and global markets. Instead she was met with scorn, condescension and outright anger by former Federal Reserve Chair Alan Greenspan, former Treasury Secretary Robert Rubin and his deputy Lawrence Summers. In fact, Greenspan, the man some affectionately called “The Oracle,” spent his political capital cheerleading these disastrous financial instruments.On Thursday, the New York Times ran a masterful and revealing front page article exposing the culpability of Greenspan, Rubin and Summers for the era of dangerous turbulence we live in.What these “three marketeers” — as they were called in a 1999 Time magazine cover story — were adept at was peddling the timebombs at the heart of this complex crisis: exotic and opaque financial instruments known as derivatives — contracts intended to hedge against risk and whose values are derived from underlying assets. To cut to the quick, Greenspan, Rubin and Summers opposed regulating them. “Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury,” recalls Alan Blinder, a former Federal Reserve board member and economist at Princeton University, in the Times article.In 1997, Brooksley Born warned in congressional testimony that unregulated trading in derivatives could “threaten our regulated markets or, indeed, our economy without any federal agency knowing about it.” Born called for greater transparency — disclosure of trades and reserves as a buffer against losses.Instead of heeding this oracle’s warnings, Greenspan, Rubin & Summers rushed to silence her. As the Times story reveals, Born’s wise warnings “incited fierce opposition” from Greenspan and Rubin who “concluded that merely discussing new rules threatened the derivatives market.” Greenspan deployed condescension and told Born she didn’t know what she doing and she’d cause a financial crisis. (A senior Commission director who worked with Born suggests that Greenspan and the guys didn’t like her independence. ” Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.”)In early 1998, according to the Times story, one of the guys, Larry Summers, called Born to “chastise her for taking steps he said would lead to a financial crisis. But Born kept at it, unwilling to let arrogant men undermine her good judgment. But it got tougher out there. In June 1998, Greenspan, Rubin and the then head of the SEC, Arthur Levitt, Jr., called on Congress “to prevent Ms. Born from acting until more senior regulators developed their own recommendations.” (Levitt now says he regrets that decision.) Months later, the huge hedge fund Long Term Capital Management nearly collapsed — confirming some of Born’s warnings. (Bets on derivatives were a key reason.)”Despite that event,” the Times reports, ” Congress (apparently as a result of Greenspan & Summer’s urging, influence-peddling and pressure) “froze” Born’s Commissions’ regulatory authority. The next year, Born left as head of the Commission. Born did not talk to the Times for their article.What emerges is a story of reckless, willful and arrogant action and behavior designed to undermine a wise woman’s good judgment. The three marketeers’ disdain for modest regulation of new and risky financial instruments reveals a faith-based fundamentalist approach to the management of markets and risk. If there is any accountability left in our system, Greenspan, Rubin and Summers should not be telling anyone how to run anything. Instead, Barack Obama might do well to bring back Brooksley Born and promote to his team economists who haven’t contributed to the ugly mess we’re in.See more stories tagged with: brooksley born, commodity futures tradingKatrina vanden Heuvel is editor of The Nation.

AfA, analogies such as these make you my favorite contributor to NR’s blog.

One problem: most European national banking systems are probably too big to bail by the respective Countries. If you get a chain reaction somewhere the main effect of the government guarantee would probably be to make the Country go bankrupt.As we learned with MBIA and Ambac, a guarantee is as good at the insurance company.

Public Law 109-364, or the “John Warner Defense Authorization Act of 2007″ (H.R.5122) (2), which was signed by the commander in chief on October 17th, 2006, in a private Oval Office ceremony, allows the President to declare a “public emergency” and station troops anywhere in America and take control of state-based National Guard units without the consent of the governor or local authorities, in order to “suppress public disorder.

all the ill banks are being treated by the government.So who is to treat the ill government?

all the female animals in white zoo should offer him a blow job.

So this is the evidence of the duty of this three &ucketeers.Blame them whreever you can.Its time to kick some asses.If nobody must take consequences than there is no reason to do it again.

mkts are way up again!!,lets see how far they can go THIS TIMEplease chant thisstatus quo!!status quo!!status quo!!

the “mood swing” from despair to hope/joyis unbelieveablethis week happinessnext week despairthen joy againtis is gambling not investing..

Exactly! I’ve asked Prof. Roubini before if he can quantify how the deposit guarantees are translating bank balance sheet risk into country currency risk especially for non-reserve currency.Meanwhile, Interesting to note that the US Dollar has one Treasury secretary while the Euro has a few heads of government and their finance ministers who are in a ‘committee’ to figure out the bank bailout!Any doubts you have about the Reserve Currency King should be put to rest!May the USD be with you!P1AQL

Fiat money system always (100% certainty) failUSD,YEN,D’mark,GBP etc etc is just papertheir fate is sealedits just everything is so intertwined, its dificult to predict the future (at least short term)

Thanks for this great link!From the article

Theoretically, a 2 percent drop in the value of all German bank assets would wipe out the net worth of the banking system.

Quite interesting for a country that has lost two wars in the past and junked its currency once and also happens to be a driving force for the Euro now. No wonder our dear AFFG is MIA.Das vorschprung durch technik ist toast.May the USD Alpha be with you!P1AQL.

Announced: LIBOR will Not be Fixed Monday October 12 – due to US Bond Markets being closed for Holiday (US equity markets are open)

Dear Professor:Where are the debt mitigation details?I hope they are not deluded enough to thinkthat this can be fixed without lowering thedebt burden to the common man!I have seen no new policies to cure the debt overhang for the common man. There will be no increase in the global aggregate demand without higher employment and lower debt. They must institute a debt mitigation strategy to complement all the bank rescue actions,or this plan will not have the engine of consumption.Are they forgetting consumptions???They are forgetting the most important part of yourplan. These central bankers are out of touch andCongress doesn’t understand that the common man mustpay his bills for the banks to survive. Everytime acommon person does not service any of his debts,the banks will suffer.

Paul Krugman (Princeton) gets Nobel Price in Economics

Phil:There are conspiracy theories with and without racist overtones. Gary Allen’s book, “None Dare Call It Conspiracy,” is a prime example of the racist genre. By contrast, most of the Kennedy Assasination conspiracy theories I have heard have no central racist elements. The New World Order conspiracy theories out there sometime do, and sometimes do not, rely in part on racist explanations for events.SWK

With all the turmoil in the market today and the collapse of Lehman Bros andAcquisition of Merrill Lynch by Bank of America this might be some goodadvice. For all of you with any money left, be aware of the next expectedmergers so that you can get in on the ground floor and make some BIG bucks.Watch for these consolidations in later this year:1.) Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W R.GraceCo. Will merge and become:Hale, Mary, Fuller, Grace.2.) PolyGram Records, Warner Bros., and Zesta Crackers join forces andbecome:Poly, Warner Cracker.3.) 3M will merge with Goodyear and become:MMMGood.4. Zippo Manufacturing, Audi Motors, Dofasco, and Dakota Mining will mergeand become:ZipAudiDoDa .5. FedEx is expected to( join its competitor, UPS, and become:FedUP.6. Fairchild Electronics and Honeywell Computers will become:Fairwell Honeychild.7. Grey Poupon and Docker Pants are expected to become:PouponPants.8. Knotts Berry Farm and the National Organization of Women will become:Knott NOW!And finally…9. Victoria ‘s Secret and Smith &Wesson will merge under the new name:TittyTittyBangBang

Guarantees from a bankrupt gvt mean nothing. The FDIC has only 1 1/2 cents to gauranty each dollar and if you read the fine print you will be paid back as soon as possible. That can mean 2 days or 20 years.

Very good point,a black hole would be vortex that apply to wave theory unwinding.The powers to be are fighting against natural laws.

Yes. But John Q Public, by and large, doesn`t know that. The promise of a guarantee is enough to prevent them going round to the bank to draw out the money. What we`ve had for the last week is a crisis of confidence moving in to the real economy. These `guarantees`, for all they are worth, will settle the nerves of most depositors.

So they “outsourced” to cheaper labor ? Hmmmmmmmmmmmmmmmmm!

Assistant Treasury Secretary Kashkari(cashncarry)hasshown us the rescue plan. Here are the seven pillars!Please notice that pillar 5 “Homeownership preservation”is the only one that talks about a cautionof protecting the taxpayers. Let me see if I have this right. You are giving boo-koo-billions to the banks, but debt reduction for the common man schmuck represents a danger to the taxpayer!Call Yoda! I sense danger in the force! The sithlords are back!1) Mortgage-backed securities purchase program: This team is identifying which troubled assets to purchase, from whom to buy them and which purchase mechanism will best meet our policy objectives. Here, we are designing the detailed auction protocols and will work with vendors to implement the program.2) Whole loan purchase program: Regional banks are particularly clogged with whole residential mortgage loans. This team is working with bank regulators to identify which types of loans to purchase first, how to value them, and which purchase mechanism will best meet our policy objectives.3) Insurance program: We are establishing a program to insure troubled assets. We have several innovative ideas on how to structure this program, including how to insure mortgage-backed securities as well as whole loans. At the same time, we recognize that there are likely other good ideas out there that we could benefit from. Accordingly, on Friday we submitted to the Federal Register a public Request for Comment to solicit the best ideas on structuring options. We are requiring responses within fourteen days so we can consider them quickly, and begin designing the program.4) Equity purchase program: We are designing a standardized program to purchase equity in a broad array of financial institutions. As with the other programs, the equity purchase program will be voluntary and designed with attractive terms to encourage participation from healthy institutions. It will also encourage firms to raise new private capital to complement public capital.5) Homeownership preservation: When we purchase mortgages and mortgage-backed securities, we will look for every opportunity possible to help homeowners. This goal is consistent with other programs – such as HOPE NOW – aimed at working with borrowers, counselors and servicers to keep people in their homes. In this case, we are working with the Department of Housing and Urban Development to maximize these opportunities to help as many homeowners as possible, while also protecting taxpayers.6) Executive compensation: The law sets out important requirements regarding executive compensation for firms that participate in the TARP. This team is working hard to define the requirements for financial institutions to participate in three possible scenarios: One, an auction purchase of troubled assets; two, a broad equity or direct purchase program; and three, a case of an intervention to prevent the impending failure of a systemically significant institution.7) Compliance: The law establishes important oversight and compliance structures, including establishing an Oversight Board, on-site participation of the General Accounting Office and the creation of a Special Inspector General, with thorough reporting requirements. We welcome this oversight and have a team focused on making sure we get it right.

Now I feel better. They have “innovative” new ideas. Isn’t that how we got here in the first place?Where’s the realistic approach to allow for a triage of banks as the Prof has called for?Why not call a bank holiday for several days to allow for a close inspection and triage of the banks?Why not deal honestly with the issues like the CDS market and the impact on the world’s finances?Why not have people working on the spiraling government debt issue and thinking about alternatives to this garbage proposal?How is it that talk is being made about the nationalization of the auto industry (which limits benefits to employees of the industry) but not healthcare (which can benefit all)?Come on. Real solutions please – no more of this dumb-ass double speak without concern for citizens whose net worth is less than 1 million. In a consumer-driven economy, you would think helping the consumer would be a priority. If we can’t be consumers (because of limited funds), corporations can’t make money. Trickle down was a nice theory, but trickle up is closer to reality than the trickle down fairy tale.Enough with the JV squad. Let’s get the varsity on the field.

People do not understand the nature of this problem it is not a banking crisis, the banking crisis is the the symptom of the illness the real illness is a severe imbalance in the distribution of wealth and all the governments attempts to solve the problem are directed at maintaining this imbalance or at least in neglecting it. This is why we are ultimately doomed there is no economy to support this level of debt and socialism will be the only viable answer. An economy cannot survive with an imbalance like this and will be forced to socialize to prevent civil unrest/starvation.

WELLI gotta’ say that Mr Paulson and his band of merry elves are having a right fun time spiking the punchbowl today.A healthy shot of adrenaline into the futures markets has certainly shot up the Dpw and the S&P. Notice, however, as a previous reader saud – that certain stocks are being sold like crazy INTO this rally.They’ve also tried to give a serious downwardss push on gold – either by shorts or by a direct gold sale. The goal there was to push the gold price below a sell trigger at the $840-$860 level. However, this article shows that people around the world are not going for it:BBC News: http://news.bbc.co.uk/2/hi/europe/7663753.stmAnd the rason, of course, is that with the US deficit projected at $2 trillion for 2009 the Gov’t has no choice but to massively print money to get out of this jam. Enormous inflation of money supply will reault from this.PeteCA

See Mike Shedlock’s blog headline today at:http://globaleconomicanalysis.blogspot.com/FED ANNOUNCES UNLIMITED BORROWINGFolks, we’re reaching the point of near madness here. For those people who follow the school of Austrian economics, this sure looks like the final phase known as the Crack-Up Boom. When the Fed turns on this kind of spigot, with interest rates set so low, the result will be frenzied activity by the hedge funds. Personally, I would not be surprised to see frantic bubble activity in the commodities area. This is really irresponsible, because it could well cause a major new escalation of global food prices. I guess we can say that the current Republicans just don’t care – because they will all be out of office in a few months.PeteCA

New thread

BTW: welcome back!

Only puny secrets need protection. Big discoveries are protected by public incredulity.Marshall McCluhan

Am reading this and thinking, why are they afraid to say what is going on? Better for all of us if we are not blind, better to have your eyes wide open.