When the music stops playing, simply turn the record over and start again.

From last thread … I will repeatProf 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

Perpetual (dollar denomiated) debt via coordinated central banks with the aid of the IMF, and perpetual war via US/NATO. The US will globalize neoconservative corporatism one way or another, whether anybody likes it or not. Remember, “you are either with us or against us”, said GWB.

Something needs to be done immediately to support the municipal bond market. If something is not done very soon, states and localities will be forced to cut back on exactly the infrastructure spending and social support networks that are essential to get us through the upcoming recession. The multiplier effect of supporting municipal issuance is the fastest and most direct route to stimulating aggregate demand, far faster than the tax rebates that were used the first time and that Nancy Pelosi is now pushing for the lame-duck Congress to meet after the election day. The last round of these rebates proved to be a classic example of pushing on a string, because stressed household did not spend the money, but put it into savings, which is exactly what we don’t want to see happen. The federal government needs step in immediately to loan directly to states and municipalities, or to support these same entities through purchases or financing of their municipal bond offerings. It should also provide reinsurance for existing municipal offerings to jumpstart the market and allow states to refinance your existing debt at lower interest rates.

With this new plan … they will succeed in blowing bubbles alright. As if we have not had enough of this irresponsible fiscal behavior. But they will certainly blow new bubbles. Which means incredible new volatility in prices, exploding monetary inflation around the world. And finally we will wind up with a situtation where the common man cannot afford a loaf of bread, people are rioting in the streets, and martial law is imposed upon the land. Complete and utter stupidity.The world should have realized that if the USA cannot get its house in order, then the only sensible alternative was to disconnect it from key decision making in the economic realm. This would certainly have included dropping the US dollar as the reserve currency. Trichet and others should have realized this was absolutely necessary.PeteCA

Doesn’t Roubini’s / US / EU plan just delay the inevitable? Apart from a few noises about infrastructure, I don’t where production plays a role in these plans when the financial sector needs production to survive. This is where Chinese production and Russian / Arab raw material plays a decisive role.

It may be that the immediate crisis has let up, but many fundamental issues remain problematic.-The consumer is deeply indebted, and personal credit will not be available on easy terms like that past decade-There is an oversupply of housing, and house values are falling, and MEW is no longer going to support spending-Consumer spending is 70% of the economy-The US Consumed 80% of the worlds savings last year, and the federal defecit is projected to double next year. Who will buy all these treasuries?Sell into the rally, hold cash(Yen and Swiss Franc?) and buy gold. Inflation and falling equity values are coming.

Ha ha! What happened to Nouriel’s proposal to end “all” home foreclosures. Is this guy working for Nancy Pelosi? Still no idea from him as to how anything is to be valued; indeed, he places no value on “systemic” rescue.This is not an economist–this is a fellow traveller with the people he is supposedly criticizing. Ridiculous. Jim Rogers makes more sense.Indeed, recapitalization looks to be off the table. Can’t 0 out shareholders! The whole point of this farce is to keep the stock marketing from collapsing–at least in a day!

So let me get this straight, the solution to all this is “good old traditional Keynesian spending.” while the good Dr. is one of many that had predicted this mess, his solutions are more of the same of what got us here in the first place. Keynesian ecomomic “theory” is the cause of this in the first place. Printing more money (debt)out of thin and throwing it around will not solve the problem. Unless, as a good socialist, you want governments owning everything, including your kids futures.

Here is a simple “traditional Keynesian solution.” Lets have all the central banks print up (in digi-dollars) a quadtrillion dollars and eliminate everybody’s debt. There, see how easy economics can be? Having played by the rules, I am now taking all steps necessary to become a “distressed homeowner” so that I can take advantage of the soon to be available government largess. We are all socialist now.

Prof -You were among a tiny handful of academics unafraid to point to nakedness…in an empire full of nakedness. Paul Krugman is an administration apologist. The money was too good, or something? Kindly report to any re-education center in Tennessee or Alabama.

Honestly, I don’t get it.All this happened because populations in the first world took on too much debt – either directly in the form of mortgages or purchases of consumer goods, or indirectly in the form to leveraging or risky lending without adequate reserves.What’s going to happen to that debt? Are governments going to assume most of the obligations incurred by rich crooks by buying their toxic waste and pass on the costs to middle class and working people in the form of inflation, higher taxes, and lower benefits? If so, bring on the revolution.Is the average person going to be left with his debt and falling wages? If so won’t that cut his buying power and result in massive unemployment? If so bring on the revolution.What’s lacking in all of this is punishment. This didn’t just happen, the result of a cosmic event. People are responsible.

And Nouriel!!!!

the buyer is buying and the seller is selling…

I’m gobsmacked. White is black and vise versa now. I thought Dr. Roubini made a lot of sense until this post. Apparently you can re-inflate a bubble if you follow his advice. I’m not an investor, and economic theorist or a gambler. I work hard and I save. I’m not rich…and it is clear now that I will never be. The game is fixed against people like me. Congratulations to Paul Krugman indeed! My a$$.

no recession!

No inflation or deflation.

You are absolutely right, the professor is on the wrong track, he has correctly predicted this mess, but he is trying to propose something that will cause even bigger mess.Sorry professor, your proposal is neither fair nor right, it will cause tremendous moral hazard, make the world a lot worse place to live.

Another thing. Don’t we really need LESS infrastructure, LESS energy consumption, and LESS people if we are too preserve the environment which supports us all?

History repeats itself again. Make enough concessions to the middle to keep the whole game going. This is not a solution. It is prolonging the inevitable collapse.

This IS crazy! The further decline in house values puts anyone with a mortgage at risk of owing morethan his home is worth. If the mortgage payment becomes untenable through inflation and/or job losses the government will have the option to take the properties. The governments involved willbecome the largest owners of “private” property displacing, eventually, all individuals but a very few. We are, through this economic “rescue” plan combined with other legislation enacted in the past ten years, on the verge of the worst tyranny the world has ever seen.

Can you say socialism? Hopefully not facism. I predict there will be lots of fights between the wealthy and poor as to whether we get socialism or facism but those are now our only two choices.

I totally agree! Let’s wake up the rest of the sheeple!

Fewer people. Too bad George W. Bush thought it unnecessary to provide birth control low-income countries. For that matter, too bad George W.’s own mother didn’t use it.

Get to know your leader: “Who is Henry Paulson?”September 23, 2008 — The plan to rescue the US financial industry arrogates virtually unlimited money and power over the financial affairs of the state to the office of Treasury Secretary Henry Paulson. Paulson is a figure with a long history of intimate connections to the political and financial elite.In 1970, fresh from the Masters program of the Harvard Business School, Paulson entered the Nixon administration, working first as staff assistant to the assistant secretary of defense. In 1972-73, Paulson worked as office assistant to John Erlichman, assistant to the president for domestic affairs. Erlichman was one of the key figures involved in organizing President Richard Nixon’s notorious “plumbers” unit that carried out illegal covert operations against the president’s political opponents, including espionage, blackmail, and revenge. Ehlichman resigned in 1973, and in 1975 he was convicted of obstruction of justice, perjury, and conspiracy, and was imprisoned for 18 months.Utilizing his connections, Paulson went to work for Goldman Sachs in 1974. In a 2007 feature, the British newspaper the Guardian wrote, “Not only was he well connected enough to get the job [in the Nixon White House], but well connected enough to resign in the thick of the Watergate scandal without ever getting caught up in the fallout. He went straight to Goldman back home in Illinois.”Paulson rose through the ranks of Goldman Sachs, becoming a partner in 1982, co-head of investment banking in 1990, chief operating officer in 1994. In 1998 he forced out his co-chairman Jon Corzine “in what amounted to a coup,” according to New York Times economics correspondent Floyd Norris, and took over the post of CEO.Goldman Sachs is perhaps the single best-connected Wall Street firm. Its executives routinely go in and out of top government posts. Corzine went on to become US senator from New Jersey and is now the state’s governor. Corzine’s predecessor, Stephen Friedman, served in the Bush administration as assistant to the president for economic policy and as chairman of the National Economic Council (NEC).Friedman’s predecessor as Goldman Sachs CEO, Robert Rubin, served as chairman of the NEC and later treasury secretary under Bill Clinton.Agence France Press, in a 2006 article on Paulson’s appointment, “Has Goldman Sachs Taken Over the Bush Administration?” noted that, in addition to Paulson, “[t]he president’s chief of staff, Josh Bolten, and the chairman of the Commodity Futures Trading Commission, Jeffery Reuben, are Goldman alumni.”“But the flow goes both ways,” the article continued, “Goldman recently hired Robert Zoellick, who stepped down as the US deputy secretary of state, and Faryar Shirzad, who worked as one of Bush’s national security advisors.”Prior to being selected as treasury secretary, Paulson was a major individual campaign contributor to Republican candidates, giving over $336,000 of his own money between 1998 and 2006.Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals. In March, Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase. Then, a little more than a week ago, he allowed Lehman Brothers to collapse, while simultaneously organizing the absorption of Merrill Lynch by Bank of America. This left only Goldman Sachs and Morgan Stanley as major investment banks, both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.In the months leading up to his proposed $700 billion bailout of the financial industry, Paulson had already used his office to dole out hundreds of billions of dollars. After his July 2008 proposal for $70 billion to resolve the insolvency of Fannie Mae and Freddie Mac failed, Paulson organized the government takeover of the two mortgage-lending giants for an immediate $200 billion price tag, while making the government potentially liable for hundreds of billions more in bad debt. He then organized a federal purchase of an 80 percent stake in the giant insurer American International Group (AIG) at a cost of $85 billion.These bailouts have been designed to prevent a chain reaction collapse of the world economy, but more importantly they aimed to insulate and even reward the wealthy shareholders, like Paulson, primarily responsible for the financial collapse.Paulson bears a considerable amount of personal responsibility for the crisis.Paulson, according to a celebratory 2006 BusinessWeek article entitled “Mr. Risk Goes to Washington,” was “one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits.”Under Paulson’s watch, that meant “taking on more debt: $100 billion in long-term debt in 2005, compared with about $20 billion in 1999. It means placing big bets on all sorts of exotic derivatives and other securities.”According to the International Herald Tribune, Paulson “was one of the first Wall Street leaders to recognize how drastically investment banks could enhance their profitability by betting with their own capital instead of acting as mere intermediaries.”Paulson “stubbornly assert[ed] Goldman’s right to invest in, advise on and finance deals, regardless of potential conflicts.”Paulson then handsomely benefited from the speculative boom. This wealth was based on financial manipulation and did nothing to create real value in the economy. On the contrary, the extraordinary enrichment of individuals like Paulson was the corollary to the dismantling of the real economy, the bankrupting of the government, and the impoverishment of masses the world over.Paulson was compensated to the tune of $30 million in 2004 and took home $37 million in 2005. In his career at Goldman Sachs he built up a personal net worth of over $700 million, according to estimates.After Paulson’s ascension to the treasury, his colleagues at Goldman Sachs carried on the bonanza. At the end of 2006, Paulson’s successor Lloyd Blankfein was handed over a $53.4 million year-end bonus, while 11 other Goldman Sachs executives raked in $150 million in year-end bonuses combined. That year, the top investment firms Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns handed out $36 billion in bonuses. At the end of 2007, the executives of the same firms, excepting Merrill, were handed another $30 billion.http://www.wsws.org/articles/2008/sep2008/paul-s23.shtmlThat not that Paulson is working both sides of the aisle: he is a registered Democrat.

Watch out for the fade in the last half hour, 45 minutes of trading. Could be a lot of profit taking and maybe some margin selling.

Dear Mr. Roubini,The financial crisis deserves an almost exclusive focus these days because the fever might kill the patient. But isn’t there a risk that the academics and the authorities are confusing the symptoms with the illness? There are two main roadblocks that are not getting much attention these days:1. In the current environment, the ongoing partial nationalization of the financial system and the increase of fiscal deficits will lead to the next outcome: treasury bonds of some major countries will become the next subprime. Iceland today is the canary in the coal mine and the G7 massive transfer of debt from the private economy to the governements plus surging fiscal deficits are worrying .2. The US manufacturing is a derisory 12% of GDP now; since 2001 it shrinked continuously despite a falling dollar and historically low interest rates. Now with strong dollar and high interest rates, liquidity shortage, skyrocketing treasury debt and a worldwide recession, the odds are more on a US manufacturing weakening rather than a US exports renaissance.That raises the question of the financial crisis being only the symptom of a much more profound illness, which is a flawed US GDP structure where the US economy has no significant source of US trade rebalancing.With that kind of hurdles, the US current account deficit refinancing looks challenging, like people cramed in a burning theater who can’t get out except if foreigners outside accept to jump in and take their place. The economic and geopolitical domino effects currently unfolding may result in the US risking to be the “black hole” (like in astronomy) of the world economy.Many would certainly be interested to read your analysis on how such pitfalls might play out in your scenario?

To PeteCA;I agree with your assessment. We are heading into a financial apocalypse of unimaginable proportions. The hyperinflation in Germany after the World War will become the poster child for our world in the future.Suggestion: If this comes to pass consider forming communes or profane monastaries – people of like interest banning together whatever assets, skills mix, etc. they can in order to survive. I’m retired so I’ll be looking for folks in my circumstances. My pension will become worthless if it even exists then, my 401K is diluted beyond measure and Social Security is sure to be garbage as well. Back to the Native American way of life – giving planet Earth a break in the process.

We are heading into a financial apocalypse of unimaginable proportions. The hyperinflation in Germany after the World War will become the poster child for our world in the future.Suggestion: If this comes to pass consider forming communes or profane monastaries – people of like interest banning together whatever assets, skills mix, etc. they can in order to survive. I’m retired so I’ll be looking for folks in my circumstances. My pension will become worthless if it even exists then, my 401K is diluted beyond measure and Social Security is sure to be garbage as well. Back to the Native American way of life – giving planet Earth a break in the process.

But the Fed wants the banks to loot the real economy to rebuild their balance sheets!

Amen.

OK, so now the Fed takes over from the Bank of Japan (BOJ) … as the purveyor of the global carry trades. That’s where we’re at.The US dollar will now be the new medium of exchange for the carry trade, as the hedge funds pump the global market (ooops … I meant to say “look for new global opportunities”).Look, if the Fed is going to assume this kind of sleaze-funding operation, the least they could do is to re-position their business location. How about we close up the Fed’s offices at the current location in Washington DC. Move everybody out! Carry out all the computers and furniture. Nail the doors shut.Then shift everything to one of those DC neighborhoods where they’ve got trash piled up on the sidewalks, prostitutes hanging in the doorways, and bums asking for money.I mean … it’s all LOCATION, LOCATION, LOCATION.Right?PeteCA

Ha ha! You fool! You fell victim to one of the classic blunders! The most famous is never get involved in a land war in Asia, but only slightly less well-known is this: never behave with integrity when money is on the line…

we’ll call the coupons “Product Stamps” – too akin to Food Stamps? -how about “Product Rebates”

what happens when you or I spend and borrow way too much?we declare banruptcy and the banks run to give us new credit cardswhy?- because they know we love to borrow too muchthe US is going bankrupt … and, after bankruptcy, they’ll extend creditall over againwhy?- because they love US

The billionaires understand credit doesn’t have to be paid back it’s the small honest people that believe that.

thanks, i am looking at the 29 and 87 charts – days immediately following the crash and see approximately 2 (if you include the bounce Friday and now today) days of bounce and then a fairly quick retest / rollover. trying to be patient…

THIS IS THE PATH TO BANKRUPTCY.One thing that looks certain now is that USA is bankrupt and will default on the world very soon.With these BAILOUTS, Global Banks would be saved but the Nations would be destroyed.Roubini has become the cheerleader for all these bailouts.The FED should move the printing press to China as very soon, the dollar wouldnt be even worth the paper used for printing it.USA can print the dollars and pay to PBOC and all those Asians with a local printing press.ITS TIME TO OUTSOURCE THE DOLLAR AND TREASURIES PRINTING PRESS TO CHINA.

Revised and improved!Bubble, bubble, the Empire’s in trouble:So we’ll pass a bill….a magic pill andPrint more fiat cash on the double!Sleight of hand throughout the landThe Money Master’s stock in trade.They’ll cure our ills with dollar billsMore than all the grains of sand“Buy and hold”, “We’re oversold!” the traders will avow.“The Dow will rise…it would not be wiseTo pull your wager out right now.”So they lobby the shills on Capitol Hill to backTheir Giant Ponzi Scheme.While the bankers insist…the pols assistIn funding a Socialist’s wet dream.Do the voters protest? Is there civil unrest?“Not while there’s distractions galore!The media is there to avert the electorate’s stare,And if not, we’ll start a war.”“Buy on the dips!” The Kudlow’s quip“This market is bound to rise.”And the Keynesian’s unite in the dead of the nightTo give Krugman the Nobel Prize!And now we float upon this bulbous boatThat distorts everything we seeIn futile hope that we don’t interlopeWith pointy-edged reality.For when our denial bubble pops,Our lifestyle’s will dropIt will suddenly become clearThat all the wealth they stole through stealthWas never really here.©2008 Jim Valeri

I’m seeing JPM down a lot today and GE. Someone said the WaMu stuff comes due on the 15th. I think the biggest what if from the above article is the CDS. I don’t know, but, it seems like this stuff has already imploded, and, there is no transparency. I don’t know. I still don’t think this has a happy ending.

A recapitalization of a bankrupt financial system is nothing else than indirectly monetizing the debt. The officials are pumping money into a system whose equity value is basically zero. Since this money is borrowed, it is backed with credit. The claim is that the money borrowed to monetize the debt will not cause a deficit in the budgets because it is backed with the purchased asset values (i.e. equity, asset backed securities, etc.). The problem is that most of these assets are worth nothing because the problem behind this crisis is an income problem.In the future, officials expect that the purchased assets will gain in value when economy stabilizes. However, the stability will not be reached by inflating the bubble again. Economies will arrive to stability when bubble burst up to a point where asset pricing is possible. Thus, today’s actions are nothing else than re-inflating the bubble with a riskier action. As a result, we can claim that the new bubble may be short lived since no action is taken to understand the real problem, which relates to the amount of loss.The debt value is a function of income. If we had no income, no one would lend us money in a fair system. Since debt is the underlying variable of such derivatives as CDOs and CDSs, we can express derivative prices as a function of income. Part of the national income of developed nations migrated to emerging markets because they offered cheaper resources for production. Basically, emerging nations transferred wealth from developed nations without investing into production that would necessitate everyone in the world. Second, after wealth transfer, emerging countries lent money to developed nations. This, in turn, created a real estate bubble, which artificially increased the wealth in developed nations. That’s why; one can claim that the income level in developed nations increased based on borrowing power rather than earning power.With decreased production and excess credit these nations eventually went into crisis that rendered the financial system’s equity value sub-prime. This means that the equilibrium between income and debt levels is broken since the resources that increase earning power are migrated to emerging economies. Moreover, developed nations also transferred wealth in the form of portfolio investment due to the income provided from debt financing. As a result, we ended up with a scenario where excess supply of houses cause destabilization of the developed nations’ economies. Since house prices made the artificial part of people’s income, they can be treated as the underlying variable behind the majority of the debt securities in developed nations.Without any stability in house prices there will be no good economic outlook. In order to reach stability, debt levels should be matched with real income levels. This could have been done with:(1)Extending the maturity of debt by lowering the coupon payments. This might have caused the duration of the assets to increase. However, the convexity would decrease thanks to decreased risk.(2)Debt-equity swap in the financial system, i.e. providing equity to creditors instead of liability payments. This is necessary as some creditors profited from this bubble. Thus, the value of their monetary holding should be deflated vis-à-vis to the real asset prices.Given the above approach, it might have been possible to provide a basis for asset pricing. As a result, public funds could have been, in turn, used more efficiently for CDO type equity restructuring of the banking system. Further, all derivatives would gain in value because their underlying would finally worth something. However, government intervention in an environment where pricing is almost impossible (i.e. the recent volatility in the markets) is highly risky; any liquidity injection could be short-lived since it can take the form of bubble re-inflation, hence a riskier action.

…BTW – i still am a bit surprised the crash sequence did not take the dow to 6,500 ish to that longer term trend line and still do not completely rule it out.

It’s interesting that the debate rages on about whether the correwct path is a true free economy (which offers glad rewards in times of prsperity, but brings real pain in times of correction), OR some form of market manipulation which is designed to avoid painful consequences (but also inevitably delays any real recovery).Why is this interesting?Because it’s exactly the same debate that raged from 1929-1933 as America slipped into an enormous depression.Why are we undergoing an enormous correction now? Because Greenspan wouldn’t allow a more serious recession in 2001-2002. At least … many people believe that, and I’m one of them.And now that the Fed is trying to pump the credit system again … it just puts off the final day of reckoning a little longer. But it doesn’t eliminate it.PeteCA

Roubini’s recommendations sound like Stalin’s 5-year plans (unrealistic, propagandistic, and socialistic).What happened to haircuts?Roubini applauds “the Treasury plan to ditch the initial TARP that was aimed only at buying toxic assets” in favor of the gathered leaders’ new plan to use the $700 billion to buy shares of banks.That flubbed-off TARP was sold to the American people, who fought it 10:1, by the weeping and gnashing of teeth and renting of garments 7/24 until it passed, right? Congress gave the investment banks (using treasury money and the Fed as their mouth piece) $700,000,000,000 after being told this was essential. And now that’s old news?Roubini cheers the death of TARP to buy toxic assets, but then later he wants our leaders to “take action where appropriate” to “purchase toxic assets to restore liquidity in the mortgage backed securities market?” How much the boys gonna’ need this time, $50, $700 billion, $1.3 trillion? Guns and butter, forever?Roubini’s words — “unlimited provision” — in banker parlance mean “until the last dime goes into the pockets of the heirs of Jay Gould.” Printed money may be infinite, but personal property in the world is not.Roubini says, “At this stage central banks that are usually supposed to be the ‘lenders of last resort’ need to become the ‘lenders of first and only resort.’” This is not policy action: it is police state emergency action.In short, acknowledging that “the damage done to confidence and to levered investments is already severe and the process of deleveraging of the shadow financial system will continue,” Roubini proposes to restore confidence by clamping down on free markets.

@ Wild BillNicely said! and I agree.

Roubini – Are you a socialist now?You have written for years calling about a Dollar criis but now cheer leading the very actions that would lead to hyperinflation. Please check your American and Global Imbalances paper.Youo have written for years warning about the collapse of BW and american deficits along with Brad Sester. Now you are cheerleading massive deficits.You need to link some of your own posts in this article that completely contradict your numerous earlier warnings about everything from deficits to dollar collapse.

I gotta’ go plot the VIX. I wonder how the market makers are even pricing options for the Dow and S&P500 these days. They must be astronomical in price.PeteCA

Dr. Robert Shiller on the history of government intervention in the economy:http://www.washingtonpost.com/wp-dyn/content/article/2008/09/26/AR2008092602838.htmlWe face an emergency that requires the government to implement temporary emergency measures, period.SWK

This is a dumb comment along with those in agreement.The only consistently Keynesian part of the US economy is the military; in that respect, the US military is “socialist”. Finance is pseudo-Friedmanism, until it needs government support, which it has consistently, these “bailouts” just the biggest and latest giveaway. Greenspan was pro-monetarism not Keynesianism.Long before Keynes, there was the creation of public firefighters, policemen, etc. That didn’t impinge on your liberty, it reinforced your right to property actually. So quit whining, dogmatist.

3 minutes left to get the coveted 1,000 point up day in the DOW ! you know they would love the headline. Wow, we never had a down 1,000 day mysteriously…days after 29 and 87 crashes featured retests… FYI

First,this is a counter trend rally.Being fundamental analysis is impossible in the opaqueness of this black box of derivatives;Elliot wave technical analysis is the best tool to locate turning points.We are in a fourth wave counter trend rally that is not sustainable,maybe back to 10.5K or 11K on the Dow.But, there is still a fifth wave down to a double bottom of 7.2K Dow before this leg down is complete.Be a careful here.

His rationality is gone now, more interested in promoting himself and giving free trials away to his website – too late to the party, Kudlow needs a sidekick yes man though.

Marc Faber today says the U.S. is definitely going to go bankrupt: it is not a matter of if but a matter of when.

Let’s start with fat Americans. They consume a lot more than the average Indian or Chinese. They’re the population problem.

The markets have a terrible case of bipolar disorder — they are amazingly unstable and unhinged on so many levels. Despite extensive electric shock therapy along with powerful medication (“liquidity injections”) plus much counseling (“government intervention”) last week it looked so depressed that is might commit suicide. Now this week it’s riding the manic wave high again, busting out the FEDRES credit card and going on a wild shopping spree it’ll later regret because it only goes deeper in to debt-despair and realizes that it will NEVER be able to pay back what it owes.With bipolar patients such as the modern American economy (most especially Wall Street), the thing to understand is that they are completely irrational and at the whims of their psyche and chemical makeup, all of which is systemic and can only be managed but never fully cured. The American economy is systemically broken and no amount of medication, electric shock therapy, and/or counseling will ever make it better — this is a lifelong condition and we’ll be dealing with it until this increasingly deranged, irrational, and unstable system crashes and is replaced by something else.NR: “Unlimited provision of liquidity to the banking system…” — Prof. Roubini…so now you propose that the money supply be made “unlimited”? Pure absurdity! Your grand solution is free fistfuls of 20 dollar bills for every man, woman, and child in the country along with unearned wheelbarrows full of cash and IOUs for every white-collar banker and Wall Street ‘professional’? Please professor, take a long sleep to regain your senses…then you will realize that this will only lead to hyperinflation, creeping social unrest, and the rise of totalitarian regimes. All of this would be funny in a way if it wasn’t so serious.

I REALLY DO LOVE THIS AMUSEMENT PARK RIDEWeeee!!! Up almost 1000 points in a day. Now THAT’S a bear market rally. I won’t be surprised to see us above 10,000 again. But when the market finally climbs above that level again it is going to get slapped hard in the face by Mister Corporate Earnings and Mr Unemployment, then fall back down after its exhausting climb. Sure is a fun roller coaster to ride before we come down to earth. Onwards to Dow 3000!!

I know that most people will choose comfort over freedom but most won’t admit it.

You or Shiller do not understand — these are not “temporary emergency measures” but rather the most massive and extensive PERMANENT swindle in the history of humankind! The current U.S. government is making the economic system of the former USSR look good, and that is sad indeed.Sickeing, truly sickening.

Guys this is not such a bad thing it gives us all a little more time to get ready for what we all know is comming so get prepared and let the fools play the market and hold on to dollars.

Instead of re-negotiating mortgages, why not foreclose and put the houses up for auction to the highest bidder. The successful bidder either gets a mortgage and moves in or leases out the house.Why reward bad decisions? Will someone erase or renegotiate my mortgage at a rate I am willing to pay?

Wouldn’t military rule be simpler!!!

SPX sp500 has already retraced a fibonacci 38.2% of previous loss.It could turn at this level or continue to next fib at 50%.

I think we will soon discover that the bank rescue plan agreed upon this weekend may have staved off imminent catastrophe, but much remains to be done.1) The bank’s willingness to lend to businesses/consumers will be sharply reduced regardless of how generously the government acts. How can banks lend in an environment where so many banks and consumers are so heavily leveraged? A large segment of consumers and businesses are simply insolvent. Thus banks are merely readjusting their lending criteria to adjust to this new reality– not based on the amount capital they are suddenly receiving from the government. If the government also attempts to help customers/businesses manage their debt via better bankruptcy protection and debt reservicing, banks will have even less incentive to lend.2) The synchronicity of this crisis across the world will make it impossible for one region to rescue another. (i.e. Americans will not be able to export themselves out of the crisis to Asia or Europe). Those countries with huge current account surpluses will not suddenly buy up American goods as they are facing similar economic slowdown.3) There’s an important geo-political dimension that limits America’s freedom to save itself. Namely– debts and credits are not evenly distributed. Germany, Japan, OPEC, and China are major creditor nations. The US, UK, Australia are major debtor nations. If the US government attempts to make things easier for their citizens by devaluing the dollar, increasing bankruptcy protection, or asking for debt relief– it will unleash the wrath of creditor nations. We shouldn’t count on creditor nations to cooperate with us, as their interests are directly opposed to ours. .

My sentiments exactly !There have been very few places to go in recent months for truly insightful perspectives on this mess, and this site, and NR’s contributions in particular, have been the intellectual gold standard.Respect, kudos and sincere thanks to NR and his colleagues for their efforts.No doubt they will continue to be needed.We are -perhaps – at the end of Act One, but nothing more.

Part of David Rosenberg`s latest piece.Market enjoying its sixth bear market rally of the past year The equity market is enjoying another nice flashy post-policy-announcement rally from oversold levels – the sixth bear market rally of the past year. One of these days, it will be a true inflection point for the next bull market. That day is inevitable. Whether we have just reached that elusive inflection point or not is something we won’t know for a few months, but how the market responds to what we anticipate is going to be a surreal set of adverse economic data in coming months and quarters will tell the tale.Conclusive bottom unlikely to emerge until mid-2009 The leading indicators are now pointing to a 1973-75 type of severe recession, and our just-revised forecasts show -1.9% annualized GDP growth for 4Q08, -3.5% for 1Q09, and -3.3% for 2Q09. We do not expect to see the next positive print on a quarterly GDP number until the first quarter of 2010. It is customary for the stock market to bottom four months before the recession ends, which would mean that a conclusive bottom will not likely emerge until mid-2009 at the earliest.Over the past 150 years, recessions average 18 monthsWe should add here that while it is fashionable to say that recessions average 10 months, as Barron’s did this weekend, it is only true of the post-WWII era. But what defined the post-WWII era were the baby boomers, which drove booming demand growth, and the repeal of Glass-Steagall, which triggered a 20-year secular credit expansion. Both are no longer drivers of the economy. The dirty little secret is that over the past 150 years, recessions have averaged 18, not 10 months. We also know that two-thirds of bear markets occur within the confines of the recessionary phase of the economic cycle.

Professor, how do you account for people who are living excessive lifestyles in general (credit card debt, cars they can’t afford)? They should have to take the medicine. Why should the government bail them out? Somehow the plan has to account for that. You can see the level of anger in these posts about providing relief to irresponsible people, even if it would be to the overall good of the economy. For the plan to be palatable to the general public, people like this can’t be given a free pass.

I like Mike Shedlock. He’s funny. It doesn’t make a difference who is in office, obviously, this is a fascist regime with a figure head. If it is a democrat we will cause a humanitarian crisis that requires us to go to war, if it is a republican God himself will command us to kill. Worse comes to worse, blow up a few of your own buildings and blame it on afghanastan, or saddam hussien or whomever the fuck is between us and the oil. Jesus, doesn’t history teach people a damn thing? Look at Vietnam, the Gulf of Tonkin for God’s sake. America has the best enemies money can buy. Anyway that’s my rant for the day.“when the broken hearted people living in the world agree. There will be an answer. Let it be.”

The TED spread still appears to be at an historically high level. What are some plausible explanations for this phenomenon, and does this measure give rise to more concern than what the equity markets are doing?

A famous quote.”Capital must protect itself in every way… Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principle men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd.”Pay close attention to that last part… “By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd.”

That would have worked in a free society however you’re forgetting, we have moved to a socialist system. What are you thinking? Talk like that will get you arrested in our new way of dealing with problems. It’s only going to get better when the One World Order is established for the next down turn.

No, seriously, why can’t individuals who are “finacially distressed” borrow directly from the FED at 2.25% and pay off higher interest rate debt? Why just banks and corporations? Why not individulas? After all, it costs the FED nothing to do this and they 2.25% return from thin air.

something has changed. we are fatter, more boozed up and technologically damaged.

Giraf,what is your explanation for the sell off in longer maturity bonds? huge supply? CB not buying or even selling?That is the more alarming news of the latest two weeks.

AfA:I trust that the people of this country will insist that the leadership do the right thing, and that they will keep voting folks out who betray their trust until things are righted again. While most of us are never entirely satisfied with any given leadership, the ebb and flow of power with each election cycle can have a certain palliative effect (better than suffering through a dictator for life!).Still, I agree with the comment of another poster — perhaps on the immediately preceding thread — to the effect that the American people tend to complacency and need a crisis in order to effectuate real change, and that we aren’t particularly adept at addressing chronic problems that require incremental measures over a longer term. Those kinds of problems — persistent deficit spending, growing liability for social security and other entitlements, ignoring public infrastructure for decades until people start to die from collapsing bridges and so forth — really seem to continue until things reach a crisis pitch, at which point we scurry around and try to address them in panic mode (not an ideal way to handle things).At the risk of sounding like Chauncey Gardner (Peter Sellers, Being There, 1979), the seeds of the problems we have now, as you point out, were allowed to take root years ago and have grown steadily over the years until, like weeds, they’ve taken over our garden of plenty. We have a lot of work to do to get our garden back into a productive state again, and that may take many seasons.SWK

@ Devils advocate:Can the individual consumer buy safer, faster roads, bridges that don’t collapse, or better police and fire protection? These are public goods that have been sadly neglected in favor of externality-laden private goods such as SUVs and McMansions.

Profoundly astute!

So somebody like me who is a good credit risk has to borrow at a higher rate than someone who thinks he deserves to own a house he can’t afford and drive a car he can’t afford. NO WAY. Let me borrow at the low interest rate.

“Everything that needs to be said, has been said.”http://www.ipsnews.net/news.asp?idnews=44198And…?The headlines and talking heads scream:”Wall Street’s greatest loss since…”"Wall Street’s greatest gain ever… “But where is the question of ‘highest volatility ever’ … ?And… ?Good luck to us all… as this round of knee-jerk fixes cannot and will not work except by making all things much much and far worse.As for Paul Krugman – now it is finally confirmed that “leadership” is in advances stages of gross insanity while its World of rule is in the final stages of extremis.Ho hum

The stimulus package was way too small, one thousand dollars doesn’t go far today, why not give 40 thousand to each taxpayer. Those who will spend will stimulate the economy and those who save will resupply the banks with new capital. If we are going to be socialist, I say give it back to the people. Why am I asked, and my children, to help those who created this mess. My house is paid for and I don’t have credit card debt, so how is this going to help me? If my neighbor’s house is devalued, so is mine. A social system should be fair to everyone.

I guess you’re talking from a poition on the US right. Save your breath. Ideology is over, or at least taking a break.

Your argument is incorrect. Giving everyone the same amount does NOT ensure that everyone is equally affected because $300,000, or whatever amount, has a different utility to different people.

It’s called attacking the messenger. While people should not be attacking him, the medicine he proffers is bitter, especially to those of us who have been responsible. I’m beginning to think that nothing short of a public flogging of those responsible for this mess, the Fulds, the Paulsons (yes, our Hank who prospered greatly and Goldman and who has botched his handling of this crisis), and the Mozilos (Mr. Countrywide), as well as innumerable other players, will appease the crowd.

What kind of sandwiches are they?

I don’t know if NR did change his mind, but it looks like a lot of people are going to have to.Self-contradiction is low on the list of problems we’re dealing with

yesAmerica’s problems are all to do with socialism.

As one who has been involved in local governance for many years, I firmly believe that a government bailout of the muni bond market would be incredibly foolish. Like the classic suburban mcmansionites, too many local governments have been loading up on astronomical levels of debt in order to satisfy the politicians’ desire for immortality through edifices. Governments need to once again learn to live within their means, and to plan ahead and invest and save for future needs instead of loading up on debt. Bailing out the current crop of incompetent governments is not going to fix the moral hazard problems any more than bailing out major Wall Street firms. The key to getting out of this debacle and avoiding others in the future is simply to live prudently within one’s means. This requires minimal borrowing and learning to appreciate and maintain what one already has. In short, stewardship.

Yeah but is blowing more air into the monster bubble a sane response?

Globalization of finance through central banking boom/bust credit processes requires globalized central banking solutions since they are basically in charge or the money systems of nations. So blowing up the bubble more with more credit for bad collateral and transferring the responsibility from the banks to the public is a central banking solution we can’t VOTE on. The bailouts are undemocratic cramdowns.Politics are irrelevant though because central banking is our global political/economic system. It’s time to stop sweating what can’t be changed because the majority(unfortunately) and the politicians and the bankers & central bankers don’t want to change the central banking boom/bust stranglehold of world governments and people.

I use Steve Keen’s workhttp://www.rgemonitor.com/asia-monitor/253266

Professor Roubini is still conventional he just recognized the excesses in the system and made a call. It wasn’t that difficult to do and he certainly wasn’t the only one. For those of you who think the Professor is going to advocate Austrian economics your crazy he’d be out a job in 10 seconds. You don’t rise to the head of economics at NYU by bucking the banking system. He just believes in fractional reserve lending controlled and regulated, of course that’s aking the impossible.

The Yuan is not easy to buy at a reasonable exchange rate if you’re living in the USA. Last year it was a sure thing and my salary rose something like 8% last year due to its appreciation vs. the dollar.The Chinese government is hell bent on growth and the bias is toward accepting domestic inflation. It doesn’t want the Yuan RMB to appreciate too much or too fast, but under this crisis I don’t see how that trend can be reversed. Even with this inflationary bias the currency is looking mighty good. I’ve been working in China for the last 3 years. My feeling is that fair value for this currency would be about 5 to the dollar. Currently it’s close to 7. If you can get it at a decent rate, go for it.The risk of arbitrary action by the PRC government is very small at this point. It knows it’s a player.

Jubilee? Abomination! My God wants to see the sinners get punished, not rewarded. Prudent accumulation gets you to the top rung in Heaven. It’s all in the Book.

Alessandro:They surely seem to have a clue now…SWK

Agreed, though some of the comments have been a little over the top, so I think Mother of God has a point.SWK

For those of you who would invoke a Darwinist remedy where nature is described by Tennyson as “red in tooth and claw”, be aware that nature also provides us with examples of cooperation within and between species. This cooperation is as much a part of natural selection as is competition. In its extreme, such as in social insects like ants,termites and bees, it represents the unthinkable for humans. However, in nature, one can find examples of all points along a continuum between extreme competition and extreme cooperation.To criticize a policy as being “socialism”, is insufficient unless you are stuck in the cold war paradigm. It can be socialism and still completely appropriate for the circumstances. A delicate blend of both socialistic and capitalistic policies may go a long way towards correcting inequities while preserving individual initiative. If we use our imaginations,we can design health care, investment, environmental policies and education policies that are the result of the best of both ideologies. We can then promote the values that reinforce these.Human nature is mutable but not infinitely so. We have seen the grayness of communist regimes. We have read Orwell and Huxley and we have listened to inner voices that tell us: “Give me liberty or give me death.” I stipulate those views as being correct, yet there is room for more benign socialism never the less. It is no different than an animal altering its environment in order to make it more stable and life enhancing for itself.

Absolutely agree with you here! The major problem hasn’t been addressed for years in US: we don’t make much the world wants to buy anymore. And so we borrow everyone else’s money to buy stuff because we aren’t making any money from producing anything. This is true of Main street and Wall street too. Yes, the US could well become a financial “black hole”,- if it isn’t already!

As I pointed out in a preceding thread, the ratio of U.S. National Debt to GDP was in excess of 1:1 following World War II. We’re not quite there yet.Keynes emphasized that deficit spending to stimulate growth when the private sector cannot, especially if used for public works projects that will benefit everyone in the future, makes sense. The trouble is, as everyone should know, it becomes politically expedient to continue deficit spending even after the economy is back on its feet, leading to persistent debt and the sorts of troubles we’re experiencing now. This perversion of Keynes’ Theory is one of the real culprits here.I agree with Dr. Roubini that public works spending should be undertaken if the private sector is unable or remains unwilling to spend, and if private aggregate demand continues to be depressed for a long time. The alternative some have espoused in this thread, including allowing a depression to unfold, invite unnecessary misery and a real potential for the loss of the civil and political freedoms they claim to hold so dearly. Given the choice between anarchy and socialism, I’ll take socialism any day.SWK

Thanks Mandarin,That was, in a nutshell, my analysis. I know it is difficult to get buy the RMB, but I know a close Chinese friend who can do it for me. I am even thinking about getting into the SSE and buy, directly, few stocks there through a join account, as I believe this is a nice entry point (remark how that the SSE did not sell off last week as much as other stock exchanges, I guess in most part, due to the early and deep correction it know already)Still thinking about it though.

I agree wholeheartedly with you, Wild Bill.Back in the days of the Cold War, the Soviet Union and the United States used to get into arguments over which human rights set forth in the Universal Declaration of Human Rights should have primacy. The United States has always emphasized the so-called primary human rights, i.e., civil and political rights, such as freedom of speech, freedom of association, freedom of religion, and so forth. The Soviet Union, by contrast, held that civil and political rights could never be realized and enjoyed fully in the absence of fulfillment of so-called secondary human rights, e.g., the right to a standard of living adequate for health and well-being, including food, clothing, housing, medical care, necessary social services, an education, etc.I believe it is important to strike a balance between these two sets of rights. There is no need to starve so that we may enjoy liberty, and there is likewise no need to sacrifice materially our precious freedoms for the sake of a square meal.Little is pure in this world, and reasonable pragmatism, and the impacts of policy on the lives of real human beings, should always outweigh the rigidity of ideologies of whatever stripe.SWK

Professor Roubini for president!!!

Well said.

Thank you.SWK

Thank you.SWK

You know, we’ve never had an economist President. Might be worth trying sometime.SWK

It’s not a question of confusion, it’s a question of nomenclature. This is simply the way human rights have been categorized in scholarly works (which is why I referred to them as “so-called” primary and secondary human rights). There are also claims to a third category, tertiary rights, which are not individual rights but rights of “peoples.” Naturally, there is a lot of controversy about the latter, especially where they come into conflict with individual rights. Tertiary rights, e.g., to foster and maintain a particular culture, often have been claimed in African states in the context of preserving tribal custom and identity.SWK

Bravo, Wild Bill! Certain ideologues here have forgotten that economics is a social science. The economy should be balanced, if one desires social harmony, in such a way as to provide a just system for the aquisition, distribution, and consumption of goods and services. That’s the intent of what has been called social democracy. Since it’s a human created system, we should allow ourselves the freedom to devise and modify the system so that a comfortable level of stability is maintained in the social realms. Its called adaptation and if we don’t adapt, we die. This is true for society as well as for the individual. Unfortunately, many here attacking Dr. Roubini would seem to prefer holding to their non-adaptive ideologies and being dead right as a result. I don’t think that would be good social policy, however.

My thought is that there are just a lot of average folks in this country who, for one reason or another, are never going to have the personal or pecuniary resources to “play” in this “game.” They’re just trying to live their lives, contributing what they can to the common good by whatever honest means they have of making a living for themselves. They shouldn’t be made to suffer needlessly by others who have manipulated the economy for self-enrichment and who have done little or nothing productive for the betterment of society.SWK

Well, being social animals, most of us prefer the company of others most of the time. Still, living as I do with my wife and three children, I occasionally long for the peace than only solitude can bring! SWK

Well said, Ashu. A lot of bleating and moaning on this site is from those who were not smart enough or lacked the necessary balls to get their noses in the trough. Lots and lots of sour grapes.It’s not a question of greed. It’s a question of working hard, unearthing opportunities and having the courage of your convictions.And, by the way, don’t forget fear. Wall Street, and all financial markets, are driven by fear as much as greed.

Product Stamps, I like this. Good to see some can find humor in this situation.

These people’s idea of a stimulus is to send everyone a check to go to Wal-Mart and pay their cable bill. It shows you this let them eat fritos mentality of the people in power. It’s pretty distasteful.

Hi SWK. Seems to me that I paid more than a few dollars to my government in income taxes during my career in the investment business. Also donations to charities and worthwhile causes. Did society not get any betterment for my efforts?

Well, maybe Danton for awhile. You know, just until we clear out the deadwood.

Hi Giraf – I posted a question for you but put above this post by mistake.Thanks

Greed and Fear, greed hatred and delusion. This is the basic law of the universe, basic Karma 101. If you want peace, start with peaceful means. This is not a metaphysical concept. This is reality. I will expound more later when I have time. ;0)

It’s a cheap trick: costly to the taxpayer, but politically popular with the masses (who doesn’t like getting found money?). And then they have the gaul to refer to it as a tax “refund,” when it is really nothing but a deficit giveaway. If we’re going to have to run into deficit spending to stimulate demand, we might as well use the money to create jobs through the construction of public works projects. At least our national infrastructure, which has been largely neglected and poorly maintained for over thirty years, can be restored.SWK

Yes, it certainly looks like fear and greed are driving the system now, doesn’t it? And I suppose you would also argue this is the best of all possible systems? Why yes, the markets are a testiment to that now aren’t they? I guess its true if it benefits you. To hell with anyone who suffers from it, eh? Nice society you have there. I also have always felt that might makes right.

This mess will be over when a new financial system based on MONEY appears, probably after a lot more pain, war and a hyperinflation or two in some “important, developed” countries (US? Euro zone?). Until we get rid of all the debt-chits (both real and virtual) which we currently label money, we are all still unavoidably living in a giant casino created originally by US bankers and politicians nearly 100 years ago. Since the system seemed so successful and was then adopted by the entire world, there is no obvious way to opt out. Under current circumstances, where we are only allowed to save, trade, and account with debt-chits which continuously lose their purchasing power, we are still on the road to ruin.Also, there are huge societal costs to the past 100 year debt-fest. Debt-chits discourage thrift and hard work as people who make their living playing in the casino seem to be doing much better.Few will venture down this train of thought as the logical conclusion is not a nice picture. It’s more fun to think that happy days are here again and we have nothing but blue sky and smooth sailing ahead of us.Unfortunately, since the adoption of real money by any country would be extremely painful, people will need to many more of their possessions taken from them before they finally figure it out. Fortunately, we can take heart that Pavlov’s dogs lost their programming when a nearby river flooded, when they were alone, cold and wet in their laboratory cages. This same type of experience will eventually deprogram us, wherever we live in the world – and this debt-induced monster which has been eating away at us for a long, long time will finally go away.

I can hear opportunity knocking already. Where Bear Stearns failed, I’m going to succeed cause I’m good enough, I’m smart enough, and doggone it, people like me.

Peter:As I’ve said, I’m no anarchist, nor even a libertarian (though I certainly can empathize with some of their positions). I suspect the fact of the matter to be that governments, as inefficient and disdainful as they may sometimes be, offer a state of existence preferable to the sort of Hobbesian world that we surely would face in the absence of any government at all.The tertiary rights stuff can be difficult to accept. For example, suppose you’re a young woman in a culture that insists that you undergo a nonconsensual ritual clitorectomy (female circumcision) at age 10 or 12. Should that sort of cultural tradition trump the individual right to bodily integrity and to be free from torture?I have a hard time being that open-minded myself. Call me a moral imperialist if you will, but that’s just how I see things.SWK

Yes, society benefitted from your largesse. And so did you. We all benefit from the collective productive efforts in our societies. The question now is, do some benefit disproportionatly to others and also to others’ detriment? You know full well that money is power and if you gots it, its better than a loaded gun in our society. Notice how it is now: the money and promises are going to the financial elite. Those who are of lesser means are expected to shut up and pay the bill without complaint. Where’s the fairness in that approach? Doesn’t my sweat equity contribution to this society matter? If so, why am I being screwed so that rich folk don’t suffer the consequences of their own actions? If I caused one millionth the social chaos the bozos on Wall street have caused I’d be looking at life without parole.

To your point above PeteCA, C-SPAN-1 is airing a replay this evening at 11.25pm est of today’s Institute of International Bankers meeting.Of particular interest is the 2nd speech of the program from Mr. Jochen Sanio, President of the German Federal Financial Supervisory Authority.Online Video viewing is available here:The Institute of International Bankers => 2008 Annual Meeting

Ahh, but you and I, we’re smarter than them, we’ve learned from history! Poor Danton, t’was a shame how he was framed. Robespierre- not so much!

lessen??boy you are for one helluva big surprisemy 2cents on the current situation1.the “SHORTS” strike back2.a dying star!! when a star reaches its maximum “shell-life”, before it turn into a glowing dust and never to shine bright again, it explodes!! shining brighter than ever, and you look at the sky and you say WOW!! (the greatest rally in 7 decades)after that silent, the former star now morphed to a LED light,never to shine bright againlike peterjb or Pete saidPhysicsPhysics

Well, I think we’re finally wising up! The President got a much more favorable reaction during his much-touted “tax relief” program during his first term.SWK

my 2cents on the current situation1.the “SHORTS” strike back2.a dying star!! when a star reaches its maximum “shell-life”, before it turn into a glowing dust and never to shine bright again, it explodes!! shining brighter than ever, and you look at the sky and you say WOW!! (the greatest rally in 7 decades)after that silent, the former star now morphed to a LED light,never to shine bright againlike peterjb or Pete saidPhysicsPhysics

More realistically what will happen is just more warfare. That is the only “public works” project the people in power have ever been able to come up with to “stimulate” anything. Extreme hazard of doing business with people who have no morals, that is, they will justify taking human life for profit. This should be the first litmus test for any leader. Is he or she a pacifist? All these politicians thump the bible to get into office. First commandment, Thou shalt not kill. Beat your swords into plough shares.

wow look at oil & gold:D

Still possible. That is one potential target for a bottom. Not promising anything.PeteCA

better yet – lets admit what happened with the first check – “chinese product stamps”. it didnt go to savings – it pretty much went overseas in the end -listen the point is to prop up production not consumtion – but make that production hire the consumers so the dough stays around here.lets make a real economy.

What happens in those situations is that the Gov’t declares massive public works program to employ people. This is still one future outcome. We’re not out of the woods yet. If they hadn’t let the derivatives market explode – I think they would have had a chance to contain this. As it is – there is a real risk of contagion of failures and defaults.PeteCA

“Governments got religion”Aren’t most of these governments supposed to be laic?What about instauring some kind of economic laïcité; the absence of economic interference in government affairs, and vice-versa? Hopefully, we won’t hear anymore about socialistic this and capitalistic that, and most interventions would be unnecessary, and unwarranted.

Yes, that is my “supernova & black hole” theory as applied to economics.Not only does the dying star collapse on itself, it also sucks every matter (money) that gets too close to it and can never be out again.

Uhh, dude, have you checked the Pentagon budget lately? I mean, really…

The year of Jublilee was for an ancient people whose central authority was God. I don’t think it works for a people whose central authority is a cartel of bankers.

Don’t just look at them, buy them! They’re going to be a lot more expensive next year.

Stewart Smalley! I KNEW you were lurking about on this blog!SWK

Wild Bill is right–most of you posters, amazingly, appear to hunger for a deflationary crash that will indeed punish the financiers. Deservedly so. But who will be punished more? If they live, ask your grandparents about the Great Depression or your parents. Or read/watch Grapes of Wrath (my great uncle went to California in the dust bowl and grandfather never saw him again).We have looked a deflationary spiral in the face, in the form of a global bank collapse and a complete collapse of capital (indeed interbank lending still is frozen). Be careful what you wish for, and be careful in calling for nostrums like a reserve currency or other neo-Austrian “solutions.” To the average man in street these will prove no solutions at all. Placing a floor–even if it is 40% down in the bubble areas prevents everyone’s neighborhood from going upside down, with all the deflationary and destabilizing consequences that attend. Noriel’s solutions of pumping capital into the banks (with preferred shares) and jump starting commercial paper are crucial to avoid general employment collapse and a death spiral in municipal bonds/muncipalities. Otherwise, you will have to start from scratch, a la FDR, and recall the huge Keynesian stimulus of WWII that was required then.I think most are biting the head that informed you, in the service of nutcase apocalyptic desires.Or read McCarthy’s The Road, if you wish to look the beast full in the face, or Kunstler, if you want a somewhat rosier scenario.

Ah, but then all our politicians would be out of jobs.

Very low volume. I asked someone about this and they said it is indicative of a short squeeze, vs, long buyers. Not bullish. We have a bit of upside according to my Elliot Waving people, but, then look out. Don’t ask me about the Elliot Wave, I’m flummoxed. I understand the theory. The people I get updates from have been on target for awhile though and I tend to trust them. You can look on Mike Shedlock’s blog too, his is about what I have been seeing.

Yeah, Faber has been calling this for as long as the good Dr. R. Check any of his vids on Bloomberg or anywhere else. He’s saying there’s gonna be hell to pay, both now and later. And he’s holding mainly CASH, fyi.

Fine point on debt forgiveness. Or read Dickens’s Little Dorrit, please for the psychological exploration of the Stalinistic approach which Dickens experienced through his father’s imprisonment. Micawber of David Copperfield is the comic, two-dimension rehearsal of this theme early in Dicken’s career. For consumption of the financier class and the ultimate satiric exposure of its shallowness, see the Veneerings in Our Mutual Friend, Dickens’s last complete novel.But I’m afraid we would prefer to visit the sins of the father on the son–irrevocably, at perpetual waste of human potential. Few of you really want a return to the 19th century of debtors prisons and Oliver Twist–but, then, perhaps many do in their cries of “moral hazard.” The comparison to Hoover fiddling while the entire economy burned to the ground is also apt. And I hate the I-bankers as much as any of you.Sorry, all, I couldn’t resist the opportunity that maybe one or two of you might discover the Inimitable Boz, as opposed to his Disneyification.

Not going to happen. It is too big to bail. Banks, Auto makers, grocery stores, trucking, shipping, States, municipalities, universities, hospitals, drug makers … Everything depends on credit. Think about it. It’s easy to read up and look at figures, but, seriously. It is too big to bail. The shadow banking system is dead. The next tower to fall is the debt tower. It’s all over but the shouting. They are simply re arranging deck chairs on the Titanic.

Yes, and watch while drinking a nice mellowing cup of kava-kava tea. You won’t care anymore about any of it, believe me…(“Say, I wonder where I can get some shares of kava-kava producers? I mean, this stuff is gonna be the next Big Thing!”)

U.S. Treasury Said to Invest in Nine Major U.S. Banks (Update3)Oct. 13 (Bloomberg) — The Bush administration will invest about $125 billion in nine of the biggest U.S. banks, including Citigroup Inc. and Goldman Sachs Group Inc., in the government’s latest attempt to shore up confidence in the financial system.The proposed cash injections in exchange for preferred shares are part of a $700 billion rescue approved by Congress and follow similar moves by European leaders to unfreeze global credit markets by helping beleaguered banks. The other companies are Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., said people briefed on the plan.“It’s a good thing, it’s what needs to happen, it will allow the markets to start functioning again,” said Ralph Cole, a vice president for research at Ferguson Wellman Capital Management Inc. in Portland, Oregon, which oversees $2.7 billion including shares in JPMorgan, Wells Fargo and Goldman.The purchases represent a new approach for Treasury Secretary Henry Paulson, who first promoted a bailout targeted at illiquid mortgage-related assets. The urgency for a more immediate infusion has grown as banks struggle to regain the confidence of investors, counterparties and clients after bad loans caused more than $635 billion of writedowns across the industry.http://www.bloomberg.com/apps/news?pid=20601068&sid=a6iAcfnPhVIg&refer=home

Yeah, give me a taste of that $125 billion and I’ll start functioning again real good too!!

No, they won’t lend. They’ll take the money and put it into Treasury notes. This was the complaint about the $750, and it’s still the complaint.Why is Roubini encouraging these bank games? It’s a ridiculous farce.

BAILOUT THRILLER(Michael Jackson’s Thriller)WilliamBanzai7It’s Midnight this October night and the street is full of Politicians, Lurking in the DarkUnder The Moonlight, You See A Sight That Almost Stops Your Heart.You Try To Scream, But Terror Takes The Sound Before You Make It.Debt Markets Start To Freeze, As Horror Looks You Right Between The Eyes,Your ParalyzedYou Hear The Door Slam, And Realize There’s Nowhere Left To RunYou Feel The Cold Take Hold, And Wonder If You’ll See the Mother of All Bear RunsYou Close Your Eyes, And Hope That This Is Just Imagination,But All The While, You Hear The GOP Pachydermata Creepin’ Up BehindYou’re Out Of TimeThey’re Out to Get You, There’s Demons Closing In On Every Side.They Will Possess You, Unless You Change The Number On Your Skype.Now Is the Time for You and Your Trading partners to huddle Close TogetherAll Thru The Night, It’ll Save You From The Terror On The Reuter Screen,It’ll Make You See:(narrated by Vincent Price)Darkness Falls Across The Land, The Asian Trading Day Is Close At Hand.Bottom Feeders Crawl In Search Of Blood To Foreclose on Your NeighborhoodAnd Whosoever Shall Be Found Without The Soul For Economic BustMust Stand And Face The Hounds Of Subprime Hell, And Rot Inside WaMu’s Bankrupt Shell.The Foulest Stench Is In The Air The Funk Of 700 Billion Bailout BucksAnd Shortselling Ghouls From Every Trading Room Are Closing In To Seal Your DoomAnd Though You Fight To Stay Alive Your Net Worth Starts To ShiverFor No Investing Mortal Can Resist The Evil Of The Bailout Thriller’Cause this Is Thriller, Bailout make or break Nightand No-ones Gonna Save You from the Beast about to Strike.You Know its Thriller, Fed Bailout Thriller NightYou’re fighting for Your Monetary Life inside a Killer, Thriller.Thriller, Fed Bailout Thriller Night’Cause I can thrill you More Than Any Market Ghoul Could ever try. (Thriller, Bailout Night)So Let Me Hold You Tight And Share A Killer, Chiller, Fiscal MassacreThriller Here Tonight.’Cause this Is Thriller ,Fed Bailout Thriller nightIt Will Thrill You More Than Any Ghoul Could ever dare tryAny Ghoul could ever Dare Try(Daddy, can I be a Banker for Halloween? No deary…its too scary! Be something funnylike the McCain campaign )http://williambanzai7.blogspot.com/

Anyway, sorry Pete, I got emotional and didn’t really answer your question. I can say for me I was raised Democrat, but, now after researching I have to say I think the best thing for the most people is hard money and free markets. Oh yeah, and, first things first, non violence, no war.

Racist? I’m talking about Big Macs, SUVs, McMansions.The average person in India or China eats less, needs less energy. They don’t consume as much and their consumption is more renewable, cotton, food, against oil, metals.Homo suburbianus is heading toward extinction

oh BTWHappy Eid..

This isn’t primarily economics-related, but it is eerie how ‘familiar’ it seemed to be. I watched all 9 parts, but here are the last 2, which are most interesting, especially in light of recent events:http://www.youtube.com/watch?v=M_t2qGxU18Ehttp://www.youtube.com/watch?v=PEy_ihziQfA

Thank you for your comment.

“Counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction. Accordingly, sizes of the reciprocal currency arrangements (swap lines) between the Federal Reserve and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded.”Does that mean if they take the higher value of all that CDS stuff, they can borrow more ?If so what then if there is a few more mortgage failures, Doesn’t this mean they borrowed more on all of this but now the government own it and guarantee it ?

How about making everyone eligible to borrow from FED at 2.25%, but only to cover a mortgage on their primary residence? That would remove the complainers who think it is unfair.

http://www.cliffkule.blogspot.com has a chart showing the sell-off after the 1929 crash and into the early 1930s…

In less than two weeks, the US has committed @ US $1-trillion to various programs designed to unlock the credit markets.1. Which entity’s balance sheet (Fed or US Treasury) will reflect a credit to cash and debit to “Stuff – Toxic and Otherwise” (preferreds, CDS etc.)?2. Assuming the acquiring entity’s balance sheet didn’t reflect @ US $1-trillion in uncommitted cash two weeks ago, how was it created (describe the actual process)?3. Has anyone kept a running balance of funds committed by the Fed through its various programs over the past 14-months?

maybe they can no longer publish the balance sheets or budgets, just like no longer publishing the M3 monetary supply figures, that way no one knows the real figures so no panic…

Just saw Krugman being interviewed – it was interesting that his economic bully pulpit is used to advance ideals that many would associate with socialism. I wonder if Obama will find a role for him if the Dems form the next administration?

Now that the US Govt has put it’s “full faith and credit” on the line, don’t be surprised to see a complete and terminal trashing of the US currency. You cannot successfully bailout a debt mountain by displacing it with a bigger debt mountain. It may very well work for a time, with all “players” giving a nod and a wink to the ruse. But ultimately it will be seen for what it is- the trashing of the Treasury.In many respects, while immediate Armageddon has been averted, a much more treacherous condition has now been delivered to us all.The last Bailout card has been played.

Faber said, the US will go bankrupt.When this is happening, what are the consequences?What will happen?

The function of the MSM is to disguise the true nature of reality.This isn’t working anymore.

Did you get to see Franki Valli?

Derivatives are called “derivatives” because they are derived from something. CDS’s were born as bogus insurance polices (not so called as they would attract regulatory oversight)designed as sales sweeteners to insure the toxic ABS paper sliced and diced from mortgage issuances and paper.Credit Default Swaps also allowed issuers/traders HUGE profits in fees, so much so that the big banks saw these fees as the revenue stream- and not the mortgage returns themselves.Who is at fault?1) Govt’s – who allowed their regulators to turn a blind eye. In effect Govt got into bed with the fat end of town.2)Ratings Agencies- who aided and enabled the proliferation of these highly rated yet TOXIC WMFD’s to the point where they can bring down whole financial systems and societies.Thye had NO f******g clue what they were rating. yet did so anyway for the enormous fees involved.3)The Banks – who exploited the enormous loop hole provided by Basel 2 where the aforementioned mess of toxicity could be conveniently hidden OFF BALANCE SHEET , unregulated and safely hidden from prying eyes.I note that no action of note has yet been taken addressing the culpability of these 3 entities.

Junk is always junk, however you cut it. But the theory of CDOs was sound: that the risk was `tiered`. If fraudulently generated mortgages hadn`t made it into those structures, the senior tranches would likely have been o.k.If investors hadn`t been so hungry for yield, the structures would never have been created. Unfortunately, few institutional investors did any due diligence and just relied on the ratings agencies opinions. All in all, the perfect storm.

I think all the king’s horses and all the king’s men will not be able to charade their way out of the deflation that is underway (except for printing more money and hyperinflate until the currency is totally worthless or threatens to be perceived in that way.)The stock market is impossible to time, because who can predict which rules will change, when the rules will change, and how investors will perceive the rules. What if the government confiscates your gold again!We went from anybody with a pulse getting a loan to big tightening.NOT INVESTMENT ADVICE

“What do you expect us to do? Annouce that all the Cabinet members will be buying IBM and General Motors tommorrow?-exasperated Administration official, New York Times, October 20, 1987See today’s and last fews days headlines… After the crash of 2008 they actually bought shares ! ! !I do not remember checking a box when I voted to save Goldman, Citibank and Bank of America opting to let Lehman and so many others fail. Did any of you check such a box.Rest In Peace – CapitalismI recommend a peaceful boycott of the policies of the fascists who run the world right now. Whenever they speak in public and say the word “market”, everyone laugh as if you just heard the funniest joke or seen the funniest thing you have ever seen in your life or perhaps light a match or lighter and hold in the air in memoriam of capitalism.

longer, he is the original gloom and doomer

Can`t argue with that.

What was that Ohio Players song from the seventies? Roller Coaster.Will the Dow close down today? I don`t know what we are going to do if the markets can`t sustain today`s rally.

Guest on 2008-10-14 07:52:49Looks like there is a mandatory length of threads, so I couldn`t reply above.The `curve steepner`does necessarily relate to inflation. Two year yields are directly impacted by money market rates, which the Fed can, more or less, control. The `price`or yield on 10 year notes is set more by supply and demand.Clearly, the Fed has short rates lower and maybe will be taking them lower still. However, the Treasury will continue to do 5, 10 year notes and long bond auctions as part of its overall financing programs. I`m presuming Robertson shares my view and is worried that the market can`t handle the supply at current levels.Re the Dow, looks like the sheep are sated. Up just 180 as I write. Don`t confuse the circumstances of the 1987 crash with the current crisis. Back in 1987 the economy was in good shape, stocks just got overpriced and corrected. This time, the banking system and western economies are a mess.

???????????

It is funny how everyone seems to want complete chaos, but when money no longer equates to power and some animal masqueraded as a human wants want you have and all you can do is cower and let them take it – then how will they feel. All of the fat, rich people like to think that it is survival of the fittest, it is survival of the fattest and you want no part of some of the bad people in this world, they are the strongest and will rule without the aristocracy that is now in power. Sometimes is is nice just to get the crumbs.

technical day by day is all i meant above… approximate 2 day bounce for both years followed by roll over – not calling bottoms or making fundamentals sorry for short term banter…

not making fundamental comparisons i meant to say

You are correct Ted appears to be Deadhttp://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP%3AIND

Second that… What the prudent investos/saber fails to see is tha they will also be affected hard because they have more to lose tnah the reckless investor who is already broken

Bloomberg and other sources confirm that the first tranche of 250 billion will go to nine banks. More likely it will mostly go to the big 3. What we are seeing here is not a bailout at all but a consolidation of the banking industry. There is no systemic bailout – Paulson admitted that they’ll let the weak ones fail. In the meantime, credit will in effect be rationed and channeled by a Goldman-led cartel. Their triage scheme will be extended under the next administration to the economy as a whole. Favored sectors will prosper, others will cease to exist. We’re evolving into a statist model of capital allocation and the transition won’t be easy. This is a controlled Depression and conventional market analysis won’t be worth much. Perhaps the best investment will be a steady government job at the post office.

The basic idea of the CDS wasn’t bad. They just failed to do any regulatory oversight at all. The system ran totally amuck. All they needed to do was to apply the the basic minimum of common sense. The regulators never even did that. Hopeless.PeteCA

WTF!!! I leave for 1 week and what happens???For all you financial masochists out there, I hope you enjoyed last week. For the rest of us who are looking for answers… Follow your gut. Truth and righteousness are due north on this compass towards safety.Expect the market to volley between 8,500-10,000 for quite some time. I’d expect a triple bottom over the course of the next 6 months (with 2 & 3 not being as severe as last week). My 3 month inverted oil% lag (which I posted some time ago) played out almost to the day, but unfortunately, I don’t see the inversion rallying the same way on the upside.I’ll post my new outlook when I have more time.(I’ve got lots of catch up to do.)Miss Americap.s. @ Allessandro, “rate cut and money” instead of “rate cut or money”. I was wrong. I hope my error did not cost you? My apologies.

TED back on BloombergCurrently 4.28 – it was at 4.63 last Friday and 3.55 last Monday.If anyone on this board could offer a theory as to why the equity markets are rejoicing I am sure many readers would be interested. TED Spread

yes, some of their high low info sometimes does not make sense though. just click on historical prices and you can select range and download into excel at bottom from there. i will send you what i have now as well…

Because no more major financial companies will go below and the domino effect has been halted, at least temporarily. Plus the Dow was down 43% and was due for a bounce.

Dow has just gone negative, imagine thatNasdaq -44

Sorry, should have read `does not`.I sold my DIA yesterday morning using the b,b & p rule. Early, but the money is back in my jeans.

Merci!

Grantham article in Barrons this week (free access)

Gobsmacked – The Amazing Story of Brooksley BornI came across this story yesterday … and I was utterly amazed. Or, as the British like to say, gobsmacked.It’s the story of how a woman running the derivatives markets in the USA in the late 1990′s tried to tell the American establishment to put a lid on things – basically that the derivatives markets were running the risk of being seriously undercapitalized.The woman’s name was Brooksley Born and she went up against the financial establishment running Washington and Wall Street – Greenspan, Rubin and Summers. Needless to say, they made her feel like a complete idiot and she eventually resigned.But the fact of the matter is that it was the other way around … Greenspan was the idiot and Ms. Born was right.Here’s the link:http://www.alternet.org/workplace/102559/the_woman_who_could_have_prevented_this_financial_mess_was_silenced_by_greenspan%2C_rubin_and_summers/PeteCA

Brilliant analysis: America is witnessing a financial calamity brought on by weapons of mass destruction in the hands of financial anarchists. But, unbeknownst to themselves, once they loot and destroy “the wealthiest nation on earth,” they also destroy themselves. There is no host economy left on earth that will welcome them in.

Question of the day (or maybe the week)Let’s suppose the global stock markets start dropping again this week.Do you think there’s a real possibility that the G7 might just shut down all the markets if this happens … and then go away and try to figure out what to do next?I’ve got no proof, of course.But think about it.If their great proclamation from last weekend doesn’t stabilize things, then it seems logical they will go to more extreme measures.I’m just tossing this out … because if you do any short-term trades this week, keep in mind that one possible outcome is that the markets could be unexpectedly closed. Give yourself an out, or at least hedge your trade in case you can’t unwind it when you expected.PeteCA

The best thing you can do … is to get some advice from them about how to survive a major economic downturn. They are the most important resource you could ever have – people who really lived through a depression.The trouble is … can you deal with what thay tell you. I’ve got a father-in-law who loves to tell stories about being a kid and growing up in hard times in America. His favorite story is about taking a gun and hunting squirrels for food – so the kids could make squirrel-brain sandwiches. No, I’m not joking. Think you could handle squirrel-brain sandwiches? Well, maybe you’ll get better advice than that PeteCA

11:18 a.m.Moody’s: Does not expect upgrades of banks on U.S. actionsThis tells you it is not enough!

Well, let’s think about how that would play out. Iceland shut down its markets temporarily, and when they reopened, they dropped 75% immediately. Not sure it would make sense to close the markets unless there were some concrete steps being taken to stabilize the markets that people would actually believe would stabilize the markets.SWK

What if they close down all the markets, then go away…NOT try to figure out what do next…and just NOT come back?

Libor will become GIGOR, Global InterGovernment Offered Rate…

Some rhetorical questions:What did the UK have to pay?What did Germany have to pay?What did France have to pay?a rhetorical answer: a fraction of what the US will end up paying.

I think fascism. These bank moves are economic fascism, the government apparatus is in place for authoritarian control, there just isn’t a strong popular movement at the moment because it was so badly led by the Republicans.. but we can see a white supremacist tendency in McCain’s campaign. Maybe in 2012.But the US can solve some of its problem by plundering other countries, militarily in Iraq, financially in Europe and “emerging markets”. That’s why Paulson warns against “protectionism”, i.e. let us buy up your deflated economy with US sovereign wealth bailout money, sell high to buy up the deflated US. In the meantime, prevent others from buying up the US on “national security” grounds.A new banking oligarchy is being created and the forces against it are very weak.

thanks for posting that.. seems like there really could be a method to the madness..

Hi Dr. Roubini, thank you for the wonderful website! I am starting to think that your personal passively invested stock market is a genius personal move – the more bearish people become, the more your income goes up to appear on TV, etc. So, as long as you personally passively invest, it is a de facto truth that your largest contributions occur when the market is depressed! How cool is that.

Dr. Roubini check your Webster:Webster’s New World Dictionary: Inflation 1. an inflating or being inflated. 2. an increase in the amount of money in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices.

Pete CAWhen I was younger and my grandmothers were still alive – I never knew my grandfathers, they died b4 I was born – I heard plenty of stories about how the Great Depression was survived. My parents were children at that time, but my grandmothers were trying to feed their families. So I am familiar with stories of squirrel sandwiches and the like. My grandmothers canned lambs quarters – weeds-some of those years to survive.The lessons my parents passed on to me can be summed up in the motto of that time:Use it up, wear it out, make do, or do without. One reason I am such a history buffof the Great Depression is that it helped me understand my parents and grandmothers better – sort of getting a glimpse into how their psyches were affected by it. Thepsychology is fascinating. I can definitely say that simply due to their experiences I have been directly affected as well.My parents are blessed by the fact that my brother and my nephew farm the farm next door as well as my parents farm. In fact, my brother’s farm has been in our family for over 100 years! I am blessed too in that if times were bad, I knowour family, with our relatives would bond together to survive. I just have alot ofconcern for my parents. I can’t imagine how bitter it might make them. They don’t subscribe to daily newspapers by the way. A waste of money to them. That’s the”depression mentality” as I call it. They live very frugally now, as they always have. They have passed on frugality lessons to me. My husband says I can not only make a penny squeak, it screams!I hope in some way to cushion the blow. I am lucky to have 3 other siblings too,and we all keep in close contact with each other. Fortunately, we all get along.Maybe just surrounding my parents with a good support system is the best way to deal with this.Any other input would be appreciated. Thinking “outside the box” is welcome.

The mother of all credit crunches will come when central banks stop lending to each other, because some are insolvent. Sound familiar?

the Chinese people are happy to buy your lovely bonds.You American people just keep spending. No worry!thank you.God bless the USA.

How long to this ?

30 year fixed rates are about where they were on Friday, 6.375% with no points…but they were 5.75% last Monday.I think we would need 5.25% or lower to spur another refi boom and really motivate new buyers….(refis for people w/equity left).

It wasn’t regulation or government that caused this mess. It was deregulation and the hands off, we know better free market or free for all approach that never works. It never works when greed is present and it will always be present. We want free markets but not free for alls. There needs to be some rules/regulations, some structure and predictability espically in the financial markets.Let’s look at what’s happening, businesses can not get the funding they need, banks are afraid to lend, the economy is shrinking, and fear is rising. Everyone agrees that getting the banks recapitalized and lending again and buying back mortgages will take a while. During that time the economy will slip further making the recovery process more difficult.Getting money into the economy to maintain it at an acceptable level is essential. These public works projects are a good way to get money into the economy and keep the economy moving. The infrastructure improvements will also help us in the future and keep us competitive.Once we get the regulations in place and recover, the “we know better people” can then start the dismantling process and we can start this all over again in another 20 years. We can always count on selfishness and greed.

The bailout may overt a depression by keeping people employeed as Dr. Robini plans, but will have the unintended concenquence of hyper inflation. Or that my be the intended concenquence, to pay back with cheap dollars. However, that punishes the savers and rewards the debtor, especially if the homes are is kept at inflated high prices. The’s no way for a healthy ecomony when over 50 percent of income is used on homes in CA, MA, NY.

Exactly – they had gone below 6% a couple of weeks ago when some program or bail out had been announced but they are right back up now. Not to worry a new bail out for homeowners will be hitting soon – just another few hundred billion.

WRITING ON THE WALLWatch for Obamato pick DimonJ.P. Morgan Chase boss is leading candidate to be Treasury chief if Democrat wins on Nov. 4, writes David Weidner.http://www.marketwatch.com/news/story/prediction-obama-pick-dimon-treasury/story.aspx?guid=%7BCC95B387%2D4E33%2D4883%2DAB80%2DEB3FA337E6E3%7DJust another thief for instead of Paulson.Obama will not change.

Time for another revolution, RB. Off with Putin`s head.

Roubini is correct. The key to resolving the “crisis” is to understand that the fodder for the system – the American consumer can no longer consume – the majority is up to their eyeballs in debt: “good debt” – such as mortgages and student loans and “bad debt” such as credit cards and “neutral” debt such as car loans. If the consumer can not consume then the economy cannot move – regardless of how much you re-capitalize banks.-First time homeowners who are upside down on their mortgages should have mortgages reduced to reflect current valuation, Interest rates should be lowered for these owners to reduce the burden and free up cash for them to go out and consume or save, student loan debt balances should be reduced unilaterally by 50% – in most industrialized nations higher education is free or near free. We should do the same – this way people can have more cash to save and spend in the economy. Bottom line: the “people” need to be bailed out. For those of you screaming “thats socialism !!”, you are correct – but its also socialist to protect billionaires from taking their loses. Roubini has been right on on just about everything so far – all of a sudden when he suggests that some of the “safety net” be extended to regular folks you people now feel thats he’s on the wrong path – he is 100% correct.

The USA, when will you pay the money back to China?

As soon as they start selling our T-Bills.Of course then they would have to quiteartifically devaluing their currency as well asdeal with the bad side of exporting insteadwhat they have been enjoying for so long.So lets do it NOW and they can deal with theirresulting growth inversion.

you didnt wait for a rply if you can ask a question

USA has been downgraded to BB-by me!

you are making sense.

The lessons of the Great Depression which were not learned are:1. Keep wealth flowing throughout society. Do not allow it to be concentrated at the top where it stagnates.2. Keep the bankers and speculators semi honest. If investments are just phony paper rather than constructive they will collapse.3. Do not let productive sectors of the economy such as manufacturing or agriculture get shortchanged. Banking, gambling casinos and prostitution are not industries. Neither are advertising and real estate. The stock market crash of 1929 was preceded by a 10 year agriculture depression and fierce opposition to giving workers a fair shake. All solutions proposed at the time involved putting checks and balances in place and working toward a slightly more even distribution of wealth. Despite rewrites of history by Uncle miltie friedman and other comedians monetary policy and tariffs would not have been fatal if wealth was return for work rather than inherited social position.

Someone, I think LB, was saying last week that the hedgeies are subject to margin calls with the majority of positions that need to be unwound hitting this week. It doesn’t matter though, the universal declaration from the pundits was that Friday’s low was the bottom and everything else is just volatility, trading range, re-tracement, testing etc.Let’s see what the evil twins Ted and Libor have to say tomorrow.Notwithstanding the real economy, just about every action in the past month has been about getting those two to behave. Although there has been some revisionist spin, the expectation was that if the economic medicine was given in the proper dosage, there would be a meaningful and measurable change.We shall see…

new thread

Anyway, thanks and you too, if applicable

The W. Bush years were continuous Keynesian expansionary policy, both fiscal and monetary. We’re now reaping the consequences. Even the Keynesians understood you had to turn off the taps occasionally. Leave it to “free market” Bush to turn them on for seven straight years. Some “free marketer”… socialism for the well-connected is what this is.

Bailouts reward people who borrowed to finance the “good life”, bankers (borrow short lend long) and the deadbeats. There is no getting around that, but if I understand correctly the idea of Debt Reduction would turn a previously non-recourse debt into a recourse one, at least that ante’s up the moral hazard from about zero to something.

Is it not the case that under the expansion of the FDIC powers to include guaranteeing the senior debt of banks and their holding companies, the following scenario is likely?Say you have two entities. The first ABC, a ‘new’ banking enterprise. It has no cash, but since it is a “bank” all of its senior debt is protected. This bank then gets an infusion of cash (say, $5 billion) from DEF bank. This is issued as ‘Senior debt’, so its 100% protected (by your tax dollars).Because this ‘new’ bank ABC is created by former executives from DEF the terms are rather favorable, and the debt has a very high interest rate. In exchange ABC buys up all sorts of Junk bonds on the cheap in the hopes they don’t default, but to be frank no one cares because the executives will pay themselves insane salaries either way.If the junk bonds don’t pay out, ABC ceases to exist DEF gets its money back — and depending on the exact rules the interest added to the principle as well… — and the process is repeated again. If successful, DEF still gets lots of cash on a really expensive debt. The executives of ABC and DEF make out like bandits, the companies merge, and everyone is happy.Will you please write about the moral hazard created by this latest government action?(source of scenario text: poster onwww.chrismartenson.com , in Blog, under “The FDIC expansion explained”)

Yeah, the Chinese who use coal to heat their homes are using renewable. HA!!